Operations improvement chapter 18
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Operations Improvement chapter – 18. Operations improvement is the 6 th step in quality planning and control. There is always a scope for improvement in business operations, that’s why making improvement is considered as the main responsibility of operational managers.

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Operations improvement chapter 18

Operations Improvement chapter – 18


Operations improvement is the 6 th step in quality planning and control

Operations improvement is the 6th step in quality planning and control.

There is always a scope for improvement in business operations, that’s why making improvement is considered as the main responsibility of operational managers.

  • Measuring and Improving Performance(how can operations measure their performance in terms of the five performance objectives?)

    The first step for improving performing improvement is to know how good the operation at the moment. Or identify the worth of operation.


Operations improvement chapter 18

Performance measurement means the activity of measuring or assessing the various aspects of a process.

  • So, performance measurement identifies if an operation is good or bad.

  • Three aspects of performance measurement is as follows:

  • What factors to include as performance measures?

  • Which are the most important performance measures?

  • What detailed measures to use?


A what factors to include as performance measures

a. What factors to include as performance measures?

It is not possible to take a single factor to measure the performance of an operation, instead we have to take a bindle of factors from performance objectives.


Operations improvement chapter 18

Broad strategic measures

Overall strategic objectives

Operations strategic objectives

Financial strategic objectives

Market strategic objectives

Functional strategic measures

Composite performance measures

Customer satisfaction

Agility

Resilience

Generic operations performance measures

Flexibility

Cost

Dependability

Quality

Speed

Transaction costs

Customer query time

Order lead time

Throughput time

Defects per unit

Mean time between failures

Lateness complaints

Time to market

Product range

Some detailed performance measures

Labour productivity

Level of customer complaints

Machine efficiency

Scrap level

Performance measures at different levels of aggregation


Operations improvement chapter 18

High strategic relevance and aggregation

High diagnostic power and frequency of measurement

Performance measures at different levels of aggregation

Broad strategic measures

Functional strategic measures

Composite performance measures

Generic operations performance measures

Detailed performance measures


B what are the most important performance measures

b. What are the most important performance measures?

1.Operations overall strategy.

2.Detailed measures.

C. What are the detailed measures to use?

Five performance objectives of operation are used. Five performance objectives should be broken down into individual factors.

Page 585 fig 18.1


Balanced scorecard approach

Balanced scorecard approach

  • This approach presents an overall picture of organizational performance in a single report.


Operations improvement chapter 18

Financial performance measures

To achieve strategic impact, how should we be viewed by shareholders?

Internal process performance measures

To achieve strategic impact, what aspects of performance should business process excel at?

Customer performance measures

To achieve strategic impact, how should we be viewed by customers?

Learning and growth performance measures

To achieve strategic impact, how will we build capabilities over time?

The measures used in the balanced scorecard

Overall strategic objectives


Setting target performance

Setting target performance

Performance measures can only be set, once the performance target is known.

There are four approaches to set performance targets as follows:

  • Historically based targets- this type of targets compare the current performance against the previous.

  • Strategic Targets – the targets set to show the appropriate level of performance to achieve the strategic objectives of an organization.

  • External performance based targets- targets set to show the performance level according to similar, competitor’s or external operators performance.

  • Absolute performance targets- targets set on upper limit of performance


Benchmarking

Benchmarking

Benchmarking means a process of learning from others. It is comparing ones own performance or methods against others. Benchmarking in operations is about stimulating creativity in improvement.


Types of benchmarking

Types of benchmarking

  • Internal benchmarking – comparing operations within an organization. For example an automobile company having many factories for business, where one factory can benchmark the other.

  • External benchmarking – benchmarking with another organization.

  • Non-competitive benchmarking – benchmarking with organizations who do not perform the same business.

  • Competitive benchmarking – benchmarking against competitors .

  • Performance benchmarking – comparison between achieved levels of performance in different operations. For example an organization compare the five performance objectives against other organizations performance.


Practice benchmarking comparing one operation practice to another

Practice benchmarking- comparing one operation practice to another.

  • Improvement priorities (howcan operational managers prioritize improvement of performance objectives)

    Improvement priorities are based on two major influences:

  • Needs and performances of customers.

  • The performance and activities of competitors.


The needs and preferences of customers are known as importance of operations objective

The needs and preferences of customers are known as ‘importance’ of operations objective.

The performance and priorities of competitors are known as ‘performance’ of operations objective.


Operations improvement chapter 18

The

Your

IMPORTANCE

PERFORMANCE

of each competitive objective

in each competitive objective

IMPROVEMENT PRIORITIES

Prioritizing process objectives

Priorities should be determined by …


Judging the importance factor to customer

Judging the ‘importance’ factor to customer

  • Order winning competitive factors- the factors that directly win the business for an operation.

  • Qualifying competitive factors- factors that may not win business, but a fall in performance leads to lose of business.

  • Less important factors – unimportant competitive factors.


Operations improvement chapter 18

Order-winning objectives

Qualifying objectives

Less important objectives

+ve

+ve

+ve

neutral

neutral

Competitive benefit

neutral

Competitive benefit

Competitive benefit

Qualifying level

–ve

–ve

–ve

High

Low

High

Low

High

Low

Achieved

Achieved

Achieved

Achieved

performance

performance

performance


Operations improvement chapter 18

Order-winning objectives

Qualifying objectives

Less important objectives

9-point importance scale

For this product or service, does this performance objective …

1 …provide a crucial advantage with customers?

2 …provide an important advantage with most customers?

3 …provide a useful advantage with most customers?

4 …need to be up to good industry standard?

5 …need to be around median industry standard?

6 …need to be within close range of the rest of the industry?

7 …rate as not usually important but could become more so in future?

8 …very rarely rate as being important?

9 …never come into consideration?


Operations improvement chapter 18

Temperature-controlled – overnight service

IMPORTANCE to customers

1 2 3 4 5 6 7 8 9

PRICE

X

SERVQUAL (DISN.)

X

SERVQUAL (ORDER TAKE)

X

ENQUIRY LEAD-TIME

X

DROP QUOTE

X

WINDOW QUOTE

X

DELIVERY PERFORMANCE

X

X

DELIVERY FLEXIBILITY

VOLUME FLEXIBILITY

X

DOC. SERVICE

X

1 2 3 4 5 6 7 8 9


Operations improvement chapter 18

Better than competitors

1 …consistently considerably better than our nearest competitor’s?

Similar processes

2 …consistently clearly better than our nearest competitor’s?

Customer expectations

3 …consistently marginally better than our nearest competitor’s?

4 …often marginally better than that of most competitors?

Same as competitors

5 …about the same as that of most competitors?

Similar processes

Customer expectations

6 …often close to that of our main competitors?

7 …usually marginally worse than that of our main competitors?

Worse than competitors

8 …usually worse than that of most competitors?

Similar processes

Customer expectations

9 …consistently worse than that of most competitors?

9-point performance scale

For this product or service, is the achieved performance …


Nine point scale for judging importance and performance

Nine-point scale for judging importance and performance

Diagram 18.6 page 590

The Sandcone Theory

According to sandcone theory, the obejectives should be prioritized in an order.

Sandcone theory considers quality as first priority, then dependability, speed, flexibility and cost.


Operations improvement chapter 18

Cost

Flexibility

Speed

Dependability

Quality

Quality

Quality + dependability

Quality + dependability + speed

Quality + dependability + speed + flexibility

Quality + dependability + speed + flexibility + cost

The sandcone model of improvement


Approaches methods to improvement what are the broad approaches to managing the rate of improvement

Approaches/methods to improvement (what are the broad approaches to managing the rate of improvement)

Once the priority improvement is fixed, the next step if to consider the approach or strategy to take the improvement. There are two strategies for improvement process:

  • Breakthrough improvement (innovation-based improvement)

  • Continuous improvement

    These two approaches can be compared to a Sprint and Marathon.


Breakthrough improvement

Breakthrough improvement

This approach assumes that main method of improvement is major or dramatic changes in the operations. Or changing the operations absolutely for improvement.

Examples for breakthrough improvement:

New machine in a factory

Computer-based reservation system in a hotel.

These improvements are always costly, sudden and disturbing the ongoing working of operations.


Continuous improvement

Continuous improvement

  • This is also known as Kaizen in Japan.

    It means improvement step-by-step. Or small improvements instead of drastic ones.

    Continuous improvement is small level of improvements in an operation.


How to build a continuous improvement capability

How to build a continuous improvement capability ?

Continuous improvement comes with specific abilities, behaviors and actions.

These are known as:

Organizational abilities – the capacity adopt a particular approach to continuous improvement.

Continuous behaviors – the routine behavior of staff.

Enablers – the techniques used to progress the continuous improvement effort.


Difference between breakthrough and continuous improvement

Difference between breakthrough and continuous improvement


Improvement cycle

Improvement cycle

Improvement is a never-ending process, this repeated nature is known as improvement cycle.

There are two main improvement methods ::

  • PDCA – plan, do, check, and act.

  • DMAIC – SIX SIGMA


Operations improvement chapter 18

PDCA

It starts with ‘p’ (plan) stage which examines the current method. The next step is ‘do’ stage, here the plan is implemented. Next stage is ‘C’ where the implemented solution is checked. The last stage is ‘A’ (act) where the change is standardized, if it has been successful.


Dmaic cycle

DMAIC CYCLE


Operations improvement chapter 18

Define

Plan

Plan

Do

Measure

Control

Act

Check

Improve

Analyze

The plan–do–check–act (or ‘Deming’) improvement cycle,and the define–measure–analyze–improve–control(or DMAIC) ‘six sigma’ improvement cycle


Operations improvement chapter 18

Define – identify the problem, define requirements and set the goal

Control – establish performance standards and deal with any problems

Measure – gather data, refine problem and measure inputs and outputs

Analyze – develop problem hypotheses, identify ‘root causes’ and validate hypotheses

Improve – develop improvement ideas, test, establish solution, and measure results

The DMAIC cycle


Bpr or business process re engineering approach

BPR or Business process Re-engineering approach

This is the same way of breakthrough approach.

It promotes business process re-engineering approach. BPR is a mix of many ideas. For example Just-in-time, flow charting, critical examination study, operations network management e.t.c BPR Means redesign the process to fulfill customer needs.


Operations improvement chapter 18

End-to-end process 1

End-to-end process 2

End-to-end process 3

BPR advocates reorganizing (reengineering) processesto reflect the natural processes that fulfil customer needs

Functionally based processes

Function 1

Function 2

Function 3

Function 4

Customer needs

Business processes

Customer needs fulfilled


Principles of bpr

Principles of BPR

  • Organize business process around the output of process, i.e customers.

  • Try for dramatic improvement.

  • Have those who use the output from a process to perform the process. Or check if all internal customers can be their own suppliers.

  • Put decision points where the work is performed.


The techniques of improvement

The techniques of improvement


Operations improvement chapter 18

Input/output analysis

Flowcharts

Scatter diagrams

x

x

Input

Output

x

x

x

x

x

x

x

x

x

Cause–effect diagrams

Pareto diagrams

‘Why-why’ analysis

Why?

Why?

Why?

Some common techniques for process improvement


1 scatter diagrams

1.Scatter diagrams

It’s a graphical representation technique. This method provides easy solution for identifying whether there is evidence of a connection between two sets of data.

For example the time you start work and how long the journey to work takes. This method only identifies the relationship.


2 process maps or flow charts

2.Process maps or flow charts

Describes how the activities within the process relate to each other. It records each stages of process. It clarifies improvement opportunities.

3. Cause –Effect diagrams

A technique that finding out the root cause problems. This method is done by questioning technique such as what, when, where, how and why. It provides way for brainstorming sessions.


4 pareto diagrams

4. Pareto diagrams

This technique identifies what is important and what is not.

5. Why-Why Analysis

This technique starts by asking why the problem occurred, again once the reasons are found, each reasons are taken individually and questioned ‘why’. This process continues.


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