© Nigel Slack, Stuart Chambers & Robert Johnston 2007 Instructor’s Manual Operations Management Fifth edition Nigel Slack Stuart ChambersRobert Johnston For further instructor materialplease visit: www.
pearsoned. co. uk/slack ISBN-13: 978-0-273-70850-6 / ISBN-10: 0-273-70850-3 ? Pearson Education Limited 2007 Lecturers adopting the main text are permitted to download the manual as required. 2© Nigel Slack, Stuart Chambers & Robert Johnston 2007 Pearson Education Limited Edinburgh GateHarlowEssex CM20 2JEEnglandandAssociated Companies around the world. Visit us on the World Wide Web at: ww. pearsoned.
co. uk ———————————-First published 2007© Nigel Slack, Stuart Chambers & Robert Johnston 2007The rights of Nigel Slack, Stuart Chambers and Robert Johnston to be identified as the author of this Work have been asserted by her in accordance with the Copyright, Designs and Patents Act1988. ISBN-13: 978-0-273-70850-6ISBN-10: 0-273-70850-3All rights reserved. Permission is hereby given for the material in this publication to bereproduced for OHP transparencies and student handouts, without express permission of thePublishers, for educational purposes only.In all other cases, no part of this publication may bereproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic,mechanical, photocopying, recording, or otherwise without either the prior written permission of the Publishers or a licence permitting restricted copying in the United Kingdom issued by theCopyright Licensing Agency Ltd.
, Saffron House, 6-10 Kirby Street, London EC1N 8TS. This book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published, without the prior consent of thePublishers. © Nigel Slack, Stuart Chambers & Robert Johnston 2007 Contents Chapters Pages1. Operations management 52.
The strategic role and objectives of operations 163. Operations strategy 244. Process design 325. The design of products and services 406. Supply network design 457.
Layout and flow 538. Process technology 609. Job design and work organization 6910. The nature of planning and control 7811. Capacity planning and control 8312. Inventory planning and control 11313. Supply chain planning and control 12414.
Enterprise resource planning (ERP) 13515. Lean operations and JIT 14716.Project planning and control 15517.
Quality planning and control 16618. Operations improvement 18219. Failure prevention and recovery 19020. Total Quality Management 19721. The operations challenge 204 Nigel Slack, Stuart Chambers & Robert Johnston, Operations Management , fifth edition,Instructor’s Manual4© Nigel Slack, Stuart Chambers & Robert Johnston 2007 Supporting resources Visit www.
pearsoned. co. uk/slack to find valuable online resources Companion Website with Grade Tracker for students ? Multiple choice questions with Grade Tracker function to test your learning and monitor your progress ?An interactive Study Guide including audio animations of key diagrams and extra resourceslinkedto specific sections of the book with clearly indicated icons ? Case studies with model answers ? Excel Worksheets designed to enable you to put into practice important quantitativetechniques ? Hints on completing study activities found in the book ? Links to relevant sites on the web ? Flashcards to aid in the revision of key terms and definitions For instructors ? Complete, downloadable Instructor’s Manual ? Fully customisable, media-rich PowerPoint slides that can be downloaded and used for presentations ?A TestGen testbank of hundreds of questions allowing for class assessment both online andbypaper tests Also: The Companion Website with Grade Tracker provides the following features: ? Search tool to help locate specific items of content ? Online help and support to assist with website usage and troubleshootingFor more information please contact your local Pearson Education sales representativeor visit www. pearsoned.
co. uk/slack 5© Nigel Slack, Stuart Chambers & Robert Johnston 2007 CHAPTER 1 Operations managementTeaching guide IntroductionTeaching the material in Chapter 1 of the book is both the most important and the most difficult part of teaching an operations management course. It is the most important because it is vitalthat students develop an enthusiasm for the subject and this is best attempted early in the course. It is difficult because one has to establish some key principles before the ‘building blocks’ of thesubject have been taught.
We have found it useful always to work from whatever experience thestudents have. For post-experience students like MBAs this is not difficult.One can always ask them to describe the nature of operations in the companies they have worked for.
One can evenexplore some of the prejudices they might hold about operations management (dull, obstructive,always screwing things up, etc. ) and base the discussions on that. Undergraduates are moredifficult to teach because they usually have less experience, but even so they have experiencedmany different operations from a customer’s point of view. Therefore, one can ask them abouttheir recent experiences as a customer (both good and bad) and base a discussion on theimportance of operations management around those experiences.Key teaching objectives ? To enthuse students with the ‘hands-on’ excitement that can be gained from anunderstanding of operations management (‘… I want to prevent you ever enjoying a theatre performance, restaurant meal or shopping experience ever again. I want you continually to be looking for the operations implications of every operation you enter. You are going to beturned into sad people who cannot go anywhere without thinking of how you could improvethe process’).
? Convince students that all organizations really do have an operations function; thereforeoperations management is relevant to every organization. ?Convince students that all managers are operations managers because all managers manage processes to produce outputs (‘Even marketing managers are operations managers. Whatyou learn as marketing in business school is really the “technical” side of marketing. Of course this is important, but marketing managers also have to produce marketing reportsand information, without mistakes in them, on time, relatively quickly, flexibly enough to contain the latest information and without using an army of marketing analysts to do so.
Inother words, they are producing services for internal customers’). ? To introduce the key ideas in the chapter, namely, Operations managers manage transformation processes, with inputs and outputs. Nigel Slack, Stuart Chambers & Robert Johnston, Operations Management , fifth edition,Instructor’s Manual6© Nigel Slack, Stuart Chambers & Robert Johnston 2007 ? Operations can be analyzed at three levels, the level of the supply network, the level of the operation itself (sometimes called the level of the organization ) and the level of individual processes. ? Operations differ in terms of their volume, variety, variation and visibility (the four Vs). ? Operations managers engage in a set of activities, devising operations trategy,designing operations, planning and controlling operations and improving operations.
Exercises/discussion points There are many cases and exercises that one could use to introduce operations management. Thecompanion volume to this book (Johnston, R. et al, 2nd edition, ISBN 0 273 624962) containsseveral useful cases. In addition, you might like to try some of the ideas given in the subsequenttext, all of which we have used. ? Teaching tip – Use the pie chart that shows the consultancy spend in each functional area(a PowerPoint version is available with the other PowerPoint slides) to prompt a discussion.For example, ‘ Operations and process management is the biggest single sector of spend inthe consultancy market. Why do you think this is’? Try to guide the discussion to the ideathat excellence in operations management reduces the cost base of the operation and helpsto bring in more revenue. We call this the ‘double whammy’ effect of operations.
Nowonder it is important when it can do both these things. ‘ Remember the old adage, profit isa very small number, made up of the difference between two very big numbers. It only takesa bit to be taken off costs and bit to be added on to revenue to make a big difference to profit’. Exercise – A useful exercise for demonstrating the ubiquitous nature of operations is to ask the class to identify every service they have encountered from waking up in the morning togoing to bed at night. The radio alarm which wakes them up depends on the operations of the radio station.
The water in which they wash (presumably) was delivered by a water utility. The public transport operation transported them to college, etc. etc. , through to the bar, or other place of entertainment that they finish the day with. ? Teaching tip – Many television programmes can be recorded off-air, which illustrateoperations.Looking ‘behind the scenes’ of well-known operations such as airports, is afavourite topic for TV producers. Any of these could be used to promote group discussionson what operations management might be like in such operations. ? Exercise – The four Vs dimensions of operations can be used for many types of exercise.
For example, one could ask different groups to identify different types of restaurant, foodretailer, car servicing operation, cinema, club or pub and plot the ‘similar but different’operations on the four dimensions. ? Exercise –For residential courses, especially for post-experience students, an evening could be spent ‘on the town’, where syndicates are required to sample the services of a restaurant,a retail operation and an entertainment operation, and report back the following morning. This is a great way of giving participants a change of scene on the Thursday of a one-week course. ? Teaching tip – Remember ‘role-play’ can be used effectively in an introductory session. The lecturer can role-play two operations managers managing separate similar but different Nigel Slack, Stuart Chambers & Robert Johnston, Operations Management , fifth edition,Instructor’s Manual7© Nigel Slack, Stuart Chambers & Robert Johnston 2007 operations, for example, the chief tailor of a ‘fashion label’ and the production manager at amass-produced ‘off-the-peg’ garment factory. The differences in the types of resource(people and equipment), the operation’s objectives, the four Vs and so on can all beemphasized during the role-play. ? Teaching tip – ‘Role-play’ can also be used with a standard case study.
For example, theConcept Design. Services case at the end of Chapter 1 lends itself to role-playing the operations manager andmarketing director of the company, to illustrate their different perspectives. Exercise – All the chapters start with an example of ‘Operations in practice’ . It is often agood idea to ask the students to read through this example and then use it to promote adiscussion on the topic. In this chapter IKEA is described. Questions such as the followingcould be used to prompt discussion.
1. Did the company simply conform to the conventional operations model in itssectors or did it devise something new? 2. What did the company do differently from previous furniture retailers? 3. Why do you think it decided to be different from other companies in its sector in theway it manages its operations? . What advantages did making these changes give it? See later for suggested answers to these questions. ? Teaching tip – It is always worth illustrating the ideas in operations and processmanagement with reference to not-for-profit organizations. Charities, local governmentorganizations and particularly health care services (although some of these are private) provide a wealth of examples. For example, try asking the students to contrast an accidentand emergency (A) department of a hospital with a unit that specializes in cosmeticsurgery.
The former has to cope with very high variety, high variation and high visibility. Demand is relatively unpredictable and it must provide fast and responsive service(relatively at least, it would be measured in minutes and hours rather than weeks andmonths). The cosmetic surgery unit by contrast, may still have high variety but, because patients are able to wait, it is unlikely to have very high variation.
Because of this, the process can be planned and scheduled in advance so that there will be far higher utilizationof the process’s resources.Case study teaching notes Design House Partnerships at Concept Design Services This exercise is best used as an introductory exercise towards the beginning of any operationsmanagement course. It is a ‘soft’ exercise in that many of the issues are in the form of opinion. Nigel Slack, Stuart Chambers & Robert Johnston, Operations Management , fifth edition,Instructor’s Manual8© Nigel Slack, Stuart Chambers & Robert Johnston 2007 Some notes on Design House Partnerships at Concept Design Services This is quite a complex case in some ways.Its purpose is not to provide students with anopportunity to ‘solve a problem’. Rather, it is an introductory case (in spite of its complexity)that can be used to open up a number of issues for discussion.
Its overall purpose is to introducestudents to the richness and complexity of many problems within operations management. Three characters are involved in the case study. Linda Fleet is the Head of Marketing, GrantWilliams is the Operations Manager, and Jim Thompson is the CEO of the company.Once youare familiar with the case it is sometimes effective to role-play one or more of these charactersfor the benefit of the class, with them asking questions of the characters and the lecturer providing any further detail or clarification through this mechanism. Also, it is useful to use props to illustrate the type of products this company designs, makes and distributes.
For example, bring in a basic plastic bucket to illustrate Focus products, a more expensive‘upmarket’ item of plastic homeware to illustrate Concept products, and a plastic item from adesign house (such as Alessi) to illustrate the Design House Partnership products.Why is operations management so important in this company? This is a big question and it is best to tackle it both at a strategic and an operational level. At a strategic level, operations management has provided the capability, particularly in thedesign and manufacturing parts of the organization, that allows the company to compete soeffectively. Draw the students’ attention to the final part of the case where the CEO expressesthe view that the important changes in the company have come because of it being able todeploy operations superiority of some sort.At an operational level, one could point out the designs that are cost effective and delivered ontime to allow the company to be first into the market with new ideas.
Products made to highlevels of quality, when they are needed, and at reasonable cost, will allow the products to besold effectively and prevent customers’ complaints as well as saving the company money. Distribution processes that provide good customer service without excessive stock levels willmaximize sales whilst minimizing costs.Early in the class discussion it is useful to make sure that students understand that there arethree types of operations represented in this company. ? A design operation that produces the designs for products, sometimes in cooperationwith design house designers. ? Manufacturing operations that actually produce the products.
? Distribution operations that take customer orders at its call centre, assemble the order from the products it keeps in store, and physically distribute the products to thecustomer. All of these operations are important to the company because: ? hey all contribute to the company’s ability to serve its customers and therefore retainold customers and gain new customers. ? all contribute to the company’s costs and therefore, if managed efficiently, can reducethe costs for the whole business. ? all, if not managed well, can disrupt the flow of products to customers and negativelyimpact on the company’s reputation. Nigel Slack, Stuart Chambers & Robert Johnston, Operations Management , fifth edition,Instructor’s Manual9© Nigel Slack, Stuart Chambers & Robert Johnston 2007 VolumeVarietyVariationVisibilityLow HighHigh LowHigh LowHigh Low FocusproductsConceptproductsPartnershipproducts? 4 Vs analysis for Concept Design Services Another way of answering this question is to look at the contribution of operations management as it is described in Chapter 1 of the book. In the chapter, four contributions of the operationsfunction were identified. These are as follows: ? Minimizing cost ? Maximizing revenue ? Avoiding excess investment ? Developing capabilities for future innovationAsk the class how different parts of the company contribute to each of these objectives.Draw a 4Vs profile for the company’s products/servicesA four Vs analysis Although there is not enough information in the case to perform a rigorous four Vs analysisthere is enough to make an informed approximation of what the four Vs profiles of the differentproduct group would look like.
Start by establishing that the students understand the nature of volume, variety, variability and visibility Then ask them to describe the company’s three mainproduct groups, Focus products, Concept products and Design House Partnership products.After that, it could be useful to make a matrix and hold a discussion about what the four Vsmean for each of these product groups. The most difficult is variation because little informationis given on this in the case. However, with a little discussion, it becomes clear to students thatthe basic stable products that represent the Focus group will be less prone to seasonality or sudden fashion changes than either Concept products or Design House Partnership products. For the latter, the fashion element will introduce a degree of risk and uncertainty as to how salesmay develop.The nature of visibility is also a little unclear. Broadly, the company’s operations are low or fairlylow visibility operations.
Yet there are comments in the case that indicate that Design HousePartnership requires a higher degree of contact with the customer, who in this case is DesignHouse itself. The company’s designers must collaborate with the design houses’ designers. Also, Grant comments that the Villessi designers frequently visit Grant’s factory. Nigel Slack, Stuart Chambers & Robert Johnston, Operations Management fifth edition,Instructor’s Manual10© Nigel Slack, Stuart Chambers & Robert Johnston 2007 What would you recommend to the company if they asked you to advise them inimprovingtheir operations? This is an opportunity for a general discussion based on the analysis of the first two questions. One way of approaching this question is to ask the class to identify the challenges or problemsthat are identified in the case.
These may include the following. ? The move from a company that sells directly to retailers (Focus and Concept products)to one that sells predominantly to design houses (Design House Partnership products). The emerging differences between product groups.
The four Vs analysis indicated thatFocus has a very different four Vs profile when compared with both Concept andDesign House Partnership products. What are the implications for this in how thecompany processes these three product groups? ? Are the resources in the company’s operations appropriate for these product groups? The main point here is that the type of machines and people necessary to make Focusproducts (high volume/low variety) may be very different from the kind of machines andpeople required to process Concept and Design House Partnership products.For example, the large machines that the company has recently bought, together withmultiple impression moulds, seem to be ideal for Focus products that are high volume,low margin, low variety. After all, the disadvantage of these large machines and mouldsis that they take a long time to change over between products. Yet there would berelatively few changeovers when making Focus products. By contrast, both Conceptand Design House Partnership products are low volume, high variety products thatneed a far more flexible set of processes to produce them.It is unlikely that the largemachines and multiple impression moulds used by the company are ideal for this. Therefore, there is some evidence that, in trying to use the same resources to make allits products, it is making life difficult for itself.
This is possibly the reason why its schedules need to change so frequently. ? The manufacturing operation seems to be in conflict with the design operation. ? The manufacturing operation seems to be in conflict with the marketing function over the accuracy of its forecasts.Discuss with the class why manufacturing needs better forecasts and why marketing may genuinely find it difficult to give them in thesecircumstances. ? The company admits that it is having some problems in subcontracting Focus products. Discuss with the class why this might be and why subcontracting is such a popular option currently.
Model answers to suggested questions on IKEA How is the IKEA operations design different from that of most furniture retail operations? Although some furniture retailers do have large ‘out of town’ operations, many use premiseswithin town or shopping malls.IKEA’s operations are very large and purpose-built. They featurevery large car parks and are located close to major motorway intersections.
In fact, everythingabout the design of IKEA’s operations encourages high volume of throughput. This high volumemeans that many of the fixed costs of running the IKEA operation such as local taxes,administrative costs and some energy costs are spread over a high volume of individual salestransactions. This reduces the overall cost of making a sale, a part of IKEA’s strategy of offeringgood value for money.The variety of products sold in IKEA stores is relatively large comparedwith many furniture retail operations.
For example, it includes small items such as glasswareand kitchenware as well as very large items such as sofas, tables and shelving systems. Modular design of some products such as shelving systems allows variety to be extended even Nigel Slack, Stuart Chambers & Robert Johnston, Operations Management , fifth edition,Instructor’s Manual11© Nigel Slack, Stuart Chambers & Robert Johnston 2007 further from a few basic component parts.These components can be assembled together (bythe customers) in different ways to offer an almost infinite variety of combinations. However, asfar as the variety of service is concerned, it is relatively narrow. Most products are sold incartons, customers are left to make their own decisions without interference from sales staff (though advice is available if requested), and even when ordering special products the staff onlytake down the order in a standardized form.
The checkout operation, where customers pay for the goods, is also highly standardized, with everyone going through exactly the same sequenceof activities. Even delivery to the customers’ home is largely a matter of the customers carryingthe goods themselves in their own cars (though a delivery service is also available). As far asdemand variation is concerned, weekends and public holidays are much busier than workingweek days; therefore variation is relatively high. However, from IKEAs experience, demand isrelatively predictable. Because of this predictability, they can plan to have more staff available atbusy periods.However, because customers are encouraged to perform much of the servicethemselves, the need to fluctuate staff is less than it would be in a conventional store. Also inconventional stores, because of the high level of expertise and customer contact required, it ismuch more difficult to obtain the services of part-time staff during peak demands.
The relativelystandardized and simplified service given by IKEA makes it easier to schedule part-time staff inbusy periods. Finally, customer contact is, in some parts of the operation, high, but overall it islower than in most furniture retail operations.Customers are responsible for choosing the typesof furniture they require, working out whether the furniture would fit together in their own home(special sheets and tape measures are provided by IKEA to help customers do this), filling inorder forms when special furniture has to be delivered, serving themselves with smaller itemsinto trolleys, entering the warehouse area and picking out from the warehouse shelves thelarger items that are in cartons, transporting the goods through to the checkout and finallyloading the goods on to their own car. Most of this occurs with very little customer contact.Inmany instances the only point at which interaction takes place between customer and servicestaff is at the point of payment. In effect the customer is ‘trained’ to perform much of the valueadding part of the service themselves. Clearly this cuts down the costs of the transaction as far as IKEA is concerned.
These savings can then be passed on to the customer. What do you think might be the major problems in running an operation like IKEA? The dependency on a high degree of customer participation has some advantages but it mayalso have some drawbacks.Customers need to be ‘trained’ by clear use of signage, byinstructions within the brochures and catalogues and by observing other customers behaviour. Furthermore, the store needs to be laid out such that it is difficult for customers to deviate fromthe standard route through the store to the checkout.
However, some customers may notbehave in the prescribed manner and staff will need to be able to cope with these exceptions. If customer training is not well handled several difficulties can arise.For example, customers maypick up goods from shelves or the warehouse, change their mind and then leave them aroundthe store in unsafe positions. Alternatively, if customers are puzzled by the nature of theoperation they will need tactful help from customer contact staff. The other major problem facingthe store would probably be stock availability.
The system works best when all items requestedby customers are in fact in stock. Out-of-stock items not only disappoint the customers but alsocause extra cost in terms of administration and ordering.This is an especial problem in modular based products such as shelving systems. If one particular module is not available it couldimpact on a large proportion of the customers who want to purchase some combination of modules. Nigel Slack, Stuart Chambers & Robert Johnston, Operations Management , fifth edition,Instructor’s Manual12© Nigel Slack, Stuart Chambers & Robert Johnston 2007 What do you identify as the ‘operations function’ within IKEA? How is this different fromthe ‘sales function’?The overall macro operation at IKEA is concerned with serving customers with their requiredfurniture products. In this sense it is a customer processing operation.
However, to achieve thisthere are in effect two parallel sets of micro operations. The first one deals with the flow of customers such as the showroom, the child-minding facility, the checkout operation and so on. The second set of operations are concerned with material flow. These are items such as thegoods inwards receiving operation, the warehouse operation and the shelf stocking operationfor the smaller items.In effect these two sets of micro operations are arranged so that productsare ‘assembled’ for the customers (or looked at another way, the customers assemblethemselves for the products! ). It becomes clear that practically everybody within the store isconcerned in some way with one of these two sets of micro operations, either transformingcustomers or transforming material.
This means that the operation of ‘making the sale’ andtherefore ‘satisfying customers’, although sales activities, are in fact the heart of the operationitself.In contrast, the marketing operation is concerned with the technical decisions of pricing,promotion and product selection and so on. These decisions are probably taken at regionalheadquarters (that are information processing operations in effect). Model answers to short cases Acme Whistles 1. What is the overlap between operations, marketing and product/service developmentat Acme Whistles? The simple answer to this question is, ‘There is a very significant overlap between thesefunctions’. The underlying question is ‘Why’? Partly, the reason is size.As Simon Topman saysin the example, small companies cannot afford specialist functions so at a managerial leveleveryone does everything to some extent. This becomes especially true when the boss of thecompany is also the owner.
It is literally his own money that is being spent when creating anynew managerial roles. Partly also the tradition and competitive stance of the company has aninfluence. This is a company that competes on quality and innovation. Both these things rely oninformal communications within the organization and a fast moving, agile ability to checkout andimplement new ideas. Oxfam What are the main issues facing Oxfam’s operations managers? Broadly, Oxfam will have the same issues as any other operation. They must define their strategic objectives, design appropriate processes that deliver appropriate services, plan andcontrol those processes, and continually adapt and improve how they deliver their services.
But they also have some particularly difficult challenges because of their status as an emergencyand caring organization. ? They must provide a global service. By definition, Oxfam’s scope of operations is global. Anywhere a disaster is likely to strike could receive the attention of the charity.
However, much of Oxfam’s work is not concerned with the high profile disaster relief side of its business, but rather the ongoing community development projects itundertakes. Most of these projects will be in the poorer, less developed parts of theworld. The implication of this is that, from an operations point of view, services must bedelivered without an assumed level of infrastructural support. The ability to adaptdevelopment methodologies to such circumstances would be a key operations task. Nigel Slack, Stuart Chambers & Robert Johnston, Operations Management fifth edition,Instructor’s Manual13© Nigel Slack, Stuart Chambers & Robert Johnston 2007 Another aspect of globalization for Oxfam concerns the coordination of expertise. Experts, either in development or disaster relief, may be located anywhere in the world. The task of understanding and coordinating this pool of potential help must be a major operations task.
It will rely on maintaining a database of expertise and on the ability todeploy it, sometimes at short notice. ? They must be environmentally ethical. To Oxfam, the concept of environmentalmanagement must be tackled at two levels.The most obvious one is that environmentalawareness is an ‘output’ from the charity’s operations. In other words, environmentalmanagement, to some extent, is one of the operation’s ‘products’.
It will engage inlobbying governments and non-governmental agencies to achieve its aims of greater environmental sustainability. However, there is also another related issue. Oxfam’soperations themselves must also be environmentally sound. Agricultural projects, for example, must be managed to ensure that there is no inappropriate use of fertilizersand pesticides locally, even when there may be local pressures to do so. They must be socially responsible. Again, this is one of those issues, which is both anoutput from the operation and an objective for the way it runs its own operations.
A keyissue here must be the way in which the ‘on the ground’ managers of developmentprojects tackle some of the particularly sensitive cultural issues. For example, ‘gender issues’ are one of Oxfam’s campaigning points; however, appropriate gender roles areseen in very different ways in different parts of the world. Pursuing its own ends in termsof, say girls’ education, must be balanced against traditional ideas of women’s role.Whereas this difficulty may be relatively straightforward to reconcile at a strategic levelback in the charity’s Oxford headquarters, its success depends on how local operationsmanagers deal with the issue at a day-to-day level. Pret A Manger What are the advantages and disadvantages of Pret A Manger organizing itself so thatthe individual shops make the sandwiches that they sell? There are a number of advantages in this type of organization. ? The load on the staff in the shop is equalized throughout the day.
The demand fromcustomers for purchasing the sandwiches occurs mainly in the middle of the day.If thestaff only sold sandwiches, they would be busy in the middle part of the day andunoccupied at other times. The way Pret a Manger organize their processes, the staff can occupy themselves making sandwiches in the early part of the day, then, as the dayprogresses, staff will progressively move from making to selling. As demand thenreduces towards the end of the day, staff will move onto general cleaning and tidyingactivities as well as making ready for the same cycle of activities to repeat itself the nextday. ? There is clear and direct responsibility for quality, customer service and cost.If thereare any problems with quality and availability of sandwiches, it is the same staff whocaused the problems who receive customer complaints (In fact, Pret a Manger get veryfew complaints). Similarly, the effectiveness of cost control can be clearly associatedwith the staff in the shop.
? It is a more interesting job that has a number of different activities (making, selling,cleaning, etc. ) than one where an individual will specialize in just one of these tasks. ? It is easier to engender a sense of pride in the high quality and wholesome nature of theproducts when they are made on the premises.
Nigel Slack, Stuart Chambers & Robert Johnston, Operations Management , fifth edition,Instructor’s Manual14© Nigel Slack, Stuart Chambers & Robert Johnston 2007 ? It should be pointed out that there also disadvantages. The main one is that the cost of making sandwiches in a sandwich factory (the way the vast majority of sandwiches aremade) is very significantly cheaper because of the higher volume. How can effective operations management at Pret A Manger contribute significantly to itssuccess? And what would the consequences of poor operations management be in thiskind of organization? By developing a culture within each store that takes pride in the products themselves,the way they are made and the way customers are served. ? By listening to customers so that customers’ reactions and comments can inform thedesign of new products.
? By not wasting materials through poor control, which would increase the cost of runningthe operation. ? By developing a sense of fun as well as a sense of commitment in the staff so thatcustomers sense a friendly and relaxed atmosphere. Two very different hotels For each hotel, what is the role of technology and the role of the operation’s staff indelivering an appropriate level of service? For Formule 1, technology is harnessed in the manufacture of the self-contained bedroom unitsin the factory prior to assembly on the site. Because of the standardization, conventional factoryautomation can be used to some extent.
More obviously, during the running of normaloperations at the hotel, technology, in the form of the automatic ‘booking in’ machine at thedoor, allows the hotel to remain ‘open’ even while it is unstaffed for much of the day. This saveslabour.Similarly, labour is saved by the use of automatic cleaning in the washrooms. This alsoensures that high standards of cleanliness are maintained throughout the day, even when thehotel is not staffed.
Although not mentioned in the text, Formule 1 hotels also have automaticdrinks and snack dispensers, which would allow guests to stave off hunger and thirst eventhough the hotel does not provide food in a conventional restaurant setting. At the Mwagusi Safari Lodge, very little technology is used. The attraction of the hotel lies in itslocation and in how their staff treat the guests.Staff must not only be informative and courteous,they will also need to protect and reassure those guests who are anxious in their surroundingsand create a sense of adventure (but not too much adventure).
2 What are the main differences in the operations management challenges facing thetwo hotels? The main difference is the degree of standardization in the operation’s processes. For Formule1, the main use of standardization is in the manufacture of the individual room units. All roomunits are exactly the same size.Because they all have the same fitting, these fittings can bepartly installed at the factory. This allows the company to buy furniture, curtains, and carpets inhigh volumes, keeping costs down. The standardized nature of the units also allows the hotel tobe constructed quickly (which itself saves costs) using standardized methods of constructionthat are cheaper than building entirely different hotels at each site. Standardization of roomsalso allows a standardized procedure to be adopted for cleaning and maintenance, so staff canbe easily trained using a standardized training package.Finally, standardization of the roomunits, paradoxically, allows all Formule 1 hotels to adapt to the geography of the site.
By puttingthe standard units together, like children’s building blocks, they can use unusually shapedpieces of land, which tend to be cheaper than regularly shaped sites. By contrast, the MwagusiSafari Lodge provides experiences ‘customized for every visitor’s requirements and abilities’. Nigel Slack, Stuart Chambers & Robert Johnston, Operations Management , fifth edition,Instructor’s Manual 15© Nigel Slack, Stuart Chambers & Robert Johnston 2007Also, the Mwagusi Safari Lodge must be able to cope with fluctuations in demand through theyear. However, Formule 1 try to choose locations that capture the business traveller marketduring the week and leisure travellers at the weekend. 16© Nigel Slack, Stuart Chambers & Robert Johnston 2007 CHAPTER 2 The strategic role and objectives of operationsTeaching guide Introduction Although the two topics covered in this chapter (the strategic role of operations, and theobjectives of operations) are related there is no strict requirement to teach them together.Oftenwe incorporate the first part of the chapter (the strategic role of operations) into our generalintroduction to operations strategy and either have a separate session on operations performanceobjectives or, if time is short, incorporate it in to the introductory lesson with the material fromChapter 1.
Both the topics in this chapter are important but the concept of ‘strategic role’ is adifficult one for undergraduates to understand. We have found that undergraduates with someexperience can get something out of the issues in this section but those without any work experience find it difficult.Certainly, students with experience such as MBAs or executivecourse participants can get a lot out of the idea of ‘strategic role’.
The Hayes and WheelwrightStage 1 to 4 model, especially, is very useful to teach this easily. Key teaching objectives ? To stress to students the importance of how the operations function sees its role andcontribution within an organization (‘ … you can go into some organisations and their operations function is regarded with derision by the rest of the organisation; how come, theysay, that we still can’t get it right. This is not the first time we have ever made this productor delivered this service.
Surely we should have learned to get it right by this time! Theoperations people themselves know that they are failures, the organisation does nothing butscream at them, telling them so …. Other companies have operations functions who seethemselves as being the ultimate custodian of competitiveness for the company. They arethe A team, the professionals, the ones who provide the company with all they need to bethe best in the market …’). ? To show students that there is a progression of operations excellence (using Hayes andWheelwright’s nomenclature) from Stage 1 to Stage 4.
?To demonstrate that there is a whole range of performance criteria, which can be used to judge an operation and which operations managers influence (‘…although cost is importantand operations managers have a major impact on cost, it is not the only thing that theyinfluence. They influence the quality, which delights or disappoints their customers, theyinfluence the speed at which the operation responds to customers’ requests, they influencethe way in which the business keeps its delivery promises, they impact on the way anoperation can change with changing market requirements or customer-preference.All thesethings have a major impact on the willingness of customers to part with their money. Operations influences revenue as well as costs. ‘).
Nigel Slack, Stuart Chambers & Robert Johnston, Operations Management , fifth edition,Instructor’s Manual17© Nigel Slack, Stuart Chambers & Robert Johnston 2007 ? To demonstrate that for each performance objective there are internal and external benefits. Exercises/discussion points ? Exercise – Teaching the importance of the strategic role of operations using the Hayes andWheelwright Stage 1 to 4 model is best done (we have found) by relating it directly to thestudents’ experience.Trying to use the model on a case study was found to be difficult. Anycase study which incorporates all the relevant information, would be excessively long.
Instead, try the following exercise. ? Teaching tip – Teaching the nature and importance of the various performance objectivescan be done in two ways. One can look at each performance objective in turn using examples of where the particular performance objective has a special significance. For example, ? Quality – Use any company which competes especially on quality.
High quality hotelsand restaurants can be used, as can luxury services such as high price hairdressers andso on.This can prompt a useful discussion regarding what we mean by quality(although you may wish to reserve this for the lesson on quality). Alternatively, use anexample where high conformance is necessary for safety reasons such as in hospital blood testing. ? Speed – Any accident, emergency or rescue service is useful to discuss here. Theconsequences of lack of speed are immediately obvious to most students. Also, usetransportation examples where different speeds are reflected in the cost of the service. First and second-class postage is an obvious example as are some of the over-nightcourier services.
Likewise, the fast check-in service offered to business class passengersat airports and the exceptionally fast service of Concorde (depending on whether it isflying when you are reading this! ), which offers a fast service at a very high price. ? Dependability – Some of the best examples to use here are those where there is a fixed‘delivery’ time for the product or service. Theatrical performances are an obviousexample (or the preparation of lectures). Other examples include space exploration projects, which rely on launch dates during a narrow astronomical ‘window’.
?Flexibility – We have found the best examples here to be those where the operationdoes not know who or what will ‘walk through the door’ next. The obvious examplewould be a bespoke tailor who has to be sufficiently flexible to cope with differentshapes and sizes of customer and also (just as importantly) different aesthetic tastes andtemperaments. A more serious example would be the oil exploration engineers whoneed to be prepared to cope with whatever geological and environmental conditionsthey find while drilling for oil in the most inhospitable parts of the world.Accident andemergency departments in hospitals can also provide some good discussions. Unlessthey have a broad range of knowledge, which allows them to be flexible, they cannotcope with the broad range of conditions presented by their patients. ? Cost – We use the example of low cost retailers such as Aldi who have achieved somesuccess in parts of Europe by restricting the variety of goods they sell and services theyoffer.
? Exercise – The alternative method of teaching performance objectives (and the one we prefer) is to find an example, which can be deconstructed using all five performance Nigel Slack, Stuart Chambers & Robert Johnston,Operations Management , fifth edition,Instructor’s Manual18© Nigel Slack, Stuart Chambers & Robert Johnston 2007 objectives. The case exercise at the end of Chapter 2 (Operations objectives at the PenangMutiara) is ideal for this. Not only can it provoke a debate on the external benefits of each performance objective (why the customers like each of them), but it can also demonstratesome of the internal connections between the performance objectives (for example, the waystaff flexibility allows them to respond quickly to unexpected demand). Case study teaching notesOperations objectives at the Penang Mutiara This case describes some aspects of the operations objectives of the Penang Mutiara Hotel, oneof the most luxurious resort hotels in South-East Asia. The hotel’s objectives are describedthrough extensive quotes from the Manager of the hotel. The operations objectives of the hotelare described in the same order as they are treated in the chapter, namely, quality, speed,dependability, flexibility and cost. Examples are given of what each of these objectives meansto the hotel. Some notes on the Penang Mutiara case studyThis exercise is best used as an introductory exercise towards the beginning of any operationsmanagement course.
It is a ‘soft’ exercise in that many of the issues are in the form of opinion(albeit by the chief operations managers of the hotel) and students are probably sufficientlyfamiliar with hotels (if not necessarily of the same class) to speculate. Although the questions tothe case exercise refer to operation’s role in corporate strategy and the Hayes and WheelwrightStage 1 to 4 model, the intended use of the case exercise is to give the students practice inidentifying the five performance objectives.It is important for them to recognize that there areseveral dimensions to quality, as well as to the other performance objectives.
Asking them toidentify what each of the five performance objectives actually means to an operation such asthis helps them to understand their multi-dimensional nature. The exercise may also be extended by asking the students to identify what the various activitiesof the operations management mean at an operation such as this. For example:What are the design decisions, which the hotel’s operations managers must make?What do planning and control mean in an operation such as this? How might an operation such as this improve its performance levels? 1. Is the hotel’s operations management appropriate for its strategy? The key question here is ‘how does the hotel compete? ‘ After which one should ask, ‘do our operations support this way of competing? ‘Hotels such as the Penang Mutiara compete on a global scale against other resort hotelsaround the world. The Mutiara is at the ‘up-market’ end of this business, offering high levels of comfort to its guests.Quality of service therefore must be of a high standard although someaspects of quality, such as cleanliness and the state of repair of the furniture and fittings, will beexpected to be acceptable by guests and only noticed if they are not acceptable. Other aspectsof quality, such as the standard of the food and the level of personal attention, should clearlyidentify the hotel in the luxury end of the market.
Nigel Slack, Stuart Chambers & Robert Johnston, Operations Management fifth edition,Instructor’s Manual19© Nigel Slack, Stuart Chambers & Robert Johnston 2007 Can the hotel implement changes in strategy? Changes in strategy for the hotel might include things such as the following: ? Moving into the off-season conference market (requiring the operation to offer differenttypes of service package to different guests). ? Linking with other South-East Asian luxury hotels to offer multi-location holidays (requiringthe operation to coordinate its reservation system with other hotels and tour operators). ?Extending its services to provide specialist sports and activity holidays (requiring theoperation to broaden its range of activities to include specialist instructors and equipment,medical services, etc.
). The hotel’s main concern (as with any manager of high customer contact operations) will behow to implement such changes so that:(a) on-going operations are not disrupted and customers inconvenienced;(b) there are no problems, even at the start of the new services, so customers are well served,even those who are (unwittingly) ‘guinea pigs’ for the new service. 2.Where is the Penang Mutiara on the Stage 1–4 scale? ? Stage 1 – If the manager is to be believed, the Mutiara’s standard of operationsperformance is certainly not holding the operation back from competing effectively. ? Stage 2 – It is not merely trying to raise its standards of service to those practised in thebest resort hotels. Its standards seem to be what one would expect from the best hotels inits class. ? Stage 3 – Is the hotel up to the standard of the best in the world? It is difficult to tell fromone person’s (the manager’s! ) view, but it sounds from the case as though it is.
?Stage 4 – Is the operation actually driving the competitive strategy of the organization? Again, it is difficult to tell, but if it were it would mean that the excellence of its service andinnovation shown by its operations were changing the expectations of customers . 3. The Mutiara’s external objectives.
Quality of service at the hotel will include aspects such as the following: ? Appearance of fixtures and fittings. ? Cleanliness of the hotel. ? Courtesy and expertise of staff. ? Appearance and taste of food. ? Complimentary ‘extras’ in rooms. Speed means aspects such as the following: ?Reporting back to guests on the progress of requests. Nigel Slack, Stuart Chambers & Robert Johnston, Operations Management , fifth edition,Instructor’s Manual20© Nigel Slack, Stuart Chambers & Robert Johnston 2007 ? Regular and predictable cleaning times.
? Regular supply of linen, room-extras, and so on. ? Meals and entertainment happen as advertized. Flexibility means aspects such as the following: ? Introduction of new services in the hotel. ? Meeting a wide (but defined) range of customer requests. ? Changing the number of staff allocated to particular tasks.
? Adjusting the timing of activities (e. g. oom cleaning) to meet customer requests. Cost. Much of the cost base of the hotel will be fixed; the cost of staff is largely constant in asmuch as in the short to medium term .
In the longer term, the costs of the building and facilitiesand their maintenance and upkeep are also difficult to reduce. For this reason, the utilization of the hotel’s resources (the ‘occupancy’ of the hotel) will be a key determinant of profitability. Thisis why the hotel’s operation has such a significant contribution to make in ensuring that thequality of service it provides encourages customers to visit and return to the hotel.Internal interactions between performance objectives The interesting relationships particularly brought out in the case were those between flexibilityand quality (responding to a guest’s needs when something goes wrong) and speed (movingstaff around to respond to changes in demand for services). In addition, flexibility, in terms of responding quickly to, say, a staff shortage in room cleaning, could also help keep the cleaningtask on schedule and hence dependable. Flexibility could also keep staff utilization high bymoving them to where they will be fully and usefully occupied.This maintains staff productivityand hence keeps costs low.
Flexibility seems to play a central role in ‘enabling’ the other performance objectives. Model answers to short cases Organically good quality 1. What does Lower Hurst Farm have to get right to keep the quality of its products andservices so high? It is first important to understand what is meant by ‘quality’ in this case. Of course, it means thesame as for any other product, namely, that it consistently meets its specification. But also thereare other issues with this organization. First, there is a matter of trust.The people who buy thismeat are doing so, at least partly, because it is organic.
Therefore, they must trust the operation to maintain everything that is associated with organic farming. This includes both the way theanimals are reared and cared for and the stewardship of the countryside. The operationtherefore must do everything it can to demonstrate that it is doing this and build the trust of itscustomers. Second, there is a significant ‘quality of service’ issue.
Catherine points out thatcustomers like to have personal communication with her when they are ordering their meat.Quality of service therefore means not only the courtesy and responsiveness that we wouldexpect from any service, but also the feeling that the customers are ‘part of the system’. Nigel Slack, Stuart Chambers & Robert Johnston, Operations Management , fifth edition,Instructor’s Manual21© Nigel Slack, Stuart Chambers & Robert Johnston 2007 Achieving these different aspects of quality means devoting considerable attention to how thefarm manages its processes. In effect, there are three processes here, rearing the cattle,butchering the cattle and packing the meat and order taking and despatch to customers.Rearing the cattle under organic conditions is clearly a rigorous and a demanding process. Theinputs to the process (the land, cattle, feed, absence of artificial fertilizers and drugs etc.
) mustall be checked for quality and the day-to-day care of the cattle must conform to organic farmingrules. The butchering must be done so as not to cause too much distress to the animals and thefreezing process is designed (with specialist help) to maintain the quality of the meat. Finally,the ordering process must be conducted, not just with courtesy, but also with a level of friendliness appropriate to customers’ expectations.
Similarly, transportation of the productsmust be fast and dependable (Catherine always calls customers to make sure that they havereceived their order and that it is in good condition). 2. Why is Nick’s point about veterinarian help important for all types of operation? Nick distinguishes between how most farmers use veterinarian help (as an emergency service)as opposed to how organic farmers use it (as a method for preventing problems happening inthe first place). This issue applies to almost all operations.
It is treated in detail in Chapter 19where we distinguish between preventive maintenance and ‘run to breakdown’ maintenance. Nick’s view is very close to the modern philosophy that, because the true cost of breakdown inany part of an operation is far higher than most people imagine because of the disruption itcauses, it is usually best to try to put some effort into preventing breakdowns happening in thefirst place. When speed means life or death 1. Draw a chart, which illustrates the stages between an accident occurring and fulltreatment being made available.We do not have enough information to draw any definitive chart.
2. What are the key issues (both those mentioned above and any others you can thinkof), which determine the time taken at each stage? Looking at the list of activities above, one can see that minimizing the time between each onedepends on a number of factors. ? Information flow – The faster the information moves between the three parties (thevictim, the vehicle with its staff and the hospital) the faster decision processes can start.Automated systems of accident notification, such as that described in the box, areuseful but more common means such as the advent of widespread mobile phoneownership will help reduce information-transmission times. ? Decision making – Although partly dependent on the quality of information provided, it isimportant that all staff are trained to make decisions (in this case usually diagnosticdecisions) as quickly as possible. Training will need to be designed to promote fast andaccurate diagnostic decision making. ?Skills availability – This is related to the above point; if the necessary skills that areavailable in the diagnosis and treatment in the vehicle can be speeded up. At itsextreme, this would involve a full medical team and all equipment being carried onboard the vehicle, which is clearly impractical.
However, the decision on what skills tohave aboard the vehicle (there are doctors carried on the helicopter) and whatequipment to have on board (a trade-off between weight and availability of equipmenton the helicopter) are key issues.Nigel Slack, Stuart Chambers & Robert Johnston, Operations Management , fifth edition,Instructor’s Manual22© Nigel Slack, Stuart Chambers & Robert Johnston 2007 ? Journey times – The location of hospitals in heavy accident areas can reduce journeytimes. Probably the most significant move of recent years is to position ambulancesaway from their home base and near potential accident zones, as mentioned in the box(it’s a lot cheaper than moving hospitals). ? Capacity management – The problem with accidents is that they cannot be planned inadvance.Some times are known for being dangerous (a rainy Friday evening whenpeople are returning home from work, for example). But there will always be someelement of uncertainty.
Providing plenty of resources during such emergenciesminimizes the chance that ambulances, doctors and so on will be busy, but this willobviously be expensive. To some extent this decision will always come down to howmuch, as a society, we are willing to pay to minimize accident trauma. Taxi Stockholm 1. How can Taxi Stockholm keep its dependability high during those times whendemand is high and traffic is congested?Taxi Stockholm seem to use two methods of keeping their dependability high. First, they ensurea high level of communication with the customer through their call centre.
They deliberately donot emphasize productivity so that call centre operatives can keep the customer informedregarding the level of service they should expect to receive (for example, how long they willhave to wait for a taxi). This also allows call centre operators to manage customers’expectations. Remember it is not speed that they are competing on but dependability.It is moreimportant to Taxi Stockholm that, even if the taxi will not arrive for half an hour, it really doesarrive within half an hour. The second method they use is some very advanced technology.
TaxiStockholm are known for their investment in state-of-the-art identification, positioning andautomatic routing technology. Again, this enables the operation to obtain accurate informationthat helps it to make reasonable estimates of time of arrival and journey times. Flexibility and dependability in the newsroom 1. What do the five performance objectives mean for an operation such as the BBC’snewsroom? ?Quality – primarily means that the news report is fair and accurate but also means thatvideo downloads and link ups and so on work seamlessly. ? Speed – means that a journalist can cover any ‘breaking’ news quickly and his or her report is transmitted back to the newsroom quickly. ? Dependability – means that the news bulletin can go out on time. Most televisionstations programme their news at set times of day. Being late is not an option.
? Flexibility – means being able to hold several news stories together with video reportsand make the decision about which to include and in what order as late as possible. Cost – means being able to do all the above without an army of news reporters, cameraoperators, presenters, studio technicians and so on. 2. How do these performance objectives influence each other? They are all related to some extent but the relationship, which is highlighted in the box is thatbetween flexibility and dependability (with some quality thrown in). In effect the argument beingmade is that the latest video handling technology enables the most appropriate mix of stories(highest quality programme) to be broadcast with absolute dependability. Nigel Slack, Stuart Chambers & Robert Johnston,Operations Management , fifth edition,Instructor’s Manual23© Nigel Slack, Stuart Chambers & Robert Johnston 2007 Everyday low prices at Aldi 1. What are the main ways in which Aldi operations try to minimize their costs? Aldi performs two sets of complementary things to keep their costs down; they minimize inputcosts and they reduce process complexity.
Minimizing input costs includes specializing in ‘private label’, that is Aldi branded products. This means that they can specify the composition (for example, recipe) of products to keep costsunder control.They do not have to support the brand marketing that is necessary with brandedproducts. They are also a large organization who can order products in very large quantitiesthereby keeping prices down. They do not use complex and costly fittings in their stores. Using‘open carton’ displays and deliberately not supplying grocery bags both eliminate costs thatother supermarkets incur.
The system is also simple. An ordering and stock management system that only has to copewith 700 items is much easier to design and operate than one, which has to cope with 30,000items.Supply chain, stock movement, quality management and other systems are thereforesimpler and cheaper. By using simple customer management devices such as the returnabledeposit only when a cart is brought back to the store, the job of collecting and returning trolleysis eliminated. Being cheap is our speciality 1.
Identify the various ways in which Hon Hai has kept its costs low. Four factors that have a significant impact on operations cost are mentioned in the short case. (a) It does not spend money on unnecessary overheads – unimposing corporateheadquarters and so on.
b) Economies of scale – its low prices have brought in more business, which increases thevolume of output of its factories, which in turn reduces the unit cost of producing itsproducts. (c) Economies of scale – the company makes many of its own components, presumablybecause it can do so cheaper than it could buy them from suppliers. In other words, it isretaining the profits from component manufacture itself. (d) It makes in low cost loca tions such as China. 2. How easy will it be for Hon Hai’s competitors to copy the way it has kept its costslow?In principle, there is nothing to stop Hon Hai’s competitors adopting exactly the same policies. Infact, many competitors are doing exactly the same thing. However, remember that Hon Hai hasthe advantage of doing all these things before many of its competitors even thought about them.
When any company tries something new, it will have to learn how to make its strategy workeffectively. Hon Hai has more experience of this than its competitors. Nevertheless, it will haveto maintain its level of organizational and process-learning if it is to stay ahead.It is also important to note that the cost efficiencies that come from operations- andprocessexcellencewithin the firm are far more difficult to copy than those that derive from simplyreducing input costs.
For example, Hon Hai gains significant cost advantage from producing inChina, but eventually all its competitors will be doing this. 24© Nigel Slack, Stuart Chambers & Robert Johnston 2007 CHAPTER 3 Operations strategyTeaching guide Introduction Think carefully before even including this chapter in your course.Clearly it is a vitallyimportant issue for any practising operations manager, but sometimes undergraduates c