WEEK 13 – CH.

18
OPERATIONS IMPROVEMENT
Inggang Perwangsa Nuralam, SE., MBA.
• Why is improvement so important in operations management?
• What are the key elements of operations improvement?
• What are the broad approaches to managing improvement?
• What techniques can be used for improvement?
 Case: Improvement at Heineken

 Sales growth can put pressure on any company’s

operations. Heineken had to increase its volume by
between 8 and 10 % / year on a regular basis.
 In a competitive market, the company faced two challenges.
1) To improve its operations processes to reduce its costs.
2) Because it would have taken a year to build a new packaging line, it needed to improve
the efficiency of its existing lines in order to increase its capacity.
 The objective of the improvement project was to improve the plant’s Operating Equipment
Efficiency (OEE).
a) Obtaining accurate operational data on which improvement decisions could be based,
b) Changing the culture of the operation to promote fast and effective decision making.
One of this by encouraging staff to focus on the improvement of how they do their job
rather than just ‘doing the job’.
 Why improvement is so important

 Improvements and innovations may be imitated or countered by competitors.

 For example, in the automotive sector, the quality of most firms’ products is very
significantly better than it was two decades ago. This reflects the improvement in
those firms’ operations processes.
 Yet their relative competitive position has in many cases not changed. Those firms
that have improved their competitive position have improved their operations
performance more than competitors.
 Where improvement has simply matched competitors, survival has been the main
benefit.
 What are the key elements of operations improvement?
The ‘elements’ that are the building blocks of improvement include:
 Radical or breakthrough improvement  Customer-centricity
 Continuous improvement  Systems and procedures
 Improvement cycles  Reduce process variation
 A process perspective  Synchronized flow
 End-to-end processes  Emphasize education/training
 Radical change  Perfection is the goal
 Evidence-based problem-solving  Waste identification
 Customer-centricity  Include everybody
 Systems and procedures  Develop internal customer–supplier
 Reduce process variation relationships.
 What are the key elements of operations improvement?
Four broad approaches to managing improvement
1) Business process reengineering (BPR) – a radical approach to improvement
that attempts to redesign operations along customer-focused processes rather
than on the traditional functional basis.
2) Total quality management (TQM) – puts quality and improvement at the heart
of everything that is done by an operation.
3) Lean – an approach that emphasizes the smooth flow of items synchronized to
demand so as to identify waste.
4) Six Sigma – a disciplined methodology of improving every product, process,
and transaction.
 What are the key elements of operations improvement?
BPR reorganizing processes
 What are the key elements of operations improvement?
BPR reorganizing processes
Before re-engineering
 What are the key elements of operations improvement?
BPR reorganizing processes
After re-engineering
 What are the key elements of operations improvement?
Some of the elements of
improvement approaches
 What are the key elements of operations improvement?
Innovation or ‘breakthrough’ improvement versus Kaizen or continuous improvement
 What are the key elements of operations improvement?
Two improvement cycles

Traditional approach Six Sigma improvement cycle

What are the key elements of operations improvement?
 What techniques can be used for improvement?
Many techniques described throughout Slack et al. could be considered improvement
techniques. Specific ‘improvement techniques’ include:

 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 help to reveal the root
causes of problems;
 Pareto diagrams, which attempt to sort out the ‘important few’ causes from the ‘trivial
many’ causes;
 Why–why analysis that pursues a formal questioning to find root causes of problems.
 What techniques can be used for improvement?
Some common techniques for process improvement