10 Principles Of Ops Management

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10 Principles Of Ops Management

  1. 1. The Ten Principles of Operations Management Randall Schaefer, CPIM With thanks to Steven Melnyk, Ph.D., Professor of Operations Management at Michigan State University
  2. 2. The Ten Principles of Operations Management <ul><li>Low cost foreign competition is not the only reason manufacturing struggles in the United States </li></ul><ul><li>Many companies struggle because they repeatedly violate one or more of the principles of operations management </li></ul><ul><li>The labels given to these principles are unique to this presentation but the principles they describe are timeless </li></ul>
  3. 3. 1. Principle of Reality <ul><li>Neither Theory of Constraints nor lean principles nor Total Quality Management nor any other technique will solve all your problems. </li></ul><ul><li>There is no universal solution </li></ul>
  4. 4. Reality <ul><li>Tendency to focus on the tool rather than the problem </li></ul><ul><li>Tale of the inventory problem that could not be addressed with a </li></ul><ul><li>lean effort </li></ul>
  5. 5. 2. Principle of Organization <ul><li>All aspects of production must be organized into a coherent whole. </li></ul><ul><li>Anybody can throw parts together and get shipments out the door but that does not assure profits. </li></ul><ul><li>If profits are to be predictable and consistent then all activity leading to profits must be predictable and consistent with each other. </li></ul>
  6. 6. Organization <ul><li>Manufacturing is an interconnected set of processes </li></ul><ul><li>If one thing is changed, other things will change – often in </li></ul><ul><li>unexpected ways </li></ul><ul><li>Tale of the company that rebuilt jet engines </li></ul>
  7. 7. 3. Principle of Fundamentals <ul><li>Strict adherence to the fundamentals is the foundation upon which all effective production is based. </li></ul><ul><li>Maintaining accurate inventory records, BOMs, general systems disciplines and the like will take you 80% of the way to success. </li></ul><ul><li>The proper application of lean efforts, TOC or whatever can only take you the final 20%. </li></ul>
  8. 8. Fundamentals <ul><li>Adherence to fundamentals provides the best chance for </li></ul><ul><li>survival </li></ul><ul><li>Tale of the manufacturer with part and capacity shortages but </li></ul><ul><li>“ accurate” BOMs </li></ul>
  9. 9. 4. Principle of Accountability <ul><li>People will not put effort into that for which they are not held accountable. </li></ul><ul><li>Rewards and consequences, on the other hand, will result in great effort. </li></ul>
  10. 10. Accountability <ul><li>“ You get what you inspect not what you expect,”… Oliver Wight </li></ul><ul><li>Managers determine the goals and … </li></ul><ul><li>** establish metrics </li></ul><ul><li>** standards for evaluating metrics </li></ul><ul><li>** assigns responsibility </li></ul><ul><li>** compare actual outcomes against the goals </li></ul><ul><li>** take corrective action where necessary </li></ul>
  11. 11. Accountability <ul><li>Metrics define a company’s values in operations terms </li></ul><ul><li>Comparison of accountability… forecast vs. inventory accuracy </li></ul>
  12. 12. 5. Principle of Variance <ul><li>Variances are inherent in every process. </li></ul><ul><li>When the system’s goal is to reduce costs, variances must be measured and controlled. </li></ul><ul><li>When the system’s goal is to increase options or enhance variety, variance must be encouraged. </li></ul>
  13. 13. Variance <ul><li>Supply chain literature treats variance as bad – dimensional </li></ul><ul><li>variance of components is bad </li></ul><ul><li>But variance can also refer to processes and procedures – </li></ul><ul><li>like ISO standards </li></ul><ul><li>Managed variances (Kaizen events) can lead to </li></ul><ul><li>breakthroughs in processes and procedures </li></ul><ul><li>Variance in thought process is the source of creativity </li></ul>
  14. 14. 6. Principle of Causality <ul><li>The problems managers face are often symptoms – urgent shipments, late quotes, expediting, etc. </li></ul><ul><li>Unless the underlying causes are resolved, managers will find themselves repeatedly fighting the same problems. </li></ul><ul><li>Symptoms are residuals. Get rid of them by resolving the root causes. </li></ul>
  15. 15. Causality <ul><li>Symptoms demand attention because they are visible and urgent </li></ul><ul><li>Attacking symptoms is self-defeating </li></ul><ul><li>Tale of the fittings manufacturer with too much inventory </li></ul>
  16. 16. 7. Principle of Managed Passion <ul><li>Nothing drives a company forward like employees with a passion for their jobs. </li></ul><ul><li>Nothing drags a company down like employees just putting in time. </li></ul>
  17. 17. Managed Passion <ul><li>Tale of John Wolchowski </li></ul><ul><li>Not every employee will be passionate about his job but every </li></ul><ul><li>boss can try to instill it </li></ul><ul><li>Manage the passion or it may sub-optimize the organization </li></ul>
  18. 18. 8. Principle of Humility <ul><li>You were not hired because you knew everything or had experienced everything. </li></ul><ul><li>Don’t hesitate to admit ignorance -- pride is expensive. </li></ul><ul><li>Admit ignorance, get help, learn, move on. </li></ul>
  19. 19. Humility <ul><li>Managers are routinely confronted with circumstances with </li></ul><ul><li>which they are not familiar </li></ul><ul><li>A manager should not make the company pay the price of him </li></ul><ul><li>learning thru trial and error </li></ul>
  20. 20. Humility <ul><li>Good managers do not view their limitations as personal failures </li></ul><ul><li>Good managers do not hesitate to get help, learn, and move on </li></ul><ul><li>Ignorance is acceptable – stupidity is not. Not getting help is </li></ul><ul><li>risky and stupid </li></ul><ul><li>Tale of the frame rails </li></ul>
  21. 21. 9. Principle of Success <ul><li>Define what constitutes success. </li></ul><ul><li>Markets change so the definition of success must often be revised. This will require rethinking the previous principles. </li></ul><ul><li>This principle keeps the other principles relevant. </li></ul>
  22. 22. Success <ul><li>The most important definition is always in terms of what matters </li></ul><ul><li>to the customer </li></ul><ul><li>Define and understand your customer – external customers are </li></ul><ul><li>more important than internal customers </li></ul><ul><li>Evaluating systems requires asking whether the customer is </li></ul><ul><li>delighted and would even pay more if we did X or Y or Z </li></ul><ul><li>Sales do not assure profits. They are only an opportunity to profit </li></ul>
  23. 23. Success <ul><li>Profit must be viewed as a residual. </li></ul><ul><li>You cannot directly manage for profits </li></ul><ul><li>You must manage to delight and maintain customers </li></ul><ul><li>Profits will follow </li></ul>
  24. 24. 10. Principle of Change <ul><li>Every manufacturing solution is temporary because every solution is inadequate in some way. </li></ul><ul><li>Eventually, a new solution will be found that excels in the ways in which the old one was inadequate </li></ul>
  25. 25. Change <ul><li>The 70s brought us MRP, the 80s brought us JIT/lean, the 90s </li></ul><ul><li>brought us theory of constraints </li></ul><ul><li>There will always be something new </li></ul><ul><li>Managers must not get caught up in any one theory of manufacturing, </li></ul><ul><li>software package, hardware platform, process or procedure </li></ul><ul><li>Tale of Ford and General Motors </li></ul>
  26. 26. Change <ul><li>A manager must manage for stability in the short term – disciplines, </li></ul><ul><li>processes and procedures </li></ul><ul><li>A manager must understand that everything will eventually change and </li></ul><ul><li>manage for change in the long term </li></ul><ul><li>A manager need not predict the nature of future changes – just embrace </li></ul><ul><li>change and learn how to manage it </li></ul><ul><li>The ability to manage change separates good managers from weak </li></ul><ul><li>ones </li></ul>
  27. 27. The 10 Principles of Operations Management <ul><li>Conclusion </li></ul><ul><li>U.S. manufacturing must still struggle with wages, benefits and regulations to become competitive with foreign manufacturers </li></ul><ul><li>Each principle of operations management violated is a burden that adds to the difficulty of the task </li></ul><ul><li>Embrace these principles and the task becomes easier </li></ul>

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