1

LATIN AMERICA
WESTERN EUROPE
ASIA PACIFIC
NORTH AMERICA
MEA
EASTERN EUROPE
Presented by

Zaenal ABIDIN
Nimas Kharismamurti
Yendra BUDIANA
GROUP 1
OPERATIONS
PERFORMANCE
2

Introduction
Operations performance can make or break any
organization
The stakeholders perspective on operation
performance
Corporate social responsibility ( CSR )
The Five Generic Performance Objectives
The Internal & External effects of the performance
objectives
What is a trade off ?
Targeting and operation focus
Type of Focus
Benefit and risk in focus
Drifting out of focus
Case Study
Q & A

Agenda
The Five Generic Performance Objectives
Quality Speed Dependability
Flexibility Cost

How the relative importance of different aspect of performance
changes over time?
How performance objectives trade off against each others?
How exceptional performance levels can be reached by focusing
on a limited set of objectives and exploiting the trade off between
objectives?
THREE RELATED ASPECT OF PERFOMANCE TO UNDERSTANDING
OPERATION STRATEGY
Key Questions
How can operation performance make or break the organization?
What are operation performance objectives?
Do the role and key performance objectives of operation stay constant or vary
over time?
Are trade-off between operations performance objectives inevitable, or can
they be overcome?
What are the advantages and disadvantages of focused operations?
Market Requirements
Relative importance of
the operation
resource perspective
Operations Resources
Operation performance
Capacity
Supply networks
Process technology
Development and
Organization
Quality
Speed
Dependability
Flexibility
Cost
Relative importance of
the market
requirements
perspective
Performance Obj A
Trade
OFF
Operation strategy and resulting performance basically will
bring either make or break any business, Its not because the
operation function is large and in most business, BUT
The operations function gives the ability to compete by providing
the ability to respond to customers and developing capabilities
that will keep it ahead of its competitors in the future.
Assessing the performance of anything is hardly work
Perceived performance is a function of amongst other things
- Who you are ( Customer, employee, stockholder ), your
objective ( often disputed )
- Timescale ( what is judge as good now may not be
appropriate next year )
- measurability ( how do you measure trust, relationship,
security ect )
- how comprehensive you want to be
Operation Performance
Impact to Organisation
All operation have stack holders
- Stakeholder are the people and groups who have a
legitimate interest in operation strategy both
internal ( operation employee ) and external (
customer, society or community groups and
company shareholders )
External stakeholder may have direct commercial
relationship with organization, ie suppliers and
customers other may not ie. Industry regulators
In non profit organization, these stakeholder
groups can overlap, voluntary worker may be
employee, shearholders and customers all at once.
The Stackholder Perspective on
Operation Performance
Stakeholder What stakeholders wants from
the operation
What the operation want
from stakeholder
Shareholder ROI
Stability of earning
Liquidity of investment
Investment capital
Long term commitment
Directors / Top
Management
Low / acceptable operating cost
Secure revenue
Well targeted investment
Low risk failure
Future innovation
Coherent, consistent, clear
and achievable strategic,
Appropriate investment
Staff Fair wages
Good working conditions
Safe work environment
Personal & Career development
Attendance, Diligent / best
effort, Honesty and
Engagement
Staff representative
bodies
Conformance with national
agreements, Consultation
Understanding, Fairness,
Assistance in problem
solving
Suppliers ( Material,
Service, Equipment ect )
Early notice of requirements,
long term order, fair price, on
time payment
Integrity of delivery, quality
and volume, Innovation,
responsiveness, progressive
price reduction
Typical Stakeholder Performance
Objectives
Stakeholder
What stakeholders wants from
the operation
What the operation want
from stakeholder
Regulators ( ie,
financial regulators )
Conformance to regulations
Feedback on effectiveness of
regulations
Consistency of regulation
Consistency of
application of regulations
Responsiveness to
industry concern
Government ( Local,
national, regional )
Conformance to legal
requirements, contribution to
(local / national / regional )
economy
Low / simple taxation,
Representation of local
concern, Appropriate
infrastructure
Lobby groups ( ie,
Environment lobby
group )
Alignment of the
regulations activities with
what ever the group is
promoting
No unfair targeting ,
practical help in
achieving aims
Society Minimize negative effect
from the operation ( noise,
traffic ), maximize positive
effect ( job, sponsorship, ect
)
Support for the
organizations plans
The company has responsibility to ensure that
its own employee are treated well, society at
large is not negatively affected by the
operations, minimize vehicle pollution,
minimise wastage of material, energy ect
Typical Stakeholder Performance
Objectives
Holcim work with the triple bottom
line
Inputs
Output
Operations
Resources
Information :
Switzerland company
80 K peoples
70 countries production site
The worlds leading cement and
aggregates industry ( crushed stone,
gravel and sand)

Produced : ready mix concrete
supplies, asphalt, offering consulting,
research, trading, engineering, and
other services.

Problem : give significant impact on the
sustainability and social responsibility

Holcim strategy : to integrate
economic, environment, and social
impact through the 3 bottom line
projects


HOLCIM
INDUSTRY
To achieve that goals Holcim has
established a set of group wide
performance targets, but before
that, the company aims to
understand the current
performance
Corporate Social Responsibility
(CSR)
Stakeholder perspective

CSR essentially tell us about how business take into
account of its economic, social and environmental impacts
in the way its operate.
Maximising the benefits and minimising the downsides
More specifically, CSR as the voluntary action that
business can take over
Compliance with minimum legal requirements.
To address both competitive interests and interests of
wider society
Marks & Spencer
CSR is defined as listening and responding the needs of
companys stakeholder which is include as well the
sustainability development.
There is also the believe that having a good relationship
between employees, suppliers and wider society is the best
guarantee for long term success

CSR berpotensi turut memperkuat value
chain sebagai basis keunggulan bisnis
CSR juga sebagai upaya perbaikan kondisi
lingkungan usaha
Membangun
keunggulan
berbasis value
chain
Membangun kepercayaan investor
(meminimalkan resiko bisnis atau bagian
dari manajemen resiko)
Memudahkan akses pada sumberdaya dan
Penganekaragaman sumber daya
Memperkuat jaringan perusahaan dan
dukungan stakeholder
Meningkatkan
nilai
perusahaaan
Peran Strategis CSR
Quality
Specification
Quality
Conformanc
e Quality
Speed
Time between
beginning to
the end of the
process

Dependabilit
y
Due delivery
time
Actual
delivery time
Flexibility
Product or
service
flexibility
Mix flexibility
Volume
flexibility
Delivery
flexibility
Cost
Operating
expenditur
e
Capital
expenditur
e
Working
capital
Five Generic Performance Objectives
The five generic performance objectives is the basic task which is at the end,
how we can satisfying our customer requirement.
In Operation requires more Tightly defined set up of objectives



Quality
Quality can be define as Refer to the specification of product
or service.
Quality mean appropriate specification or the products and
services are fit for purpose, they do what they are suppose to
do. Fit for purpose -> contains two concepts
the 1
st
is the level of product or service specification
the 2
nd
is whether the operation achieves conformance to that
specification.
Quality mean meet the customer need
Quality mean meet customer satisfaction

Specification of Quality also a multidimensional issue.
There are two dimension
Hard dimension is concern with the evident and largely
objective aspects of the product or service
Soft dimension- is associated with aspect of personal
interaction between customers and product or more
usually service
Explanation
Hard dimensions of
specification
Quality
Soft dimension of
specification
Quality
Feature Helpfulness
Performance Attentiveness
Reliability Communication
Aesthetics Friendliness
Security / safety Courtesy
Integrity
Example of Hard and Soft specification
Quality



Speed

Can be defined as time between when
customer request a product or service to the
time when the customer receives it.
In another operation can be defined the time
between when material enters an operation
and when it leaves fully processed.
It may also include the time to clarify
customers exact needs ( ie. Designing a
product or service )
the queuing time before operations resources
become available and after the core
processing, the time to deliver, transport and
or install the product or service.
Explanation



Dependability

The term is use to mean keeping delivery
promises, honouring the delivery time given to
customer.
Its the other half of total delivery performance
along with delivery speed.

Dependability = due delivery time actual
delivery time

When delivery is on time, the equation should
equal with zero, positive means its early and
negative means its late delivery
Explanation



Flexibility
Flexibility meaning the ability to be bent , this
is the useful concept that tranlates into operational
terms as the ability to adopt different states, take
up different positions or do different things,
One operation define as flexible than the other
if it can do more things-exhibit a wide range of
abilities
Cost
Cost is the most important performance objective
which is showing whether the organization is
efficient or not, profit or loss
There are 3 main things which is contribute with cost
:
a. Operating expenditure
b. Capital expenditure
c. Working Capital
Explanation
Net profit
Losses ???
Total operation
flexibility
Range flexibility Response flexibility
Product / Service
flexibility
The range products and
services that the company has
the design, purchasing and
operations capability to
produced
The time necessary to
develop or modify the
products or services and
processes that produce
them to the point where
regular production can start
Mix Flexibility
The range product and
services that the company
produces within a given time
period
The time necessary to
adjust the mix of products
and services being
produced
Volume flexibility
The absolute level of
aggregated output that the
company can achieve for a
given products or service time
The time taken to change
the aggregated level of
output
Delivery flexibility
The extent to which delivery
dates can be brought forward
The time taken to
recoganize the operation so
as to re plan for the new
delivery date
The Range and Response dimensions of
Operations Flexibility
Internal and External effect of
Performance Objective
The performance objective clearly related to some aspect
of external market positioning and clearly connected to the
internal decisions that are made concerning the operation
resources.

Due to above reason, its worthwhile examining each of
performance objective in order to, how they affect market
position outside in the operation and operation resources
inside the operation

Ie. High performance in term of speed delivery out side
the operation give clear benefit to customers who value
short delivery time for products or queuing time for
service
Operation resources
Potential internal benefit include
Performance
objective
Market requirement
Potential external benefit include
Error- free losses
Less disruption and complexity
More internal reliability
Lower processing cost
Quality
High specification product and
services
Error-free products and services
Reliable products and services
Faster through put times
Less queuing and or inventory
Lower overheads
Lower processing cost
Speed
Short delivery / queuing times
Fast response to requests

Higher confidence in the operation
More internal stability
Lower processing cost
Dependability
On time delivery / arrival of products
and services
Knowledge of delivery times
Better response to unpredicted
event
Better response to variety activities
Lower processing cost
Flexibility
Frequent new products and services
Wide range of products and services
Volume adjustments
Delivery adjustments
Productive process
Higher margins
Cost Low price
First / business class Economic class
Services First / Business class cabin
Airport lounges, pick up service
Economic cabin
Customers Wealthy people, business
peoples. VIPs
Travellers ( Friend and family ), holiday
makers, cost sensitive business
travellers
Service range Wide range, may need to be
customize
Standardised
Rate of service
innovation
Relatively high Relatively low
Volume of activity Relatively low volume Relatively high volume
Profit margins Medium to high Low to medium
Different Group Require Different
Performance Objective
Main competitive
factor
Customisation, extra service.
Comport feature, convenience
Price, acceptable service
Performance
Objective
Quality ( Specification and
conformance), flexibility and speed
Cost, Quality ( performance )
Polar means, the scale that represent the important of each
performance objective have the same origin
The Polar Representation of Perf OBj
Cost
Depen
dability
Flexibil
ity
Quality
Speed
Newspaper collection
New paper
collection
service
General
recycling
service
Reassurance
Crime
reduction
Crime
detection
Working with
criminal justice
agency
Efficienc
y
Actual
performance
Required
performance
Police performance method
Order winning factors are the things that directly and
significantly contribute to winning business.
They are regarded by customers as key reasons for
purchasing the product or services.
The most important aspects of the way a company defines
its competitive stance is by raising performance in order
winning factor will either result in more business or
improve the chances of gaining more business
In addition to order winners and qualifiers, some
authorities add a third category which is called delight.
Delight are aspects of performance that customers have not
yet been made aware of or that are so novel that no one
else are aware of them
Order Winning and Qualifying
competitive factors
Market is change over time, then operation resource
capabilities developing over time,
Therefore not surprising if the nature of reconciliation
process also change over time
Then the competitive agenda for the business will be
influenced largely by how the organization positions itself
in the market.

Change in the firms market
Its consist of :
a. Introduction stage
b. Growth stage
c. Maturity stage
d. Decline stage
The relative importance of performance
obj change over time
Trade off
Trade Off Concepts are :
a. Understanding Operation Strategy
b. Improve their performance
c. What do we want to be particularly good at ? (particular aspect or a
balance between objectives)
What is the trade off ?
1. We cant have everything
2. Sometimes we must sacrifice one to get the others
3. We cant let one objective decrease too far

WHAT INSTINCTIVELY UNDERSTAND :
a. 3 objectives are related
b. Because some resource is finite
c. The trade off relationship is not simple and linear
d. The nature of the relationship will differ for each individual
e. None of us is always totally certain just how own trade offs operate

Why are the trade off important
Will not have equal importance for an individual operation
Certain aspects of performance will outweigh others
(competitive characteristic)
Which will shape our view of the operation (aspects of
performance)
The operations have chosen to trade off higher costs or high
inventory to achieve fast rresponse and fast delivery
TRADE OFFS AND THE
EFFICIENT FRONTIER
Figure 2.10 shows the relative performance of
several companies in the same industry in terms of
their cost efficiency and the variety of products or
services that they offer to customers
Figure 2.10 a is one way of improving cost efficiency
is to severely limit the variety on offer to customers.
Figure 2.10 b is a way by adopting a modular
product design strategy it improved both its variety
and its costs efficiency simultaneously.
IMPROVING OPERATIONS
EFFECTIVENESS BY USING TRADE OFFS
By pushing out the efficient frontier
By improving variety

TRADE OFF, OPERATIONS STRATEGY AND CSR
The idea of trade offs and the efficient frontier can
also help with an understanding of how CSR fits into
operations strategy.
Multiple Dimensions of Sustainability
1. Environmental
2. Social
3. Economic
4. Voluntariness
TARGET AND OPERATIONS FOCUS
THE CONCEPT OF FOCUS
1. Focus as operations segmentation (based on
market)
2. The operation-within-an operation concept ( set up
completely new operations if further
products/services are added to the range

TYPE OF FOCUS
Benefit and risk in
focuENEFITS AND
RISKS IN FOCUS
1. Clarity of performance objectives
2. Developong appropriate resources
3. Enhanced learning and improvement
4. Significant shifts in the marketplace
5. Few economies of scale
6. Structural vulnerability
DRIFTING OUT OF FOCUS
Operation could become drifting out of focus for several reasons:
a. New product and services (lack of examining the specific
requirements of that new particular product/service)
b. Strategy drift (the absence of clear a competitve direction)
c. Control by a specialist (the absence of a more of explicit strategy)
d. Company wide solutions (there should be one solution can cure all the
problems)
e. Business Growth (to deal with larger volumes, leads to a loss of
focus)