RMIT Classification: Trusted

Operations Management

Week 12
Improving Operations

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Learning Objectives

You should be able to:

 Explain why companies need to improve
operations
 Understand how operations can be improved to:
 Release cash
 Improve market supports
 Reduce costs
 Identify improvement opportunities
 Understand the alternative approaches to making
improvements

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Plan

Release
cash
Review

Do
Improving
Operations

Improve
Reduce
market
costs
support

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Check
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Why Improve
Operations?
A. Releasing Cash
1. Reduce inventory
2. Change supplier payment terms
3. Sell or leases equipment
4. Outsource

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Why
Lv Improve
Operations?
B. Improving market support

1. Identify the key order-winners and qualifiers to be

supported
2. Translate these into strategic tasks
3. Review current performance
4. Identify and implement changes

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Examples of review performance and the improvements to

meet alternative order-winners and qualifiers

order-winners and Reviewing current Typical

qualifiers performance improvements
Price • Review material, Reduce material/labour
labour and overhead waste
cost Reduce material/labour
• Identify areas of cost
material/labour waste
• Review product
pricing
Delivery speed Analyse and compare the Eliminate any waiting
delivery lead times time between the steps in
requested by customers the process
against actual delivery Eliminate wasteful
lead time activities

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Why
Lv Improve
Operations?
C. Reducing costs

• Review where costs can be reduced:

Material, direct and overhead
• Map activities to identify and eliminate areas of waste
o Review and reduce mix of volumes
o Review and increase price of services or products (where
appropriate)
o Review and stop selling services or products (where appropriate)

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Approaches in improving
operations
Passive vs Proactive
 Passive improvements are mainly identified and
implemented through suggestion schemes or by support
functions such as IT
 Proactive improvement are achieved through building an
improvement culture

Incremental vs Breakthrough
 Incremental  large number of small and frequent
improvements
 Breakthrough  major changes to existing practices

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Alternative rapproaches in improving

operations

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Improvement tools and

techniques
1. Benchmarking
2. Mapping the customer journey
3. Mapping processes
4. Identifying causes of problems
5. Generating improvement ideas
6. Re-engineering business processes

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Improvement tools and

techniques
1. Benchmarking

• Comparing performance and practices between firms

2. Mapping the customer journey

 Map the customer journey

 Identify points of interaction
 Determine where to interact with customers
 Determine how best to manage the interactions

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Customer journey for business class

passengers for two hypothetical
airways
Customer journey Airways A Airways B
Ticket purchase Online/phone Online/phone
Checking in Online check-in Online check-in
At airport using business At airport using business
class desk class desk
Travel to Airport A limousine collects
passengers
Check in baggage Fast bag drop point at Not required. It is
airport checked in when placed
in the limousine
During flight Flat bed Bar area
Flexible eating times Flat bed
Massage
… … …

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Improvement
Improvementtools and techniques:
tools and
techniques
3. Mapping Processes
• Process charts: sequence and time of the steps
• Service maps: movement of customers
• Information and material flow charts

Using mapping process helps:

• Identify value-adding activities

• Eliminate waste – activities customer would
not pay for

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3. Mapping Processes: Process

Chart

Source: Jay Heizer, Barry Render, Operations Management (11th Edition) ISBN-13 : 978-0133408010, Pearson
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Improvement tools and

4.techniques
Identifying causes of problems

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The process of improving

operations
Identifying causes of problems

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Improvement tools and

techniques
5. Improvement ideas 6. To Re-engineer
can be generated by: Business Processes:

• Brainstorming • Map the process

• Reverse • Identify value-adding
brainstorming activities
• Listing attributes • Eliminate waste
and/or • Make the value-adding
• Forging relationships steps flow
• Repeat the cycle

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Making improvements

1. Involving employees

• Creating self-managed teams

• Sharing information
• Creating time for improvement

2. Involving suppliers
3. Involving customers

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Questions

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