About Cisco Systems
Introducing Operations Management
Operations and Business Strategy
The Five Basic Operations Performance Objectives
CISCO SYSTEMS INC. is the worldwide leader in networking for the Internet.
Cisco Systems shipped its first product in 1986 and is now a multi-national corporation, with over 72,000 employees in more than 115 countries. Today, Cisco solutions are the networking foundations for service providers, small to medium business and enterprise customers which includes corporations, government agencies, utilities and educational institutions.
There are many definitions for Operation Management, however one of them is: it’s the activity of managing the resources which are devoted to the production and delivery of products and services.
Most organizations expect operations to be involved in implementing, supporting and driving business strategy. And hence two points should be taken into consideration:
- Expected role within the business.
- Specific performance objectives.
(Slack et. all. 2007)
This essay will focus on the second point, which is Operations Performance Objectives.
A performance objective can be identified as a metric used to quantify the efficiency an/or effectiveness of an action (Neely et all, 1995)
These five performance objectives are applicable to all forms of operations and are forming the backdrop to operations decision-making.
- Quality: Is the measure by which it is said that the product or service is meeting customer expectation.
- Speed: Is reflecting the time between the customer request and product or service delivery.
- Dependability: Is reflecting whether the business can deliver product or service that was promised to the customer.
- Flexibility: Is reflecting how the operation process can adapt or change what it do, how it do and/or when it deliver.
- Cost: Operation cost is an important factor that’s affecting the final price of the product or service and how it become affordable by the customer, which will finally affect the profitability of the business.
Each one of these operations objectives is multidimensional and each of its dimensions can be used strategically to gain or support a competitive advantage (Swink and Hegarty, 1998)
What’s meant by quality, as one of the operations objectives is how the product or service is in conformance to the customer expectation.
Although it’s hard to be measured, but quality is not only the major influence in customer satisfaction, but it also affects other operations objectives.
- Quality reduces costs, a firm that make a mistake in a product or deliver inaccurate service, will pay extra money and time to correct its mistake.
In the case of Cisco, customers who receive malfunctioning products have the right to do free RMA (Return Material Authorization) where Cisco is responsible to pay the shipment fees as well as the new replacement hardware.
- Quality increases speed, Quality as an objective does not only have external impact like customer satisfaction, it also has internal impact when sorting out quality problem that might distract the firm from giving attention to other parts of the operation which might result on delaying the production and the selling process and affect the overall speed of the operations.
Cisco has TAC (Technical Assistance Center) team who support customers in troubleshooting as well as new deployment support. Troubleshooting faulty products consume time from the team that can be used in helping other customers in new deployments/configuration assistance.
Speed as an operations objective reflects how fast the firm can respond to customer requests. The more enhanced operations cycles, the faster the firm can respond, the higher customer satisfaction then the more likely they will buy again.
The aim is to speed up response, ensure dependability of delivery, and reduce costs through minimizing total inventory across the whole system (Fowler, 1999)
- Speed reduces inventory, Fast operations cycles reduce the time between customer request and product delivery and hence increase the overall revenue of the firm.
Cisco’s customers and partners pay when they receive the equipment, so delays in production process result in delaying revenues, which affects the overall profitability of the organization.
Dependability (or sometimes referred as Reliability) is reflecting whether the firm can deliver its products or services on the exact time when they were needed by the customer or at least when they were promised by the firm.
Unlike quality – speed and dependability are easily measurable and quantifiable (Steve Brown et all, 2005)
- Dependability increase speed, Failure to deliver an item that’s part of the operation on time might slow the overall production cycles and will waste time coping with the disruption.
- Dependability reduces cost, Additional costs might apply when an item is not delivered on time, the firm either quickly request this item with higher price, or it will delay the production which will affect the revenue. In all cases cost is affected by dependability.
Cisco is making use of economy of scale, where it uses supply chain network to supply some parts of its equipment, failure to deliver supplies on time will delay the production process or it will push the organization to buy it from other suppliers with higher price.
Flexibility as an operations objective means how the firm can change or adapt its operations to provide the following:
- Product/Service flexibility.
- Mix (of products and services) flexibility.
- Volume flexibility.
- Delivery time flexibility.
(Slack et. all. 2007)
It is indeed critical objective that affects multiple sides of the operations.
- Flexibility increase speed, If the resources inside the operation is flexible, time will not be wasted in waiting for someone or equipment to deliver CR “Change Request”, which will increase the overall customer satisfaction.
- Flexibility maintains dependability, Internal operations flexibility will help to keep the operation on schedule when unexpected events disrupt the operation’s plan. And hence will increase the overall dependability of the firm.
Cisco is doing well when it comes to flexibility. Customers have flexibility in requesting bundled products and services with good discount, they also have flexibility in choosing the shipment date whether to be delayed or flagged as urgent. Customers can also request any volume starting from one peace only to whatever quantity is required.
The lower the cost of operations, the lower the price that can be given for the product or the higher profit if no price competition is in place. That’s why cost is one of the most attractive operations objectives.
- Cost increase productivity, Cost is not only increasing the overall profitability of the firm, but it can also improve the productivity by making better use of the inputs to the operations to get better output like making use of the waste to deliver other products or tools which will cut out the overall waste of the operations. This waste can be a waste of material, waste of staff time or waste of underutilized facilities.
Cisco is always working hard to lower its COGS (Cost of good sale), Routing and Switching products in Cisco are the main offering, its production process is very mature now, that’s why it has the highest Profit to COGS ratio among other products.
Figure 1 shows the interactions between the above five performance objectives and how cost is influenced by other objectives.
Figure 1 Operations performance objectives external and internal effects and how cost is influenced by other objectives
- Nigel Slack, Alistair Brandon-Jones, Robert Johnston, Alan Betts (2013) “Operations and process management”, Pearson Education, ISBN 978 1 78273 749 0, Custom edition, Chapter 2
- Nigel Slack, Stuart Chambers, Robert Johnston, (2007) “Operations management”, Pearson Education, ISBN 978 0 273-70847-6, Fifth edition, Chapter 2
- Morgan Swink, W. Harvey Hegarty, (1998) “Core manufacturing capabilities and their links to product differentiation”, International Journal of Operations & Production Management, Vol. 18 Iss: 4, pp.374 – 396
- Steve Brown et all, (2005) “Strategic operations management”, Elsevier Butterworth-Heinemann, ISBN 0 7506 6319 7
- Neely, A. et all, (1995) “Performance measurement system design”, International Journal of Operations & Production Management, 15 (4), 80.
- Fowler, A. (1999) “Feedback and feedforward as systemic frameworks for operations control”. International Journal of Operations & Production Management, 19(2), 182-204
- John Chamber (2008) Annual Report [online] available from