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Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
1
Business Systems Business Systems --Operations ManagementOperations Management
Facilitator:Facilitator:Dr. Jonathan FarrellDr. Jonathan Farrell
Session 2 – Planning & Control, Operations Improvement
2
This EveningThis Evening’’s Programs Program
•• LittleLittle’’s Law s Law –– Some more examplesSome more examples•• The Nature of Planning & ControlThe Nature of Planning & Control•• Operations ImprovementOperations Improvement•• Case Study Case Study –– Geneva Construction & Risk (pp609Geneva Construction & Risk (pp609--
612)612)
2
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
3
Operations resources Customer requirements
DemandSupplyDelivery of products
and services
The operation The market
Planning and ControlPlanning and Control
Required time, quantity and quality of products
and services
4
What is planning and control?What is planning and control?
Supply of products and
services
Planning and control
Demand for products and
services
The operation’s resources
The activities which reconcile
supply and demand
The operation’s customers
3
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
5
Planning is deciding
Control is
what activities should take place in the operation
when they should take place
what resources should be allocated to them
understanding what is actually happening in the the operation
deciding whether there is a significant deviation from what should be happening
(if there is deviation) changing resources in order to affect the operation’s activities
6
Significance of planning or controlSignificance of planning or control
Time Time horizonhorizon
Hours / days
Days /weeks /months
Months / years
MediumMedium--term Planning and Controlterm Planning and ControlUses partially disaggregated demand forecasts
Determines resources and contingencies
Objectives set in both financial and operations terms
LongLong--term Planning and Controlterm Planning and ControlUses aggregated demand forecasts
Determines resources in aggregated form
Objectives set in largely financial terms
ShortShort--term Planning and Controlterm Planning and ControlUses totally disaggregated forecasts or actual demand
Makes interventions to resources to correct deviations from plans
Ad hoc consideration of operations objectives
PLANNING
CONTROL
4
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
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Planning and control needs….
Information on Demand levels
Information on Resources
8
Objectives of Operations Planning and Objectives of Operations Planning and ControlControl
Quality ?
Speed ?
Dependability ?
Flexibility ?
Cost ?
5
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
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QualityQuality
# of defects per unit
# and level of customer complaints
Warranty claims
Mean time between failure (MTBF)
10
SpeedSpeedFast throughput
Responsive service to customers
Low work-in-progress
Low overheads
Exposed problems
6
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
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DependabilityDependabilityThings happen when they should
More stability
More quality ‘potential’
Less wasted time/effort
Facilitates improvement
12
FlexibilityFlexibility
Time needed to develop new products / services
Range of products & services
Average batch size
Time to change schedules
7
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
13
CostCost
Minimum delivery time / average delivery time
Utilisation of resources
Labour productivity
Cost of inspections (Quality Control)
14
The nature of supply and demandThe nature of supply and demand
Purchase Make Deliver
DP
Purchase Make Deliver
Purchase Make Deliver
DP
Make to stock
Make to order
Resourceto order
PD
P = total throughput time D = Demand timeP = total throughput time D = Demand time
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Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
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ASSEMBLE TO ORDER
Purchase
OperationOperation
Make Assemble Deliver
DP
Order
16
Resource to order
Make to order
Make to stock
Dependent demand
Independent demand
Each product or service large compared with total capacity of the operation
Each product or service small compared with total capacity of the operation
9
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
17
Pull and push philosophies of Pull and push philosophies of planning and controlplanning and control
CENTRAL OPS. PLANNING AND CONTROL SYSTEM
Work centre
DEMANDWork centre
Work centre
Work centre
Instruction on what to make and where to
send it
FORECASTOR
PUSH CONTROLPUSH CONTROL
18
Work centre
Work centre
Work centre
Work centre DEMAND
Request Request Request Request
Delivery Delivery Delivery Delivery
Pull and push philosophies of Pull and push philosophies of planning and controlplanning and control
PULL CONTROLPULL CONTROL
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Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
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Dependent and independent demandDependent and independent demand
Dependent demande.g. input tyre store in car plant
Demand for tyres is governed by the number of cars planned
to be made
Demand for tyres is largely governed by
random factors
ACE TYRES
Independent demande.g. tyre fitting service
20
Quality lossesSlow running
equipmentEquipment
“idling” “Breakdown”failure
Set-up and changeovers
Not worked (unplanned)
Valuable operating time
Maximum available time
Not worked (planned)
11
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
21
Approaches to operations planning Approaches to operations planning and controland control
The big picture plan and control all the operation’s resources together
Local decision rules set decision rules for each part of the operation to take its own decisions
22
SchedulingLoading
Sequencing Monitoring and control
When to do things?
In what order to do
things?
How much to do?
Are activities going to
plan?
The activities of planning and controlThe activities of planning and control
12
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
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0
20
40
60
80
100
120
140
1 2 3 4 5 6
Load in std. hours
Capacity
0
20
40
60
80
100
120
140
1 2 3 4 5 6
Load in std. hours
Capacity
Work centres Work centres
Finite and Infinite loadingFinite and Infinite loading
Finite LoadingFinite Loading Infinite LoadingInfinite Loading
e.g. # of passengers on a planee.g. # of passengers on a plane e.g. # of patients arriving at e.g. # of patients arriving at Emergency departmentEmergency department
24
E.g. Sequencing
• Various sequencing rules are used in operations:
- customer priority;
- due date;
- LIFO - last in, first out;
- FIFO - first in, first out;
longest operation time first;
- shortest operation time first.
Local decision rulesLocal decision rules……..
-
13
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
25
Transformation
Intervention
Plans
Compare / replan
Monitor
Input Output
The control feedback loopThe control feedback loop
26
Activity A Activity B Activity C Activity D Activity E
Buffer of inventory
Bottleneck drum sets the beat
Communication rope controls prior activities
The drum, buffer, rope, conceptThe drum, buffer, rope, concept
14
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
27
VolumeVolume--Variety influences on planning Variety influences on planning and controland control
Volume Planning horizon
Low
High
Variety
High
Low
Main planning decision
Control decision Robustness
Short
Long
Timing
Volume
Detailed
Aggregated
High
Low
28
Making processes
better
Preventing processes
becoming worse
Managing operations process improvement Total quality
management Failure prevention and
recovery
Operations process
improvement
Operations Improvement Operations Improvement
-- A ModelA Model
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Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
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HowHow operations can measure their performanceoperations can measure their performance
Cost
Dependability
FlexibilitySpeed
Quality Cost
Dependability
FlexibilitySpeed
Quality
Market requirements and operations performance change over time
Operational performance Market requirements
30
100
90
80
70
60
50
Absolute performance = 100%
Customer expectation = 98%
Target performance = 95%
Competitor performance = 81%
Now
Per
cent
age
of d
eliv
erie
s on
-tim
e
Performance against customer expectations is POORHistorical performance is GOODPerformance against target is POORPerformance against competitors is GOODAbsolute performance is POOR
Delivery performance is 87% Delivery performance is 87% --Is this good, bad, or indifferent ?Is this good, bad, or indifferent ?
XX
XX
XX
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Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
31
Innovation... Innovation... vsvs ...Kaizen...KaizenShort-term, dramaticLarge steps Intermittent Abrupt, volatile Few championsIndividual ideas & effort Scrap and rebuild New inventions/theories Large investment Low effort Technology Profit
Short-term, dramaticLarge steps Intermittent Abrupt, volatile Few championsIndividual ideas & effort Scrap and rebuild New inventions/theories Large investment Low effort Technology Profit
Effect Pace
TimeframeChange
Involvement Approach
Mode Spark Capex
Maintenance Focus
Evaluation
Long-term, undramaticSmall steps Continuous, incrementalGradual and consistentEveryone Group efforts, systematicProtect and improveEstablished know-howLow investment Large maintenance effortPeople Process
Long-term, undramaticSmall steps Continuous, incrementalGradual and consistentEveryone Group efforts, systematicProtect and improveEstablished know-howLow investment Large maintenance effortPeople Process
32
Intended performance improvement with Intended performance improvement with breakthrough improvementbreakthrough improvement
Time
Per
form
ance
Breakthroughimprovements
17
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
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Actual performance improvement with Actual performance improvement with breakthrough improvementbreakthrough improvement
Time
Per
form
ance
Actual improvement
34
PPerformanceerformance improvement with continuous improvement with continuous improvementimprovement
Time
Per
form
ance
“Continuous”improvement
Standardise and maintain
Improvement
18
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
35
Define
Measure
AnalyzeImprove
Plan Do
CheckAct
(a) The plan-do-check-act, or “Deming” improvement cycle, and
(b) The define-measure-analyze-improve-control, or DMAIC six sigma improvement cycle
Control
(a) (b)
Plan
36
Define-identify problem, define
requirements and set the goal
Measure-gather data, refine problem and measure inputs and
outputs
Analyse-develop problem hypotheses, identify “root
causes” and validate hypotheses
Improve-develop improvement ideas,
test, establish solution and
measure results
Control-establish performance
standards and deal with any problems
19
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
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PDCA Cycle repeated to createPDCA Cycle repeated to createcontinuous improvementcontinuous improvement
Time
Per
form
ance
“Continuous”improvement
Plan
Do
Check
Act
38
Continuous and breakthrough improvementContinuous and breakthrough improvement
Time
Continuous improvement
Breakthroughimprovement
Cum
ulat
ive
impr
ovem
ent
20
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
39
(a)“Breakthrough” improvement, (b) “continuous”improvement and (c) combined improvement patterns
Perf
orm
ance
Time
Perf
orm
ance
Time
Perf
orm
ance
Time
Planned “breakthrough”improvements
Actual improvement
pattern
Continuous improvement
Combined “breakthrough”and continuous
improvement
(a) (b)
(c)
40
SHITSUKE5.Discipline
Follow agreed procedures
SEIKETSU4.Personal cleanlinessStart with your own person
SEISO3.Keep the workplace clean
SEITON2.Put things in orderTools and parts in the
right place
The FiveThe Five--Step Kaizen Step Kaizen MovementMovement
SEIRI1.Straighten up
WIP, Unnecessary toolsUnused machineryDefective products
Paperwork and Documents
21
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
41
A four-step approach to problem solving
Observe the test results(CHECK)
Act on the opportunity(ACTION)
Recognise the opportunity(PLAN)
Test the theory to achieve the opportunity
(DO)
The Deming (Shewart) Cycle
42
Breakthrough Improvement (BPR)Breakthrough Improvement (BPR)
• Capture information only once – at the source• Put decision point where the work is performed• Treat geographically dispersed resources as though
they were centralised• Link parallel activities instead of integrating their results
Principles of BPRPrinciples of BPR
22
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
43
Characteristics of Successful BPRCharacteristics of Successful BPR
•• Aggressive performance targetsAggressive performance targets
•• Commitment of senior managementCommitment of senior management
•• Audits of customers, benchmarking of best practiceAudits of customers, benchmarking of best practice
•• Dedicated executive resourcesDedicated executive resources
•• A comprehensive pilot to test the reA comprehensive pilot to test the re--engineered processengineered process
44
Candidates for BPRCandidates for BPR
• Organisation Structures more than 5 Years Old.• Information Systems that are “Record Keepers”• “Island” Departments e.g. Purchasing, Accounts
Payable• Organisations with Multiple Areas of Data
Collection/Information Gathering • Any Process where the Control is Separate from the
Activity
23
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
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BPR BPR -- The ProblemsThe Problems
Up to 70% of BPR Exercises fail due to:• Lack of Commitment• Holding on to “Sacred Cows”• Not Delegating Responsibility and Authority • Using BPR in Isolated Areas of the Organisation• Lack of Clear Goals and Objectives• Ineffective Use of Information Technology
46
Common techniques for process improvementCommon techniques for process improvement
Input/output analysis Flow charts Scatter diagrams
Cause-effect diagrams Pareto diagrams Why-why analysis
Input Output
xx
x x
x xxx
x
x x
Why?
Why?
Why?
24
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
47
TradeTrade--off relationship between objectivesoff relationship between objectives
Performance objective 1
Performance objective 2
Improve performance by raising the pivot
48
PrioritiPrioritissinging Competitive ObjectivesCompetitive Objectives
Priorities should be determined by ......
The
IMPORTANCE
of eachcompetitive
objective
Your
PERFORMANCE
in each ofcompetitiveobjectives
IMPROVEMENT PRIORITIES
25
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
49
Com
petit
ive
Ben
efit
Achieved performance
qualifyinglevel
ORDER-WINNINGOBJECTIVES
QUALIFYINGOBJECTIVES
LESS IMPORTANTOBJECTIVES
+ve
neutral
-ve
Low High
Com
petit
ive
Ben
efit
Achieved performance
+ve
neutral
-ve
Low High
Com
petit
ive
Ben
efit
Achieved performance
+ve
neutral
-ve
Low High
50
2 - Provide an important advantage with most customers
3 - Provide a useful advantage with most customers
4 - Need to be up to good industry standard
5 - Need to be around median industry standard
6 - Need to be within close range of the rest of the industry
7 - Not usually important but could become more so in future
8 - Very rarely rate as being important
9 - Never come into consideration
For this product group does this performance objective ......
ORDER-WINNINGOBJECTIVES
QUALIFYINGOBJECTIVES
LESSIMPORTANTOBJECTIVES
9 Point Importance Scale9 Point Importance Scale
1 - Provide a crucial advantage with customers
26
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
51
PRICE
SERVQUAL (DISN.)
SERVQUAL (ORDER TAKE)
ENQUIRY LEAD-TIME
DROP QUOTE
WINDOW QUOTE
DELIVERY PERFORMANCE
DELIVERY FLEXIBILITY
VOLUME FLEXIBILITY
1 2 3 4 5 6 7 8 9
X
X
X
X
XX
X
X
X
IMPORTANCE to Customers
DOC. SERVICE X
Temperature Controlled Temperature Controlled Overnight ServiceOvernight Service
1 2 3 4 5 6 7 8 9
52
1 - Consistently considerably better than our nearest
4 - Often marginally better than most competitors
For this product group is achieved performance ........
competitor2 - Consistently clearly better than our nearest competitor3 - Consistently marginally better than our nearest competitor
5 - About the same as most competitors
6 - Often close to main competitors
7 - Usually marginally worse than main competitors
8 - Usually worse than most competitors
9 - Consistently worse than most competitors
BETTERTHANCOMPETITORS
SAMEASCOMPETITORS
WORSETHANCOMPETITORS
9 Point Performance Scale9 Point Performance Scale
27
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
53
COST
SERVQUAL (DISN.)
SERVQUAL (ORDER TAKE)
ENQUIRY LEAD-TIME
DROP QUOTE
WINDOW QUOTE
DELIVERY PERFORMANCE
DELIVERY FLEXIBILITY
VOLUME FLEXIBILITY
1 2 3 4 5 6 7 8 9
1 2 3 4 5 6 7 8 9X
X
X
X
XX
X
X
X
PERFORMANCE against Competitors
DOC. SERVICE X
Temperature ControlledTemperature ControlledOvernight Overnight SServiceervice
Estimated
54
betterthan
sameas
worsethan
lessimportant qualifying order
winning
1
2
3
4
5
6
7
8
9
123456789
IMPORTANCEFOR
CUSTOMERSLOW HIGH
PER
FOR
MA
NC
EA
GA
INST
CO
MPE
TITO
RS
GO
OD
BA
D
28
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
55
betterthan
sameas
worsethan
lessimportant qualifying order
winning
1
2
3
4
5
6
7
8
9
123456789
IMPORTANCEFOR
CUSTOMERSLOW HIGH
PER
FOR
MA
NC
EA
GA
INST
CO
MPE
TITO
RS
GO
OD
BA
D
URGENTACTION
IMPROVE
APPROPRIATEEXCESS ?
56
betterthan
sameas
worsethan
lessimportant qualifying order
winning
1
2
3
4
5
6
7
8
9
123456789
IMPORTANCEFOR
CUSTOMERSLOW HIGH
PER
FOR
MA
NC
EA
GA
INST
CO
MPE
TITO
RS
GO
OD
BA
D
Volume FlexX
Drop QuoteX
Delivery XWindow QuoteX
Servqual(DISN)X
Doc Service XXPrice/Cost Delivery
FlexX
XServqual(Order Take)
X
Enquiry Lead-Time
29
Business Systems - Operations Management
Session 2 – Planning & Control, Operations Improvement
57
Case Study Case Study –– Geneva Construction & RiskGeneva Construction & Risk
• How does the Six Sigma approach seem to differ from the TQM approach adopted by the company almost twenty years ago?
• Is Six Sigma a better approach for this type of company?
• Do you think that Tyko can avoid the Six Sigma initiative suffering the same fate as the TQM initiative?