20.1
Chapter 20
Organizing for improvement
Photodisc. Jack Hollingsworth
20.1
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.2
Organizing for improvement
Operations
strategy
Design
Operations
management Improvement
Planning
and control
20.2
Operations
improvement
makes processes
better
Organizing for
improvement
Risk
management
stops processes
becoming worse
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.3
Key operations questions
In Chapter 20 – Organizing improvement – Slack et al.
identify the following key questions:
• Why does improvement need organizing?
• How should the improvement effort be linked to strategy?
• What should be improvement priorities?
• What information is needed for improvement?
• How can organizational culture affect improvement?
• What are the key implementation issues?
20.3
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
Operations improvement should achieve ‘fit’ between
market requirements and operations performance
Level of market requirements
20.4
A
Alignment between market
requirements and operations
performance
Level of operations performance
20.4
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
Current market
requirements
requirements change
Intended market
requirements
Extent of market
Operations improvement should achieve ‘fit’ between market
requirements and operations performance (Continued)
Level of market requirements
20.5
B
A
Extent of operations
resource capability change
Current operations
performance
Intended operations
performance
Level of operations performance
20.5
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
Deviation from the line of ‘fit’ can expose the operation to
risk
Level of market requirements
20.6
Off the line of fit –
operations
performance
inadequate for market
requirements
X
B
Y
A
Off the line of fit –
operations
performance not
exploited in the market
Level of operations performance
20.6
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.7
Information for improvement
• The urgency, direction and priorities of improvement
will be determined partly by whether the current
performance of an operation is judged to be good, bad
or indifferent.
• Performance measurement is the process of
quantifying action
• Without performance measurement, it would be
impossible to exert any control over an operation on an
ongoing basis.
20.7
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.8
Performance measures at different levels of aggregation
Broad strategic
measures
Overall strategic
objectives
Composite
performance
measures
Generic operations
performance
measures
Customer
satisfaction
Quality
Defects per
unit
Some detailed
Level of
performance
customer
measures
complaints
Scrap level
20.8
Operations
strategic
objectives
Market
strategic
objectives
Functional strategic
measures
Agility
Dependability
Mean time
between
failures
Lateness
complaints
Financial
strategic
objectives
Speed
Resilience
Flexibility
Customer
query time
Order lead time
Throughput
time
Time to
market
Product
range
Cost
Transaction
costs
Labour
productivity
Machine
efficiency
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.9
Performance measures at different levels of aggregation
(Continued)
Broad strategic
measures
High strategic
relevance and
aggregation
Functional strategic
measures
Composite performance
measures
Generic operations
performance measures
Detailed performance
measures
20.9
High diagnostic
power and
frequency of
measurement
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.10
The measures used in the balanced scorecard
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?
Overall
strategic
objectives
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?
20.10
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.11
Different standards give different messages
Absolute performance = 100%
100
90
Strategic goal = 95%
X
80
Actual performance = 83%
70
60
X
X
X
Competitor performance = 75%
X
Last years average
performance = 60%
X
50
40
Time
• Performance by historical standards is GOOD.
• Performance against improvement goal is POOR.
• Performance against competitors is GOOD.
• Absolute performance is POOR.
20.11
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.12
Types of benchmarking
• Internal benchmarking is a comparison between operations or parts of
operations which are within the same total organization.
• External benchmarking is a comparison between an operation and other
operations which are part of a different organization.
• Non-competitive benchmarking is benchmarking against external
organizations which do not compete directly in the same markets.
• Competitive benchmarking is a comparison directly between competitors
in the same, or similar, markets.
• Performance benchmarking is a comparison between the levels of
achieved performance in different operations.
• Practice benchmarking is a comparison between an organization’s
operations practices, or way of doing things, and those adopted by
another operation.
20.12
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.13
Prioritizing process objectives
Priorities should be determined by
The
Your
IMPORTANCE
PERFORMANCE
of each
competitive
objective
in each
competitive
objective
IMPROVEMENT PRIORITIES
20.13
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
The importance of competitive objectives
Less important
objectives
+ve
+ve
Neutral
–ve
Low
20.14
Qualifying
objectives
Competitive benefit
Competitive benefit
Order-winning
objectives
Achieved
performance
High
+ve
Neutral
–ve
Low
Qualifying
level
Achieved
performance
High
Competitive benefit
20.14
Neutral
–ve
Low
High
Achieved
performance
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.15
Nine-point importance scale
For this product/service does this performance objective ......
1. Provide a crucial advantage with customers.
Order-winning
objectives
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.
20.15
Qualifying
objectives
5. Need to be around median industry standard.
Less
important
objectives
7. Not usually important but could become more so in future.
6. Need to be within close range of the rest of the industry.
8. Very rarely rate as being important.
9. Never come into consideration.
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.16
Temperature controlled – Overnight service
IMPORTANCE to customers
1
2
3
4
PRICE
5
6
8
9
8
9
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
20.16
7
2
3
4
5
6
7
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.17
Nine-point performance scale
For this product/service is achieved performance ........
Better than
competitors
1. Consistently considerably better than our nearest competitor.
2. Consistently clearly better than our nearest competitor.
3. Consistently marginally better than our nearest competitor.
Same as
competitors
4. Often marginally better than most competitors.
5. About the same as most competitors.
6. Often close to main competitors.
Worse than
competitors
7. Usually marginally worse than main competitors.
8. Usually worse than most competitors.
9. Consistently worse than most competitors.
20.17
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.18
Temperature controlled – overnight service
PERFORMANCE against competitors
1
2
3
4
5
6
7
8
9
X
COST
SERVQUAL (DISN.)
X
X
SERVQUAL (ORDER TAKE)
ENQUIRY LEAD-TIME
X
DROP QUOTE
X
X
WINDOW QUOTE
DELIVERY PERFORMANCE
X
DELIVERY FLEXIBILITY
X
VOLUME FLEXIBILITY
X
DOC. SERVICE
X
1
2
3
4
5
6
7
8
9
Estimated
20.18
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
The importance – performance matrix
GOOD
20.19
1
Better
than
EXCESS ?
2
APPROPRIATE
PERFORMANCE
AGAINST
COMPETITORS
3
4
Same
as
BAD
5
IMPROVE
6
7
X
Worse
than
URGENT
ACTION
8
9
9
8
Less
important
LOW
20.19
X
7
6
5
Qualifying
IMPORTANCE
FOR
CUSTOMERS
4
3
2
1
Order
winning
HIGH
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.20
The importance – performance matrix (Continued)
GOOD
1
Better
Delivery
Volume flex
2
X
than
Window
quote
Drop quote
3
X
X
BAD
COMPETITORS
PERFORMANCE
AGAINST
4
Same
as
X Servqual
(Disn.)
5
Doc service
6
Price/Cost
X
X
Delivery flex
Servqual X
(Order take)
8
X
Enquiry
Lead-time
9
9
8
Less
important
LOW
20.20
X
7
Worse
than
X
7
6
5
4
Qualifying
IMPORTANCE
FOR
CUSTOMERS
3
2
1
Order
winning
HIGH
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.21
The sandcone model of improvement
Cost
Flexibility
Speed
Dependability
Quality
Quality
Quality + dependability
Quality + dependability + speed
Quality + dependability + speed + flexibility
Quality + dependability + speed + flexibility + cost
20.21
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.22
Improvement culture
An organization’s ability to improve its operations performance depends
to a large extent on its ‘culture’ (i.e. ‘the pattern of shared basic
assumptions … that have worked well enough to be considered valid…’
or as some put it, ‘the way we do things around here’.
The elements of organizational culture include:
• the organization’s mission and values;
• its control systems;
• its organizational structures, hierarchies, and processes;
• its power structures;
• its symbols, logos and designs including its symbols of power;
• its rituals, meetings and routines;
• its stories and myths that develop about people and events.
20.22
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.23
Single loop learning
Assess operations
performance
Make
improvements
20.23
Compare performance
against objectives
Learn new insights
and capabilities
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.24
Double loop learning
Question
relevance of
objectives
Assess operations
performance
Compare performance
against objectives
Develop new
(more relevant)
objectives
Make
improvements
20.24
Learn new insights
and capabilities
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
20.25
EFQM ‘Business Excellence’ Model
People
results
People
Leadership
Policy and
strategy
Processes
Partnerships
and resources
20.25
Customer
results
Key
performance
results
Society
results
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010