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Chapter 8
Operations Consulting and
Reengineering

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DEFINITIONS
• A consultant is someone who knows 100,000
position to make love in but doesn’t have a girl
friend.
• A consultant is someone who takes the watch off
your wrist and tells you the time.

• An accountant is someone who knows the cost of


everything and the value of nothing.
An auditor is someone who arrives after the battle
and bayonets all the wounded.

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OBJECTIVES
• Operations Consulting Defined
• Operations Consulting and the 5 P’s
• Hierarchy Within a Consulting Organization
• Stages of Operations Consulting
• Operations Consulting Tool Kit
• Reengineering

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Operations Consulting
Defined
• Operations consulting involves assisting
clients in developing operations strategies
(i.e., product leadership, operational
excellence, customer intimacy, etc.) and
in improving production (and service
delivery) processes.

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Operations Consulting & the 5 Ps


• Plants
– Adding and locating new plants
– Expanding, contracting, or refocusing facilities
• Parts
– Make or buy decisions
– Vendor selection decisions
• Processes
– Technology evaluation
– Process improvement and reengineering

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Operations Consulting & the 5 Ps


(Continued)
• People
– Quality improvement
– Setting/revising work standards
– Learning curve analysis
• Planning and Control Systems
– Supply chain management
– MRP
– Shop floor control
– Warehousing and distribution
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Hierarchy within Consulting Firms


A way of looking at the typical
consulting firm’s organization

Finders
Who find new business Partners

Who manage the Minders


business
Managers

Who actually Grinders


do the work Consultants

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Economics of Consulting Firms


• David H. Maister’s article on consulting
draws an analogy between the consulting firm
and a job shop operation. Three types of
jobs:
• 1. Brain Surgery: Requiring innovation and
creativity
• 2. Gray Hair: Requiring a great deal of
experience (little innovation)
• 3. Procedures: Requiring activities similar to
other existing projects (little innovation or
experience)
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When are Operations Consultants Needed

• When faced with major investment


decision(s)

• When management believes it is not


getting the maximum effectiveness from
the organization’s productive capability

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Stages in Operations Consulting Process


1. Sales and proposal development
2. Analyze problem
3. Design, develop and test alternative
solutions
4. Develop systematic performance measures
5. Present final report
6. Implement changes
7. Assure client satisfaction
8. Assemble learnings from the study

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Operations Consulting Tool Kit:


Category 1 In this scheme we have
five categories of
activities, starting with
Problem Definition Problem Definition, that
consultants perform and
the supporting tools
used to aid the
Issue trees consultant in
performing that
Customer surveys category
Gap analysis

Employee surveys

Five forces model


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Operations Consulting Tool Kit: Category 2

Data Gathering

Plant tours/audits

Work sampling

Flow charts
Organizational charts

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Operations Consulting Tool Kit: Category 3

Data Analysis and


Solution Development

Problem analysis (SPC tools)

Bottleneck analysis

Computer simulation

Statistical tools

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Operations Consulting Tool Kit: Category 4

Cost Impact and


Payoff Analysis

Decision trees

Balanced scorecard

Stakeholder analysis

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Operations Consulting Tool Kit: Category 5

Implementation

Responsibility charts

Project management techniques

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Reengineering
Defined
• Reengineering is defined as the fundamental
rethinking and radical redesign of business
processes to achieve dramatic improvements in
critical, contemporary measures of performance
such as cost, quality, service, and speed. As a
engineering discipline, reengineering can be applied
to any process in manufacturing and service
businesses, education, and the government.
• Business process reengineering (BPR) is focused on
reengineering business processes.

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Key Words in the


Reengineering Definition
• Fundamental
– Why do we do what we do
– Ignore what is and concentrate on what
should be
• Radical
– Business reinvention vs. business
improvement

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Key Words in the Reengineering Definition


(Continued)
• Dramatic
– Reengineering should be brought in “when a need
exits for heavy blasting”
• Companies in deep trouble
• Companies that see trouble coming
• Companies that are in peak condition
• Business Process
– a collection of activities that takes one or more
kinds of inputs and creates an output that is of
value to a customer

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Principles of Reengineering

• Organize around outcomes, not tasks

• Have those who use the output of the process


perform the process

• Merge information-processing work into the


real work that produces the information

• Treat geographically dispersed resources as


though they were centralized

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Principles of Reengineering (Continued)

• Link parallel activities instead of integrating


their results

• Put the decision point where the work is


performed, and build control into the process

• Capture information once and at the source

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Question Bowl
Reasons for the boom in consulting include
which of the following?
b. Globalization
c. Very inexpensive
d. Existing managers don’t know what they
are doing
e. All of the above
f. None of the above
Answer: a. Globalization

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Question Bowl
According to David J. Collis’s research on the
consulting industry, which of the following
companies made the most money?
b. PricewaterhouseCoopers Consulting
c. KPMG Consulting
d. IBM
e. McKinsey & Company
f. Accenture

Answer: c. IBM (from Exhibit 8.1)

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Question Bowl
In the hierarchy of a typical consulting firm
who are at the top of the organizational
pyramid?
b. Minders
c. Finders
d. Grinders
e. Binders
f. None of the above
Answer: b. Finders

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Question Bowl
Which of the following are some of the major
strategic and tactical areas where
companies typically seek operations
consulting?
b. Plant
c. Parts
d. Processes
e. People
f. All of the above
Answer: e. All of the above (The five P’s also
include Planning and control systems.)
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Question Bowl
Using the “Stages in the Operations
Consulting Process”, what stage follows
the “Implement Changes” stage?
b. Sales and proposal development
c. Analyze problem
d. Assure client satisfaction
e. Present final report
f. Develop systematic performance
measures
Answer: c. Assure client satisfaction

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Question Bowl
Which of the following are a part of the
“Operations Consulting Tool Kit” that
apply to the category of “Problem
Definition”?
b. Bottleneck scorecard
c. Employee surveys
d. Flowcharts
e. Statistical tools
f. None of the above
Answer: b. Employee surveys

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Question Bowl
Which of the following are a part of the
“Operations Consulting Tool Kit” that
apply to the category of “Data
Gathering”?
b. Decision trees
c. Employee surveys
d. Flowcharts
e. Statistical tools
f. None of the above
Answer: c. Flowcharts

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Question Bowl
Which of the following are a part of the
“Operations Consulting Tool Kit” that
apply to the category of
“Implementation”? Answer: e. None of
b. Organization charts the above (These
c. Gap analysis tools actually
d. Five forces model should include
e. Computer simulation Responsibility
f. None of the above Charts and Project
Management
Techniques.)
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End of Chapter 8

©The McGraw-Hill Companies, Inc., 2004