Hapter 18 Perations Improvement: Source: Courtesy of Lotus-Haed, WWW - Pixelpusher.co - Za

Chapter 18
Operations improvement
Source: Courtesy of Lotus-Haed, www.pixelpusher.co.za
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Operations improvement
Operations
improvement
Operations
Operations
strategy process
improvement
makes processes
better
Operations Total quality
management management
Design Improvement organizes process
improvement
Failure
prevention and
recovery stop
Planning and processes
control becoming worse
Performance measures at different levels of aggregation
Broad strategic Overall strategic

measures objectives
Functional strategic Market Operations Financial

measures strategic strategic strategic
objectives objectives objectives
Composite
Customer
performance Agility Resilience
satisfaction
measures
Generic operations
performance Quality Dependability Speed Flexibility Cost
measures
Defects per Mean time Customer Time to Transaction
Some detailed unit between query time market costs
performance Level of failures Order lead time Product Labour
customer Lateness Throughput range productivity
measures complaints complaints time Machine
Scrap level efficiency
Performance measures at different levels of aggregation
Broad strategic High strategic

measures relevance and
aggregation
Functional strategic
measures
Composite performance
measures
Generic operations
performance measures
High diagnostic
Detailed performance power and
measures frequency of
measurement
The measures used in the balanced scorecard
Financial performance
measures
To achieve strategic impact,
how should we be viewed by
shareholders?
Internal process Customer performance

performance measures Overall strategic measures
To achieve strategic impact, objectives
To achieve strategic
what aspects of impact, how should we
performance should be viewed by
business process excel at? customers?
Learning and growth
performance measures
To achieve strategic
impact, how will we
build capabilities over
time?
Prioritizing process objectives
Priorities should be determined by …
The Your
IMPORTANCE PERFORMANCE
of each in each
competitive competitive
objective objective
IMPROVEMENT PRIORITIES
Order-winning Qualifying Less important
objectives objectives objectives
+ve +ve +ve

Competitive benefit
Competitive benefit
Competitive benefit
neutral neutral neutral
Qualifying
–ve –ve level –ve
Low High Low High Low High

Achieved Achieved Achieved
performance performance performance
9-point importance scale
For this product or service, 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 5 …need to be around median industry standard?
objectives
6 …need to be within close range of the rest of the industry?
7 …rate as not usually important but could become more so

Less important in future?
objectives 8 …very rarely rate as being important?
9 …never come into consideration?
Temperature-controlled – overnight service
IMPORTANCE to customers
1 2 3 4 5 6 7 8 9
PRICE X
SERVQUAL (DISN.) X
SERVQUAL (ORDER TAKE) X
ENQUIRY LEAD-TIME X
DROP QUOTE X
WINDOW QUOTE X
DELIVERY PERFORMANCE X
DELIVERY FLEXIBILITY X
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 1 …consistently considerably better than our nearest

ses competitor’s?
competitors
oc e s
lar pr 2 …consistently clearly better than our nearest competitor’s?
i r
Sim stome s 3 …consistently marginally better than our nearest competitor’s?
Cu tation
ec
exp
Same as 4 …often marginally better than that of most competitors?
e s
competitors
roc ess 5 …about the same as that of most competitors?
rp
ila r
Sim ustome ns 6 …often close to that of our main competitors?
C
c t a ti o
e
exp
Worse than es 7 …usually marginally worse than that of our main competitors?
competitorsc ess
o 8 …usually worse than that of most competitors?
r pr
ila r
Sim ustome ns 9 …consistently worse than that of most competitors?
C
c t a ti o
e
exp
Temperature-controlled – overnight service
PERFORMANCE against competitors

1 2 3 4 5 6 7 8 9
COST X
SERVQUAL (DISN.) X
SERVQUAL (ORDER TAKE) X
ENQUIRY LEAD-TIME X
DROP QUOTE X
WINDOW QUOTE X
DELIVERY PERFORMANCE X
DELIVERY FLEXIBILITY X
VOLUME FLEXIBILITY X
DOC. SERVICE X
1 2 3 4 5 6 7 8 9
Estimated
GOOD
1
better 2 EXCESS ?
than
APPROPRIATE X
3
a bi lity
ept
PERFORMANCE
COMPETITORS
f acc
same un do
bo
5
AGAINST
as
ow er
6 L IMPROVE
7
X
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
GOOD
1
Delivery X
better 2 Volume flex.
than X Window
Drop quote quote
3
X X
X Servqual
4
PERFORMANCE
COMPETITORS
(Disn.)
same 5
Doc service X
AGAINST
as
6
Price/Cost X XDelivery flex.
7
Servqual X
(order take)
8
worse X
Enquiry Lead-time
than
9
BAD
9 8 7 6 5 4 3 2 1
less order
important qualifying
winning
IMPORTANCE
LOW FOR HIGH
CUSTOMERS
Innovation Kaizen
Short-term,
Short-term,dramatic
dramatic Effect Long-term,
Long-term,undramatic
undramatic
Large
Largesteps
steps Pace Small
Smallsteps
steps
Intermittent
Intermittent Timeframe Continuous,
Continuous,incremental
incremental
Abrupt,
Abrupt,volatile
volatile Change Gradual
Gradualand
andconsistent
consistent
Few
Fewchampions
champions Involvement Everyone
Everyone
Individual
Individualideas
ideas&&effort
effort Approach Group
Groupefforts,
efforts,systematic
systematic
Scrap
Scrapandandrebuild
rebuild Mode Protect
Protectand
andimprove
improve
New
Newinventions/theories
inventions/theories Spark Established
Establishedknow-how
know-how
Large
Largeinvestment
investment Capex Low
Lowinvestment
investment
Low
Loweffort
effort Maintenance Large
Largeeffort
effort
Technology
Technology Focus People
People
Profit
Profit Evaluation Process
Process
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 Measure
Act Check Improve Analyze
The DMAIC Define – identify the
cycle problem, define
requirements and set
the goal
Control – establish Measure – gather

performance data, refine problem
standards and deal and measure inputs
with any problems and outputs
Improve – develop Analyze – develop

improvement ideas, problem hypotheses,
test, establish identify ‘root causes’
solution, and and validate
measure results hypotheses
‘Breakthrough’ improvement does not always deliver
hoped-for improvements
Planned ‘breakthrough’
improvements
Performance
Actual improvement
pattern
Time
Continuous improvement
Performance
Standardize and maintain
Improvement
Time
PDCA cycle repeated to create continuous improvement
Performance
Plan
Do
Act
Check
Time
Combined improvement
Combined
Performance
‘breakthrough’ and
continuous improvement
Time
Some common techniques for process improvement
Input/output analysis Flowcharts Scatter diagrams

x x
Input Output x x
x
x
x x
x
x x
Cause–effect diagrams Pareto diagrams ‘Why-why’ analysis
Why?
Why?
Why?
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
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 1
Customer needs fulfilled

Business processes
Customer needs
Key Terms Test
Performance measurement
Measuring and assessing the various aspects of the
performance of a process or of a whole operation.
Polar diagram
A diagram that uses axes, all of which originate from the
same central point, to represent different aspects of
operations performance.
Benchmarking
Comparing methods and/or performance with other
processes in order to learn from them and/or assess
performance.
Key Terms Test
Order-winning competitive factors
Those that directly and significantly contribute to winning
business.
Qualifying competitive factors

Those 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 factors

Those that are neither order-winning nor qualifying, so that
performance in them does not significantly affect the
competitive position of an operation.
Key Terms Test
Importance–performance matrix
A 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 improvement
An 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.
An 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
Kaizen
Japanese term for continuous improvement.
Improvement cycles
The 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 cycle
Stands for Plan–Do–Check–Act cycle, perhaps the best
known of all improvement cycle models.
Key Terms Test
DMAIC cycle
Increasingly used improvement cycle model, popularized
by the Six Sigma approach to operations improvement.
Business process reengineering

The philosophy that recommends the redesign of
processes to fulfil defined external customer needs.
Process maps
Diagrams 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 Test
Cause–effect diagram
A technique for searching out the root cause of problems;
a systematic questioning technique, also known as an
Ishikawa diagram.
Pareto analysis/law
A 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).

Hapter 18 Perations Improvement: Source: Courtesy of Lotus-Haed, WWW - Pixelpusher.co - Za

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Chapter 18

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

Broad strategic Overall strategic

Functional strategic Market Operations Financial

Broad strategic High strategic

Internal process Customer performance

Priorities should be determined by …

+ve +ve +ve

Low High Low High Low High

1 …provide a crucial advantage with customers?

4 …need to be up to good industry standard?

7 …rate as not usually important but could become more so

For this product or service, is the achieved performance …

Better than 1 …consistently considerably better than our nearest

PERFORMANCE against competitors

Act Check Improve Analyze

Control – establish Measure – gather

Improve – develop Analyze – develop

Standardize and maintain

Input/output analysis Flowcharts Scatter diagrams

Cause–effect diagrams Pareto diagrams ‘Why-why’ analysis

Function 1 Function 2 Function 3 Function 4

Customer needs fulfilled

Qualifying competitive factors

Less important competitive factors

Business process reengineering

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