Chapter 4: Operations and process innovation

Chapter 4: Operations and process innovation

1. 4.1. Operations Management

   • • Clothing Manufacturing – Brand: Zara -Inputs: Fabric, thread, zippers, design concepts from Zara's design team. -Process: Fabric cutting, garment sewing at Zara's factories, quality control at production centers. -Outputs: Fashion garments sold in Zara stores.
   • • Emphasize the importance of combining physical factors (raw materials, equipment) and human factors (expertise) to create value.
   • Define: Operations management is about the control of a conversion process from an input to an output
     • the customer
     • information from customers
     • the physical and business
   • • Continuous improvement: Through collecting and analyzing information, businesses can continuously improve production processes to improve efficiency and product quality.
       • Take the example of Toyota, information flow in automobile production is extremely important. Information is continuously exchanged between suppliers, manufacturers and customers, helping to improve product quality, reduce costs and meet market needs.
   • • Businesses need to continuously adapt to environmental changes to maintain and grow. Effective management of the flow of information, materials and products is important to ensure the success of the production process.
   • • The production process depends on effective management of resources and information and adaptation to changes in the business environment
       • In the automobile manufacturing industry, production stages may include: chassis processing, engine assembly, painting, and quality inspection. Environmental factors such as fierce competition, electric vehicle requirements and emissions regulations will directly affect the production processes of automakers

2. 4.2. Process design and innovation

   • Process industries
     • Clear determination of capacity, one routing for all products
     • Limited volume flexibility
     • High production speed, short throughput time
     • Rigid process control
     • High capital investment
     • Low added value
     • Strong impact of changeover times
     • Small number of production steps
     • Limited number of product
     • Low product complexity
   • The relationship
     • The relationship between product and process innovation are new activities introduced into a company's manufacturing or service
   • • Locus: where innovation takes place (Product & Process)
     • Level: innovation level (Modunlar & Architectuaral)
     • Degree: level of innovation implementation (Incremental & Ractical)
   • Gap Analysis
     • A technique used extensively to aid understanding of the differences (or gaps) between the customer and producer view or experience of a product or service

3. 4.3. Innovation in the management of the operations process

   • Gap analysis
     • Concept
       • A technique used extensively to aid understanding of the differences (or gaps) between the customer and producer view or experience of a product or service
     • Importance
       • Understanding customers and their expectations
     • Challenges
       • Changing expectations over time
       • Diverse customer base
     • Illstrative Example
       • Differences between teachers and students in a lecture
       • External Example
         • Hotel Service
           • Customers expect fast and comfortable service
           • Staff may only focus on the service process
         • Service at Starbucks
           • Customers expect high-quality beverages and frinedly service
           • Staff may be pressured to serve quickly, leading to a lack of attention to the customer experience
     • Producers
       • Perspective on product/service
         • Concepts and quality standards
       • Preparation and execution
         • Guidelines
         • Service delivery processes
         • Staff training
       • Differences between the product's perspective and customer expectations
         • Focusing on process rather than customer perceptions
         • May lead to customer dissatisfaction
     • Customers
       • Impact of unmet expectations
         • Dissatisfaction
         • May lead to customers not returning
       • Characteristics of product/service expectations
         • Product quality
         • Customer service
         • Service timing
       • Expectations based on
         • Brand image
         • Personal experience
         • Feedback from others
     • Consequences
       • Sources of dissatisfaction
       • Identified gaps
         • Need for correction
       • Negative impacts
         • Decreased revenue
         • Loss of cutomers
         • Brand damage
       • Improvement actions in design and delivery
   • Total quality management (TQM)
     • Concept
       • An effective system for integrating efforts in quality development, maintenance, and improvement
       • Meeting customer satisfaction at the most economical levels
     • History
       • Developed and refined by Crosby, Deming, Ishikawa, Juran
       • Introduced by Arm and Feigenbaum in the 1950s
     • TQM Philosophya
       • Developing a continuous improvement process
       • Developing systems and procedures that support quality improvements
       • Designing in quality to get things right
       • Investigating all costs related to quality (internal and external)
       • Everyone in the organization participates
       • Involving all parts of the organization
       • Meeting the needs and expectations of customers
     • Challenges
       • Difficulty in meeting expectations
       • Requires the participation of all employees
     • Illustrative Example
       • Ford
         • Improving production processes: Using Lean Manufacturing to minimize waste and increase efficiency.
         • Applying modern technology: Integrating robots into the production line to enhance accuracy and reduce production time.
       • Nestlé
         • "Good Label" program: Ensuring that products meet high quality and food safety standards.
         • Acknowledging customer feedback: Using customer opinions to improve product and service quality.
       • Amazon
         • Optimizing delivery processes: Utilizing big data to forecast demand and adjust inventory.
         • Enhancing customer experience: Creating an order tracking system that informs customers of their goods' exact location.
     • Impacts
       • Encouraging innovation
       • Enhancing the organization’s “knowledge”
       • Increasing customer satisfaction
       • Improving product reliability
     • Conclusion
       • TQM is not a substitute for real leadership
       • Employee participation is crucial
       • Small improvements can lead to significant impacts
   • Quality circles and process improvement teams
     • Concept
       • Quality Circles
         • Small groups of voluntary employees discussing problems and finding solutions
       • Process Improvement Teams
         • Focus on improving the entire business process
     • Origin
       • Developed from the ideas of Deming, Juran, and Ishikawa (1960s)
       • Widely adopted in Japan with millions of workers participating
     • Benefits
       • Continuous Improvement
         • Enhances product quality and processes
       • Encourages Innovation
         • Employees have opportunities to contribute new ideas
       • Employee Involvement
         • Empowers and increases employee commitment
     • Challenges
       • Cultural Differences (Between management and unions)
       • Limited applicability in certain environments
     • Illustrative Example
       • Toyota (Japan)
         • Achieved significant success in the automotive industry
         • Uses the "Kaizen" method
           • Continuously improves production processes through employee contributions
       • Vinamilk (Vietnam)
         • Encourages employee participation in improving milk production processes
         • Applies quality circle models to enhance food safety standards
       • 3M (USA)
         • "15% Free Time" Program
           • Encourages employees to spend 15% of their work time developing personal ideas
         • The "Post-it Notes" product was born from this initiative
     • Outcomes
       • Innovative Solutions
         • Generates improvement initiatives and cost savings
       • Practical Applications
         • Many companies have registered patents based on ideas from quality circles
       • Increased Satisfaction
         • Positive impact on customers and the company’s image
   • Quality function deployment (QFD)
     • Examples
       • Toyota
         • Emphasized continuous improvement through QFD in the design of hybrid vehicles like the Prius, focusing on customer needs for fuel efficiency and reliability.
         • Used QFD to align product design with customer expectations, resulting in higher quality vehicles and improved customer loyalty.
       • Kayaba
         • Developed its own approach called "Anticipatory Development," which successfully incorporated customer feedback into product design, leading to winning a Deming Prize for quality achievements.
         • Initially struggled to implement QFD like Toyota, facing significant challenges.
       • Samsung
         • Utilized QFD in the development of Galaxy smartphones to ensure features like camera quality and battery life met consumer demands.
         • Engaged various departments (marketing, design, engineering) from the beginning, leading to successful product launches and high customer satisfaction.
       • Boeing
         • Employed QFD to improve the design of the 787 Dreamliner by integrating customer requirements for comfort and fuel efficiency directly into engineering specifications.
         • Facilitated cross-department collaboration between marketing and engineering, leading to a more customer-focused product development process.
     • Steps
       • How's Interaction
       • How's to VOC
       • Main Interaction
       • Voice of Customer
       • Competitive Analysis
       • Deployment Priority
     • Challenges
       • Complexity in implementation
       • Requires strong coordination among multiple departments
       • May face resistance to change from traditional processes
     • Benefits
       • Improved customer
       • Enhanced communication among departments
       • Higher quality products
       • Reduced time to market
     • Key Objectives
       • Promote better understanding of customer demands
       • Promote better understanding of design interactions
       • Involve operations early in the process
       • Remove traditional barriers between departments
       • Focus the design effort
     • Definition
       • Also known as the "House of Quality"
       • Structured approach to relate the voice of the customer to every stage of design and delivery process
   • The ISO 9000 approach
     • Overview
       • Set of standards governing the documentation of a quality program.
       • External examiner checks company compliance with standards.
     • Key elements of quality management
       • Customer Focus: Quality management should prioritize customer needs.
       • Performance Measurement: Quality performance must be measurable.
       • Improvement-Driven: Management should focus on continuous improvement.
       • Top Management Commitment: Top leaders should maintain and improve management systems.
     • Standard overview
       • 9000: Describes standards for quality management, vocabulary, and fundamentals.
         • 9001: Focuses on compliance and certification requirements.
           • 9002: Identical to 9001, focused on production lines (now obsolete).
             • 9003: Emphasized final inspection and testing (now obsolete).
               • 9004: Provides guidelines for long-term organizational success.
     • Standards timeline
       • 1987: Initial release of ISO 9000 standards focused on quality assurance and inspection.
         • 1994: Revision focusing on quality assurance with less focus on inspection.
           • 2000: Emphasized the importance of process management and stakeholder needs.
             • 2008: Added ISO 9004:2009, focusing on "Managing for Sustained Success."
               • 2015: Marked the 25th anniversary of ISO 9000, with emphasis on the PDCA (Plan-Do-Check-Act) cycle for systems management.
   • The EFQM excellence model
     • Overview: Focuses on achieving results through enablers.
       • Enablers
         • Leadership
         • People
         • Policy and Strategy
         • Partnerships and Resources
       • Results
         • People Results
         • Customer Results
         • Society Results
         • Key Performance Results
     • Performance Measurement
       • Self-assessment based on a systematic, regular review for business excellence.

4. 4.4. Design of organisation and its suppliers: Supply chain management

   • What is Supply chain management?
     • Definition
       • A set of approaches for integrating suppliers, manufacturers, warehouses, and stores.
     • Objectives
       • Right Quantities: Ensuring the correct amount of merchandise.
       • Right Locations: Delivering products to the appropriate locations.
       • Right Time: Timely production and distribution.
     • Goals
       • Minimize Costs: Reducing system-wide costs.
       • Satisfy Service Level Requirements: Meeting the required service levels effectively.
   • EXAMPLE: Supply chain in Automotive Industry
     • We can observe from this example
       • Supply points and demand points can be far apart.
       • Lead time from raw materials to finished cars is significant.
       • The supply chain involves many interdependent units that must work together.
       • Matching supply with demand can be challenging.
     • • 1. Raw Materials: Steel, aluminum, rubber, plastic, and glass are sourced from suppliers.
       • 2. Component Suppliers: These raw materials are delivered to parts manufacturers who create key components such as engines, batteries, tires, and electronics.
       • 3. Assembly Plant: Components are shipped to automotive assembly plants where the vehicles are assembled.
       • 4. Distribution Center: Once assembled, vehicles are sent to distribution centers or warehouses for storage.
       • 5. Dealerships: Cars are then delivered to local dealerships by truck for sale to customers.
       • 6. End Users: Finally, customers purchase the vehicles from dealerships for personal or commercial use.
   • Traditional versus Contemporary view
     • Traditional view
       • Example: A small, family-owned textile manufacturer in rural Vietnam
         • • Limited network: The manufacturer primarily relies on a single local supplier for raw materials and a few regional distributors for their products.
           • Local focus: Operations are confined to the local area, with limited interactions beyond the immediate region.
           • Supply-demand matching: Production is driven by orders from distributors, with a focus on meeting their specific requirements.
           • Material and finance flow: Raw materials are purchased on credit, and finished goods are sold on credit to distributors.
       • What is this?
         • Network of connected entities: Managing the flow of materials, information, and finances
         • Local focus: Primary focus on a few entities such as suppliers and manufacturers
         • Goal: Balancing supply and demand
     • Contemporary view
       • What is this?
         • Collaboration among partners: Creating value for customers and partners
         • Global focus: Emphasizes a large-scale, global perspective
         • Goal: Achieving a competitive advantage & sharing competencies and knowledge
       • Example: A multinational electronics company with a global supply chain
         • • Collaborative partnerships: The company works closely with suppliers, manufacturers, logistics providers, and retailers across the globe to optimize the supply chain.
           • Holistic focus: The company considers factors such as sustainability, risk management, and customer satisfaction throughout the entire supply chain.
           • Competitive advantage: The company leverages its global network and efficient operations to offer competitive pricing, faster delivery times, and innovative products.
           • Knowledge sharing: The company invests in technology and data analytics to facilitate information sharing and collaboration among partners.
   • Supply Chain and Product Development: Apple iPhone 14 Pro
     • Product Development: The initial phase focusing on ideation, design, and decision-making related to the product.
       • Planning
         • Product architecture: Apple decided to equip the iPhone 14 Pro with the powerful A16 Bionic chip, a smooth 120Hz ProMotion display, and a triple-camera system with a 48MP sensor.
         • Make-or-buy decisions: Apple designed the A16 Bionic chip in-house but sourced OLED displays from Samsung and other components from various suppliers worldwide.
         • Supplier involvement: Samsung and other component suppliers were involved in the development process early on to ensure components met Apple's standards.
         • Strategic partnerships: Apple maintains long-term partnerships with core suppliers like TSMC (for chip manufacturing) and Corning (for glass).
       • Design
         • Supplier selection: Apple chose reputable suppliers for aluminum and glass to ensure the product's quality and durability.
         • Supply contracts: Apple signed detailed contracts with suppliers specifying quality, quantity, delivery time, and confidentiality terms.
     • Supply Chain: The subsequent phase encompassing activities from raw material sourcing to delivering the product to the end customer.
       • Production
         • Network planning: Apple has manufacturing facilities in China and manufacturing partners in Vietnam to meet high production demands.
         • Logistics management: Apple uses advanced logistics systems to transport components and finished products to distribution centers worldwide.
         • Inventory positioning: Apple uses inventory management systems to track the location of each product, ensuring fast and accurate delivery.
       • Sourcing
         • Inventory management: Apple uses advanced inventory management systems to track each component, ensuring sufficient raw materials for production.
         • Work-in-progress management: Apple applies Lean Manufacturing principles to optimize production processes and minimize waste.
         • Productivity management: Apple continuously improves production processes to increase productivity and reduce costs.
       • Distribution
         • Promotions: Apple frequently runs promotions and discounts to stimulate demand.
         • Network planning: Apple has a network of retail stores and authorized resellers worldwide.
         • Inventory consolidation: Apple uses large distribution centers to consolidate products and distribute them to retail stores.
       • Sales
         • Sales channels: Apple has a strong online and offline sales network.
         • Marketing: Apple invests heavily in marketing to build a premium brand image and create anticipation for new products.

5. 4.5. Lean innovation

   • 5 steps and principles
     • 1. Identify customer value
       • 2. Map the value stream
         • 3. Create flow
           • 4. Establish pull
             • 5. Seek perfection
   • Lean innovation is creating a new product or process, including the work required to bring an idea or concept into a final form, with emphasis on identifying and creating the value and removing the waste of the new product development (NPD) process.
     • techniques
     • corporate culture
     • others focus strongly on process improvement programs

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