So sandwich store or emergency room. We see that an operation has to be able to
perform well along four dimensions. The first one is the, the cost dimension.
That's probably what most of us associate with operations management.
It's just providing a high efficient operation.
The second dimension is variety. Now to be fair, consumers don't care about
variety per se. They just want something that they like.
So really variety measures the flexibility of an operation to provide goods and
services to a heterogeneous customer base. The third dimension is quality.
The quality dimension is broken up into two sub-dimensions.
The first one is called performance quality, the second one is called
conformance quality. Performance quality measures how good of a
product or service we provide. Most of us would agree that a BMW is a
high-performing car. Not because how it is built, but primarily
because how it has been designed. The second dimension then is conformance
quality. It really captures to what extent we're
able to deliver on the promise that we have made to the customer.
And then finally there's timeliness. Our ability to provide a quick response to
demand. Those four dimensions are important for
two reasons. First of all, they are the goals that we
strive for in an operation. And so they will guide what type of
performance measures we track. And then, they're really also at the heart
of defining the business strategy. These four dimensions give us opportunity
to differentiate our operations from other, thereby potentially providing us
with a competitive advantage. Now imagine you get hired to consult to
Subway. And you would be asked to come up with a
performance measurement system that tracks these four dimensions that we just
discussed. What would you measure?
Well, on the plus side, you would start potentially looking at the labor
productivity. You could imagine measures such as the
sandwiches per employees, or the customers served per employee, or the minutes it
takes you to make a sandwich or other measures like that.
You could also look at the customers per restaurant to measure.
To what extent your gonna efficiently use the real estate investment, that you have
by renting the, the restaurant. Now, how about the variety?
On the variety side, again, our idea of varieties that we will look at.
Are we be able to meet the heterogenous customer preferences?
Well, a simple measure for that would simply be looking at the number of items
that we have on the menu. Beyond that, if we're making the c-,
sandwiches to order, we could imagine looking at the percentage of customer
requests that we're able to fill. So customers come in, they want extra
lettuce, extra tomato, and the percentage of customer requests that we meet would be
another good measure of variety. How about quality?
Remember on the quality side, we had the two dimensions, conformance quality and
performance quality. So performance quality we will probably
have to do some customer research. Some survey looking for things about to
what extent they like the ambiance of the restaurant, to what ex-, extent they found
the courtesy of the staff in line with their expectations or other things.
On the conformance side we would probably look are we really delivering what we
promised? And so that means we could look at the
freshness of the ingredients of the sandwiches.
We could in extreme case even go as far as putting the sandwiches on the scale and
just measure whether we put the exact appropriate amount of grams of cheese on
the, the subway ham and cheese sandwich and so that would give us Good measure of
conformance quality. And then timing this is relatively easy to
measure. Customers care about the time that it
would takes them to get to the sandwich. And so, we could go and measure how many
minutes a customer has to wait between entering the store and leaving the store
with a sandwich in their hand. So finally let's talk about strategy.
Strategy guru, Michael Porter, suggested there are two ways in which an
organization can get a competitive advantage.
Either through cost leadership or through differentiation.
The dimensions that we discussed -- variety, quality and timeliness -- are
three ways in which your operation can differentiate itself from others.
Thereby, by coming up with a great operation, you are really creating your
firm competitive advantage.