SERVICE OPERATIONS

MANAGEMENT

ISD
ISD 657
657
MBA
MBA && EMBA
EMBA II
II

Lecturer: Dr. Seth K. Nkrumah

 Process Improvement

Learning Objectives:
At the end of the session, students should be able to;
 Understand the concept of continuous improvement
 Understand the foundations of Continuous
Improvement
 Understand the different types and process of
benchmarking
 What is Process Improvement?

 "Process improvement" in simple terms

means making things better
 Different from ‘firefighting or crisis
management’.

“Process improvement is a deliberate

attempt by organizations to improve their
processes”.
 What is Process Improvement?
 Organizations involved in process improvement seek
to;

learn what causes things to happen in a process

use this knowledge to;
 reduce variation
 remove activities that contribute no value to the product or

service produced (waste), and

 improve customer satisfaction.

 establish a culture where everyone becomes a "fire

preventer," rather than a "fire fighter."
 Continuous Improvement

 Continuous improvement is a quality

management paradigm that adopts an
approach to improving performance which
assumes many small incremental
improvement steps.
 Continuous improvement is also known as
kaizen.
 Radical Improvement
(a.k.a Re-engineering)

 This is the fundamental rethinking and

radical redesign of business processes
to achieve dramatic improvements.

 Such improvement can be in the area of

performance, such as cost, quality, service,
and speed.
 Continuous Improvement and
Re-Engineering Explained
 Re-engineering replaces one process with a completely new
and different one whiles Continuous Improvement improves a
process over time
 Re-engineering is used if there are new changes or challenges
to the system whiles continuous improvement is used to
stabilize and enhance an already effective process or system.
 Re-engineering Is a one-time event whiles continuous
improvement is an ongoing event
 With Re-engineering the process owner is highly involved
whiles with continuous improvement the process owner is
mildly involved.
 Focus of Process Improvement
 There is the need for service organizations to establish
continuous improvement using quality initiatives.
 Continuous improvement is a way of thinking that needs
to be incorporated into a firm’s culture.
 World-class service firms are noted for their commitment
to ongoing improvement in customer service.
 QUOTE FROM TOYOTA

 We achieve brilliant results from people with

average capabilities, who operate and
improve brilliant processes.
 Our competitors achieve average results from
brilliant people who operate broken
processes.
 ‘We will always beat them’(Toyota Company).
 Foundations of Continuous
Improvement
 Principal objective of continuous improvement is eliminating
the causes of problems so that they do not occur.
 Based on the teachings of W. Edwards Deming. Deming’s
teaching consists of three principles:
- Customer Satisfaction: Organizations should be customer
focused.
- Management by Facts : Management decision making should
be based on objective data collected from an organizations
processes. (Gather statistical data)
- Respect for and development of People: Employees should
be given support and their ideas should be solicited in an environment
of mutual respect.

7-10
 Continuous Improvement

 Continuous Improvement adopts an approach to

improving performance which assumes many
small incremental improvement steps.
 Continuous improvement sees small
improvements, however, as having one significant
advantage over large ones – they can be followed
relatively painlessly by other small improvements.
 Continuous improvement is also known as
kaizen.
Process Improvement
Quality level

Plan Do

Act Check

Time
 Plan-Do-Check-Act (PDCA) Cycle

The Plan-Do-Check-Act(PDCA) cycle proposed

by Deming captures the philosophy of

continuous improvement.
 Recognizes that checking or
4. Act 1. Plan
inspecting for quality is too
late(and costly) and instead
organizations should focus
on the process. 3. Check 2. Do
 Plan-Do-Check-Act (PDCA) Cycle

Plan: Select and analyze the problem. Identifying

and selection of the problem. Blueprint or flow chart to
help with problem identification. Identify possible
causes and produce a workable solution .
Do: Implement the solution. Implement the solution
on a trial basis. Monitor implementation progress.
Check: Review and evaluate the results of the
change. Check that the solution is having the intended
effect.
Act: Standardize the solution and learn from the
experience. If successful standardize process changes
and implementing programs etc. Repeat the PDCA
cycle on another problem.
Benchmarking
 Benchmarking involves finding out and implementing ‘best’
practices that generate superior business results.

 A benchmarked company is one recognized for its

exemplary performance (e.g. in terms of processes, market
share, & profit).

 Any example of benchmarked companies?

 Toyota for processes
 Intel for design
 Honda for rapid product development
 Booking.com for global online website best practices
 Microsoft for software development
 Apple for mobile/cell phone technology
Benchmarking
 There are two parties to each benchmarking
relationship: an initiator firm and a target firm.

 The initiator firm is the firm that initiates contact and

studies another firm.

 The target firm is the firm that is being studied (also

called a benchmarking partner).
Benchmarking
 To be a benchmark, a company must be willing
to open its doors and allow others to view its
operations and tour its facilities.

 Two rationales explain why benchmarking is

good business.


The first originates from Deming's thought that "the
worst thing for a business is a weak competitor."


By opening up, benchmark organizations gains
additional impetus to seek continuous improve­ment.
Types of Benchmarking
 Process benchmarking—comparing processes

 Financial benchmarking—comparing business

results
 Performance benchmarking —comparing cost
structures, speed, quality levels, etc.
 Product benchmarking—comparing product
attributes and functionality
 Strategic benchmarking—comparing firm
competitiveness along several dimensions
 Functional benchmarking —comparing or learning
how another firm performs a particular function
Commonly Benchmarked Performance
Measures
 Different firms in different industries use
thousands of different benchmarking measures.

 The measure a firm chooses depends on the key

business factors (KBFs) of each particular firm.
Commonly Benchmarked Performance
Measures
 The categories of measures that are often
gathered in benchmark­ing studies include:

 Financial ratios such as return on assets or return

on investments

 Productivity ratios, compare inputs to outputs.

 Customer-related results, e.g. customer

satisfaction, customer dissatisfaction, and
comparisons of customer satisfaction relative to
competitors.
Commonly Benchmarked Performance
Measures (continued)

Operating results, relating to cycle times, waste-reduction
measures, value-added measures, lead times, time from
concept to market, setup times, percent reduc­tion in setup
times, and myriad other operating results.


Human resource measures, e.g. employee satisfaction


Quality measures. This include conformance-based
quality information such as reject rates, capability
information, performance information, scrap and rework
measures, percent defectives, field repairs, costs of
quality, and many other measures.


Market-share measures, e.g. proportion of market share.
Why Organizations Benchmark?

 The overriding purpose in benchmarking is to

improve the competitive position of a company.
Why Organizations Benchmark?
• Benchmarking provides an objective evaluation of a
company's business activities and methods.

• Benchmarking serves as a vehicle to source for

improvement ideas from other organizations.

• Benchmarking broadens an organization’s experience

base by providing insights into systems and
methods that work and those that don’t.

• Through careful benchmarking investigations and a

process of continually incorporating the best practices
into its business operations, the organization can gain a
clear lead over others in the marketplace.
Benchmarking Process
• Robert Camp, the principal of the Best Practice Institute, developed
a process that he believes if followed by businesses will help them
achieve great success in their benchmarking efforts.

• Robert Camp’s approach is a formal 10-step process to

benchmarking.
1. Decide what to benchmark
2. Identify whom to benchmark
3. Plan and conduct the investigation
4. Determine the current performance gap
5. Project future performance levels
6. Communicate benchmarking findings and gain acceptance
7. Develop action plans
8. Implement specific actions
9. Monitor progress
10. Recalibrate the benchmarks
Benchmarking Process

• Camp, combines these ten benchmarking steps into five

phases of development: planning, analysis,
integration, action, and maturity.

Step 1: Planning
• Identify what to benchmark, identify whom to benchmark,
and gather data.
• A plan for benchmarking is prepared.
• Decide what to benchmark
• Identify whom to benchmark
• Plan the investigation and conduct it
• Gather necessary information and data
• Observe the best practices
Benchmarking Process: Camp’s Framework

Step 2: Analysis
•Examine the performance gap and project future

performance.
•The keys questions in this step are:

• What is the performance of the benchmark partners?

• What is our performance compared to them?
• Why are they better?
• What can we learn from them?
• How can we apply the lessons to our organization?
Benchmarking Process: Camp’s Framework

Step 3: Integration
•Communicate the findings, gain acceptance, and

develop new goals.

•The key questions in this step are:

• Has management accepted the findings?

• Do our goals need to be modified based on the
findings?
• Have the goals been clearly communicated to all
involved parties?
Benchmarking Process: Camp’s Framework

Step 4: Action
•Take actions, monitor progress, and recalibrate

measures as needed.
•Best practices are implemented and periodically

recalibrated as needed.

Step 5: Maturity
•Achieve the desired state.

•Determine when leadership position is attained.

•Pursue benchmarking as an ongoing process.

Problems associated with Benchmarking

• It can be difficult obtaining cooperation from other firms

in the industry where an organization belongs.

• An organization’s benchmarking efforts will be wasted

unless it fully understands its own processes before it
benchmarks the target.

• Benchmarking is time-consuming and costly

• Difficulty in evaluating benchmarking success due to

differences in how firms estimate performance outcomes
END OF SESSION

THANK YOU

7-31
 LECTURE 6

 TOTAL QUALITY MANAGEMENT AND

STATISTICAL QUALITY CONTROL
 TOPICS UNDER DISCUSION
 INTRODUCTION

 Quality management involves more than

just managing to the optimum level
 To fully address both value and
conformance perspectives on quality,
organisations must;
1. Understand what dimensions of quality
are most important to customers
2. Develop products and services that will
meet the users’ requirement
3. Put in place business processes
capable of meeting the specifications
driven by users’ requirement
4. Verify that the business process are
indeed meeting the specifications
Note;
To accomplish this, all individuals within
the organisation must address quality
within all of an organisation’s business
process;
Thus, from design through purchasing,
manufacturing and distribution, the
organisation must have processes and
people capable of delivering quality
products and services
This approach is what is referred to as
TQM.
Note 2.
TQM is a business philosophy centered
around seven core principles
1. Customer focus
2. Leadership involvement
3. Continuous improvement
4. Employee empowerment
5. Quality assurance
6. Supplier partnership
7. Strategic quality plan
 Statistical Quality Control

To understand SQC, it must be

emphasised that organisations must;
1.Understand what dimensions of quality
are most important to users
2. Develop products and services that will
meet the users’ requirement
3. Put in place business processes
capable of meeting the specifications
driven by the users’ requirement
4.Verify that the business process are
indeed meeting the specifications
 Statistical Quality Control is directly
aimed at the fourth issue- thus making
sure that a business’ current processes
are meeting the specifications.
 Thus, SQC is the application of statistical
techniques to quality control
 Process Capability

 It expresses how an organisation can

establish whether or not its business
processes are capable meeting certain
quality standards
 One way this is done is by comparing the
requirement placed on a process to the
actual output of the process.
 A simple measure of process capability
is deploying the;
Process Capability Ratio or Cp
Given as;
 Cp = UTL –LT L
6σ
Where;
UTL = upper tolerance level
LTL = lower tolerance level
σ = process standard deviation
Note;
The UTL and the LTL sometimes called the
upper and lower specification limits, include the
acceptance range of values for some measure of
interest such as;
-weight
-temperature
-time
The above is usually set by
Engineers
Customers or
Third parties who require a particular
service standards
 Calculating and interpreting the
process capability ratio
Example;
Oakley Axles PLC has a customer that requires axle with
a diameter of 25cm.,±0.02cm. The customer has stated
that Oakley must be able to meet the requirements
99.7% of the time in order to keep the business.
Currently, Oakley is able to make axles with a process
mean of exactly 25cm and a standard deviation of
0.005cm.
Task: calculate and indicate if Oakley is capable of
meeting the customer’s needs.
solution

?
Given the formulae; Cp= UTL-LTL
6σ
Cp = 25.02-24.98 = 0.04
6(0.005) 0.03
= 1.33
Narration: since the process capability is greater than 1, Oakley’s
process is more than capable of providing 99.7% defect-free axles
 Example 2 Process capability
Index
Engineers at ATL Textiles have developed the following specifications for a
key dyeing process:
Target value for process mean = 140 degrees
Upper tolerance limit(UTL) = 148 degrees
Lower tolerance limit(LTL) = 132 degrees
The UTL and LTL are based on the engineer’s observation that results are
acceptable as long as the temperature remains between 132 and 148
degrees. Currently, the dyeing process has a mean temperature of 139.8
with a standard deviation of 2.14 degrees. Because the process mean is
slightly off from the target value of 140 degrees, the quality team uses the
process capability index to evaluate the process’ capability
Note
Process capability Index is given as;

Cpk = min µ-LTL, UTL-µ

3σ 3σ
Solution

?
 solution

Cpk = min 139.8-132 , 148-139.8

3(2.14) 3(2.14)
=min 1.21, 1.28 = 1.21
Narration: though the process mean is off-center, the process is still
capable of meeting the tolerance limits more than 99.7% of the time
 Control Charts

 Control charts are specialised run charts

that help organisations track changes in
key measure over time .
 By the use of the control charts
organisations can easily determine
whether a process is ‘in control’ and take
action if is not.
 Sampling and Variable types

 The idea behind sampling is that

businesses do not have to examine
every process outcome to assess how
well a process is doing
 They can always use carefully selected
samples to obtain a fairly good idea how
well a process is working
 note

 In general a good sample is one in which

-every outcome has an equal chance of
being selected into the sample
 Continuous variables and
Attributes
 CV= these are ones that can be
measured along a continues scale such ‘
Weight, height, length and temperature
 Att= this refers to the presence or
absence of a particular characteristics
 Sample Average

given as ; X = n
Xi
i-1
n
Where ;
n= number of observations in the sample
Xi = value for the i th observation
R = sample range for a continuous variable
which is (the highest value in the sample –
the lowest value)
Sample observation ounces

1 16.41

3
example 16.12

16.57

4 16.88

5 16.86

6 17.02

7 15.85

8 16.43

9 16.83

10 16.17

11 16.29

12 15.99

13 15.95

14 16.21

15 16.27

sum
Task;
1.Find the sample average
2.Find the range
Solution

?
Answer

SA= X = 245.85
15
= 16.39 ounces
R = 17.02 -15.85 = 1.17
Note; if the sample results falls outside the
control limit the process is considered as
‘out of control’
 Example 2
days 1 2 3 4 5 x R
1 136 137 144 141 138
Observation (n=5)
2 143 138 140 140 139
3 140 141 144 137 135
4 139 140 141 139 141
5 137 138 143 140 138
6 142 141 140 139 138
7 143 141 143 140 140
8 139 139 141 140 136
9 140 138 143 141 139
10 139 141 142 140 136
sum