6 Operations Improvement

Nigel Slack, Stuart Chambers & Robert Johnston, 2004 Operations Management, 4E: Chapter 18
18.1
Operations Improvement
Chapter coverage:
Measuring and Improving Performance
Improvement Priorities
Approaches to improvement
Techniques for process improvement
18.2
Measuring and Improving Performance
1) Performance measurement
Performance: the degree to which the operations
fulfils performance objectives at any point in time, in
order to satisfy customers.
Performance objectives: quality, speed,
dependability, flexibility and cost
Can represented on a Polar diagram.
18.3
Market requirements and operations performance change over time
Polar diagram - How operations can measure their performance
Cost
Dependability
Flexibility
Quality
Speed
Cost
Dependability
Flexibility
Quality
Speed
Performance of the operation Requirements of the market
18.4
2) Performance standards
After an operation has measured its performance, it
needs to make a judgement as to whether its
performance is good, bad or indifferent.
Four ways of comparing current performance to
some kind of performance standard:
1. Historical Standard
2. Target performance standard
3. Competitor performance standards
4. Absolute performance standards
18.5
1. Historical standards
Comparison against previous performance
Judges if operation is getting better or not over
time.
No indication if performance is satisfactory
2. Target performance standards
Target set randomly to reflect some level of
performance.
Must be appropriate and reasonable
Example: Budget (quarterly review)
18.6
3. Competitor performance standards
Comparison against one or more of the
organizations competitors.
Relates performance directly to its competitive
ability
Good for strategic performance improvement
4. Absolute performance standards
Target is a theoretical limit.
Example: zero defects, or zero LTI
18.7 Measuring and Improving Performance
3) Benchmarking
Compares operation with those of other companies.
Process of learning from others
Widely adopted because:
a) The problems faced in managing their processes
are most likely similar to other operations
managers elsewhere.
b) There is probably another operation somewhere
that has developed a better way of doing things
Some objectives:
To judge how well an operation is doing
To set realistic performance standards.
To search for new idea and practices which can be
adopted
Examples of benchmarking include:
A dishwasher manufacturer comparing the energy
efficiency of its own products against its
competitors
An online retailer of computer accessories
comparing the way it organizes its warehouse and
delivery with an online retailer of books and DVDs
A hotel chain comparing the room cleaning times
in all its hotels
A chemical company comparing its transportation
and distribution practices with a specialist logistics
company.
Types of benchmarking (not mutually exclusive):
Internal benchmarking comparison made within
the same organization.
Example: a large motor vehicle manufacturer with
several factories might choose to benchmark each factory
against the others.
External benchmarking comparison between an
operation and other operations which are not part of
same organization.
Non-competitive benchmarking comparison
against external organizations which do not compete
directly in the same markets.
Competitive benchmarking comparison between
competitors.
Performance benchmarking comparison
between the levels of achieved performance in
different operations.
Practice benchmarking comparison of the way of
doing things.
Example: comparison of SOP for controlling stock levels
by other department stores.
18.12
Improvement Priorities
Major influences on deciding improvement priorities:
The needs and preference of customers
The performance and activities of competitors

1. Judging importance to customers
2. Judging performance against competitors
3. The importance-performance matrix
18.13
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
7 - Not usually important but could become more so in future
8 - Very rarely rate as being important
9 - Never come into consideration
Judging importance to customers
For this product group does this performance objective
......
ORDER
WINNING
OBJECTIVES
QUALIFYING
OBJECTIVES
LESS
IMPORTANT
OBJECTIVES
9 Point Importance Scale
1 - Provide a crucial advantage with customers
18.14
1 - Consistently considerably better than our nearest competitor
4 - Often marginally better than most competitors
Judging performance against competitors
For this product group is achieved performance ........
2 - Consistently clearly better than our nearest competitor
3 - Consistently marginally better than our nearest competitor
5 - About the same as most competitors
6 - Often close to main competitors
7 - Usually marginally worse than main competitors
8 - Usually worse than most competitors
9 - Consistently worse than most competitors
BETTER
THAN
COMPETITORS
SAME
AS
COMPETITORS
WORSE
THAN
COMPETITORS
9 Point Performance Scale
18.15
better
than
same
as
worse
than
less
important
qualifying
order
winning
1
2
3
4
5
6
7
8
9
1
2 3 4 5
6
7 8 9
IMPORTANCE
FOR
CUSTOMERS
LOW HIGH
P
E
R
F
O
R
M
A
N
C
E

A
G
A
I
N
S
T

C
O
M
P
E
T
I
T
O
R
S

G
O
O
D

B
A
D

URGENT
ACTION
IMPROVE
APPROPRIATE
EXCESS ?
18.16
Approaches to improvement
1.Breakthrough improvement
Innovation based improvement
Example: introduction of a new, more efficient machine
in a factory
2.Continuous improvement - Kaizen
Smaller incremental improvement steps
Example: modifying the way a component is fixed to an
equipment to reduce change over time.
Rate of improvement is not important but the momentum
is.
18.17
(a) Breakthrough improvement, (b) continuous
improvement and (c) combined improvement patterns
P
e
r
f
o
r
m
a
n
c
e

Time
P
e
r
f
o
r
m
a
n
c
e

Time
P
e
r
f
o
r
m
a
n
c
e

Time
Planned
breakthrough
improvements
Actual improvement
pattern
Continuous
improvement
Combined
breakthrough and
continuous
improvement
(a) (b)
(c)
18.18
3.The difference between breakthrough and continuous
improvement
Long-term, undramatic
Small steps
Continuous, incremental
Gradual and consistent
Everyone
Group efforts
Conventional know-how
Spread

Little investment
People
Process
Innovation... ...Kaizen
Short-term, dramatic
Big steps
Intermittent
Abrupt, volatile
Few champions
Individual ideas & effort
New inventions/theories
Concentrated all eggs in 1
basket
Large investment
Technology
Results for profit
Effect
Pace
Timeframe
Change
Involvement
Approach
Stimulus
Risks

Practical req.
Effort orientation
Evaluation criteria
18.19
4. Improvement cycle models
Improvement can be represented by a never-ending
process of repeatedly questioning and re-questioning the
detailed working of a process activity
This repeated and cyclical nature of continuous
improvement is usually summarized by improvement
cycles
Examples of improvement cycles:
PDCA cycle
DMAIC cycle
18.20
Define
Measure
Analyze Improve
Plan Do
Check Act
(a) The plan-do-check-act
(b) The define-measure-analyze-improve-control
Control
(a) (b)
Plan
18.21
PDCA Cycle repeated to create
continuous improvement
Time
P
e
r
f
o
r
m
a
n
c
e

Continuous
improvement
Plan
Do
Check
Act
18.22
Input/output analysis Flow charts Scatter diagrams
Cause-effect diagrams Pareto diagrams Why-why analysis
Input Out put
x
x
x x
x x x
x
x
x x
Why?
Why?
Why?
The common techniques for process
improvement
18.23
Cause-and-effect diagram
Also called Fishbone diagram or Ishikawa diagram.
Used to identify root cause of a problem or potential
solution for an objective.
Encourages team work.
Cause Cause
Cause Cause
Cause
Effect
18.24
Construct a cause-and-effect diagram to identify
the causes of poor gas mileage of your car.

Step 1:
Identify the effect
Can be positive (objective) or negative (problem)
18.25
Step 2:
Fill in the effect box and draw the spine
Step 3:
Identify main categories
Man Machinery
Method Materials
Environment
POOR GAS
MILEAGE
18.26
Step 4:
Identify causes influencing the effect

Man Machinery
Method Materials
Environment
POOR GAS
MILEAGE
Wrong octane
gas
Use wrong
gear
18.27
Step 5:
Add detailed level
Man Machinery
Method Materials
Environment
POOR GAS
MILEAGE
Wrong octane
gas
Use wrong
gear
Dont know
recommended
octane
No owners
manual
Cant hear
engine
Poor hearing
Radio too loud
18.28
Man Machinery
Method Materials
Environment
POOR GAS
MILEAGE
Wrong octane
gas
Use wrong
gear
Dont know
recommended
octane
No owners
manual
Cant hear
engine
Poor hearing
Radio too loud
18.29
Step 6:
Analyse the diagram
Select which cause to take action on.

18.30

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Nigel Slack, Stuart Chambers & Robert Johnston, 2004 Operations Management, 4E: Chapter 18

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