Operational Excellence - Van Assen
Operational Excellence The origin of Operations Management and its strategic impact Prof.dr.ir. Marcel van Assen 1
Structure of this master class Definition of OpX & strategic impact of OM/OpX Physics of OpX OpX for Services vs Industry Lean six sigma for OpX Implementation of OpX
Objectives Understand the origins of OpX and the efficiency paradigm Contemporary approach impacts strategy and financial performance Know that OpX is a multi-disciplinary discipline Understand the physics of OpX (hard side): dynamics & variability Understand human dynamics of OpX: leadership Understand the differences and similarities of industrial environments and services Optimization and BPM & the use of lean and six sigma tools
What is Operational Excellence? Proposition: The objective of Operational excellence is to achieve the lowest costs: cost cutting. The focus is primarily on ultimate efficiency and the highest productivity. Quality must be realized against the lowest costs. 4
What is Operations Management? Source: Wikipedia The management area concerning the production and supply of goods, information and services, With the responsibility to realize efficient and effective operations. Het comprises 5 the management of people (incl. capacity, skills and knowledge) and resources (incl. capital, materials and technology), The distribution of goods and services to the final customer, and The analysis of queuing systems
Origins of Operations Management Adam Smith (1723–1790): Founder of the division of work with his book An Inquiry into the Nature and Causes of the Wealth of Nations (1776) Henry Ford (1863–1947) and Frederick Winslow Taylor (1856– 1915) are considered the founders of scientific management with the book The principles of scientific management (1911): 1. 2. 3. 4. 6 Detailed analysis and improvement of work methods. Thorough selection, training and development of employees. The development of procedures and the standardization of processes and activities. The division of work and responsibilities between employees and management
Modern Times (1936) 7
Strategy as an outside-in positioning dilemma Competitive advantage (supply side) Competitive Broad target Scope (market side) Small 8 Low Cost Uniqueness of product Cost leadership Differentiation Cost focus Stuck in the middle Differentiation focus
Market demands have changed dramatically since the sixties 9
Market factors impacting on operations of Western organizations Figure 1.2 Source: Goodman, M. (1995) Creative Management, Hemel Hempstead: Prentice Hall, p. 38
Simple trade-off models are not appropriate (anymore) X Product Leadership Peformance level of market leaders Minimal performance level in the industry Operational Excellence Customer Intimacy 11
Modern flexibility requirements How many varieties are there of the BMW 7series? 12
Hierarchy of (conflicting) operational objectives High Profitability Low Costs High Sales Low Unit Costs High Throughput High Utilization Less Variability 13 Quality Product Low Inventory Short Cycle Times High Customer Service Fast Response Low Utilization 13 Many products High Inventory More Variability
Efficiency / exploitation Het interne dilemma bij streven naar winst uit zich in de paradox tussen: exploitatie versus exploratie, ofwel doelmatig versus doeltreffend, ofwel efficiëntie versus effectiviteit III Focus on exploration of new value added activities IV Focus op initiatieven gericht op exploitatie (Operational Excellence) I Focus on exploration of new value added activities II Effectivity / exploration
In-class Group assignment “Putting the service-profit chain to work” Why and/or when is a service-delivery system strategic? What are the prerequisites for a service-delivery system to be strategic? How is this related to operational excellence Is dit model geldig in een non-profit situatie en waarom wel/niet?
The links in the Service profit chain Employee retention Internal service quality Revenue growth External service value Employee satisfaction Customer satisfaction Customer loyalty Employee productivity -Workplace design -Job design -Employees selection and development -Employee rewards and recognition -Tools for serving customers Profitability -Retention -Repeat business -Referral -Service designed and delivered to meet targeted customers’ need -Service concept: results for customers
The links in the Service profit chain World class service-providers understand the links between their operational drivers and the business results – there is a cause and effect chain between operational drivers and business performance Drivers Service Delivery Results
The links in the Service profit chain Employee satisfaction Employee attraction Performance Drivers Service Delivery Customer satisfaction Customer loyalty Results network
The links in the Service profit chain Drivers network Vision Leadership Strategy Process Planning & coordination Concept People & Culture Information & technology Service Delivery Results
The links in the Service profit chain Drivers network Vision Leadership Employee satisfaction Employee attraction Strategy Process Planning & coordination Concept Performance Service Delivery People & Culture Information & technology Customer satisfaction Customer loyalty Results network
Dupont-scheme
Verbeteren van de operational renewal en Continuous operational improvement.
Grote verbeteringen (operational renewal) en C.I. in kleine stapjes (operational improvement)
What is Operational Excellence? Proposition: The objective of Operational excellence is to achieve the lowest costs: cost cutting. The focus is primarily on ultimate efficiency and the highest productivity. Quality must be realized against the lowest costs. No, Operational Excellence 24 focuses on an excellent production and servicedelivery system – the excellent exploitation of an integrated operating model/system to make and deliver the products and/or services; with the objective to maximize operational profit (not a sole focus on cost); is based on excellent Operations Management; is basically a technical discipline, but so-called soft disciplines like a culture of continuous improvement and leadership are also important.
What is Operational Excellence? Proposition: The objective of Operational excellence is to achieve the lowest costs: cost cutting. The focus is primarily on ultimate efficiency and the highest productivity. Quality must be realized against the lowest costs. No, Operational Excellence focuses on an excellent production and service-
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