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Operations primer. The Three Questions. What is improvement? Linking operations to strategy Where to target improvement? Linking operational flows to financial flows How to improve? Lean operations. What is Improvement : A Strategic Framework for Operations. Business Strategy. Desired

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Presentation Transcript

The three questions
The Three Questions

  • What is improvement?

    • Linking operations to strategy

  • Where to target improvement?

    • Linking operational flows to financial flows

  • How to improve?

    • Lean operations

S. Chopra


What is improvement a strategic framework for operations
What is Improvement:A Strategic Framework for Operations

Business

Strategy

Desired

Capabilities

Operations

Structure

Resources

Processes

S. Chopra


Can a process do everything well
Can a Process do Everything Well?

  • Operational focus and focused factories

  • Is all capacity the same? Should we eliminate the most expensive capacity?

    • Flexible versus efficient capacity

S. Chopra


Focus and the efficient frontier

Responsiveness

World-class

Emergency Room

operations

frontier

One general

facility

World-class

(non-emergency)

Hospital

Costefficiency

Focus and the Efficient Frontier

S. Chopra


Where to target improvement linking operational and financial flows
Where to Target Improvement?Linking Operational and Financial Flows

  • Flow time

  • Throughput

  • Inventory

  • Process Cost

  • Quality

S. Chopra


Relating operational measures flow time t throughput r inventory i with little s law
Relating operational measures (flow time T, throughput R & inventory I) with Little’s Law

Flow rate/Throughput R

[units/hr]

  • Inventory = Throughput x Flow Time

    I = R xT

  • Turnover = Throughput / Inventory

    = 1/ T

Inventory I

[units]

...

...

...

...

...

Flow Time T[hrs]

S. Chopra


Process flow examples
Process Flow Examples

Job Flow: The Travelers Insurance Company processes 10,000 claims per year. The average processing time is 3 weeks. Assuming 50 weeks in a year, what is the average number of claims “in process”.

Cash Flow: Motorola sells $300 million worth of cellular equipment per year. The average accounts receivable in the cellular group is $45 million. What is the average billing to collection process cycle time?

S. Chopra


Targeting improvement mbpf inc consolidated statement
Targeting ImprovementMBPF Inc.: Consolidated Statement

S. Chopra




$60.2/yr

$25.3/yr

$110.3/yr

$50.1/yr

$6.5

$15.1

Raw Materials

(roofs)

Fabrication

(roofs)

$175.8/yr

$175.8/yr

$10.6

$9.8

$40.2/yr

Assembly

Finished Goods

$8.6

$40.2/yr

Purchased Parts (bases)

MBPF Business Process Flows

S. Chopra



Flow rate R

($/week)

5.0

3.38

Accounts

Receivable

2.12

Assembly

Finished

Goods

Fabrication

0.96

Raw Materials

0.77

Purchased Parts

11.12 6.75 7.12 3.14 2.90 5.80

Flow Time T (weeks)

Where to Target Improvement?

S. Chopra


How to improve throughput
How to Improve? Throughput

  • Bottleneck resource

  • Decrease work at bottleneck

    • Quality at source

  • Move work from bottleneck to non-bottleneck

    • Pooling of bottleneck resources

  • Add to bottleneck

    • Shifting bottleneck

S. Chopra


How to improve time
How to Improve? Time

  • Critical path

  • Decrease time on critical path

    • Quality at source

  • Can activities on critical path be performed in parallel?

  • Decrease waiting time

    • Decrease variability

    • Pool available resources

S. Chopra


How to improve inventory
How to Improve? Inventory

  • Cycle + Safety inventory

  • Decrease cycle inventory

    • Decrease batch size by increasing flexibility / aggregating transportation

  • Decrease safety inventory

    • Decrease uncertainty

    • Decrease lead time

    • Pool available inventory physically or through postponement

S. Chopra


How to improve lean operations
How to Improve? Lean Operations

  • Synchronize flows by

    • Reduce batch size (decreases time and inventory)

    • Use flexibility to pool resources (increases throughput)

    • Decrease variability (decreases time and inventory)

    • Pull rather than push work (decreases time and inventory)

    • Quality at source (decreases time, increases throughput, improves quality)

S. Chopra


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