18.1
Operations Improvement
Chapter coverage:
Measuring and Improving Performance
Improvement Priorities
Approaches to improvement
Techniques for process improvement
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.2
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.
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.3
Polar diagram - How operations can measure their performance
Cost
Speed
Cost
Dependability
Quality
Flexibility
Speed
Dependability
Quality
Flexibility
Market requirements and operations performance change over time
Performance of the operation
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Requirements of the market
Operations Management, 4E: Chapter 18
18.4
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:
1.
2.
3.
4.
Historical Standard
Target performance standard
Competitor performance standards
Absolute performance standards
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.5
1. Historical standards
–
–
–
Comparison against previous performance
Judges if operation is getting better or not over
time.
No indication if performance is satisfactory
2. Target performance standards
–
–
–
Target set randomly to reflect some level of
performance.
Must be appropriate and reasonable
Example: Budget (quarterly review)
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.6
3. Competitor performance standards
–
–
–
Comparison against one or more of the
organizations competitors.
Relates performance directly to its competitive
ability
Good for strategic performance improvement
4. Absolute performance standards
–
–
Target is a theoretical limit.
Example: ‘zero defects’, or ‘zero LTI”
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.7
Measuring and Improving Performance
3) Benchmarking
– Compares operation with those of other companies.
– Process of learning from others
– Widely adopted because:
a) The problems faced in managing their processes
are most likely similar to other operations
managers elsewhere.
b) There is probably another operation somewhere
that has developed a better way of doing things
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
Measuring and Improving Performance
18.8
– 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
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.9
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.
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
Measuring and Improving Performance
18.10
– 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.
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
Measuring and Improving Performance
18.11
•
•
•
•
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.
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.12
Improvement Priorities
Major influences on deciding improvement priorities:
– The needs and preference of customers
– The performance and activities of competitors
1. Judging importance to customers
2. Judging performance against competitors
3. The importance-performance matrix
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.13
9 Point Importance Scale
Judging importance to customers
For this product group 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 - Not usually important but could become more so in future
8 - Very rarely rate as being important
9 - Never come into consideration
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.14
9 Point Performance Scale
Judging performance against competitors
For this product group is achieved performance ........
BETTER
THAN
COMPETITORS
SAME
AS
COMPETITORS
WORSE
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
4 - Often marginally better than most competitors
5 - About the same as most competitors
6 - Often close to main competitors
7 - Usually marginally worse than main competitors
8 - Usually worse than most competitors
9 - Consistently worse than most competitors
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
GOOD
18.15
1
better
than
EXCESS ?
2
APPROPRIATE
COMPETITORS
AGAINST
PERFORMANCE
3
4
same
as
IMPROVE
6
7
worse
than
BAD
5
URGENT
ACTION
8
9
9
8
7
less
important
6
5
4
3
2
1
order
winning
qualifying
IMPORTANCE
LOW
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
FOR
CUSTOMERS
HIGH
Operations Management, 4E: Chapter 18
18.16
Approaches to improvement
1.Breakthrough improvement
•
•
Innovation based improvement
Example: introduction of a new, more efficient machine
in a factory
2.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.
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
(a) ‘Breakthrough’ improvement, (b) ‘continuous’
improvement and (c) combined improvement patterns
Planned
“breakthrough”
improvements
Actual improvement
pattern
Continuous
improvement
Time
(b)
Performance
(a)
Performance
Performance
18.17
Time
Combined
“breakthrough” and
continuous
improvement
Time
(c)
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.18
3.The difference between breakthrough and continuous
improvement
Innovation...
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
...Kaizen
Effect
Pace
Timeframe
Change
Involvement
Approach
Stimulus
Risks
Practical req.
Effort orientation
Evaluation criteria
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Long-term, undramatic
Small steps
Continuous, incremental
Gradual and consistent
Everyone
Group efforts
Conventional know-how
Spread
Little investment
People
Process
Operations Management, 4E: Chapter 18
18.19
4. 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
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.20
Define
Plan
Do
Measure
Control
Act
Check
Improve
(a)
Analyze
(b)
(a) The plan-do-check-act
(b) The define-measure-analyze-improve-control
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.21
Performance
PDCA Cycle repeated to create
continuous improvement
Plan
Act
Do
Check
“Continuous”
improvement
Time
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.22
The common techniques for process
improvement
Input/output analysis
Flow charts
Scatter diagrams
x
Input
Out put
x
x
x
x
x
x
x
x
x
Cause-effect diagrams
Pareto diagrams
x
Why-why analysis
Why?
Why?
Why?
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.23
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.
Cause
Cause
Cause
Effect
Cause
Cause
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.24
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)
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.25
Cause-and-effect diagram
Step 2:
– Fill in the effect box and draw the spine
Step 3:
– Identify main categories
Man
Machinery
POOR GAS
MILEAGE
Environment
Materials
Method
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.26
Cause-and-effect diagram
Step 4:
– Identify causes influencing the effect
Man
Machinery
Use wrong
gear
POOR GAS
MILEAGE
Environment
Wrong octane
gas
Materials
Method
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.27
Cause-and-effect diagram
Step 5:
– Add detailed level
Poor hearing
Can’t hear Man
engine
Machinery
Radio too loud
Use wrong
gear
POOR GAS
MILEAGE
Environment
No owner’s
manual
Don’t know
recommended
octane
Wrong octane
gas
Materials
Method
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.28
Cause-and-effect diagram
Poor hearing
Can’t hear Man
engine
Machinery
Radio too loud
Use wrong
gear
POOR GAS
MILEAGE
Environment
No owner’s
manual
Don’t know
recommended
octane
Wrong octane
gas
Materials
Method
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.29
Cause-and-effect diagram
Step 6:
– Analyse the diagram
• Select which cause to take action on.
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18
18.30
The End
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 18