Operations Improvement

1. Operations Improvement Chapter coverage: Measuring and Improving Performance Improvement Priorities Approaches to improvement Techniques for process improvement

2. 1) Performance measurement Performance: the degree to which the operations fulfils performance objectives at any point in time, in order to satisfy customers. Performance objectives: quality, speed, dependability, flexibility and cost Can represented on a Polar diagram. Measuring and Improving Performance

3. Cost Cost Speed Speed Dependability Dependability Flexibility Flexibility Quality Quality Polar diagram - How operations can measure their performance Market requirements and operations performance change over time Performance of the operation Requirements of the market

4. 2) Performance standards After an operation has measured its performance, it needs to make a judgement as to whether its performance is good, bad or indifferent. Four ways of comparing current performance to some kind of performance standard: Historical Standard Target performance standard Competitor performance standards Absolute performance standards

5. Historical standards Comparison against previous performance Judges if operation is getting better or not over time. No indication if performance is satisfactory Target performance standards Target set randomly to reflect some level of performance. Must be appropriate and reasonable Example: Budget (quarterly review)

6. Competitor performance standards Comparison against one or more of the organizations competitors. Relates performance directly to its competitive ability Good for strategic performance improvement Absolute performance standards Target is a theoretical limit. Example: ‘zero defects’, or ‘zero LTI”

7. Benchmarking Compares operation with those of other companies. Process of learning from others Widely adopted because: The problems faced in managing their processes are most likely similar to other operations managers elsewhere. There is probably another operation somewhere that has developed a better way of doing things Measuring and Improving Performance

8. Some objectives: To judge how well an operation is doing To set realistic performance standards. To search for new idea and practices which can be adopted Measuring and Improving Performance

9. Examples of benchmarking include: A dishwasher manufacturer comparing the energy efficiency of its own products against its competitors An online retailer of computer accessories comparing the way it organizes its warehouse and delivery with an online retailer of books and DVDs A hotel chain comparing the room cleaning times in all its hotels A chemical company comparing its transportation and distribution practices with a specialist logistics company. Measuring and Improving Performance

10. Types of benchmarking (not mutually exclusive): Internal benchmarking – comparison made within the same organization. Example: a large motor vehicle manufacturer with several factories might choose to benchmark each factory against the others. External benchmarking – comparison between an operation and other operations which are not part of same organization. Measuring and Improving Performance

11. Non-competitive benchmarking – comparison against external organizations which do not compete directly in the same markets. Competitive benchmarking – comparison between competitors. Performance benchmarking – comparison between the levels of achieved performance in different operations. Practice benchmarking – comparison of the way of doing things. Example: comparison of SOP for controlling stock levels by other department stores. Measuring and Improving Performance

12. Major influences on deciding improvement priorities: The needs and preference of customers The performance and activities of competitors Judging importance to customers Judging performance against competitors The importance-performance matrix Improvement Priorities

13. 9 Point Importance Scale Judging importance to customers For this product group does this performance objective ...... 1 - Provide a crucial advantage with customers ORDER WINNING 2 - Provide an important advantage with most customers OBJECTIVES 3 - Provide a useful advantage with most customers 4 - Need to be up to good industry standard QUALIFYING 5 - Need to be around median industry standard OBJECTIVES 6 - Need to be within close range of the rest of the industry 7 - Not usually important but could become more so in future LESS IMPORTANT 8 - Very rarely rate as being important OBJECTIVES 9 - Never come into consideration

14. 9 Point Performance Scale Judging performance against competitors For this product group is achieved performance ........ 1 - Consistently considerably better than our nearest competitor BETTER THAN 2 - Consistently clearly better than our nearest competitor COMPETITORS 3 - Consistently marginally better than our nearest competitor 4 - Often marginally better than most competitors SAME 5 - About the same as most competitors AS COMPETITORS 6 - Often close to main competitors 7 - Usually marginally worse than main competitors WORSE 8 - Usually worse than most competitors THAN COMPETITORS 9 - Consistently worse than most competitors

15. 1 GOOD EXCESS ? better 2 than APPROPRIATE 3 4 same 5 PERFORMANCE as COMPETITORS AGAINST IMPROVE 6 7 URGENT 8 worse ACTION than 9 BAD 6 1 9 8 7 5 4 3 2 less order qualifying important winning IMPORTANCE LOW FOR HIGH CUSTOMERS

16. Breakthrough improvement Innovation based improvement Example: introduction of a new, more efficient machine in a factory Continuous improvement - Kaizen Smaller incremental improvement steps Example: modifying the way a component is fixed to an equipment to reduce change over time. Rate of improvement is not important but the momentum is. Approaches to improvement

17. Planned “breakthrough” improvements Continuous improvement Performance Performance Actual improvement pattern Time Time (a) (b) Combined “breakthrough” and continuous improvement Performance Time (c) (a) ‘Breakthrough’ improvement, (b) ‘continuous’ improvement and (c) combined improvement patterns

18. The difference between breakthrough and continuous improvement Innovation... ...Kaizen Short-term, dramatic Big steps Intermittent Abrupt, volatile Few ‘champions’ Individual ideas & effort New inventions/theories Concentrated ‘all eggs in 1 basket’ Large investment Technology Results for profit Long-term, undramatic Small steps Continuous, incremental Gradual and consistent Everyone Group efforts Conventional know-how Spread Little investment People Process Effect Pace Timeframe Change Involvement Approach Stimulus Risks Practical req. Effort orientation Evaluation criteria

19. Improvement cycle models Improvement can be represented by a never-ending process of repeatedly questioning and re-questioning the detailed working of a process activity This repeated and cyclical nature of continuous improvement is usually summarized by improvement cycles Examples of improvement cycles: PDCA cycle DMAIC cycle

20. Define Plan Plan Do Measure Control Act Check Improve Analyze (a) (b) • The plan-do-check-act • The define-measure-analyze-improve-control

21. Plan Performance Do Act Check “Continuous” improvement Time PDCA Cycle repeated to createcontinuous improvement

22. Input/output analysis Flow charts Scatter diagrams x x Input Out put x x x x x x x x x Cause-effect diagrams Pareto diagrams Why-why analysis Why? Why? Why? The common techniques for process improvement

23. Also called Fishbone diagram or Ishikawa diagram. Used to identify root cause of a problem or potential solution for an objective. Encourages team work. Cause Cause Cause Effect Cause Cause Cause-and-effect diagram

24. Construct a cause-and-effect diagram to identify the causes of poor gas mileage of your car. Step 1: Identify the effect Can be positive (objective) or negative (problem) Cause-and-effect diagram

25. Step 2: Fill in the effect box and draw the spine Step 3: Identify main categories Man Machinery POOR GAS MILEAGE Environment Materials Method Cause-and-effect diagram

26. Step 4: Identify causes influencing the effect Man Machinery Use wrong gear POOR GAS MILEAGE Environment Wrong octane gas Materials Method Cause-and-effect diagram

27. Step 5: Add detailed level Man Machinery Can’t hear engine Poor hearing Radio too loud Use wrong gear POOR GAS MILEAGE Environment Don’t know recommended octane No owner’s manual Wrong octane gas Materials Method Cause-and-effect diagram

28. Man Machinery Can’t hear engine Poor hearing Radio too loud Use wrong gear POOR GAS MILEAGE Environment Don’t know recommended octane No owner’s manual Wrong octane gas Materials Method Cause-and-effect diagram

29. Step 6: Analyse the diagram Select which cause to take action on. Cause-and-effect diagram

30. The End