OPERATION

IMPROVEMENT
Chapter
16
 Introduction
Improvement means to make something better. And all operations, no matter
how well managed, are capable of being better. Of course, in one sense, all of
operations management is concerned with being better, but there are some issues
that relate specifically to the activity of improvement itself. Yet at one time
improvement was not central to operations managers, who were expected simply
to ‘run the operation’, ‘keep the show on the road’ and ‘maintain current
performance’. No longer. In fact in recent years the emphasis has shifted markedly
towards making improvement one of the main responsibilities of operations
managers. Moreover, the study of improvement as a specific activity has attracted
significant attention from both academics and practitioners. Some of this attention
focuses on specific techniques and prescriptions while some looks at the
underlying philosophy of improvement. Both aspects are covered in this chapter,
because both aspects of improvement have their place in effective improvement.
Radical or breakthrough change

Radical breakthrough improvement (or ‘innovation’-based

improvement as it is sometimes called) is a philosophy that
assumes that the main vehicle of improvement is major and
dramatic change in the way the operation works. The introduction
of a new, more efficient machine in a factory, the total redesign of a
computer-based hotel reservation system, and the introduction of
an improved degree programe at a university are all examples of
breakthrough improvement.
ontinuous or incremental improvement - 535

Continuous improvement, as the name implies, adopts an approach to improving

performance which assumes many small incremental improvement steps. For
example, modifying the way a product is fixed to a machine to reduce changeover
time, simplifying the question sequence when taking a hotel reservation, and
rescheduling the assignment completion dates on a university course so as to
smooth the students’ workload are all examples of incremental improvements.
While there is no guarantee that such small steps towards better performance will
be followed by other steps, the whole philosophy of continuous improvement
attempts to ensure that they will be. Continuous improvement is not concerned
with promoting small improvements per se. It does view small improvements,
however, as having one significant advantage over large ones – they can be
followed relatively painlessly by other small improvements
Exploitation or exploration

A closely related distinction to that between continuous and

breakthrough improvement is the one that management
theorists draw between what they call ‘exploitation’ and
‘exploration’. Exploitation is the activity of enhancing processes
(and products) that already exist within a firm. The focus of
exploitation is on creating efficiencies rather than radically
changing resources or processes. Its emphasis is on tight
control of the improvement process, standardizing processes,
clear organizational structures and organizational stability.
Organizational ‘ambidexterity’

It is clear that the organizational skills and capabilities to be successful at

exploitation are likely to be very different from those that are needed for the
radical exploration of new ideas. Indeed, the two views of improvement may
actively conflict. A focus on thoroughly exploring for totally novel choices may
consume managerial time and effort and the financial resources that would
otherwise be used for refining existing ways of doing things, reducing the
effectiveness of improving existing processes. Conversely, if existing processes are
improved over time, there may be less motivation to experiment with new ideas.
Organizational ambidexterity means the ability of a firm both to exploit and explore
as it seeks to improve; to be able to compete in mature markets where efficiency is
important, by improving existing resources and processes, while also competing in
new technologies and/or markets where novelty, innovation and experimentation
are required.
The structure of improvement ideas - 538

There have been hundreds of ideas relating to operations improvement that have been
proposed over the last few decades. To understand how these ideas relate to each other
it is important to distinguish between four aspects of improvement:

● The elements contained within improvement approaches – these are the fundamental
ideas
of what improves operations. They are the ‘building blocks’ of improvement.
● The broad approaches to improvement – these are the underlying sets of beliefs that
form a coherent philosophy and shape how improvement should be accomplished.
Some improvement approaches have been used for over a century (for example, some
work study approaches , see Chapter 9 ), others are relatively recent (for example,
Six Sigma, explained later). But do not think that approaches to improvement are
different in all respects; there are many elements that are common to several
approaches.
● The improvement techniques – there are many ‘step-by-step’ techniques,
methods and tools
that can be used to help find improved ways of doing things, some of which
use quantita
tive modelling and others are more qualitative.
● The management of improvement – how the process of improvement is
managed is as
important, if not more important, than understanding the elements and
approaches to
improvement. The improvement activity must be organized, resourced and
generally
controlled for it to be effective at actually achieving demonstrable
improvement.
 WHAT ARE THE KEY ELEMENTS OF OPERATIONS
IMPROVEMENT?

The elements of improvement are the individual fundamental ideas of

improvement. Think of these elements of improvement as the building
blocks of the various improvement approaches that we will look at
later. Here we explain some, but not all (there are lots), of the more
common elements in use today.
A process perspective

Even if some improvement approaches do not explicitly or formally include the idea
that taking a process perspective should be central to operations improvement,
almost all do so implicitly. This has two major advantages. First, it means that
improvement can be focused on what actually happens rather than which part of the
organization has responsibility for what happens. In other words, if improvement is not
reflected in the process of creating products and services, then it is not really
improvement as such. Second, as we have mentioned before, all parts of the business
manage processes. This is what we call operations as activity rather than operations
as a function.
End-to-end processes

Some improvement approaches take the process perspective further and prescribe
exactly how processes should be organized. One of the more radical prescriptions of
business process re-engineering (BPR, see later), for example, is the idea that
operations should be organized around the total process which adds value for
customers, rather than the functions or activities which perform the various stages of
the value-adding activity. We have already pointed out the difference between
conventional processes within a specialist function and an end to-end business
process (see Chapter 1).
Customer centricity

There is little point in improvement unless it meets the requirements of the

customers. However, in most improvement approaches, meeting the
expectations of customers means more than this. It involves the whole
organization in understanding the central importance of customers to its success
and even to its survival. Customers are seen not as being external to the
organization but as the most important part of it. However, the idea of being
customer-centric does not mean that customers must be provided with
everything that they want.
Voice of the customer (VOC)

The ‘voice of the customer’ (VOC) is an idea that is closely related to the idea of
customer centricity. The term means capturing a customer’s requirements,
expectations, perceptions and preferences in some depth. Sometimes a VOC
exercise is done as part of new service and product development as part of quality
function deployment (QFD) which was explained in Chapter 4.
Systems and procedures

Improvement is not something that happens simply by getting everyone to ‘think

improvement’. Some type of system that supports the improvement effort may be
needed. An improvement system (sometimes called a ‘quality system’) is defined
as: ‘the organizational structure, responsibilities, procedures, processes and
resources for implementing quality management.’5 It should ‘define and cover all
facets of an organization’s operation, from identifying and meeting the needs and
requirements of customers, design, planning, purchasing, manufacturing,
packaging, storage, delivery and service, together with all relevant activities
carried out within these functions. It deals with organization, responsibilities,
procedures and processes. Put simply [it] is good management practice.’6
Reduce process variation

Processes change over time, as does their performance. Some aspect of process
performance (usually an important one) is measured periodically (either as a single
measurement or as a small sample of measurements). These are then plotted on a
simple timescale. This has a number of advantages. The first is to check that the
performance of the process is, in itself, acceptable (capable). They can also be
used to check if process performance is changing over time, and to check on the
extent of the variation in process performance.
Synchronized
This isflow
another idea that we have seen before – in Chapter 15 , as part of the lean
philosophy. Synchronized flow means that items in a process, operation or supply
network flow smoothly and with even velocity from start to finish. This is a function
of how inventory accumulates within the operation. Whether inventory is
accumulated in order to smooth differences between demand and supply, or as a
contingency against unexpected delays, or simply to batch for purposes of
processing or movement, it all means that flow becomes asynchronous.

Emphasize
education/training
Several improvement approaches stress the idea that structured training and
organization of improvement should be central to improvement. Not only should the
techniques of improvement be fully understood by everyone engaged in the
improvement process, but the business and organizational context of improvement
should also be understood.
Perfection is the goal
Almost all organization-wide improvement programmes will have some kind of goal or
target that the improvement effort should achieve. And while targets can be set in
many different ways, some improvement authorities hold that measuring process
performance against some kind of absolute target does most for encouraging
improvement. By an ‘absolute target’ one literally means the theoretical level of
perfection, for example zero errors, instant delivery, delivery absolutely when
promised, infinite flexibility, zero waste, etc
Waste identification
All improvement approaches aspire to eliminate waste. In fact any improvement implies
that
some waste has been eliminated, where waste is any activity that does not add value.
But the identification and elimination of waste is sometimes a central feature. For
example, as we discussed in Chapter 15 , it is arguably the most significant part of the
lean philosophy.
evelop internal customer–supplier relationships

One of the best ways to ensure that external customers are satisfied is to establish the
idea
that every part of the organization contributes to external customer satisfaction by
satisfying its own internal customers. This idea was introduced in Chapter 15 , as was
the related concept of service-level agreements (SLAs). It means stressing that each
process in an operation has a responsibility to manage these internal customer–supplier
relationships. This is done primarily by defining as clearly as possible what their own
and their customers’ requirements are. In effect this means defining what constitutes
‘error-free ’ service – the quality, speed, dependability and flexibility required by internal
customers.
 WHAT ARE THE BROAD APPROACHES TO
IMPROVEMENT?

By the broad approaches to improvement we mean the underlying sets of beliefs

that form a coherent philosophy and shape how improvement should be
accomplished. But do not think that approaches to improvement are different in
all respects; there are many elements that are common to several approaches.
Some of theseapproaches have been, or will be, described in other Chapters.
 Total quality management as an improvement
approach
Total quality management (TQM) was one of the earliest management ‘fashions’. Its
peak of popularity was in the late 1980s and early 1990s. As such it has suffered from
something of a backlash in recent years. Yet the general precepts and principles that
constitute TQM are still hugely influential. Few, if any, managers have not heard of
TQM and its impact on improvement. Indeed, TQM has come to be seen as an
approach to the way operations and processes should be managed and improved,
generally. This totality can be summarized by the way TQM lays particular stress on
the following elements (see Chapter 17):
● Meeting the needs and expectations of customers.
● Improvement covers all parts of the organization (and should be group based).
● Improvement includes every person in the organization (and success is recognized).
● Including all costs of quality.
● Getting things ‘right first time’, that is designing in quality rather than inspecting it
in.
● Developing the systems and procedures which support improvement.
ean as an improvement approach
The idea of ‘lean’ spread beyond its Japanese roots and became fashionable in the
West at
about the same time as TQM. And although its popularity has not declined to the same
extent as TQM, over 25 years of experience have diminished the excitement once
associated with the approach. The key elements of lean when used as an improvement
approach are as follows:

● Customer-centricity.
● Internal customer–supplier relationships.
● Perfection is the goal.
● Synchronized flow.
● Reduce variation.
● Include all people.
● Waste elimination.
 Business process re-engineering
The idea of BPR originated in the early 1990s when Michael Hammer proposed that,
rather (BPR)
than using technology to automate work, it would be better applied to doing away with
the need for the work in the first place (‘don’t automate, obliterate’). In doing this he was
warning against establishing non-value-added work within an IT system where it would
be even more difficult to identify and eliminate. All work, he said, should be examined for
whether it adds value for the customer and, if not, processes should be redesigned to
eliminate it. It was the IT that allowed radical process redesign even if many of the
methods used to achieve the redesign had been explored before. The main principles of
BPR can be summarized in the following points:
● Rethink business processes in a cross-functional manner which organizes work around
the
natural flow of information (or materials or customers).
● Strive for dramatic improvements in performance by radically rethinking and
redesigning
the process.
● Have those who use the output from a process perform the process. Check to see if all
 Measuring performance - 549

The Six Sigma approach uses a number of related measures to assess the performance of
operations processes:

● 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 (that is, only units of
output with no defects are not defective; defective units will have one or more than one
defect).
● 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).
● Proportion defective – is the percentage or fraction of units that have one or more defect.
● Process yield – is the percentage or fraction of total units produced by a process that are
defect-free (that is, 1 − proportion defective).
● 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 opportunity – is the proportion or percentage of defects divided by
the total
number of defect opportunities (the number of defects divided by (the number of
items
produced × the number of opportunities per item)).
● Defects per million opportunities (DPMO) – is exactly what it says, the
number of
defects which the process will produce if there were 1 million opportunities to do so.
● The Sigma measurement 11 is derived from the DPMO and is the number of
standard deviations of the process variability that will fit within the customer
specification limits.
550 (insert picture)

● Customer-driven objectives – Six Sigma is sometimes defined as ‘the process of

comparing process outputs against customer requirements’. It uses a number of measures
to assess
the performance of operations processes. In particular it expresses performance in terms
of defects per million opportunities (DPMO).
● Use of evidence – Although Six Sigma is not the first of the new approaches to
operations
to use statistical methods, it has done a lot to emphasize the use of quantitative evidence.
● Structured improvement cycle – The structured improvement cycle used in Six
Sigma is
the DMAIC cycle.
● Process capability and control – Not surprisingly, given its origins, process
capability and
control is important within the Six Sigma approach.
● Process design – Latterly Six Sigma proponents also include process design in the
collection of elements that define the Six Sigma approach.
Differences and similarities - 553
In this chapter we have chosen to explain very briefly four improvement approaches. It
could
have been more. Enterprise resource planning (ERP , see Chapter 14 ), total preventive
maintenance (TPM , see Chapter 18 ), Lean Sigma (a combination of lean and Six Sigma)
and others could have been added. But these four constitute a representative sample of
the most commonly used approaches. Nor do we have the space to describe them fully.
But there are clearly some common elements between some of these approaches that
we have described. Yet there are also differences between them in that each approach
includes a different set of elements and therefore a different emphasis, and these
differences need to be understood.

WHAT TECHNIQUES CAN BE USED FOR IMPROVEMENT?

Improvement techniques are the ‘step-by-step’ methods and tools that can be used to
help find
improved ways of doing things; some of these use quantitative modelling and others are
more
Scatter diagrams
Scatter diagrams provide a quick and simple method of identifying whether there is
evidence of a connection between two sets of data: for example, the time at which you
set off for work every morning and how long the journey to work takes. Plotting each
journey on a graph which has departure time on one axis and journey time on the other
could give an indication of whether departure time and journey time are related, and if so
how. Scatter diagrams can be treated in a far more sophisticated manner by quantifying
how strong the
relationship is between the sets of data.

Process maps (flow charts)

Process maps (sometimes called flow charts in this context) can be used to give a
detailed understanding prior to improvement. They were described in Chapter 6 and are
widely used in improvement activities. The act of recording each stage in the process
quickly shows up poorly organized flows. Process maps can also clarify improvement
opportunities and shed further light on the internal mechanics or workings of an
operation. Finally, and probably most importantly, they highlight problem areas where no
procedure exists to cope with a par
 Cause–effect diagrams Pareto
diagrams
• Cause–effect diagrams are a particularly • In any improvement process, it is worthwhile
effective method of helping to search for the distinguishing what is important and what is
root causes of problems. They do this by less so. The purpose of the Pareto diagram
asking what, when, where, how and why (first introduced in Chapter 13) is to
questions, but also add some possible distinguish between the ‘vital few’ issues and
‘answers’ in an explicit way. They can also the ‘trivial many’. It is a relatively
be used to identify areas where further data straightforward technique which involves
is needed. Cause–effect diagrams (which are arranging items of information on the types of
also known as Ishikawa diagrams) have problem or causes of problem into their order
become extensively used in improvement of importance (usually measured by
programmes. This is because they provide a ‘frequency of occurrence’). This can be used
way of structuring group brainstorming to highlight areas where further decision
sessions. Often the structure involves making will be useful. Pareto analysis is
identifying possible causes under the (rather based on the phenomenon of relatively few
old-fashioned) headings of: machinery, causes explaining the majority of effects.
manpower, materials, methods and money.
Yet, in practice, any categorization that
comprehensively covers all relevant possible
causes could be used.
HOW CAN THE IMPROVEMENT
PROCESS BE MANAGED?

• In the final part of this chapter we examine • Why does the improvement effort need
some of the managerial issues associated with organizing?
how improvement can be organized. Not all the
issues concerned with managing the • Improvement does not just happen. It needs
improvement process are easily defined, and organizing and it needs implementing. It also
many are outside the traditional scope of an needs a purpose that is well thought through
operations management text, but they are and clearly articulated. Although much
important. Many of the issues could be operations improvement will take place at an
described as the ‘soft’ side of improvement. But operational level, it may be small scale and
do not dismiss this as in any way less incremental. Nevertheless, it must be placed in
important. In practice it is often the ‘soft’ stuff some kind of context. In his 14 points for
that determines the success or failure of quality improvement, he emphasizes the need
improvement efforts. Moreover, the ‘soft’ stuff for statistical control methods, participation,
can be more difficult to get right than the education, openness and purposeful
‘hard’, more technique-based, aspects of improvement:
improvement. The ‘hard’ stuff is hard, but the
‘soft’ stuff is harder!
 1 Create constancy of purpose.
2 Adopt new philosophy.
3 Cease dependence on inspection.
4 End awarding business on price.
5 Improve constantly the system of production and
service.
6 Institute training on the job.
7 Institute leadership.
8 Drive out fear.
9 Break down barriers between departments.
10 Eliminate slogans and exhortations.
11 Eliminate quotas or work standards.
12 Give people pride in their job.
13 Institute education and a self-improvement
programme.
14 Put everyone to work to accomplish it.
Sourcing improvement ideas – 561 ● The pioneer importer – is an imitator that is the pioneer in
another place (another country,
• industry, or product market). This is what Ryanair did in
When we examined the elements Europe when it imported the
of, and approaches to, • Southwest model.
improvement, earlier, they focused
• ● The fast second – is a rapid mover arriving quickly after
on generating improvement ideas
an innovator or pioneer, but before
that originated within the • they have had an opportunity to establish an unassailable
organization. Yet to ignore the lead, and before other poten
• tially rival imitators take a large share of the market.
improvements that other
•
companies are deploying is to • ● The come from behind – is a late entrant or adopter that
ignore a potentially huge source has deliberately delayed adopting
• a new idea. Samsung did this with its chip-making business,
ofinnovation. Whether they are
by using
competitors, suppliers, customers, • its manufacturing capability and knowledge to halve the
or simply other firms with similar time it takes
challenges, external firms can • to build a semiconductor plant. Then Samsung established
a lead over
provide solutions to internal • competitors by exploiting its strength in key technical,
problems. He identifies three production
‘strategic types’ of imitators: • and quality skills.
 Benchmarking Types of benchmarking
• There are many different types of benchmarking
Benchmarking is clearly related to the
(which are not necessarily mutually exclusive),
idea of finding inspiration from outside
some of which are listed below:
the organization. It is ‘the process of • ● Internal benchmarking is a comparison between
learning from others’ and involves operations or parts of operations which are within
comparing one’s own performance or the same total organization.
methods against other comparable • ● External benchmarking is a comparison between
operations. It is a broader issue than an operation and other operations which are part of
a different organization.
setting performance targets, and includes
• ● Non-competitive benchmarking is benchmarking
investigating other organizations’ against external organizations which do not
operations practice in order to derive compete directly in the same markets.
ideas that could contribute to • ● Competitive benchmarking is a comparison
performance improvement. Its rationale is directly between competitors in the same, or
based on the idea that (a) problems in • similar, markets.
• ● Performance benchmarking is a comparison
managing processes are almost certainly
between the levels of achieved performance in
shared by processes elsewhere, and (b) • D ifferent operations.
there is probably another operation • ● Practice benchmarking is a comparison between
somewhere that has developed a better an organization’s operations practices, or
way of doing things. • way of doing things, and those adopted by another
enchmarking as an improvement tool

Although benchmarking has become popular, some businesses have failed

to derive maximum benefit from it. Partly this may be because there are
some misunderstandings as to what benchmarking actually entails. First, it
is not a ‘one-off’ project. It is best practiced as a continuous process of
comparison. Second, it does not provide ‘solutions’. Rather, it provides
ideas and information that can lead to solutions. Third, it does not involve
simply copying or imitating other operations. It is a process of learning and
adapting in a pragmatic manner. Fourth, it means devoting resources to
the activity. Benchmarking cannot be done without some investment, but
this does not necessarily mean allocating exclusive responsibility to a set
of highly paid managers. In fact, there can be advantages in organizing
staff at all levels to investigate and collate information from benchmarking
targets.
Single- and double-loop learning - 563

Single-loop learning occurs when there is a repetitive and

predictable link between cause and effect. This is similar
to the idea of ‘routine control’ that we discussed in
Chapter 10 . Some kind of output characteristic from a
process is measured and associated with the input
conditions that caused it. Every time an operational error
or problem is detected, it is corrected and, in doing so,
more is learned about the process.