How To Measure The Performance Of Operations Systems Commerce Essay


Topic 2a: Select a company of your choice and critically investigate how to measure the performance of operations systems.

2b: Critically investigate the use of quality management tools and techniques to improve operations.


The purpose of this article is to highlight on the performance of the current operations systems which organisation is following and how organisations can check or measure their performance. This article gives the insight view of operations of a service oriented industry.

Mission Statement

FedEx will produce superior financial returns for shareowners by providing high value-added supply chain, transportation, business and related information services through focused operating companies. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx will strive to develop mutually rewarding relationships with its employees, partners and suppliers. Safety will be the first consideration in all operations. Corporate activities will be conducted to the highest ethical and professional standards.


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The unique FedEx operating strategy works seamlessly - and simultaneously - on three levels.

Compete collectively by standing as one brand worldwide and speaking with one voice.

Operate independently by focusing on our independent networks to meet distinct customer needs.

Manage collaboratively by working together to sustain loyal relationships with our workforce, customers and investors.

A recent publication (Mission, Strategy, Values |About Fedex, 2010)

Literature Review

Operations Strategy for Competitive Advantage

Competitive advantage implies the creation of a system that has a unique advantage over competitors. The idea behind is to develop customer value and satisfaction in an efficient way. Pure forms of these strategies may exist, operation managers are more likely to be called on to implement some combination of them according to the range of products and services being offered.

Performance Measurement

Performance measurement is simply about measuring things. Essentially it is the quantification of an input such as staff hours, or output such as cost, or level of activity of an event or process such as number of calls answered per operator per hour. Performance reporting is the way managers, staff or systems, report this information. It usually involves some sort of tabulation or graphic display, with some analysis as to how the measure performs against some agreed target or objective. Performance management however is about action, based on the performance measure and its report, performance management is concerned with the actions taken which result in changes to behaviour, motivation, and control or process improvement.

Selecting the right measures for an operation is not easy. Indeed, many organisations have too many wrong measures; just because it can be measured doesn't mean it should be measured.


There are typical four main purposes or reasons to take measurements: communication, motivation, control and improvement.


By measuring something the organisation is saying that it is important; conversely, by measuring everything it is implying that nothing is important. A measure therefore informs employees as to what the organisation requires them to strive for and indeed what them as an individual or a department may be accountable for. It is also an important means of communicating and implementing strategy.


The measure or set of measures, used by an organisation creates a particular mindset that influences employee's behaviour. If speed of response is measured but not the quality of the interaction, employees may find themselves, albeit subconsciously, compromising quality for speed. It is important therefore to have the right mix or balance of measures and also a set that supports the strategic intentions of the organisation.


One key purpose of performance measurement is to provide feedback so that action can be taken to keep a process in control. This requires a complete control loop, with measures, targets, and a means of checking deviation, feedback mechanisms and means to take appropriate action if the process is not meeting the target. This may be used to ensure consistent performance not only within an organisation but also across organisations.


Performance measures can provide a powerful means of driving improvement. Often simply by communicating a measure, improvements can be obtained. By linking measures with rewards (such as bonus or compensations) and/or punishments (such as no job), they can motivate individuals to improve performance, assuming the individuals have control over what is being measured. Information about what pushes the process on or off target can also help individuals and organisations learn how to manage better the process involved.

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Some organisations have also to measure some things because they are required by regulators or owners for example, while clearly this has to be done, managers should not confuse the two, i.e. the things they have to measure versus the things they need to measure to communicate, motivate, control and improve their operations.

Networks, Technology and Information are Transforming Service

In recent years major changes have seen in the nature of service. Networks, technology and information have enabled more effective operations management and have also been able to create some entirely new services. Information technology, coupled with technologies such as satellite tracking, has enabled operations managers to make decisions based on more complete and real-time information. Operations dealing with a geographically dispersed workforce and/or customer base have realises significant improvements in utilisation of engineers or vehicles while improving service levels.

Parcel tracking has become a hygiene factor for courier businesses. Organisations like Fedex builds up brand reliability which is clearly supported by the technology which allows customers to track the progress of their goods. A major development in recent years has been the construction of intelligence networks. This means the links between computers and networks that facilitate communication and the transmission of data between individuals within organisations and between organisations.

Alignment of Operational Progress towards Strategic Aim and Objectives

Many organisations, both manufacturing and service, are recognising that by improving the service provided they can make significant and sustainable gains in the marketplace. Service and service delivery can be, and increasingly are, a competitive weapon.

Service oriented companies are also recognising that there may be a need to provide high levels of customer service. Increasing competition, declining sales and more service-aware customers are putting pressure on service organisations to rethink and improve the levels of service that they offer. The effect of good service on creating valuable customers, increasing customer retention and loyalty and on attracting new customers, as well as on the financial position of an organisation is important.

Whether a strategy is planned or emergent, it is usually driven by some force, which may be external or internal. The internal forces or strategy drivers might be existing operational capabilities or new skills or technologies that have become available or been developed. The changing needs of stakeholders may also act as a force of change - pressure from shareholders, political masters, management or employees for an increased share value, change in direction, reduced costs or improved services.

Operations-led Strategy

Opportunities for change may arise from new developments from within the organisation, such as new services, skills, technologies or processes. The availability of e-commerce technology provides opportunities for new delivery channels for many organisations, requiring a rethinking of strategy, including how to manage market and finance such developments.

Externally driven Strategy

Modifications to strategy may be driven by changes in the organisation's external environment, either actual or anticipated. Such changes might include new competitors entering the marketplace; or the strategic developments of competitions through different positioning or service developments; or the changing needs of customers who require a different service concept, which may be the result of the activities of the competition; or the loss of customers because their needs are not being met.

Corporate-led Strategy

The impetus for change may come from the organisation's executive, driven by a desire or need by its stakeholders for a greater return on assets, expansion, retrenchment or diversification.

Visionary Leadership

Any one of the drivers just cited may be sufficient to begin the cycle of strategy formulation and development, although clearly the more drivers that are in evidence, the more pressure there is on the strategy cycle to move. One condition that we believe has a major impact on the strategy formulation process is visionary leadership. This is usually provided by an individual, usually at corporate level, although it is possibly a senior figure within operations, marketing or finance, who takes responsibility for strategy development and acts as the linchpin in the wheel, pulling all the forces together and helping them move in the right direction.

Key issues in Strategy development

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The development of clear corporate objectives is based on the strategy drivers - the internal or external pressures or opportunities for change. The objectives may well be expressed in financial or competitive terms over a set period of time, like return on investment, profit margin, number of new customers or market share. This objectives need to be clearly stated and will provide the means of measuring and monitoring the success or otherwise of the strategy.


To ensure that those objectives can be achieved, there needs to be a clear understanding of the market and the environment in which the organisations currently operates or plans to be operating. This will include an understanding of the size and nature of the competition, the nature and size of the market or potential market, existing competing and complementary products and services, the ways the market is currently segmented and the likely reaction of the competition. One key outcome of this activity is the identification of a potential target market and an assessment of the perceived needs and expectations of the target customers.

Service Concept

The service concept is a clear statement about the nature of the service;

The service experience - the customer's direct experience of the service process, including the way the customer is dealt with by the service provider.

The service outcome - in particular the benefits provided, emotions felt and perception of value for money.

Performance Objectives

Having identified a target market and developed a service concept, the operation needs guidance as to how it should manage its resources and activities. This will ensure that the service it provides will meet the corporate objectives and the needs of the target market and will establish how it will differentiate itself from the competition. A clear understanding of the performance objectives and their relative priorities is required.


The design or development of an appropriate operation may be a complex activity requiring a large number of interrelated decisions, connecting processes, employees, customers and infrastructure. New investment may be required or there may be a redeployment of existing resources. The operation plan then needs to be checked against the objectives to ensure that the total strategy is consistent and will achieve the objectives that have been set. Thus the process may have to go through several iterations before a consistent and cohesive strategy is created.