chapter 18
TRANSCRIPT
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Chapter 18
Operations improvement
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Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Operations improvement
Operations strategy
Design Improvement
Planning and control
Operations management
Operations improvement
Total quality management
organizes process improvement
Failure prevention and recovery stop
processes becoming worse
Operations process
improvement makes processes
better
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Performance measures at different levels of aggregation
Overall strategic objectives
Broad strategic measures
Market strategic
objectives
Financial strategic
objectives
Operations strategic
objectives
Functional strategic measures
Customer satisfaction
ResilienceAgilityComposite performance measures
Quality Dependability Speed Flexibility CostGeneric operations performance measures
Some detailed performance measures
Defects per unit
Mean time between failuresLateness complaints
Customer query timeOrder lead timeThroughput time
Time to marketProduct range
Transaction costs
Level of customer complaints
Scrap level
Labour productivity
Machine efficiency
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Performance measures at different levels of aggregation
High strategic relevance and aggregation
High diagnostic power and
frequency of measurement
Detailed performance measures
Broad strategic measures
Functional strategic measures
Composite performance measures
Generic operations performance measures
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Overall strategic objectives
Customer performance measures
To achieve strategic impact, how should we be viewed by customers?
Internal process performance measures
To achieve strategic impact, what aspects of performance should business process excel at?
Financial performance measures
To achieve strategic impact, how should we be viewed by shareholders?
Learning and growth performance measures
To achieve strategic impact, how will we build capabilities over time?
The measures used in the balanced scorecard
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Prioritizing process objectives
Priorities should be determined by …
IMPROVEMENT PRIORITIES
The
IMPORTANCE
of each competitive
objective
Your
PERFORMANCE
in each competitive
objective
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Com
petit
ive
bene
fit
performance
+ve
neutral
–ve
Low HighAchieved
Order-winning objectives
Achieved
Qualifying level
+ve
neutral
–ve
Low High
Qualifying objectives
Com
petit
ive
bene
fit
Achieved performance
+ve
neutral
–ve
Low High
Less important objectives
Com
petit
ive
bene
fit
Achieved performance
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Order-winning objectives
For this product or service, does this performance objective …
9-point importance scale
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?
Qualifying objectives
Less important objectives
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
IMPORTANCE to customers
1 2 3 4 5 6 7 8 9
X
X
X
X
X
X
X
X
X
PRICE
SERVQUAL (DISN.)
SERVQUAL (ORDER TAKE)
ENQUIRY LEAD-TIME
DROP QUOTE
WINDOW QUOTE
DELIVERY PERFORMANCE
DELIVERY FLEXIBILITY
VOLUME FLEXIBILITY
DOC. SERVICE X
Temperature-controlled – overnight service
1 2 3 4 5 6 7 8 9
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
For this product or service, is the achieved performance …
Better than competitors
1 …consistently considerably better than our nearest competitor’s?2 …consistently clearly better than our nearest competitor’s?3 …consistently marginally better than our nearest competitor’s?
9-point performance scale
4 …often marginally better than that of most competitors?
5 …about the same as that of most competitors?
6 …often close to that of our main competitors?
Same as competitors
7 …usually marginally worse than that of our main competitors?
8 …usually worse than that of most competitors?
9 …consistently worse than that of most competitors?
Worse than competitors
Similar processes
Similar processes
Similar processes
Customer
expectations
Customer
expectations
Customer
expectations
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1 2 3 4 5 6 7 8 9
PERFORMANCE against competitors
Temperature-controlled – overnight service
COST
SERVQUAL (DISN.)
SERVQUAL (ORDER TAKE)
ENQUIRY LEAD-TIME
DROP QUOTE
WINDOW QUOTE
DELIVERY PERFORMANCE
DELIVERY FLEXIBILITY
VOLUME FLEXIBILITY
1 2 3 4 5 6 7 8 9
X
X
X
X
X
X
X
X
X
DOC. SERVICE X
Estimated
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
betterthan
sameas
worsethan
lessimportant qualifying
orderwinning
1
2
3
4
5
6
7
8
9
123456789
IMPORTANCEFOR
CUSTOMERSLOW HIGH
PE
RF
OR
MA
NC
EA
GA
INS
T
CO
MP
ET
ITO
RS
GO
OD
BA
D
URGENTACTION
IMPROVE
APPROPRIATE
EXCESS ?
X
X
Lower bound of acceptability
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
betterthan
sameas
worsethan
lessimportant qualifying
orderwinning
1
2
3
4
5
6
7
8
9
123456789
IMPORTANCEFOR
CUSTOMERSLOW HIGH
PE
RF
OR
MA
NC
EA
GA
INS
T
CO
MP
ET
ITO
RS
GO
OD
BA
DVolume flex.
XDrop quote
X
Delivery X
Window quote
X
Servqual (Disn.)X
Doc service X
XPrice/Cost Delivery flex.X
X
Servqual (order take)
X
Enquiry Lead-time
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Short-term, dramaticLarge steps Intermittent Abrupt, volatile Few championsIndividual ideas & effort Scrap and rebuild New inventions/theories Large investment Low effort Technology Profit
Short-term, dramaticLarge steps Intermittent Abrupt, volatile Few championsIndividual ideas & effort Scrap and rebuild New inventions/theories Large investment Low effort Technology Profit
Effect Pace
TimeframeChange
Involvement Approach
Mode Spark Capex
Maintenance Focus
Evaluation
Long-term, undramaticSmall steps
Continuous, incrementalGradual and consistent
Everyone Group efforts, systematic
Protect and improveEstablished know-how
Low investment Large effort
People Process
Long-term, undramaticSmall steps
Continuous, incrementalGradual and consistent
Everyone Group efforts, systematic
Protect and improveEstablished know-how
Low investment Large effort
People Process
Innovation Kaizen
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The plan–do–check–act (or ‘Deming’) improvement cycle,and the define–measure–analyze–improve–control
(or DMAIC) ‘six sigma’ improvement cycle
Define
Measure
AnalyzeImprove
Control
Plan Do
CheckAct
Plan
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Define – identify the problem, define
requirements and set the goal
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
Control – establish performance
standards and deal with any problems
The DMAIC cycle
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Per
form
ance
Time
Planned ‘breakthrough’ improvements
Actual improvement pattern
‘Breakthrough’ improvement does not always deliverhoped-for improvements
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Per
form
ance
Time
Continuous improvement
Standardize and maintain
Improvement
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Per
form
ance
Time
PDCA cycle repeated to create continuous improvement
Continuous improvement
Plan
Do
Check
Act
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Per
form
ance
Time
Combined ‘breakthrough’ and
continuous improvement
Combined improvement
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Some common techniques for process improvement
Cause–effect diagrams ‘Why-why’ analysis
Why?
Why?
Why?
Flowcharts Scatter diagrams
xx
x x
x xxx
x
x x
Input/output analysis
Input Output
Pareto diagrams
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Cost
Quality + dependability + speed + flexibility + cost
Flexibility
Quality + dependability + speed + flexibility
Speed
Quality + dependability + speed
The sandcone model of improvement
Dependability
Quality + dependability
Quality
Quality
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
BPR advocates reorganizing (reengineering) processesto reflect the natural processes that fulfil customer needs
Function 1
Cu
sto
mer
nee
ds
Cu
sto
mer
nee
ds
fulf
illed
Functionally based processes
Function 2 Function 3 Function 4
Bu
sin
ess
pro
cess
es
End-to-end process 1
End-to-end process 2
End-to-end process 3
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms TestPerformance measurementMeasuring and assessing the various aspects of the
performance of a process or of a whole operation.
Polar diagramA diagram that uses axes, all of which originate from the
same central point, to represent different aspects of operations performance.
BenchmarkingComparing methods and/or performance with other
processes in order to learn from them and/or assess performance.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms Test
Order-winning competitive factorsThose that directly and significantly contribute to winning
business.
Qualifying competitive factorsThose that have a minimum level of performance (the qualifying
level) below which customers are unlikely to consider an operation’s performance to be satisfactory.
Less important competitive factorsThose that are neither order-winning nor qualifying, so that
performance in them does not significantly affect the competitive position of an operation.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms TestImportance–performance matrixA technique that brings together scores that indicate the relative
importance and relative performance of different competitive factors in order to prioritize them as candidates for improvement.
Breakthrough improvementAn approach to improving operations performance that implies major
and dramatic change in the way an operation works; for example, business process reengineering (BPR) is often associated with this type of improvement, also known as innovation-based improvement, contrasted with continuous improvement.
Continuous improvementAn approach to operations improvement that assumes many, relatively
small, incremental improvements in performance, stressing the momentum of improvement rather than the rate of improvement; also known by the Japanese term kaizen, often contrasted with breakthrough improvement.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms Test
KaizenJapanese term for continuous improvement.
Improvement cyclesThe practice of conceptualizing problem solving as used in
performance improvement in terms of a never-ending cyclical model, for example the PDCA cycle or the DMAIC cycle.
PDCA cycleStands for Plan–Do–Check–Act cycle, perhaps the best
known of all improvement cycle models.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms Test
DMAIC cycleIncreasingly used improvement cycle model, popularized
by the Six Sigma approach to operations improvement.
Business process reengineeringThe philosophy that recommends the redesign of
processes to fulfil defined external customer needs.
Process mapsDiagrams that describe processes in terms of how the
activities within them relate to each other (also known as process blueprinting or process analysis).
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms TestCause–effect diagramA technique for searching out the root cause of problems;
a systematic questioning technique, also known as an Ishikawa diagram.
Pareto analysis/lawA general law found to operate in many situations, which
indicates that 20% of something causes 80% of something else, often used in inventory management (20% of products produce 80% of sales value) and improvement activities (20% of types of problems produce 80% of disruption).