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“Our objective is to show how managers can design and control
process structure and process drivers to improve the
performance of any business process.”
Anupindi, et al.
Chapters 1 & 2
Products, Processes and Performance
Operations Strategy and Management
Based on Managing Business Process Flows by Anupindi, et al
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Operations
the application of
resources
to the production
of goods and
services.
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Premise: Operations matters strategically
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Secret of Toyota’s Success?
What is the secret of Toyota’s success? The incredible consistency of
Toyota’s performance is a direct result of operational excellence.
Toyota has turned operational excellence into a strategic weapon.
This operational excellence is based in part on tools and quality
improvement methods made famous by Toyota in the manufacturing world,
such as just-in-time, kaizen, one-piece flow, jidoka, and heijunka. These
techniques helped spawn the “lean manufacturing” revolution. But tools
and techniques are no secret weapon for transforming a business. Toyota’s
continued success at implementing these tools stems from a deeper
business philosophy based on its understanding of people and human
motivation. Its success is ultimately based on its ability to cultivate
leadership, teams, and culture, to devise strategy, to build supplier
relationships, and to maintain a learning organization.
(Liker, The Toyota Way, p. 6)
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Operational Innovation
Operational innovation has been central to some of the greatest success
stories in recent business history, including Wal-Mart, Toyota, and Dell.
Wal-Mart is now the largest organization in the world, and it owns one of the
world’s strongest brands. Between 1972 and 1992, Wal-Mart went from
$44 million in sales to $44 billion, powering past Sears and Kmart with
faster growth, higher profits and lower prices. How did it score that hat
trick? Wal-Mart pioneered a great many innovations in how it purchased
and distributed goods. One of the best known of these is cross-docking, in
which goods trucked to a distribution center from suppliers are immediately
transferred to trucks bound for stores – without ever being placed into
storage. Cross-docking and companion innovations led to lower inventory
levels and lower operating costs, which Wal-Mart translated into lower
prices. The rest is history. … Similar observations can be made about Dell
and Toyota, organizations whose operational innovations have become
proper nouns: the Dell Business Model and the Toyota Production System.
Each of these three companies fundamentally rethought how to do work in
its industry. Their operational innovations dislodged some of the mightiest
corporations in the history of capitalism, including Sears, General Motors
and IBM.
Hammer, “Deep Change”, HBR, April 2004, pp. 86
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Execution is Critical and not Trivial
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PROCESS view is key to understanding and improving
operations
Everything is a process
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Process Classification -- First Level: Operating
vs. Support
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The process view considers any organization to be a process
that transforms inputs into outputs.
Information
structure
Process
Management
Network of
Activities and Buffers
Inputs
Outputs
Goods
Services
Flow units
(customers, data,
material, cash, etc.)
Labor & Capital
Resources
Figure 1.2
Based on Managing Business Process Flows by Anupindi, et al
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Little’s Law (Chapter 3: Process Flow Measures)
In a stable process these three measures are related to one another by Little’s
Law:
Average Inventory (I) = Throughput ( R ) x Average Flow Time (T)
I=RxT
•
•
•
Flow rate (R) = the number of flow units
that flow through a specific point in the
process per unit of time.
Inventory (I) = the total number of flow
units present within process boundaries.
Flow time (T) = the total time spent by a
flow unit within process boundaries.
A stable process is one in which, in the long run, the
average inflow rate is the same as the average outflow
rate.
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I = RT Textbook Examples
3.5.1
Material Flow
3.5.2
Customer Flow
3.5.3
Job Flow
Flow unit is?
What do we know?
What can we calculate?
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3.5.4
Cash Flow
3.5.5
Cash Flow
Processes:
how to describe them?
• Inputs and Outputs
• Flow Unit
• Process flow chart (activities and buffers)
• Resources
Your Job
Flow unit?
Throughput?
Flow time?
Inventory?
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Toyota Principles
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Toyota Principles
Long –Term Philosophy. Toyota is serious about long-term thinking. The focus from the very
top of the company is to add value to customers and society. This drives a long-term
approach to building a learning organization, one that can adapt to changes in the environment
and survive as a productive organization. Without this foundation, none of the investments
Toyota makes in continuous improvement and learning would be possible.
The Right Process Will Produce the Right Results. Toyota is a process-oriented company. They
have learned through experience what processes work, beginning with the ideal of one-piece
flow. Flow is the key to achieving best quality at the lowest cost with high safety and morale.
At Toyota this process focus is built into the company’s DNA, and managers believe in their
hearts that using the right process will lead to the results they desire.
Add Value to the Organization by Developing Your People and Partners. The Toyota Way
includes a set of tools that are designed to support people continuously improving and
continuously developing. For example, one-piece flow is a very demanding process that
quickly surfaces problems that demand fast solutions – or production will stop. This suits
Toyota’s employee development goals perfectly because it gives people the sense of urgency
needed to confront business problems. The view of management at Toyota is that they build
people, not just cars.
Continuously Solving Root Problems Drives Organizational Learning. The highest level of the
Toyota Way is organizational learning. Identifying root causes of problems and preventing
them from occurring is the focus of Toyota’s continuous learning system. Tough analysis,
reflection, and communication of lessons learned are central to improvement as is the
discipline to standardize the best-known practices.
(Liker, The Toyota Way, p. xvi)
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Priority: Process Intent DRIVES Process Design
James Swartz, Hunter and Hunted.
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Balanced Scorecard Perspective
Chase, et al, Operations Management, p. 29.
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Mobil BSC: Financial & Customer
The Strategy Focused Organization by Kaplan & Norton.
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Mobil BSC: Internal & Growth and Learning
The Strategy Focused Organization by Kaplan & Norton.
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Wall Street Journal
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Principle
The Theory of Swift and Even Flow
The Theory of Swift, Even Flow holds that the more swift and even the flow
of materials (or information) through a process, the more productive is that process
(Schmenner & Swink, 1998; Schmenner, 2001). Thus, productivity for any
process—be it labor productivity, machine productivity, materials productivity, or
total factor productivity—rises with the speed by which materials (or information)
flow through the process, and it falls with increases in the variability associated
with the flow, be that variability associated with quality, quantities, or timing.
“Service Business and Productivity” by Schmenner, Decision Sciences, Summer 2004, pp. 333-347.
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Innovative Processes Happen Through People
"The central issue is never strategy, structure, culture, or systems. The core of
the matter is always about changing the behavior of people." Those people
may be called upon to respond to profound upheavals in marketplace
dynamics -- the rise of a new global competitor, say, or a shift from a
regulated to a deregulated environment -- or to a corporate reorganization,
merger, or entry into a new business. And as individuals, we may want to
change our own styles of work -- how we mentor subordinates, for example,
or how we react to criticism. Yet more often than not, we can't.
-- John Kotter, a Harvard Business School professor
So instead of trying to motivate them with the "fear of dying," Ornish reframes
the issue. He inspires a new vision of the "joy of living" -- convincing them
they can feel better, not just live longer. That means enjoying the things that
make daily life pleasurable, … . "Joy is a more powerful motivator than
fear," he says.
-- Dr. Dean Ornish, a professor of medicine at the University
of California at San Francisco
http://www.fastcompany.com/magazine/94/open_change-or-die.html
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