S. Chopra/Operations/Quality1 Wrap Up Levers for Improving Process Performance

S. Chopra/Operations/Quality2 Strategic Framework u What is “improvement?” –Strategic position »Shouldice, Wriston u Targeting improvement –Link to financials »CRU Computer Rentals

S. Chopra/Operations/Quality3 Process Flow Measures u Key concepts: Flow time, inventory, throughput, process cost, quality. u Key relation: Inventory = Flow time  throughput u Key management activity: Select process flow measures to manage for improvement. u Key metric: Net present value, return on total assets. u The basic managerial levers for process improvement are: 1. Increase in throughput (decrease in flow time). 2. Decrease in inventory (decrease in flow time). 3. Decrease in process cost. 4. Improve quality

S. Chopra/Operations/Quality4 Levers for Managing Theoretical Flow Time u Key concepts: Critical path, critical activity, theoretical flow time. u Key management activity: Identify and manage activities on all critical paths. u Key metric: Length of critical paths. u 1. Reduce the work content of an activity on the critical path. –Eliminate non value-adding aspects of the activity (\work smarter"). –Increase the speed at which the activity is done (\work faster"). –Reduce the number of repeat activities (\do it right the first time"). u 2. Move some of the work content off the critical path. Move work from a critical path to a non-critical path. Move work from a critical path to the \outer loop" (pre- or post- processing).

S. Chopra/Operations/Quality5 Levers for Managing Theoretical Capacity u Key concepts: Throughput, Capacity, bottleneck resource u Key management activity: Identify and manage bottleneck resource(s). u Key metric: Contribution margin per unit time on bottleneck(s). u The basic approaches to increasing the theoretical capacity of a resource pool can be summarized as: –Decrease the unit load on the bottleneck resource. »Work smarter, faster, do it right the first time, or change the product mix. » Move some of the work content to a non bottleneck resource. –Increase the size of load batches at a bottleneck resource. –Increase the scheduled availability of a bottleneck resource (“work longer"). –Increase the number of bottleneck resource units (“scale of operation"),

S. Chopra/Operations/Quality6 Levers for Reducing Waiting Time (Inventory related) u Key concepts: Waiting time, flow time efficiency, cycle inventory, safety inventory, safety capacity. u Key management activity: Manage buffers to reduce waiting time. u Key metric: Waiting time in buffers. u The basic approaches to reducing waiting time can be summarized as: 1. Reduce cycle inventory (reduce batch size). Reduce setup or ordering cost per batch. Reduce forward buying. 2. Reduce safety inventory. Reduce demand variability. Reduce the replenishment lead time. Reduce the variability in replenishment lead time. Pool safety inventory. u Physical centralization u Exploit product substitution. u Use common components. u Postpone the product differentiation closer to the point of demand.

S. Chopra/Operations/Quality7 Levers for reducing Waiting Time (Capacity Related) 3. Manage Safety Capacity Increase safety capacity. Decrease variability in arrivals and service. Pool available safety capacity. 4. Synchronize flows: Manage capacity to synchronize with demand. Manage demand to synchronize with available capacity. Synchronize flows within the process. 5. Manage the psychological perceptions of the customers to reduce the cost of waiting.

S. Chopra/Operations/Quality8 Levers for Lean Operations u Key concepts: Waste, non-value adding activities, cellular layout, demand pull, quality at source. u Key management activity: Synchronize process flows while maintaining efficiency. Set up a framework for process improvement. 1. Synchronizing flows in a plant. Reduce batch size (transfer and production) Level Production and Transfer: Batch size reduction, Heijunka. Pull rather than push work Quality at Source Flexible resources Cellular layout. 2. Continuous improvement: How to increase visibility of waste at low cost?

S. Chopra/Operations/Quality9 Levers for Controlling Process Performance u Key concepts: Normal and abnormal variability, process capability. u Key management activity: Monitor and adjust process performance dynamically over time. Reduce variability and its effects. 1. Measure, prioritize, and analyze variability in key performance measures over time. 2. Feedback control to limit abnormal variability – Set control limits of acceptable variability in key performance measures. – Monitor actual performance and correct any abnormal variability. 3. Decrease normal process variability / increase process capability. –Design for Processing (Simplify, Standardize, and Mistake Proof). –Fewer steps