Operations Improvement

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

• 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.

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Polar diagram - How operations can measure their
performance
Market requirements and operations performance
change over time
Performance of the operation
Requirements of the market
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• 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

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• 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)

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• 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

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Measuring and Improving Performance

• 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

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Measuring and Improving Performance

• 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

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Measuring and Improving Performance

• 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.

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Measuring and Improving Performance

• 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.

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Measuring and Improving Performance

• 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.

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Improvement Priorities

• 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

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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
8 - Very rarely rate as being important
IMPORTANT
OBJECTIVES
9 - Never come into consideration
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9 Point Performance Scale
Judging performance against competitors For this
product group is achieved performance ........
1 - Consistently considerably better than our
nearest competitor
BETTER
2 - Consistently clearly better than our nearest
competitor
THAN
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
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1
GOOD
EXCESS ?
better
2
than
APPROPRIATE
3
4
same
5
PERFORMANCE
as
COMPETITORS
AGAINST
IMPROVE
6
7
URGENT
8
worse
ACTION
than
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BAD
1
6
2
3
4
5
7
8
9
less
order
qualifying
important
winning
IMPORTANCE
LOW
FOR
HIGH
CUSTOMERS
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Approaches to improvement

• 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.

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(a) Breakthrough improvement, (b) continuous
improvement and (c) combined improvement patterns
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• The difference between breakthrough and
  continuous improvement

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• 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

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Define
Plan
Do
Plan
Measure
Control
Check
Act
Analyze
Improve
(a)
(b)

• The plan-do-check-act
• The define-measure-analyze-improve-control

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PDCA Cycle repeated to create continuous
improvement
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The common techniques for process improvement
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Cause-and-effect diagram

• Also called Fishbone diagram or Ishikawa diagram.
• Used to identify root cause of a problem or
  potential solution for an objective.
• Encourages team work.

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Cause-and-effect diagram

• 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)

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Cause-and-effect diagram

• Step 2
• Fill in the effect box and draw the spine
• Step 3
• Identify main categories

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Cause-and-effect diagram

• Step 4
• Identify causes influencing the effect

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Cause-and-effect diagram

• Step 5
• Add detailed level

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Cause-and-effect diagram
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Cause-and-effect diagram

• Step 6
• Analyse the diagram
• Select which cause to take action on.

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• The End