Operations Improvement
chapter – 18
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.
I. 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.
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?
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.
Performance measures at different levels of aggregation
Broad strategic
measures
Overall strategic
objectives
Composite performance
measures
Generic operations
performance measures
Operations
strategic
objectives
Market
strategic
objectives
Functional strategic
measures
Customer
satisfaction
Quality
Defects per
unit
Some detailed
Level of
performance
customer
measures
complaints
Scrap level
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
Performance measures at different levels of aggregation
Broad strategic
measures
High strategic
relevance and
aggregation
Functional strategic
measures
Composite performance
measures
Generic operations
performance measures
Detailed performance
measures
High diagnostic
power and
frequency of
measurement
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
• This approach presents an overall picture of
organizational performance in a single report.
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
Learning and growth
performance
measures
To achieve strategic
impact, how will we
build capabilities
over time?
Customer performance
measures
To achieve strategic
impact, how should we
be viewed by
customers?
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:
1. Historically based targets- this type of targets compare the
current performance against the previous.
2. Strategic Targets – the targets set to show the appropriate
level of performance to achieve the strategic objectives of an
organization.
3. External performance based targets- targets set to show the
performance level according to similar, competitor’s or
external operators performance.
4. Absolute performance targets- targets set on upper limit of
performance
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
• 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.
II. Improvement priorities (howcan
operational managers prioritize
improvement of performance objectives)
Improvement priorities are based on two major
influences:
1. Needs and performances of customers.
2. The performance and activities of
competitors.
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.
Prioritizing process objectives
Priorities should be determined by …
The
Your
IMPORTANCE
PERFORMANCE
of each
competitive
objective
in each
competitive
objective
IMPROVEMENT PRIORITIES
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.
Order-winning
objectives
Qualifying
objectives
+ve
neutral
–ve
High
Low
Achieved
performance
neutral
–ve
Qualifying
level
Low
High
Competitive benefit
+ve
Competitive benefit
Competitive benefit
+ve
Less important
objectives
neutral
–ve
Low
High
Achieved
Achieved
performance
performance
9-point importance scale
For this product or service, does this performance objective …
Order-winning
objectives
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?
Qualifying
objectives
5 …need to be around median industry standard?
6 …need to be within close range of the rest of the industry?
Less important
objectives
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?
Temperature-controlled – overnight service
IMPORTANCE to customers
1
2
3
4
5
PRICE
7
8
9
X
SERVQUAL (DISN.)
X
SERVQUAL (ORDER TAKE)
X
ENQUIRY LEAD-TIME
X
DROP QUOTE
X
WINDOW QUOTE
DELIVERY PERFORMANCE
6
X
X
X
DELIVERY FLEXIBILITY
VOLUME FLEXIBILITY
X
DOC. SERVICE
X
1
2
3
4
5
6
7
8
9
9-point performance scale
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?
Same as
competitors
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?
Worse than
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?
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.
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
III. 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:
1. Breakthrough improvement (innovationbased improvement)
2. Continuous improvement
These two approaches can be compared to a
Sprint and Marathon.
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
• 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 ?
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
Breakthrough improvement
Continuous improvement
Places high value on creativity
Less ambitious
Encourages free thinking and
individualism
Stresses adaptability
Does not accept constraints
stresses teamwork
Stresses attention to detail
Depends on the wealth of experience
within the organization.
Improvement cycle
Improvement is a never-ending process, this
repeated nature is known as improvement
cycle.
There are two main improvement methods ::
1. PDCA – plan, do, check, and act.
2. DMAIC – SIX SIGMA
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
The plan–do–check–act (or ‘Deming’) improvement cycle,
and the define–measure–analyze–improve–control
(or DMAIC) ‘six sigma’ improvement cycle
Define
Plan
Do
Control
Act
Check
Improve
Measure
Analyze
The DMAIC
cycle
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
Improve – develop
improvement ideas, problem hypotheses,
identify ‘root causes’ and
test, establish
validate hypotheses
solution, and
measure results
BPR or Business process Reengineering 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.
BPR advocates reorganizing (reengineering) processes
to reflect the natural processes that fulfil customer needs
Functionally based processes
Function 1
Function 2
Function 3
Function 4
End-to-end process 3
Customer needs fulfilled
End-to-end process 2
Business processes
Customer needs
End-to-end process 1
Principles of BPR
A. Organize business process around the output
of process, i.e customers.
B. Try for dramatic improvement.
C. Have those who use the output from a
process to perform the process. Or check if
all internal customers can be their own
suppliers.
D. Put decision points where the work is
performed.
IV. The techniques of improvement
Some common techniques for process improvement
Input/output analysis
Flowcharts
Scatter diagrams
x
Input
Output
x
x
Cause–effect diagrams
Pareto diagrams
x
x
x
x
x
x
x
x
‘Why-why’ analysis
Why?
Why?
Why?
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
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
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.