Final Lecture OM for IBA 2011

8/2/2019 Final Lecture OM for IBA 2011

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21.1

21.1

Agenda final plenary OM class:

Ongoing operations improvements

(Chapters 18 and 20) CSR and OM (Chapter 21) Course closure:

- Evaluation (qualitative)

-Exam tips


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21.2

21.2

Operations improvement

Operationsstrategy

Design Improvement

Planning

and control

Organizing forimprovement

Riskmanagement

stops processesbecoming worse

Operationsimprovement

makes processesbetter


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21.3

21.3

Optimization of an organization is a never-ending process.If you sit back and do the same thing tomorrow as you did

today, youll never make it.


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21.4

21.4

Short-term, dramatic Large steps

Intermittent

Abrupt, volatile Few champions Individual ideas and effort Scrap and rebuild New inventions/theories

Large investment Low effort Technology Profit

Innovation Kaizen

Innovation or breakthrough improvement versus Kaizen orcontinuous improvement

Long-term, undramatic Small steps

Continuous, incremental

Gradual and consistent Everyone Group efforts, systematic Protect and improve Established know-how

Low investment Large maintenance effort People Process


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21.5

21.5

Performance

Time

PDCA cycle repeated to create continuous improvement

Plan

Do

Check

Act

Continuous improvement cycles


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21.6

21.6

Plandocheckact (PDCA), or Deming improvement cycle,

versus definemeasureanalyzeimprovecontrol (DMAIC)six sigma improvement cycle

Define

Measure

AnalyzeImprove

Control

Plan

Do

CheckAct

Plan

Two improvement cycles


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21.7

Defineidentifyproblem, define

requirements and set

the goal

Measuregather data,refine problem andmeasure inputs and

outputs

Analyzedevelopproblem hypotheses,identify root causes

and validatehypotheses

Improvedevelopimprovementideas, test,

establish solutionand measure

results

Controlestablishperformance

standards and deal

with any problems

The DMAIC cycle


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21.8

Performan

ce

Time

Combined

breakthrough andcontinuous improvement

Combined improvement


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21.9

Four broad approaches to managing improvement

Business process reengineering (BPR) a radical approach toimprovement that attempts to redesign operations along customer-focused processes rather than on the traditional functional basis

Total quality management (TQM) puts quality and improvementat the heart of everything that is done by an operation (see

previous class)

Lean an approach that emphasizes the smooth flow of itemssynchronized to demand so as to identify waste (see Class 10)

Six Sigma a disciplined methodology of improving every product,process, and transaction

All these improvement approaches share overlapping sets ofelements


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21.10

Business process

reengineering (BPR)

Six Sigma

Lean Total quality

management

(TQM)

End-to-end

processes

Radical/breakthrough

improvement

Evidence-based

decisions

Systems and

procedures

Improvement

cycles

Perfection

is the goal

Reduce

variation

Customer

centric

Emphasis on

education

Include allpeople

Customerrelationships

Waste

identification

Synchronized

flow

Process based

analysis

Continuous

improvement

Some of the elements of improvement approaches

Emphasis on

solutions what to

do

Emphasis on

methods how to

do it

Emphasis on gradual

change

Emphasis on rapid

change


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21.11

Scatter diagrams, which attempt to identify relationships and influences

within processes;

Flow charts, which attempt to describe the nature of information flow

and decision-making within operations;

Cause

effect diagrams, which structure the brainstorming that can helpto reveal the root causes of problems;

Pareto diagrams, which attempt to sort out the important few causes

from the trivial many causes;

Whywhy analysisthat pursues a formal questioning to find root causes

of problems.

Many improvement techniques available


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21.12

Essence of common improvement techniques

Causeeffect diagrams Whywhy analysis

Why?

Why?

Why?

Flow charts Scatter diagrams

xx

x x

x xxx

x

x x

Input/output analysis

Input Output

Pareto diagrams


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21.13

Organizing for improvement

Operationsstrategy

Design Improvement

Planning

and control

Organizing forimprovement

Riskmanagement

stops processesbecoming worse

Operationsimprovement

makes processesbetter

Operationsmanagement

Operations improvement should achieve fit between market


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21.14

Level of operations performance

Levelofmarketrequirements

Operations improvement should achieve fit between marketrequirements and operations performance

Current operationsperformance

Extent of operationsresource capability change Intended operations

performance

Current marketrequirements

Extentof

market

requiremen

tschange

Intended marketrequirements

A

B

Deviation from the line of fit can expose the operation to risk


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21.15

Level of operations performance

Levelofmarketrequirements

Deviation from the line of fit can expose the operation to risk

Off the line of fit

operationsperformance notexploited in the market

Off the line of fitoperationsperformanceinadequate for marketrequirements

A

B

X Y


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21.16

Urgency, direction and priorities of improvementwill be determined partly by whether the currentperformance of an operation is judged to be good, bador indifferent.

Information for improvement

Without performance measurement, it would be

impossible to exert any control over an operation on anongoing basis.

Performance measurement is the process ofquantifying action


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21.17

Performance measures at different levels of aggregation

Overall strategic

objectives

Broad strategicmeasures

Marketstrategic

objectives

Financialstrategic

objectives

Operationsstrategic

objectives

Functional strategicmeasures

Customersatisfaction

ResilienceAgility

Composite

performancemeasures

Quality Dependability Speed Flexibility CostGeneric operationsperformancemeasures

Some detailedperformancemeasures

Defects per

unit

Mean time

betweenfailuresLatenesscomplaints

Customer

query timeOrder lead timeThroughputtime

Time to

marketProductrange

Transaction

costsLevel ofcustomercomplaints

Scrap level

Labourproductivity

Machineefficiency


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21.18

100

Different standards give different messages

Time

40

50

60

70

80

90

Performance by historical standards is GOOD.

Last years average

performance = 60%X X

XX

X

Strategic goal = 95%

Performance against strategic goal is POOR.

Competitor performance = 75%

Performance against competitors is GOOD.

Absolute performance = 100%

Absolute performance is POOR.

Actual performance = 83%X


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21.19

Internal benchmarkingis a comparison between operations or parts ofoperations which are within the same total organization

External benchmarkingis a comparison between an operation and otheroperations which are part of a different organization

Non-competitive benchmarkingis benchmarking against externalorganizations which do not compete directly in the same markets

Competitive benchmarkingis a comparison directly between competitorsin the same, or similar, markets

Performance benchmarkingis a comparison between the levels of

achieved performance in different operations

Practice benchmarkingis a comparison between an organizationsoperations practices and those adopted by another operation

Types of benchmarking


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21.20

Prioritizing improvement objectives

Priorities should be determined by

IMPROVEMENT PRIORITIES

The

IMPORTANCE

of eachcompetitiveobjective

Your

PERFORMANCE

in eachcompetitive

objective

21 21


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21.21

For this product/service does this performance objective ......

Nine-point importance scale

Order-winningobjectives

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.

Qualifyingobjectives

7. Not usually important but could become more so in future.8. Very rarely rate as being important.

9. Never come into consideration.

Lessimportantobjectives

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21.22

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-TIMEDROP 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

21 23


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21.23

21.23

For this product/service is achieved performance ........

Better thancompetitors

1. Consistently considerably better than our nearest competitor.

2. Consistently clearly better than our nearest competitor.

3. Consistently marginally better than our nearest competitor.

Nine-point performance scale

4. Often marginally better than most competitors.5. About the same as most competitors.

6. Often close to main competitors.

Same ascompetitors

7. Usually marginally worse than main competitors.

8. Usually worse than most competitors.

9. Consistently worse than most competitors.

Worse thancompetitors

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T ll d i h i


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21.24

21.24

1 2 3 4 5 6 7 8 9

PERFORMANCE against competitors

Temperature controlled overnight service

COST

SERVQUAL (DISN.)

SERVQUAL (ORDER TAKE)

ENQUIRY LEAD-TIMEDROP 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

21 25

I f i (C i d)


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21.25

21.25

Better

than

Sameas

Worsethan

Lessimportant Qualifying

Orderwinning

1

2

3

4

5

6

7

8

9

123456789

IMPORTANCEFOR

CUSTOMERSLOW HIGH

PERFORM

ANCE

AGAIN

ST

COMPETI

TORS

G

OOD

BAD

Volume flexX

Drop quoteX

Delivery X

Window

quoteX

Servqual(Disn.)

X

Doc service X

XPrice/Cost Delivery flexX

X

Servqual(Order take)

X

EnquiryLead-time

Importance performance matrix (Continued)

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Th d d l f i t


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21.26

21.26

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

21 27

D fi i CSR


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21.27

21.27

No common, universal definition

Most definition contain 5 dimensions

Environmental

Social Triple P (People, Planet, Profit) Economic

Stakeholder Voluntariness

So CSR is NOT the same as philanthropy!

Defining CSR

21.28 Voluntariness of CSR?
http://www.youtube.com/user/wwf?blend=1&ob=4


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21.28

21.28

A necessary

cost of doingbusiness

Something that

gives us adistinctive

position in themarket

Meaningless if it

includes what wewould doanyway

A waste of

money

20

0

60

40

Voluntariness of CSR?

(Data from Economist Intelligence Unit, Jan 2008)

Corporate responsibility is

21.29

Corporate social responsibility


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21.29

21.29

Threeyearsago

HighVeryhigh

Moderate LowVerylow

Dont

know

Today HighVeryhigh

Moderate Low

Three

yearshence

Verylow

Dont

know

HighVeryhigh Moderate

Low

How executives view the importance (degree of priority) of corporateresponsibility

Corporate social responsibility

21.30 Five dimensions of CSR for operations managers


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21.30

Operationsstrategy decisions

Designdecisions

Improvementdecisions

Planning andcontrol decisions

Stakeholder dimension

Social dimension

Environmental(sustainability)

dimension

Voluntarinessdimension

Economic dimension

Analyzing

operationsdecisions

Five dimensions of CSR for operations managers

21.31 Examples of links between CSR and OM


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21.31

Product/service design customer safety, recyclability of

materials, energy consumption

Network design employment implications and environmentalimpact of location

Layout of facilities staff safety, disabled customer access

Process technology staff safety, waste and productdisposal, noise pollution, fumes and emissions

Job design workplace stress, unsocial working hours

Capacity planning and control employment policies

Inventory planning and control waste reduction

Examples of links between CSR and OM

21.32 Some environmental considerations in OM


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21.32

Product/service design Recyclability of materials, energy consumption,

waste material generation

Network design Environmental impact of location, development ofsuppliers in environmental practice, reducing transport-related energy

Layout of facilities Energy efficiency

Process technology Waste and product disposal, noise pollution, fumeand emission pollution, energy efficiency

Job design Transportation of staff to/from work, development inenvironmental education

Planning and control (including MRP, JIT and project planning and control)

material utilization and wastage, environmental impact of projectmanagement, transport pollution of frequent JIT supply.

Some environmental considerations in OM

Failure prevention and recovery Environmental impact of processfailures, recovery to minimize impact of failures.

21.33 Linking CSR & risk management


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21.33

Breach ofethical

practice

Negativeconsequence of

breach of ethicalpractice

Assess the potential causes of, and risks from, any breach of ethical

practice

Linking CSR & risk management

Prevent breachesof ethical practice

occurring

Mitigate the effectsof any breach ofethical practice

Recover from theeffects of any breach

of ethical practice

21.34

Do ethical and financial performance trade off? (Continued)


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21.34

Do ethical and financial performance trade-off? (Continued)

Ethical performance

Financialperform

ance

Simultaneously improving both ethical and financial performance , partlybecause extreme positions on either are becoming less acceptable

Societal pressure +reputational riskdefining minimumethical standards

Shareholderexpectations

defining minimumfinancial standards

21.35 Food for Thought: Ecological footprints


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21.35

To supply the average persons basic needs in the UnitedStates, it takes 12.2 acres of land. In the Netherlands it

takes 8 acres, and in India it takes 1 acre. Calculated this

way, the Dutch ecological footprint covers 15 times the

area of the Netherlands. Indias ecological footprint is 1.35

of its area. Most dramatically, if the entire world lived

like North Americans, it would take three planet earths

to support the present world population.

Food for Thought: Ecological footprints

21.36 CSR in practice


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21.36

Corporate Social Responsibility is listening and responding to the needs

of a company's stakeholders. This includes the requirements of sustainable

development. We believe that building good relationships with employees,

suppliers and wider society is the best guarantee of long-term success. This

is the backbone of our approach to CSR. (Marks and Spencer's, Retailer)

[Our vision is to] enable the profitable and responsible growth of our

airports. One of our six strategies to achieve that purpose is to earn the trust

of our stakeholders. Corporate responsibility is about how we manage oursocial and environmental impacts as part of our day to day business, in

order to earn that trust. (BAA, Airport operator)

CSR in practice

21.37


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21.37

37DSM Vision 2010: Retain top ranking in sustainability

DSMfor the 5th consecutive year

among theGlobal Sector Leaders

In Chemicals

External recognition CSR performance

21.38 CSRs dark side: Reputation damage
http://www.sustainability-index.com/default.html


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CSR s dark side: Reputation damage
http://www.youtube.com/watch?v=XavZc6X--tA

Final Lecture OM for IBA 2011

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