Slide 3.1
Chapter 3
Substitutes for strategy
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.2
Look at four of the most commonly adopted approaches to
operations that are often used as ‘substitutes for strategy’
Total Quality Management
Lean operations
Business Process Reengineering
Six Sigma
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.3
Feigenbaum (generally held to be the originator of the term)
defines TQM as………
‘an effective system for integrating the quality
development, quality maintenance and quality
improvement efforts of the various groups in an
organisation so as to enable production and service
at the most economical levels which allow for full
customer satisfaction’
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.4
The elements of TQM
Meeting the needs and expectations of customers
Covering all parts of the organisation
Including every person in the organisation
Examining all costs that are related to quality,
especially failure costs
Getting things ‘right first time’
Developing the systems and procedures that
support improvement
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.5
EFQM excellence model
Leadership
People
Processes
People
results
Policy and
strategy
Customer
results
Partnership
and resources
Society
results
Key
performance
results
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.6
EFQM excellence model - Leadership
Processes
People
Leadership – how leaders
develop and facilitate the
achievement of the mission and
vision, develop values required
for long-term success and
implement these through
appropriate actions and
behaviour, and are personally
involved in ensuring that the
organisation’s management
system is developed and
implemented
People
results
Policy and
strategy
Customer
results
Partnership and
resources
Society
results
Key
performance
results
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.7
EFQM excellence model – People, policy and strategy,
partnerships and resources
Leadership
People – how the organisation
manages, develops and releases the
knowledge and full potential of its
people.
Policy and strategy – how the
organisation implements its mission
and vision through a clear stakeholderfocused strategy, supported by
relevant policies, plans, objectives,
targets and processes.
Partnerships and resources – how
the organisation plans and manages
its external partnerships and internal
resources to support its policy and
strategy and the effective operation of
its processes.
Processes
People
results
Key
performance
results
Customer
results
Society
results
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.8
Leadership
EFQM excellence model – Processes
People
Policy and
strategy
Partnership
and resources
Processes – how the
organisation designs,
manages and improves its
processes in order to support
its policy and strategy and
fully satisfy and generate
increasing value for its
customers and other
stakeholders.
People
results
Key
performance
results
Customer
results
Society
results
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.9
EFQM excellence model – People results, customer
results and society results
Leadership
People
Policy and
strategy
Partnership
and resources
Processes
People results – this covers
employees’ motivation, satisfaction,
performance and the services the
organisation provides for its people.
Key
performance
results
Customer results – this includes
customers’ loyalty and their
perceptions of the organisation’s
image, product and services, sales
and after-sales support.
Society results – this relates to the
organisation’s performance as a
responsible citizen, its involvement in
the community in which it operates
and any recognition it might have
received.
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.10
EFQM excellence model – Key performance results
Leadership
People
Processes
People
results
Policy and
strategy
Customer
results
Partnership and
resources
Society
results
Key performance results –
this shows the financial and
non-financial outcomes of the
organisation’s planned
performance, including such
things as cash flow, profit,
meeting budgets, success rates
and the value of intellectual
property.
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.11
TQM elements in the four operations strategy decision categories
Capacity
Resource usage
Market competitiveness
Performance
objectives
Quality
Speed • Provide resources to
support quality
Dependability • Use quality as
performance criterion
Flexibility
Cost
Capacity
Supply
Network
Process
Technology
Development
and
Organisation
Decision areas
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.12
TQM elements in the four operations strategy decision categories
(Continued)
Supply Network
Resource usage
Performance
objectives
Speed
Dependability
Market competitiveness
• Continuous quality
emphasis with
suppliers
• Purchase using
quality criterion
• Work on functional
barriers
Quality
Flexibility
Cost
Capacity
Supply Network
Development
Process
and
Technology Organisation
Decision areas
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.13
TQM elements in the four operations strategy decision categories
(Continued)
Process Technology
Resource usage
Performance
objectives
Speed
Dependability
Flexibility
Market competitiveness
• Built-in quality in
process
• Statistical process
control
• Enhance quality
capability
• Quality as a
performance criterion
Quality
Cost
Capacity
Supply
Network
Process Technology
Development
and
Organisation
Decision areas
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.14
TQM elements in the four operations strategy decision categories
(Continued)
Development and Organization
• Long-term plans
• Quality culture
• Continuous improvement
• Quality performance
measurement and control
• Training and education
emphasis
• Operational supervision
is important
• Communication
• Appropriate
organisational structure
Performance
objectives
Quality
Speed
Dependability
Flexibility
Cost
Capacity
Supply
Network
Process
Technology
Market competitiveness
Resource usage
Development
and Organisation
Decision areas
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.15
The lean approach aims to meet demand instantaneously, with
perfect quality and no waste
It means that the flow of products and services always
delivers….
exactly what customers want (perfect quality)
in exact quantities (neither too much nor too little)
exactly when needed (not too early or too late)
exactly where required (not to the wrong location)
at the lowest possible cost.
It results in items flowing rapidly and smoothly through
processes, operations and supply networks.
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.16
The lean approach to operations includes…..
Customer-based demand triggers
Synchronised flow
Involvement behaviour
Waste elimination
Waste from irregular flow
Waste from inexact supply
Waste from inflexible response
Waste from variability
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.17
Lean flow – how do items move through your processes?
Traditional approach – ‘Push’
Work
centre
Buffer
inventory
Work
centre
Buffer
inventory
Work
centre
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.18
Lean flow – how do items move through your processes?
(Continued)
Lean approach – ‘Pull’
Work
centre
Work
centre
Delivery
Request
Request
Request
Work
centre
Delivery
Work
centre
Delivery
….Don’t send nothin’ nowhere…. Make ‘em come
and get it….
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.19
The four elements of lean
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.20
productivity
problems
WIP
Defective
materials
Scrap
Rework
Downtime
Reduce the level of inventory (water) to reveal the operation’s
problems
WIP
Defective
materials
productivity
problems
Scrap
Rework
Downtime
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.21
Lean elements in the four operations strategy decision categories
Capacity
Resource usage
Market competitiveness
Performance
objectives
Quality
Speed • Sacrifice high
utilisation for fast and
Dependability dependable
throughput
Flexibility
Cost
Capacity
Supply
Network
Process
Technology
Development
and
Organisation
Decision areas
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.22
Lean elements in the four operations strategy decision categories
(Continued)
Supply Network
Resource usage
Performance
objectives
Speed
Dependability
Flexibility
Market competitiveness
• Supplier development
to ensure quality and
delivery conformance
• Integrated supply
network coordination
to ensure synchronous
flow
• Work on functional
barriers
Quality
Cost
Capacity
Supply Network
Process
Technology
Development
and
Organisation
Decision areas
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.23
Lean elements in the four operations strategy decision categories
(Continued)
Process Technology
Resource usage
Performance
objectives
Speed
Dependability
Market competitiveness
• Small flexible
technology
• Emphasis on
equipment reliability
• Reduce process
variability
Quality
Flexibility
Cost
Capacity
Supply
Network
Process Technology
Development
and
Organisation
Decision areas
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.24
Lean elements in the four operations strategy decision categories
(Continued)
Development and Organisation Resource usage
Performance
objectives
improvement
through waste
elimination
• Smooth synchronised
flow exposes waste
• People motivation and
involvement through
reduced buffering
Speed
Dependability
Flexibility
Cost
Capacity
Supply
Network
Process
Technology
Market competitiveness
• Continuous
Quality
Development
and Organisation
Decision areas
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.25
What is BPR?
BPR has been defined as…..
the effective
‘an
fundamental
system
rethinking
for integrating
and radical
the quality
redesign of
business processes
development,
qualitytomaintenance
achieve dramatic
and quality
improvementsefforts
improvement
in critical,
of the
contemporary
various groups
measures
in an of
performance so
organisation
such
as as
to enable
cost, quality,
production
service
and
and
service
speed.
at
the most economical levels which allow for full
customer satisfaction’
Hammer, M. and Champy, J. (1993) Reengineering the Corporation: A manifesto for
business revolution, New York: Harper Business.
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.26
BPR advocates reorganising (re-engineering) processes to reflect
the natural processes that fulfil customer needs
Functionally-based processes
Function
1
Function
2
Function
3
Function
4
End-to-end process 3
Customer needs fulfilled
End-to-end process 2
Business processes
Customer needs
End-to-end process 1
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.27
BPR elements in the four operations strategy decision categories
Capacity
Resource usage
Market competitiveness
Performance
objectives
Quality
Speed • Balance capacity
Dependability
across end-to-end
processes
Flexibility
Cost
Capacity
Supply
Network
Development
Process
and
Technology Organisation
Decision areas
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.28
BPR elements in the four operations strategy decision categories
(Continued)
Supply Network
Resource usage
Performance
objectives
Speed
Market competitiveness
• Internally, customers
become their own
supplier rather than
depending on another
function
Quality
Dependability
Flexibility
Cost
Capacity
Supply Network
Process
Technology
Development
and
Organization
Decision areas
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.29
BPR elements in the four operations strategy decision categories
(Continued)
Process Technology
Resource usage
Performance
objectives
Speed
Market competitiveness
• Information
technology is an
enabler of cost
reduction
Quality
Dependability
Flexibility
Cost
Capacity
Supply
Network
Process Technology
Development
and
Organisation
Decision areas
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.30
BPR elements in the four operations strategy decision categories
(Continued)
Development and Organisation
Resource usage
Performance
objectives
making at the lowest
practical level
• Rethink business
processes in a crossfunctional manner
• Dramatic cost
reductions can come
from the elimination of
unnecessary process
steps
Speed
Dependability
Flexibility
Cost
Capacity
Supply
Network
Process
Technology
Market competitiveness
• Locate decision
Quality
Development
and Organisation
Decision areas
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.31
What is Six Sigma?
Named because it requires the natural variation of processes (± 3
standard deviations, or ‘sigma’) to be half their specification range
So, the specification range of a product or service should be ± 6 the
standard deviation of the process.
Now the definition of Six Sigma has widened to be defined as….
‘… a disciplined methodology of defining,
measuring, analysing, improving and controlling the
quality in every one of the company’s products,
processes and transactions – with the ultimate goal
of virtually eliminating all defects.’
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.32
The elements of Six Sigma
Customer-driven objectives
Use of evidence
Structured improvement cycle
Structured training and organisation of improvement
Process capability and control
Process design
Process improvement
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.33
The DMAIC cycle used in Six Sigma
Define – identify
problem, define
requirements and
set the goal
Control – establish
performance
standards and deal
with any problems
Measure – gather
data, refine problem
and measure inputs
and outputs
Improve – develop Analyse – develop
improvement
problem hypotheses,
ideas, test,
identify ‘root causes’
establish solution
and validate
and measure
hypotheses
results
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.34
Six Sigma elements in the four operations strategy decision
categories
Process Technology
Resource usage
Performance
objectives
Market competitiveness
• Emphasis on process
control
Quality
Speed
Dependability
Flexibility
Cost
Capacity
Supply
Network
Process Technology
Development
and
Organisation
Decision areas
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.35
Six Sigma elements in the four operations strategy decision
categories (Continued)
Development and Organisation
Resource usage
Performance
objectives
a structured decisionmaking cycle
• Strong evidencebased methodology
•Very substantial
training required
• Emphasis on process
knowledge
Speed
Dependability
Flexibility
Cost
Capacity
Supply
Network
Process
Technology
Market competitiveness
• Improvement through
Quality
Development
and Organisation
Decision areas
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.36
Some points for discussion
How much should one be influenced by the experiences of
other organisations?
Operations that rely on others to define what is ‘best
practice’, are always limiting themselves to currently
accepted methods of operating or currently accepted limits
to performance.
Best practice is not ‘best’ in the sense that it cannot be
bettered, it is only ‘best’ in the sense that it is the best
one can currently find.
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.37
Some points for discussion (Continued)
Senior managers sometimes use these new approaches
without fully understanding them.
If senior managers do not understand these approaches,
how can the rest of the organisation take them seriously?
The details of these approaches are not simply technical
matters. They are fundamental to how appropriate the
approach could be in different contexts.
Not every approach fits every set of circumstances. So,
understanding in detail what each approach means
must be the first step in deciding whether it is
appropriate.
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.38
Some points for discussion (Continued)
All these approaches are different.
Does the approach emphasise a gradual, continuous
approach to change, or a more radical ‘breakthrough’
change?
What is the balance between whether the approach
emphasises what changes should be made or how
changes should be made?
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.39
Each of the ‘new approaches’ are positioned in terms of their
emphasis on what changes to make or how to make the changes,
and whether they emphasise rapid or gradual change
Emphasis on
rapid change
BPR
Six Sigma
Emphasis on
what to do
Emphasis on
how to do it
Lean
TQM
Emphasis on
gradual change
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012
Slide 3.40
Some points for discussion (Continued)
These approaches are not strategies, but they are strategic
decisions.
Operations strategy is the ‘reconciliation of market
requirements and operations resource capabilities’.
An individual enterprise’s market requirements and
operations resource capabilities are unique.
Operations strategy is individual and specific to one
organisation at one point in time, but these approaches
are generic.
They are an important part of a strategy, but not
strategies in themselves.
Nigel Slack and Michael Lewis, Operations Strategy, 3rd Edition, © Nigel Slack and Michael Lewis 2012