Key Focus Areas of Operations Management

2
Operations and Project Management
Presented by
Danushka Abeywickrema ,MBA (UK)

Key focus areas of Operations Management(OM)
The main focus of the OM is the processers which
spreads around the organization. Following are some key
variables that OM would like to manipulate in improving
overall performance of the organization.
• Quality
• Speed
• Dependability
• Cost
• Flexibility

Lean synchronization
What is lean?
Lean synchronization is an approach to operations which tries to meet
demand instantaneously with perfect quality and no waste.
It is an approach which differs from traditional operations practices
insomuch as it stresses waste elimination and fast throughput, both of
which contribute to low inventories.
The ability to deliver just in time not only saves working capital (through
reducing inventory levels) but also has a significant impact on the ability
of an operation to improve its intrinsic efficiency.
Definition of Lean
‘lean synchronization aims to meet demand instantaneously, with
perfect quality and no waste’

The lean synchronization philosophy can be
summarized as concerning three overlapping
elements:
(a) the elimination of waste in all its forms,
(b) the inclusion of all staff of the operation in
its improvement, and
(c) the idea that all improvement should be on a
continuous basis.
Most of the ideas of lean synchronization are
directly applicable to service operations.

How to eliminate waste?
The terms Muda , Mura , and Muri are Japanese words
conveying three causes of waste that should be reduced or
eliminated.
Muda.
These are activities in a process that are wasteful because they
do not add value to the operation or the customer.
Mura.
This means ‘lack of consistency’ or unevenness that results in
periodic overloading of staff or equipment. So, for example, if
activities are not properly documented so that different people
at different times perform a task differently then, not
surprisingly, the result of the activity may be different.

Muri
This means absurd or unreasonable. It is based on the
idea that unnecessary or unreasonable requirements
put on a process will result in poor outcomes.
In other words, waste can be caused by failing to carry
out basic operations planning tasks such as prioritizing
activities (sequencing), understanding the necessary
time (scheduling) and resources (loading) to perform
activities.

Seven types of waste
1.Over-production
Producing more than is immediately needed by the next
process in the operation is the greatest source of waste
according to Toyota.
2. Waiting time
Equipment efficiency and labor efficiency are two popular
measures which are widely used to measure equipment and
labour waiting time, respectively. Less obvious is the amount
of waiting time of items, disguised by operators who are kept
busy producing WIP which is not needed at the time.
3. Transport
Moving items around the operation, together with the double
and triple handling of WIP, does not add value. Layout
changes which bring processes closer together and
improvements in transport methods and workplace
organization can all reduce waste.

4. Process.
The process itself may be a source of waste. Some operations
may only exist because of poor component design, or poor
maintenance, and so could be eliminated.
5. Inventory.
All inventory should become a target for elimination.
However, it is only by tackling the causes of inventory that it
can be reduced.
6. Motion.
An operator may look busy but sometimes no value is being
added by the work. Simplification of work is a rich source of
reduction in the waste of motion.
7. Defectives.
Quality waste is often very significant in operations. Total
costs of quality are much greater than has traditionally been
considered, and it is therefore more important to attack the
causes of such costs.

Six Sigma
What is six sigma?
Six Sigma is a disciplined, statistical-based, data-driven approach and
continuous improvement methodology for eliminating defects in a product,
process or service. It was developed by Motorola and Bill Smith in the early
1980’s based on quality management fundamentals, then became a popular
management approach at General Electric (GE) with Jack Welch in the early
1990’s. The approach was based on the methods taught by W. Edwards
Deming, Walter Shewhart and Ronald Fisher among many others. Hundreds
of companies around the world have adopted Six Sigma as a way of doing
business.
Definition of six sigma
‘A disciplined methodology of defining, measuring, analysing,
improving, and controlling the quality in every one of the
company’s products, processes, and transactions – with the
ultimate goal of virtually eliminating all defects.’

A defect is a failure to meet customer required performance (defining performance
measures from a customer’s perspective is an important part of the Six Sigma approach).
A defect unit or item is any unit of output that contains a defect (i.e. only units of output
with no defects are not defective; defective units will have one or more than one defects).
A defect opportunity is the number of different ways a unit of output can fail to meet
customer requirements.
(simple products or services will have few defect opportunities, but very complex products
or services may have hundreds of different ways of being defective).
Defects per opportunity is the proportion or percentage of defects divided by the total
number of defect opportunities
(the number of defects divided by (the number items produced * the number of
opportunities per item)).
Defect per unit (DPU) is the average number of defects on a unit of output
(the number of defects divided by the number of items produced).
Defects per million opportunities (DPMO) is exactly what it says, the number of defects
which the process will produce if there were one million opportunities to do so.

Stages in reaching Six Sigma
Reaching six sigma demands long and committed effort from the
organizations. As such organizations reach six sigma gradually as
follows.
66800
defects for
1.0 Million
units
230
defects for
1.0 Million
units
3.4
defects for
1.0 Million
units
6200
defects for
1.0 Million
units

Mass Customization
What Is Mass Customization?
Mass customization is the process of delivering market goods and services that
are modified to satisfy a specific customer's needs. Mass customization is a
marketing and manufacturing technique that combines the flexibility and
personalization of custom-made products with the low unit costs associated
with mass production.
Important facts
• Mass customization is a process that allows a customer to personalize certain
features of a product while still keeping costs at or near mass production
prices.
• Innovative manufacturing techniques help companies produce
interchangeable parts that can be combined in a variety of ways to build a
cost-effective product that satisfies a specific customer's needs.
• The four primary types of mass customization are collaborative customization,
adaptive customization, transparent customization, and cosmetic
customization.
• Various companies employ mass customization techniques, including retail
companies, software creators, financial services companies, and modular
home builders.
• Companies that offer mass customization can give themselves a competitive
advantage over other companies that only offer generic products.

Examples
• Fee-only, independent financial advisors allow
their clients to customize their portfolio holdings
to match their unique situations. The consumer
may choose products that match their investment
risk tolerance, time horizon, investment style,
and future goals.
• Certain furniture companies offer mass
customization by providing multiple options for
various components or features. This flexibility
may include different fabrics, furniture legs, or
pieces that combine in numerous configurations.
Also, modular home builders use mass-
customization models by allowing customers to
make changes to the base home package.

Benefits of mass customization
•Mass customization enables manufacturers to delay
the step of product differentiation until the final phase
of manufacturing.
•Mass customization can then become part of a
lucrative marketing strategy for a company. Companies
that offer customization can give themselves
a competitive advantage over their rivals.
•Mass customization can also help a company with the
costs associated with excess inventory. Implementing
a just-in-time (JIT) approach to manufacturing can
assist companies in minimizing inventory and increasing
efficiency.