Business Systems - Operations Management

1

Business Systems - Operations Management

Session 2 – Planning & Control, Operations Improvement

1

Business Systems Business Systems --Operations ManagementOperations Management

Facilitator:Facilitator:Dr. Jonathan FarrellDr. Jonathan Farrell


2

This EveningThis Evening’’s Programs Program

•• LittleLittle’’s Law s Law –– Some more examplesSome more examples•• The Nature of Planning & ControlThe Nature of Planning & Control•• Operations ImprovementOperations Improvement•• Case Study Case Study –– Geneva Construction & Risk (pp609Geneva Construction & Risk (pp609--

612)612)

2



3

Operations resources Customer requirements

DemandSupplyDelivery of products

and services

The operation The market

Planning and ControlPlanning and Control

Required time, quantity and quality of products

and services

4

What is planning and control?What is planning and control?

Supply of products and

services

Planning and control

Demand for products and

services

The operation’s resources

The activities which reconcile

supply and demand

The operation’s customers

3



5

Planning is deciding

Control is

what activities should take place in the operation

when they should take place

what resources should be allocated to them

understanding what is actually happening in the the operation

deciding whether there is a significant deviation from what should be happening

(if there is deviation) changing resources in order to affect the operation’s activities

6

Significance of planning or controlSignificance of planning or control

Time Time horizonhorizon

Hours / days

Days /weeks /months

Months / years

MediumMedium--term Planning and Controlterm Planning and ControlUses partially disaggregated demand forecasts

Determines resources and contingencies

Objectives set in both financial and operations terms

LongLong--term Planning and Controlterm Planning and ControlUses aggregated demand forecasts

Determines resources in aggregated form

Objectives set in largely financial terms

ShortShort--term Planning and Controlterm Planning and ControlUses totally disaggregated forecasts or actual demand

Makes interventions to resources to correct deviations from plans

Ad hoc consideration of operations objectives

PLANNING

CONTROL

4



7

Planning and control needs….

Information on Demand levels

Information on Resources

8

Objectives of Operations Planning and Objectives of Operations Planning and ControlControl

Quality ?

Speed ?

Dependability ?

Flexibility ?

Cost ?

5



9

QualityQuality

# of defects per unit

# and level of customer complaints

Warranty claims

Mean time between failure (MTBF)

10

SpeedSpeedFast throughput

Responsive service to customers

Low work-in-progress

Low overheads

Exposed problems

6



11

DependabilityDependabilityThings happen when they should

More stability

More quality ‘potential’

Less wasted time/effort

Facilitates improvement

12

FlexibilityFlexibility

Time needed to develop new products / services

Range of products & services

Average batch size

Time to change schedules

7



13

CostCost

Minimum delivery time / average delivery time

Utilisation of resources

Labour productivity

Cost of inspections (Quality Control)

14

The nature of supply and demandThe nature of supply and demand

Purchase Make Deliver

DP



DP

Make to stock

Make to order

Resourceto order

PD

P = total throughput time D = Demand timeP = total throughput time D = Demand time

8



15

ASSEMBLE TO ORDER

Purchase

OperationOperation

Make Assemble Deliver

DP

Order

16

Resource to order

Make to order

Make to stock

Dependent demand

Independent demand

Each product or service large compared with total capacity of the operation

Each product or service small compared with total capacity of the operation

9



17

Pull and push philosophies of Pull and push philosophies of planning and controlplanning and control

CENTRAL OPS. PLANNING AND CONTROL SYSTEM

Work centre

DEMANDWork centre

Work centre

Work centre

Instruction on what to make and where to

send it

FORECASTOR

PUSH CONTROLPUSH CONTROL

18

Work centre

Work centre

Work centre

Work centre DEMAND

Request Request Request Request

Delivery Delivery Delivery Delivery

Pull and push philosophies of Pull and push philosophies of planning and controlplanning and control

PULL CONTROLPULL CONTROL

10



19

Dependent and independent demandDependent and independent demand

Dependent demande.g. input tyre store in car plant

Demand for tyres is governed by the number of cars planned

to be made

Demand for tyres is largely governed by

random factors

ACE TYRES

Independent demande.g. tyre fitting service

20

Quality lossesSlow running

equipmentEquipment

“idling” “Breakdown”failure

Set-up and changeovers

Not worked (unplanned)

Valuable operating time

Maximum available time

Not worked (planned)

11



21

Approaches to operations planning Approaches to operations planning and controland control

The big picture plan and control all the operation’s resources together

Local decision rules set decision rules for each part of the operation to take its own decisions

22

SchedulingLoading

Sequencing Monitoring and control

When to do things?

In what order to do

things?

How much to do?

Are activities going to

plan?

The activities of planning and controlThe activities of planning and control

12



23

0

20

40

60

80

100

120

140

1 2 3 4 5 6

Load in std. hours

Capacity

0

20

40

60

80

100

120

140

1 2 3 4 5 6

Load in std. hours

Capacity

Work centres Work centres

Finite and Infinite loadingFinite and Infinite loading

Finite LoadingFinite Loading Infinite LoadingInfinite Loading

e.g. # of passengers on a planee.g. # of passengers on a plane e.g. # of patients arriving at e.g. # of patients arriving at Emergency departmentEmergency department

24

E.g. Sequencing

• Various sequencing rules are used in operations:

- customer priority;

- due date;

- LIFO - last in, first out;

- FIFO - first in, first out;

longest operation time first;

- shortest operation time first.

Local decision rulesLocal decision rules……..

-

13



25

Transformation

Intervention

Plans

Compare / replan

Monitor

Input Output

The control feedback loopThe control feedback loop

26

Activity A Activity B Activity C Activity D Activity E

Buffer of inventory

Bottleneck drum sets the beat

Communication rope controls prior activities

The drum, buffer, rope, conceptThe drum, buffer, rope, concept

14



27

VolumeVolume--Variety influences on planning Variety influences on planning and controland control

Volume Planning horizon

Low

High

Variety

High

Low

Main planning decision

Control decision Robustness

Short

Long

Timing

Volume

Detailed

Aggregated

High

Low

28

Making processes

better

Preventing processes

becoming worse

Managing operations process improvement Total quality

management Failure prevention and

recovery

Operations process

improvement

Operations Improvement Operations Improvement

-- A ModelA Model

15



29

HowHow operations can measure their performanceoperations can measure their performance

Cost

Dependability

FlexibilitySpeed

Quality Cost

Dependability

FlexibilitySpeed

Quality

Market requirements and operations performance change over time

Operational performance Market requirements

30

100

90

80

70

60

50

Absolute performance = 100%

Customer expectation = 98%

Target performance = 95%

Competitor performance = 81%

Now

Per

cent

age

of d

eliv

erie

s on

-tim

e

Performance against customer expectations is POORHistorical performance is GOODPerformance against target is POORPerformance against competitors is GOODAbsolute performance is POOR

Delivery performance is 87% Delivery performance is 87% --Is this good, bad, or indifferent ?Is this good, bad, or indifferent ?

XX

XX

XX

16



31

Innovation... Innovation... vsvs ...Kaizen...KaizenShort-term, dramaticLarge steps Intermittent Abrupt, volatile Few championsIndividual ideas & effort Scrap and rebuild New inventions/theories Large investment Low effort Technology Profit

Short-term, dramaticLarge steps Intermittent Abrupt, volatile Few championsIndividual ideas & effort Scrap and rebuild New inventions/theories Large investment Low effort Technology Profit

Effect Pace

TimeframeChange

Involvement Approach

Mode Spark Capex

Maintenance Focus

Evaluation

Long-term, undramaticSmall steps Continuous, incrementalGradual and consistentEveryone Group efforts, systematicProtect and improveEstablished know-howLow investment Large maintenance effortPeople Process

Long-term, undramaticSmall steps Continuous, incrementalGradual and consistentEveryone Group efforts, systematicProtect and improveEstablished know-howLow investment Large maintenance effortPeople Process

32

Intended performance improvement with Intended performance improvement with breakthrough improvementbreakthrough improvement

Time

Per

form

ance

Breakthroughimprovements

17



33

Actual performance improvement with Actual performance improvement with breakthrough improvementbreakthrough improvement

Time

Per

form

ance

Actual improvement

34

PPerformanceerformance improvement with continuous improvement with continuous improvementimprovement

Time

Per

form

ance

“Continuous”improvement

Standardise and maintain

Improvement

18



35

Define

Measure

AnalyzeImprove

Plan Do

CheckAct

(a) The plan-do-check-act, or “Deming” improvement cycle, and

(b) The define-measure-analyze-improve-control, or DMAIC six sigma improvement cycle

Control

(a) (b)

Plan

36

Define-identify problem, define

requirements and set the goal

Measure-gather data, refine problem and measure inputs and

outputs

Analyse-develop problem hypotheses, identify “root

causes” and validate hypotheses

Improve-develop improvement ideas,

test, establish solution and

measure results

Control-establish performance

standards and deal with any problems

19



37

PDCA Cycle repeated to createPDCA Cycle repeated to createcontinuous improvementcontinuous improvement

Time

Per

form

ance

“Continuous”improvement

Plan

Do

Check

Act

38

Continuous and breakthrough improvementContinuous and breakthrough improvement

Time

Continuous improvement

Breakthroughimprovement

Cum

ulat

ive

impr

ovem

ent

20



39

(a)“Breakthrough” improvement, (b) “continuous”improvement and (c) combined improvement patterns

Perf

orm

ance

Time

Perf

orm

ance

Time

Perf

orm

ance

Time

Planned “breakthrough”improvements

Actual improvement

pattern

Continuous improvement

Combined “breakthrough”and continuous

improvement

(a) (b)

(c)

40

SHITSUKE5.Discipline

Follow agreed procedures

SEIKETSU4.Personal cleanlinessStart with your own person

SEISO3.Keep the workplace clean

SEITON2.Put things in orderTools and parts in the

right place

The FiveThe Five--Step Kaizen Step Kaizen MovementMovement

SEIRI1.Straighten up

WIP, Unnecessary toolsUnused machineryDefective products

Paperwork and Documents

21



41

A four-step approach to problem solving

Observe the test results(CHECK)

Act on the opportunity(ACTION)

Recognise the opportunity(PLAN)

Test the theory to achieve the opportunity

(DO)

The Deming (Shewart) Cycle

42

Breakthrough Improvement (BPR)Breakthrough Improvement (BPR)

• Capture information only once – at the source• Put decision point where the work is performed• Treat geographically dispersed resources as though

they were centralised• Link parallel activities instead of integrating their results

Principles of BPRPrinciples of BPR

22



43

Characteristics of Successful BPRCharacteristics of Successful BPR

•• Aggressive performance targetsAggressive performance targets

•• Commitment of senior managementCommitment of senior management

•• Audits of customers, benchmarking of best practiceAudits of customers, benchmarking of best practice

•• Dedicated executive resourcesDedicated executive resources

•• A comprehensive pilot to test the reA comprehensive pilot to test the re--engineered processengineered process

44

Candidates for BPRCandidates for BPR

• Organisation Structures more than 5 Years Old.• Information Systems that are “Record Keepers”• “Island” Departments e.g. Purchasing, Accounts

Payable• Organisations with Multiple Areas of Data

Collection/Information Gathering • Any Process where the Control is Separate from the

Activity

23



45

BPR BPR -- The ProblemsThe Problems

Up to 70% of BPR Exercises fail due to:• Lack of Commitment• Holding on to “Sacred Cows”• Not Delegating Responsibility and Authority • Using BPR in Isolated Areas of the Organisation• Lack of Clear Goals and Objectives• Ineffective Use of Information Technology

46

Common techniques for process improvementCommon techniques for process improvement

Input/output analysis Flow charts Scatter diagrams

Cause-effect diagrams Pareto diagrams Why-why analysis

Input Output

xx

x x

x xxx

x

x x

Why?

Why?

Why?

24



47

TradeTrade--off relationship between objectivesoff relationship between objectives

Performance objective 1

Performance objective 2

Improve performance by raising the pivot

48

PrioritiPrioritissinging Competitive ObjectivesCompetitive Objectives

Priorities should be determined by ......

The

IMPORTANCE

of eachcompetitive

objective

Your

PERFORMANCE

in each ofcompetitiveobjectives

IMPROVEMENT PRIORITIES

25



49

Com

petit

ive

Ben

efit

Achieved performance

qualifyinglevel

ORDER-WINNINGOBJECTIVES

QUALIFYINGOBJECTIVES

LESS IMPORTANTOBJECTIVES

+ve

neutral

-ve

Low High

Com

petit

ive

Ben

efit


+ve

neutral

-ve

Low High

Com

petit

ive

Ben

efit


+ve

neutral

-ve

Low High

50

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

For this product group does this performance objective ......

ORDER-WINNINGOBJECTIVES

QUALIFYINGOBJECTIVES

LESSIMPORTANTOBJECTIVES

9 Point Importance Scale9 Point Importance Scale

1 - Provide a crucial advantage with customers

26



51

PRICE

SERVQUAL (DISN.)

SERVQUAL (ORDER TAKE)

ENQUIRY LEAD-TIME

DROP QUOTE

WINDOW QUOTE

DELIVERY PERFORMANCE

DELIVERY FLEXIBILITY

VOLUME FLEXIBILITY

1 2 3 4 5 6 7 8 9

X

X

X

X

XX

X

X

X

IMPORTANCE to Customers

DOC. SERVICE X

Temperature Controlled Temperature Controlled Overnight ServiceOvernight Service

1 2 3 4 5 6 7 8 9

52

1 - Consistently considerably better than our nearest

4 - Often marginally better than most competitors

For this product group is achieved performance ........

competitor2 - Consistently clearly better than our nearest competitor3 - 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

BETTERTHANCOMPETITORS

SAMEASCOMPETITORS

WORSETHANCOMPETITORS

9 Point Performance Scale9 Point Performance Scale

27



53

COST

SERVQUAL (DISN.)

SERVQUAL (ORDER TAKE)

ENQUIRY LEAD-TIME

DROP QUOTE

WINDOW QUOTE

DELIVERY PERFORMANCE

DELIVERY FLEXIBILITY

VOLUME FLEXIBILITY

1 2 3 4 5 6 7 8 9

1 2 3 4 5 6 7 8 9X

X

X

X

XX

X

X

X

PERFORMANCE against Competitors

DOC. SERVICE X

Temperature ControlledTemperature ControlledOvernight Overnight SServiceervice

Estimated

54

betterthan

sameas

worsethan

lessimportant qualifying order

winning

1

2

3

4

5

6

7

8

9

123456789

IMPORTANCEFOR

CUSTOMERSLOW HIGH

PER

FOR

MA

NC

EA

GA

INST

CO

MPE

TITO

RS

GO

OD

BA

D

28



55

betterthan

sameas

worsethan


winning

1

2

3

4

5

6

7

8

9

123456789

IMPORTANCEFOR

CUSTOMERSLOW HIGH

PER

FOR

MA

NC

EA

GA

INST

CO

MPE

TITO

RS

GO

OD

BA

D

URGENTACTION

IMPROVE

APPROPRIATEEXCESS ?

56

betterthan

sameas

worsethan


winning

1

2

3

4

5

6

7

8

9

123456789

IMPORTANCEFOR

CUSTOMERSLOW HIGH

PER

FOR

MA

NC

EA

GA

INST

CO

MPE

TITO

RS

GO

OD

BA

D

Volume FlexX

Drop QuoteX

Delivery XWindow QuoteX

Servqual(DISN)X

Doc Service XXPrice/Cost Delivery

FlexX

XServqual(Order Take)

X

Enquiry Lead-Time

29



57

Case Study Case Study –– Geneva Construction & RiskGeneva Construction & Risk

• How does the Six Sigma approach seem to differ from the TQM approach adopted by the company almost twenty years ago?

• Is Six Sigma a better approach for this type of company?

• Do you think that Tyko can avoid the Six Sigma initiative suffering the same fate as the TQM initiative?

Date post:	12-Sep-2021
Category:	Documents
Upload:	others
View:	1 times
Download:	0 times