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Chapter 2 Operations performance 59
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A publishing company plans to replace its four proofreaders who look for errors in manuscripts with a
new scanning machine and one proofreader in case the machine breaks down. Currently the proofreaders
check 15 manuscripts every week between them. Each is paid A80,000 per year. Hiring the new scanning
machine will cost A5,000 each calendar month. How will this new system affect the proofreading department’s
productivity?
Bongo’s Pizzas has a service guarantee that promises you will not pay for your pizza if it is delivered more than
30 minutes from the order being placed. An investigation shows that 10 per cent of all pizzas are delivered
between 15 and 20 minutes from order, 40 per cent between 20 and 25 minutes from order, 40 per cent
between 25 and 30 minutes from order, 5 per cent between 30 and 35 minutes from order, 3 per cent between
35 and 40 minutes from order, and 2 per cent over 40 minutes from order. If the average profit on each pizza
delivered on time is A1 and the average cost of each pizza delivered is A5, is the fact that Bongo’s does not
charge for 10 per cent of its pizzas a significant problem for the business? How much extra profit per pizza
would be made if 5 minutes was cut from all deliveries?
Step 1. Look again at the figures in the chapter which illustrate the meaning of each performance objective for
the four operations. Consider the bus company and the supermarket, and in particular consider their external
customers.
Step 2. Draw the relative required performance for both operations on a polar diagram.
Step 3. Consider the internal effects of each performance objective. For both operations, identify how quality,
speed, dependability and flexibility can help to reduce the cost of producing their services.
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Visit the web sites of two or three large oil companies such as Exxon, Shell, Elf, etc. Examine how they describe
their policies towards their customers, suppliers, shareholders, employees and society at large. Identify areas
of the company’s operations where there may be conflicts between the needs of these different stakeholder
groups. Discuss or reflect on how (if at all) such companies try and reconcile these conflicts.
Selected further reading
Bourne, M., Kennerley, M. and Franco, M. (2005) Managing
through measures: a study of the impact on performance,
Journal of Manufacturing Technology Management, vol. 16,
issue 4, 373–95. What it says on the tin.
Kaplan, R.S. and Norton, D.P. (2005) The Balanced Scorecard:
measures that drive performance, Harvard Business
Review, Jul/Aug. The latest pronouncements on the Balanced
Scorecard approach (which we cover in Chapter 18).
Neely, A. (ed.) (2002) Business Performance Measurement:
Theory and Practice, Cambridge University Press, Cambridge.
A collection of papers on the details of measuring performance
objectives.
Pine, B.J. (1993) Mass Customization, Harvard Business
School Press, Boston. The first substantial work on the idea
of mass customization. Still a classic.
Waddock, S. (2003) Stakeholder performance implications of
corporate responsibility, International Journal of Business
Performance Management, vol. 5, numbers 2–3, 114–24.
An introduction to stakeholder analysis.
Useful web sites
www.aom.pac.edu/bps/ General strategy site of the
American Academy of Management.
www.cranfield,ac.uk/som Look for the ‘Best factory awards’
link. Manufacturing, but interesting.
www.opsman.org Lots of useful stuff.
www.worldbank.org Global issues. Useful for international
operations strategy research.
www.weforum.org Global issues, including some operations
strategy ones.
www.ft.com Great for industry and company examples.
Now that you have finished reading this chapter, why not visit MyOMLab at
www.myomlab.com where you’ll find more learning resources to help you
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