Module 1 Section H
To manage a constraint, one must
Identify the constraint on the process. Exploit the constraint—find a way to maximize its utilization. This may involve using buffers (e.g., time) in front of the constraint to keep the constraint free of disruption and "ropes," flows of information forward from the constraint that can be used to release materials in line with the constraint's limits. Subordinate everything to the constraint. This is the "drum," the element that sets the pace for the progress of the work. Exploiting it is the key to changing the beat. Elevate the constraint—try to expand its capacity. Repeat the process with another constraint. As one constraint is resolved, another usually appears.
Process technology
Invest in information technology to reduce costs.
Operations managers can often simultaneously motivate, reward, and develop employees by using three common supervisory practices that provide different degrees of variety and challenge.
Job enlargement Job enrichment Job rotation
Culture
Organizations will learn to scan their external environments to manage change proactively. They will communicate more openly and decide more quickly. They will be more accepting of risks and open to experimentation.
Risk management
the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities.
Risk acceptance
"A decision to take no action to deal with a risk or an inability to format a plan to deal with the risk." This is a common response when a risk has low impact and probability. It may also be chosen by an organization with high risk tolerance facing a risk that will be expensive or difficult to manage.
Risk avoidance
"Changing a plan to eliminate a risk or to protect plan objectives from its impact." Avoidance is often used when the impact of a risk's occurrence is unavoidable. A high impact, high probability risk will usually be avoided. A risk may also be avoided by risk prevention—taking steps to prevent the occurrence of the risk entirely.
Risk mitigation
"Reducing exposure to risk in terms of either its likelihood or its impact." Risk mitigation may be used when impact and probability are moderate, when the possibility of success in mitigation is high, or when the costs of mitigation are low relative to the impact. Risk mitigation approaches sometimes use redundancy as a form of mitigation. To continue the previous example, let's say that the substance in the manufacturing process is hazardous only under certain conditions
Job enrichment
"an increase in the number of tasks that an employee performs and an increase in the control over those tasks." This is often described as vertical job enlargement, in that employees have more opportunities to apply discretion or judgment to their work.
Job enlargement
"an increase in the number of tasks that an employee performs"—can be used to provide well-performing employees with greater challenge in their existing positions. This is useful when opportunities for promotion are limited. Job enlargement increases employees' responsibilities horizontally—within their job class.
Job rotation
"the practice of an employee periodically changing job responsibilities to provide broader perspective and a view of the organization as a total system." Job rotations are temporary assignments that can be used as part of a career development system, allowing employees to experience different jobs and their requirements. Job rotations are also used to cross-train employees in other positions, which gives operations greater flexibility and resilience in the event of labor disruptions or employee illness.
Change Management Process
1.Establish a sense of urgency. 2.Create a coalition. 3.Develop a vision and a strategy. 4.Communicate the vision and the strategy. 5.Empower employees. 6.Generate short-term wins. 7.Consolidate gains and produce more change. 8.Anchor change management in the culture
lean enterprise
A group of individuals, functions, and sometimes legally separate but operationally synchronized organizations. The value stream defines the lean enterprise. The objectives of the lean enterprise are to correctly specify value to the ultimate customer, and to analyze and focus the value stream so that it does everything from product development and production to sales and service in a way that actions that do not create value are removed and actions that do create value proceed in a continuous flow as pulled by the customer. Lean enterprise differs from a "virtual corporation" in which the organizational membership and structure keeps changing.
theory of constraints (TOC)
A holistic management philosophy developed by Dr. Eliyahu M. Goldratt, based on the principle that complex systems exhibit inherent simplicity. Even a very complex system comprising thousands of people and pieces of equipment can have, at any given time, only a very, very small number of variables—perhaps only one, known as a constraint—that actually limit the ability to generate more of the system's goal.
Six sigma
A methodology that furnishes tools for the improvement of business processes. The intent is to decrease process variation and improve product quality.
Lean production
A philosophy of production that emphasizes the minimization of the amount of all the resources (including time) used in the various activities of the enterprise. It involves identifying and eliminating non-value-adding activities in design, production, supply chain management, and dealing with customers. Lean producers employ teams of multiskilled workers at all levels of the organization and use highly flexible, increasingly automated machines to produce volumes of products in potentially enormous variety. Lean production contains a set of principles and practices to reduce cost through the relentless removal of waste and through the simplification of all manufacturing and support processes.
Business process reengineering (BPR)
A procedure that involves the fundamental rethinking and radical redesign of business processes to achieve dramatic organizational improvements in such critical measures of performance as cost, quality, service, and speed. Any BPR activity is distinguished by its emphasis on process, rather than functions and products, and the customers for the process.
risk register
A report that has summary information on qualitative risk analysis, quantitative risk analysis, and risk response planning. This register contains all identified risks and associated details.
Operations will take different approaches to controlling its risks, depending on
A risk's magnitude The probability of success in the measures taken and their required costs The possibilities that additional risk will be created as a result of the intervention The organization's risk tolerance. An organization's risk tolerance is related to the nature of its business. An airline company will be less tolerant of risk (we hope), but a software company may be more tolerant. Tolerance level is also affected by the organization's leadership style, its culture, and its resources. An organization with substantial resources is more likely to withstand the impacts of risks that are not successfully controlled.
Management is primarily a skill that keeps a complicated system of people and processes functioning well. Leadership on the other hand is A set of processes that creates organizations or adapts them to significantly changing circumstances Involved in looking to the future using market trends, demographic change, and world wide political events More oriented towards working with marketing and corporate financiers Managing the managers
A set of processes that creates organizations or adapts them to significantly changing circumstances Management is a set of processes that can keep a complex system of people and technology running smoothly. Leadership is a set of processes that creates organizations in the first place or adapts them to significantly changing circumstances.
participative management
A system that encompasses various activities of high involvement in which subordinates share a significant degree of decision-making power with their immediate superiors. Participative management draws on the rationale that everyone in an organization is capable of and willing to help guide and direct the organization toward agreed-on goals and objectives.
Total quality management (TQM)
A term coined to describe Japanese-style management approaches to quality improvement. Since then, total quality management (TQM) has taken on many meanings. Simply put, TQM is a management approach to long-term success through customer satisfaction. TQM is based on the participation of all members of an organization in improving processes, goods, services, and the culture in which they work. The methods for implementing this approach are found in teachings of such quality leaders as Philip B. Crosby, W. Edwards Deming, Armand V. Feigenbaum, Kaoru Ishikawa, J.M. Juran, and Genichi Taguchi.
process focused
A type of manufacturing organization in which both plant and staff management responsibilities are delineated by the production process. A highly centralized staff coordinates plant activities and intracompany material movements. This type of organization is best suited to companies whose dominant orientation is to a technology or material and whose manufacturing processes tend to be complex and capital-intensive.
product focused
A type of manufacturing organization in which both plant and staff responsibilities are delineated by product, product line, or market segment. Management authority is highly decentralized, which tends to make the company more responsive to market needs and more flexible when introducing new products. This type of organization is best suited to companies whose dominant orientation is to a market or consumer group and where flexibility and innovation are more important than coordinated planning and tight control.
To prevent management from getting out of touch from what is really happening in the company, many CEO's ask leaders to Adopt the management by walking around supervisory style Manage people very closely using short interval goals. Disguise themselves and play the role of an entry level associate Arrange a leave of absence for department heads so they can clear their minds
Adopt the management by walking around supervisory style One major internet retailer's CEO is noted for his practice of management by walking around (MBWA). Asking many questions as he's touring the facilities, he insists that the company's managers spend time in the trenches [on the floor] with their people to prevent getting disconnected from the reality of what's happening.
Capacity
Balance capacity across the process, from beginning to end.
Operations Strategy Area
Capacity Supply network Process technology Organizational improvement
BPR's key features are
Completely rethinking business processes by starting with the desired outcome and then working backward through the steps needed to produce each stage. The effect is to eliminate unnecessary or non-value-added activity. Big ambitions. The word "radical" is applied to BPR because it aims for large rather than incremental improvements in productivity. This may mean loss of jobs to automation and large redefinitions of the remaining jobs. Increase in the type of work done at each stage so that there is less reliance on internal and external suppliers. For example, process steps can be integrated. Increase in the amount of control given to those who perform the work.
A successful outcome of a business process workflow redesign, intended to solve a cross functional activity problem, often leads to Training in how to follow the newly documented process Bringing in consultants to assist in interpreting the results Using the study as justification for the purchase of additional applications software Creating a new single department to take charge of the whole process
Creating a new single department to take charge of the whole process Companies searching for ways to improve their operations have sometimes discovered that the execution of strategy-critical activities is hampered by a disconnected organizational arrangement whereby pieces of an activity are performed in several different functional departments, with no one group or manager being accountable for optimal performance of the entire activity. To address sub-optimal performance a company can reengineer the work effort using business process reengineering, and create a new single department or cross functional work group to take charge of the whole process.
DMAIC
Define: establish the area for improvement and the scope of improvement. Measure: use facts to make sure the improvement is worthwhile and refine understanding of the present state. Analyze: develop theories about causes for poor performance.: Improve: develop and test ideas to correct or change the current state, Control: check that improvement has been attained and sustained over time. Begin the process again.
When management fails to articulate a concise operational strategy that is aligned with overall corporate strategy, the result is that Departmental "specialists" will tend to optimize their own areas of control without consideration of the rest of the organization Company-wide solutions will become a viable substitute for the weak Operational strategy IT security will likely fall victim to corporate espionage ERP system accuracy will continue to be reliable because employee training is part of the ERP system startup
Departmental "specialists" will tend to optimize their own areas of control without consideration of the rest of the organization In the absence of more explicit operations strategy, specialists in areas such as inventory control, process technology, will tend to develop their own "systems" protecting their own organizational positions.
Resistance may come from a variety of sources
Employees may be asked to learn new tasks or new ways of doing old tasks. The "hazard" here is that they may have to spend more time with fewer work results. In addition, they may make mistakes, which will damage their self-esteem and even affect their careers. New individuals may be added to existing working groups, replacing people who had personal relationships within the group. Levels of trust and ways of interacting must be created anew. There may be confusion about what the change will require and how it will affect individuals and their work.
Organizational improvement
Empower workers to make decisions. To reduce costs, eliminate steps that do not add value. Be open to cross-functional designs in revising processes.
Supply network
Focus on decreasing the number of internal and external suppliers.
Due to senior executives having primary responsibility for strategy development, in most corporations The CEO is the primary strategy architect with little influence from others Other senior executives help fashion major elements of the strategy Much "borrowing" through competitive benchmarking occurs The business strategy is formulated first by department heads then fine tuned by the CEO and staff
Other senior executives help fashion major elements of the strategy In most corporations, strategy is the product of more than just the CEO's handiwork. Typically, other senior executives -- business unit heads, the CFO and VP's of production, marketing , HR, and other functional departments have influential strategy-making roles and help fashion the chief strategy components.
Systems
Performance will be carefully tracked, and skill development will be offered to employees. Information systems will make critical data more accessible to those who use them.
Performance management systems are designed to improve performance, motivate continued positive performance, and support employee development. They include
Providing whatever training is needed to enable a new employee to deliver expected performance. Formal training (e.g., classroom, manual, online sessions) can be supplemented with on-the-job coaching by supervisors and peers—more experienced workers performing similar tasks. Using performance data to assess employee behavior against expected behavior and performance targets. Providing performance feedback regularly, not just at an annual salary review meeting. Feedback can improve performance by correcting behaviors, but it also motivates performance and makes employees more confident. Sustaining positive performance by providing recognition and rewards. This includes competitive compensation and benefits packages and access to promotions. Rewarding good performance is more effective than punishing poor performance, and rewards are most effective when they are related to employees' own interests. For example, public recognition is meaningful to some employees; others might value additional time off or access to training.
three approaches to managing risk:
Risk acceptance Risk avoidance Risk mitigation
Managers must consider which of the following basic types of risks? Risk associated with negative results and risks that may have either negative or positive results Risk that have been fully defined and those that have been historically documented Risks that cannot be avoided and risks that can be avoided Risks with losses very difficult to quantify and risks that are variable based on a number of unknowns
Risk associated with negative results and risks that may have either negative or positive results Speculative risk differs from pure risk in that pure risk is associated with only negative results while speculative risk sees opportunity for both negative and positive outcomes
Six sigma shares TQM's focus on the customer's requirements as the driving force behind product/process design and delivery. It does have some distinctive features:
Six sigma places heavy emphasis on measuring results and making decisions based on facts. The name "six sigma" derives from a commitment to developing and maintaining processes within six standard deviations (sigmas) of specifications. This has evolved into a general philosophy about building the collection of data into processes and using those data to make evidence-based decisions. DMAIC (define, measure, analyze, improve, control) is a structured improvement cycle that can be used to create both continuous process improvement and one-time improvements. It includes five stages in a repeating cycle.
Characteristics of Organizations Successful at Managing Change
Structure Systems Culture
The strategic risk plan must have go/no-go guidelines for The legal community Customer contracts Switching from problem mitigation to recovery Make or buy decisions
Switching from problem mitigation to recovery The strategic risk plan asks the questions; At what point do we reach the limit of avoidance and mitigation strategies before we start to rely on recovery strategies?
agility
The ability to quickly plan, source, make, and deliver to adapt and respond to changes in the competitive environment. It is a SCOR performance attribute that includes product and service flexibility (speedy introduction of new products and services), mix flexibility (ability to quickly change products or services offered), volume flexibility (ability to service large order quantities), and delivery flexibility (ability to quickly change delivery dates to meet new requirements).
change management
The business process that coordinates and monitors all changes to the business processes and applications operated by the business, as well as to its internal equipment, resources, operating systems, and procedures. The change management discipline is carried out in a way that minimizes the risk of problems that will affect the operating environment and service delivery to the users.
organizational design
The creation of an organizational structure to support the strategic business plans and goals of an enterprise . . . The organizational structure design provides the framework within which the business operational and management activities will be performed.
The key points of TQM include
The customer is not external to the organization but is part of it. In fact, the customer is the most important part of the organization. Everyone in the organization is also a customer (served by internal suppliers) and an internal supplier (serving other internal customers). Every person in the organization has an impact on quality. Investing in prevention will lower the other costs related to quality. Quality should be designed into products and services. Quality management should be proactive, not solely reactive. This tenet is represented by the well-known warning to "do it right the first time." The organization must develop procedures to ensure continuous improvement.
Together, policies and procedures define in a formal manner
The organization's values and visions for the employer-employee relationship. This can include ethical standards or commitments to quality, internal/external customer focus, employee involvement and contributions, and so on. Operations managers and supervisors must be aware of the employer's employee relations strategy and their role in implementing this strategy—for example, by adopting respectful behavior towards employees. Expectations about behavior and appearance (e.g., ethical behavior, treating customers with respect and appreciation, treating other employees with respect, on-time attendance, wearing appropriate dress, refraining from substance abuse or behaviors that interfere with work processes such as smoking or bringing food and beverages into work areas). Operations managers can provide input to HR on the practical needs created by shop floor conditions (e.g., what constitutes safe clothing) or can consult on ways to make policies more understandable to employees. Required approaches to tasks and workplace situations (e.g., when and how to withdraw items from inventory; how to handle a customer complaint; how to schedule vacation, personal, or sick time; how to file a complaint against a supervisor or another employee; restrictions on computer use or taking company property home).
An organization's culture can be seen in
The principles the organization has committed to through a code of ethics, corporate values, and a vision statement and that it visibly supports through its actions The policies and procedures that have been developed to communicate expectations and approaches to work The way in which managers and employees relate to each other and employees behave toward each other, customers, and suppliers The norms of behavior that pressure employees to behave a certain way, including the kinds of behaviors that are rewarded and discouraged The historic events the organization values The people who are offered as emblematic of the organization.
Continuous communication and feedback
The risk management plans must be communicated clearly to all those involved in control measures. The planners must ensure that they receive feedback on the effectiveness of the measures to control the risks and on any changes in the organization's identified risks. This includes changes in the status of existing risks and the emergence of new risks.
Each type of structure presents challenges that the organization must find ways to manage in order to remain effective:
The simple structure is constrained by the span of control of its single leader. Span of control refers to the number of activities or employees that a manager is responsible for. For example, in Parmit's early days, the Parmits themselves were managing the entire organization. Decisions may be delayed if the leader is overwhelmed with issues. Imagine the number of decisions that the Parmits faced every day in their new business, from obtaining capital to dealing with complaints from shop employees unhappy with the length of their lunch breaks. The functional and multidivisional structures can become very focused on their own needs, and it may be more difficult to align these structures with an overall strategy. Communication and collaboration across functions and divisions are more difficult. For example, at Parmit Cycles, the multi-use vehicle division and the motorbikes and scooters division are not good at sharing information about consumer needs. Collaborative teams working on hybrid products are allowed but not supported by division managers. The matrix structure can create stress for employees and their multiple leaders, who have their own needs and priorities and may resent having to share their resources with other functions or divisions. For the team members, it creates feelings of divided loyalty between their functional leaders and the project leader. The matrix structure also adds another layer of management, which increases costs. Parmit's experience with matrix structure is varied. Some project managers are able to create cohesive teams who are loyal to the project objectives; some project teams become mired in functional and divisional competitions.
Good managers and supervisors are the foundation of a productive workforce.
They have credibility and authority They are seen as fair They are good communicators They delegate tasks to employees They approach negative outcomes as problems to be solved They are clear in their expectations
Monitoring and assessment
This may be a periodic review of preparedness to respond to risk and after-action debriefs (analysis after a positive or negative risk event has occurred) that examine the effectiveness of the control measures.
Structure
To be agile, organizations will need fewer rules and more distributed decision-making power. Structures will be simplified to reduce unnecessary interdependencies.
Lean production has four key features:
Using customer needs to define demand, so that demand is satisfied in the exact amount, at the right time, and with the right level of quality. Supply is pulled, rather than pushed, through production and the supply chain. Operations Strategy notes that this is easier to accomplish in industries with more predictable demand. Synchronized or smooth flow of inventory through operations, without delays and accumulation at individual stages. The goal is to eliminate elements of lead time so that a good can flow through the transformation process without waiting time. Along with the Theory of Constraints (TOC) and just-in-time (JIT) production philosophies, lean manufacturing is an example of synchronized production Employee involvement in solving problems with flow. Eliminating waste. In the Toyota system—which drew on earlier manufacturing approaches (including Henry Ford's production philosophy and practices) and popularized today's lean production philosophy—there are seven forms of waste. Operations Strategy identifies four general categories as sources of waste: -Irregular flow -Under- or oversupply -Inability to flex to changes in demand -Failure to conform to specifications and customer expectations (i.e., poor quality)
redundancy
a backup capability . . . to reduce the effects of breakdowns
bottleneck
a facility, function, department, or resource whose capacity is less than the demand placed upon it
synchronized production
a manufacturing management philosophy that includes a consistent set of principles, procedures, and techniques where every action is evaluated in terms of the global goal of the system.
process flow analysis
a procedure to evaluate the effectiveness of a sequence of business activities. The analysis determines which elements of the flow are value-added and eliminates those that are not, determines which parts of the process can be automated, evaluates activities as to whether they contribute to the core competencies of the business or are candidates for outsourcing, and designs a structure for the remaining activities of the process to improve productivity.
Contingency planning
a process for creating a document that specifies alternative plans to facilitate . . . success if certain risk events occur.
It is determined that the key to success in a particular market is in the company's ability to deliver a variety of high quality products in less lead time than industry standard. The operational emphasis should be on the operation's quality utilization agility cost
agility Agility is the ability to successfully manufacture and market a broad range of low-cost, high-quality products and services with short lead times and varying volumes that provide enhanced value to customers through customization.
risk tolerance
an organization's or stakeholder's readiness to accept a threat or potential negative outcome in order to achieve its objectives
resiliency
the ability to return to a position of equilibrium after experiencing an event that causes operational results to deviate from expectations.
