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Operational ExcellenceThe origin of Operations Management and itsstrategic impactProf.dr.ir. Marcel van Assen1
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 financialperformance Know that OpX is a multi-disciplinary disciplineUnderstand the physics of OpX (hard side): dynamics & variabilityUnderstand human dynamics of OpX: leadership Understand the differences and similarities of industrialenvironments and services Optimization and BPM & the use of lean and six sigmatools
What is Operational Excellence?Proposition: The objective of Operational excellence is to achieve thelowest costs: cost cutting. The focus is primarily on ultimate efficiency and the highestproductivity. Quality must be realized against the lowest costs.4
What is Operations Management?Source: Wikipedia The management area concerning the production andsupply of goods, information and services, With the responsibility to realize efficient and effectiveoperations. Het comprises 5the management of people (incl. capacity, skills andknowledge) and resources (incl. capital, materials andtechnology),The distribution of goods and services to the finalcustomer, andThe analysis of queuing systems
Origins of Operations Management Adam Smith (1723–1790): Founder of the division of work with hisbook An Inquiry into the Nature and Causes of the Wealth ofNations (1776) Henry Ford (1863–1947) and Frederick Winslow Taylor (1856–1915) are considered the founders of scientific management withthe book The principles of scientific management (1911):1.2.3.4.6Detailed analysis and improvement of work methods.Thorough selection, training and development of employees.The development of procedures and the standardization ofprocesses and activities.The division of work and responsibilities between employeesand management
Modern Times (1936)7
Strategy as an outside-inpositioning dilemmaCompetitive advantage (supply side)Competitive BroadtargetScope(market side)Small8Low CostUniqueness of productCost leadershipDifferentiationCost focusStuck inthe middleDifferentiation focus
Market demands have changeddramatically since the sixties9
Market factors impacting on operations of WesternorganizationsFigure 1.2Source: Goodman, M. (1995) Creative Management, Hemel Hempstead: Prentice Hall, p. 38
Simple trade-off models are notappropriate (anymore)XProductLeadershipPeformance levelof market leadersMinimal performance levelin the industryOperationalExcellenceCustomerIntimacy11
Modern flexibility requirementsHow many varieties are there of the BMW 7series?12
Hierarchy of (conflicting) SalesLow ity13QualityProductLowInventoryShortCycle TimesHigh ductsHighInventoryMoreVariability
Efficiency / exploitationHet interne dilemma bij streven naar winst uit zichin de paradox tussen:exploitatie versus exploratie,ofweldoelmatig versus doeltreffend,ofwelefficiëntie versus effectiviteitIIIFocus on exploration of newvalue added activitiesIVFocus op initiatieven gericht op exploitatie(Operational Excellence)IFocus on exploration of newvalue added activitiesIIEffectivity / 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 systemto be strategic? How is this related to operational excellence Is dit model geldig in een non-profitsituatie en waarom wel/niet?
The links in the Service profit ty-Workplace design-Job design-Employees selection and development-Employee rewards and recognition-Tools for serving customersProfitability-Retention-Repeat business-Referral-Service designed anddelivered to meet targetedcustomers’ need-Service concept:results for customers
The links in the Service profit chainWorld class service-providers understand the linksbetween their operational drivers and the businessresults – there is a cause and effect chain betweenoperational drivers and business performanceDriversServiceDeliveryResults
The links in the Service profit omerloyaltyResults network
The links in the Service profit chainDrivers networkVisionLeadershipStrategyProcessPlanning nologyServiceDeliveryResults
The links in the Service profit chainDrivers eattractionStrategyProcessPlanning onCustomerloyaltyResults network
Dupont-scheme
Verbeteren van de operational renewalen Continuous operational improvement.
Grote verbeteringen (operational renewal) enC.I. in kleine stapjes (operational improvement)
What is Operational Excellence?Proposition: The objective of Operational excellence is to achieve thelowest costs: cost cutting. The focus is primarily on ultimate efficiency and the highestproductivity. Quality must be realized against the lowest costs.No, Operational Excellence 24focuses on an excellent production and servicedelivery system – the excellent exploitation of anintegrated operating model/system to make anddeliver the products and/or services;with the objective to maximize operational profit (nota sole focus on cost);is based on excellent Operations Management;is basically a technical discipline, but so-called softdisciplines like a culture of continuous improvementand leadership are also important.
No, Operational Excellence focuses on an excellent production and service-delivery 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;
