OPERATION MANAGEMENT WHAT ARE THE KEY ELEMENTS OF

OPERATIONS IMPROVEMENTS?
LESSON 7
 improvement cycles;
OPERATION IMPROVEMENT  a process perspective;
 end-to-end processes;
WHY IS IMPROVEMENT SO IMPORTANT  radical change;
IN OPERATIONS MANAGEMENTS?  evidence-based problem-solving;
 customer centricity;
 Improvement is now seen as the prime
 systems and procedures;
responsibility of operations management.  reduce process variation;
 Operations managers are judged not  synchronized flow;
only on how they meet their ongoing  emphasize education/training;
responsibilities of producing products  perfection is the goal;
and services to acceptable levels of  waste identification;
quality, speed, dependability, flexibility,  include everybody;
and cost, but also on how they  develop internal customer-supplier
improve the performance of the relationships
operations function overall.
IMPROVEMENT CYCLE
WHY THE FOCUS ON IMPROVEMENT?
An important element within some
There is a perceived increase in the improvement approaches is the use of a
intensity of competitive pressures (or literally never ending process of repeatedly
‘value for money’ in not-for-profit or questioning and re-questioning the detailed
public sector operations). working of a process or activity. This repeated
and cyclical questioning is usually summarized
 There is a perception of increased by the idea of the improvement cycle, of which
competitive pressure, and certainly, the there are many, but two are widely used models
owners of operations (shareholders or —-
governments) are less likely to tolerate
poor returns or value for money.  PDCA cycle (sometimes called the
Deming Cycle, named after the famous
The nature of world trade Is changing. quality ‘guru’, W.E. Deming)
 Economies such as China, India and  DMAIC (pronounced De-Make) cycle,
Brazil are emerging as both producers made popular by the Six Sigma
and consumers of products and services. approach.
New technology has both introduced PDCA cycle
opportunities to improve operations
practice and disrupt existing markets. P(for plan) stage.
 the music business have had to adapt  Involves an examination of the
their working practices to downloading current method or the problem area
and music streaming. being studied.
 This involves collecting and analysing
The interest in operations improvement data so as to formulate a plan of action
has resulted in the development of many which is intended to improve
new ideas and approaches to improving performance.
operations which have, in turn, focused
attention on improvement. D (for do) stage.
 The more ways there are to improve  « This is the implementation stage
operations, the more operations will be during which the plan is tried out in the
improved. operation.
  This stage may itself involve a mini- (C) Controlled.
PDCA cycle as the problems of
implementation are resolved. To check that the improved level of
performance is sustained.
C (for check) stage.  « After this point the cycle starts again
 « where the new implemented solution is and defines the problems which are
evaluated to see whether it has preventing further improvement.
resulted in the expected performance
improvement. A PROCESS PERSPECTIVE

A (for act) stage. This has two major advantages.

 « During this stage the change is
consolidated or standardized if it  ' First, it means that improvement can
has been successful. be focused on what actually
 « Alternatively, if the change has not happens rather than which part of the
been successful, the lessons learned organization has responsibility for what
from the ‘trial’ are formalized before the happens.
cycle starts again.
 ' Second, all parts of the business
The DMAIC cycle manage processes. This is what we call
operations as activity rather than
(D) Defining the problem or problems, operations as a function.

 « partly to understand the scope of So, if improvement is described in terms of how

what needs to be done and partly to processes can be made more effective, it will
define exactly the requirements of have relevance for all the other functions of the
the process improvement. business in addition to the operations function.

 « (Often at this stage a formal goal or END-TO-END PROCESSES

target for the improvement is set.
 « An end-to-end process (also known as
(M) Measurement stage. an “e2e process”) is a complete series of
activities and tasks that are necessary
 « This stage involves validating the to produce a finished product or service.
problem to make sure that it really is a
problem worth solving, using data to  It involves every step from the
refine the problem and measuring beginning of the development process all
exactly what is happening. the way to the delivery of the final
product or service.
(A) Analysed.

 The analysis stage is sometimes seen  Some improvement approaches take the
as an opportunity to develop hypotheses process perspective further and
as to what the root causes of the prescribe exactly how processes
problem really are. should be organized.

 « Such hypotheses are validated (or not)  « One of the more radical prescriptions
by the analysis and the main root causes of Business Process Re- engineering
of the problem identified. (BPR), for example, is the idea that
operations should be organized
(I) Improving the process. around the total process which adds
value for customers, rather than the
Ideas are developed TO remove the root functions or activities which perform the
causes of problems, solutions are tested and various stages of the value-adding
those solutions that seem to work are activity.
implemented, formalized and results measured.
 EVIDENCE-BASED PROBLEM- It deals with organization, responsibilities,
SOLVING; procedures and processes. Put simply [it] is
good management practice.
 Six Sigma in particular promotes
systematic use of (preferably REDUCE PROCESS VARIATION;
quantitative) evidence.
 Processes change over time, as does
 Six Sigma consultants is devoted to their performance.
mastering quantitative analytical
techniques  « Some aspect of process performance
(usually an important one) is measured
 Underlying the use of these techniques periodically (either as a single
is an emphasis on the scientific method, measurement or as a small sample of
responding only to hard evidence, and measurements).
using statistical software to facilitate
analysis.  « So a potentially useful method of
identifying improvement opportunities
is to try and identify the sources of
CUSTOMER CENTRICITY random variation in process
performance.
 Customers are seen not as being
external to the organization, but as the  « Statistical process control is one way of
most important part of it. doing this.

 However, the idea of being customer

centric does not mean that customers SYNCHRONIZED FLOW;
must be provided with everything that
they want.  « Synchronized flow means that items in
a process, operation or supply network
 Although ‘What's good for customers’ flow smoothly and with even velocity
may frequently be the same as ‘What's from start to finish.
good for the business’, it is not always.
 « Once a state of perfect synchronization
 Operations managers are always having
to strike a balance between what of flow has been achieved, it becomes
customers would like and what the easier to expose any irregularities of
operation can afford (or wants) to flow which may be the symptoms of
do. more deep-rooted underlying problems.

EMPHASIZE
SYSTEMS AND PROCEDURES; EDUCATION/TRAINING;
An improvement system (sometimes called a
‘quality system’) is defined as: ‘the  Training and organization of
organizational structure, responsibilities, improvement should be central to
procedures, processes and resources for improvement.
implementing quality management.
 Not only should the techniques of
It should define and cover all facets of an improvement be fully understood by
organization's operation, from identifying and everyone engaged in the improvement
meeting the needs and requirements of process, the business and
customers, design, planning, purchasing, organizational context of
manufacturing, packaging, storage, delivery improvement should also be
and service, together with all relevant activities understood.
carried out within these functions.
 education and training has an important
part to play in motivating all staff
 towards seeing improvement as a  Even with improvement specialists used
worthwhile activity. to lead improvement efforts, the staff
who actually operate the process can
still be used as a valuable source of
PERFECTION IS THE GOAL; information and improvement ideas.

 An ‘absolute target’ literally means DEVELOP INTERNAL CUSTOMER-

the theoretical level of perfection — for SUPPLIER RELATIONSHIPS.
example, zero errors, instant delivery,
delivery absolutely when promised,  One of the best ways to ensure that
infinite flexibility, zero waste, etc. Of external customers are satisfied is to
course, in reality such perfection may establish the idea that every part of the
never be achievable. organization contributes to external
customer satisfaction by satisfying its
 « What is important is that current own internal customers.
performance can be calibrated
against this target of perfection in  It means stressing that each process in
order to Indicate how much more an operation has a responsibility to
improvement is possible. manage these internal customer
supplier relationships.
WASTE IDENTIFICATION;
 They do this primarily by defining as
 « All improvement approaches aspire to clearly as possible what their own and
eliminate waste. their customers’ requirements are.

 in fact, any improvement implies that  In effect this means defining what
some waste has been eliminated, where constitutes ‘error-free’ service — the
waste is any activity that does not add quality, speed, dependability and
value. flexibility required by internal
customers.
 « But the identification and elimination
of waste is sometimes a central feature.
WHAT ARE THE BROAD APPROACHES
TO MANAGING IMPROVEMENT?
INCLUDE EVERYBODY;
1. Total quality management (TQM),
 The contribution of all individuals in the 2. Lean
organization may go beyond 3. Business process re-engineering
understanding their contribution to ‘not (BPR)
make mistakes’. 4. Six Sigma

 Individuals are expected to bring

something positive to improving the way 1. TOTAL QUALITY MANAGEMENT
they perform their jobs. (TQM),

 The principles of ‘empowerment’ are  This philosophy, above everything,

frequently cited as supporting this stresses the ‘total’ of TQM.
aspect of improvement.
 « It is an approach that puts quality
 Some authorities believe that a small (and indeed improvement generally) at
number of infernal improvement the heart of everything that is done by
consultants or specialists offer a better an operation.
method of organizing improvement.
As a reminder, this totality can be
 However, these two ideas are not summarized by the way TQM lays
incompatible. particular stress on the following elements:
  meeting the needs and expectations of o reduce variation;
customers; o include all people;
 improvement covers all parts of the o waste elimination
organization (and should begroup-based);
 « improvement includes every person in 3. Business process re-engineering (BPR)
the organization (and success is
recognized);  The idea of business process re-
engineering originated in the early
 including all costs of quality;
1990s when Michael Hammer proposed
 « getting things ‘right first time’, I.e. that, rather than using technology to
designing-in quality rather than automate work, it would be better
inspecting it in; applied to doing away with the need
 « developing the systems and procedures for the work in the first place (‘don’t
which support improvement. automate, obliterate’).

 In doing this he was warning against

2. LEAN AS AN IMPROVEMENT
establishing non-value-added work
APPROACH
within an information technology
system where it would be even more
 « The idea of ‘lean’ spread beyond its difficult to identify and eliminate.
Japanese roots and became fashionable
in the West at about the same time as All work, he said, should be examined for
TQM.
whether it adds value for the customer and if
not processes should be redesigned to eliminate
 « But, unlike TQM, it was seen initially it.
as an approach to be used exclusively in
manufacturing. Now, lean has become BPR, unlike those two earlier approaches,
fashionable as an approach that can be advocated radical changes rather than
applied in service operations. incremental changes to processes.
 The lean approach aims to meet demand BPR has been defined as: ‘the fundamental
instantaneously, with perfect quality rethinking and radical redesign of business
and no waste. processes to achieve dramatic improvements in
critical, contemporary measures of performance,
 lean approach as consisting almost such as cost, quality, service and speed’.
exclusively of waste elimination.
The main principles of BPR can be summarized
 What they fail to realize is that effective in the following points:
waste elimination is best achieved
through changes in behaviour. o Rethink business processes in a cross-
functional manner which organizes work
 It is the behavioural change brought around the natural flow of information
about through synchronized flow and (or materials or customers).
customer triggering that provides the
o Strive for dramatic improvements in
window onto exposing and eliminating
performance by radically rethinking and
waste.
redesigning the process.

The key elements of the lean when used as an o Have those who use the output from a
improvement approach are as follows: process perform the process. Check to
see if all internal customers can be their
o customer-centricity; own supplier rather than depending on
o internal customer—supplier another function in the business to
supply them (which takes longer and
relationships;
separates out the stages in the process).
o perfection is the goal;
o synchronized flow;
 o Put decision points where the work is initially but eventually could cause
performed. Do not separate those who do failure in the field. The only way to
the work from those who control and eliminate these defects was to make
manage the work. sure that design specifications were
tight (i.e. narrow tolerances) and its
processes very capable.

 The Greek letter sigma ¢ is often used to

indicate the standard deviation of a
process, hence the Six Sigma label.

 « General Electric (GE), who were

probably the best known of the early
adopters of Six Sigma, defined it as ‘A
disciplined methodology of defining,
measuring, analysing, improving,
and controlling the quality in every
one of th company’s products,
processes, and transactions — with
the ultimate goal of virtually
eliminating all defects.’

The Six Sigma approach uses a number of

related measures to assess the performance of
operations processes.

 A defect is a failure to meet customer

required performance (defining
performance measures from a
customer's perspective is an important
part of the Six Sigma approach).

 A defect unit or item is any unit of

output that contains a defect (i.e. only
4. SIX SIGMA
units of output with no defects are not
defective; defective units will have one
 The Six Sigma approach was first or more than one defects).
popularized by Motorola, the electronics
and communications systems company.
 A defect opportunity is the number of
When it set its quality objective as ‘total
different ways a unit of output can fail
customer satisfaction’ in the 1980s, it
to meet customer requirements (simple
started to explore what the slogan would
products or services will have few defect
mean to its operations processes. They
opportunities, but very complex
decided that true customer
products or services may have hundreds
satisfaction would only be achieved
of different ways of being defective).
when its products were delivered
when promised, with no defects,
 Proportion defective is the
with no early-life failures, and when
percentage or fraction of units that have
the product did not fail excessively
one or more defect.
in service.
 Process yield is the percentage or
 To achieve this, Motorola initially
fraction of total units produced by a
focused on removing manufacturing
process that are defect free (i.e. 1 -
defects. However, it soon came to realize
proportion defective).
that many problems were caused by
latent defects, hidden within the design
 Defect per unit (DPU) is the average
of its products. These may not show
number of defects on a unit of output
 (the number of defects divided by the
number of items produced).

 Defects per opportunity is the

proportion or percentage of defects
divided by the total number of defect
opportunities (the number of defects
divided by (the number items produced *
the number of opportunities per item)).

 Defects per million opportunities

(DPMO) is exactly what it says, the
number of defects which the process will
produce if there were one million
opportunities to do so.

 The Sigma measurement is derived

from the DPMO and is the number of
standard deviations of the process
variability that will fit within the
customer specification limits.

 Many of the techniques could be

considered improvement techniques, for
example statistical process control (SPC).

 Techniques often seen as

‘improvement techniques’ include:

 scatter diagrams,

 flow charts,

 cause-effect diagrams,

 Pareto diagrams, and

 why—-why analysis.