Operation management summary of presentation

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Representative slides of the presentation made during the session on Operation sManagement for Goldman Sachs 10k WE Development Program, bangalore on 1st Mar, 2012. Its background paper is available at http://www.cvmark.com/?p=457

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Operation management summary of presentation

  1. 1. Operations Management Partial Content of One Day Presentation made at Goldman Sachs ISB AIMS 10k Women Entrepreneur Development Program 1Mar2012, Bangalore
  2. 2. Introduction • Feedback of last session – Informative – Applicable – Actionable – How many really started implementing • Critical Business Issues • Type of Operational Problems • Expectations 2CVMark Consulting - Shridhar Lolla
  3. 3. The team • 38 + 1 Entrepreneurs – Different Domains – Size – Age of Organization – Revenue – Offerings – Background • We have a challenge: Complexity of Divergence – How much to generalize and how much to be specific – Generalization will make it difficult to connect to your organization – Specialization will not allow to do justice with all and it will not allow you to develop your own concepts 3CVMark Consulting - Shridhar Lolla
  4. 4. Methodology for the Session • Objective: Get something that is actionable – Make it a working session – The coach picks up one company and guides the entrepreneur – All other follow the steps for their own company – At the end every body has ones operations described and understood Let’s Co-create this Session 4CVMark Consulting - Shridhar Lolla
  5. 5. Content • Business Excellence • Operation Excellence • Project Management 5CVMark Consulting - Shridhar Lolla Operation Management does not exist for moving the work just at a movement of time, it must provide a growth option for the organization on an ongoing basis. Hence, we cover the subject of operation management, while seeking excellence!
  6. 6. Business Excellence 6CVMark Consulting - Shridhar Lolla
  7. 7. Business Excellence • Every business has an Objective • With time, a business must reach closer to its Objective • Every business sets its Goals on an ongoing basis to measure its progress towards Objective. For Entrepreneurs: What is the Objective of your business? How do you Measure progress (Goal)? 7CVMark Consulting - Shridhar Lolla
  8. 8. Time Performance Growth Curve-1 Growth Curve-2 Sustainable Growth For Entrepreneurs: Which is your Growth Curve ? 8CVMark Consulting - Shridhar Lolla
  9. 9. Biggest Dilemma I want to Deliver as per Green Curve I want to Demand as per Red Curve Stability Growth 9CVMark Consulting - Shridhar Lolla Don’t you need both! So what’s the secret?
  10. 10. Time Performance Organizations face catastrophic failure when the growth is lower than the variability and noise in the system. Saturated Growth Curve 10CVMark Consulting - Shridhar Lolla
  11. 11. Time Performance Growth due to improvement-1 Growth due to improvement-2 on the base-1 Base created by improvement-1 Base under formation by improvement-2 Inside Growth Curve 11CVMark Consulting - Shridhar Lolla
  12. 12. Time Performance The underlying phenomenon of building exponential growth Excellence is a Journey Sustainable Business is about Excellence For Entrepreneurs: What are the 3 improvement initiatives in your business. 12CVMark Consulting - Shridhar Lolla
  13. 13. Business Strategy • While there would be several opportunities and options to pursue, resources of the organization would be limited. • For a sustainable business, the company must have a unique value proposition, (other things remaining the same). • Business strategy – provides intent and topmost decision for the organization and it foresees the business over a longer horizon. – uses internal and external factors and makes a choice on available options. • Offerings, Technology, Product,/ Service customer segment, geography, resources • Low cost, High Variety, High Quality, Fast Response, Availability, Innovativeness For Entrepreneurs: What do you offer ? Name Product or Service. What is the Unique Value Proposition of your business? Who are your customers ? How do you create Value ? 13CVMark Consulting - Shridhar Lolla
  14. 14. Operation Excellence 14CVMark Consulting - Shridhar Lolla
  15. 15. Definition • Operations – Management of Value Creation Process – A systematic approach to transform input into useful revenue generating output 15CVMark Consulting - Shridhar Lolla
  16. 16. Building Blocks of Operations Core Process Innovation Suppliers and Partners Customer End Operation Support 16CVMark Consulting - Shridhar Lolla
  17. 17. Functional Relationships Operations Finance HRMarketing 17CVMark Consulting - Shridhar Lolla
  18. 18. Operations Overview • Operation Strategy – Options exercised • Operation Management – Building the Operating System – Planning , Control and Operating the system 18CVMark Consulting - Shridhar Lolla
  19. 19. Operation Strategy • What situation we want to be in – To deliver as per over all strategy – The Options made for Operations • Input – Product or Service – Type, variety • Options – Process Design – Supply Chain – Technology – Capacity, People 19CVMark Consulting - Shridhar Lolla
  20. 20. Operation Management • An Objective – To deliver product or service – Under certain Design Constraints • Products, technology, supply chain, geography, Capacity – Under certain boundary conditions • Quality, Safety, Health, Environment, Cost, Regulations, Value system For Entrepreneurs: What are the Boundary Conditions of your Operations 20CVMark Consulting - Shridhar Lolla
  21. 21. Operation Management Functions Design Issue Operational Control Issue Product / Service Design Forecasting Process Design Production Planning and Control Quality Management Supply Chain Management Location and Layout of facilities Maintenance Management Capacity Planning Continuous Improvement of Operations 21CVMark Consulting - Shridhar Lolla
  22. 22. Architecture of Operation Management Processing •Process and product design •Material and Capacity Planning •Operations planning and control •Purchase and inventory control Output Input Labor Material Capital Goods Service Quality Management Maintenance Management Process Improvement Source: Mahadevan: Operation Management Forecasting 22CVMark Consulting - Shridhar Lolla
  23. 23. Elements of Operations 23CVMark Consulting - Shridhar Lolla
  24. 24. Conversion Process • Factors Affecting Process Design – Volume, Variety – Flow: • Continuous • Intermittent • Mixed Flow – Layout • Group of activities organized in a way – Flow Chart For Entrepreneurs: Draw the Value Creation Process Is your process Volume driven or Variety driven Blending Compression Coating PackingRaw Material Warehouse FG 24CVMark Consulting - Shridhar Lolla
  25. 25. Product/ Service • Development Process – Concept – Design – Development – Production For Entrepreneurs: Write 3 proposed improvements in your product or services. 25CVMark Consulting - Shridhar Lolla
  26. 26. Capacity • The rate of throughput, #s per unit time • Measurement – Capacity: Throughput – Process Time – Cycle Time – Lead Time For Entrepreneurs: What is design capacity of your process ? What is the rough utilization ? 26CVMark Consulting - Shridhar Lolla
  27. 27. Managing Capacity Key dilemma :Match capacity and demand Long term Medium Term Short term Time frame 2-5 years 1 yr 1w-12w Planning Premise Augment capacity Balance demand supply Maximize availability, productivity Key Decisions Capital Budget Exercise Supply- demand management Resource Deployment, Maintenance routing, Improvement Projects Tools and Techniques Investment Planning, Break Even analysis, Cash flow, Decision Tree Aggregate Production Planning, Make or Buy Decision Planning and Scheduling, TPM, Waste Reduction, Debottlenecking 27CVMark Consulting - Shridhar Lolla
  28. 28. Supply Chain Management • Chain of Activities in creating and delivering value • Flow of Raw Material, Components, Service – Inbound, In house , Outbound For Entrepreneurs: Who are your key partners?. Draw your supply Chain. RM Warehouse Regional Warehouse Distributors RetailersPlant 1:n 1:nWarehouse 1:nn:1 28CVMark Consulting - Shridhar Lolla
  29. 29. Plant Distributor Distributor Distributor Distributor Government, Hos pitals & Institutions stock stockstock stock stock stock RM Warehouse Retailers Regional WH Regional WH Regional WH Regional WH stock stock stock stock Material Suppliers Non Stock Supply Direct Supply Supply Chain 29CVMark Consulting - Shridhar Lolla
  30. 30. Supply Chain: Performance • Availability • Reliability • Responsiveness • Flexibility • Cost • Asset For Entrepreneurs: What is your supply chain designed for ? 30CVMark Consulting - Shridhar Lolla
  31. 31. Location • Factor Advantage • Distance • Regulatory & Policy Issues • Infrastructure • Cost Structure For Entrepreneurs: Why are you located where you are located? 31CVMark Consulting - Shridhar Lolla
  32. 32. Inventory Planning and Control • Material Waiting anywhere is Inventory. • Why Inventory is needed – Customer tolerance time is more than supply time – Uncertainty • Types of Inventory • Pipeline Inventory • Safety Inventory • Decoupling Inventory • Cyclic Inventory • Seasonal Inventory For Entrepreneurs: Where are your material or work waiting ? What is the size of your inventory ? 32CVMark Consulting - Shridhar Lolla
  33. 33. Planning and Control • Demand Forecasting • Aggregate Planning • Resource Planning • Scheduling and Control • Operation Improvements 33CVMark Consulting - Shridhar Lolla
  34. 34. Operation Management Planning Horizon Planning Aspect Time Horizon Facility 5-10 years Capacity Augmentation 3-5 years Design Decisions 1-10 years Business Plan 1 year Master Production Scheduling, Material & capacity requirement planning 3 months Scheduling and Control 1 week What are your planning Horizons? 34CVMark Consulting - Shridhar Lolla
  35. 35. Planning Premise -Response time • Type of Orders – Made to Stock – Made to orders – Assemble to Order – Made to Availability – Time n Material – Project – SAS For Entrepreneurs: What are the type of Orders you fulfill? What promise do you make to customers on delivery? What is your peak order season or time. How do you deal with peak or large orders. 35CVMark Consulting - Shridhar Lolla
  36. 36. Quality management • Definitions – Conformance to Specification – Fulfilling Customer Needs – Fitness to Use • Total Quality Management – Organization wide effort – Everyone, everywhere and everytime 36CVMark Consulting - Shridhar Lolla
  37. 37. Maintenance • Infrastructure – Machines – People – Information System • Maintenance Options – Inspection – Preventive Maintenance – Predictive Maintenance – Breakdown Maintenance – Planned Shutdown / overhauls – Equipment replacement Measure: OEE: Overall Equipment Efficiency Availability x Efficiency x Quality 37CVMark Consulting - Shridhar Lolla
  38. 38. Project Management 38CVMark Consulting - Shridhar Lolla
  39. 39. When do you Need • Capacity Addition • Capacity Improvement • Business Plan • And :Market expansion, Funds Infusion, Sales Expansion, Building Distribution Channels, New Product Development. 39CVMark Consulting - Shridhar Lolla
  40. 40. Interdependent Set of Activities Conducted to Deliver an Objective within a Time and Cost For Entrepreneurs: What’s your next project. An improvement work can also be a project. Today 180th Day Critical Path T9 T10 T11 T4 T5 T8T7T6 T3T2T1 40CVMark Consulting - Shridhar Lolla
  41. 41. Characteristics of Project Environment • Variety • More Uncertainty • High Touch-time • Less repetition • Agreed Scope • Committed Resource • Agreed Date 41CVMark Consulting - Shridhar Lolla
  42. 42. Project • Scope • Schedule • Resources Project Scope TimeResource For Entrepreneurs: Which of the three elements is the most critical? 42CVMark Consulting - Shridhar Lolla
  43. 43. Key Steps in Project Planning • Work Break Down: – Identify the Scope of Work • Sequence the Work • Rough Schedule the Work • Allocate resources, (people and infrastructure) • Re-sequence the work to avoid resource conflict • Reschedule the work • Estimate cost Project Initiation Scoping Contract Development Design Implementation Testing Operation Installation Launch 43CVMark Consulting - Shridhar Lolla
  44. 44. Gantt Chart 44CVMark Consulting - Shridhar Lolla
  45. 45. Project Control • Monitor Progress of each step • Monitor Cost • Facilitate steps falling out of schedule – Resource Management – Material and Contract Management – Risk Management Project Progress Report Project Cost Report 45CVMark Consulting - Shridhar Lolla
  46. 46. Truth about project • More projects fail than they succeed. – Over 80% of projects do not meet their full scope, cost or time. – Several of these are abandoned halfway – Several of these create cultural backlash • The current ways of doing projects have issues that cause their failures 46CVMark Consulting - Shridhar Lolla
  47. 47. Why 80% projects fail • Estimations are estimations – People are measured on Estimates • Bad Multitasking – Switching Between Tasks • Project Review – Review each and every activity 47CVMark Consulting - Shridhar Lolla
  48. 48. BAD Multitasking Days 0 5 10 15 20 25 30 35 40 45 Task-1 Task-2 Task-3 15 days 48CVMark Consulting - Shridhar Lolla
  49. 49. Better Project Management • Separate and Aggregate Uncertainty (buffer) • Limit Number of Projects in execution • Limit Number of Tasks Assigned to Task Owners • Monitor and Control Uncertainty A B C Buffer A B C 49CVMark Consulting - Shridhar Lolla
  50. 50. Integrating the Operating System 50CVMark Consulting - Shridhar Lolla
  51. 51. Linking Operation Strategy and Operation Management • Business Model – The Logic of Creating, Delivering, Capturing Value of a Business For Entrepreneurs: Identify One Customer Segment Identify significant need Identify the Offer Identify process of value creation Identify key infrastructure Who are your key partners supplier + sales + distribution 51CVMark Consulting - Shridhar Lolla
  52. 52. 52 Building the Business Model Value Proposition Customer SegmentInfrastructure Deliver Value Create Value For Entrepreneurs: Do you already have your business model visualized? CVMark Consulting - Shridhar Lolla
  53. 53. Value Proposition Sales and Distribution Channels Customer Relationship Key Partners Key Resources Key Activities Building the Business Model Customer Segment 1 2 3 4 5 6 7 53CVMark Consulting - Shridhar Lolla
  54. 54. Capitalizing Operations 54CVMark Consulting - Shridhar Lolla
  55. 55. Capitalize • Assumption : There are enough sales and we need to manage operations better, i.e. constraint is inside the company. • Otherwise: • The capability built and the excess capacity revealed must be capitalized • At appropriate time, signal must be given to sales to increase orders flow • Sales must use the new found capability and capacity as its key sales pitch and must make effort to increase margins • The sales practice need to change due to new capability of the plant. 55CVMark Consulting - Shridhar Lolla
  56. 56. 56 Completing the Business Model Reference: The Business Model Generation, Alex Osterwalder Value Proposition Customer SegmentInfrastructure Deliver Value Create Value Finance Capture Value Invest Value CVMark Consulting - Shridhar Lolla
  57. 57. Value Proposition Sales and Distribution Channels Revenue Customer Relationship Key Partners Key Resources Key Activities Key Costs The Complete Business Model Customer Segment 1 2 3 4 5 6 7 8 9 57CVMark Consulting - Shridhar Lolla
  58. 58. Operating the System 58CVMark Consulting - Shridhar Lolla
  59. 59. Revisit: Fundamentals of business • Objective: To offer and grow the offering with time (Sustainable growth) – The quantum of offering is always with time. • The value must be captured and reinvested – Only then a business is sustainable i.e. the business must make profit, more profit and faster profit. For Entrepreneurs: What is your order to cash time? What is your process lead time? 59CVMark Consulting - Shridhar Lolla
  60. 60. Revisit: Fundamentals of business • Prime Goal: Faster # Units/time • Speed / efficiency/ productivity is essence • But efficiency without Effectiveness is unsustainable • Effectiveness is doing what is needed NOW. For Entrepreneurs: What does effectiveness mean in your business. How do you know which work order to process. How do you prioritize work orders. 60CVMark Consulting - Shridhar Lolla
  61. 61. Effectiveness and Efficiency Drive Operations • Effectiveness: produce what needed • Efficiency: productivity • Effectiveness: Choice, Planning and control • Efficiency: Utilization 61CVMark Consulting - Shridhar Lolla
  62. 62. Limitations to Flow • There are too many things… • Material Not available, people not availability, absenteeism, no capacity, defective parts, insufficient skills, break downs, holidays, quality problems, no orders, too much of orders, shut down, strike, long testing time, rework, pending for decision, management bandwidth, traffic jam, flood • hence we need a methodology, that gives us ever flourishing company, without confusion, easily, without exhausting costly resources, without taking risk, without creating imbalance in work- life. 62CVMark Consulting - Shridhar Lolla
  63. 63. Laws of Operations Standing On the Shoulders of Giant: Eli Goldratt • Law-1: – Objective of Operations is to ever improve flow • Law-2 – Do not over produce or over create before time • Law-3 – Have single priority system • Law-4 – Have a focused mechanism to deal with disruptions. 63CVMark Consulting - Shridhar Lolla
  64. 64. For Entrepreneurs • How do you prevent doing of work that is not needed. • How do you set priority • How do you identify where to improve ? 64CVMark Consulting - Shridhar Lolla
  65. 65. Dealing with Limitations to Flow • Flow Blockers and Disruptions – Systemic • Cause and Effect Analysis • Identification of Root Cause • Building of Solution • Implementation of Solution • Transformation – Assignable • Segregation of Causes • Pareto • Actions 65CVMark Consulting - Shridhar Lolla
  66. 66. Practices in World Class Organizations • Principles – TQM : Quality – TPM: Maintenance – Just in Time (JIT) – Employee involvement – Simplicity • Methodology – Lean : Waste Reduction – Six Sigma : Variation – TOC : System Improvement – Agile 66CVMark Consulting - Shridhar Lolla
  67. 67. Quality Management Tools Purpose Quality Control Tool Problem Identification Control Chart Identifying improvement Opportunities Histograms Check Sheets Pareto Diagrams Scatter Diagram Graphs Analysis of Problem and Root cause Cause n Effect Diagram CEDAC 67CVMark Consulting - Shridhar Lolla
  68. 68. Quality Management Tools Purpose Quality Management Tool Operation Planning for building Quality Into Product or Service Tree Diagram Matrix Diagram Process Decision Program Chart Arrow Diagram Poke Yoke Strategic Planning QFT Quality Costing 68CVMark Consulting - Shridhar Lolla
  69. 69. Lean Tools • 5-S • Pull Based System • Kan Ban • Poka Yoke • SMED 69CVMark Consulting - Shridhar Lolla
  70. 70. Quality Awards and Certification • The Deming Prize • CII-EXIM Business Excellence Award • The Rajiv Gandhi National Quality Award • ISO 9000 Series • ISO 14000 series • CMMI • QS 9000 series • TL 9000 series • OHSAS 18001 Challenges to WCM •Change Management •Crisis •Leadership •Time and Effort •Focuses Approach 70CVMark Consulting - Shridhar Lolla
  71. 71. Inside each improvement initiative P P P P D D D D C C C C A A A A Standardization Institutionalization Building Stronger base Performance S curve of a single initiative Time 71CVMark Consulting - Shridhar Lolla
  72. 72. Time Performance Growth due to improvement-1 Growth due to improvement-2 on the base-1 Base created by improvement-1 Base under formation by improvement-2 72CVMark Consulting - Shridhar Lolla
  73. 73. Time Performance The underlying phenomenon of building exponential growth 73CVMark Consulting - Shridhar Lolla
  74. 74. Time Performance Exponential Growth Curve The base created by successive improvements 74CVMark Consulting - Shridhar Lolla
  75. 75. Summary • Checklist – Defined Business Objective and Goal – Decided Products, Service and Value Proposition – Designed Process, Capacity, Supply Chain – Decided Operational Performance Parameters – Designed Infrastructure – Decided the type of Orders – Designed Planning and Control Process – Decided when to not work – Got a priority system to handle orders – Got a method to identify big problems – Built a process of ongoing improvement 75CVMark Consulting - Shridhar Lolla
  76. 76. Summary • Operations Management – Creating and Delivering Value – Designing and Operating System – Improving Performance with time • Sustainability is about maintaining a decisive competitive edge in an ever changing and unpredictable business environment. • Sustainable growth means Excellence 76CVMark Consulting - Shridhar Lolla
  77. 77. Sustainability is About the Cyclic Process of Ongoing Improvement Business Idea Business Model Business Plan Execution Operation Maintenance Improvements Business Excellence Operation Excellence 77CVMark Consulting - Shridhar Lolla
  78. 78. Where to Find More Information 10-Sep-2016 Copyrights ©2016 Shridhar Lolla. All Rights Reserved. Highly Confidential! 78
  79. 79. Principal : Shridhar Lolla Shridhar is a practitioner of Organizational Effectiveness and handholds management teams in dramatically improving impact of their effort on business results. He holds a PhD degree from IIT Delhi. Early in his career Shridhar led leadership positions at ABB –the Swiss industrial automation conglomerate, in Manufacturing, R&D and Service functions. For past decade he has been working with operational teams in bringing paradigm shift in implementing operational excellence programs. He runs a fast paced operational innovation program, ‘Revealing Hidden Capacity’ that delivers dramatic improvements in less than a lead time He lives in Bangalore and can be reached at lolla@cvmark.com and +91 9448 070081 12-06-2014 79Confidential

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