Prioritizing Areas for Operations Improvement

Prioritizing Areas for Operations Improvement

In this lesson, you’re expected to learn about:
– the dynamics of operations strategy
– performance benchmarking
– the importance-performance matrix

The dynamics of operations strategy can be thought of on the dimension of reconciling market needs and operations capabilities.

• Ideally, we want to compete using our strong resources, which, in a perfect world, are exactly those that are valued by the market.

• This is where reconciling market needs and operations capabilities starts.

It basically involves setting operations priorities by comparing customers’ needs (“order-winners”, “qualifying”, and “less important” factors) with operations performance benchmarking.

Priorities must be determined for:
– Customers: what they want
– Competitors: comparative performance to competitors
– Importance: of each performance objective
– Performance: on each objective

Performance Benchmarking Scale

Measuring how the operation performs in comparison to competitors.

• Previously, we saw how to evaluate customers’ needs and classify them into “order-winners” and “qualifying” factors. Now we see the other component of our analysis: the performance against competitors.

• A competitive performance standard consists of judging whether the achieved performance of an operation is better than, the same as or worse than that of its competitors.

In the same way as the nine-point importance scale that was mentioned earlier, we can derive a more discriminating nine-point performance scale, as shown in the figure below:
Source: Slack et al. (2010)
Enlarged version:
[Optional] Importance-Performance Matrix & the Performance Scale
The Importance-Performance Matrix
The priority for improvement which each competitive factor should be given can be assessed from a comparison of their importance and performance.
Results from the importance and performance analysis can be plotted on an importance-performance matrix, as shown below.

Enlarged version:

Interpreting the Importance-Performance Matrix

The results can be very insightful: 

 Prioritize the urgent improvements, i.e. those that are important to clients and the organization is performing poorly.

• Then, work on secondary improvements, i.e. those that are either important and the organization performs reasonably, or those that are not too important.

 Decide what to do with excess: this can be tricky and there is no single answer. It can be an opportunity for cost-saving, because the organization performs well, but the market does not value it. Alternatively, the organization can work towards making it important to the market.

[Optional] The Importance-Performance Matrix
Check out this free resource where Professor Nigel Slack, the creator of the Importance-Performance Matrix, explains its use:
Summary: A step-by-step method for analyzing Operations

1) Identify the organization’s performance objectives

Those on which the organization wants to compete, such as product quality, engineering quality, project flexibility, volume flexibility, cost, delivery speed, delivery dependability, delivery flexibility etc.

2) Assess the importance of the selected criteria to customers using the 9-point importance scale. 

Suggestion: you can conduct a short survey with your clients.

3) Benchmark your operations against competitors using the 9-point performance scale. 

Suggestion: you can either rely on expert judgement from your team, survey your clients, or conduct extended research.

4) Create the importance-performance matrix
5) Prepare an action plan for improving your operations
Jim Rohn Sứ mệnh khởi nghiệp