chapter 18

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

Chapter 18

Operations improvement

Source: Courtesy of Lotus-Haed, www.pixelpusher.co.za



Operations strategy

Design Improvement

Planning and control

Operations management


Total quality management

organizes process improvement

Failure prevention and recovery stop

processes becoming worse

Operations process

improvement makes processes

better


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


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


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


Prioritizing process objectives

Priorities should be determined by …

IMPROVEMENT PRIORITIES

The

IMPORTANCE

of each competitive

objective

Your

PERFORMANCE

in each competitive

objective


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


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


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


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


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


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


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


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


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


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


Per

form

ance

Time

Planned ‘breakthrough’ improvements

Actual improvement pattern

‘Breakthrough’ improvement does not always deliverhoped-for improvements


Per

form

ance

Time

Continuous improvement

Standardize and maintain

Improvement


Per

form

ance

Time

PDCA cycle repeated to create continuous improvement

Continuous improvement

Plan

Do

Check

Act


Per

form

ance

Time

Combined ‘breakthrough’ and

continuous improvement

Combined improvement


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


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


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




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.


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.


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.


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.


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).


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).

chapter 18

Documents

customer performance

stuart chambers

robert johnston

growth performance measures

edition nigel slack

performance objective

worse slack

performance scalefor