Page 99 - Operations Strategy

74 CHAPTER 2 • OPERATiOns PERfORmAnCE
concept’. It is fundamental to our understanding of operations strategy. Perhaps most
importantly, the idea of trade-offs is also at the heart of how operations seek to improve
their performance over time. One of the many questions central to improvement efforts
is, ‘What do we want to be particularly good at?’ Is there one particular aspect of per-
formance that we wish to stress above everything else (‘with us it is quality first, second
and third’), or are we trying to achieve a balance between objectives (‘we wish to offer the
customer a wide range of services but not to the extent that costs get out of control’)? In order to
answer these questions, we need to understand the way performance objectives relate
to each other. This is where trade-offs come in.

What is a trade-off?
All of us are familiar with the simple idea that (much as we would like) we cannot have
everything. Most of us want some combination of health, wealth and happiness. But
we also know that sometimes we must sacrifice one to get the others. Driving ourselves
too hard at work may give us wealth but can have negative effects on both health and
happiness. Of course, we cannot let the wealth objective decrease too far, or our poverty
will undermine happiness and even health. We all instinctively understand that (a)
the three objectives are related, (b) because some resource is finite (time, ability etc.)
we must, to some extent, trade off each objective against the others, (c) the trade-off
relationship is not simple and linear (we do not decrease, or increase, our health by a
fixed amount for every €1,000 earned), (d) the nature of the relationship will differ for
each individual (some of us can derive great happiness and well-being from the pro-
cess of making money) and, perhaps most importantly, (e) none of us is always totally
certain just how our own trade-offs operate (although some of us are better at knowing
ourselves than others).
That these ideas also apply to operations was first articulated by Professor Wickham
Skinner at Harvard University. As ever, in those days he was speaking of manufacturing
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operations, but broadly the same principles apply. He said :
‘Few executives realise the existence of trade-offs. Yet most managers will readily admit that
there are compromises or trade-offs to be made in designing an airplane or a truck. In the case
of an airplane, trade-offs would involve matters such as cruising speed, take-off and landing
distances, initial costs, maintenance, fuel consumption, passenger comfort, and cargo or pas-
senger capacity. A given stage of technology defines limits of what can be accomplished in these
respects. For instance, no one today can design a 500-passenger plane that can land on a carrier
and also break the sonic barrier. Much the same thing is true of manufacturing. The variables
of cost, time, quality, technological constraints, and customer satisfaction place limits on what
management can do, force compromises, and demand an explicit recognition of a multitude
of trade-offs and choices.’

Why are trade-offs important?

We judge the effectiveness of any operation by how well it performs. The call centre
that can respond to our call and solve our problems within seconds, any time of the
day or night, is superior to one that takes several minutes to answer our call and does
not operate through the night. The plant that can deliver products in 24 hours is
judged superior to one that takes three days; plants turning over their stock 25 times a
year are superior to one that, operating under similar conditions, only manages to turn

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