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BRIEF CONTENTS

Part 1: Introduction to Operations Management 1 1. Operations Management 3 2. Operations Performance 36 3. Operations Strategy 70 Part 2: Structural Issues 107 4. Facilities 109 5. Capacity 135 6. Process Design and Technology 164 7. The Supply Network 201 Part 3: Infrastructural Issues 231 8. Planning and Control 233 9. Inventory Management 264 10. Lean Operations 293 11. Quality Management 321 12. People in Operations Management 362 13. Risk, Resilience and Recovery 396 14. Operations Improvement 424 15. Innovation in Operations Management 457 Part 4: The Future of Operations Management 489 16. Emerging Challenges in Operations 490

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CONTENTS

Tables and Figures xvi Internationalization theories 21 Preface xviii Vernon’s product cycle theory 21 Dunning’s eclectic theory 21 Letter to the Student xx Stage theories 22 Letter to the Lecturer xxi THE INTERNATIONALIZATION OF Case Study Grid xxiii SERVICES 23 Tour of the Online Resource Separated services 24 Centre xxvi Demander-located services 25 About the Author xxvii Provider-located services 25 Peripatetic services 25 Guided Tour of the Book xxviii CHALLENGES OF OPERATING Author’s Acknowledgements xxx INTERNATIONALLY 27 Publisher’s BENEFITS FROM OPERATING Acknowledgements xxxi INTERNATIONALLY 28

Part 1: Introduction to 2. Operations Performance 36 Operations Management 1 INTRODUCTION 37 PERFORMANCE OBJECTIVES 38 1. Operations Management 3 PERFORMANCE MEASUREMENT 42 INTRODUCTION 4 PERFORMANCE MEASURES 44 THE TRANSFORMATION MODEL 6 Economy 44 DIFFERENT TYPES OF OPERATIONS 7 Efficiency 45 SERVICE OPERATIONS 9 Effectiveness 47 THE CHANGING NATURE OF DEVELOPMENTS IN PERFORMANCE OPERATIONS MANAGEMENT 13 MEASUREMENT 48 Moving beyond the factory 13 PERFORMANCE MEASUREMENT SYSTEMS 49 The increased importance of the supply network 14 PERFORMANCE STANDARDS 51 The growing importance of The organization’s past services 14 performance 51 THE INTERNATIONAL CONTEXT FOR The organization’s own targets 52 OPERATIONS MANAGEMENT 17 Competitors’ performance 52 Technological 17 Best practice 53 Political 18 Market requirements 53 Sociocultural 20 BENCHMARKING 54 Economic 20 THE TRIPLE BOTTOM LINE 57

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LOCATION AND OPERATIONS Part 2: Structural Issues 107 PERFORMANCE 61 4. Facilities 109 3. Operations Strategy 70 INTRODUCTION 110 INTRODUCTION 72 LOCATION DECISIONS 110 THE NATURE OF STRATEGY 72 Weighted scoring 113 Organizational-level strategy 73 Centre of gravity 114 Business-level strategy 73 THE SCALE AND SCOPE OF Functional-level strategy 74 OPERATIONS FACILITIES 119 OPERATIONS MANAGEMENT AND THE STRATEGIC ROLE AND PURPOSE STRATEGY 75 OF OPERATIONS FACILITIES 121 OPERATIONS STRATEGY 77 The primary strategic OPERATIONS STRATEGY – PROCESS 80 reason for the facility 122 Top-down 80 The level of competence Bottom-up 81 on-site 122 Market-led 82 THE CONFIGURATION OF Operations-led 82 OPERATIONS FACILITIES 124 Approaches to configuring OPERATIONS STRATEGY – CONTENT 83 international operations 124 Structure 83 Generic international Infrastructure 84 configurations 125 INTERNATIONAL OPERATIONS Configuring of international STRATEGIES 86 facilities 127 Market access strategy 86 Resource-seeking strategy 87 5. Capacity 135 THE INTERNATIONALIZATION OF INTRODUCTION 136 OPERATIONS MANAGEMENT AND THE TRANSFORMATION MODEL 88 THE MEANING OF CAPACITY 137 Inputs 89 THE MEASUREMENT OF CAPACITY 139 The process 89 FORECASTING DEMAND 141 Outputs 91 CAPACITY TIMING DECISIONS 143 ENTERING FOREIGN MARKETS 92 Capacity leads demand 143 Direct export 92 Capacity matches demand 144 Joint venture 93 Capacity lags demand 144 Establish a sales subsidiary 94 CAPACITY INCREMENTS 146 Establish a production facility 94 CAPACITY MANAGEMENT 148 INTERNATIONAL OPERATIONS Level capacity 148 AND BUSINESS STRATEGY 97 Chase demand 150 Global sourcing 98 Demand management 152 Location 98 MANAGING CAPACITY IN Network effects 98 CUSTOMER SERVICE OPERATIONS 153 Competition 99 Yield management 153

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Queuing theory 154 THROUGHPUT 191 THE DYNAMICS OF CAPACITY QUEUING SYSTEMS 192 MANAGEMENT 157 Single line, single server 192 Single line, multiple servers 192 6. Process Design and Multiple lines, multiple servers 192 Technology 164 The psychology of queuing 192 INTRODUCTION 166 DIFFERENT PROCESS 7. The Supply Network 201 TECHNOLOGIES 167 INTRODUCTION 202 Material-processing THE IMPORTANCE OF technologies 167 PURCHASING 204 Customer-processing SUPPLY NETWORKS 204 technologies 170 THE CONFIGURATION OF THE Information-processing SUPPLY NETWORK 206 technologies 172 THE COORDINATION OF THE DECISION-MAKING ABOUT SUPPLY NETWORK 209 TECHNOLOGY 174 COLLABORATIVE PLANNING, THE CRUCIAL ROLE OF ICT 178 FORECASTING AND Localized exploitation 178 REPLENISHMENT (CPFR) 212 Internal integration 178 The SCOR model 213 Business process redesign 178 THE OUTSOURCING DECISION 213 Business network redesign 179 GLOBAL SOURCING 217 Business scope redefinition 179 RELATIONSHIPS WITH SUPPLIERS 221 TECHNOLOGY ADOPTION SINGLE VERSUS MULTI-SOURCING 223 STRATEGIES 179 TECHNOLOGY TRANSFER 180 Part 3: Infrastructural PROCESS CHOICE 183 Issues 231 Project 183 Jobbing 184 8. Planning and Control 233 Batch 184 INTRODUCTION 234 Mass 184 THE PRINCIPLES OF PLANNING Continuous 184 AND CONTROL 235 Professional services 185 THE ACTIVITIES OF PLANNING Mass services 185 AND CONTROL 238 Service shop 185 Strategic operations planning 238 THE LAYOUT OF PROCESS Aggregate planning 239 EQUIPMENT 187 Master production scheduling 240 Fixed position layout 188 Activity scheduling 240 Process layout 189 Expediting 246 Product layout 190 MEETING CUSTOMER DEMAND 249 Group (or cellular) layout 190 P:D RATIOS 252

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PLANNING AND CONTROL Simplicity in equipment and PHILOSOPHIES 253 layout 311 Supply-push 253 Total quality 312 Demand-pull 254 Product design 312 COMPUTER-BASED PLANNING Lean supply 312 AND CONTROL 255 Total people involvement 313 OPTIMIZED PRODUCTION Total productive maintenance 313 TECHNOLOGY (OPT) 256 LEAN IN SERVICES 314 9. Inventory Management 264 LEAN AS A BEST PRACTICE MODEL 315 INTRODUCTION 265 11. Quality Management 321 TYPES OF INVENTORY 265 INTRODUCTION 322 THE ROLE OF INVENTORY 266 THE EVOLUTION OF QUALITY TYPES OF DEMAND 270 IDEAS 323 MANAGING INDEPENDENT W. Edwards Deming 323 DEMAND INVENTORY 270 Joseph Juran 323 The order quantity decision 270 Armand Feigenbaum 323 The order timing decision 272 Philip Crosby 324 INVENTORY LEVEL ANALYSIS 275 Genichi Taguchi 324 MANAGING DEPENDENT DEMAND INVENTORY 278 Kaoru Ishikawa 324 THE CUSTOMER SERVICE Quality inspection 324 ANALOGY 285 Quality control 325 Quality assurance 326 10. Lean Operations 293 Total quality management INTRODUCTION 294 (TQM) 326 LEAN PRINCIPLES 295 Quality in service operations 328 SYNCHRONIZATION 296 DEFINING QUALITY 329 LEAN AS A PLANNING AND The specification: ‘What can CONTROL SYSTEM 297 I expect when I buy Line balancing 297 the product?’ 331 Kanban 299 Conformance to specification: ‘Will it do what I expect?’ 332 LEAN AS AN INVENTORY CONTROL SYSTEM 301 Reliability: ‘Will it continue to do what I expect?’ 332 WASTE ELIMINATION 304 Delivery: ‘When can I have it?’ 332 CONTINUOUS IMPROVEMENT 305 Price: ‘How much do I have THE INVOLVEMENT OF ALL to pay?’ 332 EMPLOYEES 305 THE QUALITY GAPS MODEL 333 LEAN TECHNIQUES AND PRACTICES 309 Gap 1: the gap between Smooth flow 309 customers’ expectations and Focus on set-ups 310 management’s perceptions of Standardized procedures 311 customers’ expectations 333

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Gap 2: the gap between GROUP WORKING 379 management’s perception of Virtual teams 381 customers’ expectations and Factors affecting team the product specification 333 effectiveness 381 Gap 3: the gap between the Workforce diversity 384 specification and the customers’ experience of the CULTURAL CONTEXT 384 product 334 Organizational culture 385 Gap 4: the gap between the National culture 387 customers’ experience and the OTHER NATIONAL CONTEXTUAL external communications to FACTORS 390 customers 334 Gap 5: the gap between the customers’ expectations and 13. Risk, Resilience and the customers’ experiences 334 Recovery 396 MEASURING QUALITY 336 INTRODUCTION 397 Operations measures 336 RISK 399 Financial measures 336 Internal failures 400 Customer measures 340 External failures 401 STATISTICAL QUALITY Detecting failure 403 CONTROL 340 Analysing failure 405 Acceptance sampling 340 Failure patterns 407 Statistical process control Measuring failure 407 charts 341 Learning from failures 409 THE ISO 9000 SERIES QUALITY RESILIENCE 410 MANAGEMENT SYSTEM 345 Improved process design 410 ISO 9000 AND TQM 348 Redundancy 410 QUALITY AWARDS 349 Fail-safing 411 SIX SIGMA 351 Maintenance of equipment 411 GLOBAL DIFFERENCES IN QUALITY MANAGEMENT 353 Total productive maintenance (TPM) 413 12. People in Operations RECOVERY 414 Management 362 SERVICE RECOVERY 417 INTRODUCTION 363 JOB DESIGN 364 14. Operations Scientific management 364 Improvement 424 Behavioural approaches 369 INTRODUCTION 425 REWARD AND REMUNERATION 374 THE PERFORMANCE GAP 425 Levels of pay 374 The scale and scope of the Performance-related pay 375 performance gap 426 Managing employee Setting priorities for performance 377 performance improvement 427

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APPROACHES TO PERFORMANCE THE NEW PRODUCT DEVELOPMENT IMPROVEMENT 430 PROCESS 468 Radical change 430 Idea generation 468 Continuous performance Idea selection 468 improvement 432 Preliminary design 469 Radical and incremental Prototype 469 improvement compared 433 Testing 469 THE PROCESS PERSPECTIVE ON Final design 469 IMPROVEMENT 435 PROCESS INNOVATION 471 Business process re-engineering (BPR) 436 New service development 471 BUSINESS PROCESS REDESIGN 437 THE IMPACT OF TECHNOLOGICAL INNOVATION ON PRODUCTS AND Identify and document existing PROCESSES 472 processes 437 The fluid phase 473 Identify processes for improvement 438 The transitional phase 473 Evaluate process design The specific phase 473 alternatives 439 NEW PRODUCT DESIGN Process redesign tools 441 PRACTICES 477 TOOLS AND TECHNIQUES FOR PROCESS IMPROVEMENT TOOLS 445 NEW PRODUCT DESIGN 478 Scatter diagrams 445 Design for manufacture Pareto diagrams 446 (DFM) 478 Cause and effect diagrams 446 Quality function deployment Why-why analysis 447 (QFD) 478 OPERATIONS IMPROVEMENT Taguchi methods 479 THROUGH ORGANIZATIONAL Complexity reduction 479 LEARNING 447 Value engineering and value Knowledge management 448 analysis (VE/VA) 480 NEW PRODUCT DEVELOPMENT 15. Innovation in Operations IN INTERNATIONAL Management 457 ORGANIZATIONS 480 INTRODUCTION 458 R&D-related factors 481 INNOVATION 459 Non-R&D factors 481 NEW PRODUCT DEVELOPMENT 460 TYPES OF NEW PRODUCTS 464 Part 4: The Future of Incremental products 464 Operations Management 489 Next-generation products 464 Breakthrough products 464 16. Emerging Challenges in SOURCES OF NEW PRODUCT Operations 490 IDEAS 465 INTRODUCTION 491 Market-pull 465 THE INTERNATIONALIZATION OF Technology-push 466 OPERATIONS MANAGEMENT 492

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CURRENT ISSUES 495 Primary measure of Low-cost labour 495 performance 503 Population changes 496 Competitive imperative 504 Risks of discontinuity 497 Performance improvement 505 Environmentalism 497 Relationship between Social responsibility 498 performance objectives 505 Competition 505 OPERATIONS MANAGEMENT AND DIGITAL TECHNOLOGIES 501 Unit of analysis 502 Glossary 512 Goal 503 Author Index 521 Domain of OM 503 Dominant OM activity 503 Subject Index 523 OM tools 503

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CHAPTER 1 OPERATIONS MANAGEMENT

LEARNING OBJECTIVES

On completion of this chapter, you should be able to: • explain what is meant by the term operations management; • understand some of the basic concepts of operations management; • distinguish between different types of operations; • appreciate the growing importance of service operations; and • understand the impact of globalization on the practices of operations management.

RUNNING CASE STUDY H&M: A GLOBAL FASHION COMPANY

From its humble beginnings in 1947 as a single but also the physical systems that can ensure shop in Sweden, H&M is now one of the biggest goods ordered on it will be delivered to customers names in the retail fashion industry. H&M in that country. employs over 130,000 people, both in Sweden The most visible part of H&M’s operations and in its nearly 4,000 stores, which are in over is its stores. The company says it wants these 60 countries, right the way across the globe, to provide an ‘inviting, inspiring and exciting including most countries in Europe, as well as experience’ to shoppers. While every store is many in the Middle East, Africa, Asia and the unique, any is immediately recognizable as H&M Americas. It plans to open further stores (it has from its signage, window displays and internal a target of increasing the number of stores by layouts. All stores seek to place the clothes centre 10–15 per cent each year), as well as expanding stage through the use of internal displays that its online sales operations by rolling out its digital aim to provide styling tips and inspiration. H&M’s presence to an increasing number of countries. online stores try to emulate this experience H&M’s digital ambition means setting up not only in the virtual world, while providing additional a dedicated website to serve each new country, accessibility for customers who can’t easily get

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to H&M physical stores, and enhanced levels of fabrics (mainly cotton) and the other components service by enabling customers to view and order needed. H&M’s logistics and distribution a much wider range of merchandise (and in many operation must then ensure that the right goods more sizes) than would be possible in any physical end up in the right quantity as required by each store. store. Factory shipments are transported, mostly However, the stores are only the end point of a by sea and rail, to H&M’s logistics centres, which much longer supply process. This starts with design. are strategically located in the geographic vicinity All of H&M’s garments are designed in Stockholm of its stores in each region. Stores do not hold by its in-house team of clothing designers, pattern- backup stocks, and so must replenish as required makers and print designers. They aim to provide from the distribution centres. In 2013, H&M something for men, women, teenagers and launched its Garment Collecting Initiative, which children, whatever their taste or style. enables customers to hand in clothes that they no In contrast to the design process, H&M longer want for reuse or recycling. This is aimed at does not produce any of its garments in-house. creating a closed loop in textiles, so that nothing Rather, it draws on a network of over 1,900 ever goes to waste. The first H&M garments factories owned by as many as 900 independent containing materials from the Garment Collecting suppliers, which are based in countries such as Initiative were launched in 2014 – denim garments China, Turkey, Bangladesh, Cambodia and India. that contained 20 per cent recycled cotton. H&M views its suppliers as long-term strategic Source: www.hm.com (accessed 8 partners who manufacture its products, including September 2016). being responsible for sourcing the necessary

POINTS TO PONDER AS YOU READ THIS CHAPTER: »» Notice the different types of operations occurring throughout H&M’s business (e.g. design, production, logistics and distribution, retail). Some of these are manufacturing operations, and some are service operations. Each uses different types of resources to produce different kinds of outputs. »» Notice how H&M’s shops rely on a complex interconnected global supply network to ensure that goods are available to customers. »» Think about what led H&M to operate on such a vast global scale and about the challenges posed in managing all of these operations, both individually and collectively.

Operations management is INTRODUCTION concerned with the Operations management management of the resources and processes required is crucial to the lives of all of us. That is because by an organization operations management is responsible for the creation and delivery of all the to produce goods products and services that we need for our daily lives, including all the food that or services for we eat, the clothes that we wear, the transport we use, the health services that we customers. receive, and so on. All of these were brought to you courtesy of operations

The operations management. Unless you live as a self-sufficient hermit in an isolated cave, there function is is unlikely to be any aspect of your life that is not entirely dependent upon that part of the operations management. That is becauseoperations nearly function every physical product or organization intangible service that you consume or use is created and delivered by some kind that has the of business organization. And the is the part of that responsibility for operations organization that is responsible for producing the goods and services it supplies management. to its customers. All organizations have operations functions, although they often go under other names. These often reflect the specific activities that they carry out, for example catering, distribution or nursing. There is a misconception that

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operations management is only concerned with manufacturing activities. Although many of the concepts on which the academic study of operations management is based do have their origins in the manufacturing industries, many are equally applicable to services. Conversely, recent advances in the study of service operations have yielded valuable insights into the management of manufacturing operations. The distinction between manufacturing and services is in many respects artificial and increasingly irrelevant because most products have some element of service accompanying them. For example, when you buy a new computer (an entirely physical product), you assume that you are also buying access to aftersales services, such as operating guidance, software updates and repairs. Equally, many services have a tangible product as an integral part of what is delivered to the customer. For example, as a passenger on an airline (an entirely intangible service), your flight, especially if it is long-haul, is usually accompanied by the provision of on-board food and drink (an entirely physical product). Operations management is the most exciting of the business disciplines. Marketing is concerned with identifying and creating customer needs. Finance is concerned with ensuring that the organization has the necessary financial resources to conduct its business. Similarly, human resource management is concerned with ensuring that the organization has the necessary human resources it needs. Operations management is concerned with the management of the resources and processes required by an organization to produce goods or services for customers. The operations function can best be thought of as the ‘doing’ part of the organization. It is where the action is. Operations management is critical to the success or failure of an organization. Any organization exists to deliver a service of some kind and/or to make a product. If its operations management fails, then the organization will fail. The operations function is responsible for the majority of the organization’s costs, assets and people, typically accounting for 60–70 per cent of each (Hill, 2005). Operations management is important because of its direct impact on costs. No organization can be successful unless Internationaliza- its operations are managed cost-effectively. However, operations management tion is the process is also important because of its impact on non-cost factors such as the quality, of expanding busi- availability, timeliness and reliability of the goods and services provided by ness operations across international the organization. All customers judge the value of what they receive by some boundaries. At first, combination of these factors. No organization will be successful for long unless this might only it provides goods and services in a way that satisfies its customers by providing involve exporting them with the value they seek. or importing goods and/or services. The context in which operations management is practised has been changing in But it might go recent years. Until comparatively recently, most production processes in most on to involve the organizations were organized and took place within national boundaries. establishment of production facilities Although manufacturers may have imported the raw materials they needed, in other countries, most produced goods primarily, if not exclusively, for local consumption. Similarly, as well as facilities it was rare to find any service that was not produced and consumed locally. It was to support sales, internationalizationunusual to find production processes that crossed national boundaries. This has research and been changing for some time as the forces of globalization have led to the development, and other activities in of operations. For many organizations, the last decade has foreign countries. seen an acceleration of the trend towards the fragmentation of production processes. Today, many operations processes cross international boundaries in ways that were not previously possible. For example, the cup of coffee that you

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A newly industrialized buy from your local Starbucks coffee outlet may depend on operations taking economy (NIE), place in as many as 19 different countries. The coffee beans may come from sometimes also termed a newly plantations in countries as diverse as Kenya, Saudi Arabia, Indonesia and industrialized Colombia. The beans would have then been sent to one of the company’s roasting, country (NIC), is manufacturing and packaging plants in the US. The paper for the cups and a country that napkins could have been produced from forests in Sweden. The sugar could have has undergone a come from Brazil. The milk could have come from Australia. All the required final considerable level of industrialization products would then have to have been transported to your local Starbucks, one in the recent of 22,000 outlets worldwide in over 60 countries. Neither is Starbucks exceptional.newly past, switching its industrializedImprovements in economies transport systems(NIEs) have made the movement of materials much primary economic easier and cheaper. New centres of manufacturing have emerged in activity from , such as China, India, Brazil and Mexico, that agriculture to manufacturing, and offer resources, particularly labour, at a fraction of the cost available in traditional possibly services. manufacturing locations. Workers, especially those with the most sought-after NIEs are not quite expertise, can move between countries with much greater speed and ease than yet at the status of was the case in the past. Today’s financial systems and markets enable virtually the industrialized unlimited amounts of capital to be transferred across the world instantaneously. nations of the West, but are more And, perhaps most importantly, unlimited quantities of information, including advanced than the new ideas and innovations, can be communicated and shared almost countries of the instantaneously across the world thanks to the Internet. These factors have all Third World. become increasingly important not only to manufacturing, but also in many THEservices, TRANSFORMATION and particularly in information- andMODEL knowledge-based contexts. The transformation transformation process process is the system by which Any operation can be depicted as a that converts inputs inputs of resources into outputs of goods and services (see Figure 1.1). (e.g. people, » primary inputs equipment, For the inputs, it is useful to distinguish between: materials, energy, information) are » The et that al. are themselves transformed to become part of the converted into output of the operation. These are sometimes referred to as ‘transformed outputs of goods » resources’resources (Slack , 2013). Primary inputs can be materials and/or and services. information and/or customers. » The necessary to carryet out al. the transformation, but which do not themselves form part of the output. These are sometimes referred to as ‘transformingInputs resources’ (Slack , 2013). Primary inputs: • Materials • Information The Outputs • Customers transformation • Goods Resources: process • Services • Facilities • Consumables • People

Figure 1.1 The input-output transformation model for operations Source: adapted from Operations Management, 7th edition, by Nigel Slack, Alistair Brandon-Jones and Robert Johnston, Pearson Education Limited. © Nigel Slack, Stuart Chambers, Christine Harland, Alan Harrison, Robert Johnston 1995, 1998. © Nigel Slack, Stuart Chambers, Robert Johnston 2001, 2004, 2007, 2010. © Nigel Slack, Alistair Brandon-Jones, Robert Johnston 2013.

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» Facilities These can typically be classified as: » : These are the resources that are necessary to undertake the operation, but which are not used up in the operation. Typically, these include the land, buildings, equipment and vehicles used by the organization to perform the operation. These resources are usually intended to be used over several years. Consequently, they are normally designated as fixed » Consumablesassets by accountants, and their value appears in the fixed assets column of the balance sheet. » : These are the resources that are used up as part of the operation. Examples include the energy necessary to power buildings, plant » Peopleand machinery, and the materials necessary to maintain, repair and operate them (often referred to as MRO supplies). » : The human resources necessary to undertake the operation. These will usually include the staff of the organization. However, employees of other organizations might also be involved in the transformation process, for example those belonging to the suppliers or subcontractors of the organization undertaking the operation. The transformation model sees operations management as those activities that are concerned with how these resources are managed in order to produce the required outputs of goods and services. DIFFERENT TYPES OF OPERATIONS

Operations» can be classified into three different types depending upon which type of primary input is principally being transformed in the operation: » Material-processing operations are those in which materials are transformed either from one form to another, and/or from one place to another. Manufacturing operations in which raw materials and components are transformed into finished products fall into this category (e.g. manufacturing a car or producing a garment). Other material-processing » operations include mining, and the transport, storage and distribution of goods in warehousing and retailing operations. » Information-processing operations are those in which information is transformed from one form to another and/or from one place to another. There are many examples of information processing, including accountancy, banking, financial services, telecommunications and research of all kinds. » Nowadays, it is difficult to think of information-processing operations that do not involve the use of computers. » Customer-processing operations, in which the customer is transformed by the operation. There are many examples of this type of operation, including medical services (e.g. hospitals) in which sick people are, hopefully, made well, education, where people are transformed by gaining additional knowledge or skills, and entertainment, where people are transformed by the emotional benefit gained from the event. While one of these types of processing often predominates in any particular operation, many operations also typically involve two or even all three types.

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For example, a restaurant processes both materials (food) and customers; a book publisher processes both information (the text for the book) and materials (the paper, ink, etc.); and an airline processes customers (passengers) and materials (their baggage).

CASE STUDY TOYOTA: THE WORLD’S NUMBER ONE

With global sales now at 10 million vehicles per so dependent on intricate supplier collaboration, annum and climbing, Toyota finds itself as the it has been claimed that TPS helps to achieve this world’s leading auto manufacturer. US giant end, insofar as it minimizes defects. The eradication General Motors, which had previously held this of such design flaws also allows newly created title for 74 years, was dethroned in 2006, and products to reach the customer in a shorter time the Japanese automaker has not looked back than can be achieved by other companies, and since. In a financial climate in which most of with a greater level of quality control. the top automakers have experienced declines This approach to production has been both in sales and profits, Toyota stands out for researched and emulated by a number of its burgeoning financial returns, which are not international carmakers and is now considered restricted to the established US market, following the industry gold standard, while also finding investment in China’s developing market. traction within other sectors. Now articulated as Environmental and technological advancement, ‘lean’ production, numerous service environments in the form of its part-electric, part-petrol hybrid have also incorporated this approach. One such models, also creates healthy demand. Toyota’s surprising application of TPS methodology can Lexus subsidiary also taps into the US luxury be found within the field of healthcare, in which market, propelled in 2016 through its RX crossover the traditional focus upon meeting objectives is model, which exceeded sales forecasts. replaced with the prioritization of processes. Each Despite the fact that it dates back to 1937, role within the organization is defined in terms of Toyota rose from relative obscurity in the 1950s key competencies, and, as these are met, patient through Taiichi Ohno’s development of the Toyota needs are satisfied with greater consistency. Production System (TPS). Based on Japanese TPS has been regarded as the secret to principles such as jidoka (referring to human Toyota’s success, implementing increased automation), muda (elimination of waste) and flexibility and productivity while eradicating many kaizen (continuous improvement), TPS enables of the production errors that plague other car greater cohesion within the manufacturing manufacturers. As a result, the company does not process, particularly with regard to team- and need to resort to competitor-minded discounts in management-based tasks. In an industry that is order to satisfy a customer base that is happy to pay for quality. As Toyota continues to outperform its rivals for a fourth consecutive year, it now contemplates consolidating its position through business partnerships with manufacturers such as Daihatsu and Suzuki. And yet, at the heart of this increasingly outward-looking company remain the streamlining qualities facilitated through the TPS, which acts as an integral foundation for such growth. Sources: Magee, D. (2007) How Toyota Became #1, 1 December, available at: www.ft.com/content/ c2cd0f74-9c76-11dc-bcd8-0000779fd2ac

Getty Images/Hero Images (accessed 3 October 2016).

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Toussaint, J., Conway, P.H. and Shortell, S. (2016) The http://corporatenews.pressroom. Toyota Production System: What Does It Mean, and toyota.com/releases/toyota+lexus+scion+ What Does It Mean for Health Care?, 6 April, available january+2016+sales+ release.htm (accessed at: http://healthaffairs.org/blog/2016/04/06/ 3 October 2016). the-toyota-production-system-what-does- Treanor, S. (2014) Toyota Retains Number One it-mean-and-what-does-it-mean-for-health- Slot in Global Care Sales, 23 January, available at: care/ (accessed 3 October 2016). www.bbc.co.uk/news/business-25860234 Toyota Press Room (2016) Toyota Motor Sales Posts (accessed 3 October 2016). January 2016 Results, 2 February, available at:

QUESTIONS 1. What type of operations are most important to Toyota? 2. To what extent does Toyota’s success depend on its operations?

SERVICE OPERATIONS

Services are the services intangible outputs Operations» Tangibility can be classified more simply in terms of their outputs, as either from an operation. goods or . The factors that distinguish them are: » : Goods are physical products that can be touched, seen, tasted or smelled. As physical entities, goods can be stored and transported. The ownership of goods can be transferred from the supplier to the customer. » SimultaneityServices, on the other hand, are intangible, and therefore unlikely to possess any of these properties. » : Services are distinguishable from goods in that their production and consumption usually takes place simultaneously. As such, it is usually not possible to store a service that has just been produced for consumption at some time in the future. Normally, customers have to be » Customerpresent to contact receive the service when it is produced. On the other hand, goods can usually be stored ready for future consumption by a customer. » : Because of their intangibility and simultaneity, services normally require some degree of contact with the customer, although the degree of that contact can vary. Similarly, some services are much more labour-intensive than others, and might involve the customer coming » Qualityinto contact with large numbers of employees of the service delivery organization, such as in a visit to a hospital or staying in a hotel. » : Because of the nature of the output of a service operation, it is much more difficult to define and measure the quality of a service. The quality of a product can be defined and measured in terms of its functionality (i.e. its fitness for the purpose for which it is intended). The quality of a service, on the other hand, can often only be judged by its recipient. Service quality is dependent on the perception of a customer. Such perceptions may vary between one customer and another, and between the customer and the service deliverer. As such, service quality often depends upon the psychological state of a customer at the time of consumption. Indeed, some services are intended to change a customer’s psychological state.

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It is possible to think of examples that equate to the extremes of pure goods (coal mining) and pure services (psychotherapy). However, a closer consideration of the outputs of most operations reveals that it is rare to find such extremes. Usually, there are elements of service in most goods-producing operations. For example, even extractors of commodity goods such as coal or oil typically provide their customers with information about their chemical composition or offer technical advice on their use. Similarly, even producers of a highly customized service such as management consultancy will usually produce some tangible output, such as a written report of some kind. It is usually more helpful to think of the outputs of operations as being located somewhere on a continuum between pure services and pure goods (see Figure 1.2). Many service operations are different from those in manufacturing, in that The front office they usually require the operation to have some degree of contact with the is the area of customer. Organizations that treat their customers in the same way that they an operation in treat the inanimate objects that are materials are neither likely to retain existing which contact customers nor attract new ones. with customers normally takes The study of service operations has led to the developmentfront office of some usefulback place. officeconcepts in addition to those that have emerged from the study of manufacturing. One such concept is that of the difference between the and the The back office is the area of an . The area in which contact with customers occurs is termed the front operation in which office. This primarily involves customer-processing operations. The area where there is normally there is normally no contact with customers is termed the back office. This may no contact with involve information- and/or material-processing operations (see Figure 1.3). customers. The transforming resources required in the front office are likely to be significantly different than those needed in the back office. In particular, operations in the front

Coal mining

Automobile manufacture

Takeaway food

Restaurant

Dentist

Management consultancy

Psychotherapy

Pure goods Pure services

Figure 1.2 The goods-services continuum Source: inspired by information in Slack et al. (2013).

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Front Office Customers Customers

Back Office

Figure 1.3 Front office/back office operations Source: adapted from Operations Management, 6th edition, by Nigel Slack, Stuart Chambers, and Robert Johnston, Pearson Education Limited. © Nigel Slack, Stuart Chambers, Christine Harland, Alan Harrison, Robert Johnston 1995, 1998. © Nigel Slack, Stuart Chambers, and Robert Johnston 2001, 2004, 2007, 2010.

office need to revolve around the customer. The people that work in the front office are likely to require quite different skills than those in the back office. Front office staff need high levels of interpersonal skills if they are to interact successfully with customers. The physical resources used in the front office, buildings, machinery and equipment may also need to be quite different from those in the back office. Indeed, the front and back offices may well be physically located in quite different places. However, the relationship and interaction between front and back office operations is often a key part of the management of operations. WHEN THINGS GO WRONG

CASE STUDY HONG KONG DISNEYLAND: THINGS CAN ONLY GET BETTER

Hong Kong Disneyland’s final construction on composition. Reportedly, such design choices the reclaimed land of Lantau Island in 2005 even dictated the rotation of the front gate by marked the culmination of a $1.8 billion joint 12 degrees, which a feng shui specialist assured partnership with the Hong Kong government. would lead to greater prosperity in the park’s Targeting not only the flourishing wealth found future. Clearly, park management were leaving among China’s citizens, the park also attracted a nothing to chance. significant number of visitors from surrounding However, after opening its gates in September South East Asia. To this end, designers wished 2005, it became clear that there were some to incorporate elements of Chinese tradition and significant problems in its operations. Despite the culture through the use of feng shui in its stylistic fact that, at 30,000 visitors, the park had the lowest capacity of all Disneyland parks, this was revealed to be an unmanageable number when 29,000 locals converged on Hong Kong Disneyland on the day prior to its grand opening. Unfortunately, these prospective visitors fell victim to the irony of 45-minute waits for fast food and ride queues of up to two hours, a fact not wasted on local media, who were quick to comment on the park’s chaotic management. The day after, on the park’s official opening, a seemingly manageable 16,000 visitors gained entry, with approximately one-third comprising of mainland Chinese park-goers, and it was this group that locals blamed for, among

GRAPHEAST other things, smoking in non-designated areas,

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queue-jumping, public urination and spitting. Park call on Disneyland to make improvements both staff also bore the brunt of customer blame on to entry procedures and ticketing. Since this the basis that such visitors should not have been intervention, park pricing, opening times and admitted entry, and, even on the opening day ticket policy have been altered in order to spread itself, it was reported that staff were discourteous admittance throughout the week and ease the and unhelpful. strain that is placed on the park infrastructure. For Hong Kong Disneyland, the problems Date-specific tickets are now used to ease did not end on its opening day, as approximately congestion during busy periods, and particularly 50 rides experienced technical difficulties, Chinese holidays. Better staff training now leading to the employment of safety protection ensures that Cantonese, English and Mandarin systems. As a result of such shutdowns, there can be spoken and, along with multilingual were six instances of visitor sickness and minor guide maps, these help to ensure that customer injuries sustained. In addition, worker complaints satisfaction is achieved across the broad range of included commuting, rota and management visitor nationalities. communication problems. Marking perhaps the A new induction programme, aimed at nadir of the park’s woes, during Chinese New quickly introducing mainland tourists who Year, in February 2006, a ticketing malfunction are unfamiliar with the Disney brand, has also led to entrance having to be refused to new been introduced. Clearly, without the previous visitors who had valid tickets, because the park childhood exposure to such characters, a visit was already full to capacity. As a consequence to the park would represent an extremely of the over-ticketing fiasco, some prospective disorientating, and perhaps even alienating, park-goers stormed their way in, and the sight experience, so Disney has worked to minimize of a child being passed over spiked gates to his this possibility, and, in doing so, maximize brand open-armed parents who waited inside the park exposure. To this end, the park has developed a provided local television with a poignant visual pre-show movie that can be shown to its visitors example of the park’s inadequate planning. when they initially get to the park. Upon entry, Since then, further complaints have been visitors are taken to an area for approximately made regarding the park’s lack of size, attractions 15 minutes, where they are regaled with the and competent staff. Disney enthusiasts also cornucopia of Disney characters and their make unfavourable comparisons between Hong associated attractions. This allows Chinese Kong’s 22 major attractions, compared with tourists to learn about Disney’s history while Tokyo’s 45, and Paris and Florida’s 44 and 65, rendering Hong Kong Disneyland as increasingly respectively. This considered, Hong Kong bears attractive to Chinese travel agents. the highest cost per ride of all its equivalent parks. Finally, in 2012, the park turned its first As previously alluded to, tensions between Hong profit, following six years of continual losses. Kong locals and mainland Chinese visitors can Attraction investment has facilitated consistent quickly escalate, and such visitors lamented the visitor figures, and the park finds itself inthe park’s lack of Mandarin instruction, which is the prestigious group of the world’s top 15 most dominant language of China. This problem arises visited theme parks. And yet, significant threats from the fact that Cantonese is the language of are posed by a struggling Chinese economy southern China, including Hong Kong, but it is and the rival Disneyland Shanghai park, which unintelligible to a purely Mandarin speaker, which is three times its size. However, as Hong Kong remains the language of the Chinese government. Disneyland has shown, the Shanghai park One implication of this linguistic impasse was must continue to closely monitor the 10,000 found in the live shows, in which the characters employees who worked on its opening day spoke no Mandarin and the props and voice- in order to make continual improvements to overs on all but one of the rides were in English. customer experience. The resort’s management acknowledged such developmental difficulties, vowing that such Sources: Boland, R. (2016) What Is the Difference problems remained common to all new ventures between Mandarin and Cantonese?, 30 March, and that improvements could be made. available at: http://gohongkong.about.com/ At the peak of the park’s problems in 2006, od/travelplanner/f/languages_mandarin_ even the Hong Kong government was forced to cantonese.htm (accessed 3 October 2016).

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Bradsher, K. (2006) At Hong Kong Disneyland, The Holson, L.M. (2005) The Feng Shui Kingdom, Year of the Dog Starts with a Growl, 4 February, 25 April, available at: www.nytimes. available at: www.nytimes.com/2006/02/04/ com/2005/04/25/business/worldbusiness/ world/asia/at-hong-kong-disneyland-the- the-feng-shui-kingdom.html?_r=1 (accessed 3 year-of-the-dog-starts-with-a-growl.html October 2016). (accessed 3 October 2016).

QUESTIONS 1. What were the main problems experienced by Hong Kong Disneyland in its ‘front office’ operations? 2. What seem to be the main causes of these problems? 3. What more could have been done to overcome these problems?

TAKING IT Much of the academic discipline of operations management is FURTHER underpinned by the ideas of ‘systems theory ’, also often referred to as ‘systems thinking’. Investigate the ideas of systems theory and systems thinking to gain a better understanding of what they mean when applied to the management of business operations. In particular, note the difference between an open and closed system. Consider the extent to which operations systems in organizations are open or closed, and what this means for their management.

THE CHANGING NATURE OF OPERATIONS MANAGEMENT

In recent years, the way both academics and practitioners think about the subject of operations management has been changing. This has been reflected in the content of operations management as an academic discipline. The most notable Movingof these are: beyond the factory A supply network is the set of interconnected The roots of operations management lie in manufacturing, and for many years relationships the subject focused almost exclusively on what went on within the confines between all the parties that of the factory. This had the benefit of enabling the development of very specific supply inputs and detailed expertise about the production of physical goods. In particular, it to, and receive enabled very many mathematically based tools and techniques to be developed outputs from, an that could help in vitally important factory tasks such as production planning operation (including and scheduling (see Chapter 8), inventory control (see Chapter 9) and quality the suppliers’ suppliers and their control (see Chapter 11). suppliers, etc., and However, restricting operations management to the consideration of factory- the customers’ customers and their based activities alone is limiting becausesupply the network performance of operations is customers, etc.). affected by what goes on outside of the factory as much as by what goes on within it. Most operations take place within a , which comprises all the suppliers to the operation (and all their suppliers and their suppliers) and the

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customers of the operation (and all their customers and their customers). The performance of an organization’s operations and the extent to which it can satisfy customers depends significantly on the performance of suppliers and others in its supply network (see Chapter 7). Thus, supply network relations are increasingly recognized as being vitally important in operations management. Within the organization, interactions with the other functional areas of business also have a significant impact on the performance of operations. For example, if the marketing department’s advertising campaign raises customer expectations in ways that make it difficult for the operations department to meet, there will be an increased likelihood of customer dissatisfaction. Similarly, the operations function cannot operate effectively unless the finance department is able to arrange adequate funding and the human resource management department is able to attract and retain workers with the right skills and attitude (see Chapter 12). As will be discussed in Chapter 3, functional-level strategies (for operations, marketing, finance, human resource management, etc.) need to be consistent with one another and with the organization’s business strategy if they are to contribute to achieving a competitive advantage. In the past (and perhaps too often today), many organizations considered the prime role of operations as being concerned with cost-cutting and efficiency gains in order to achieve the lowest possible operating costs. Viewing operations in this way severely constrains its strategic role. As not all organizations compete on the basis of price alone, operations can only be used strategically as a competitive weapon if its performance objectives are aligned with those of the organization’s business strategy. These may well require operations to meet customer requirements in other aspects of performance (e.g. quality, flexibility, dependability and speed), Theand not increased just cost alone importance (see Chapter 2).of the supply network

For many years, there has been a trend for organizations to obtain a greater proportion of their inputs from external suppliers, buying them externally rather than producing them internally. In particular, many organizations have been Offshoring making greater use of suppliers based in other countries, as theyoffshoring can often offer involves moving lower prices. Such international sourcing means that more organizations become certain operations part of international supply networks. The greater use of in the to another country. sourcing of suppliers typically causes the physical lengthening of the supply This could be done either by relocating chain and increases its vulnerability to disruption. The management of the affected international supply is both more important and more complex than when operations to the purchasing from local suppliers. It is difficult to envisage any reduction in the organization’s internationalization of supply networks, so this aspect of operations management own facilities in seems set to remain important for some time to come. another country, The growing importance of services or by outsourcing the operations to a foreign supplier. It is invariably the case that as a country develops economically, the proportion The motivation for this is often, but of its national economic output arising from services increases. Similarly, the not exclusively, cost proportion of its citizens in paid employment in service industries also tends to saving. increase. Thus, the service sectors of most national economies have continued to grow in importance. Even China, where GDP has rocketed in recent years on the back of its hosting of offshored manufacturing operations from the West, has Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 Operations management 15

Gross domestic product (GDP) is a measure of the now reached the point where the growth in its service industries is outstripping size of a country’s gross domestic economy. It is productthat of its (GDP) manufacturing industries. In most countries today, services normally defined as the account for the majority of the value of a country’s output, its market value of , as illustrated in Table 1.1. all final goods and services produced As services have grown in importance in most of the world’s major economies, within the country. service operations management has emerged as an increasingly important field of study. It would be odd indeed if operations management as a subject were to ignore this vitally important sector of most national economies. It would do a grave disservice to those working in the service economy and sideline the subject of operations management (and those who teach it) within the business school curriculum. Operations management academics have therefore been giving service operations much more attention in recent years. They have done this in two ways. First, by seeking to apply concepts and techniques developed in manufacturing contexts to service environments. Examples of this include the application of lean thinking (see Chapter 10) to services such as hospitals and statistical quality control techniques (see Chapter 11) to monitor performance in sectors such as hospitality and air travel through the use of customer feedback questionnaires. Second, by developing new concepts and techniques that take account of the specific characteristics of service operations. Examples of this include the quality gaps model, described in Chapter 11, and queue management techniques, discussed in Chapter 8. Both of these trends seem set to continue as services grow in economic importance. Therefore, it is likely that greater consideration will continue to be given to service issues within the operations Agriculture Production Services

Brazil 5 26 69

China 10 45 45

Germany 1 31 68

Egypt 11 39 50

India 18 26 56

Indonesia 15 46 39

Japan 1 26 73

Malaysia 10 41 49

Nigeria 22 24 54

South Africa 3 28 69

Turkey 9 27 64

United Kingdom 1 20 79

United States 1 21 78

Table 1.1 Percentage GDP (2012) by sector for selected countries

Source: The World Bank: World Development Indicators: Table 4.2 Structure of output, available at: http://wdi.worldbank.org/table/4.2 (accessed 26 February 2015). To view the terms of use, please visit www.worldbank.org/terms-of-use-datasets

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management discipline for some time to come. Some important associated Thedevelopments internationalization in service operations of service management operations include:

Mass customization is the use of a In the past, most services had a high degree of simultaneity (i.e. their outputs were single process to consumed at the point of production). This made them difficult, if not impossible, produce a wide to trade between countries, as providers needed to be physically present at variety of products (or services). It aims the point of consumption. However, Internet technologies are now changing to realize unit cost this, reducing or removing the need for service provider and consumer to be in reductions through physical contact. For example, some medical diagnosis and even treatment can economies of now be conducted via telemedicine techniques. Similarly, many tangible aspects scope in the same of services can be digitized (e.g. the written word, music, moving images), making way that mass manufacturing it possible to deliver them electronically from a distance. This is prompting two aims to achieve trends. First, operations that were previously thought of as front office, such as the economies of scale. provision of most aspects of personal financial banking services, because of the requirement for both customer and service provider to be in the same location at Economies the same time, can now be transferred to the back office. It is the information that of scale are reductions in unit travels rather than the people. Second, there is now a reduced need for front office cost of output and back office operations to be co-located. This means that there are ongoing due to increasing opportunities to locate back office operations in other areas, often in offshore production Masslocations, customization where there is an in abundance services of either low-cost or high-skilled workers. volumes. Unit cost savings mass customization are achieved by spreading the fixed The use of digital technologies has opened the way to in costs of production ways that wereeconomies not previously of scale possible, making it possible to tailor products and over an increased services to individual customer requirements, while at the same time lowering volume and from the increased costs due to in production. A good example of this is recorded efficiency available music. When this had to be transmitted via a physical device such as a CD, then from the division the list of tracks included was predetermined by the supplier. Only the mass of labour and from production of identical products could enable each CD to be produced at a low using large-scale enough cost for it to be offered at an affordable price to customers. Now that machinery. music can be digitally downloaded from Internet sites or heard via online Servitization streaming services, customers can select whatever pieces of music they want, in is the process effect creating their own customized CDs. Furthermore, they can do so at as low through which Servitizationor perhaps a lower to pricedifferentiate per track than products would have been on the CD. manufacturers provide an accompanying service or services Despite moving their manufacturing operations to lower labour cost offshore for their traditional locations, many suppliers of physical goods still find it difficult to achieve product offering satisfactory levels of profits in highly competitive markets. More and more are in order to add therefore looking to use the provision of accompanying services as the means of additional value servitization for their customers differentiating their offerings from competitors and customizing their offering when they are to meet specific customer needs. An example of such is provided using that product. by aero engine maker Rolls-Royce. They offer customers a ‘power by the hour’ package of aero engine performance for an aircraft that takes care of all of the necessary support, including maintenance, rather than merely selling engines and providing a separate maintenance service. This means that their customers, the airlines, in effect, only pay for their engines when they are working.

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THE INTERNATIONAL CONTEXT FOR OPERATIONS MANAGEMENT

Globalization globalizationIt is generally accepted that over the last 30 years or so, a number of powerful refers to the factors have combined to produce the phenomenon that has become known as increasing . This has led to the increasing integration of economic activity integration of around the world, evidenced in the growth in international trade and the economic activity around the world, increasing interdependence of national economies. Many commentators also evidenced in emphasize the increase in cross-border social, cultural and technological the growth in exchange as essential concomitant elements of globalization. Globalizationmultinational has international trade enterprisesproved to be a(MNEs) contentious issue. Its critics point to the lessdominance developed of Westernized countries and the increasing free-market economics, the growing power and influence of interdependence (LDCs) of national , and the detrimental impact on economies. and the natural environment. This book will studiously avoid considering An increase in the rights and wrongs of globalization. There are many other forums in which to cross-border do so. Our concern is rather to understand the phenomenon and its resultant social, cultural impact on the internationalization of operations management. and technological exchange is The factors driving globalization can be classified under four broad headings: also a feature of technological, political, sociocultural and economic. These are now discussed in globalization. Technologicalturn below. A multinational enterprise (MNE), or sometimes also The digital technology revolution, driven by ever-increasing processing power of termed a multi- national company computers and the near ubiquitous presence of the Internet, continues apparently (MNC), is a business unabated. Many analysts argue that these information and communication organisation that technologies (ICTs) and their supporting infrastructure of cables and satellites has operations in a have created a new techno-economic1 paradigm that is underpinning a fifth number of different Kondratiev long wave of economic growth (Dicken, 2015). There can be no countries. doubting the growing importance of the Internet for businesses and individuals. A less developed In advanced economies, all but the smallest firms make at least some use of the country (LDC) Internet in their businesses. In the retail sector, use of the Internet is now mature, is one whose with, for example, nearly 70 per cent of Swedes, 65 per cent of British and 57 per economy is cent of Americans undertaking some of their shopping online in 2015, according underdeveloped, relying mostly on to Digital Strategy Consulting (2015). The Internet now has over 3 billion users, agriculture (and and 40 per cent of the world’s population have an Internet connection (Internet possibly extractive Live Stats, 2015). However, Internet penetration rates vary widely. Extreme industries), and examples are the case of Eritrea, where less than 1 per cent of the population whose population have Internet access, and Qatar, where 97 per cent have Internet access. has a low standard of living. One of the main benefits of the Internet is that it facilitates cheap and easy direct personal contact, irrespective of distance. Whether we have yet come to a point where the Internet has led to the death of distance (as predicted by Cairncross, 1997) is probably questionable. But the Internet’s ability to reduce the effects of distance can be significant. The use of email, instant messaging (Facebook, Twitter, WhatsApp, etc.) and other forms of digital communications enables individuals and organizations to communicate with one another almost anywhere on the planet. Almost limitless quantities of data can be transferred within seconds. Low-cost video conferencing services such as Skype and FaceTime can enhance,

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if not completely replace, the more impersonal aspects of communicating via the B2B (i.e. business to written word on a computer, tablet or smartphone screen. B2B business) refers to B2C a transaction that Within a few short years, online trading between businesses disintermediation( ) and between takes place between businesses and consumers ( ) has become commonplace. Traditional one business organi­ re-intermediation zation and another. business supply chains have been disrupted, with both and in evidence. In some cases, suppliers have chosen to B2C (i.e. business bypass the traditional distributors of their industry and trade directly with to consumer) refers customers (e.g. Amazon, Dell). In other cases, new intermediaries have emerged to a transaction and reconfigured supply (e.g. Travelocity for travel and Amazon for shopping). that takes place between a business If products can be digitized (e.g. music, movies, the written word), they can be organization and delivered directly to consumers via the Internet, thereby removing the need for an individual the traditional distribution channels. The Internet can facilitate access to new consumer (i.e. customers at a fraction of the cost of more traditional means. For example, online individual citizens). banking makes it possible to offer customers the ability to undertake almost all Disintermediation traditional transactions without the need for traditional banking halls. is the removal The Internet is also being used by organizations in their dealings with suppliers. of one or more intermediaries (such For example, the use of online auctions can enable companies to attract bids from as a distributor, many more potential suppliers than would be economicallyelectronic viabledata interchange using more wholesaler, broker (EDI)traditional means. For many years, large organizations have usually conducted or agent) in a supply much of their business with their suppliers through chain (known systems, improving information flows between the companies, allowing colloquially as ‘cutting out the them, for example, to enable exact order requirements and for stock positions middleman’). This is to be updated instantaneously. Now the Internet has dramatically reduced the a common feature cost involved in operating EDI, enabling companies of any size to make use of its of e-commerce, benefits. Global positioning satellites have enabled the exact location of goods especially B2C in transit to be tracked. ICTs are also used by organizations to enable workers e-commerce. in different locations to work together effectively. This has been particularly pronounced in the separation of front and back office operations in some service organizations. In all cases, the impact of technology is to shrink distance, reducing the importance of proximity between supplier and customer. It is also worth noting the impact that improvements in technology in the latter half of the twentieth century have had on the speed and cost of transportation of both goods and people. Advances in air travel mean that virtually any part of the inhabited world can be reached from any other in less than a day. Improvements in transport infrastructures on both land and sea, and in transportation systems (particularly the near universal adoption of containers), have led to dramatic reductions in the total time taken to transport goods. Taken together with the Politicalimpact of Internet-based ICTs, the world can truly be said to have shrunk.

For almost half a century after the Second World War, the world was essentially divided into three groupings. The industrialized countries of the ‘West’ (North America, Western Europe and Japan) manufactured most of the world’s goods and accounted for most international trade. The USA was the most dominant political and economic force as the European powers and Japan recovered from the devastation of war. Second, the ‘communist bloc’ of the Soviet Union and Eastern Europe sought to create its own economic system quite separate from that of the capitalist West. The rest of the world outside of these two groupings Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 Operations management 19

was the ‘Third World’. This comprised the mostly poor and underdeveloped Re-intermediation countries that were often the sources of the world’s raw materials and food. is the reintroduction of an intermediary Many countries were emerging from colonialism during this period and some in a supply chain. became battlegrounds (usually metaphorically, but sometimes literally) between The growth of the competing interest of the West and communism. e-commerce has prompted An increasingly important political development since the Second World War the emergence has been the emergence of international agencies to promote international of new kinds of trade and development, such as the WTO, the IMF, the AIIB and the World intermediary in Bank. Most countries belong to such agencies. The World Trade Organization many industries. (WTO) negotiates agreements between governments that govern the rules of Electronic data trade between nations. It has promoted trade liberalization by brokering deals interchange (EDI) that have progressively lowered trade barriers and tariffs between countries. is the computer-to- The International Monetary Fund (IMF) promotes international monetary computer exchange cooperation and provides temporary financial assistance to countries in financial of structured information via a difficulty. The Asian Infrastructure Investment Bank (AIIB), initiated by China telecommunication in 2009, supports the building of infrastructure in the Asia-Pacific region. The link. EDI has been World Bank provides low-cost finance to developing countries for education, used by business health and infrastructure projects. Although the economic development of many since the 1970s and Third World countries has been disappointing, some have advanced significantly there are agreed international and are now considered as newly industrialized economies (NIEs). O’Neill standards covering (2001) coined the acronym BRICs for what he saw as the strongest NIEs, namely its use. It is still Brazil, Russia, India and China. The intervening years have seen somewhat mixed used by many performances from the economies of these countries. Most notably, China has MNEs to automate become the world’s second largest economy (after the US). It is the world’s their purchase of goods and services. largest manufacturing economy, and the largest trading nation, being the largest exporter and second largest importer of goods (IMF, 2014). As such, it should perhaps not now be considered as an emerging economy at all. As well as adding South Africa to the list of BRICs, O’Neill went on to invent the further acronym MINT for the next group of countries, Mexico, Indonesia, Nigeria and Turkey, assessed as significant NIEs (Magalhaes, 2013). The emergence of countries such as these is characteristic of the changing economic order in the rapidly globalizing world. As well as cooperating globally to promote increased international trade, countries have also done so regionally to create formal trading groups. The first of these was the European Union (EU). Originally formed by six countries in 1957 as the European Common Market, the EU now encompasses 28 countries. While there is the prospect of others joining in the future, the UK announced its intention to quit the organization in 2016. Free trade is a central tenet of the EU. ASEAN (the Association of Southeast Asian Nations) comprises 10 South East Asian countries who have pledged to create the ASEAN Economic Community as a free trade zone. A similar free trade agreement, the North American Free Trade Agreement (NAFTA) was set up between the US, Canada and Mexico in 1994. Further moves to promote free (or at least freer) trade between groups of countries have been given currency by the Trans-Pacific Partnership Agreement (TPPA), to which 12 Pacific countries are signatories, and the Transatlantic Trade and Investment Partnership (TTIP) between the US and the EU. The creation of free trade blocs such as these can particularly impact decisions about where companies choose to locate their production and service delivery facilities. Locations within a country that can offer tariff-free access to all of the countries Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 20 INTRODUCTION TO OPERATIONS MANAGEMENT

within its trading block are usually seen as highly attractive for firms seeking to Socioculturalaccess and penetrate those markets.

The last two decades have seen an increase in the movement of people around the world. More open borders and cheaper travel costs have contributed to the numbers migrating, both legally and illegally, to seek work and improved economic circumstances, or to escape war and persecution. More people travel greater distances to take holidays. Many young people now often undertake extended periods of travel, sometimes including short periods of work, typically before going to university or taking a permanent job. Many students now choose to study in universities outside of their homelands. Satellite television and the Internet make it possible to learn about life in other countries very quickly. People all over the world now aspire to access the same products and services that might previously only have been available in the more advanced economies. This has fuelled the trend for global products that have the same level of quality wherever in the world they are produced and consumed. The world may not yet be a global village, but many people now feel themselves to be citizens of the Economicworld as much as citizens of their country of origin or current residence.

Until the financial crisis of 2008, the period since the end of the Second World War had seen the most sustained period of economic growth in modern history. Despite the economic difficulties suffered by many countries in the aftermath of 2008, in many ways it was the financial stability and mostly continuous growth experienced in the preceding several decades that have underpinned the forces of globalization. While the US and the countries of Western Europe were the driving economies for much of that time, the emergence of new manufacturing centres in the NIEs of South East Asia (e.g. South Korea, Taiwan, Singapore, Hong Kong, Malaysia, Thailand, the Philippines, Indonesia), Latin America (e.g. Brazil, Mexico) and particularly China has provided a major stimulus to the world economy. As previously discussed, the growth in the international trade in services has become a notable feature of the world economy in recent years, far outstripping the growth in manufactured goods (WTO, 2014). Advances in technology have enabled more services to be traded internationally, especially in financial services and ICT. Of the developing countries, India has been particularly successful in benefiting from this trend. Finally, in discussing the economic drivers of globalization, the role of MNEs should be noted. These are among the world’s largest businesses and they operate in countries outside of their homeland. They include familiar names such as Exxon Mobil and Royal Dutch Shell (oil companies), General Motors and Toyota (carmakers) and Apple and Samsung (electronics manufacturers). Indeed, their activities often span the globe and their products can be found in virtually every country. The financial value of the activities of such businesses can exceed that of many nation states. The decisions taken by their executives can have a greater impact than that of many government ministers. Unlike governments, their decisions are taken not in pursuit of national interest, but rather in pursuit of growth and profits for their shareholders. Their decisions, about where to

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locate their operations and where to source their suppliers, can have significant impacts on the economies of the countries involved. In most countries, MNEs can take advantage of the freedoms afforded by banking and financial systems that operate electronically on a 24-hour basis to transfer funds unhindered from government restrictions. Thus, many MNEs are powerful economic forces in Internationalizationtheir own right that often act theories independent of national governments.

In the face of the forces of globalization discussed above, more and more organizations have been internationalizing their business operations. Although some businesses have always operated internationally, these have generally been small in number but very large in size, as typified by large multinational enterprises (MNEs). A number of theories explaining this internationalization process have been Vernon’spromulgated, product including: cycle theory

Vernon (1966) offered an analysis of the internationalization process. The essence of this theory is that production increasingly moves away from the place of origin» Phase over 1 –time Introduction in a series of identifiable phases. Vernon identified five such phases based on the product lifecycle model: »» Phase 2 – Growth : All export markets are served from production in the home country. » : Production facilities set up in high-income markets to » Phaseserve local3 – Maturity markets. Low-income markets in less developed countries (LDCs) continue to be served from production in the home country. »» Phase 4 – Saturation: The newer lower-cost facilities in the high-income markets export to LDCs, displacing exports from the home country. »» Phase 5 – Decline : The newer lower-cost facilities in the high-income markets export to the home country. » : Newer lower-cost production facilities set up in LDCs, which export back to the home country. Vernon’s theory was based on his analysis of the overseas investments of US corporations and his prediction of likely future events. A frequently cited example of a product that followed the theories of pattern of invention, growth and production is that of the personal computer and the US, where the PC was invented and first manufactured. However, modern critics argue that his theory does not explain more recent patterns of internationalization. They maintain thatDunning’s his model eclecticis too simplistic theory in today’s much more complex world.

Dunning» Ownership-specific (1976) argued that advantages a firm will engage in international production at a particular location when all of the following three conditions are present: » : The firm must have access to assets not possessed by competing firms. Such assets might be tangible (e.g. raw materials, plant and machinery, skilled labour) or intangible (technological

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or marketing know-how, patents, brand names, management expertise). » LargeLocation-specific firms tend tofactors be better placed to internationalize as they usually have access to greater amounts of finance at lower cost. » : There must be factors at the foreign location that make it more advantageous for the firm to locate its operations there rather than at home. These factors might include access to markets, the availability of resources, lower production costs, favourable political conditions and » Internalizationcultural/linguistic affinities. The importance of each will vary depending on the type of activity taking place. » : The firm must internalize the use of its ownership-specific advantages at the location, exploiting them itself, rather than selling them or leasing them to other firms. Dunning’s theory is sometimes known as OLI, in reference to the three factors. Although some critics argue that it is more a list of factors rather than a theory, it offers a useful framework to examine specific cases of internationalization of operations.Stage theories

Various authors have argued that firms internationalize in a series of incremental sequential stages. A number of different models describe the various stages that have been put forward.

The» bestStage known 1 of these is the Uppsala model (Johanson and Wiederscheim- Paul, 1975), which identifies four stages: » Stage 2 » : No regular export activity. » Stage 3 » : Export to foreign countries via local sales agents. »» Stage 4: Establishment of a wholly or part-owned subsidiary company in order to sell directly to the foreign country. » : Establishment of production facilities in the foreign country. completeOhmae (1994) insiderization adds two further stages beyond the Uppsala model. Ohmae’s stage 4 (his stage 1 equates to Uppsala’s stage 2, as he omits Uppsala’s stage 1) is . At this stage, the firm becomes an ‘insider’ in the markets it services, with all the resources necessary for that, including R&D, production and marketing. This requires the diffusion of organizational activities to different locations around the world, to meet the needs of each of the different markets. The fact that various functional activities have become replicated around the world is likely to lead to tensions within the organization, with national managers attempting to meet the specific requirements of local markets clashing with those at headquarters trying to coordinate and control disparate efforts around the globe. true globalization Ohmae’s stage 5 is . This requires all members of the organization to make a mental adjustment and adopt a truly global mindset. This is one where the loyalty of each employee is to the firm as a global entity, not to the headquarters or the country where they work, and the focus is on meeting the needs of customers irrespective of where they are located in the world. Overcoming of the problems caused by the dispersion of operations and

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functional activities around the world leads to a new role for senior managers at corporate head office. Their role becomes one of guarding corporate identity. As such, they will focus their efforts on controlling branding and ensuring that corporate» Stage policies 1 can meet the needs of all stakeholders across the globe. Thus, Ohmae’s stage model has the following stages: » Stage 2 » : Export via agents. » Stage 3 » : Establishment of a sales subsidiary in the foreign country. » Stage 4 » : Establishment of production in the foreign country. » Stage 5 » : Complete insiderization. » : True globalization. Stage model theories of internationalization have been criticized in a number of ways. First, they are based on analyses of how a relatively small number of companies have behaved in the past. They do not adequately describe how all companies have internationalized. Some empirical studies have shown that some companieset al. have followed a number of different paths to the establishment of foreign production facilities, skipping one or more of the stages (e.g. Turnbull 1987; Clark , 1997). Indeed, some companies can be ‘born global’ (Rennie, 1993), operating in international markets on a substantial scale from their earliest days. Furthermore, some companies have behaved differently when entering different overseas markets. Second, the models do not mean that all companies must or will follow these stages in the future. The stage models do not necessarily represent best practice, and organizational strategists may well be able to devise other ways to internationalize. Finally, all stage model theories seem to assume that internationalization is market-led, with organizations entering particular countries to meet an identified market need in that country. However, as will be discussed in Chapter 3, strategy can also be operations- led. Establishing operations in one foreign market may be part of a process of building knowledge and expertise that can subsequently be used, not only to expand further into that market, but also as a springboard for entry into other markets. Lessons learnt from experiences in one market can be used to inform andTHE shape INTERNATIONALIZATION actions in others. OF SERVICES

Most of the theories about internationalization discussed above are implicitly, if not explicitly, based only on a consideration of manufacturing organizations. This may have been understandable up until recently, as there have been few instances of service-based organizations operating internationally. However, services have become increasingly important and now represent the overwhelming majority of economic activity in industrialized countries. Also, it is fairly easy to think of examples of service providers that do operate internationally (e.g. the banking and financial services, media, telecommunications, business services industries). So, are we to simply assume that service organizations internationalize in exactly the same way as manufacturers? Or, should services be considered as a special case? One of the most important distinctions made between services and manufacturing is that of customer contact. Manufacturing does not usually require any direct customer contact. However, back office services do not require direct customer

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contact either. A great deal of the internationalization of services in recent years has taken place in back office services. The offshoring of back office service operations has often been driven by a desire to move labour-intensive support services to low labour cost locations. India has especially become a favoured Outsourcing is destinationoutsourced for the offshoring of back office services. Some companies have one of the terms chosen to set up their own back office operations in foreign countries. Others used to describe have these operations to locally owned external providers. Back the process of office operations can be viewed as another form of manufacturing, and so in obtaining inputs of goods or services many respects it seems quite legitimate to consider their internationalization as from sources being akin to that of manufacturing operations. outside of the Front office operations, however, appear to be different, as these require some organization. degree of customer contact. So where and how that contact takes place is a key element in these operations. The facilitation of contact between service provider and service user may necessitate one or other of them to move. The service provider may need to move to meet the service user. The service user may need to move to meet the service provider. Front office services can be categorized on the Separatedbasis of a 2x2 matrixservices formed by considering these movements (see Figure 1.4).

These are services where there is no need for face-to-face physical contact between service provider and user. Contact in these services is typically technology-mediated in some way, as is the case for telephone and Internet services. Technological advances have seen an increase in cross-border separated services. Telephone call centres are an obvious example. Reductions in the cost of telecommunications have fuelled the vast increase in the offshoring of call centres, especially to India and other low labour cost countries with an abundance of well-educated English speakers. The widespread availability of the Internet has made it possible for businesses and consumers alike to conduct most commercial transactions online.Provider Increasing bandwidth is making Does not move Moves

Separated services Demander-located (e.g. telephone call services Does not move centre) (e.g. management consultancy)

User

Provider-located Peripatetic services Moves services (e.g. trade shows, (e.g. medical services, conferences) hotels)

Figure 1.4 Customer contact service location matrix Source: inspired by ideas in B890 International enterprise (1995-2002) The Open University.

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it possible to deliver many services online via the Internet for the first time. This is especially so for entertainment. It is now possible to download music, videos and movies from the Internet. Internet technology is advancing rapidly and the possibilities seem unlimited. Technologically speaking, the location of an online service provider has become irrelevant. This is opening up new approaches to the internationalization of any service that can be digitized, and our understanding Demander-locatedof the internationalization servicesprocess seems certain to be challenged.

Some face-to-face services need to be provided at the user’s location, with the provider needing to move to deliver the service. Management consultancy is one example of such a demander-located service. Some industrial services such as the repair and commissioning of equipment also fall into this category. The internationalization of this type of service requires the provider to have the capability of delivering the service in the user’s country. This clearly has implications for the skills required by the service delivery personnel, the provision Provider-locatedof any necessary equipment services they require, the cost of delivery, and so on.

The provision of some face-to-face services requires the user to move to the provider’s location. This is often the case where the service needs specialist equipment or staff, as is often the case for medical services. Some services are provided specifically for users who are themselves travelling, whether for business or pleasure (e.g. in the hotel and hospitality industries). Sometimes the user travels to the provider’s home country to receive the service, as is the case for some specialist medical treatments. However, more normally, this category of service requires the provider to establish service provision locations to suit the Peripateticuser. This clearly services has implications for internationalization.

Although they are more unusual, there are services where the provider and the user both move in order to facilitate the service encounter. Trade shows, conferences and some live entertainments fall into this category. The encounter needs to take place at a location suitable for the event, so both service providers and users need to have the ability to access such venues. Internationalization normally creates a conflict between the pressure to standardize provision globally in order to maximize economies of scale and scope, and the pressure to customize in order to meet the different requirement of customers in each locality. Services have traditionally been seen as being more difficult to globalize because of the imperative to tailor the service offering to meet different local needs. This is particularly true for front office services where the requirement of customer contact makes them fundamentally different to manufacturing. This ought to prompt a somewhat different consideration of the internationalization process for at least some types of services. However, with some exceptions (e.g. Segal-Horn, 2005), the development of theory of the internationalization of services has lagged that for manufacturing.

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CASE STUDY RAJA FASHIONS: A HONG KONG TAILOR COMES TO YOUR TOWN

Hong Kong is rightly famed for its bespoke tailors. So Mr Daswani decided that if the customers Their shops abound in the innumerable shopping would not come to him, he would have to go malls and streets of the former British colony. to them. He had always visited London, but Mr They are particularly numerous in the Tsim Sha Daswani and his team now regularly visit major Tsui area of Kowloon, where anyone of European cities in 14 countries, including those of North appearance is invariably harangued by the many America, Europe, the Gulf region and Australia. hawkers who throng its main streets, extolling Team Daswani set up shop in a hotel suite, the virtues of the particular tailor’s shop they thereby avoiding the expense and hassle of having represent. permanent business premises 6,000 miles from Hong Kong tailors can reputedly produce home. Customers book an appointment in response a bespoke suit in as little as 24 hours, and for to full-page adverts placed in local newspapers or a price equivalent to what would typically be via the Raja Fashions website. He also gets many paid for an off-the-peg suit in Europe or North word-of-mouth recommendations and is often America, and a fraction of what might have to be invited by executives of big companies. Mr Daswani paid for the equivalent bespoke suit in London’s also has many celebrity clients (reputedly including Saville Row. Tony Blair, David Beckham and Lashmi Mittal). Raja Raja Fashions, run by Raja Daswani, is now Fashions always sets up a special room for people Hong Kong’s biggest bespoke tailoring business. who do not want to be seen. Yet, before 1997, the year the colony was Mr Daswani’s strategy of taking his shop to his handed back to China and became a Special customers works as follows. First, he meets with a Administrative Region of the People’s Republic, customer to discuss his or her requirements. Many the company was indistinguishable from the customers bring in a favourite suit to be copied, or hundreds of Hong Kong’s other tailors. Customers point out a style that they like in magazines and for Raja Fashions and the other tailors came from advertisements. Second, the team takes detailed the large European expatriate community, as measurements and digitally photographs the well as visitors to Hong Kong, who would typically customer to give extra information about his stay for only a couple of days, often while en or her body shape and stance. These are then route to Australia or other parts of South East emailed to Hong Kong, where the suits are made. Asia. However, after the 1997 handover, many Third, the customer chooses the fabric. There are Europeans started to leave Hong Kong. To over 20,000 to choose from, including cashmeres make matters worse, the handover coincided and silk mohair. The choice affects the price. with a financial crisis in the region, resulting in Prices start from under £250. The customer then decreased visitor numbers. receives the suit by post four to six weeks later. For

Photos courtesy of Vishal Daswani, Director, Raja Fashions

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the equivalent in the West. Although clothing generally has become more casual in recent years, smart business wear has retained its allure. Mr Daswani feels that he has helped bring bespoke tailoring to a wider audience. He argues, ‘Although people want to look smart, they are more conscious of their budgets than they used those in more of a hurry, suits can be sent express to be’. Although professionals such as bankers, delivery in two weeks at extra cost. If there are any brokers, financiers, lawyers and the like still make problems, Raja Fashions has arrangements with up the bulk of his clientele, a growing percentage local tailors who can make minor changes at no are on more moderate incomes. extra charge. Sources: Raja Fashions (2016) Raja Fashions, Raja Fashions’ business model has proved available at: (accessed to be a great success. A skilled tailor can be www.raja-fashions.com 20 April 2016). employed in China for a fraction of the cost of

QUESTIONS 1. What is the nature of the customer contact operation in Raja Fashions? 2. What are the main challenges faced by the model of operations management evidenced in Raja Fashions?

CHALLENGES OF OPERATING INTERNATIONALLY

Once an organization is involved in international activities, it falls to its operations managers to rise to the challenges posed in managing what can often appear to be disparate activities in far-flung locations. The most significant challenge is perhaps overcoming the dilemma that is inherent in most international operations, namely that of attempting to reconcile the competing demands of managing on both a global and a local scale. On the one hand, hard-won knowledge and expertise gained from past operational experience needs to be exploited on a worldwide basis in order to produce and deliver goods and services as efficiently as possible. This creates a pressure to harmonize operations across the globe, using standardized systems and technologies, for easier coordination and control. On the other hand, there are pressures to respond to the specific circumstances in each location. The quality and quantity of input resources (e.g. labour, raw materials) may vary at each location. Legislation may differ from country to country. There may be significant cultural differences between people (employees, customers, suppliers, etc.) in different countries. Products and services may need to be customized to meet local requirements. This tends to fragment operations. Organizations who successfully manage international operations are able to balance these conflicting pressures. They neither seek to impose standard solutions, irrespective of location, nor permit individual locations to operate entirely independently of one another. Recent advances in ICT are increasingly offering the means to achieve the level of interaction required to facilitate the management of operations across the globe.

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Managing international operations is likely to pose considerable challenges in many areas of operational activity, both structural and infrastructural, making managerial decision-making more difficult and complex. Operations managers may be faced with trying to serve differing and possibly unfamiliar markets, with operating systems in different locations, possibly using differing technology with workforces of varying levels of skills, in very different societal contexts. There will inevitably be conflicts of what activities to undertake at what location, and with what priority. BENEFITS FROM OPERATING INTERNATIONALLY

Organizations with successful international business strategies typically tend not to view the challenge of managing international operations as a problem to be overcome. Rather, they treat their exposure to new and different ways of operating and to the differing demands of customers across the globe as a series of learning opportunities. Organizations that operate in more than one country have many opportunities to learn from their exposure to different international environments. Also, the increased internationalization of business provides organizations with many opportunities for learning from the good operations practice of other organizations they encounter across the world. Successful international organizations actively seek to feed back this new knowledge and diffuse it throughout the organization. They use their learning from their international operations as a source of competitive advantage to drive their business strategy. Multinational organizations are also much better placed to learn than organizations that only undertake arm’s-length international transactions. This is because they are more efficient at transferring knowledge gained about operating in different countries between their subsidiaries. This can be attributed to their use of the same internal evaluation and accounting systems, which also makes them more likely to invest quickly if they see opportunities (Kogut and Zander, 1993). Flaherty (1996) points out that truly global operations (in the sense intended by Ohmae, 1994, as discussed above) rely on a network rather than a hierarchy for coordination. A network is better at promoting joint learning between its members. It can enable them to more easily share the different solutions they may have developed to solving specific problems in their own operating environments. Lessons from these experiences can prove useful to other members faced with similar problems in their own environments. This can be especially helpful if one operation has had to learn to satisfy particularly demanding customers in one part of the world. Organizations that operate internationally are more likely to be directly exposed to the operating practices of others in similar industries, or similar operating practices in different industries. This can offer tremendous opportunities for learning from their best practice. For example, for many years, Western manufacturers have taken the opportunity to learn directly from the world- class operations of many Japanese companies, particularly with regard to lean manufacturing practices such as JIT (just in time), TQM (total quality

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kaizen

management), , and so on, which will be discussed in more detail in Chapters 10 and 11. Neither has it been necessary to go to Japan to do this as many Japanese firms have set up manufacturing facilities in many parts of the world. This was particularly so in the UK in the late 1980s and early 1990s, when many Japanese manufacturers set up factories in the UK, primarily to access EU markets. This provided local British firms with an opportunity to benchmark their operations against high-performing Japanese companies who were facing the same operating environment as they were. In their study of UK manufacturing firms during this period, Hanson and Voss (1993) showed the benefit of this approach, finding that high-performing British companies were five times more likely to use benchmarking as an improvement tool than low- performance companies. The report also showed that the UK companies that won contracts to supply the new arrivals were especially able to benefit from the supplier development programmes set up by various Japanese manufacturers. This demonstrates that international operations can offer benefits to many different parties.

TAKING IT The globalization and internationalization of business operations have FURTHER proved to be politically controversial in recent years. Explore why this is so, and determine who is most affected by these phenomena. What are the advantages and disadvantages of the globalization and internationalization of business operations, and for whom?

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» Operations management is concerned with the management of the resources » and processes required by an organization to produce goods or services for customers. »» Any operation can be depicted as a transformation process that converts inputs of resources to outputs of goods and services. » Operations can be classified as material processing, customer processing » or information processing, depending upon which type of resource is predominantly being transformed. »» Service operations are distinguished by their intangibility, simultaneity, customer contact and subjective quality. » Service operations can usually be divided between the front office, which » involves customer contact, and the back office, which customers do not normally visit. » Most operations take place within a supply network, which comprises all the suppliers to the operation (and all their suppliers and their suppliers) » and the customers of the operation (and all their customers and their customers). » Many operations, both in services and manufacturing organizations, have » become internationalized in recent years. Most operations now have an international dimension to some extent. » The internationalization of operations is being driven by powerful forces » of globalization. These forces are a combination of political, economic, sociocultural and especially technological factors. » There are a number of theories concerning the internationalization of organizations, including Vernon’s product cycle theory, Dunning’s eclectic theory and various stage theories (e.g. the Uppsala model and Ohmae’s » stage model). None of these offer entirely satisfactory explanations of the internationalization process. »» The internalization process may apply differently to services, especially in customer contact services, compared to manufacturing. » Operating internationally presents many challenges to operations managers. The most significant of these is probably reconciling conflicting local and global demands. Globally, there is a pressure to maximize efficiency by standardizing operations for easier coordination and control. Locally, there is a pressure to customize operations to meet the specific requirements of each location, which can lead to a fragmentation of operations. Successful » international operations management requires that these conflicting pressures be balanced. » Organizations can benefit from operating internationally if they can share the learning from their own experiences and learn from the practices of other organizations that they come into contact with in other countries.

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Suggested answers can be found on www.macmillanihe.com/BarnesOM

1. Use the transformation model (Figure 1.1) to analyse the following types of organization. In each case, list the transformed resources, the transforming resources and the outputs produced. a. Clothing manufacturer b. School c. Dentist d. Accountancy e. Restaurant f. Bank 2. What are the main differences between manufacturing and service operations? 3. Think of five services that you have experienced as a consumer in thelast month (e.g. restaurant meal, transportation system, hairdresser, university class, cinema). Describe the degree of tangibility, simultaneity and customer contact you experienced with the service in each case. How did these affect your perception of the quality of the experience? 4. Explain, for the benefit of a friend who is not studying the subject, why operations management is vitally important for any organization. 5. What are the most important forces of globalization? 6. What are the main theories covering the internationalization of organizations? 7. Find a recent example from the business news media of an organization that operates internationally. a. Identify the most significant challenges it faces in its international operations management. b. Identify the main benefits available to it from its international operations. 8. To what extent do you think that the internationalization of services should be treated as a special case from that of manufacturing? 9. Choose one of the major MNEs. Identify the most significant forces of globalization that have impacted on the international operations of the company in the last few years. What has been the organization’s response to those forces? 10. Choose two companies that have internationalized in recent years, one manufacturer and one service provider. Which of the theories of internationalization best describes the way that each underwent internationalization?

CASE EXERCISE HOTEL MATINA

Hotel Matina is a family-owned boutique hotel hotel’s guests (e.g. reception, swimming pool, bar located on a Greek holiday island. Although services), while others take place mostly out of the the hotel has only 40 rooms and one suite, guests’ sight (e.g. housekeeping, procurement, managing its operations is a complex business. laundry). However, it is the hotel’s reception and Some operations involve direct contact with the housekeeping departments that are fundamental

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to ensuring that the guests are provided with a surrounding area, and to meet their needs for a reliable and quality overnight experience. range of individual services such as taxi bookings, Internet connections, restaurant bookings, and THE HOTEL RECEPTION so on. Given the nature of their encounters Reception is the main contact point for guests with customers, all reception staff are recruited throughout their stay at the hotel. It deals with and trained to have good communication and reservations, check-in, customer service and presentation skills. They need to show empathy check-out. Hence, its location is at the most and demonstrate a desire to serve guests’ needs important and visible entry and exit point of the speedily and pleasantly. The emotional demands hotel. Its physical layout aims to not only convey on reception staff can be very great, as they need a warm first impression to the guests, but also to to be always smiling and to speak to customers provide enough space to make it convenient and in a warm and friendly way, irrespective of their pleasant for guests who are waiting to be served. own physical, mental and psychological situation. While background music plays, arriving guests Being at the focal point of the hotel, reception who have checked in online can use the express staff also have an important role to play in check-in service. Similarly, guests can speed their promoting and selling the hotel’s other services, departure by utilizing the express check-out such as the swimming pool, the bar and the service by settling their bill online. restaurant. Reception aims to provide guests with The reception also acts as a communication the personal contact needed to satisfy their hub for other hotel employees, since it provides requests for information about the hotel and the information about events taking place at the hotel, vacated rooms that are ready to be cleaned, electrical faults reported by guests that need to be transferred to the maintenance department, and so on. THE BACK OFFICE The work of reception is supported by a back office, located in the basement of the hotel. This is responsible for collecting and processing a vast amount of customer information at all stages of the guest cycle, from initial contact before arrival, during their stay and after their departure. Unlike those at the reception, back office staff do not need any special knowledge of languages or communication skills. Instead, a great emphasis is placed on their analytical and computer skills. The main activities in the back office encompass: »» Reservations: Take reservations, check information about room rates and

PHOTODISC inventory availability, accept and/or decline

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reservation, take customer information responsible for accumulating and analysing and details and/or check with marketing such customer information in order to database if customer details already exist, develop appropriate marketing activities. confirm reservation with the client. »» Room status and allocation: Upon arrival, HOUSEKEEPING guests need to be allocated to a room The work of a housekeeper is physically depending on their reservation requests demanding, repetitive, unskilled and of low status. (e.g. double bed) and the current status However, it is vital in ensuring that guests are of the hotel’s room stock. Checking the satisfied with their stay. Moreover, the scale and status of the hotel’s stock of rooms is a complexity of maintaining the cleanliness of the process that involves staff from different hotel should not be underestimated. Apart from departments (e.g. housekeeping, reception, cleaning bedrooms, housekeeping staff also need maintenance); its management is crucial to clean the public areas (reception, lobbies, since it can significantly affect guest service corridors etc.). The traffic volume in public areas and satisfaction. For example, they need to can be quite large, with more than 200 people avoid any delays in providing guests their walking through these areas of the hotel on a required room, while ensure that rooms typical day, sometimes more than once. that are still dirty are not released. All rooms are cleaned via a standardized »» Billing: All charges that guests incur within process. Checklists are provided to staff, so that the hotel (at the bar, restaurant, room they know what to clean, in what order, and what service, etc.) need to be charged on a daily to check before finishing the maintenance of each basis to the guest’s folio. This information room. The hotel housekeeper makes random needs to be timely and accurate in order to checks each day to ensure that rooms have been avoid any errors (e.g. charging customers prepared to the required standard. Housekeeping for items they have not purchased, and/ tasks are very suitable for the application of time or avoiding the loss of any payments). and motion studies. This has enabled, for example, Cooperation and communication with all the room cleaning trolley used by housekeeping hotel departments is required. On the day staff to be designed to carry around all necessary of departure, the department prints the bill, cleaning and maintenance materials. Similarly, which is passed to reception, so that guests bedroom furniture is fixed to the walls, thereby can check it and settle it. preventing its rearrangement by guests, which might slow down floor cleaning. Also, the time »» Night audit: At the end of every day, all needed to clean a bedroom has been accurately information recorded during the day needs calculated (20 minutes on average). This greatly to be checked for accuracy and reports simplifies the task of scheduling the work of generated for the next day’s activities. housekeeping staff each day, as staffing levels and Specifically, the status of all rooms has to be tasks can be based on the number of guests and checked, and arrival and departure reports reservations. have to be printed and disseminated to The cleaning of the public areas is divided into reception and housekeeping. a number of tasks with different frequency and »» Reporting: The back office needs to provide timings, devised according to their importance the hotel manager with reports of hotel and the risk of their becoming dirty. For example, performance (e.g. level of reservations, floors are scheduled to be cleaned at least three occupancy rates and average room rates) times per day (early morning, afternoon and whenever requested. evening), window cleaning is planned for every »» Guest history: After their departure, guests’ other day, while surfaces are scheduled for details and any information generated from cleaning once a day. Curtains are cleaned once a their activities (e.g. request for a second month to remove wind-blown dust accumulations. pillow, a specific newspaper, preference for Public toilets need regular attention to ensure a particular wine) has to be entered into the that they are clean and restocked with toiletries. hotel’s marketing database. This information They are checked at least three times per day. is important in establishing relations with A checklist is displayed prominently in the toilet guests (e.g. posting birthday and Christmas areas so that guests can see a record of the cards) and for personalizing their future timing of cleaning and restocking that has taken stays. The marketing department is also place.

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Overall, the housekeeper keeps a detailed QUESTIONS schedule of cleaning activities, ranging from day- to-day cleaning tasks, through regular but less 1. List as many of the operations taking frequent cleaning of particular items, to deep place in the hotel as you can. For each of cleaning or ‘seasonal cleaning’. Moreover, the these, identify their inputs, transformation range of different floor surfaces, linen and furniture processes and outputs. items in the hotel means that different treatments, 2. Classify each of these operations according detergents and cleaning regimes are required, to the dominant transformed resource adding to the complexity of housekeeping (materials, customers, information). activities. The wrong use of a cleaning material 3. Which are front office and which are back and chemical may have a harmful effect on the office operations? item, the person using it and the environment. So 4. What are the main challenges for those staff must comply with relevant legislation for the managing the hotel’s operations? use and storage of such chemicals. 5. What types of skills are required by the staff Original case courtesy of Marianna Sigala working in each of the hotel’s operations?

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The Borderless World: Power and Strategy in the Global Marketplace

Ohmae, K. (1994) , HarperCollins, London. O’Neill, J. (2001) ‘Building better global economic BRICs’, GlobalMcKinsey Economics Quarterly Paper No. 66, Goldman Sachs. Rennie, M.W. (1993) ‘Global competitiveness: born global’, , 4(4):The Blackwell45–52. Encyclopedia of Management: Strategic Management Segal-Horn, S. (2005) ‘Globalization of service industries’, in J. McGee (ed.), Operations Management, Blackwell, Oxford, pp. 147–54. Slack, N., Brandon-Jones, A. and Johnston, R. (2013) , 7th edn, Pearson Education, Harlow. Managing Export Entry and Expansion Turnbull, P.W. (1987) ‘A challenge to the stages theory of the internationalization process’, in P.J. Rosson and S.D. Reid (eds), , Praeger,Quarterly New York, Journal pp. 21–40. of Economics Vernon, R. (1966) ‘International investmentInternational and international Trade Statistics trade in2014 the product cycle’, , 80: 190–207. WTO (World Trade Organization) (2014) , available at: www.wto.org/english/res_e/statis_e/its2014_e/its14_toc_e.htm (accessed 23 February 2015). ADDITIONAL READING The Rise of the Networked Society Operations Management for Competitive Castells,Advantage M. (1996) , Blackwell, Oxford. Chase, R., Jacobs, R. Multinationaland Aquilano, Enterprises N. (2005) and the Global Economy , 11th edn, McGraw-Hill, New York. Dunning, J.H. (1993) The World Is Flat: A Brief History of the Twenty-First, Addison-Wesley, Century Reading, MA. Friedman, T.L. (2006) Service Operations Management: Improving, ServicePenguin, Delivery London. Johnston R., Clark,Toyota G. and Production Shulver, M. System: (2012) Beyond Large-Scale Production , 4th edn, Pearson Education, Harlow. Ohno, T. (1995) , Productivity Press, NewEuropean York. Management Journal Vandermerwe, S. and Rada, J. (1988) ‘Servitization of business: adding value by adding services’, , 6(4): 314–24. NOTE

1 Kondratiev theorized in the 1920s that economic growth occurs c. in ‘waves’ of about 50 years duration, each ushered in by technological advances.c. The first wave corresponded with the mechanization of thec. Industrial Revolution ( 1770–1830), the second with the comingc. of the steam engine and the railways ( 1830–1880), the third with the introduction of electricity ( 1880–1930) and the fourth with mass production systems ( 1930–1980).

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AUTHOR INDEX

Page numbers in bold indicate tables and in italic indicate figures.

Abernathy, W.J. 472–4, 472 Ghosal, S. 124–5 Maister, D.H. 193–4 Atthirawong, W. 111–13, 112 Goldratt, E. 256, 257 Maslow, A. H. 369, 376 Greasley, A. 437, 439 Mathe, H. 448 Bank, J. 331 Gregory, M. 82, 127, 427 Mayo, E. 369 Bartlett, C.A. 124–5 Meijboom, B. 118, 118 Belbin, R.M. 382 Hackman, J.R. 369–72, 370 Mills, J.F. 81–2, 83 Berry, L.L. 329, 334 Hagel, J. 218 Mintzberg, H. 73, 77 Bessant, J. 459 Hamel, G. 81, 99, 215 Monczka, R.M. 217–18 Bolstorff, P. 213 Hammer, M. 436 Morita, M. 307 Brown, J.S. 218 Handy, C. 386 Buchanan, D. 379–80 Hanson, P. 29 Nahajima, S. 413–14 Hayes, R.H. 74, 75–6, 80, 82, Neely, A. 48 Champy, J. 436 98, 137–8, 501–2, 505 Nonaka, I. 449, 450 Chiesa, V. 481 Herzberg, F. 369 Norton, D. 49–50 Christensen, C.M. 475–6 Hill, T. 82, 427 Cooper, C. 324 Hofstede, G. 353, 387–9 Oakland, J.S. 328, 345 Crosby, P.B. 324, 345 Houtepen, M. 118, 118 Ohmae, K. 22–3 Huczynski, A. 379–80 Oldham, G. 369–72, 370 Dahlsrud, A. 58 O’Neill, J. 19 Dale, B.G. 324 Imai, M. 305 Ouchi, W.G. 306 De Meyer, A. 315–16, 315 Deal, T.E. 386–7 Johansson, J. 22 Parasuraman, A. 333–4 Deming, W.E. 323, 327–8 Johnson, G. 73 Perras, C. 448 Dornier, P. 121, 216 Johnston, R. 174–6, 348 Platts, K. 82, 427 Dunning, J.H. 21–2 Jokinen, M. 120–1 Poon, S. 173 Jones, D. 294–5 Prahalad, C.K. 81, 99, 215 Elkington, J. 58 Judge, T. 381–4 Quinn, J.B. 77 Ferdows, K. 122–4, 315–16, 315 Kaplan, R. 49–50 Flaherty, M.T. 98–9 Kennedy, A.A. 386–7 Robbins, S.P. 381–4 Fliedner, G. 212 Ketokivi, M. 120–1 Roos, D. 294–5 Flynn, B.B. 353, 354 Rosenbaum, R. 213 Forrester, J.W. 209, 209 Leonard-Barton, D. 447 Rowan, S. 389 Friedman, T. 203–4 Rungtusanatham, M. 354 MacCarthy, B.L. 111–13, 112 Garvin, D. 330 McCelland, D. 376 Saladin, B. 353, 354 Gattorna, J. 223 McGregor, D. 369 Schein, E. 384–5

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Schmenner, R.W 426 Takeuchi, H. 449, 450 Waters, J.A. 77 Schonberger, R.J. 315 Taylor, F.W. 48, 365, 366 Wheelwright, S.C. 75, 80, 82, 98 Senge, P.M. 307 Tidd, J. 459 Wiederscheim-Paul, F. 22 Shenkar, O. 389 Trent, R.J. 217–18 Womack, J. 294–5 Shi, Y. 127 Shingo, S. 310–11 Utterback, J. 472–4, 472 Shostack, L. 444 Skinner, W. 75, 120 Venkatraman, N. 178–9 Slack, N. 39–40, 77, 80, Vernon, R. 21 425–6, 427, 428 Vollmann, T.E. 426 Swatman, P. 173 Voss, C. 29, 55

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SUBJECT INDEX

Page numbers in bold indicate tables and in italic indicate figures.

3D printing 168–70 AMH see automatic materials awards, quality 349 80:20 rule 275–8, 276, 446 handling (AMH) Ayodhya crisis, India 416–17 animal experimentation 499

ABC analysis 275–8, 276 APO see Advanced Planner and Optimizer (APO) B2B (business to business) absenteeism 365, 370, 375, 378 transactions 18 Apple 81, 400, 466, 504 acceptance quality level (AQL) 341 B2C (business to consumer) appraisal costs 337–9, 338, transactions 18 acceptance sampling 325, 339 326, 340–1 back office services 10–11, appropriateness of 11, 16, 23–4, 88, 219 access to markets 86–7, technology 182, 183 110–11, 112, 122 back-shoring 220 AQL see acceptance access to resources quality level (AQL) backwards loading 243–4 110–11, 112, 122 armed conflict 497 Balanced Active Lifestyle initiative, accident and emergency (A&E) McDonald’s 484–7 artefacts, cultural 384–5 service, Hong Kong 247–8 balanced scorecard Asda 146 accountability, in teams 384 (BSC) 49–50, 50 ASEAN (Association of Southeast action-oriented team roles 382 Bangladesh 399–400 Asian Nations) 19 action teams 380 bar charts 244 Asian Infrastructure Investment active customer-technology Bank (AIIB) 19 barcodes 173, 212, 284–5, 506–7 interaction 171–2, 171 assembly lines 184, 190, batch production 184, activism 399–400 235, 236, 307 185, 186, 187, 189 activity sampling 368 assumptions, cultural 385 bathtub curve of failure patterns 407, 407 activity scheduling 238, 240–6 Aston Martin 116–17 Bayer 213 additive manufacturing 168–70 AudioNova 85 behaviouralism 305–7, 364, Adidas 474–5 autocratic management 369–72, 370, 376 Advanced Planner and style 306, 389 beliefs, cultural 385 Optimizer (APO) 255 automated factory advice teams 307, 379–80 systems 509–10 benchmarking 54–7, 334, 439 ageing populations 496 automated guided vehicles benchmarking clubs 56 aggregate planning (AGVs) 168 Benetton 399–400 152–3, 238, 239 automated storage and retrieval best practice 53 AGVs see automated guided systems (AS/RSs) 168, lean operations as model vehicles (AGVs) 284–5 of 315–16, 315 Ahold Delhaize 78 automatic materials handling best practice analysis 213 (AMH) 168 Aichi Steel 302–3 best practice benchmarking autonomous maintenance AirAsia 330 55, 439 413 airbag safety 224–5, 335–6 ‘bet your company’ culture 387 autonomous work groups Biasio, Lorenzo 85 airline baggage tracking 506–7 307, 372, 380–1 bill of materials (BOM) 279 Aldi 78, 146 autonomy, in job design Amazon 83, 173, 197–8, 370, 370, 371 birth rates 496 250, 251, 502 availability 332, 408 black belts (Six Sigma) 353

523 Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 524 subject Index

Bloomberg News 428–9 service blueprinting utilization 139, 140, Bolland, Marc 260 444–5, 444 144, 145, 156 yield management 153–4 BOM see bill of materials (BOM) business process simulation 445 capacity cushion 143, 153 bonus schemes 375, 376 business scope redefinition 179 capital-intensive facilities 145 bottlenecks 256–7 business transformation capital investment decisions 84, bottom-up perspective of ICT-enabled 178–9 107, 143–5, 267, 272 operations strategy 81–2 see also transformation model CAPP see computer-aided BP 213 process planning (CAPP) BP (British Petroleum) 421–2 captive offshoring 217,217 BPO see business process CAD see computer-aided carbon emissions 497–8 outsourcing (BPO) design (CAD) carbon footprint 498 BPR see business process CAE see computer-aided re-engineering (BPR) engineering (CAE) cargo bicycles 466–8 Braunschweiler, Lukas 85 California 77 Carlsberg 102 Brazil 6, 15, 19, 89 call centres 24, 91–2, 219–20 cars breakthrough CAM see computer-aided 3D printing 169–70 improvement 430–2, 430 manufacturing (CAM) systems airbag safety 224–5, 335–6 assembly lines 184, breakthrough products 464–5 Canada 19 190, 235, 236, 307 BRICs countries (Brazil, Russia, capabilities, operational 76, recalls 41–2, 335–6 India, China) 19 315–16, 315 see also Japanese capacity 136–7 Brown, Gordon 146 manufacturing practices BSC see balanced scorecard (BSC) aggregate planning 152–3, 238, 239 Cascade Engineering 62–3 Bubb, Nick 262 capacity management 91, case studies budget airlines 330 148–57, 148–9, 239 Adidas 474–5 budgets 52 case studies 135–6, Aston Martin 116–17 bullwhip effect 209–11,209 146–7, 160–2 Benetton 399–400 business continuity chase demand BP (British Petroleum) 421–2 planning 415 strategy 149, 150–2 capacity 135–6, 146–7, 160–2 customer service Business Excellence Cascade Engineering 62–3 operations 152, 153–7 models 349 Celine Restaurant 66–9 definition 137 business-level strategy 73–4, 74 challenges in demand management 149, operations 490–1, business network redesign 152, 239 500–1, 506–7, 509–10 179 factors affecting 137–9 Coca-Cola Hellenic Bottling business objectives 73 forecasting demand Company 227–9 business process 141–2, 212 Dell 203–4 modelling 213 lead capacity strategy 143–4 facilities 109–10, business process outsourcing level capacity 116–17, 131–3 (BPO) 76, 89 strategy 148–50, 148 General Motors 268–9 business process re-engineering master production Gothenburg City Delivery (BPR) 178, 432, 436–7 scheduling 240 System 466–8 business process measurement 139–40 Gulf of Mexico oil spill 421–2 redesign 178, 437–45 queuing systems 156–7, Heineken 102–4 business process 192–4, 193 Honda 335–6 simulation 445 queuing theory 154–7 Hong Kong accident process activity rough cut capacity and emergency (A&E) charts 441–3, 442 planning 240 service 247–8 process mapping 443– scale of increments 146 Hong Kong Disneyland 11–13 4, 443, 444 timing decisions 143–5 Hotel Matina, Greece 31–4

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HP Global Business Toyota 8–9, 41–2, collaborative planning, Services 416–17 131–3, 302–3, 308–9 forecasting and innovation 457–8, 461–2, UK Mail 176–7 replenishment 466–8, 474–5, 484–7 University Hospital (CPFR) 212–13 inventory management Wales 440–1 collectively based 264–5, 268–9, 274–5, 290–2 UPS (United Parcel rewards 375–6, 383 Jaguar 318–20 Service) 250–1 collectivism 353, 388, 389 Kodak 461–2 Walmart 428–9 combination mode of knowledge lean operations 293–4, Whole Foods Market 372–3 creation 449, 450 302–3, 308–9, 318–20 see also H&M case study commodity goods and Linpac 454–5 causal analysis 141–2 services 216 Local Motors 169–70 cause and effect commonality 479–80 London Underground 160–2 diagrams 446–7, 447 communications McDonald’s 484–7 CBM see condition-based digital 17–18 Marks & Spencer 260–3 maintenance (CBM) service operations 329 Marriott International 393–5 Celine Restaurant 66–9 virtual teams 381 MESA 349–51 cellular equipment competence 329 Nestlé 290–2 layout 188, 189, 190–1 competition 99, 505 Next 274–5 centralized service Nike 500–1 competitive advantage facilities 117, 118, 118 online trading 197–9, 197 core competencies and 215–16 centre of gravity operations strategy and 72, operations performance method 114–15 36–7, 41–2, 56–7, 62–3, 66–9 73, 74–6, 75, 98–9 cerebral team roles 382 operations strategy 70–1, competitive benchmarking 54 78–9, 85–6, 95–7, 102–4 Chartered Institute of Public competitive imperative 504 Finance and Accountancy people management 362–3, competitor performance 52–3 372–3, 376–7, 393–5 (CIPFA) 56 complexity, operations 121 performance chase demand strategy 149, complexity reduction improvement 424–5, 150–2 techniques 479–80 428–9, 440–1, 454–5 Chenobyl nuclear plant planning and control 233–4, disaster 401 components 265–6 247–8, 250–1, 260–3 Cheung Kong Holdings 386 computer-aided design (CAD) 167, 477 Pret A Manger 95–7 China 6, 14–15, 15, 19, 20, 111 computer-aided engineering process technology 164–5, Coca-Cola 93–4 169–70, 176–7, 509–10 (CAE) 167 industrial robots 509–10 quality management 321–2, computer-aided manufacturing offshoring to 89, 218 335–6, 349–51, 357–60 (CAM) systems 168 Pret A Manger 95–7 Raja Fashions 26–7 computer-aided process see also Hong Kong risk, resilience and planning (CAPP) 167 Christmas demand 249, 250–1 recovery 396–7, 399– computer-integrated 400, 416–17, 421–2 CIM see computer-integrated manufacturing (CIM) Ritz-Carlton hotel 357–60 manufacturing (CIM) systems systems 168 social responsibility 62–3, City Delivery System, computer numerically controlled 500–1 Gothenburg 466–8 (CNC) machines 167 Sonova 85–6 click-and-collect purchases 198 concurrent engineering 477–8 Southwest Airlines 56–7 climate change 398, 402, 497–8 condition-based maintenance supply networks 201–2, CNC see computer numerically (CBM) 412–13 203–4, 224–5, 227–9 controlled (CNC) machines configuration Takata 224–5 Coca-Cola 93–4 of facilities 110, 124–8 Tesco 78–9, 146–7 of supply networks 206–9, Torbay Hospital, Coca-Cola Hellenic Bottling 207, 208 Devon 376–7 Company 227–9

Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 526 subject Index conflict, in teams 383 transaction 208 lean operations 314 conformance 332 transportation 114–15 in-process checks 404 consumables 7 courtesy 329 quality management 328–9 continuous improvement CPFR see collaborative queuing theory 154–7 8, 295, 305, 326, planning, forecasting and recovery 417–18 327–8, 339, 379 replenishment (CPFR) telephone-based 24, continuous performance craft workers 364–5 91–2, 219–20 yield management 153–4 improvement 432–4, credibility 329 433, 434 customer training 172, 472 criminal activities 402 continuous production customer’s risk 341 critical incident technique 405 184–5, 186, 187, 189 cybercrime 398, 402, 497 criticality 216 contributor facilities 123, cycle time 191 123, 124 Crosby, Philip 324, 325 cyclical movements in data 141 control 235 cross-functional teams 380 cyclical review see also planning and control cultural factors, location and systems 273–4, 274 control charts see statistical 112 process control (SPC) charts culture Daswani, Raja 26–7 control loop model of definitions 384–5 operations 51, 51 national 387–9 DDM see direct digital manufacturing (DDM) control loops 235–6, 235 organizational 385–7 dealmaking versus core competencies 99, curvilinear regression 141 relationships 388–9 215–16 customer base decision-making 469–70 corporate operations rationalization 208, 208 decomposition analysis 141 strategy 81 customer-based quality corporate social responsibility measures 340 Deepwater Horizon disaster 421–2 (CSR) 38, 58–60, customer complaints 404, 405 defective products 304 59, 60, 61, 498–9 customer contact 9, 23–4, 24 defects per million opportunities case studies 62–3, 500–1 (DPMO) 351–2 customer demand see demand costs 14, 44 define, measure, analyse, customer failures 402 appraisal 337–9, 338, 339 improve and control (DMAIC) employment 390 customer participation 151–2 methodology 352 external failure 337–9, customer-processing degree of automation of 338, 339 operations 7 technology 175 of holding inventory 267–8, customer-processing degree of integration of 272 technologies 170–2, 171 technology 175 incremental unit cost 503–4 customer requirements 53 delivery times 211, 266 insurance 268, 272 customer satisfaction 39, 40 Dell 90, 203–4, 251 internal failure 337–9, measures 47, 49, 340 338, 339 Delphi studies 142 customer self-service 152, labour 24, 61, 87, 88, demand 171–2, 471–2, 502 89, 145, 495–6 aggregate planning 152–3, location decisions customer service operations 238, 239 and 112, 113 capacity management 152, bullwhip effect 209–11,209 of maintenance 413 153–7 capacity management performance objective 39, customer participation 151–2 and 91, 148–57, 148–9, 239 315, 316, 425 customer-processing capital investment and 143–5 prevention 337–9, 338, technologies 170–2, 171 chase demand 339 customer self-service 152, strategy 149, 150–2 of quality 326, 327, 171–2, 471–2, 502 collaborative planning, 336–9, 338, 339 empowerment of staff 372 forecasting and replenishment storage 267–8, 272 inventory analogy 285–6, 314 (CPFR) 212–13

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demand management 149, implementation driverless vehicles 168 152, 239 problems 431 ‘drum, buffer, rope’ 256 dependent demand Internet of things 173 inventory 270, 278–85, 279 new product development forecasting 141–2, 212 and 477 e-business 173, 211 independent demand online trading 18, 173, e-commerce 18, 173, inventory 270–4, 197–9, 197, 491, 502 197–9, 197, 491, 502 271, 273, 274 performance improvement earliest due date rule 241, 242 level capacity and 430–2, 459 earliest planned start strategy 148–50, 148 performance measurement time rule 241 queuing theory 154–7 and 504 ease of access, service yield management 153–4 planning and control 255 operations 329 see also planning and control radical change and 430–2 eBay 173 radio frequency identification demand-pull control 254–5, 255 eclectic internationalization devices (RFIDs) 173, 284–5 demander-located theory 21–2 services 24, 25 remote delivery of services 93, 117 econometrics 141 Deming Application economic context 20–1 Prize 323, 349 risk of disruption 398 staff resistance to 431, 432 economic factors, location Deming, W. Edwards 323, 327–8 virtual teams 381 and 112 demographic trends 496–7 Dillon, Mary 484 economic growth 17, 19, 20 dependability 40, 315, economic order quantity 316, 332, 425 direct digital manufacturing (DDM) 168–70 (EOQ) 270–2, 271 dependent demand economic risk mitigation 414 inventory 270, 278–85, 279 direct exporting 92–3 disaster investigation 405 economies of scale 16, 25, design and build policy 252, 253 90, 119, 121, 146 disaster recovery planning 415 design capacity 139 economies of scope 90, design for manufacturing discontinuities 397–8, 497 92, 120, 121 (DFM) 312, 478 discrimination 499 economy measures 44 design of experiments diseconomies of scale 119, 146 ECR (efficient consumer (DOE) 479 disintermediation 18 response) 314 designing technologies 167 Disneyland, Hong Kong 11–13 EDI see electronic data destructive testing 340 dispatch rules 240–2 interchange (EDI) deterioration and damage of disruptive innovation 475–6 ediTRACK software 261–2 inventory 268, 272 diversity, workforce 384, 393–5 effective capacity 139 development-oriented division of labour 365 effectiveness 39 organizations 481–2 of operations strategy 74–5 DMAIC (define, measure, analyse, DFM see design for improve and control) of teamworking 381–4 manufacturing (DFM) methodology 352 effectiveness Digital Strategy Consulting 16 documentation measures 47–8, 49 digital technologies 16, 17–18, business processes 437–8 efficiency 14, 39, 48–9, 346 20, 24–5, 172–3, 237, 501–5 explicit knowledge 449 efficiency measures 45–7, 139 business transformation quality manuals 325, 345 Egypt 15 and 178–9 specifications 331–2 customer self- electronic data interchange (EDI) 18 service 171–2, 502 DOE see design of e-business 173, 211 experiments (DOE) electronic point of sale (EPOS) technology 212, 284–5 e-commerce 18, 173, Dow Jones Sustainability 197–9, 197, 491, 502 Index 60 emergent strategies 77 electronic point of sale DPMO see defects per million employee representatives 59, (EPOS) 212, 284–5 opportunities (DPMO) 391

Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 528 subject Index employees see staff external benchmarking 54–6 assessment 402–3, 403 employment costs 390 external failure costs 337– business continuity planning 415 employment legislation 150, 9, 338, 339 151, 390–1 external failures 401–2 detection 403–4 failure rate 408 empowerment of staff 295, external standards 52–3, 439 learning from 409–10, 410 305–7, 313, 372, 379 externalization mode measures 407–9 energy efficiency 498 of knowledge mitigation actions 414–15 enterprise resource planning creation 449, 450 patterns 407, 407 (ERP) 255, 284–5, 284 extreme weather recovery 396–7, 414–18 environmental performance 58, events 398, 402, 497 59–60, 60, 61 resilience 396–7, 410–14 types of 400–2 environmentalism 497–8 face-to-face services 24, 25, 91 fault tree analysis 405, 406 EOQ see economic order facilities 7, 110 feedback, in job design 370, quantity (EOQ) capital-intensive 145 370, 371 EPOS (electronic point of sale) case studies 109–10, Feigenbaum, Armand 323 technology 212, 284–5 116–17, 131–3 EQA see European Quality centre of gravity femininity 388, 389 Award (EQA) method 114–15 financial crisis (2008) 20 equality 499 configuration 110, 124–8 financial hedging equipment contributor 123, 123, 124 instruments 414 layout design 187–91, focused operations 90, 120–1 financial measures of 188, 189, 311–12 global coordinated quality 336–9, 338, 339 in lean operations 311–12 operations 126–8 finished goods inventory 266, maintenance of 411–14 home operations 125–6 267, 279, 302 planning and international operations first come, first served rule 241 strategy 94–5 control 237, 244 fish bone diagrams 446–7,447 see also process technology labour-intensive 145 five Ss of good lead 123, 123, 124 equipment schedules 244 housekeeping 312 ergonomics 368–9 location decisions 110–15, 112, 117–18, 118, 481–2, 495–6 fixed position equipment Ericson 125 layout 188–9, 188, 189 multidomestic ERP see enterprise resource operations 126 flexibility planning (ERP) outpost 123, 123 as performance objective 40, errors 401 planning and control 237 315, 316, 426 espoused values 385 regional operations 126 of team members 382 ethical issues 61 scale and scope 110, 119–21 flexible manufacturing see also corporate social server 122, 123 systems (FMSs) 168 responsibility (CSR) services 117–18, 118 flexible specialization 90 European Nutrition Task source 122, 123 flow charts 443–4,443 , 444 Force (ENTF) 487 strategic role 121–4, 122–3 fluid phase of technological European Quality Award weighted scoring innovation 472, 473 (EQA) 349 method 113–14, 115 FMEA see failure mode and European Union 19, 390, 496 see also capacity effects analysis (FMEA) exit interviews 404 fail-safing 411 FMSs see flexible manufacturing expatriate workers 374–5 failure mode and effects analysis systems (FMSs) expediting 238, 246–7 (FMEA) 326, 405, 406 focused operations 90, 120–1 explicit knowledge 448, failure plans 409 Food Group Australia (FGA) 449, 450 failures 497 487 exponential smoothing analysis techniques 405, Ford Motor Company 213 techniques 141 406, 409–10, 410 forecasting demand 141–2, 212

Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 subject Index 529 foreign markets see grades of service 154 Disneyland 11–13 internationalization Greece 31–4 Li & Fung 206 formal social interactions 389 green belts (Six Sigma) 353 Pret A Manger 97 Raja Fashions 26–7 forming technologies 167 greenhouse gas Formula One 440–1 emissions 497–8 hospitals 90, 139 forward loading 243–4 GRI see Global Reporting case studies 247–8, 376–7, 440–1 fossil fuels 497, 498 Initiative (GRI) Hotel Matina, Greece 31–4 France 198 gross domestic product (GDP) 15, 15 house of quality 478 free trade agreements 19–20 group equipment layout 188, HP Global Business Fresh & Easy 78–9 189, 190–1 Services 416–17 front office services 10–11, group working see teamworking human failures 401 11, 16, 24, 24, 92, 219–20 groupthink 383 human resource management FTSE4Good Index 60 growth needs strength 371 see people management functional-level human resources see staff strategy 14, 74, 74 Gulf of Mexico oil spill 421–2 Humler, Herve 359 functional structure 435, 435 H&M case study 3–4 capacity 135–6 ICT see information and Gantt charts 244 challenges in communication gates 469–70 operations 490–1 technology (ICT) GDP (gross domestic facilities 109–10 idea generation 459, product) 15, 15 innovation 457–8 465–6, 465, 468 General Electric 168 inventory idea selection 459, 468–9 General Motors 268–9, 295 management 264–5 immigrant workers 496–7 genetic engineering 499 lean operations 293–4 IMV project, Toyota 131–3 operations Germany 15, 353, 390 in-house offshoring 217,217 performance 36–7 in-process checks 403–4 Global Business Excellence operations strategy 70–1 programme (GLOBE) 291–2 people management inadequacies 401 global configuration 124 362–3 incident reporting 404 global coordinated performance incremental improvement operations 126–8 improvement 424–5 432–4, 433, 434 global population planning and control 233–4 incremental products 464 changes 496–7 process technology 164–5 incremental unit cost 503–4 global process networks 218 quality management 321–2 independent demand Global Reporting Initiative risk, resilience and inventory 270–4, (GRI) 59–60 recovery 396–7 271, 273, 274 supply networks 201–2 global sourcing 98, 217–20, 266 India 6, 15, 19 global warming 398, 402, 497–8 hardware of operations 83–4 Ayodhya crisis 416–17 globalization 17–21, 22–3, 99 hearing aids 85–6 call centres 24, 92 see also internationalization hedging 414 McDonald’s 91 GMB Union 376–7 Heineken 102–4 offshoring to 24, 88, good design 460 heterogeneous workforce 384 89, 92, 218, 495–6 goods-services home operations 125–6 individualism 388, 389 continuum 10, 10 Homeplus 198–9 Indonesia 15, 19 Gothenburg, Sweden 466–8 Honda 77, 335–6 Industrial Revolution 364–5 government 59 Hong Kong industrial robots 167, 168, 509–10 location decisions and 112 accident and emergency role culture 386 (A&E) service 247–8 informal social interactions 389

Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 530 subject Index information and communication as performance objective 40 foreign production technology (ICT) 16, 17–18, process innovation 459, facilities 94–5 20, 24–5, 172–3, 237, 501–5 460, 471–4, 472 joint ventures 93–4 business transformation sustaining innovation 476 market access strategy 86–7 and 178–9 technological 459, 472–7, 472 market-led perspective 86, customer self- see also new product 97–8 service 171–2, 502 development (NPD) operations-led e-business 173, 211 input-output transformation perspective 87, 98, 99 e-commerce 18, 173, model see transformation resource-seeking 197–9, 197, 491, 502 model strategy 86, 87–8 electronic point of sale input resources 6–7, 6, 88, 89 sales subsidiaries 94 (EPOS) 212, 284–5 insurance 414 International Organization for implementation Standardization (ISO) 345 problems 431 insurance costs 268, 272 international trade 17–21 Internet of things 173 integrating technologies 168–9 internationalization 492–5 new product development Intel 124 and 477 benefits 28–9 intellectual property 215 online trading 18, 173, challenges 27–8 197–9, 197, 491, 502 intermediaries 18, 203 eclectic theory 21–2 performance improvement disintermediation 18 of new product development and 430–2, 459 re-intermediation 18 (NPD) 480–2 performance measurement supported customer- of operations 5–6 and 504 technology interaction 172 product cycle theory 21 planning and control 255 internal benchmarking 54 of R&D 480–2 radical change and 430–2 internal failure costs 337–9, of services 16, 23–5, 91 radio frequency identification 338, 339 stage theories 22–3 devices (RFIDs) 173, 284–5 internal failures 400–1 of supply networks 14 remote delivery of internal integration of ICT transformation model services 93, 117 systems 178 and 88–92, 88 risk of disruption 398 internal standards 51–2, 439 see also international staff resistance to 431, 432 operations strategy internalization mode virtual teams 381 of knowledge Internet 16, 17–18, 24–5, information, as resource 237 creation 449, 450 172–3, 237, 502 business scope information-processing international agencies 19 operations 7 redefinition 179 International Air Transport customer self- information-processing Association 506 service 171–2, 502 technologies 172–3 international configuration 125 e-business 173, 211 infrastructural International Labour e-commerce 18, 173, decisions 84, 231 Organization 400 197–9, 197, 491, 502 see also innovation; new product development inventory management; International Monetary and 477 lean operations; people Fund (IMF) 19 management; performance international networks of online trading 18, 173, improvement; planning facilities 126–8 197–9, 197, 491, 502 and control; quality international operations planning and control 255 management; risk strategy 72, 86–100 remote delivery of infrastructure, location case studies 95–7, 102–4 services 93, 117 decisions and 112 competitive advantage risk of disruption 398 innovation 458–60 and 98–9 virtual teams 381 case studies 457–8, 461–2, direct exporting 92–3 Internet of things 173 466–8, 474–5, 484–7 foreign market entry intra-organizational disruptive innovation 475–6 modes 92–5 processes 438

Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 subject Index 531 inventory management 265 quality circles 307, 379–80 labour characteristics 112 ABC analysis 275–8, 276 rugby scrum approach 477–8 labour costs 24, 61, 87, case studies 264–5, Theory Z 306–7 88, 89, 145, 495–6 268–9, 274–5, 290–2 total quality management labour-intensive facilities costs of holding (TQM) 49, 76, 81, 295, 145 inventory 267–8, 272 305, 312, 324, 325, 326–8, labour legislation 150, cyclical review 348, 348, 354, 379 151, 390–1 systems 273–4, 274 Toyota Production System labour productivity 48 dependent demand (TPS) 8, 41, 294, 295, 304, inventory 270, 278–85, 279 305, 307, 308–9, 379 language difficulties, offshoring 219–20 economic order quantity see also lean operations (EOQ) 270–2, 271 Jeary, David 275 laying off staff 151, 437 LDCs see less developed enterprise resource planning jidoka 8 (ERP) 255, 284–5, 284 countries (LDCs) JIT see just in time (JIT) system independent demand lead capacity strategy 143–4 job design 364–72, 370 inventory 270–4, lead facilities 123, 123, 124 271, 273, 274 activity sampling 368 leadership, team effectiveness behaviouralism 364, lean operations and 268, and 382–3 296–7, 296, 301–2, 304 369–72, 370 lean operations 8, 28–9, materials requirement ergonomics 368–9 41, 83, 294–5 planning (MRP) 255, method study 366–7 advantages 316 278–84, 279 predetermined motion time order point systems 272–4, systems (PMTS) 368 as best practice model 315–16, 315 273, 274, 279 scientific management 364–9 case studies 293–4, order quantity time study 367–8 302–3, 308–9, 318–20 decisions 270–2, 271 work study 366–8 continuous improvement 8, order timing decisions 270, Job Diagnostic Survey 370 295, 305 272–4, 273, 274 job enlargement 371 disadvantages 316 queuing analogy 285–6, 314 employee involvement and reasons for holding job enrichment 371 empowerment 295, inventory 266–7 job order schedules 244 305–7, 313 reorder level job rotation 371 equipment and systems 273, 273 job specialization 191, 365–6 layout 311–12 types of inventory 265–6 jobbing processes 184, five Ss of good inventory replenishment 212 185, 186, 187, 189 housekeeping 312 Ishikawa diagrams 446–7, 447 John Lewis Partnership 199 inventory and 268, 296–7, 296, 301–2, 304 Ishikawa, Kaoru 324 joint business planning 212 kanban ISO 9000 series quality system 254, joint ventures 93–4 299–301, 300 management Juran, Joseph 323 system 345–8, 348 line balancing 297–9 just in time (JIT) system 76, planning and control ISO 14000 standard 60 81, 249, 254, 294, 327 297–302, 300 principles 295–307 Jaguar 318–20 kaizen 8, 305, 326, 379 product design 312 services 314 Japan 15, 353, 388, 496 kanban system 254, Japanese manufacturing 299–301, 300 set-up times 310–11 simplicity 311–12 practices 8, 28–9, Keller, Fred 62–3 48, 81, 294–5, 323, single minute exchange of Kit Kat voucher reward 376–7 354, 379, 384, 433 dies (SMED) 310–11 just in time (JIT) system 76, knowledge management smooth flow 309–10 81, 249, 254, 294, 327 448–50, 450 standardized procedures 311 kaizen 8, 305, 326, 379 Kodak 461–2 suppliers 312–13

Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 532 subject Index lean operations (continued) London Stock Exchange 60 market-qualifying criteria 82 synchronization 295, London Underground 160–2 market requirements 53 296–302, 296 long-term-oriented market surveys 142 techniques and societies 388 marketing practices 309–14 longest processing time rule 240 ISO 9000 series and 346 Theory Z 306–7 loss reduction 415 requirements 121 total productive maintenance (TPM) 313–14 lot tolerance percentage of Marks & Spencer 78, 260–3 waste elimination 8, defectives (LTPD) 341 Marriott International 393–5 295, 304–5 low-cost labour 24, 61, 87, masculinity 353, 388 88, 89, 145, 495–6 learning curve effects 138 mass customization 16, learning, organizational 54, Lufthansa 506 90, 479–80 76, 447–50, 450 Luxottica 85 mass production 184, learning organizations 307 185, 186, 187, 189 legal frameworks, location McDonald’s 91, 96, 330, 484–7 mass services 185, decisions and 112 186, 187, 189 machine-diagnostic checks 404 less developed countries Machine That Changed the master black belts (Six (LDCs) 17, 21, 89 Sigma) 353 World, The 294–5 level capacity strategy master production schedules Macintosh computer 504 148–50, 148 (MPS) 238, 240, 278–9 Maersk 169 Li & Fung 206 material-processing maintenance Li Ka Shing 386 operations 7 condition-based maintenance material-processing Lidl 146 (CBM) 412–13 technologies 167–9 line balancing 297–9 preventative material schedules 244 linear regression 141 maintenance 412–13, 414 materials Linpac 454–5 resilience and 411–14 planning and Little’s Law 191 run to breakdown (RTB) 412–13 control 237, 244 loading 243–4 total productive maintenance see also inventory management local community 59 (TPM) 313–14, 413–14 materials requirement planning Local Motors 169–70 maintenance, repair and (MRP) 255, 278–84, 279 localized exploitation of operating (MRO) MBNQA see Malcolm ICT systems 178 inventory 266, 267, 279 Baldrige National Quality localized service Malaysia 15, 495 Award (MBNQA) facilities 117–18, 118 Malcolm Baldrige National mean time between failures location Quality Award (MTBF) 408 centre of gravity (MBNQA) 349, 353, 357 mean time taken to repair method 114–15 malicious actions 398, 402, 497 (MTTR) 408 competitive advantage management policies, measurement and 98 capacity and 138 of capacity 139–40 facilities 110–15, 112, manufacturing lead times 211 control and 236 117–18, 118, 481–2, 495–6 manufacturing of failure 407–9 operations performance resources planning quality 336–40, 338, 339 and 61 (MRP2) 283–4, 283 work 367–8, 375 R&D units 481–2 market access strategy 86–7 see also performance service operations 24, measurement 25, 117–18, 118 market focus 120–1 MESA 349–51 weighted scoring market-led perspective of method 113–14, 115 strategy 82, 86, 97–8 method study 366–7 see also offshoring market-pull approach to Mexico 6, 19, 496 London Olympic Games 160–1 innovation 465–6, 465 migrant workers 496–7

Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 subject Index 533 minimum slack time rule 241 mura 304 new service minimum wage legislation 390 Murdoch, Rupert 386 development 471–2 MINT countries (Mexico, muri 304 New York Stock Exchange 60 Indonesia, Nigeria, Myanmar 102–4, 495 newly industrialized economies Turkey) 19 (NIEs) 6, 19, 20, 89 mission statements 73 News Corporation 386 NASA 169, 386 mitigation, risk 414–15 Next 274–5 national culture 387–9 MNEs see multinational next-generation products 464 enterprises (MNEs) natural disasters 402, 415 Nigeria 15, 19 mobile devices 173 nearshoring 220 Nike 500–1 modularity 479–80 Nestlé 125, 290–2 North American Free Trade Moore’s Law 510 network perspective 127–8 Agreement (NAFTA) 19 new product development Morrisons 146 ‘not invented here’ syndrome 432 (NPD) 458, 459, 460–3, 505 motivating potential score novelty goods and services 216 (MPS) 370 breakthrough products 464–5 case studies 461–2, NPD see new product motivation 466–8, 484–7 development (NPD) job design and 369–72, 370 commonality reward and approach 479–80 remuneration 374–7, objectives 378, 383, 390, 391 complexity reduction business 73 techniques 479–80 motorbikes 77 performance 38–40, 315, design for manufacturing 316, 425, 426, 505 Motorola 351 (DFM) 312, 478 obsolescence, moving average disruptive innovation 475–6 inventory 268, 272 calculations 141 final design 469 Ocado 198 moving technologies 168 idea generation 459, MPS see master production 465–6, 465, 468 offshore facilities 122, 123 schedules (MPS); motivating idea selection 459, 468–9 offshoring 14, 61, 89, potential score (MPS) incremental products 464 217–20, 495–6 MRO see maintenance, repair and internationalization 480–2 back-shoring 220 operating (MRO) inventory market-pull benefits 218 MRP see materials requirement approach 465–6, 465 call centres 24, 92, 219–20 planning (MRP) modularity approach 479–80 challenges 218–19 MRP2 see manufacturing next-generation nearshoring 220 resources planning (MRP2) products 464 service operations 24, MTBF see mean time between preliminary design 469 88, 92, 219–20 failures (MTBF) process 468–71, 470, 477 typology of 217, 217 MTTR see mean time taken prototypes 469, 477 Ohno, Taiichi 304 to repair (MTTR) quality function deployment oil spill, Gulf of Mexico 421–2 (QFD) 326, 478–9 muda 8, 304 Omni-Channel rugby scrum approach 477–8 multi-factor productivity 45 Retailing 197–9, 197 standardization 479–80 multi-skilled workers 90, 151 online-only businesses 502 Taguchi methods 479 multidomestic operations 126 online trading 18, 173, technological innovation 197–9, 197, 491, 502 multifunctional teams 477–8 and 472–7, 472 multinational technology-push approach 466 operational capabilities 76, 315–16, 315 configuration 124–5 testing 469 multinational enterprises time to market 463, 480 operational risk mitigation 414 (MNEs) 17, 20–1 value engineering and value operations-based approach multiple regression 141 analysis (VE/VA) 480 to quality 330–1 multiple sourcing 223–4 virtual prototyping 477 operations complexity 121

Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 534 subject Index operations facilities see facilities market access strategy 86–7 overbooking 153 operations functions 4–5 market-led perspective 82, overproduction 304 86, 97–8 operations improvement see overtime working 150 performance improvement nature of strategy 72–4, 74 operations-led operations-led perspective of perspective 82–3, packaging 454–5 strategy 82–3, 87, 98, 99 87, 98, 99 Pareto diagrams 446, 446 operations management process 79, 80–3, 80 changing nature of 13–16 Pareto rule 275–8, 276, 446 resource-seeking definitions and concepts 4–6 strategy 86, 87–8 part-time staff 151 operations measures 336 sales subsidiaries 94 partnership agreements 212–13 operations performance 37–8 strategic role of operations partnership supply relationships benchmarking 54–7, 334, 439 model 75–6, 75 221, 222, 223–4, 312 case studies 36–7, 41–2, structural decisions 83–4, 107 passive customer-technology 56–7, 62–3, 66–9 top-down perspective 80–1 interaction 170–1, 171 corporate social responsibility unrealized strategies 77 path dependency 76 (CSR) 38, 58–60, 59, 60, 61 operations, types of 7–11 pay 374–6, 378, 383, 390, 391 environmental optimized production P:D ratios 252, 253 performance 58, technology (OPT) 256–7 59–60, 60, 61 PDCA see plan-do-act- order point systems 272–4, lean as best practice check (PDCA) cycle 273, 274, 279 model 315–16, 315 people 7, 236–7, 244 location and 61 order quantity see also staff decisions 270–2, 271 objectives 38–40, 315, people management 236–7, 316, 425, 426, 505 order timing decisions 270, 363–4 272–4, 273, 274 performance gap 425–6 activity sampling 368 sandcone model of operations order-winning criteria 82 autonomous work excellence 315–16, 315 organizational behaviour groups 307, 372, 380–1 social performance 58–9, theories 305–7 behaviouralism 364, 59, 61 organizational culture 385–7 369–72, 370, 376 standards 51–3, 51, 60, 439 organizational failures 401 case studies 362–3, trade-offs 40, 61, 315 372–3, 376–7, 393–5 organizational knowledge see also performance 448–50, 450 cultural context 384–9 improvement; performance employment costs 390 organizational learning 54, measurement 76, 447–50, 450 employment legislation 150, operations strategy 72, 77 151, 390–1 organizational-level bottom-up perspective 81–2 empowerment of staff 295, strategy 73, 74 case studies 70–1, 78–9, 305–7, 313, 372, 379 organized labour 85–6, 95–7, 102–4 ergonomics 368–9 groups 59, 391 competitive advantage job design 364–72, 370 outpost facilities 123, 123 and 72, 73, 74–6, 75, 98–9 job enlargement 371 content 79, 83–4 output-based payment job enrichment 371 schemes 375 direct exporting 92–3 job rotation 371 effectiveness 74–5 outsourced offshoring 217,217 in lean operations 295, emergent strategies 77 outsourcing 24, 61, 502 305–7, 313 foreign market entry advantages 214 method study 366–7 modes 92–5 business process outsourcing organized labour foreign production (BPO) 76, 89 groups 59, 391 facilities 94–5 call centres 24, 92 pay 374–6, 378, infrastructural decisions 84 decision-making 213–16 383, 390, 391 international 72, 86–100 disadvantages 215 performance joint ventures 93–4 typology 217, 217 management 377–8, 383

Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 subject Index 535

performance-related process activity personality characteristics, of pay 375–6, 378 charts 441–3, 442 team members 382 predetermined motion time process mapping 443–4, Philippines 495 systems (PMTS) 368 443, 444 piecework 375 reward and process perspective 435–7, plan-discover-act-learn remuneration 374–7, 435 model 409–10, 410 378, 383, 390, 391 radical change 430–2, scientific management 430, 433–4, 434 plan-do-act-check (PDCA) cycle 327–8 364–9, 375 scale and scope of required staffing failures 401, 428–9 improvement 426–7 planning and control 234–5 time study 367–8 scatter diagrams 445–6, 445 activities 238–47, 238 work study 366–8 service blueprinting 444–5, activity scheduling 238, workforce diversity 384, 444 240–6 393–5 technological innovation and aggregate planning 238, 239 workforce scheduling 244–6 459, 475–6 case studies 233–4, workforce skills 390 why-why analysis 447 247–8, 250–1, 260–3 see also teamworking performance management, computer-based 255 people-oriented team roles 382 employee 377–8, 383 control loops 235–6, 235 demand-pull perceived approach to performance measurement 38, philosophy 254–5, 255 quality 330–1 42–3, 213, 426 design and build performance appraisal 378 balanced scorecard (BSC) 49–50, 50 policy 252, 253 performance gap 425–6 benchmarking 54–7, 334, 439 enterprise resource planning performance-importance (ERP) 255, 284–5, 284 case study 66–9 matrix 427, 428, 439 expediting 238, 246–7 developments in 48–9 performance improvement kanban system 254, digital technologies 425 299–301, 300 and 503–4 business process re- lean operations 297–302, 300 economy measures 44 engineering (BPR) 178, line balancing 297–9 effectiveness 432, 436–7 loading 243–4 measures 47–8, 49 business process manufacturing efficiency measures 45–7 redesign 178, 437–45, resources planning 442, 443, 444 environmental (MRP2) 283–4, 283 performance 58, 59–60 business process master production schedules simulation 445 incremental unit cost 503–4 (MPS) 238, 240, 278–9 case studies 424–5, productivity materials requirement 428–9, 440–1, 454–5 measures 45–7, 46 planning (MRP) 255, cause and effect scientific management 48 278–84, 279 diagrams 446–7, 447 social performance 58–9 optimized production continuous 432–4, 433, 434 systems 49–50 technology (OPT) 256–7 digital technologies three Es of 44–8, 44 P:D ratios 252, 253 and 430–2, 505 performance objectives 38–40, principles 235–7 disruptive innovation 475–6 315, 316, 425, 426, 505 produce to order innovation and 459 performance, operations see policy 249–52, 253 knowledge management operations performance produce to stock and 448–50, 450 policy 249, 252, 253 performance-related new technology 430–2 pay 375–6, 378 resource to order policy 252, 253 new working methods 432 routing 242 performance standards organizational learning 51–3, 51, 60, 439 sequencing 240–2 and 447–50, 450 strategic operations performance, team 381–4 Pareto diagrams 446, 446 planning 238–9, 238 performance gap 425–6 peripatetic services 24, 25 supply-push philosophy priority setting 427, 428 person culture 386 253–4, 254, 255

Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 536 subject Index

‘plants within a plant’ concept 90 process focus 121 team effectiveness platform products 464 process innovation 459, and 383–4 PMTS see predetermined motion 460, 471–4, 472 waste in 304 time systems (PMTS) process mapping 443–4, Proctor & Gamble 82, 125, 213 poka-yoke 307, 411 443, 444 produce to order political context 18–20 process networks 218 policy 249–52, 253 political factors, location process perspective produce to stock policy 249, and 112 of performance 252, 253 improvement 435–7, 435 population changes 496–7 product-based approach process technology 166 to quality 330–1 postponement 249–51 adoption strategies 179– product cycle theory 21 power culture 386 80, 463 product design power distance 353, 387, 389 appropriateness of 182, final design 469 183 practice benchmarking 54–6 in lean operations 312 capacity and 137 predetermined motion time preliminary design 469 case studies 164–5, systems (PMTS) 368 prototypes 469, 477 169–70, 176–7, 509–10 Pret A Manger 78, 95–7 see also new product choice decisions 174–6 preventative maintenance development (NPD) customer-processing 412–13, 414 technologies 170–2, 171 product development see new prevention costs 337–9, product development (NPD) degree of automation 175 338, 339 degree of integration 176 product equipment price and quality 332 layout 188, 189, 190 designing technologies 167 price discounting 152, 153, 211 failures 401 product focus 121 price premiums 463 forming technologies 167 product innovation see new primary inputs 6 ICT-enabled business product development (NPD) priority setting 427, 428 transformation 178–9 product recalls 41–2, implementation 173, 285, 335–6 prisoner’s dilemma 221–2 problems 431 product/service design proactive international industrial robots 509–10 failures 400–1 sourcing 217 information-processing product testing 469 problem-solving technologies 172–3 teams 307, 379–80 product traceability 285, 405 integrating production teams 380 process activity technologies 168–9 charts 441–3, 442 material-processing productivity measures 45–7, 46 process batch sizes 257 technologies 167–9 professional services 185, process culture 387 moving technologies 168 186, 187, 189 process design optimized production profit-sharing 376 technology (OPT) 256–7 cycle time 191 project champions 353 performance improvement equipment layouts 187– project sponsors 353 and 430–2, 459 91, 188, 189 project teams 380 radical change and 430–2 process types 183–7, projects 183, 185, 186, 187, 189 186, 187 robustness of 181, 182 promotional campaigns 152, queuing systems 192–4, 193 scale of 174–5 211 resilience and 410 staff resistance to 431, 432 proprietary goods and throughput time 191 technology transfer 180– 2, 182, 183 services 216 work in progress 191 transferability of 181, prototypes 469, 477 process equipment layout 188, 182, 183 189–90, 189 provider-located services 24, 25 process types 183–7, 186, 187 process flow charts 443–4, proximity to market 86–7, 443, 444 processes 110–11, 112, 122

Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 subject Index 537 psychology of queuing 192–4 statistical quality relationships versus pull control 254–5, 255 control 326, 340–4, 351 dealmaking 388–9 purchasing 204 quality management systems relay race approach 477 decisions 44 (QMS) 326, 345–8, 348 reliability 329, 332, 408 relationships 221–3, 222 quality manuals 325, 345 remote delivery of see also supply networks quality of life, location services 93, 117 push control 253–4, 254, 255 decisions and 112 remuneration and reward 374– quantitative methods, 7, 378, 383, 390, 391 forecasting 141–2 renewable energies 498 QFD see quality function queuing deployment (QFD) reorder level systems 273, 273 inventory analogy 285, 314 repetitive strain injury (RSI) 366 QLF see quality loss lean operations 314 function (QLF) replanning 239 psychology of 192–4 see reporting QMS quality management systems 156–7, 192–4, 193 systems (QMS) incident 404 theory 154–7 QR (quick response) 314 sustainability 59–60 qualitative methods, research-oriented forecasting 142 R&D organizations 481–2 quality 44, 315, 316 internationalization 480–2 reshoring 220 case study 41–2 see also innovation; new resilience 396–7, 410–14 product development (NPD) definitions 329–33 resource-based view (RBV) efficiency and 48–9 radical change 430–2, of strategy 82–3 430, 433–4, 434 as performance resource constraints 137 objective 39, 425 radical redesign 436–7 resource inputs 6–7, 6, 88, 89 quality assurance 324, 325, 326 radio frequency identification resource-seeking devices (RFIDs) 173, 284–5 quality awards 349 strategy 86, 87–8 Raja Fashions 26–7 quality circles 307, 379–80 resource to order quality control 324, 325–6, 325 Rana Plaza disaster, policy 252, 253 Bangladesh 399–400 statistical 326, 340–4, 351 responsiveness 329 random movements in data 141 quality function deployment reward and remuneration 374– (QFD) 326, 478–9 rationalization, of supply 7, 378, 383, 390, 391 networks 206–9, 207, 208 quality inspection 324–5, 325 RFIDs (radio frequency quality loss function (QLF) 479 raw materials inventory 265–6, identification 267, 279, 301–2 quality management 322–3 devices) 173, 284–5 acceptance sampling 325, RBV see resource-based risk 397–8, 399, 497 326, 340–1 view (RBV) of strategy assessment 402–3, 403 case studies 321–2, re-intermediation 18 business continuity 335–6, 349–51, 357–60 reactive international planning 415 costs of quality 326, sourcing 217 case studies 396–7, 327, 336–9, 338, 339 recalls, product 41–2, 399–400, 416–17, 421–2 defining quality 329–33 173, 285, 335–6 customer’s 341 evolution of ideas 323–9, 325 recovery 396–7, 414–18 disaster recovery planning 415 global differences 353–4 recruitment 151 ISO 9000 series 345–8, 348 failure analysis redundancy 410–11 quality awards 349 techniques 405, regional operations 126 quality gaps model 333–4 406, 409–10, 410 quality measures 336–40, regression techniques 141 failure detection 403–4 338, 339 regulators 59 failure measurement 407–9 services 328–9 regulatory frameworks, location failure patterns 407, 407 Six Sigma 351–3 decisions and 112 failure rate 408

Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 538 subject Index risk (continued) of performance mass 185, 186, 187, 189 learning from improvements 426–7 new service failures 409–10, 410 of process technology 174–5 development 471–2 mitigation 414–15 scatter diagrams 445–6, 445 offshoring 24, 88, 92, 219–20 recovery 396–7, 414–18 scenario planning 142 peripatetic 24, 25 resilience 396–7, 410–14 process types 185–7, scheduling supplier’s 341 186, 187 activity 238, 240–6 types of 400–2 professional 185, master production 238, 186, 187, 189 risk priority numbers 240, 278–9 provider-located 24, 25 (RPNs) 405, 406 workforce 244–6 quality management 328–9 Ritz-Carlton hotel 357–60 Schlee, Clive 95–7 recovery 417–18 robots, industrial 167, scientific management 48, remote delivery 93, 117 168, 509–10 305–7, 364–9, 375 separated 24–5, 24 robustness of scope service shops 185, technology 181, 182 economies of 90, 186, 187, 189 role culture 386 92, 120, 121 see also customer rough cut capacity planning 240 of facilities 110, 119–21 service operations routing 242 of performance servitization 16 RPNs see risk priority improvements 426–7 SERVQUAL 334, 340 numbers (RPNs) SCOR model (supply chain set-up times 310–11 RSI see repetitive strain injury (RSI) operations reference Shanghai, China 95–7 RTB see run to breakdown (RTB) model) 213, 438 Shell 213 rugby scrum approach 477–8 Sears 77 short-term-oriented seasonal movements run to breakdown (RTB) 412–13 societies 388 in data 141 Russia 19, 496 short-time working 150 SECI model 449, 450 Ryanair 330 shortest processing time security 329 rule 240, 242 self-confidence of teams 383 S&OP see sales and operations simplicity, in lean planning (S&OP) self-managed work teams 307, operations 311–12 372, 380–1, 389 sabotage 398 simultaneous self-service 152, 171–2, engineering 477–8 Sainsbury’s 146 471–2, 502 single factor productivity 45 St Athan, Wales 116–17 separated services 24–5, 24 single minute exchange of sales and operations sequencing 240–2 dies (SMED) 310–11 planning (S&OP) 239 server facilities 122, 123 single sourcing 223, 224 sales subsidiaries 94 service blueprinting 444–5, 444 Six Sigma 351–3 sampling service shops 185, acceptance 325, 326, 340–1 skill variety, in job 186, 187, 189 design 370, 370, 371 activity 368 services 9–11, 10, 11, 14–16 skills sandcone model of operations excellence 315–16, 315 customer self-service 152, team members 382 171–2, 471–2, 502 workforce 390 Sara Lee 213 demander-located 24, 25 slack time 241 Saunders, Neil 260 empowerment of staff 372 smart technologies 173 scale internationalization 16, SMED see single minute of capacity increments 146 23–5, 91 exchange of dies (SMED) diseconomies of 119, 146 ISO 9000 series and 347 smooth flow 309–10 economies of 16, 25, lean operations 314 social factors, location and 90, 119, 121, 146 location decisions 24, 112 of facilities 110, 119–21 25, 117–18, 118 social performance 58–9, 59, 61

Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 subject Index 539 social responsibility 38, social responsibility suppliers 44, 59, 89 58–60, 59, 60, 61, 498–9 and 499, 500–1 failures 401–2 case studies 62–3, 500–1 staffing failures 401, 428–9 lean operations and 312–13 socialization mode of knowledge as stakeholders 59 location decisions and 112 creation 449, 450 temporary 151 relationships with 221–3, 222 sociocultural context 20 transfers 354 social responsibility and 499 software of operations 84 turnover 365, 370, 378 tier 1 207, 207 Sonova 85–6 whistle-blowing systems 404 see also supply networks workforce diversity 384, source facilities 122, 123 supplier’s risk 341 393–5 Supply Chain Council 213 South Africa 15, 19 workforce scheduling 244–6 supply chains 203 Southwest Airlines 55, 56–7 see also people management; spatial containment 414 teamworking supply networks 13–14, 61, 202–3, 204–6 SPC charts see statistical process stage-gates 469–70 bullwhip effect 209–11,209 control (SPC) charts stage theories of business processes 437–8 specialization 90, 91–2, internationalization 22–3 carbon footprint 498 126, 191, 365–6 stakeholders 59 case studies 201–2, specialized ecosystems 218 standard deviation 342, 351 203–4, 224–5, 227–9 specific phase of technological standardization 25, 90, collaborative planning, innovation 472, 473 91–2, 126, 479–80 forecasting and specifications 331–2 standardized procedures, in replenishment speed 39, 425 lean operations 311 (CPFR) 212–13 competitive advantage SQC see statistical quality standards and 98 control (SQC) performance 51–3, configuration 206–9,207 , 208 Stadsleveransen system, 51, 60, 439 coordination 209–12, 209 Gothenburg 466–8 quality 345–8, 348 direct exporting 93 staff 7, 236–7, 244 statistical process control 81 disintermediation 18 absenteeism 365, statistical process control failures 401–2 370, 375, 378 (SPC) charts 325, 327, global sourcing 98, business process re- 341–4, 342, 343, 344 217–20, 266 engineering and 437 statistical quality control inventory and 266 capacity management (SQC) 326, 340–4, 351 multiple sourcing 223–4 and 150–1 steel factory explosion 302–3 outsourcing empowerment 295, step change 430–2, 430 decisions 213–16 305–7, 313, 372, 379 see partnership lay-offs 151, 437 stock inventory management agreements 212–13 in lean operations 295, storage costs 267–8, 272 partnership sourcing 221, 305–7, 313 strategic operations 222, 223–4, 312 part-time 151 planning 238–9, 238 re-intermediation 18 pay 374–6, 378, strategic role of operations relationships with 383, 390, 391 model 75–6, 75 suppliers 221–3, 222 performance strategic value 216 risk of disruption 398 management 377–8, strategy 72–4, 74 383 SCOR model 213, 438 see also operations strategy performance-related single sourcing 223, 224 pay 375–6, 378 structural decisions 83–4, 107 social responsibility and 499 resistance to new see also capacity; facilities; see also outsourcing technology 431, 432 process design; process supply-push control 253– technology; supply networks reward and 4, 254, 255 remuneration 374–7, subcontracting 151 supported customer-technology 378, 383, 390, 391 substitution 415 interaction 171, 172

Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 540 subject Index sustainability indices 60 sustainable 498 ‘tough-guy macho’ culture 386 sustainability reporting 59–60 see also digital technologies; Toyoda, Akio 41 Sustainability Reporting process technology Toyoda, Eiji 308–9 Framework 59–60 technology laggard Toyota 83, 294–5, 299, 306, 328 strategy 180, 463 sustainable technologies 498 case studies 8–9, 41–2, sustaining innovation 476 technology leadership 131–3, 302–3, 308–9 strategy 179–80, 463 Sweden 466–8 Toyota Production System technology-push approach (TPS) 8, 41, 294, 295, 304, synchronization, in lean to innovation 466 305, 307, 308–9, 379 operations 295, 296–302, 296 technology transfer 180– TPM see total productive 2, 182, 183 maintenance (TPM) systems theory 13 telephone-based customer TQM see total quality services 24, 91–2, 219–20 management (TQM) tacit knowledge 448–9, 450 temporal containment 415 traceability, product 285, 405 Taguchi, Genichi 324, 479 temporary staff 151 trade-offs 40, 61, 121, Taguchi methods 479 terrorism 398, 402, 415, 497 315, 338–9, 478 Takata 224–5, 335–6 Tesco 78–9, 146–7, 198, 314 trade unions 59, 391 targets 52 testing, product 340, 469 Trader Joe’s 78 task culture 386 Thailand 495 traditional model of task identity, in job theft, of inventory 268, 272 purchasing 221, 222 design 370, 370, 371 theory of constraints (TOC) 256 training needs task significance, in job customer 172, 472 Theory Z 306–7 design 370, 370, 371 staff 378 three Es of performance Tata 81 measurement 44–8, 44 Trans-Pacific Partnership TBL see triple bottom line (TBL) Agreement (TPPA) 19 throughput time 191, teamworking 307, 379 252, 253, 256–7 transaction costs 208 action teams 380 tier 1 suppliers 207, 207 Transatlantic Trade and advice teams 307, 379–80 Investment Partnership time horizons 388 cross-functional teams 380 (TTIP) 19 time sensitivity 388 effectiveness 381–4 transfer batch sizes 257 evaluation and rewards 383 time series analysis 141 transferability of groupthink 383 time study 367–8 technology 181, 182, 183 heterogeneous teams 384 time to market 463, 480 transformation model 6–7, 6 leadership 382–3 timing decisions inputs 6–7, 6, 88, 89 multifunctional teams 477–8 capacity 143–5 internationalization national culture and 389 inventory management 270, and 88–92, 88 problem-solving 272–4, 273, 274 outputs 88, 91–2 teams 307, 379–80 TOC see theory of process 6, 88, 89–91 production teams 380 constraints (TOC) transformed resources 6 project teams 380 top-down perspective of transforming resources 6–7, self-managed work teams operations strategy 80–1 10–11 307, 372, 380–1, 389 Torbay Hospital, Devon 376–7 transitional phase team composition 382 total factor productivity 46 of technological team roles 382 innovation 472, 473 total productive maintenance team size 382 (TPM) 313–14, 413–14 transnational configuration 125 virtual teams 381 total quality management Transport for London technological innovation 459, (TQM) 49, 76, 81, 295, (TfL) 160–2 472–7, 472 305, 312, 324, 325, 326–8, transportation 18 technologies 348, 348, 354, 379 carbon footprint 498

Copyrighted material – 9781137525789 Copyrighted material – 9781137525789 subject Index 541

costs 114–15 utility goods and services 216 why-why analysis 447 waste 304 utilization of capacity 139, Williams, Claire 441 trends 141 140, 144, 145, 156 Williams Formula One triage systems 247–8 team 440–1 triple bottom line (TBL) 38, value-added services 502 Wolfson, Simon 275 58–60, 59, 60, 62–3 value analysis (VA) 480 work centres 240 true globalization 22–3 value-based approach to work design, team effectiveness trust quality 330–1 and 381–2 supply chain partners 213, value engineering (VE) 480 ‘work hard/play hard’ 222–3 culture 386–7 values, cultural 385 team effectiveness and 383 work in progress 191 Velove Armadillo bicycles 466–8 Turkey 15, 19, 89 work-in-progress inventory 137, vertical integration 213–14 types of operations 7–11 257, 266, 267, 279 vertical loading 371 lean operations video conferencing 17–18 and 296–7, 296, 302 UK Mail 176–7 Vietnam 495 work measurement 367–8, 375 uncertainty avoidance 353, violations 401 work sampling 368 387–8 virtual prototyping 477 work study 366–8 Unilever 82 virtual teams 381 work teams 379 Union of Japanese Scientists vision statements 73 see also teamworking and Engineers 349 voice of the customer 478 workforce diversity 384, United States 15, 19, 388, 496 393–5 University Hospital Wales 440–1 workforce scheduling 244–6 Wade-Gery, Laura 262 unrealized strategies 77 workforce skills 390 Wales 116–17 Uppsala model 22 working methods, radical Walmart 78, 213, 314, 428–9 UPS (United Parcel change in 432 Service) 250–1 waste elimination 8, 295, 304–5 works councils 390 US 353 weighted scoring World Bank 19 method 113–14, 115 usage value of inventory World Trade Organization items 275–8, 276 Wesley, John 62 (WTO) 19 user-based approach to whistle-blowing systems 404 quality 330–1 Whole Foods Market 372–3 yield management 153–4

Copyrighted material – 9781137525789