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Operations – II Value chain basics

Operations – II Value chain basics. Chitra Duvedi. Operations Evolution. First Revolution.: Ford Motor Co. 1910-1920. Single Product. Vertical Integration Second Revolution: Toyota Motor Co. 1960-1970 Wide Variety Long term relationship with suppliers.

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Operations – II Value chain basics

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  1. Operations – IIValue chain basics Chitra Duvedi

  2. Operations Evolution • First Revolution.: Ford Motor Co. 1910-1920. • Single Product. • Vertical Integration • Second Revolution: Toyota Motor Co. 1960-1970 • Wide Variety • Long term relationship with suppliers. • Suppliers located in geographic proximity to plant • Third Revolution: 1995-.. • Mass Customization. ( Product service Bundling) • Geographically dispersed Network/Supply Chain • Medium term relationship with suppliers • Suppliers have to maintain technology and cost leadership.

  3. Value chain The Invisible Throughput & Invisible Waste Q C D I M S The Visible Throughput & Visible Waste Operating Cycle

  4. What are the activities that are adding value? What are non value adding activities? How do I minimize NVA activities? Value stream map

  5. Value Stream? • Customer, Plant, Vendors & Service providers • Visible waste • Invisible waste

  6. Process Measurement • Area of concern • Measurement basic • Process under control • Capable Process • Predictable performance

  7. Customer? • Who is the customer? • Who are the stakeholders? • What do we mean by adding value?

  8. Satisfaction Revealed Exciting (Unspoken) Fulfilled Requirements Un-fulfilled Requirements Expected (Unspoken) Customer Needs Dissatisfaction

  9. Customer expectations • Survey • Focus group • Observing the usage

  10. GAP model Nature of Service on offer Corporate Image Word of mouth communication Personal needs Post experience Expected service GAP Perceived service GAP 5 Service delivery External communication to customers GAP4 GAP 1 Staff’s understanding of service requirements GAP 3 Translation of perceptions into service system GAP 2 Management’s perception of customer

  11. Toyota Production System • Approach to Production • Build only what is needed • Stop if something goes wrong • Eliminate anything which does not add value\ • Philosophy of Work • Respect for Workers • Full utilization of workers’ capabilities • Entrust workers with responsibility & authority

  12. Changing the Mental Model Setup TimeIndustry Knowledge: Die Change is Expensive - Don’t Change Dies TaiichiOhno: Economics Requires Many Dies Per Stamping Machine One Minute Die Change

  13. Principles of Lean Thinking 1. Eliminate Waste2. Increase Feedback3. Delay Commitment4. Deliver Fast5. Build Integrity In6. Empower the Team7. See the Whole

  14. Principle 1: Eliminate Waste Waste Anything that does not create value for the customer Prime Directive of Lean ThinkingCreate Value for the customer Improve the Value Stream

  15. Waste - Visible • Defects • Overproduction • Transportation • Waiting • Inventory • Motion • Over Processing

  16. Invisible waste • Handoffs • Useless Information • Wishful Thinking • Discarded Knowledge • Communication Barriers • Lost ideas • Lost energy • Lost initiative

  17. Principle #2: Build Quality In Why? How to build quality in Poka Yoke

  18. Principle #3: Create Knowledge Knowledge Creation Knowledge Retention Knowledge Use

  19. Principle #4: Defer Commitment Set based concurrent process Design for change

  20. Principle #5: Deliver Fast Automation Design Quality Deliver Most important 25% Quality Function Deployment

  21. Principle #6: Respect People Quality Circles

  22. Principle #7: Optimize the Whole Delays Queues Speed Throughput Sometimes you may want to slow down Whole value stream – optimization beyond software development

  23. Principle #8: Add Value to the Customer Who is our customer What is “valuable” to him

  24. How to Improve • Automation of manual activity • Work elimination • Transfer of responsibility (and persons?) from one department to other • Job redesign • Measurement plan for tracking the performance • Documentation of procedures • Training of procedures • Organization restructure

  25. Alignment of Operations • system design & product service bundle offering Product/service bundle Attributes • Product Cost • Product delivery-response time • Product variety/customization • Product Quality Operations System Attributes • Process cost • RM Cost, Process Cost, Assets Utilization • Process flow time • Process flexibility • Process quality

  26. Operations System design: Managing Cost Service Tradeoffs Cost of service High Low Service Level

  27. Elements of Operations • system Design : • Structure • Facility • Capacity, Location • Process Technology • Vertical Integration • Infrastructure • Workforce • Operations Planning & Control • Information flow, Inv. & Op. Plg. • Quality systems • Sourcing Policies • Organization structure

  28. Operations Innovations : • Enhancing Operations Performance • Business Process Innovations: Reconfiguration • Product/Service bundle Innovations • Product design innovations • Process technology innovations • Processes within firm • Processes across chain

  29. Operations systems: Typology • Product Versus Service • Delivery lead time • Product variety • Nature of Demand uncertainty • Order Penetration Point • Focus – Functional / Product

  30. Operations Innovations • Change Value offering based on Operations capabilities • Dell, National Panasonic • Improve efficiency & responsiveness of Post order processes • Postpone the point of differentiation • Paint Industry • Change Value addition curve • Dell • Capacity pooling in services • Yield Management

  31. Order Penetration Point Customer Order SOURCE MAKE COMPONENTS ASSEMBLY DELIVERY Customer Order SOURCE MAKE COMPONENTS ASSEMBLY DELIVERY Customer Order SOURCE MAKE COMPONENTS ASSEMBLY DELIVERY

  32. Stages in Strategic Role of Operations • Stage 1: Minimize negative potential of Operations • Stage 2: Achieve parity with competitors: externally neutral • Stage 3: Provide credible support to business strategy: internally supportive • Stage 4: Pursue an Operations-base competitive advantage

  33. Operations based Competitive advantage • Toyota • Dell Computers • Wal-Mart • Southwest Airlines • Tata Steel

  34. Operations Managers: Enhancing Capabilities • Developing Business orientation • Developing Supply chain orientation • Developing Project Management capabilities • Continuous Improvement Projects ( Bottom driven) • Breakthrough projects ( top driven) • Learning Projects • Learning to use new set of tools & Technologies • Restructure process using IT • Use sophisticated finance tools to take care of supply and demand related uncertainty

  35. Thank You chitra@enhanceandexcel.com

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