OPERATIONS MANAGEMENT
XLRI
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DID YOU KNOW?
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DID YOU KNOW?
ClockSpeed
Charles Fine MIT
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GOAL
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WILL HUMANS REMAIN IN OPERATIONS
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OIL
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OIL
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RARE EARTH
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OPERATIONS MANAGEMENT
THE CONSTANTS?
1. Process
2 Inventory
3. Project
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COUNTRY TO WATCH
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COUNTRY TO WATCH:CHINA
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WHAT MAY NOT CHANGE?
1. Process
2 Inventory
3. Project
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SHELL GAME LEARNINGS
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STRENGTHS
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OPPORTUNITIES FOR IMPROVEMENT
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BAD APPLE THEORY
BAD APPLE THEORY
• Process or Person
THE CONCEPT OF BOTTLENECK
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THE CONCEPT OF BOTTLENECK
The neck or mouth of a bottle
The narrow section of road or traffic junction that impedes traffic
THE CONCEPT OF BOTTLENECK
5 Focusing Steps of the Process of Ongoing Improvement
Step 0: Agree on the System GOAL (to define “Constraint” and “problem”)
Step 1: IDENTIFY the System Constraint (the Weakest Link)
Step 2: Decide how to EXPLOIT (protect - not Waste) the System Constraint
Step 3: SUBORDINATE everything to the above decision
Step 4: ELEVATE the Constraint
Step 5: If the constraint was removed in previous steps, GO BACK to Step 1
Supply Demand
10/hr 12/hr 8/hr 11/hr 10/hr
10/hr 10/hr
System Constraint
Step 1 Step 2 : Step 3: Step 4:
Identify the System Decide how to Exploit Subordinate (Decide when and how to )
Constraint the System Constraint everything to this Elevate the System Constraint
decision 120%
$120m Potential for Constraint
100% 100% Elevation
100%
$100m $100m Murphy / Common Cause $100m Murphy / Common Cause
Potential for more
Overproduction / Rework
Goal Units 80%
Starvation, Blockage
(Constraint Exploitation) $80m
60% Planned/Unplanned Downtime New level of
60% Constraint
$60m Current level of Current level of
$60m Exploitation
Constraint Constraint
Exploitation Exploitation
Step 5: Go back to Step 1
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DIFFICULTY IN IDENTIFYING BOTTLENECKS
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MEASUREMENTS DRIVE BEHAVIOR!!!
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VALUE ADDED WORK
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VALUE ADDED WORK VS NON VALUE ADDED
If a customer could see all of
the activities in your company,
would he be prepared to pay
Transporting for them?
Overproduction Because that is what he does!
Seven Muda
(waste)
Non Value adding to product or Waiting
service from the POV of the Customer
Unnecessary
Motion
Inappropriate Unnecessary
Processing Inventory
Defects
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CANNOT HAVE A ONE SIZE FIT ALL
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THE CAST OF CHARACTERS
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WHOM SHOULD WE REMEMBER FROM
HISTORY?
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LESSONS FROM HISTORY
YEAR CONTRIBUTION BY
1776 SPECIALIZATION OF LABOUR ADAM SMITH/
BABBAGE
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EARLY PRACTICES – ADAM SMITH
An Economist
1776 – “Wealth of Nations”
Proposed the “Division of Labor”
Example : Pin Manufacturing Industry
10 workmen
Individually making pins - 10 / day
Workmen doing specialized tasks – 48000 / day
Domestic System (USA) versus Craft Guilds (UK)
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EARLY PRACTICES – CHARLES BABBAGE
Work in 1852
A Mathematician
Expanded on Adam Smith’s ideas
Costing
Four more Reasons
Reduces time for learning
Reduces Waste
Attainment of higher Skills
We can match skill to task
Book: On the Economy of Machinery and Manufacture Rajiv Misra
CLAUDE SHANNON – HICK HYMAN LAW
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CLAUDE SHANNON – HICK HYMAN LAW
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OPERATIONS MANAGEMENT
A HISTORICAL SUMMARY
YEAR CONTRIBUTION BY
1776 SPECIALIZATION OF LABOR ADAM SMITH/
BAGGAGE
1779 INTERCHANGEABLE PARTS WHITNEY
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INTERCHANGEABLE PARTS
• Born 1765; died 1825
• In 1798, received government
contract to make 10,000
muskets
• Showed that machine tools
could make standardized parts
to exact specifications
– Musket parts could be used in any
© 1995 Corel Corp.
musket
Eli Whitney • Other Examples
Was helped by the ability to machine hardened steel: Dimensional Creep
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THE IMPACT OF STANDARDS
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FILE CLIP
• File Clip
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PEN
• Pen
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THE CONTAINER
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AFTER INTERCHANGEABLE PARTS WHAT?
Process (ISO 9000)
Business process
Interoganization Process
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THE EGG SHELL
REVERSING THE INDUSTRIAL REVOLUTION
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OPERATIONS MANAGEMENT
A HISTORICAL SUMMARY
YEAR CONTRIBUTION BY
1776 SPECIALIZATION OF LABOUR ADAM SMITH/
BABBAGE
1779 INTERCHANGABLE PARTS WHITNEY
1900 SCIENTIFIC MANAGEMENT TAYLOR
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SCIENTIFIC MANAGEMENT
• Born 1856; died 1915
• Known as ‘father of scientific
management’
• In 1881, as chief engineer for Midvale
Steel, studied how tasks were done
– Began first time & motion studies
• Created efficiency
principles
Frederick W.
Taylor
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SCIENTIFIC MANAGEMENT
• What is Scientific Management?
Frederick W.
Taylor
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SCIENTIFIC MANAGEMENT
Taylor: Management Should
Take More Responsibility for
• Matching employees to right job
• Providing the proper training
• Providing proper work methods and tools
• Establishing legitimate incentives for
work to be accomplished
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SCIENTIFIC MANAGEMENT
F.W. Taylor, Mechanical Engineer, 1900
e.g. Life as an UPS pickup driver
Taylor’s Studies
12.5 tons being loaded increased to 48 tons
Optimum size of shovel is 21 pound size
“one best way to do a job exists”
Biography: The One Best Way, Harvard school Rajiv Misra
SCIENTIFIC MANAGEMENT - PROPONENTS
Frank & Lillian Gilbreth
• Frank (1868-1924); Lillian
(1878-1972)
• Husband-and-wife engineering
team
• Further developed work
measurement methods
• Applied efficiency methods to
their home & 12 children!
© 1995 Corel Corp.
Book and Movie: Cheaper by the Dozen, Book: Bells on their toesRajiv Misra
SCIENTIFIC MANAGEMENT IN PRACTICE
‘Make them all
alike!’
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SCIENTIFIC MANAGEMENT IN PRACTICE
Henry Ford
• Born 1863; died 1947 ‘Make them all
alike!’
• In 1903, created Ford
Motor Company
• In 1913, first used
moving assembly line
to make Model T 1995 Corel
Corp.
– Unfinished product
moved by conveyor
past work station
• Paid workers very well for 1911 ($5/day!)
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SCIENTIFIC MANAGEMENT - PROPONENTS
Henry Ford
• Model A to T in 5 years ‘Make them all
alike!’
• Model A, time – 8.56 hrs
• Parts Interchangeability and
Material handlers to give 1995 Corel
Corp.
parts: Time = 2.3 mins
(Car stationary on stands,
Worker Moved)
• Assembly line Time = 1.19mins
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SCIENTIFIC MANAGEMENT - PROPONENTS
Andrew Carnegie
• Steel Industry: 1870 $100/Ton, 1890: $12/Ton
Sears
• Automated Order processing / Warehouse
– Mail Order Company
– Stock turns (Inventory Turns)
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SCIENTIFIC MANAGEMENT
To American production, without which this war would have been lost
Joseph Stalin
Toasting US at the Teheran summit, 1943
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SCIENTIFIC MANAGEMENT
“one best way to do a job exists and manager’s responsibility to find it”
Biography: The One Best Way, Harvard school Rajiv Misra
OPERATIONS MANAGEMENT
A HISTORICAL SUMMARY
YEAR CONTRIBUTION BY
1776 SPECIALIZATION OF LABOUR ADAM SMITH/
BABBAGE
1779 INTERCHANGABLE PARTS WHITNEY
1900 SCIENTIFIC MANAGEMENT TAYLOR
1901 SCHEDULING TECHNIQUES GANTT
Rajiv Misra
OPERATIONS MANAGEMENT
A HISTORICAL SUMMARY
YEAR CONTRIBUTION BY
1776 SPECIALIZATION OF LABOUR ADAM SMITH/
BABBAGE
1779 INTERCHANGABLE PARTS WHITNEY
1900 SCIENTIFIC MANAGEMENT TAYLOR
1901 SCHEDULING TECHNIQUES GANTT
1915 ECONOMIC ORDER QUANTITY HARRIS
1927 HUMAN RELATIONS MAYO
1931 SQC SHEWART
1935 SAMPLING DODGE/ROMING
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GANTT CHART
Time Period
Activity
J F M A M J J
Design
Build
Test
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GANTT CHART
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COSTS ARE ALSO IMPORTANT
A HISTORICAL SUMMARY
YEAR CONTRIBUTION BY
1776 SPECIALIZATION OF LABOUR ADAM SMITH/
BABBAGE
1779 INTERCHANGABLE PARTS WHITNEY
1900 SCIENTIFIC MANAGEMENT TAYLOR
1901 SCHEDULING TECHNIQUES GANTT
Rajiv Misra
OPERATIONS MANAGEMENT
A HISTORICAL SUMMARY
YEAR CONTRIBUTION BY
1776 SPECIALIZATION OF LABOUR ADAM SMITH/
BAGGAGE
1779 INTERCHANGABLE PARTS WHITNEY
1900 SCIENTIFIC MANAGEMENT TAYLOR
1901 SCHEDULING TECHNIQUES GANTT
1915 ECONOMIC ORDER QUANTITY HARRIS
1927 HUMAN RELATIONS MAYO
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HUMAN RELATIONS – ELTON MAYO
Hawthorne effect.
Elton Mayo was trying to study the effect of lighting on
productivity at a Western Electric plant in Hawthorne, Illinois. He
divided workers into two groups. For the test group, he increased
the illumination in their work area. Productivity went up. For the
control group, he left the lighting the same. Productivity went up.
That made no sense to Mayo, so he tried another study. He
took a group of female workers, gave them regularly scheduled
rest periods, company paid lunches and shorter work weeks.
Productivity went up. Eighteen months later, all those perks were
eliminated. And productivity? It went up once again.
Mayo concluded that productivity increased every time he
paid attention to workers.
Tip: Pay attention to your people.
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TQM: TOTAL QUALITY MANAGEMENT
Six Sigma
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OPERATIONS MANAGEMENT
A HISTORICAL SUMMARY
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OPERATIONS MANAGEMENT
A HISTORICAL SUMMARY
YEAR CONTRIBUTION BY
1776 SPECIALIZATION OF LABOUR ADAM SMITH/
BAGGAGE
1779 INTERCHANGABLE PARTS WHITNEY
1900 SCIENTIFIC MANAGEMENT TAYLOR
1901 SCHEDULING TECHNIQUES GANTT
1915 ECONOMIC ORDER QUANTITY HARRIS
1927 HUMAN RELATIONS MAYO
1931 SQC DEMING/ SHEWART
1935 SAMPLING DODGE/ROMING
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STATISTICAL QUALITY CONTROL
W. Edwards Deming
• Born 1900; died 1993
• Engineer & physicist
• Credited with teaching Japan
quality control methods in
post-WW2
• Used statistics to analyze
process
• His methods involve workers
in decisions
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STATISTICAL QUALITY CONTROL
W. Edwards Deming
In God we trust, the rest must bring data
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STATISTICAL QUALITY CONTROL
Paper Tearing
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STATISTICAL QUALITY CONTROL
Plot of Sample Data Over Time
70
60
Sample Value
Sample
50 Value
40 UCL
30 Average
20
10 LCL
0
1 5 9 13 17 21
Time
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STATISTICAL QUALITY CONTROL
THE THREE GURUS
Juran (Cost of Poor Quality)
• Control Costs
• Prevention
• Appraisal
• Failure Costs
• Internal
• External
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STATISTICAL QUALITY CONTROL
THE THREE GURUS
• Deming
• Juran (Cost of Poor Quality)
• Crosby (Quality is Free, Eventually) Total Cost of Ownership
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OPERATIONS MANAGEMENT
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FOCUSED
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TOC
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LEAN
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OPERATIONS MANAGEMENT
A HISTORICAL SUMMARY (Cont’d)
YEAR CONTRIBUTION BY
1940 OR IN WAR
1948 LP/ DIGITAL COMPUTER
1950 NON LINEAR PROG./ STOCHASTIC
1970 OPERATIONS STRATEGY/ MRP SKINNER/ORLICKY
1980 QUALITY IN JAPAN/CAD-CAM Goal – GOLDRATT/ OHNO
1990 INTERNET/ERP
1995 SCM/CRM
2000 INTEGRATED SOLUTION
2015 PRESCRIPTIVE SOLUTIONS ???
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HISTORICAL SUMMARY
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THE FOUR PLANTS TO STUDY
1 Adam Smith-- Pin Factory
2 Ford
3. Hawthorne GE
4. Toyoto
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THE SOLUTION TOOL KIT
The Designing and Improvement of Processes
1.0 of 5.0 Taylorism: Scientific Management
The One Best Way: HBS
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THE SOLUTION TOOL KIT
The Designing and Improvement of Processes
2.0 of 5.0 Total Quality Management
Deming/Juran/Crosby
Out of Crisis: Deming
14 principles of Deming
Quality is free Crosby
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THE SOLUTION TOOL KIT
The Designing and Improvement of Processes
3.0 of 5.0 FOCUSED FACTORIES
Tradeoffs
Skinner
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THE SOLUTION TOOL KIT
The Designing and Improvement of Processes
4.0 of 5.0 Lean: Japanese
No tradeoffs
The Machine that changed the world: MIT
www.youtube.com/simpleximprovement
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THE SOLUTION TOOL KIT
The Designing and Improvement of Processes
5.0 of 5.0 The Theory of Constraints: Bottleneck
The Goal: Goldratt
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THE SOLUTION TOOL KIT
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THE SOLUTION TOOL KIT
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THE FOUR PLANTS TO STUDY
1 Adam Smith-- Pin Factory
2 Ford
3. Hawthorne GE
4. Toyota
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