10-1 McGraw-Hill/Irwin Operations Strategy Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. Cross-Cutting Capabilities: Lean Operations, Quality and Flexibility Chapter 10

10-2 Capabilities: Definition  Valuable  Rare  Inimitable  Generally require engagement across different parts of the organization  Are applied widely, not just to a single customer, product or service

10-3 Lean Operations: Overriding Principle  Waste Reduction  Types of Waste

10-4 Lead Operations: Examples of Specific Lean Concepts  Produce only when demanded by downstream users  Maintain production at a constant level  Reduce lot sizes  Achieve short, predictable lead times  Strive for a linear flow  Have suppliers resupply frequently and in small lots  Integrated design fully with operations  Limit number of suppliers  Reduce variability, particularly in demand  Fully engage the workforce in the process

10-5 Lean Operations: Origin in Just-in- time

10-6 Lean Operations: Benefits of JIT

10-7 Lean Operations: Tools  Cellular one-piece flow  Value stream mapping  Production leveling  Supplier rationalization

10-8 Lean Operations Tools: Cellular One- piece Flow

10-9 Lean Operations Tools: Value Stream Mapping (Before)

10-10 Lean Operations Tools: Value Stream Mapping (After)

10-11 Lean Operations: Benefits  Reduced lead times  Lower work-in-process inventory  Increased engagement in problem solving and quality improvement  Improved team building and cooperation  More cooperation with suppliers  Adoption of a systems view of operations, including the supply chain

10-12 Lean Operations: Impact on Competitiveness

10-13 Lean Operations: Impact on Competitiveness

10-14 Quality Management: Elements of TQM  Kaizen: develop a process that is visible, repeatable, measurable  Atarimae hinshitsu: Examine intangibles that affect the process and optimize their impact  Kansei: Examine the way the product is used by the customer and seek opportunities to improve it  Miryokuteki hinshitsu: Observe product use in the marketplace to uncover new product applications and new products

10-15 Quality Management: Deming’s Fourteen Foundational Points of TQM

10-16 Quality Management: Cost of Quality

10-17 Quality Management: Cost Trade-offs in Achieving Quality

10-18 Quality Management: Six Sigma’s DMAIC Approach

10-19 Quality Management: Organizing for Six Sigma  Executive leadership  Champions  Master black belts  Process owners  Black belts  Green belts  Embedding the quality process throughout the organization

10-20 Quality Management: Impact on Competitiveness  Estimated ongoing cost savings:  Cost savings between 1 to 5 percent of revenues annually for company-wide programs  Cost savings of $300,000 to $860,000 per year per black belt  When embedded as a way of thinking in an organization can result in sustained market leadership  e.g., Toyota

10-21 Flexibility: Need for Flexibility  Organizations develop flexibility in response to variability in:  Demand  Volume  Mix  Supply  Product or service  Process  Workforce and equipment

10-22 Flexibility: Means of Handling Variability  Reduce the variability itself  Buffer against the variability with inventory  Develop flexible capabilities  Acquire flexible technology  Reduce set-up and cycle times  Cross-train the workforce  Maintain excess capacity

10-23 Flexibility: Measuring Flexibility  Range: measures the set of values the operation is able to deliver along a given dimension to determine the range of products or services it can offer  Mobility: the cost or effort to make a change within the range  Uniformity: the ability of the system to provide consistent performance across the range

10-24 Flexibility: Customization  Customization: the tailoring of product or service features for a particular group or individual  Mass customization: delivering a customized good or service while maintaining the low cost, quick delivery and high quality associated with mass production  Doing different things for different customers at or below the same cost you once did the same things for everybody

10-25 Flexibility: Approaches to Customization

10-26 Flexibility: Structuring Supply Chains for Mass Customization

10-27 Flexibility: Implementing Mass Customization Requires  Ability to understand customer needs and segment those needs into clusters around which product or services might be customized  Ability to design adaptive and/or modular products or services  Ability to translate needs into a product or service specification and track custom orders  Ability to produce or delivery against custom orders

10-28 Cross-Cutting Capabilities in Operations  Lean operations  Quality  Flexibility  Investment in the development of such capabilities can lead to sustained competitive differentiation such as that achieved by Toyota in the automotive industry