Anda di halaman 1dari 8

Washington University Olin Business School OMM 5704 Operations Management Chayet

Auditing an Operation: Some questions to ask


It is likely that at some point you will be interested in evaluating a rms operational intelligence or eectiveness. This is often one of the rst things consultants do when hired to solve a rms business problems. Analysts can benet from understanding which rms in an industry have superior competitive operational capabilities. Marketing personnel need to understand these capabilities if they are to stimulate customer demand. And of course, management needs to know where to look to bring about improvement. Depending on your role, you may or may not be given direct access to detailed operational data. And even if you are, you may not know what questions you should be asking or what things you should be trying to observe (aside from the obvious like big piles of inventory). In this document we formulate the lessons learned in class as questions for you to pose during an operational audit. By no means is this list complete, but hopefully it is enough to get you started. The nal page of this document summarizes many of the questions in the form of a short-list. 1. Competitive Priorities (a) What are the rms Competitive Priorities (Time, Price, Quality, Variety)? (b) What areas need improvement? 2. Process Flow Diagram As you tour a facility, you should gather enough information to at least sketch a process ow diagram. (a) What ows? Parts, jobs, workers, tools, etc. Assess variety. (b) Where do the ows originate, and where do they lead? (c) What type of process is it? Project, job shop, batch ow, line ow, continuous ow. Generally, as we move through this continuum, capacity issues become more pertinent than cycle-time, machine content increases, labor content decreases, variety decreases, etc. (d) Does the rm make-to-stock or make-to-order? (e) What are the basic resource pools?

3. Capacity Issues (a) What products are made in which facilities? (b) What are the capacity bottlenecks and what is their capacity? i. Look for active bottlenecks as potential candidates. These are resource pools that currently impede ow and can be identied either by inventory building in front of them, or by blocking at an immediately proceeding process step due to an inventory limit between the steps. ii. Does the capacity depend on product mix? If so, the capacity bottleneck(s) may oat, meaning that it may move depending on the mix. iii. Keep in mind capacity bottlenecks always exist, are independent of throughput (volume as opposed to mix by percentage), but may not be unique. iv. Consider doing a quick stopwatch study if the rm is not forthcoming with capacity gures. Capacity is often highly guarded by management. (c) What is required to increase capacity in response to changing market demands? i. Adding people (variable cost) may be easier than adding machines (xed cost). ii. How long to procure/install capacity bottleneck resources? How many suppliers? How much training is required? iii. Can unused capacity elsewhere be exploited? iv. Are there space constraints in existing facilities? If so, the rm may need to purchase/lease/build a new building. v. Can/will the rms raw material suppliers support an increase in capacity? (d) How is capacity allocated to customers? For example, job scheduling, prioritizing of customers, etc. (e) Are capacity bottlenecks well maintained and reliable? Are there programs in place to reduce setup times on capacity bottlenecks? (f) How does this rm manage idle periods? Do they sometimes allocate capacity to items which customers may not want, just to keep workers busy? Are idle periods used for training? (g) What is the rms capacity to take and process customer orders? This should not be the capacity bottleneck! (h) How much does capacity depend on labor content versus machine content? Human capacity is vague and more volatile than automation, but can be more exible. Service industries tend to have higher labor content. (i) Does the rm use standards, and if so how are they set? i. Two uses: Workforce planning and incentivization 2

ii. Some adjustments are reasonable, e.g. for fatigue and team meetings. iii. Standards must not depend on throughput, or more generally on factors out of the control of workers! iv. Do political factors inuence the setting of standards? Look for throughput-based incentives. v. Are the production standards balanced with quality metrics such as defect rates and customer satisfaction? vi. How are the workers tracked and compared against standards? Consistent outliers should be treated more seriously than temporary outliers. (j) Does the rms capacity structure allow production to be synchronized with real-time demand? i. Toyotas practice of Heijunka (level mixed production) is the best example. ii. A rm may be able to produce multiple products in a single facility, but how many can they produce simultaneously? iii. How large are setups between products? iv. Are production resources, including logistical systems, exible enough to accommodate a changing mix? 4. Cycle-Time Issues (a) What is the nancial impact of reducing cycle-time? i. What would be the market response to shorter cycle-times? ii. When inventory is tightly held, i.e. there is a maximum limit on inventory and it is being bumped against, then throughput-driven revenues may increase. (b) What is the critical path and how long is it? i. Assess service times and waiting times for each path. ii. Ideas for identifying: time stamp jobs as they ow through the process, survey customers, estimate work-in-process inventories and apply Littles Law, walk the process backwards to assess which steps are holding things up. iii. Do not assume that the capacity bottleneck is on the critical path! iv. If you see lots of inventory, then by Littles Law we know that cycle-times may be large if the items are slow-moving. (c) Which activities on the critical path are most important to customers? Are any non-value add? What fraction of cycle-time is waiting versus processing? (d) If you see idle resources, ask how much variability there is, and what its sources are? Perhaps the rm is holding excess capacity to absorb variability.

(e) Is there any obvious restructuring that can be done? Parallelizing, pre-processing, and reordering of steps. (f) How does the rm reduce cycle-time? Safety capacity, limiting variety (focus), variability reduction, scheduling, etc. Can capacity be dynamically adjusted (e.g. temp workers and exible schedules) to meet surges in demand? (g) How much expediting of orders is there? This is a red ag for cycle-time problems. (h) How large are order backlogs? This is inventory that cannot be physically observed! Orders may wait a long time until being released to the production/service facility. (i) How does the rm manage customer anxiety over queues? Is jockeying permitted? Do customers perceive queues as fair? (j) Do customers balk and renege? What is the nancial impact of the resulting lost sales? This may not be directly observable, but if it is then an intelligent rm will track it. (k) Does the rm understand that increasing capacity will have a bigger eect on cycle-time behaviors than increasing storage space? Of course, both actions may be nancially viable. (l) Can the rm pool/unpool resources together? i. For example, a rm may have two dierent phone numbers that cannot be shared by operators, or the rm may segment the ows of work to dierent resource pools that could be combined for operational improvement. ii. By pooling, a rm can either reduce cycle-times or reduce (labor) costs. But to provide priority service to a customer segment, resources may need to be unpooled/dedicated. iii. Problems with pooling: lines appear too long, tasks are too enlarged for worker skills, centralized fulllment may be less personal. iv. Problems with unpooling: increase in cycle-times, non-priority customers may be mistreated. 5. Inventory Issues (a) Why is this inventory being held? Are there management controls to limit inventory (kanbans/WIP caps)? i. Uncertainty : SAFETY-STOCK Uncertain demand over long and/or unreliable supplier lead-times. ii. Fixed costs : CYCLE-STOCK Replenishment in batches to amortize xed costs, such as ordering paperwork, transportation costs, production setups, etc. (b) Does the rm partner and build relationships with suppliers, or does the lowest bidder always win? 4

i. Do the rms Kaizen-together? Sophisticated rms will share practices and data with suppliers. Low price cannot be achieved without low cost! Quality is a joint eort. ii. How many suppliers for each part? iii. How far away are suppliers? Relationships with local suppliers may be deeper. (c) What causes variability in the demand that you see? Quantity discounts, promotions, bad service to customers, salesforce compensation, bullwip distortion/snowballing forecast error, seasonalities, etc. (d) What is the impact of variability on inventory performance? i. Stockouts = Lost sales, backorders ii. Too much inventory! iii. Are target ll rates and service levels set intelligently to trade these o? Is actual ll rate and/or service level tracked? iv. Are costs of excess traded-o with costs of shortage? (e) What information is shared between members of the supply chain? Do you know end demand in real-time? (f) What inventories in the supply chain are managed by suppliers for the customer, i.e. are vendormanaged inventory (VMI) practices being used? i. If so, how are risks and wealth shared? ii. What do VMI contracts look like? (g) What is being done to pull inventory levers? i. 2 (demand variance) ii. L (mean lead-time) iii. var[L] (variance in lead-time) iv. forecast error v. transaction/ordering costs vi. pool inventories vii. Does the rm try to optimize inventory management practices, e.g. by optimizing batch sizes (Q) and reorder points (R)? (h) In what ways does the rm pool inventories (of safety stock)? i. Virtual centralization Linked by information system ii. Specialization Each product stocked in only one location 5

iii. Component commonality One component ts all! iv. Product substitution Red satises mauve and pink demand v. Postponement Stock generic, customize-to-order (i) What are the costs of operating the rms warehouses/distribution centers? i. Facility ii. Material handling/transportation equipment iii. Information systems iv. Labor v. Packing materials (j) What warehouses/distribution centers does the rm operate? What function(s) do they serve? Are they necessary? i. Break bulk (pallets cases single units) ii. Break truckloads (merge/sort/repack) iii. Geographic/local market presence iv. Hold inventory more cheaply than downstream v. Pool safety stock vi. Reduce LT to downstream customers relative to direct sourcing vii. Consolidation of ordering/transaction costs viii. Control of order fulllment/replenishment (k) What fraction of goods owing through the warehouse/distribution center are cross-docked? What is the average cycle-time of goods in the facility? Are there plans/opportunities to do more crossdocking? 6. Organizational Issues I recommend further coursework in organizational behavior/structure, but we did touch on some topics as they relate to operations management. (a) How does the rm learn about and solve (quality) problems? i. Where are problems detected versus xed? (Jidoka-Quality at the source.) ii. How is management informed? (Andon-cords pulls to stop the line.) iii. How is the root cause identied and xed? 5 Whys, supplier partnerships, interaction with product design teams 6

iv. Are there standard operating procedures enforced and reviewed? These embody the knowledge of the rm and provide a foundation for improvement. Problems can be isolated by identifying deviations from standard procedures. v. Is there a culture of continuous improvement, or is there friction between management and workers? A. How many suggestions per employee? B. What percentage of workers are in teams? C. How much training do workers receive? D. What is the status of labor unions? vi. How large is the rms rework/repair area, and is inventory allowed to build there? vii. Is the product/process designed to be foolproof? For example, screws are made square to avoid insertion into round holes. (b) How are workers organized? i. Craft, teams/cells, assembly line? Factors to consider: quality, job variety, cross-training, worker skills, cost of tooling, boredom, etc. ii. You must take into account how task times would change to determine which has superior capacity and cycle-time performance. For example, if handos are time-consuming then craft becomes more benecial, but if workers can lower task times through specialization then an assembly line may be preferable. iii. Consider bucket-brigades if craft requires too much tooling or job enlargement, but an assembly line would be unproductive because of too much blocking and starvation or would be too expensive/dicult to construct. (c) How are workers paid? i. Piece rate, hourly with pay grades based on experience/skills/speed, bonuses. ii. Be careful with team incentives for assembly line workers that experience a lot of blocking and starvation!

Operational Audit Questions: A Short-List


Business Process Management

1. How easily can the rm adjust capacity and cycle-time in response to a changing marketplace? What is the nancial impact? 2. Does the rm maximize value-add on the critical path? 3. How does variability aect cycle-times, process inventory, and idleness? 4. How does the rm react to customer queueing behaviours, e.g. pooling? Waiting, reneging, balking 5. How does the rm learn about and solve problems? 6. Does the rm sensibly organize and incentive capacity? Craft, cells, assembly lines

Inventory Management

1. Why is the rm holding inventory? Cycle-stock, safety-stock 2. Is cycle/safety-stock being held in sensible locations along quantities on the supply chain? 3. What causes demand variability and what is its impact on inventory performance? 4. What information is shared between members of the supply chain? Supplier partnerships, bullwhip distortion 5. How are links of a supply chain coordinated? Vendor-managed inventory (VMI), incentives/contracts 6. Are inventories being pooled? 7. Are the rms warehouses/distribution centers providing competive capabilities?

Anda mungkin juga menyukai