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Chapter 2 Operations performance 55
Figure 2.12 The efficient frontier identifies operations with performances that dominate other operations’
performance
but they cannot be criticized for being ineffective. Of course, any of these operations that lie
on the efficient frontier may come to believe that the balance they have chosen between variety
and cost efficiency is inappropriate. In these circumstances they may choose to reposition
themselves at some other point along the efficient frontier. By contrast, operation X has also
chosen to balance variety and cost efficiency in a particular way but is not doing so effectively.
Operation B has the same ratio between the two performance objectives but is achieving
them more effectively.
However, a strategy that emphasizes increasing effectiveness is not confined to those
operations that are dominated, such as operation X. Those with a position on the efficient
frontier will generally also want to improve their operations effectiveness by overcoming the
trade-off that is implicit in the efficient frontier curve. For example, suppose operation B
in Figure 2.12(b) wants to improve both its variety and its cost efficiency simultaneously and
move to position B1. It may be able to do this, but only if it adopts operations improvements
that extend the efficient frontier. For example, one of the decisions that any supermarket
manager has to make is how many checkout positions to open at any time. If too many checkouts
are opened then there will be times when the checkout staff do not have any customers
to serve and will be idle. The customers, however, will have excellent service in terms of little
or no waiting time. Conversely, if too few checkouts are opened, the staff will be working all
the time but customers will have to wait in long queues. There seems to be a direct trade-off
between staff utilization (and therefore cost) and customer waiting time (speed of service).
Yet even the supermarket manager might, for example, allocate a number of ‘core’ staff to
operate the checkouts but also arrange for those other staff who are performing other jobs in
the supermarket to be trained and ‘on call’ should demand suddenly increase. If the manager
on duty sees a build-up of customers at the checkouts, these other staff could quickly be used
to staff checkouts. By devising a flexible system of staff allocation, the manager can both
improve customer service and keep staff utilization high.
This distinction between positioning on the efficient frontier and increasing operations
effectiveness by extending the frontier is an important one. Any business must make clear the
extent to which it is expecting the operation to reposition itself in terms of its performance
objectives and the extent to which it is expecting the operation to improve its effectiveness in
several ways simultaneously.