An operations strategy is a plan that outlines the procedures and processes that a company uses to produce and deliver goods and services to its customers. It includes the management of the company’s resources, such as labor, equipment, and materials, as well as the methods used to manage the supply chain. One of the most important aspects of an operations strategy is the setting of performance objectives. According to the book “Operations Management” by Nigel Slack and Michael Lewis, there are five generic performance objectives that organizations use to evaluate and optimize their operations. These performance objectives are: quality, speed, dependability, flexibility, and cost. These five objectives are considered generic because they are relevant to all types of organizations, regardless of industry or size.
- Quality: Quality is the degree to which a product or service meets or exceeds customer expectations. Organizations aim for high quality in their operations management and production processes to ensure customer satisfaction and to gain a competitive advantage in the marketplace. A high-quality product or service can increase customer loyalty, enhance the company’s reputation, and reduce the costs associated with returns and warranty claims.
- Speed: Speed refers to how quickly a product or service can be delivered to the customer. Organizations aim for speed in their operations to meet customer demand and to gain a competitive edge in the industry. Speed is becoming increasingly important as customers expect faster delivery times and are willing to pay a premium for it. Speed also enables organizations to respond quickly to changes in the market, such as new product releases or seasonal demand.
- Dependability: Dependability refers to the consistency and reliability of an organization’s products and services. Organizations aim for dependability in their operations to ensure customer satisfaction and to gain a competitive advantage in the industry. Dependable operations can lead to increased customer loyalty and repeat business. Additionally, dependable operations can reduce the costs associated with warranty claims, returns and customer complaints.
- Flexibility: Flexibility refers to an organization’s ability to adapt to changes in customer demand or in the marketplace. Organizations aim for flexibility in their operations to meet customer demand and to gain a competitive advantage. Flexibility enables organizations to quickly respond to changes in the market, such as new product releases or seasonal demand. It also allows organizations to quickly adapt to changes in customer preferences or needs. This can be achieved through the use of flexible manufacturing processes, flexible scheduling, or by maintaining a diverse product range.
- Cost: Cost refers to the monetary resources required to produce and deliver a product or service. Organizations aim for cost efficiency in their operations to increase profitability and to gain a competitive advantage in the industry. Cost efficiency can be achieved through a variety of methods such as reducing material costs, improving production processes, or increasing automation. Additionally, cost-efficient operations can lead to increased profitability and the ability to offer lower prices to customers.
These five generic performance objectives are interrelated and organizations should try to balance them to achieve optimal performance. According to Slack and Lewis in their book “Operations Management”, trade-offs often need to be made between these objectives, for example, achieving high quality may require a higher cost, or achieving speed may mean sacrificing some flexibility. Therefore, it is important for organizations to understand the trade-offs between these objectives and to set priorities based on their specific goals and circumstances. An operations strategy matrix is a useful tool for evaluating a company’s operations and determining the best course of action for achieving its goals. This matrix visually represents the company’s operations and plots different factors such as cost, quality, and delivery times on a graph. It helps to identify areas of the operations that are strong and areas that need improvement, allowing the company to make informed decisions about how to optimize its operations.
In conclusion, setting performance objectives is a crucial aspect of an operations strategy. The five generic performance objectives of quality, speed, dependability, flexibility, and cost are relevant to all types of organizations and should be balanced to achieve optimal performance. By understanding the trade-offs between these objectives and setting priorities based on specific goals, organizations can use tools such as an operations strategy matrix to evaluate and optimize their operations.