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Operations Management

Yes, at Least One Great Company Operates This Way

Long Term Thinking

Operations Management relies on long-term thinking, which is important because the future is long-term. Long-term thinking is a challenge for companies that focus on quarterly reporting however, companies that do long-term thinking seemed to mostly make short-term goals also. I’m thinking of Apple Computer who spends its effort looking far into the future while also simultaneously accomplishing short-term goals. Whether you are an insurance company, a manufacturer of automobiles, or a government it is always advantageous to look into the future. The funny thing about long-term thinking is that it leads to achieving short-term goals.

Standardize all Processes on their Best Practices

Operations Management Best Practices should always be a moving target. Standardize on your current Best Practice Processes but always make an effort to improve those Standardized Best Practices. When everybody is operating on Best Practices then you know your system is healthy.

Document and Display all Process Activities

I heard a person make the comment, that in any company, anyone who operates a process, is the expert on that process. Since that person is the expert on the process they should also document the process and personally follow the process. This not only defines the Best Practice but also makes sure the Best Practice is thought through. Once you have a best practice, be proud of it and display it for all to see. In some industries, it allows an audit of the process by anybody walking by.

Constantly Improve Best Practices with a Goal of Perfection

Constantly Improve in the direction of a business-defined vision or challenge. The Constant Improvement rate is at about 1 idea per person per month. A Vision goal could be Perfection in that all defects are removed or process velocity is improving. A goal might be to improve a process’s performance by 25% within two years. This is a key to excellence in Operations Management.

Focus on Value Provided

If you are not focusing on the value you are adding, then what are you focusing on? Almost every process is designed to add value. Whether you are a hospital, insurance company, manufacturer, or government agency, the focus should be on the value provided to your customers. That’s what you improve for a competitive advantage.

Profound Knowledge of Every Process

W. Edwards Deming says that business leaders do not have Profound Knowledge of their processes. Excellence in Operations Management requires that you have Profound Knowledge of every process. You not only have Profound Knowledge of every process but you also have Profound Knowledge of every Value Stream. A Value Stream is an aggregation in performance, cost, and quality of every process between customer order and customer delivery. It transcends departments, focuses on the value delivered, and is the only way to determine which process to improve that improves Value Stream performance.

Operations Management Should Effect Constant Defect Removal – Stop to Fix Problems

Every business deals with defects. There are multiple defect categories that exceed the scope of this page. However, one category is whether it is buried or not. An example of a buried defect may be an out-of-round ball bearing in a lawnmower or a defectively produced chip in a computer. It might also be a poor fit for a car seat. The major point here is that defects are discovered most quickly by process operators. If a process operator detects a problem then it is highly likely that if the process operator does not take action, then the defect would become buried. It is important to avoid this by stopping whenever you detect a defect, find the source of the defect, and repair the defective activity, before continuing. This excellent Operations Management company I’m thinking of still incurs 800 stops to their assembly line every year.

Use Consensus to Solve Problems, Implement Rapidly

Problems will always occur. The important thing is how you reply to them. This best practice problem resolution philosophy requires a consensus opinion on how to solve the problem and then produces rapid action to actually solve the problem.

Pull When Possible

Pull requires that a downstream process request the product or service when they are ready. This leads to increased performance and decreased inventory. A customer order introduces a “Pull”. Ideally, customer orders would flow in at a constant rate.

Level Out the Workload

Leveling the workload is important whether or not you run with Pull technology. In a Pull system, the technology levels out the load so that the system will continuously flow most optimally. Alternatively, a Push system is designed to manage an uneven load. You pay for that Push system’s inefficiencies in excess inventory.

Operations Management Should Strive for Continuous Flow

Operations Management is driven by Continuous Flow. It is even more desirable than Pull. Continues Flow is when the upstream process finishes their activities on the product or service right when the downstream process finishes their activities and then the hand-off occurs. With Pull, you don’t need to make a request and with Push, a department doesn’t just pile their output on another department. Continuous Flow represents the ideal state.

Respect Your Suppliers by Challenging and Supporting Them

Since Suppliers support your organization with products or services, they need to operate at the same performance levels you require for internal operations. If their products or services’ quality exceeds your operational requirements, then there is no problem. If they don’t, there could be a big problem, and it’s your problem. Because it’s your problem it’s your responsibility to work with your Suppliers and support their effort to meet your requirements. You have done what’s needed in your organization to achieve excellence, use that same expertise to support Suppliers in their organizations.

Full Guaranteed Employment

Full employment has a risk. If your operations experience excessive cost overruns sometimes it’s just easiest to lay off people. That is the risk, and it is a risk on management. An anomaly occurs here because poor management may lead to layoffs. If management was not visionary enough, or operationally efficient enough to not run the business in such a poor manner, shouldn’t management be laid off also?

Full Guaranteed Employment leads to some big advantages. One is hiring practice. Instead of hiring one person over another because they have more experience in an area, higher the more intelligent person because they will learn more with experience in multiple areas. Two, if you are a hotshot and a new high-risk project shows up, your intellectual desire may be to go there. If however, you are very intelligent, without Full Employment backing you up, you are going to look for the safe project. How do you want your employees distributed throughout your company?

Minimize Assembly Workers

Operations Management excellence will minimize the number of your Process Operators, which then gives you some valuable information. It demonstrates to you the absolute minimum number of people to operate your system. It gives you a good idea of your minimal operational costs. While you operate with the minimum number of workers, you need to create in your system replacements, for when a worker is not present. That is part of the whole operational system.

Have a Measure of Performance – Manage by Metrics

Metrics give you the pulse of your system. Value Streams have built-in metrics around performance, cost, and quality. Constant Defect Removal as a contentious relationship with Constantly Improve Best Practices. Positive change is critical for system improvement but, as with all change, it will introduce problems. Those problems are measured by defects that stop the assembly line. There is a happy medium between change metrics and defect introduction metrics.

Develop Exceptional People That Follow Your Philosophy

The biggest challenge can be finding exceptional people. Continuous Improvement is so important that a lack of its capability can decrease business expansion. Since a no layoff policy, like the one HP had before Carly Fiorina took over, attracts and trains exceptional people they will follow the business philosophy.

In Conclusion

Philosophy, Process, People & Partners, and Problem Solving are the categories that all the above discussion points fall. Operations Management is critical to do right. There is a company that is an expert at this and has a system based on the previous operational points. That system, is of course, The Toyota Production System. If you want to apply that system to your system then click on the link below:

Toyota is not perfect and neither is their Production System. But they have methodologies in place that strive for perfection. If your Operational Management system does not meet the above requirements then it is lacking. The tools of the Toyota Production System apply to any system. Use it today.

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