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Focused Operations Management

Book Description

Focused Operations Management shows how to do much more with existing resources in terms of throughput, response time and quality. It provides a system view and will touch upon performance measures, operations management, quality, cost-accounting, pricing, and above all, value creation and value enhancement.

Table of Contents

  1. Copyright
  2. Dedication
  3. Preface
  4. Acknowledgments
  5. About the Authors
  6. 1. The Modern Business Environment
    1. From a Sellers' Market to a Buyers' Market
    2. Globalization—The Small Global Village
    3. The Remedy—Adoption of New Managerial Approaches
    4. Summary
  7. 2. Principles of Management in the Dynamic Environment
    1. What Is a System?
      1. System Optimization and Suboptimization
      2. Satisficer versus Optimizer
      3. Elements of Focused Management
      4. Focused Management Triangle
        1. Global‐System View
        2. Focusing
        3. Simple Tools
    2. Summary
  8. 3. The Pareto Rule, the Focusing Table, and the Focusing Matrix
    1. The Pareto Rule
      1. The Pareto Diagram
        1. Example: Pareto Analysis of Product Contribution Volume
      2. The Pareto‐Based Focusing Methodology
        1. Example 1: Applying the Focusing Methodology in Purchasing
        2. Example 2: Applying the Focusing Methodology in Sales
    2. The Focusing Table and Matrix
      1. Generating the Focusing Matrix
    3. The Use, Misuse, and Abuse of the Pareto Rule
    4. Summary
  9. 4. Managing the System by Its Constraints
    1. Step 1—Determine the System's Goal
    2. Step 2—Establish Global Performance Measures
    3. Step 3—Identify the System Constraint
      1. Resource Constraint
        1. Shortage of a Critical Resource
        2. Permanent Bottlenecks
        3. Peak Time Resource Constraints
        4. Seasonality
        5. Discrete Events of Resource Constraints
      2. Market Constraint
      3. Policy Constraint
      4. Dummy Constraint
    4. Tools for Identifying Constraints
      1. Process Flow Diagram
      2. Time Analysis
      3. Load Analysis (Capacity Utilization)
      4. The Cost‐Utilization Diagram
    5. Summary
  10. 5. Management by Constraints in a Bottleneck Environment
    1. Step 4—Decide How to Exploit the Constraint and Break Dummy and Policy Constraints
      1. Efficiency—Increasing Constraint Utilization
        1. Increasing Bottleneck Utilization
        2. Reducing Ineffective Time (Garbage Time)
      2. Effectiveness
      3. Prioritization Methods—Strategic Gating
      4. The Mirabilis Effect
      5. Global Decision‐Making Methodology
      6. Breaking Policy and Dummy Constraints
    2. Step 5—Subordinate the Rest of the System to the Previous Decision (the Constraint)
      1. Subordination Mechanisms
        1. Tactical Gating
        2. Drum‐Buffer‐Rope
          1. Drum
          2. Buffer
          3. Rope
    3. Step 6—Elevate and Break the Constraint
      1. Elevate by Using Capital Investment
      2. Elevate without Investment through the Use of an Offloading Mechanism
    4. Step 7—If a Constraint Was Broken Return to Step 3. Do Not Let Inertia Become the System Constraint
      1. Curse of the Blessing
    5. Summary
  11. 6. Managing by Constraints When the Market Is the Constraint
    1. Step 4—Decide How to Exploit the Constraint and Break Policy and Dummy Constraints
      1. Marketing and Sales Efficiency
        1. Exploiting Marketing and Sales Personnel
      2. Marketing Strategy Effectiveness
        1. Using Excellence in Response Times and Quality as a Strategic Leverage
        2. Prioritizing in Bid/No‐Bid Processes
        3. Breaking Policy and Dummy Constraints
    2. Step 5—Subordinate the Rest of the System to the Previous Decision (the Constraint)
    3. Step 6—Elevate and Break the Constraint
    4. Step 7—If a Constraint Was Broken, Return to Step 3. Do Not Let Inertia Become the System Constraint
      1. Managing Marketing and Sales
        1. Focusing on Most Valuable Customers (MVCs) as a Value Driver
      2. Peak Management
      3. Where Should the Constraint Be Located?
    5. Summary
  12. 7. Focused Current Reality Tree
    1. Principles of a Focused Current Reality Tree
      1. Information Sources
      2. Undesirable Effects
        1. Leading Undesirable Effect
        2. Logical Relations of Undesirable Effects
        3. Inferences
      3. Constructing a Focused Current Reality Tree
        1. Core Problems
      4. Advantages and Disadvantages of the fCRT
    2. Summary
  13. 8. Resolving Managerial Conflicts
    1. Three‐Step Methodology
      1. Describe the Conflict with a Conflict Resolution Diagram
      2. Challenge the Assumptions of the Conflict Resolution Diagram
        1. Differentiation
        2. Globalization
        3. Breaking Assumptions
      3. Create Actions for Implementation Based on the Challenged Assumptions
    2. Summary
  14. 9. The Efficiencies Syndrome
    1. Dealing with the Efficiencies Syndrome
    2. Summary
  15. 10. Evils of Long Response Times
    1. Types of Inventories
    2. Work in Process
      1. Relationship between Response Time and Work in Process Level
      2. The Evils of WIP and Long Response Time
        1. Reduction in Throughput
        2. High Operating Expenses
        3. Diminished Quality
        4. Diminished Control
        5. Diminished Flexibility to Market and Technological Changes
        6. Diminished Cash Flow
        7. Diminished Motivation
        8. Missed Deadlines
        9. Lack of Customer Satisfaction
        10. Diminished Forecasting Capability
        11. Diminished Throughput
    3. Causes of Excess Work in Process
    4. Summary
  16. 11. Reducing Response Times
    1. Methods for Reducing Response Times and Work in Process
      1. Strategic Gating
      2. Tactical Gating
      3. Working with a Complete Kit
      4. Managing Bottlenecks
      5. Using the Just‐in‐Time (JIT) Method
        1. Rule I of the Just‐in‐Time Method
          1. Shortage Deviation
          2. Surplus Deviation
          3. Implementing Rule I of JIT
          4. Violating Rule I of JIT
          5. The 40–20–40 Phenomenon
        2. Rule II of JIT
          1. Working (Production) Batches
    2. Strategic Importance of Reducing Response Times and Working with Small Batches
      1. Fear of Increasing the Number of Setups
      2. Economies of Scale Thinking
        1. Fear of More Complex Control
          1. Increasing Cost per Unit
        2. Rule III of JIT
      3. Measurement and Control
      4. Implementing the Drum‐Buffer‐Rope Mechanism
      5. Quality Improvement and Reduction of the Garbage Plant
      6. Avoiding Bad Multitasking
      7. Concurrent Engineering
      8. Implementing Group Technology
      9. Working in Parallel Rather Than Serially
    3. Summary
  17. 12. The Complete Kit Concept
    1. Aspects of the Complete Kit
    2. Evils of Working with an Incomplete Kit
    3. What Prevents People from Using a Complete Kit?
    4. Specific Implementations of the Complete Kit Concept
      1. In Production
      2. In Development
      3. In Knowledge‐Based Labor
      4. In Sales
      5. In Health Care
      6. In Human Resources
      7. In Purchasing
      8. In Information Systems
    5. Implementing the Complete Kit Concept
    6. Summary
  18. 13. Performance Measures and Managerial Control
    1. Global Performance Measures
      1. Throughput
      2. Operating Expenses
      3. Inventory
      4. Lead Time
      5. Quality
      6. Due Date Performance
      7. Calculating Profit
      8. Adapting Global Performance Measures to a Supermarket Chain
        1. Throughput
        2. Operating Expenses
        3. Inventory
        4. Lead Time
        5. Quality
        6. Due Date Performance
    2. Measures' Profile in Global Decision Making
    3. Summary
  19. 14. The Effects of Fluctuations, Variability, and Uncertainty on the System
    1. Fluctuations
      1. Sources of Fluctuations
      2. Evolution of Fluctuations in a Process
        1. Choosing an Alternative
          1. Internal Fluctuations
          2. Cumulative Fluctuations
    2. Elements of Capacity
    3. Traditional Approaches to Managing Fluctuations and Uncertainty
    4. Focused Management Approach
      1. Protecting against Fluctuations
      2. Reducing Fluctuations
    5. Summary
  20. 15. Evils of Traditional Cost Accounting
    1. Loss of Relevance
    2. Undesireable Effects of Traditional Cost Accounting
      1. “It Costs Us More”
      2. “Large Batches”
      3. “Efficient Production”
      4. “Savings”
    3. Summary
  21. 16. Marketing, Costing, and Pricing Considerations in Decision‐Making Processes
    1. Decision Making in a Resource‐Constrained Environment
    2. Tools
      1. Global Decision‐Making Methodology
        1. Decision Making in an Excess Capacity Environment
        2. Global Economic Decisions from the CEO's Perspective
          1. Take Strategic Considerations into Account
          2. Change or Refine Local Performance Measures
      2. Decisions about Stopping Production or Ceasing Service
        1. Make a Global Economic Decision from the CEO's Perspective
        2. Make Strategic Considerations
        3. Change Local Performance Measures if Needed
      3. Product Mix Decisions
        1. Global Economic Decisions from the CEO's Perspective
        2. Take Strategic Considerations into Account
        3. Change Local Performance Measures if Needed
    3. Summary
  22. 17. Quality Management and Process Control
    1. Operational Approach
    2. Economic Approach
      1. Customer Approach
      2. Uniformity (Consistency) Approach
    3. Stages in Managing Quality and Process Control
      1. Stage A: No Quality Management or Feedback Exists
      2. Stage B: Inspection—Quality Control at the End of the Process
      3. Stage C: Process Control
    4. Implementing Quality Improvement Processes
    5. Throughput World versus Cost World
    6. Quality Improvement Myths
    7. Summary
  23. 18. Strategy, Positioning, and Focusing
    1. Strategy
      1. Assess Strategic Moves
      2. Improve the Good Old SWOT Analysis
      3. Watch Your Assets
      4. Determine Where the Constraint Should Be Located
      5. Define a Mafia Offer and a Viable Vision
      6. Translate Strategic Decisions into Action Items
      7. Utilize the Focused Arena Strategy
        1. Step 1: Identify the Organizational Goal, Vision, and Mission
        2. Step 2: Define Performance Measurements
        3. Step 3: Analyze Internal and External Environments with a Focused SWOT Analysis
        4. Step 4: Identify Core Competencies Using the Core Competencies Tree
        5. Step 5: Identify Core Problems Using the Focused Current Reality Tree
        6. Step 6: Focus on the Main Opportunities and Threats
        7. Step 7: Perform a Gap Analysis
          1. Gap Analysis for the Main Opportunities
          2. Gap Analysis for the Main Threats
        8. Step 8: Decide Where the Constraint Should Be Located
        9. Step 9: Determine What Actions to Take, Then Execute and Control those Actions
      8. Case Study Analysis by the FAST Methodology
        1. FAST Step 1: Identify the Organizational Goal, Vision, and Mission
        2. FAST Step 2: Define Performance Measurements
        3. FAST Step 3: Analyze Internal and External Environments with a Focused SWOT Analysis
        4. FAST Step 4: Identify Core Competencies Using the Core Competencies Tree
        5. FAST Step 5: Identify Core Problems Using the Focused Current Reality Tree
        6. FAST Step 6: Focus of on the Main Opportunities and Threats
        7. FAST Step 7: Perform a Gap Analysis
        8. FAST Step 8: Decide Where the Constraint Should Be Located
        9. FAST Step 9: Determine What Actions to Take, Then Execute and Control those Actions
    2. Summary
  24. 19. Value Creation
    1. Value Creation from Managerial Activities
    2. Assessing the Value of the Firm
    3. Economic Value Added (EVA) Metric
    4. Value Focused Management Model
      1. Determine the Goal
      2. Determine the Performance Measures
      3. Identify the Value Drivers
      4. Decide How to Improve the Value Drivers
      5. Implement and Control
      6. Value Creation: The Supermarket Chain
        1. Stage 1: Determine the Goal
        2. Stage 2: Determine the Performance Measures
        3. Stage 3: Identify the Value Drivers
        4. UnDesirable Effects
        5. Potential Value Drivers
          1. Increase the Average Customer Purchase
          2. Establish a Logistics Center
          3. Introduce a Private Label
          4. Enhance Shelf Space Management
          5. Increase the Managerial and Professional Quality of the Administrative and Operations Personnel
          6. Increase the Shelf Space Area at the Expense of Storerooms in the Branches
          7. Increase the Number of Suppliers' Credit Days
      7. Calculate the Potential Value Creation
        1. Selecting the Value Drivers
        2. Stage 4: Decide How to Improve the Value Drivers
        3. Stage 5: Implement and Control
    5. Summary
    6. Appendix A
    7. Appendix B
  25. 20. Value‐Focused Project Management
    1. Project Management Environment
    2. Project Management
      1. Value Drivers in Project Management
      2. Strategic Gating and Project Initiation as a Value Driver
        1. Strategic Gating
        2. Initiation and Specification
      3. Project Planning as a Value Driver
      4. The Project Manager as a Business Manager as a Value Driver
        1. Performance Measurement Gap Tragedy
      5. Forward‐Oriented Execution and Forward‐Looking Control as a Value Driver
      6. Implementation of the Critical Chain Approach as a Value Driver
        1. Alternative Mechanism for the Estimation of Activities' Durations and Uncertainty Management
          1. Critical Chain Approach to Project Planning
          2. Critical Chain Approach to Project Execution and Control
          3. Effects of the Implementation of the Critical Chain Approach
    3. Summary
  26. 21. Managing Research and Development
    1. Complexity of R&D Management
    2. Business Thinking and Subordination to the Market and Its Needs
    3. Effect of Project Type on Management Requirements
      1. Type A Projects
      2. Type B Projects
      3. Type C Projects
      4. Type D Projects
        1. Project Classification Table
      5. Matching Manager Personality with Project Type
      6. Evaluating the Project Portfolio
      7. Project Classification and the Complete Kit Concept
    4. Conflict between Generic Development and Specific Development
    5. Overspecification and Overdesign
      1. Sources of Overspecification
      2. Sources of Overdesign
      3. Solutions to Overspecification and Overdesign
    6. Viewing Development as a Process
    7. Working without a Complete Kit or a Mandatory Kit
    8. Lack of Strategic Gating Processes
    9. Lack of Tactical Gating Processes
    10. Inappropriate Measurement
    11. Business Structure
    12. Substantial Garbage Plant
    13. Make/Buy Decisions
    14. Summary
  27. 22. The Focused Management Approach in Logistics
    1. What Is Logistics?
      1. Typical Issues in Logistics Management
    2. The Focused Management View on Logistic Systems
      1. A Global View
      2. Focusing on the Main Issues
      3. Simple Tools
      4. The Global Inventory Management Model
      5. Work in Process Management
      6. Finished Goods Inventory Management
      7. Raw Material Inventory Management
      8. In What Form Should Inventories Be Kept?
    3. Leveraging Logistics for Improved Performance—Buffer Management
      1. The Buffer Management Mechanism in Bottleneck Management
        1. Buffer Planning
        2. Monitoring and Gap Analysis
        3. Buffer Management in Bottleneck Management
        4. Buffer Management as a Warning System
        5. Buffer Management as a Tool for Inventory Levels Management
      2. Buffer Management in the Management of Finished Goods Inventory
      3. Buffer Management of Finished Goods Inventory
      4. Buffer Management for the Raw Materials Inventory Management
    4. Summary
  28. 23. Our Managerial Credo
    1. The World Is Simpler Than It Seems
    2. All Organizations Are “Sick”
    3. Global View
    4. Managerial Maturity
    5. Human Resources
    6. Satisficer Principle
    7. Using Performance Measures
    8. Simple Tools
      1. The 85/15 Rule—Importance of Process
      2. The 10 Times Rule
      3. Differentiation
    9. Implementing Focused Management Methods
      1. What to Change?
      2. What to Change to?
      3. How to Make the Change?
    10. The Process of Change
      1. Introducing Changes and Reducing Resistance to Change
      2. Role of Information Systems in the Change Process
    11. Summary
  29. References
    1. Bibliography
  30. Recommended Readings
    1. Bibliography