operations management1 operations management: improving quality and productivity through processes...

Operations Management 1

Operations Management:Improving Quality and Productivity through

Processes

Presented by:Enrico C. Mina, DBA


Operations Management

Operations management lies at the very core of an organization’s mission and reason for existence. It defines what outputs the organization is committed to produce for its key customers, the inputs and resources that go into these outputs, and the activities needed to create and deliver them.


Objectives (1)

At the end of this course, the participants will have been able to:

Learn the basic principles and concepts of process quality and continuous improvement (kaizen) in quality and productivity

Learn the concept of process waste or non-value adding activities


Objectives (2)

Learn the techniques of flowmapping or process flowcharting

Apply the techniques to an actual problematic operational process


The Changing Economic Environment (1)

Globalization of business More turbulent business climate More demanding customers Faster technological change Tougher competition



Survival in the face of such a rapidly changing environment requires quick adaptation and the ability to enhance competitiveness.

Competitiveness is achieved by giving customers and other stakeholders superior value (benefits vs. costs) at the time they want it.



Even units doing administrative work or giving support services to operating units have to contribute to overall organizational competitiveness. They are serving internal customers.

This is even more true for offices or units dealing directly with external customers.


The Chain of Customer-Supplier Relationships

EXTERNAL SUPPLIERS

THE ORGANIZATION

1 2 3 4 5

EXTERNAL CUSTOMERS AND STAKEHOLDERS


Customer Goals

QUALITY - the ability of the output or service to satisfy customer needs

COST - the price, plus the costs of operating, maintaining, and disposing

DELIVERY - the timeliness, quantity, and manner of making the output or service available.

Customers want all three.


Customer Superordinate Goals

GOALS EXPECTATION LEVELSExplicit Implicit

Customer Delight

Quality

Cost

Delivery

Total Quality Management

Total Quality Management (TQM) is a philosophy and system of management that seeks to achieve high levels of customer satisfaction and a strong competitive position through products/services of superior quality, while at the same time achieving low costs and fast delivery.


The Process System (1)

The three customer goals are all end-results of a process.

A process is a series of interrelated activities that predictably transform inputs into desirable outputs.


Process Elements (1)

Most processes have six elements: Man (people) - the personnel that

perform the work in the process Machines - the process equipment,

physical facilities, vehicles, tools, etc.

Materials - the raw materials, supplies, components, packaging, fuel, forms, source documents, raw data, etc.


Process Elements (2)

Methods - standards, procedures, guidelines, instructions, techniques

Measurements - the capturing, recording, summarizing, and reporting of quantitative data generated by the process during operation

Environment - working conditions under which the process operates


The Process System (2)

The six process elements are distinctive but interdependent. Outputs (products and services) are the result of their systemic interaction.

W. Edwards Deming: The “common causes” inherent in the process system account for 94% of process failures. A bad system will always beat a good performer.


Cost of Quality (1)

Cost of Quality is defined as the cost of keeping customers satisfied. It includes all costs incurred to ensure that customer requirements are ultimately met.

Components: Cost of prevention - costs incurred

to prevent failures in each process element


Cost of Quality (2) Cost of appraisal - costs of

inspection, testing, measurement, and information-gathering to determine the state of the process

Cost of non-conformance - the costs of failure or poor quality. Two types:

Internal failure costs - incurred when failures are detected in-house, before sending output to the customer

External failure costs - incurred when failures are detected by the external customer.


Cost of Quality (3)

Quality experts estimate that costs of non-conformance are equal to 25% - 35% of gross sales or revenue.

Not all CONCs are visible because conventional accounting systems do not distinguish between productive vs. non-productive uses of resources.


The Cost of Non-conformance Iceberg

hidden costs

visible costs


Cost of Quality (4)

What should happen:

External failure cost

Internal failure cost

Prevention cost

Appraisal cost

Costs

T i m e

Savings

Total costswith improvedprocess quality


Process Reliability: How High? Process reliability is the ability of

the process to repeat its operations and results in a predictable and desirable way.

Acceptable Quality Levels: are 95%, 98%, and 99% reliability good enough?


99.9% Reliability

If the human heart were 99.9% reliable, it would miss 36,817 beats a year (@ 70 / minute), equivalent to 8.8 hours without a heartbeat.


6-sigma Reliability

99.99966% reliability or 3.4 failures per million

Equivalent to missing only one free throw out of 300,000 attempts.


Overall Process/System Reliability

R 20 10

5

0.95

0.98

0.99

0.999

0.36

0.67

0.82

0.98

0.60

0.82

0.90

0.99

0.77

0.90

0.95

0.995

Number of steps or elements


The Gemba (Workplace) Kaizen places heavy emphasis on

seeking improvements in the gemba, the work-place where processes are in operation and where value is created for customers.

The opportunities for improvement in the gemba are infinite.


Five Gemba Principles (1) When an abnormality takes place,

go to the gemba first to get first-hand information.

Check with the gembutsu (the “real things” inside the gemba: employees, materials, equipment, records, actual errors, working conditions, etc.).

Take temporary countermeasures on the spot to relieve the situation.


Five Gemba Principles (2) Trace the root causes of the

abnormality and take permanent countermeasures that will prevent recurrence.

Standardize all improvements made.


Traditional Organizations and Their Limits Focus on results only, ignoring the

process Focus on individual functions,

rather than on the total system Plenty of blaming and judgmental

behavior when things go wrong, rather than searching for permanent solutions


Superordinate Principles Process and Results Total Systems Focus Non-blaming/Non-judgmental

Behavior


Process and Results (1) A process is a series of interrelated

activities that transform inputs into desirable and predictable outputs.

Characteristics: On-going, continuous Not based on existing organizational

structures; usually cuts across boundaries Often unnamed and unrecognized


Process and Results (2) Typically not many; around 10-12

major ones in an organization Ideally, should start and end with the

customer or recipient of the output. Understanding business processes

is essential to implementing effective and efficient improvement programs.


Process and Results (3) Process creates results. If results

are not satisfactory, the only permanent way to improve them is to improve the process first (cause and effect).

Results are needed to verify if process improvements are working.

Therefore, there must be a balanced emphasis on both process and results.


Total Systems Focus A system is an integrated whole

made up of distinct but interdependent and interacting parts.

The only real improvement is that which enables the entire organization to serve customer requirements better.

Systemic problems can only be solved through cross-functional teamwork.


Non-blaming/Non-judgmental Behavior

A blaming culture causes people to hide problems.

Problems are really opportunities for improvement in disguise.

Focus on the problem and make people problem-solvers.

“The first time you get angry is the last time you get the truth.” (Ishikawa)


Seven Basic Concepts (1) SDCA to PDCA The next process is the customer. Quality first Market in Upstream management Speak with data Variability control and recurrence

prevention


SDCA to PDCA Standardization and Improvement

S

DC

A P

DC

A


The Next Process Is the Customer. The Customer-Supplier Chain

Three Rules:

Your Supplier

Your Process

Your Customer

inputs outputs

Do not accept defects.

Do not make defects.

Do not pass on defects.


Quality First The quality of the process must

receive first priority, ahead of Cost or Delivery.

A high quality process produces high quality products at least cost and with the shortest cycle time (enabling on-time delivery).


Market-in

A philosophy that seeks to find out factually what customers need and want, and then designs the product or service, and the processes that create and deliver them, to suit customer requirements.

Product-out: We know better than the customers; we tell them what to do. We do what is convenient for us, not for them.


Upstream Management

Service

ServiceConcept

ServiceStrategy

ServiceSystems

ServiceStaff

Trial Run

Full-scaleOperations

Follow-upService


Speak with Data

Data mean facts. Identify problems with data, analyze

causes with data, evaluate solution alternatives with data, verify success with data.

Gut-feel and past experience are useful but not enough. They must be validated with data.


Variability Control and Recurrence Prevention

Problems are caused by failures occurring in man, machines, materials, methods, measurements, or environment.

It is necessary to identify the root causes of a problem and to adopt countermeasures that eliminate them, to prevent recurrence.

Ask “Why?” 5 times to trace root causes.


Process Muda (1)

Muda is the Japanese word for waste. The presence of muda in a process

deteriorates quality, increases costs, and delays delivery by lengthening the cycle time.

Muda is non-value-adding and therefore unproductive.


Process Muda (2)

Overproduction - Each work station or process stage tries to operate at full capacity, leading to a build-up of WIP or FGI. These hide problems by making them tolerable, although at high cost, and prevent them from being addressed. This is the “mother of all muda.”


Process Muda (3)

Inventory - Excessive supplies and parts are costly to carry: cost of tied-up capital, storage, security and pilferage, supervision, insurance, obsolescence and deterioration.

Waiting - Waste of time when people and work stations are capable of work but are idle.


Process Muda (4) Transportation - Additional cost and

time created by transferring the location of people, materials, or products without any value being added.

Motion - Created by people being made to exert physical efforts that merely add to fatigue and time but do not create value.


Process Muda (5)

Overprocessing - Created when the process is performing work that is unnecessary from the customer’s point of view.

Producing failures - Process failures like defects and errors result in customer dissatisfaction, higher costs, and delays.


Process Muda (6)

In most organizations, mudas are considered normal and have been tolerated over a long period of time. Many are even in budgets.

Every muda removed and prevented from recurring improves process quality and reduces cost and cycle time, thereby automatically increasing productivity.


Process Flowcharting (1)

The first step in identifying muda is to draw a flowchart of the process.

A flowchart is a graphical representation of a process. It is essential to process analysis and improvement.


Process Flowcharting (2)

The flowchart, to be useful, must be the “as is” flow (based on the actual sequence of activities), not necessarily the theoretical one in the manuals.

The best sources of information are the people who are actually working on the process.


Basic Symbols (1)

Beginning and end

Operation

Sub-process

Wait/delay


Basic Symbols (2)

Transportation

Storage

Connector A


Basic Symbols (3)

Direction of process flow

Document

DecisionY

N

?


START

Customer Dept. X Dept. Y Dept. Z

A

A

BN

Y

B

C

C

D

N

Y

D

N

Y

E

E

FN

Y

END

FTotal Cycle Time:

Min.: ___hrs

Max.: ___hrs

Ave.: ___hrs

Total Distance Traveled:

Min.: ___m

Max.: ___m

Ave.: ___m

OK?OK?

OK?


Identifying Muda (1) Ask the following questions:

What are we doing? Can we avoid doing it at all?

Who is doing it? Can it be done better by someone else (e.g., a subcontractor)?

Where are we doing it? Can it be done better somewhere else?


Identifying Muda (2) When and how often are we doing it?

Can it be done better at other times or with another frequency?

How are we doing it? Can it be done better through another way?

If it is done manually, can we automate it?

Can it be done simultaneously or in parallel?

Can we apply Information Technology and tele-communications effectively?


Identifying Muda (3)

If there is no clear value-added, then that particular activity is muda and should be eliminated.

Draw a new, “should be” flowchart incorporating all the muda-eliminating features.

Create, document, and continuously improve standards for each process element. Use the standards for training staff.


Muda Elimination The process should be revised to

eliminate identified muda. Every such muda eliminated and prevented from recurring reduces costs and cycle time and improves process quality.

The opportunities for improvement through the continuous elimination of muda are infinite.


Service Quality (1)

Service means the provision of intangible products, or work done for someone else.

It is also the work performed to help internal customers achieve their objectives.

Where products are similar or equivalent, service is the competitive edge.


Service Quality (2)

Characteristics of service operations: The product, or the greater part of the

“product package”, is intangible. Measurement is more difficult. Production and consumption are

simultaneous; there is little chance of pre-delivery inspection.

There are frequent person-to-person contacts (“moments of truth”) between customers and front-line personnel.


The Service Triangle

Service Strategy

Service System

Service Staff

CUSTOMER


Service Gaps (1)

Gap 1 - The inability to discern correctly what customers really need and expect

Gap 2 - The inability to translate knowledge of the customers’ needs and wants into service process standards

Gap 3 - The inability of operating forces to comply consistently with service process standards


Service Gaps (2)

Gap 4 - The inability to communicate effectively with customers what the supplier is doing to meet expectations; also, the raising of these expectations through a propensity to overpromise.

Gap 5 - The inability to effectively and efficiently satisfy customer needs and wants, as judged by the customer.


Service Quality Dimensions (1) RELIABILITY - Consistent ability to

satisfy the customer’s needs and wants RESPONSIVENESS - Fast action on

customer orders, requests, inquiries, or complaints

ASSURANCE - The ability to demonstrate competence and to give the customer peace of mind before the transaction takes place


Service Quality Dimensions (2) EMPATHY - The ability to place oneself

in the customer’s shoes and treat him/her as one wishes to be treated

TANGIBLES - The physical appearance of the service supplier’s staff, facilities, equipment, forms, vehicles, and other resources.


Group Assignment Instructions for Session 5

(1) Observe the process flow in either

the ER or the OPD of a hospital (either public or private).

Draw the actual, “as is” flowchart of this process.

Analyze the “as is” flowchart to identify all muda in the process.

Set a SMART improvement goal.


Group Assignment Instructions for Session 5

(2) Formulate countermeasures that

will eliminate all the identified muda and prevent their recurrence.

Draw the revised, “should be” flowchart incorporating all the countermeasures.

Quantify the benefits and costs of implementing the improvements.

Create an implementation plan.


Implementation Planning (1)

Elements of an implementation plan:

A statement of the specific, measurable, attainable, realistic, and time-bound end-results desired by customers.

A series of activities in the proper sequence to achieve the goal.

The persons responsible for each activity.


Implementation Planning (2) A target completion date for each

activity. Measurable or tangible indicators

of success


Sample Goal Statements Our goal is to reduce the average cycle

time of the __ process at __ from __ days to __ days by the end of January, 20__.

Our goal is to reduce the level of errors in the ____ process at ____ from ___% to ___% by November 30, 20__.

Our goal is to reduce the annual cost of the ___ process at ___ from P__ to P__ by October 31, 20__.


The How-how Diagram (1) It is a tree diagram that repeatedly

asks the question: “How?” to generate the detailed activities and requirements for successful attainment of a goal.

Each answer is written into the diagram.

The process ends when it is no longer logical to continue.


The How-how Diagram (2) How?


Action Plan Matrix

3.0

2.0

1.0

Measu-rable Indicator

Target Completion Date

PersonResponsible

ActivityNo.


Implementation Planning (3) Resources required (what kind,

how many/how much, when needed, cost)

Type Quantity When Est. Cost


Implementation Planning (4) Monitoring plan (setting-up of

imple-mentation monitoring mechanism)

Report Contents Sent to Frequency


Implementation Planning (5) Standardization Training of staff


Sequence of Topics in the Report and Presentation (1) The process, its outputs, and its

customers The current or “as is” flowchart The mudas identified in the current

process Countermeasures The proposed revised flowchart


Sequence of Topics in the Report and Presentation (2) Quantification of benefits and costs Implementation plan

Goal Statement How-how Diagram Action Plan Format Resources Required Monitoring Plan


Sequence of Topics in the Report and Presentation (3) Standardization Training of staff in the new process


Alternative to the Final Exam (1)

Needed: students who are willing to work on a research paper in lieu of the final exam.

Topic: “Evaluation of the System for Handling and Disposal of Biological, Hazardous, and/or Toxic Wastes in a Hospital”

Describe the laws and DOH regulations concerning such wastes (the standards).



Describe and evaluate the degree of compliance of a specific hospital to such regulations during the last 3 years: How the hospital classifies its waste The annual volume or quantity of each waste

category How the hospital handles and disposes of

each waste category (flowchart, with diagrams/photos)

Deficiencies and areas for improvement Recommendations



Hospitals: The Medical City Pasig City General Hospital Quirino Memorial Medical Center East Avenue Medical Center Rizal Medical Center Philippine Orthopaedic Center St. Luke’s Medical Center Other private or public hospitals

operations management1 operations management: improving quality and productivity through processes...

Documents

operations management7the

concepts of process

process flowchartingapply

process equipment

system of management

changing environment

economic environment

key customers