1. Operations improvement
Chapter 18
Operations improvement
Source: Courtesy of Lotus-Haed,

2. Operations improvement Operations improvement
Operations strategy
Operations process improvement makes processes better
Operations management
Total quality management organizes process improvement
Design
Improvement
Failure prevention and recovery stop processes becoming worse
Planning and control

3. 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
Resilience
Agility
Composite performance measures
Quality
Dependability
Speed
Flexibility
Cost
Generic operations performance measures
Some detailed performance measures
Defects per unit
Mean time between failures
Lateness complaints
Customer query time
Order lead time
Throughput time
Time to market
Product range
Transaction costs
Level of customer complaints
Scrap level
Labour productivity
Machine efficiency

4. Performance measures at different levels of aggregation
High strategic relevance and aggregation
High diagnostic power and frequency of measurement
Broad strategic measures
Functional strategic measures
Composite performance measures
Generic operations performance measures
Detailed performance measures

5. The measures used in the balanced scorecard
Financial performance measures
To achieve strategic impact, how should we be viewed by shareholders?
Internal process performance measures
To achieve strategic impact, what aspects of performance should business process excel at?
Customer performance measures
To achieve strategic impact, how should we be viewed by customers?
Overall strategic objectives
Learning and growth performance measures
To achieve strategic impact, how will we build capabilities over time?

6. Prioritizing process objectives
Priorities should be determined by …
The
IMPORTANCE
of each competitive objective
Your
PERFORMANCE
in each competitive objective
IMPROVEMENT PRIORITIES

7. Order-winning objectives Qualifying objectives
Competitive benefit
performance
+ve
neutral
–ve
Low
High
Achieved
Order-winning objectives
Qualifying level
+ve
neutral
–ve
Low
High
Qualifying objectives
Competitive benefit
Achieved
performance
+ve
neutral
–ve
Low
High
Less important objectives
Competitive benefit
Achieved
performance

8. 9-point importance scale
For this product or service, 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?
Qualifying objectives
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?
Less important objectives
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?

9. Temperature-controlled – overnight service
IMPORTANCE to customers
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

10. 9-point performance scale
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?
Similar processes
Customer expectations
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

11. Temperature-controlled – overnight service
PERFORMANCE against competitors
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
Estimated

12. X X EXCESS ? APPROPRIATE Lower bound of acceptability IMPROVE URGENT1
EXCESS ?
GOOD
better 2
than
APPROPRIATE X 3 4
Lower bound of acceptability
same 5 as
URGENT
ACTION
PERFORMANCE
COMPETITORS
AGAINST
IMPROVE 6 7 X 8
worse
than 9
BAD 9 8 7 6 5 4 3 2 1
less
order
qualifying
important
winning
IMPORTANCE
LOW
FOR
HIGH
CUSTOMERS

13. X PERFORMANCE COMPETITORS IMPORTANCE CUSTOMERS Delivery Volume flex.
better
than
same as
worse
less
important
qualifying
order
winning 1 2 3 4 5 6 7 8 9
IMPORTANCE
FOR
CUSTOMERS
LOW
HIGH
PERFORMANCE
AGAINST
COMPETITORS
GOOD
BAD
Volume flex. X
Drop quote
Delivery
Window quote
Servqual (Disn.)
Doc service
Price/Cost
Delivery flex.
Servqual (order take)
Enquiry Lead-time

14. Innovation Kaizen Short-term, dramatic Long-term, undramatic Effect
Large steps
Intermittent
Abrupt, volatile
Few champions
Individual ideas & effort
Scrap and rebuild
New inventions/theories
Large investment
Low effort
Technology
Profit
Long-term, undramatic
Small steps
Continuous, incremental
Gradual and consistent
Everyone
Group efforts, systematic
Protect and improve
Established know-how
Low investment
Large effort
People
Process
Effect
Pace
Timeframe
Change
Involvement
Approach
Mode
Spark
Capex
Maintenance
Focus
Evaluation

15. The plan–do–check–act (or ‘Deming’) improvement cycle, and the define–measure–analyze–improve–control (or DMAIC) ‘six sigma’ improvement cycle
Plan Do
Check
Act
Define
Measure
Analyze
Improve
Control

16. Define – identify the problem, define requirements and set the goal
The DMAIC cycle
Control – establish performance standards and deal with any problems
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

17. ‘Breakthrough’ improvement does not always deliver hoped-for improvements
Planned ‘breakthrough’ improvements
Performance
Actual improvement pattern
Time

18. Continuous improvement
Standardize and maintain
Improvement
Performance
Time

19. Continuous improvement
PDCA cycle repeated to create continuous improvement
Plan
Performance Do
Act
Check
Time

20. Combined ‘breakthrough’ and continuous improvement
Combined improvement
Combined ‘breakthrough’ and continuous improvement
Performance
Time

21. Some common techniques for process improvement
Input/output analysis
Input
Output
Flowcharts
Scatter diagrams x
Cause–effect diagrams
Pareto diagrams
‘Why-why’ analysis
Why?

22. The sandcone model of improvement
Cost
Quality + dependability + speed + flexibility + cost
Flexibility
Quality + dependability + speed + flexibility
Speed
Quality + dependability + speed
Dependability
Quality + dependability
Quality

23. Functionally based processes Customer needs fulfilled
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
End-to-end process 2
End-to-end process 3
Customer needs
Business processes
Customer needs fulfilled

24. 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.

25. 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.

26. 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.
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.

27. 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.

28. 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).

29. 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).