World Class Operations: Evolution, Traits, Building Blocks, ModelsWorld Class Operations: Evolution, Traits, Building Blocks, Models

World Class Operations

World class operations can be defined as processes that can be used by organisations to develop high quality products and services at low costs to attain maximum customer satisfaction. To maintain world class operations, organisations must analyse building blocks crucial to such operations. The main building blocks of world class operations are strategies, systems and processes.

Another important area that organisations thrive to succeed is operational excellence, wherein they attempt to apply various scientific principles, tools and methodologies to attain sustainable improvement. In this chapter, you will study the concept and importance of world class operations and operational excellence in detail.

Evolution of Operations

Operations can be defined as a series of tasks and activities performed in organisations with an aim to meet business goals and objectives. Operations performed in organisations nowadays have not come into existence coincidentally. They have evolved through various phases.

Let us discuss these phases in detail:

Factory System

In this phase, main developments took place in the form of inventions in the textile industry and creation of new machines and devices. The phase laid the foundation for modern-day industries. The major contributor during this phase was Adam Smith, who promoted the principle of division of labour. Using machineries with the division of labour increased the output per worker.

Manufacturing System

In this phase, the factory system was replaced by the manufacturing system. The major contributor in this phase was F. W. Taylor who gave the principle of scientific management. He provided the concept of standardisation and productivity.

Another major contributor of the manufacturing system was Frank B. Gilbreth, who devised a system of classifying motions into 17 basic divisions, also known as Therbligs. This era also witnessed one of the best entrepreneurs, Henry Ford for bringing a successful automobile venture, Ford Motors. Moreover, a successful scheduling technique, i.e., Gantt chart was also developed in this era by Henry Gantt.

Human Resource Management

During this phase, the concept of human resource was introduced into manufacturing systems. The main proponents of this era were A. H. Maslow, D. McGregor and Elton Mayo. Maslow developed the theory of motivation based on the needs or expectations of individuals for their organisations. This is because the motivation of workers affects the productivity of an organisation. On the other hand, McGregor developed the theory of X and Y to help an organisation in selecting workers for a particular task. The Mayo’s theory helped organisations to study the behaviour of workers.

Quality Revolution

In this phase, the concept of quality was introduced in the development of products and services. The quality philosophers of this age promoted quality as a cost-cutting technique. Walter A. Shewart introduced the concept of statistical tools for quality control and manufacturing. These tools became imperative for developing products after World War II.

Later, Dr. W. Edwards Deming developed the concept of the Deming cycle (Plan-Do-Check-Act) to improve existing processes of manufacturing. There were other contributors too, such as Ishikawa, Joseph Juran and Philip Crosby, who played an important role in bringing and implementing quality in organisations. The contribution of quality proponents is explained in detail in the upcoming chapters.

Mass Customisation

According to Tseng & Jiao (2001), mass customisation is producing goods and services to meet individual customer’s needs with near mass production efficiency. This phase of mass customisation witnessed the use of flexible and computer-aided production systems.

By combining these systems, individual customisation can be made possible in mass production. The most important proponent of mass customisation is Henry Mintzberg, who described mass customisation as ‘pure customisation’, which entails customer opinions throughout the process of production, i.e., from designing of the product till its delivery.

According to Pine and Gilmore, mass customisation can be of two types:

• Cosmetic customisation: It refers to the presentation of a standard product differently to various customers.
  
  
• Transparent customisation: It refers to the presentation of goods to customers without making them aware about the customisation of products.

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World Class Operations

The success of every organisation depends on how well it satisfies its customers. For this, organisations engage in providing best quality products and services. Organisations need to coordinate and control various business operations required for the production and delivery of goods and services. However, due to constant rise in competition in the market, organisations are pushed to achieve continuous improvement.

An organisation can survive if it has world class operations, practices and processes. By being world class, an organisation attempts to excel its rivals. The term world class was first used for manufacturing by Schonberger. He also pointed out that the underlying concepts of world class manufacturing were applicable to non-manufacturing areas too. Thus, the term world class operations came into existence to describe a broader scope.

World class operations can be described as a combination of activities that promote faster production and delivery of quality products at reasonable costs. To achieve world-class operations, organisations focus on the elimination of redundant activities and functions (that do not add value to products or services). For instance, unnecessary product movements may result in product damage resulting in delays in production.

Self-understanding of Organisations

Organisations having world class operations have a clear understanding of their strengths and weaknesses. Such organisations know how they can exploit opportunities to stay ahead of competition. Such organisations keep their processes and procedures well-documented to measure their performance against competitors. In addition, these organisations work to improve their processes to achieve high quality output.

Adequate Management of Supply Chain

Another important trait of world class operations is that they help organisations in maintaining long-term relationships with suppliers. This ensures that suppliers have participated in the organisations’ success. As a result, the supply chain becomes fast and responsive, and suppliers make their best efforts to deliver quality products at a price required by organisations to succeed.

Knowledge of Customer Needs and Preferences

Successful organisations tend to realise that customers are crucial to their survival. Such organisations understand what their customers expect from products and services they are willing to buy. By performing world class operations, organisations aim to achieve customer loyalty; thereby increasing their customer base.

Emphasis on Quality

World class businesses understand the importance of quality in customer satisfaction. Therefore, organisations direct all their efforts to ensure that their products and services meet all expectations and requirements of customers. For this, organisations attempt to build quality processes to deliver products that provide maximum customer satisfaction.

Quick Adaptation of Change

It is an observed fact that change is inevitable. For attaining world class operations, organisations need to make adjustments at regular intervals owing to the following occurrences:

• Entry of new competitors in the market
• Obsolete technology
• Change in customer requirements

World class businesses are always swift in adjusting their operations to accommodate changes in the business environment.

Constant Efforts for Continuous Improvement

World class businesses believe that no processes can be flawless forever and needs to be improved. To achieve improvement, organisations benchmark their competitors within/outside the industry. This helps organisations in discovering new methods for improvement in their existing processes. In addition, organisations may also resort to the Plan-Do-Check-Act (PDCA) cycle to keep their processes under control.

Through the PDCA cycle, organisations first plan how operations would be performed to generate output and what would be required for completing the processes. As per the plan, processes performed by organisations are checked on regular intervals to find deviations from plans. In case of deviations, corrective measures are taken to get processes back on track.

Use of Process Metrics

World class organisations adopt various metrics and measures to analyse their performance. Such organisations focus on adopting core metrics that provide them with relevant data that helps in understanding the drivers of success. For instance, by focusing on metrics of reduced productions costs, organisations can offer products at a competitive prices, which lead to high customer satisfaction.

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Building Blocks of World Class Operations

As discussed earlier, having world class operations is an essential need for organisations to survive in tough competition in a business environment. Therefore, it is essential for organisations to understand what forms the base in the transformation of their existing operations into world class operations. Figure shows the building blocks of world class operations:

Strategies Operations Strategy

Systems Quality System, Supply Chain Management System

Processes Process Design, Planning and Control, Project Management

Let us discuss these building blocks in detail:

• Strategies: According to Slack and Lewis, operational strategy is the total pattern of decisions which shape the long term capabilities of any type of operations and their contribution strategy to the overall strategy. To attain world class operations, an organisation’s operations strategy must focus on defining its goals and objectives. Further, these goals must be communicated to all members of the organisation. Moreover, the relevance of these objectives should be assessed at regular intervals to help the organisation in achieving and maintaining world-class status.
  
  
• Systems: Another building block of world class operations are the systems adopted by an organisation. The two most important systems adopted by world class businesses are quality systems and supply chain management. Let us discuss about these systems in detail.
  
  • Quality system: As studied earlier, world class organisations focus on providing quality goods at affordable costs to customers. For this, organisations adopt reliable quality management systems that mainly help businesses in maintaining quality at all levels of operations.
    
    
    • Inspection: It involves measurement and assessment activities that are performed to check the quality of products (incoming and outgoing) and services at different stages of production and delivery. Quality inspection is conducted for work in progress (WIP) and final goods. Some of the activities that are performed as part of inspection are evaluating dimensions, assessing weight, etc.
      
      
    • Quality control: This is the second level in a quality system and includes the assessment data gathered from inspection, identification of deviations (if any) from the desired standards and adjustments in the required areas, such as materials, processes and procedures. Therefore, both inspection and control systems must be assessed regularly.
      
      
    • Quality audit: It is a process of assessing quality control systems at all levels of organisational operations. It may involve various activities, such as assessing weights, gauges, rulers and weighing machines. A common type of quality audit that is being used in most organisations (manufacturing and service) is an ISO 9000 quality system series, wherein external auditors or quality procedures are involved. If quality systems are found to conform to the prescribed international quality standards, the organisation is awarded a quality certificate for a specific period.
      
      In modern times, world class organisations are adopting Total Quality Management (TQM) systems to apply quality in each and every aspect of the business. TQM can be defined as a structured management approach that focuses on improving the quality of products and services offered to customers.
      
  • Supply chain management: To attain world class operations, organisations focus on achieving a responsive Supply Chain Management (SCM). SCM can be defined as the management of the flow of goods and services involving the storage of raw materials, work-in-process inventory and finished goods from the point of origin to consumers. An SCM mainly involves three concepts discussed as follows:
    
    • Supply chain configuration: The configuration of a supply chain involves the formation of a network of all participating firms. This mainly involves answering the following questions:
      
      What is the size of supplier’s supply base?
      
      
      What is the extent of vertical integration?
      
      
      What is the design of downstream distribution channels?
      
      
      What supply chain operations need to be outsourced?
      
      
      All supply chain configuration decisions are made by the top management of organisations.
      
      
    • Supply chain relationship: It can be described as the relationships between various participating firms of a supply chain. Such relationships are mainly established through inter-firms’ exchange. In world class operations, closed supply chain relationships are formed by exchanging visions, investment planning, etc.
      
      
    • Supply chain coordination: It refers to operational coordination between various organisations participating in a supply chain. World class supply chain coordination mainly includes synchronisation of material flow between supplier and customers.
      
• Processes: Organisations with world class operations adopt three types of functions to define and perform their processes appropriately, namely, process design, planning and control and project management. Let us discuss these in detail.
  
  • Process design: It is all about organising operations to establish consistency between production activities and process choice. Process selection may also have a direct impact on the flow of information and material across the organisation. Therefore, organisations attempt to keep their processes consistent with product portfolio decisions. Different organisations may choose different processes based on their product objectives.
    
    For instance, if an organisation is focusing on attaining greater production volumes at low costs, it will choose a mass or batch production process. Process design is a key and initial step in the development of world class operations. At a detailed level, process design involves planning of the product to be manufactured and determining steps required to develop the product. On the contrary, at a higher level, process design is an indicator of the arrangement of manufacturing resources to optimise flow patterns and deploy appropriate operations management tools.
    
    
  • Planning and control: It acts as an important building block for the development of world class operations. Planning and control is a process performed at various stages of production to refine the development of products or acquire specific resources. Planning mainly involves both the long-term planning covering overall capacity and process-related resources, such as facilities, machines and employees as well as detailed schedules to address customer needs. After implementing plans, organisations take various measures to control the extensive use of resources to meet customer demands. In planning and control, there are mainly three components. Let us discuss these components in detail
    
    • Demand management: The most critical factor in planning is forecasting customer needs. The difficulty in forecasting customer demand arises due to variation in demand of goods and services throughout the year, months, etc. The customer demand for product may vary from region to region. For example, the demand for raincoats increases during rainy season. In Cherrapunji, Meghalaya, due to heavy rains throughout the year, the demand for umbrellas and raincoats remain consistent in comparison to desert areas where rains are seasonal.
      
      Changes in demand can be predicted for some products. For instance, the sale of fast food increases at weekends (Friday through Sunday). However, predicting demand may become complex due to ever changing market trends, actions of new competitors, etc. At times, operation managers may adopt a proactive approach to increase the demand for products. Further, demand can also be affected through reservation systems, promotional marketing, price increase, etc.
      
      
    • Aggregate planning: It involves developing an aggregate plan defining all future production rates, workforce levels and inventory holdings, etc. It is generally developed before making any detailed material or resource plan and hold high accuracy for forecasting a group of product lines.
      
      An aggregate plan is also called a production plan for a manufacturing organisation emphasising on production rates and inventory holdings, whereas the same is called a staffing plan for service organisations and focus on labour related issues. An aggregate plan may provide demand projection for months or a year.
      
      
    • Material and resource planning: It is used by organisations to develop a link between various plans and activities for the fulfilment of specific customer orders. Material and resource planning is done based on dependent demand, wherein the requirement for specific products and/or associated resources is directly linked to the production or delivery of a final service or end product.
      
  • Project management: In world class operations, a project can be defined as a specific goal or objective that has a start point and end date and require a defined set of resources.
    
    For example, setting up a manufacturing plant can be defined as a project. Like all operations, a project also needs to be managed to deliver the desired results. Project management is a scientific method of planning, executing, monitoring and controlling different aspects of a project, such as time, money and human resource. The main elements of project management involves:
    
    • Defining a project
      
      
    • Assessing the feasibility of the project in terms of technical and financial aspects
      
      
    • Formulating the project
      
      
    • Implementing the project
      
      
    • Monitoring the project to discover deviations
      
      
    • Taking corrective measures to bring the project in the right track

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Project Management in India

After the second world war, project management has gained significant importance mainly due to several nuclear, aerospace and other defence programmes in the U.S. during the 1950s and 1960s. In India too, project management began to gain momentum around the mid-1960s. However, it still needs to get full-fledged acceptance by the Indian industry as well as public systems.

Project feasibility is conducted in the private sector in India without giving appropriate attention to fundamentals. In case, a feasibility study goes wrong, perennial problems keep arising during the implementation of the project. For instance, there may be delays in completion of the project and cost overruns during implementation. Other problems may come up in the areas of scales, operating revenues, break-even volumes, available capacities and profits. Similarly, in public systems too, proposed benefits of the project may fail to reach the intended people.

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Model for Operational Excellence

Achieving world class operations call for attaining operational excellence to sustain an organisation’s leadership in the market. Operational excellence can be defined as a philosophy of an organisation where continuous improvement is sought through problem solving, teamwork and leadership. It focuses on customers’ needs, employee motivation and empowerment and continuous improvement.

There are various models developed to achieve operational excellence. One such commonly used model to attain operational excellence is the Shingo model for operational excellence. The Shingo model for operational excellence focuses on achieving superior operations by applying the universally accepted principles of operational excellence, aligning management systems and implementing improvement techniques across organisations.

According to Shingo, operational excellence is not a tool or programme rather it is the consequence of the enterprise-wide practise of behaviours based on correct principles. Figure 1.6 shows the Shingo model for operational excellence:

Cultural Enablers

The culture of an organisation plays an important role in its success. Every organisation now believes that sustainability requires a strong focus on culture.

Cultural enablers include the following:

• Lead with humility: This principle states that people in an organisation must acknowledge their vulnerability and avoid prejudices and biased attitude towards others. Humility is a principle that leads to learning and improvement. Individuals in organisations should delegate tasks and keep check on practices such as biasedness and favouritism.
  
  
• Respect every individual: This principle states that every individual associated within an organisation at any level including employees, customers, etc. must be respected. Respect leads to the development of people and creates an environment for improvement of processes owned by people. Respect is not only necessary for employees but also for customers, suppliers, society, etc.

Continuous Improvement

This dimension is associated with the processes of an organisation. Continuous improvement is an on-going effort for improving products and services. The guiding principles under this dimension are as follows:

• Seek perfection: For attaining excellence in work, one must develop long-term solutions to simplify work..
  
  
• Focus on process: According to this principle, the focus should always be on the improvement of processes. For this, the correctness of material, parts and information must be ensured before using them. This is because good processes produce intended output if proper inputs are provided.
  
  
• Embrace scientific thinking: It involves adopting a structured approach for problem solving and motivating employees to share new ideas. Scientific thinking is a result-based approach that focuses on achieving the desired outcomes by using various scientific techniques such as the Plan, Do, Check, Act (PDCA) model.
  
  
• Flow and pull value: This states that redundant products or services must be avoided and the required resources for production must be made available on time. Flow involves shortening the lead time that makes the processes easier and faster. Pull involves matching the rate of production with demand. Both flow and pull lead to positive effects in an organisation.
  
  
• Assure quality at the source: It states that the achievement of quality is possible if work is done without errors. In the case of errors, fixing them should be prioritised. Following are the three important concepts related to this principle:
  
  • Do not forward defects
  • Stop and fix problems
  • Respect the individual

Enterprise Alignment

It is a continuous process wherein organisational elements are synced with organisational strategy and goals. There are two types of alignment, namely, vertical alignment and horizontal alignment. Vertical alignment ensures that processes are aligned with the organisation’s goals whereas horizontal alignment confirms that activities go according to processes.

Under enterprise alignment, the principles associated with an organisation’s purpose are as follows:

• Create constancy of purpose: It states that the direction and purpose of an organisation must be communicated to everyone related with the organisation. Leaders should know which processes have positive effects on the results and communicate the same to employees. A system must be there that ensures constant communication.
  
  
• Think systematically: This principle states that better and informed decisions can be made. All the barriers preventing information flow are eliminated. Moreover, the goals and concerns should be communicated to all. Systematic thinking unifies the other principles of operational excellence and leads to the culture of continuous improvement.

Results

All leaders of organisations are responsible for results. Ideal results require ideal behaviour. The guiding principle under this dimension is:

• Create value for customers: According to this principle, an organisation must understand customer needs and desires to offer them the right product. An organisation should focus on various aspects of value, such as quality, delivery, cost, safety and morale