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Week 4: Productivity Improvement in Operations

Week 4: Productivity Improvement in Operations

“Introduction … Productivity Paradox in Organizations … Productivity Management: Philosophy, Tools & Techniques … Tools for Sustaining Productivity Improvements … Challenges in Lean Management … Wrap-Up”
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Summaries

  • Week 4: Productivity Improvement in Operations > 4.0 Introduction > Recap
  • Week 4: Productivity Improvement in Operations > 4.1 Productivity Paradox in Organizations > The Notion of Productivity Paradox
  • Week 4: Productivity Improvement in Operations > 4.1 Productivity Paradox in Organizations > Factors that Cause Productivity Paradox in Organizations
  • Week 4: Productivity Improvement in Operations > 4.2 Productivity Management: Philosophy, Tools & Techniques > The Notion of a Value Stream in any Organization
  • Week 4: Productivity Improvement in Operations > 4.2 Productivity Management: Philosophy, Tools & Techniques > Non-Value Added Activities in Business
  • Week 4: Productivity Improvement in Operations > 4.2 Productivity Management: Philosophy, Tools & Techniques > The Overall Framework of Lean Management
  • Week 4: Productivity Improvement in Operations > 4.2 Productivity Management: Philosophy, Tools & Techniques > The Two Main Pillars of a Lean Enterprise
  • Week 4: Productivity Improvement in Operations > 4.2 Productivity Management: Philosophy, Tools & Techniques > Elements of a JIT Manufacturing System
  • Week 4: Productivity Improvement in Operations > 4.3 Tools for Sustaining Productivity Improvements > Process Mapping for NVA Analysis
  • Week 4: Productivity Improvement in Operations > 4.3 Tools for Sustaining Productivity Improvements > The Process Improvement Methodology
  • Week 4: Productivity Improvement in Operations > 4.3 Tools for Sustaining Productivity Improvements > Performance Metrics for Productivity Improvement
  • Week 4: Productivity Improvement in Operations > 4.3 Tools for Sustaining Productivity Improvements > Role of Visual Control Aids in Productivity Improvement
  • Week 4: Productivity Improvement in Operations > 4.4 Challenges in Lean Management > Implementation Challenges in Lean Management
  • Week 4: Productivity Improvement in Operations > 4.5 Week 4 Wrap-Up > Summary

Week 4: Productivity Improvement in Operations > 4.0 Introduction > Recap

  • If you may recall, in the first module, we talked about performance metrics and we introduced performance measures such as cost, quality, flexibility, delivery, and also productivity.
  • If there are 100 hours of input and an equivalent 90 hours of output, we generally say it is 90% productivity.
  • In manufacturing and in operations, in service, manufacturing, and particularly from an operations perspective, productivity has a slightly finer connotation.
  • We will, in this module, try to understand what is productivity, what kind of factors influence productivity, how do we manage productivity, and what is the framework available to us to look at the whole notion of productivity.

Week 4: Productivity Improvement in Operations > 4.1 Productivity Paradox in Organizations > The Notion of Productivity Paradox

  • Before we discuss various aspects of productivity and means of improving it, it’s very important to first know that several organizations suffer from what I call it as productivity paradox.
  • In an organization, the investment in inventory could be high, but at the same time, the market may complain of shortages and nonavailability of products.
  • Low cost of labor but not low cost of delivered products and services.
  • In several other situations, an organization may offer a fairly large service and product portfolio, but customers may not yet be happy with the products and services offered by the company.
  • Let us take an example of a hypothetical company which has four product lines, product A to product D. And let us assume the company introduced product C and D a little later, which are supposed to be good products.
  • Now there are some numbers here, you have the total distance traveled within the manufacturing set up to complete the product A in terms of raw material sub-assembly, final-assembly everything put together in meters.
  • You have a similar number 548 for product B, 959 for product line C, and, of course, 733.6 for product D. See, essentially the problem here, as you see, is although product C is supposed to be a good product, what is happening is it is traveling too much in the shop floor in the name of manufacturing that it results in high cost and lead time.
  • At the end of the day, a good product is not competitive in the marketplace on account of cost and lead time.
  • You know, there is no productivity as such because, a good product is not going to be sold in the market.
  • Let’s look at some details regarding to standard orders, and this is based on 79 sample orders.
  • What you see here is the various stages, you know, you start with order handling, then scheduling, production, assembly and testing, packing, and invoicing.
  • These are the stages, and based on these 79 sample orders, the numbers have been captured.
  • This product on account of perhaps a long lead time, might not find it to be competitive in the marketplace and the reason for it is there is a problem with scheduling, which is taking 46% of the total lead time.
  • In the same example, let’s look at the situation with respect to special orders.
  • The earlier table was related to standard orders, and this is a data based on let’s say 13 sample orders.
  • What is astonishing here is the two activities namely the order handling and scheduling together contribute about 84% of the total lead time.
  • Order handling essentially means understanding the customer requirement, you know, because it is a customized order, so one needs to understand what exactly is the kind of customization required, one has to estimate the cost for the customization, communicate it with the customer, get the approval of the customer, and then it goes to the second stage.
  • It looks like while we have a very good manufacturing system, this particular company, this product can potentially become uncompetitive because they don’t seem to have a very good order handling and scheduling system, which takes, you know, in terms of number of days it takes, about 150 days, five months.
  • Here is again another company, let’s say, manufacturing and selling some capital goods say machine tools or something like that.
  • Customer goes to the marketing branch office and says, “I am looking for a certain machine tool with following kind of requirements which are very peculiar to me.
  • Is it possible for you to give me that machine?” So, the branch office picks up the order and sends it to the marketing headquarters.
  • The marketing headquarters collects several such order enquiry from various parts, various places in the country or globally whatever.
  • Then-so, once this process is over, then of course the information, the costing has made an estimate of the cost, the process planning has finalized its specs, the design has finalized, so this whole information goes back in the same way, it goes back to the marketing headquarters which in turn communicates it to the area office which picked up the order inquiry and then the area office, marketing office goes backs to the customer and says, “Yes, we can give you this.
  • ” And all these-perhaps the lead time could be let’s say, two to four weeks depending upon what kind of activities are involved.
  • What do we infer? From all these examples that we have seen so far, first thing, excellent performance in some parameters but not in order winning is a reality.

Week 4: Productivity Improvement in Operations > 4.1 Productivity Paradox in Organizations > Factors that Cause Productivity Paradox in Organizations

  • We saw several examples of productivity paradox in the previous video.
  • We need to replace output with useful output in order to truly compute productivity.
  • What is order winning is eventually determined by the end customers, not by an organization offering products and services.
  • Before we discuss issues related to improving productivity, we shall understand what indeed is causing productivity paradox in organizations.
  • Whenever we are focusing on local optima but not on global optima, we might get stuck with productivity paradox.
  • Secondly, your productivity is moderated by that of your supply chain.
  • Not paying enough attention to the supply chain could be a costly error today, and it can introduce productivity paradox.
  • Because one part of the supply chain might improve productivity the other entity in the supply chain may not do anything with respect to productivity.
  • Things can be bad. The third reason why productivity paradox can happen is, yesterday’s order winners may become today’s order qualifiers.
  • Another reason why productivity paradox happens is there is a value migration which happens on account of all these and if organizations don’t align themselves to these changes they could find themselves in a situation of productivity paradox.
  • Given these aspects of productivity paradox, let us see what are some of the ground rules for managing productivity in today’s organizations.
  • Rule one, what creates value alone can contribute to productivity.
  • These three ground rules set the stage for our journey in managing important issues of productivity in organizations.

Week 4: Productivity Improvement in Operations > 4.2 Productivity Management: Philosophy, Tools & Techniques > The Notion of a Value Stream in any Organization

  • If you may recall, in the last video, we argued that multiple entities significantly influence and contribute to the value creation process for the ultimate customer.
  • We’ll start with this issue first by defining the notion of a value stream.
  • In every business, there is a value chain consisting of multiple entities.
  • The value originates from one side and flows through the chain to the ultimate customer.
  • Some entity conceptualizes the product or a service for the targeted customer, which we may call it as value proposition.
  • Once this product of service is conceptualized, there are multiple entities which take part in creating, adding to this value proposition, many things, and finally handing it over to the ultimate customer.
  • All these multiple entities have to play a role in order to create a value for the customer who are intense to actually buy a car and make use of it.
  • All these and the kind of things that they do in some sense must create the value stream for this holiday package as we saw in the case of a passenger car.
  • In all business situations, similar to these two examples, there is a path which is created for the value to flow.
  • As though there is a kind of a channel, through which value can flow, and this is called a value stream.
  • Since we have a new term called value stream, let’s find out what is the difference between the following two statements.
  • The value stream associated with company A competes with the value stream associated with the company B. Now the question is, what is the difference between these two statements? Is it just because I introduced the term value stream I am bringing an alternative definition? Or is this conveying something very different, something more deeper? Let’s explore this particular line of thinking.
  • In both the above examples, although there was a potential to deliver value, the value stream was not well-configured.
  • There were several blockages in the value stream, and therefore the value did not flow to the ultimate customer.
  • Clearly, an organization with an inappropriate value stream is likely to suffer from productivity paradox because something good is happening somewhere, it is not getting translated elsewhere, everybody loses in the process.
  • Managing productivity requires a ability to address the issue of value.

Week 4: Productivity Improvement in Operations > 4.2 Productivity Management: Philosophy, Tools & Techniques > Non-Value Added Activities in Business

  • If we look back at the examples in the earlier videos what we will notice is that not all activities in an organization add value.
  • Counting the number of parts and then entering it into a inventory data and then checking integrity of data and so on are all not value adding.
  • Overproduction and double handling, needlessly producing and accumulating inventories can be another source of waste in organizations.
  • Let’s summarize all these with a few categories of waste.
  • The first category of waste could be inventory-related waste, and in a typical manufacturing organization, it starts with accumulating inventory, waiting for material to work on, stock verification, counting the number of parts, temporary storage, part shortage, all these are wastages related to inventory.
  • All these are snip shots of inventory related waste in manufacturing and service organizations.
  • How does it manifest in manufacturing organizations? In terms of defects and rework, machine breakdowns, watching the machine run, which means, there is these processes are not well- designed and planned.
  • Payments are not made on time; wrong service delivery which leads to a certain kind of a service failure; proposals not completed on time for, let us say, submitting a bid; customer orders taking too long to be filled in-these are some of the instances of waste due to processes in manufacturing and service organization.
  • In manufacturing organizations, it means situations like looking for tools, carrying heavy pieces, transferring parts over long distances, double handling, overproduction-all these are typical instances where there is waste due to poor planning.
  • Well, in service organizations also, we have complicated office layouts; you have poorly planned meetings; documents or information handled too many times before a decision is made; too many people involved in decision making, extra signature, and all that; teams with incomplete or no direction for carrying out work which means there is waiting, lead time increasing, customer complaining delays in getting their service request addressed, and so on-all these are examples of waste due to planning in manufacturing and service organizations.
  • The more these activities are carried out, the greater negative impact it has on time, cost, quality, and delivery.
  • The third common thing across all these is all these activities invariably add to value subtraction, and therefore these activities primarily account for the productivity to suffer, not to improve.
  • Reducing nonvalue-adding activities is going to be an important aspect of productivity management in all organizations.

Week 4: Productivity Improvement in Operations > 4.2 Productivity Management: Philosophy, Tools & Techniques > The Overall Framework of Lean Management

  • In this module on productivity, we started with the notion of productivity paradox.
  • Then we talked about value stream, value adding, etc.
  • From our earlier discussions, it is obvious that in order to manage productivity, our entire focus must be on the issue of value and by contrary, removal of waste or nonvalue-adding activities from one’s business.
  • Let’s now look at a framework to achieve this in structured as well as a sustained manner.
  • The framework is often referred to as lean management.
  • Many organizations want to go lean, mean, and hungry in order to remain competitive in the market place.
  • Let’s start with the definition of what a lean enterprise will be and then move on.
  • A lean enterprise primarily deploys an organizational mechanism and this organizational mechanism is for defining value and identifying the value stream.
  • The value stream we can think of different situations.
  • Another possibility is, order to delivery or raw material to finished product.
  • In a lean enterprise, there will be a continuing conference of all concerned parties.
  • It’s everyone in the organization and why do they want to collaborate? To create a channel for the value stream and to dredge up all the Muda from the system.
  • As some of you might be aware, Muda means waste, Mura means unevenness, and Muri means excess.
  • These are different ways of how one needs to clean up the system so that the value can flow in the value stream.
  • If we go by this definition of a lean enterprise, then we need the following.
  • First of all, we need a way to define value and map a value stream for the products and services.
  • Secondly, we need some mechanisms which must be very structured for removing the Muda from the system on an ongoing basis.
  • Further, we will also be curious to know what would be the ultimate benefits of going lean? So, we shall use a schematic to address these issues.
  • We will start with the basic premise of a lean management.
  • As you see here, the basic premise of lean management is to eliminate waste which we have been talking about and thereby create a value stream.
  • That’s the basic idea of a lean management or a lean enterprise activities is all about.
  • You have two basic enabling mechanisms-one we call it as Total Quality Management and other we call it as Just In Time.
  • An organization which really goes lean needs these two.
  • We need to change the physical structure of manufacturing, setup time reduction, is very, very important.
  • Then there is something called smart lot size processing.
  • There is a planning premise called pull-type scheduling and simplified operational control.
  • Some of these are some of the planning methodologies.
  • Then on this side you have set of ideas which are all about process mapping, continuous improvement, benchmarking, quality circles.
  • This is a small representative set just to give a sense of the kind of tools and techniques that we may use to create a lean enterprise.
  • Then finally the question is, what is the accrued benefit? With all these that we are doing, what will happen? And in very simple terms, we are saying, less in fact will become more productive.
  • That’s the easiest way to say, “What is the ultimate benefit of being lean?” And what we mean by this is, with the same capacity we’ll be able to produce more.
  • Or for a certain kind of an output we may require less resources.
  • Whichever way you want to look at it, that’s what we mean by saying less is in fact more productive.

Week 4: Productivity Improvement in Operations > 4.2 Productivity Management: Philosophy, Tools & Techniques > The Two Main Pillars of a Lean Enterprise

  • Just In Time and Total Quality Management are integral aspects of any lean management program.
  • An organization aspiring to become lean will have to have in place a robust mechanism for practicing Just in Time and TQM. So, we shall begin our understanding of a Just In Time system by looking at the popular illustration involving a water flow system.
  • As you see here, let us say, there is a ship which needs to sail through it.
  • As we all know, in order for the ship to sail, there is a minimum ground clearance required.
  • Now the question in front of us is if there isn’t sufficient clearance for the ship to sail, which is a function of its, you know, carrying weight and so on, what do we do? So, theoretically speaking there are two possibilities.
  • One can pour water and then increase the water level to a much higher situation so that enough clearance is there and therefore the ship can sail.
  • Another possibility is to say let us chisel the rocky structure and the technical word they use is called dredging.
  • Once the required clearance is there, the ship will be able to sail without a problem.
  • One rock could be poor quality or another could be defective material, a third could be behavioral and managerial constraints, bottlenecks, and all that.
  • The question is if these are the rocks, then what is this water and what is this ship? So, the water is the quantum of inventory that the system must have.
  • You have more rocks, you need to pour more water essentially what it means is, you have more inventory in the system.
  • The ship sailing is equivalent of, let us say, daily operation rate.
  • If it is a passenger car manufacturer we are talking about, let’s say, 10,000 cars a shift and so on.
  • If it is a service system, let’s say, it’s a financial services firm then processing so many loan applications every day and so on.
  • In a Just In Time and a lean framework, inventory mean more than these.
  • What is happening here? There is a ship sailing.
  • There are rocky structures which prevent the ship from sailing.
  • We need to either fill in water, or we need to chisel the rock.
  • Essentially in a lean framework, we never fill in water.
  • It goes one step further and it says let us deliberately remove inventory.
  • Now chisel the rock and get the ground clearance and let the ship sail.
  • Let the ship sail for a few times, again bring a motor, suck some more water from this, some more rocks will prevent the ship from sailing, chisel the rock, and if you chisel the rock, again you get the ground clearance.
  • The more waste we are able to take out of the system, we say that the organization is even more leaner.
  • Much of our ability to create a lean enterprise actually lies in the nitty gritty details of setting up the required elements in the operating system to achieve this.

Week 4: Productivity Improvement in Operations > 4.2 Productivity Management: Philosophy, Tools & Techniques > Elements of a JIT Manufacturing System

  • If we go back to the water flow analogy, the waste reduction opportunities relate to our ability to modify the structural and planning methodologies in the system in such a manner that we can actually takeaway the needless inventory from the system.
  • Remember, inventory could mean materials, inventory could mean excess manpower, inventory could mean excess capacity of sorts of any kind, inventory could also mean excess space.
  • We can create some changes in structure and planning so that we’ll be able to pull out all these.
  • In a JIT system, these modifications are made by incorporating certain specific elements in planning and the physical design of the system in a few areas.
  • One, there is a requirement to redesign the manufacturing system or the operating system, if you wish to call it.
  • Two, we need to have a pull-based production planning and control system.
  • The first and the most important requirement is that the manufacturing system must be converted into a chain of internal customers.
  • You have finance; you have the marketing; of course you have the support function such as store, material, planning, and so on.
  • We take most of these basic operations and operation support resources and create them in a way that product line one will pass through it, and so they enter here and come out into, let’s say, the finished goods stores.
  • Same can happen for product line two and so on, and same can happen in all the products that we are thinking about.
  • This is what we mean by physically altering the structure of the operating system itself.
  • This new system of planning is typically called as pull-based planning, and this is very similar to a super market model.
  • Now somebody sitting at the back stores that person notices that the inventory of detergent bags, packets, are coming down, so he will initiate a certain kind of a procurement action.
  • We just saw two of them, which is, how do you change the physical structure into internal chain of customers and how do you make use of that unique structure and bring about an alternative way of planning.
  • Inventory reduction-there is something called kanban system.
  • Let’s say, you have thousand pieces of inventory between two stages.
  • Now one possibility is keep all the thousand inventory in a big basket or you convert this thousand inventory into standard containers of hundred pieces each.
  • Now what you can do? After three months, you can remove one container from the system.
  • The inventory has come down from 1,000 to 900 now.
  • This is done through what is called kanban system.
  • We should have methods of inventory reduction periodically.
  • There are many more elements like this which we need to engage on so that the water in the system comes down, so that the waste is removed, we truly add value to the customer, and that is the philosophy of lean as a mechanism of productivity management.
  • What is common to all these initiatives? Is waste in the system will come down? Now if we eliminate waste, invariably it will lead to the proportion of value-adding activities going up in the process.

Week 4: Productivity Improvement in Operations > 4.3 Tools for Sustaining Productivity Improvements > Process Mapping for NVA Analysis

  • We need a great understanding of the current process to identify where the problem is and what the likely opportunities are for improvement.
  • At some stage, it is inevitable that we dig into a process in a fair amount of detail.
  • A process mapping exercise will help us understand the potential areas for improvement.
  • Process mapping is an exercise in which various steps in the process are chronologically identified and listed down.
  • Once these steps are identified, it can be used to also find out what is the time spent, what kind of resources are consumed in the process and to what extent; all these are possible.
  • We shall take an illustrative example of a process mapping exercise to understand this in some detail.
  • What you see here is the process mapping done in the case of a particular subassembly of a product.
  • In respond to that a process mapping exercise was done.
  • Because, I didn’t want to list the whole thing and make it too complicated because there are 81 activities in all, so we have skipped a few of them.
  • Then the item is moved to the first place where it has to be processed.
  • 40, 41, and so on in all there are 81 activities before this is completed and moved to the fabrication area where final processing is done.
  • This is a typical process mapping exercise in which we list all activities one after the other.
  • Perhaps, we identify who is responsibility it is, what category of activity is this, and so on.
  • This 81 activities that we mapped, 53 of them belong to the category of waiting.
  • Whenever we do the process mapping, this is the kind of information that we can get out of the exercise.
  • Now it’s easy to find that this exercise could indeed be the basis for improving the process by eliminating the waste in this example.
  • In other words, we have dipped into a process, created the snapshot of the process in fair amount of detail.
  • Now that we have seen this process mapping result, the real questions in front of us are: what are all the ways to map a process in question? How should we go about to get this 81 activities that we got? What type of data should we collect? So, let’s try to answer these questions pertaining to a process mapping exercise.
  • We actually took those completed orders and went through the process and found out what was happening.
  • These 81 activities of a process-how did we get it? We picked up the subassembly and traced it through what happened to it.
  • A second method to map the process-collaborative discussions and charting.
  • What you can do, let’s say we will get- we want to map a process.
  • Now get some 20 people from the workplace put them into three groups, give them a large white sheet or a chart sheet or a white board, give them about half an hour, and ask them to map the process.
  • Because they are the ones who are actually performing day in and day out, so they will chronologically plot the-or-all these steps in the process in a chart.
  • Use the people, use their day-to-day working experience, and get the process.
  • You interview people in different functional areas, and based on the interview you put together, these various snapshots of what could be the process and create a process map.
  • Depending upon what is possible, these are the four ways by which one can actually do the process mapping exercise.
  • How much distance things travel, how much time-you can put a time stamp and then calculate the elapsed time, which is what we did in those 81 activities.
  • What kind of assets and people deployed you can collect that data? What category of activities-if you recall in the 81 activities we said moving, waiting, adding cost, and adding value? So, we can create our own terminology.
  • Who is responsible for this? So, these are the kind of data that one can collect, through a process mapping exercise.
  • Here is a sample of procurement process which is being mapped.
  • This is one kind of a data one can get out of a process map.
  • Basically, we can collect different types of data because the very idea of process mapping is to create more and more details about what is happening to a process because we are interested in improvement.
  • Once we have the data about the process in some detail, as we have seen here, then we are actually ready to analyze the data.
  • Out of the analysis we may come up with-maybe we’ll identify the areas that require improvement, and we may also use a certain methodology to go about the improvement of activities.
  • These are all some of the things we may want to do after we do a process mapping.

Week 4: Productivity Improvement in Operations > 4.3 Tools for Sustaining Productivity Improvements > The Process Improvement Methodology

  • In the previous video, we found how to map a process.
  • Now once we map a process, we have wealth of information.
  • Now the question is how do we go about process improvement routine in a very sustainable way? Can we have structured methodology for this? Let us take an example of a context for process improvement.
  • Let’s see how they have gone about making an improvement to address these kinds of problems.
  • They said to themselves, “Let’s try to reduce the time and paper work by 25% at least; let’s develop better job description and procedures as part of the process; let’s deliver tangible cost savings.
  • These are the broad objectives or, perhaps, you say scope for this improvement exercise in this example.
  • As we have discussed in the last video, the process mapping exercise was carried out.
  • Which means there are defined categories of activities, value adding, nonvalue adding, and things of that kind.
  • Then based on a sample of past history, identified and mapped the whole process in terms of various activities.
  • There were 79 activities in all and data was also collected including distance, response time, and rejects.
  • In terms of distance, or you know, number of activities, there are 79 activities and the service personnel were cutting across the various sections of the service delivery system.
  • One idea said if you can make sure all requests are processed on the same day, then the team said we could have eliminated activity four.
  • Change request data collection format and also incorporate an online system; three activities can be eliminated.
  • Share with customers certain identified information, then some more activities can be eliminated and so on.
  • You have quite a few improvement ideas came there were all implemented.
  • They eliminated 17 nonvalue-added activities in the process.
  • This is what they found at the end of this improvement methodology they put in place to improve the process in question.
  • The illustration that we saw is fairly representative of the process of improvement methodology that any organization can put in place.
  • Generally you have activities which are value adding.
  • There are certain activities which are nonvalue adding clearly, but within that, from a practical viewpoint, we can create a third category called necessary but not value adding.
  • Nonvalue activities, all these activities for which the customer may not want to pay are called nonvalue adding.
  • If you can put a good process control-quality process control in place, inspection can be removed.
  • Such activities are called necessary, but not-but nonvalue adding.
  • Third step is to obtain measures to assess the process.
  • Step four: Brainstorm improvement opportunities and develop a list of options which can be potentially implemented.
  • Finally, step seven: Implement, measure the results post implementation, and document the kind of improvement that we have been able to make through this process improvement.
  • The process improvement methodology which we saw also requires some kind of an organization structure through which these improvements are taken up.
  • What we will do is now we will sketch a potential or a suggestive organization structure which can go along with such improvement projects.
  • We said that we will identify some product or service which requires a certain kind of an improvement, and in this process, we need to set the scope, measure the current status.
  • After mapping it at the overall level, we need to identify detailed projects because once we do the mapping, we know we have a certain detail of the process.
  • Let me call it as project 1 and then project 2 and so on, maybe project N. So, we identify all these projects, and for each of these identified projects, which came out of a initial process mapping, we need to adopt the process improvement methodology that we just now talked about.
  • As we see, the process improvement methodology that we have seen just now is consistent with the philosophy of lean management.
  • It will help organizations implement the waste elimination activities in a structured and a sustainable manner.

Week 4: Productivity Improvement in Operations > 4.3 Tools for Sustaining Productivity Improvements > Performance Metrics for Productivity Improvement

  • We have briefly touched upon the issue of performance metrics in the first module itself if you may recall.
  • What you have here is a set of performance metrics.
  • There is a measure which says employees to supervisor ratio, which seems to be 28:1.
  • You have something called on-time delivery index, there are some measures with respect to inventory turns.
  • There are some measures for quality called first pass yield; you have 98.3% is the first pass yield for finished product in a particular situation.
  • There are some metrics which are to do with quality, and there are some of the metrics with respect to inventory.
  • A look at these measures show some noticeable differences.
  • In order to understand this, we shall first see the role of traditional measures.
  • Typically, we have quarterly or a monthly performance report of all the departments vis-à-vis the targets, or it could be standard costing reports which could report variety of variance analysis.
  • This has been the traditional role for performance measures.
  • In order to understand other possible roles for performance measures, let’s take this example.
  • Now in a business setting, the performance reports which are financial, you know, your spend analysis, your variance analysis, you are meeting the targets-all that are like the scoreboards.
  • In the same way, managers need performance reports, which are financial in nature, which will be a little bit historical.
  • The performance metrics which I showed you are nothing but trajectories of the ball not the scoreboards at all because they are not financial in nature.
  • Now we can say performance metrics are primarily for learning and improvement.
  • Players need trajectory of the ball; employees need operational measures; coaches need the scorecard; managers need financial numbers, month-end reports, and so on.
  • Players need measures which are-employees need measures which are overwhelmingly operational.
  • Maybe we need hierarchy of reports, some of them are operational, some of them are financial in nature, and performance metrics need not be necessarily and strictly linked to only to incentives.
  • Now we can compute a new measure and what is that measure? We can call it as lead time to work content.
  • Lead time to work content could be a very good measure.
  • There could be another measure which I may call it as process speed to sales rate.
  • These measures give us a different understanding of how do you measure productivity.
  • What you have here are measures for improvement and there are some measures, for example, there is a measure called schedule adherence.
  • Cost of quality, indirect labor to direct labor ratio, lead time to work content-we just now computed this measure.
  • Maybe number of days of inventory is another set of measures.
  • Now the first set of measures, I call it as local and global.
  • What we mean by that is this set of measures could be used in a department, it could be used in a division, it could be used even at an organization level.
  • It can be locally used or it could be a global measure as well.
  • Whereas the second set of measures that you see here, they are all global measures.
  • It makes sense to measure them at a division level or at an organizational level or at a product-line level.
  • What is also common to all these measures is if we improve in these measures, what it means is actually productivity is becoming better.
  • That is why these measures are called measures for improvement.
  • Here is another set of measures that we see, and we call it as measures for learning and innovation.
  • All these measures are telling us that we seem to learn better about a problem and have implemented something better.
  • New production/introduction time, time to develop the next generation of products and services and this is a very good measure.
  • Average number of engineering change notices: what it tries to suggest is if introduce a new product or a service, then customers are not happy, there is a problem, there is a performance inadequacy, then we keep changing it.
  • These measures are just a sample to stimulate your thinking on the issue of how performance metrics need to be viewed from the perspective of productivity improvement.
  • Depending on your context, one can develop specific measures and use them for setting improvement trajectories.

Week 4: Productivity Improvement in Operations > 4.3 Tools for Sustaining Productivity Improvements > Role of Visual Control Aids in Productivity Improvement

  • Improvements happen very well when there are three things.
  • At the end of the day, whether it is manufacturing or services, people who are engaged in the work should make improvements.
  • Three, it has to be continuous and an ongoing basis.
  • It’s not just one day we make an improvement and that’s the end of the story.
  • Visual control aids are mechanisms available to achieve all the three in one shot.
  • What is a visual control system? A visual control system is an operational measurement system.
  • A visual control system always provides the trajectory of the ball equivalent of this basketball match that we talked about.
  • Daily production or the shift production in a manufacturing system is maintained on a visual board.
  • Number of rejects, daily shipments, stoppages, interruptions by the hour-one can maintain both in services and manufacturing organizations.
  • Schedule adherence, lead time can be measured and displayed, cost of wastages, the quantum of improvements that we have made-so many such things can be actually captured.
  • We will take a manufacturing example and see a schematic representation of this.
  • You have the work area in a manufacturing system.
  • If it is a service system, that could be an office area.
  • Then what we are saying is we will have a visual control mechanism.
  • We have taken three measures- quality, lead time, and schedule adherence.
  • Certain things are being measured and plotted and displayed on this particular display board.
  • If it is a service organization, it could be just on the other side of the wall where the service personnel are sitting and doing some work.
  • That group of people may make use of this data and investigate improvement opportunities.
  • They are the ones who collect the data and put it there, and it is continuous because this could be an weekly meeting.
  • What are the possible options for visual control and setting up this visual control system? One, we can have a prominent display board having charts or we can have some lights.
  • What they did was they were stacking all the steel sheets in one part of the stores and by the side of that stack, there were three color codes.
  • Japanese use the word poka-yoke which can also be visual.
  • Depending upon the situation and the performance measure, we can set up our own visual control system.
  • Let me show one or two examples of how this visual control systems work.
  • Oil was used as lubricant, and it appeared that there’s too much of oil wastage happening.
  • What they did was they set up a visual control board which monitored certain parameters.
  • As you see here, these are all manufactured using some slotted steel angles.
  • These are the components which are being manufactured.
  • As you put the components here, the oil from that starts dripping through this channel, and they were collecting the oil here.
  • Of course, industrial engineering people came and then fabricated something which is more sophisticated and all that.
  • The idea of how to improve it, what improvement, came from the place where the wastage was happening.
  • Visual control aids helps one to engage with the problem and solutions more actively as these examples seem to suggest to us.
  • It complements an organization’s effort towards productivity improvement and waste elimination by bringing this angle to it.
  • You may want to identify areas in your organization where you can implement such visual control systems.
  • Once we know the potential areas for improvement, we can set up a nice visual control mechanism which serves as a nice agenda for the employees to get engaged with the process, take ownership of the process more actively.

Week 4: Productivity Improvement in Operations > 4.4 Challenges in Lean Management > Implementation Challenges in Lean Management

  • We started with productivity paradox we talked about Just In Time, lean, pull-type scheduling-so many concepts- process mapping.
  • If this is the case, then we should expect all manufacturing and service organizations to make use of these practices and become more productive and competitive.
  • That forces us to think, why is implementation difficult? If you look at all these discussions on productivity and improvement, what you will notice is there are two main features of this whole story? First one is desire for excellence is a cultural issue.
  • Second feature is the God is in details when it comes to improvement.
  • It is data intensive, it takes more time, effort, and patience.
  • There are no shortcuts and quick fixes for making lasting improvement.
  • All these make the second aspect of underlying principle of improvement, productivity, and so on.
  • Even if I’m willing to change, make improvements, I do not know how and where to apply these ideas.
  • What I mean by that is we made a beginning, we know where to start, we are all set to make this change, we have started the improvement projects and productivity improvements, and so on.
  • Two things happen-the top management commitment can be missing and a fall out of that is that the middle management will face huge pressures because there is a pressure of targets, there is a pressure of maintaining status quo, and a pressure of making wholesome changes.
  • Let’s look at some of the popular issues from the middle management.
  • Middle management may say we are not familiar with the tools that helps us.
  • Sometimes middle management says that we do not feel empowered to take any action, department is too busy because we need to do so many other things, we just can’t seem to communicate well to other areas.
  • These kinds of issue start coming up typically in the middle management which makes implementation a little bit challenging.
  • What more do we have to do? One possibility for future expansion of this productivity improvement journey is to look at three dimensions.
  • What about five years from now? There are other reasons why implementation is challenged, even though concepts are simple and looks obvious and so on.
  • In quite a few organizations where lean, Just In Time, and these productivity improvements have failed.
  • Top management must stand ahead of others and lead from the front.
  • As far as middle management is concerned, empowering them could be difficult or getting empowered is even more difficult.
  • They can refuse to get empowered or the top management wants to play everything close to the chest-so these can be another issue.
  • Improvement and excellence and cultural change is a long-drawn affair.

Week 4: Productivity Improvement in Operations > 4.5 Week 4 Wrap-Up > Summary

  • Productivity is a very important issue and an element of business competitiveness today.
  • Every organization, be it manufacturing or service-whatever it is-all the time talk about how do I cut cost, how do I employ fewer people, how do I manage efficiently with fewer resources-this is the conversation going on.
  • Then we moved on, we talked about the notion of a value stream.
  • We talked about the philosophy of lean, we talked about Just In Time and TQM, we talked about pull type scheduling, we talked about process mapping as a way by which we even understand how much value our processes are adding.
  • Then we also talked about how one can use information from a process mapping to launch a project-by-project improvement.
  • How one can use these kinds of ideas, which can be deployed, in our journey of productivity improvement.
  • Productivity improvement is all about investing in a habit of being excellent.

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