Business Systems Operations Management

Transcription

1 Business Systems Operations Management Session 10 - TQM & The Operations Challenge Facilitator: Dr. Jonathan Farrell 1 This Evening s s Program TQM An Overview of TQM The Cost of Quality Six Sigma SERVQUAL A method for measuring the quality of services Your Presentations The Operations Challenge 2 1

2 A model of operations improvement Managing operations process improvement Total Quality Management Operations process improvement Failure prevention and recovery Making processes better Preventing processes becoming worse 3 The Levels of Quality Quality strategy Organisation Includes customers and suppliers Total Quality Management Quality Assurance Quality systems/iso Quality design Quality process Quality Control Inspection SPC Batch sampling Quality standards Error detection 4 2

3 Total Quality Management Management of variation in the process. Note: The vast majority of variation is due to process design, and is the responsibility of management, not the operators. 5 The quality gurus Philip Crosby W. Edwards Deming Armand Feigenbaum Kaoru Ishikawa Joseph Juran Genichi Taguchi Quality is free - the optimum is zero defects. Deming s 14 points. How to use statistics. Total quality control. Quality circles and cause and effect diagrams. Quality as fitness for use, rather than conformance to specification. Loss function. Minimise variation. 6 3

4 Total Quality Management Includes all parts of the organisation Includes all staff of the organisation Includes consideration of all costs Includes every opportunity to get things right Includes all systems that affect quality Never stops 7 The Cost of Quality 1. Appraisal Costs inspection, testing, etc. 2. Prevention Costs identification, training, corrective action, redesign 3. Internal Failure Costs scrap, rework, repair 4. External Failure Costs warranty repair and / or replacement, loss of goodwill / reputation, complaints handling 8 4

5 The Cascading Effect of Quality External Failure Total cost of quality Costs of quality Internal failure Appraisal Prevention Time 9 The ISO 9000 approach Quality systems consist of three levels: - Level 1 - company quality manual. - Level 2 - procedures manual. - Level 3 - work instructions. ISO 9000 is the internationally recognised quality standard. 10 5

6 Six Sigma Quality ± A philosophy and set of methods companies use to eliminate defects in their products and processes Seeks to reduce variation in the processes that lead to product defects The name, six sigma refers to the variation that exists within plus or minus three standard deviations of the process outputs (99.73%) 3σ 11 Six Sigma Quality: DMAIC Cycle Define, Measure, Analyze, Improve, and Control (DMAIC) Developed by General Electric as a means of focusing effort on quality using a methodological approach Overall focus of the methodology is to understand and achieve what the customer wants DMAIC consists of five steps. 12 6

7 Six Sigma Quality: DMAIC Cycle (Continued) 1. Define (D) 2. Measure (M) 3. Analyze (A) 4. Improve (I) 5. Control (C) Customers and their priorities Process and its performance Causes of defects Remove causes of defects Maintain quality 13 Six Sigma Tools Flow Chart graphically represent the flow to identify problems Pareto Analysis Can be used to find when 80% of the problems may be attributed to 20% of the causes Checksheets Can be used to keep track of defects or used to make sure people collect data in a correct manner Histograms Can be used to identify the frequency of quality defect occurrence and display quality performance Cause & Effect diagrams Can be used to systematically track backwards to find a possible cause of a quality problem (or effect) 14 7

8 Other Six Sigma Tools Opportunity Flow Diagram used to graphically show those activities that add value from those that are performed (and maybe could be reduced or removed) that do not add value to the finished product Failure Mode and Effect Analysis (FMEA) is a structured approach to identify, estimate, prioritize, and evaluate risk of possible failures at each stage in the process Design of Experiments (DOE) a statistical test to determine cause-and-effect relationships between process variables and output 15 Six Sigma Roles and Responsibilities 1. Executive leaders must champion the process of improvement 2. Corporation-wide training in Six Sigma concepts and tools 3. Setting stretch objectives for improvement 4. Continuous reinforcement and rewards 16 8

9 Continuum of Perceived Service Quality Word of mouth Personal needs Past experience Unacceptable quality Expectations not met Pre-purchase expectations Perceived process quality Perceived output quality X X = Expectations met Satisfactory quality Expectations exceeded Source: L. L. Berry, V. A. Zeithaml.. A. Parasuraman, Quality Counts in Services, Too, Business Horizons, May-June Ideal quality 17 Service Quality Measurement - SERVQUAL A perceived service quality questionnaire survey methodology Examines Dimensions of Service Quality including: Reliability, Responsiveness, Assurance, Empathy, and Tangibles (e.g., appearance of physical facilities, equipment, etc.) 18 9

10 Service Quality Measurement - Servqual For each dimension of quality, we measure the expectation and the perception on a scale of 1 7 (22 questions) Next, we weight the five dimensions according to customer importance. The Gap Score is then = Perception Expectation A negative Gap Score means the perceived service quality is less than what was expected. 19 Level of Quality The SERVQUAL Model GAP 1 - Filled by Listening to Voice of the Customer GAP 2 -Filled by QFD/Value Eng. GAP 3 - Filled by Statistical Process Control GAP4 - Filled by Key Performance Indicators Cust. needs Understood by org. Designed Delivered Perceived by cust

11 SERVQUAL An Example Canadian Research Study (un-weighted) Management Expectation Perception P-E Tangible Reliability Responsive Assurance Empathy Average: Customer Expectation Perception P-E Tangible Reliability Responsive Assurance Empathy Average: Summary- The Implementation of TQM 1. A vision is essential 2. Implementation is itself a process 3. Quality management involves changing the culture 4. Changing the culture takes time 5. The process is never complete 22 11

12 Syndicate Presentations 23 The Operations Challenge Globalisation? Social responsibility? The environment? The Impact of new technology? The role of knowledge management? Explicit Knowledge versus Tacit Knowledge 24 12

13 Where Have We Come From? 25 We defined Operations Operations involve the strategic use of resources, usually scarce and/or limited, to transform inputs into outputs of greater value 26 13

14 And Operations Management Operations Management (OM) involves the application of technologies to strategy, design, control, and improvement of the processes that create and deliver the firm s products and services. 27 We Looked at the Importance of Project Management Preferred Vehicle for introducing: change new products client requirements new /upgraded assets Form a team, do the work & disband the team 28 14

15 We Defined what a Project is... A Unique set of objectives With a definite start point and end point Governed by scope, cost and time goals Its aim is to achieve results and disband Contract to on-going management 29 The difficulties of managing a Project... Quality Cost Time 30 15

16 Project Planning Tools are Essential for Good Operations Management Gantt Charts Critical Path Method (CPM) Program Evaluation and Review Technique (PERT) And Most Importantly, Project Management... Is more than just the numbers Is not the same as Managing the Project Don t forget the human factor The success of a project is (usually) inversely proportional to its size and timeframe Need exit champions just as much as they need project champions 32 16

17 We looked at Process Types in Manufacturing High Project Jobbing Batch Variety Mass Low Low Volume Continuous High 33 And in the Service Industry Professional Services Variety Service Shop Mass Service Volume 34 17

18 We looked at the Value Chain Firm Infrastructure Support Activities Human Resource Management Technology Development Procurement Margin Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Margin Primary Activities 35 And the types of Transformation in Operations Physical - manufacturing Locational - transportation Exchange - retailing Storage - warehousing Physiological - health care Informational - telecommunications 36 18

19 y We defined Strategic Planning The allocation of resources to programmed activities calculated to achieve a set of business goals in a dynamic competitive environment. * Source: Daniel H. Gray. Uses and Misuses of Strategic Planning Harvard Business Review.. January - February And looked at the shift from Services to Goods 100% Goods Automobile 0 100% Services Installed Carpeting Restaurant Meal Hospital Care Motel Services 38 19

20 Product Design is an Important part of Operations Management Value adding through design of form. How can a toilet brush sell for $2 at K-Mart and for $60 at David Jones? Trade-offs between function and form. 39 And Information Processing Technologies How much information needed? Manual vs electronic? JIT vs MRP, MRP2? Centralised or decentralised? (Web)-EDI with customers and suppliers? 40 20

21 We Examined the Different Types of Supply Chains Efficient Designed to minimise cost Maintain high utilization of resources Minimize inventory Suppliers chosen on cost Responsive Designed to minimise lead times Responsive to unpredictable demand Excess capacity High buffer stocks / modules Suppliers chosen on speed / flexibility 41 IT can also add value to all parts of the Value Chain Primary activities Support activities Inbound logistics Operations Outbound logistics Marketing Service Company infrastructure Human resources Systems & technology Procurement 42 21

22 IT can create Competitive Advantage by... Lowering costs Product expenses e.g. inventory control Sales expenses e.g. e-commerce Enhancing differentiation e.g. customisation Changing competitive scope e.g. global co-ordination 43 We Defined Quality in Operations Management Performance that pleases the customer with predictable uniformity and dependability. i.e. meeting the customer s s requirements or specifications, all the time

23 And looked at the Dimensions of Quality Performance primary characteristics Features secondary characteristics Reliability consistency of performance over time Durability useful life Serviceability ease of repair Response speed, courtesy, competence, GUI Aesthetics sound, feel, look, etc. Reputation perceptions of quality 45 As well as identifying the Cost of Quality 1. Appraisal Costs inspection, testing, etc. 2. Prevention Costs identification, training, corrective action, redesign 3. Internal Failure Costs scrap, rework, repair 4. External Failure Costs warranty repair and / or replacement, loss of goodwill / reputation, complaints handling 46 23

24 Bringing It All Together under Total Quality Management Management of variation in the process. Note: The vast majority of variation is due to process design, and is the responsibility of management,, not the operators. 47 There are Different Capacity Planning Horizons Long range plans Facilities major capital expenditures Locations Aggregate (Intermediate) plans Minor equipment purchasing Materials requirements Work force size Production rates Detailed (short-term) schedules Daily, weekly schedules People - machine assignments 48 24

25 We briefly looked at Queuing Theory... The Problem : To balance customer waiting time and system utilisation. To balance customer satisfaction and efficiency. i.e. to find a WIN - WIN solution. 49 We Need to be Able to Managing Capacity, either by Altering Demand Pricing Develop non-peak demand Complementary services Reservation systems 50 25

26 .. Or Controlling Supply Schedule downtime during periods of low demand Maximise efficiency during peaks Use part time employees Cross-train employees Increase consumer participation Rent or share extra capacity Invest in ability for future expansion 51 Operations Management needs Planning and Control Functions Loading Sequencing Scheduling Controlling How much to produce? In what order? When to produce? Are we on plan? 52 26

27 And Good Project Management Unique set of objectives Definite start point and end point Governed by scope, cost and time goals Aim to achieve results and disband Contract to on-going management 53 We need to Keep in Mind the Cost of Not Matching Supply and Demand Cost of overstocking liquidation, obsolescence, holding Cost of under-stocking lost sales and resulting lost margin 54 27

28 We Can Use Master Production Schedules... A statement of the volume and timing of the end products or services to be produced. Takes into account: Known demand Forecast demand Inventory level Safety stock Special demand factors(eg R&D) 55 As Well As JIT & MRP JIT is a PULL technology, and is most appropriate for controlling individual cells at the operating level. MRP is a PUSH technology, and is most appropriate for controlling the overall process, ensuring the medium term availability of materials

29 And ERP... ERP is a generic term used to describe a comprehensive information system designed to integrate all the business processes found in an enterprise. Efficiency and productivity are improved through the integration of information and the removal of duplicate information and processes. 57 We Compared JIT & MRP Question JIT MRP Where used WIP Production cycle time Schedule flexibility Regard for capacity limits Labour skills Continuous flow, make-to-stock Very low Very short Level production for min. of 30 days High. Tries to balance capacity Multi-skilled to help out other areas Job shop, custom shop Very high Very long MRP frozen for 30 days, but variable in work centres Terrible. May start off o.k., but quickly becomes inaccurate Specialized in own work area 58 29

30 And Looked at the All-Important Concept of Change Management One of the most under-estimated areas of management, particularly with regards projects About 2/3 of change management programs fail Resistance to change is a natural phenomena it means moving away from a state of equilibrium (or inertia) People are fearful of change a survival instinct. (All your senses are focused on change) Yet, change is constant and necessary 59 There are Three Types of Change Management Technical New equipment, technology, software systems (e.g. MRP, ERP), etc. Procedural New procedures, BRP, as a result of new technology, etc. Organisational Mergers, acquisitions, corporate reorganisations 60 30

31 And Lots of Reasons Why Change Fails Lack of top-management support Failure to focus on the primary objective Fuzzy, poorly-defined definition of the to be state Failure to integrate all major change initiatives into a master plan Lack of attention to the human issues Failure to address or even listen to opponents of the change 61 Including... Failure to obtain customer support Lack of clear metrics, performance measures Lack of resources No, or insufficient contingency plans No effective change management system 62 31

32 IT has an Impact on Change Management But... IT is only a means to an end IT should never drive change without a clear business case for change fix the process before automating it! IT systems should always be linked to satisfying explicit, high-priority customer needs internal and external Ensure adequate return on investments in technology account for all the costs! 63 But Change can be Successful A clear vision of where you want to be there is a compelling need for the change Clearly defined to-be organisation Commitment to making change management is part of the culture Form a Change Management Team with a clear charter 64 32

33 Successful Change also Requires Us To... Breed an atmosphere of open, even excessive, communication and discussion Everyone should be allowed to have a say Address all issues, don t allow them to fester Remember the human factor in all aspects of the change program Identify and involve ALL stakeholders 65 And You Need To... Build a systematic change management methodology to implement change (and have a contingency plan for when things go wrung wreng wrong) Integrate that methodology into the heart of the change Identify clear, concise performance measures, and constantly measure progress against them 66 33

34 Finally, Good Communication Across all Areas of the Operation is Essential... What I need is a list of specific unknown problems we will encounter This project is so important, we can't let things that are more important interfere with it. Doing it right is no excuse for not meeting the schedule. No one will believe you solved this problem in one day! We've been working on it for months. Now, go act busy for a few weeks and I'll let you know when it's time to tell them. "Teamwork is a lot of people doing what I say." "We know that communication is a problem, but the company is not going to discuss it with the employees." "This is to inform you that a memo will be issued today regarding the subject mentioned above." is not to be used to pass on information or data. It should be used only for company business. 67 Bringing It All Together... BOM IT / e-businesse SCM JIT MRP ERP MPS Business Systems Operations Management Project Management / Change Operations Management Service / Continuous Planning & Process Operations Product Process Control Design Strategy Design Improvement Corporate Strategy TQM 68 34