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8/2/2019 Final Lecture OM for IBA 2011
1/38
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
8/2/2019 Final Lecture OM for IBA 2011
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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
8/2/2019 Final Lecture OM for IBA 2011
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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
8/2/2019 Final Lecture OM for IBA 2011
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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
8/2/2019 Final Lecture OM for IBA 2011
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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
8/2/2019 Final Lecture OM for IBA 2011
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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
8/2/2019 Final Lecture OM for IBA 2011
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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
21 22
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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
21 24
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)
21 26
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=48/2/2019 Final Lecture OM for IBA 2011
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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.html8/2/2019 Final Lecture OM for IBA 2011
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CSR s dark side: Reputation damage
http://www.youtube.com/watch?v=XavZc6X--tARecommended