6 Operations Improvement

18.
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.
18.3
Polar diagram - How operations can measure their performance

Cost Cost
Speed Dependability Speed Dependability
Quality Flexibility Quality Flexibility
Market requirements and operations performance change over time
Performance of the operation Requirements of the market
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. Historical Standard
2. Target performance standard
3. Competitor performance standards
4. Absolute performance standards
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)
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”
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
– 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
– 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.
– 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.
• 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.
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
18.13 9 Point Importance Scale
Judging importance to customers
For this product group does this performance objective ......
1 - Provide a crucial advantage with customers

ORDER
WINNING 2 - Provide an important advantage with most customers
OBJECTIVES
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
7 - Not usually important but could become more so in future

LESS
IMPORTANT 8 - Very rarely rate as being important
OBJECTIVES
9 - Never come into consideration
18.14 9 Point Performance Scale
Judging performance against competitors
For this product group is achieved performance ........
1 - Consistently considerably better than our nearest competitor

BETTER
THAN 2 - Consistently clearly better than our nearest competitor
COMPETITORS
3 - Consistently marginally better than our nearest competitor
4 - Often marginally better than most competitors

SAME
AS 5 - About the same as most competitors
COMPETITORS
6 - Often close to main competitors
7 - Usually marginally worse than main competitors

WORSE
THAN 8 - Usually worse than most competitors
COMPETITORS
9 - Consistently worse than most competitors
18.15
GOOD
1
better 2 EXCESS ?
than
3 APPROPRIATE
PERFORMANCE
COMPETITORS
same 5
AGAINST
as
6 IMPROVE
7
worse
8 URGENT
than ACTION
9
BAD
9 8 7 6 5 4 3 2 1
less order
important qualifying winning
IMPORTANCE
LOW FOR HIGH
CUSTOMERS
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.
18.17 (a) ‘Breakthrough’ improvement, (b) ‘continuous’
improvement and (c) combined improvement patterns
Planned
“breakthrough”
improvements
Performance
Performance
Continuous
improvement
Actual improvement
pattern
Time Time
(a) (b)
Performance
Combined
“breakthrough” and
continuous
improvement
Time
(c)
18.18
3.The difference between breakthrough and continuous

improvement
Innovation... ...Kaizen
Short-term,
Short-term,dramatic
dramatic Effect Long-term,
Long-term,undramatic
undramatic
Big
Bigsteps
steps Pace Small
Smallsteps
steps
Intermittent
Intermittent Timeframe Continuous,
Continuous,incremental
incremental
Abrupt,
Abrupt,volatile
volatile Change Gradual
Gradualand
andconsistent
consistent
Few
Few‘champions’
‘champions’ Involvement Everyone
Everyone
Individual
Individualideas
ideas&&effort
effort Approach Group
Groupefforts
efforts
New
Newinventions/theories
inventions/theories Stimulus Conventional
Conventionalknow-how
know-how
Concentrated
Concentrated‘all ‘alleggs
eggsinin11 Risks Spread
Spread
basket’
basket’
Large
Largeinvestment Practical req. Little
investment Littleinvestment
investment
Technology
Technology Effort orientation People
People
Results
Resultsforforprofit
profit Evaluation criteria Process
Process
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
18.20
Define
Plan Do
Control Measure
Act Check Improve Analyze
(a) (b)
(a) The plan-do-check-act

(b) The define-measure-analyze-improve-control
18.21
PDCA Cycle repeated to create
continuous improvement
Performance
Plan
Do
Act
Check
“Continuous”
improvement
Time
18.22 The common techniques for process
improvement
Input/output analysis Flow charts Scatter diagrams
x x
Input Out put x x x

x
x x
x
x x
Cause-effect diagrams Pareto diagrams Why-why analysis
Why?
Why?
Why?
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
18.24
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)
18.25
Step 2:
– Fill in the effect box and draw the spine
Step 3:
– Identify main categories
Man Machinery
POOR GAS
Environment
MILEAGE
Materials Method
18.26
Step 4:
– Identify causes influencing the effect
Man Machinery
Use wrong
gear
Environment POOR GAS
MILEAGE
Wrong octane
gas
Materials Method
18.27
Step 5:
– Add detailed level
Can’t hear Man Machinery
engine
Poor hearing
Radio too loud
Use wrong
gear
MILEAGE
Don’t know
No owner’s recommended
manual octane
Wrong octane
gas
Materials Method
18.28
Can’t hear Man Machinery

engine
Poor hearing
Radio too loud
Use wrong
gear
MILEAGE
Don’t know
No owner’s recommended
manual octane
Wrong octane
gas
Materials Method
18.29
Step 6:
– Analyse the diagram
• Select which cause to take action on.
18.30
The End

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18.

Measuring and Improving Performance

Polar diagram - How operations can measure their performance

Speed Dependability Speed Dependability

Quality Flexibility Quality Flexibility

Market requirements and operations performance change over time

Performance of the operation Requirements of the market

3. Competitor performance standards

1. Judging importance to customers

1 - Provide a crucial advantage with customers

4 - Need to be up to good industry standard

7 - Not usually important but could become more so in future

1 - Consistently considerably better than our nearest competitor

4 - Often marginally better than most competitors

7 - Usually marginally worse than main competitors

3.The difference between breakthrough and continuous

4. Improvement cycle models

Act Check Improve Analyze

(a) The plan-do-check-act

Input/output analysis Flow charts Scatter diagrams

Input Out put x x x

Cause-effect diagrams Pareto diagrams Why-why analysis

Construct a cause-and-effect diagram to identify

Can’t hear Man Machinery

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