Operations management

3 level analysis of Operations Management

Supply network level —> Flow between operations (Organizations, externalsupply network)

Operations level —> Flow between processes (Departments, internal supplynetwork)

Process level —> Flow between resources

4Vs analysis

High unit cost

Low Volume

Low repetition

Each stuff performs several tasks

High Variety

Flexible and complex

Tailor made to customer needs

High Variation in demand

Changing capacity

Flexible and in touch with demand

High Visibility

Short waiting tolerance

Customer perception governs satisfaction

Communication with customer

Low unit cost

High Volume

High repeatability

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Specialization

Capital intensive

Low Variety

Well defined

Routine, standardized

Low Variation in demand

Stable and predictable

High utilization

Low visibility

Standardization and centralization

No need to communicate with customer

high staff utilization

Operations performance

Process efficiency

Lower costs

Reduced errors, better resilience

Lower operational risk

Higher capacity utilization

Lower capital requirement

Enhanced service

Secure revenue

Opportunity for process learning

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Capabilities for future innovation

5 Competitive objectives (both internal and external), you have to sacrifice oneperformance objective to achieve excellence in another

1. Speed

Internal: reduce WIP, so less inventory and labor will be needed

External: improve time to delivery —> more satisfied customers, shortdelivery time

2. Quality

Internal: prevent errors —> faster throughput, more dependable, and lesswaste on time and effort

External: enhance product or service, so less customer complaints, on-specification products and services

3. Dependability

Internal: prevent late delivery of WIP to slow down throughput so there'sless waste of time and effort

External: at least avoids customer complaints because the product orservice is dependable, reliable delivery

4. Flexibility

A operation's ability to change.

Frequent new products/services, wide range, volume and deliverychanges

5. Cost

Internal: influence quality, speed, dependability, and flexibility

External: influence the 4Vs, low price, high margin, or both

Efficient frontier

A company trade off variety for cost efficiency

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Those companies on the efficient frontier are the industry leaders

If you use a focused strategy in improvement, you are doing a conveximprovement, meaning you sacrifice one to improve the other

What is strategy?

Identify the goal, planning the path to achieve the goal

Long-term orientation, deal with the full picture

How is operations strategy different to operations management?

The time scale is longer

The level of analysis is higher (aggregate planning)

The level of aggregation is higher (overall strategy)

The level of abstraction is higher (philosophical)

4 stage model of operations contribution

1. Correct the worst problems

2. Adopt best practice (Implement strategy)

3. Link strategy with operations (Support strategy)

4. Given an operations advantage (Drive strategy)

4 perspectives on operations strategy

1. Top down: start with corporate vision

2. Bottom up: start with operational experience

3. Operations resources: consider first the resources available, what do you have—> what you do

4. Market requirement: satisfy requirement of market, what do you need —>what you want

Competitive factors

Order-winning factors: more competitive better performance

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Qualifying factors: good performance as long as you have average competitivebenefit

Less important factors: very little change to performance with changes incompetitive benefit

5 Ps of operations strategy implementation

Purpose

shared understanding of the motivation, boundaries and context fordeveloping the operations strategy

Point of entry

where the process of implementation starts in the organization

Process

how the operations strategy formulation process is made explicit

Project Management

management of implementation

Participation

who is involved in implementation

Process design: design of processes and flow of activities so that the product orservice can be created effectively. There are 2 process types: volume and variety.

Manufacturing process types

Project (Highest variety, lowest volume, most complex, large scale, customized,coordination of many different skills, have start and finish time, quality, costobjective)

Jobbing (Very small quantity, high variety, require very broad special skills,skilled jobber or team to complete whole product)

Batch (Standard product, repeating demand, specialized, requires changeover ateach stage of production)

Mass / flow-line (No set-up needed, narrow skills, repeat products)

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Continuous (Lowest variety, highest volume, repeated, highly capital-intensiveand automated, difficult and expensive to start and stop the process)

Service process types

Professional service (Consultant, high level of customer contact, highinvolvement from client, highly customized, people-based rather thanequipment-based)

Service shop (Medical doctor, medium or mixed levels of customercontact/customization)

Mass service (MTR, high volume of customer, low level of customercontact/customization)

Little's Law:

Throughput = Number of WIP x Cycle Time

Throughput efficiency = ( Work Content / Throughput Time ) X 100%

Stages of product / service design

Concept generation (research from customer, competitor, staff, or R&D)

Concept screening (feasibility —> investment required, acceptability —>what's the return, vulnerability —> what are the risks?)

Preliminary design (component structure)

Evaluation and improvement (QFD, FMEA, etc)

Prototyping and final design (simulation, rapid prototyping)

Benefits of looking at the whole supply chain: the supply chain will break at itsweakest link

Understand the competitiveness

Identify the significant links in network

Focus on long-term issues.

Don't outsource

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High strategic importance

Company already possess that specialized knowledge

Company can produce better than its competitors

Produce in-house can bring in significant performance improvement

4 Layouts

Fixed Position Layout (restaurant with waitress)

High variety low volume

Low fixed cost high variable cost

Adv.

Very high product and mix flexibility

Product / customer not moved

High variety of tasks for staff

Dis.

Very high unit costs

Scheduling space and activities can be difficult

Functional Layout (kitchen)

Medium or high variety medium or low volume

Adv.

High product and mix flexibility

Relatively robust in the case of disruptions

Easy to supervise

Dis.

Low utilization

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Can have very high WIP

Complex flow —> need more trainings

Cell Layout (buffet restaurant)

Medium or low variety medium or high volume

Adv.

Can give good compromise

Fast throughput

Group work can result in good motivation

Dis.

Can be costly to rearrange existing layout

Can need more plant

Types of cell

Specialist functional manufacturing cell (high amount of internalresources, low amount of external support required, e.g. internalaudit group)

Plant-within-a-plant manufacturing operation (high amount ofinternal resources and high amount of external support, e.g.maternity unit in a hospital)

Small multi-machine manufacturing cell (low amount of internalresources and low amount of external support, e.g. copying room inlibrary)

Complete component manufacturing cell (low amount of internalresources and high amount of external support, e.g. lunch and snackproduce area in supermarket)

Product (line) Layout (supermarket / cafe de coral)

Low variety high volume

High fixed cost low variable cost

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Adv.

Low unit costs for high volume (maximize layout)

Opportunities for specialization of equipment

Dis.

Can have low mix flexibility

Not very robust in the case of disruptions

Work can be very repetitive

Different type of layouts

Long-thin process layout

Many stages and each stage has little work content

Advantages: controlled flow, simple materials handling,lower capital requirement, greater efficiency, higher spaceutilization

Balanced process layout

Short-fat process layout

Small number of stages and each stage has a lot of workcontent

Advantages: higher mix flexibility, higher volume flexibility,greater robustness, less monotonous, higher ownership

Balancing loss = the proportion of time invested in processing the non-value-addedelements of a product or service

Balancing loss = idle time each cycle / (cycle time x number of cycles)

Decide how many staff to hire

Available productive time / Forecast demand during the period = Cycle time

Work content / Cycle time required = Number of staff required

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Process technologyMaterial processing technology

CNC machining, industrial robot, automatic guided vehicle, flexiblemanufacturing system, CIM

Information processing technology

RFID, EDI, ERP

Customer processing technology

Active interaction with the technology

Personal communication, internet-based ordering, ATM

Pass interaction with the technology

Transport system, theme park ride, car wash

Hidden interaction with the technology

Security cameras, retail scanners, credit card tracking

Interaction with the technology through an intermediary (the agent relieson technology to serve you)

Call center, hotel reservation system

Categorizing processing technology

Degree of automation (high < — > low)

Scalability (volume) (high < — > low)

Degree of integration (variety) (narrow < — > broad)

Job design: to impact quality, speed, dependability, flexibility, cost, health and safety,quality of working life

Environmental condition

Ergonomics: concerns with the human body and how it fits intosurroundings

How the person interfaces with the physical aspects of his or her

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work placeHow the person interfaces with the environmental conditionsprevalent in his or her immediate working area

Team working: the staff often with overlapping skills, collectivelyperform a defined task and have a high degree of discretion over howthey actually perform the task

Technology available

Allocation of tasks

Flexible working: working from home, working while traveling, workingas an independent contractor, working as for job consignment etc.

Behavior approaches: through job enlargement (more tasks of the sametype) and job enrichment (more tasks which give increased responsibilityautonomy or decision making)

Techniques of job design: combine tasks, form natural work units,establish client relationships, vertical loading, opening feedbackchannels

Core job characteristics: skill variety, task identify, tasksignificance, autonomy, feedback

Mental states: experienced meaningfulness of the work,experienced responsibility for outcomes of the work, knowledge ofthe actual results of the work activity

Performance and personal outcomes: high motivation, high qualityof performance, high satisfaction, low absenteeism and turnover

Method to perform each job

Time and number of workers allocated to tasks

Scientific management: work study

Division of labor

Adv.: faster learning, easier to have automation, ensures that non-productive work is reduced

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Dis.: leads to monotony, can result in physical injury, not robust,reduce flexibility

Maintaining commitment

Empowerment: giving staff the ability to change how they do their jobs,this is more than autonomy because they are authorized to make changesto the job itself as well as the way how it is performed

Relationship between HR & OM

Strategic Partner: HR align HR strategy with business strategy, and OMintegrates operations with HR strategy.

Administrative expert: OM is an internal customer of the processes (appraisal,selection, communication) carried out by HR.

Employee champion: HR listens and responds to employees, OM must besensitive to feedback from HR on how it manages day-to-day operations.

Change agent: OM and HR are jointly responsible for operations improvementactivities. HR manages transformation and change.

Cause of stress

Cannot cope with the amount or type of work asked to do. —>Provide trainingor change the job, or introduce more flexible working hours.

Have no control or say over how and when they do their work. —> Involvestaff in decision making

Feeling unsupported. —> Keep them informed, and give them opportunity totalk about their issues

Don't know their role in the organization and what is expected. —> Work out ajob description and maintain a close link between individual targets andorganizational goals

Uncertainty and insecurity due to change. —> Have employee involved inplanning the change.

Organizational structure

U-form —> functional grouping of resources

M-form —> resources based of separate divisions

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Matrix-form —> resources are structured with multi-levels of responsibility (2–level of responsibility, mixing U-form and M-form)

N-form —> loss networks internally and externally, no particular form

P:D ratio, P = production time, D = delivery time, R = time to gather resources

Produce to stock: P >> D + R, wait till production is completely finished thendeliver to customers

Independent demand

Product or service is small compared with tittle capacity of the operation

Part produce to order: P > D + R, wait till production is half way through(finished half the order) then deliver to customers

Produce to order: P = D + R, delivery starts right at the time when resources isdelivered

Resource to order: P = D, delivery starts when order is placed, production anddelivery and resource gathering are conducted simultaneously

Dependent demand

Product or service is large compared with total capacity of the operation

Loading = the reduction of time available for value-added operation time.

Loading = maximum available time — value-added operation time

Finite loading limits the loading on each center to its capacity, even if it meansthat jobs will be late

Infinite loading allows loading on each center to exceed the capacity to ensurethat jobs will not be late

Operating equipment effectiveness

Loading time = valuable operating time + quality losses + speed losses +availability losses

Availability rate = total operating time / loading time

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Performance rate = net operating time / total operating time

Quality rate = valuable operating time / net operating time

Efficiency = actual output / effective capacity

Utilization = actual output / design capacity

Production strategy

Level strategy: absorb demand

Have excess capacity

Make to stock

Make customers wait

Chase strategy: adjust output to match demand

Hiring and firing

Work overtime or work short time

Subcontracting

Demand management: change demand

Change demand pattern

Develop alternative products and/or services

Cumulative representations of demand and supply: capacity planning is bestconsidered on a cumulative basis, this allows alternative capacity and output plans tobe evaluated for feasibility

Inventory system

Single-stage inventory system

Suppliers —> Stock —> Sales operations

Two-stage inventory system

Suppliers —> Central depot —> Distribution —> Local distribution point

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—> Sales operations

Multi-stage inventory systemSupplier —> Input stock —> Stage 1 –> WIP —> Stage 2 –> WIP —>Stage 3 –> Finished goods stock

Multi-echelon inventory system

Each level will have its own inventory, then you need to minimize itsinventory in each level

Replenishment model (periodic review = every period bring up to maximum level,continuous monitoring = fixed re-order point)

Slope = demand rate (how many units you need per period)

Q = re-order quantity

Average inventory = Q/2

Re-order interval = Q/D

Inventory-related costs

Holding costs (inventory cost)

Ordering costs (admin costs to the supplier)

Pareto curve (ABC classification), only stock the most important items (A)

A = 20% of item, 80% of value

B = next 30% of item, 10% of value

C = remaining 50% of item, 10% of value

Re-ordering system

Two-bin system

Bin 1 = items being used, re-order when bin 1 is empty

Bin 2 = re-order level + safety inventory

Three-bin system

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Bin 1 = items being used

Bin 2 = re-order level inventoryBin 3 = safety inventory

Supply chain management

Upstream flow of customer requirements

Long-term plans and requirements

Market research information

Individual orders

Payment

Potential new products and services

Downstream flow of products and services for customer fulfillment

Products and services

New products and services

Delivery information

Payment request / credit

Factors for rating long-term suppliers

Short-term ability to supply

Range of products or services provided

Quality of products or services

Responsiveness

Dependability of supply

Delivery and volume flexibility

Total cost of being supplied

Ability to supply in the required quantity

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Longer-term ability to supply

Potential for innovation

Ease of doing business

Willingness to share risk

Long-term commitment to supply

Ability to transfer knowledge as well as products and services

Technical capability

Operations capability

Financial capability

Managerial capability

Types of supply relationship

Virtual spot trading: many suppliers, transactional contact, does not need to doanything to build such relationship

Partnership: medium to few suppliers, the supplier is medium to important tothe buyer

Vertical integration: close contact, few supplier, supplier is very important tobuyer so the buyer integrates it to its business

Long-term virtual operation: very few supplier but the buyer does nothing in itsbusiness to integrate the supplier

Bullwhip effect

Responsive supply chain exhibit a dynamic behavior, small changes at thedemand end of a supply chain are progressively amplified for operations furtherback in the chain

To reduce bullwhip effect

Information sharing: efficient distribution of information throughout thechain can reduce demand fluctuations along the chain by linking all

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operations to the source of demand

Channel alignment: adopting the same or similar decision-making

processes through the chain to coordinate how and who decisions aremade

Operational efficiency: eliminating sources of inefficiency orineffectiveness in the supply chain.

Effects of supply chain time compression

Shorter cycle time —> less need for safety stock —> reduced inventory holdingcost

Faster time-to-market —> higher revenue, less discounted sales

Piece flow —> easier defect detection, reduced waste cost and higher quality

Shorter cycle time —> more flexibility on scheduling and production, betterresponse to market changes

Matching supply chain with market requirements

Lean supply chain management

Efficient supply chain

Low cost

High utilization

Minimum inventory

Low cost suppliers

Functional product

Predictable

Few changes

Low variety

Price stable

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Long lead-time

Low margin

Agile supply chain management

Responsive supply chain

Low throughput times

Low utilization

Deployed inventory

Flexible suppliers

Innovative products

Unpredictable

Many changes

High variety

Price markdowns

Short lead-times

High margins

Benefits of ERP

Software communicates across all functions, therefore, there's absolute visibilityof what is happening in all parts of the business.

The discipline of forcing business-process-based changes is an effectivemechanism for making all parts of the business more efficient.

There's a better sense of control of operations that will form the basis forcontinuous improvement.

It enables far more sophisticated communication with customers, suppliers andother business partners.

It is capable of integrating whole supply chains including suppliers' suppliers

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and customer's customers.

Measures in balanced scorecard

Internal process performance measures: what aspects of performance shouldbusiness process excel at

Financial performance measures: how should be viewed by the shareholders

Customer performance measures: how should be viewed by the customers

Learning and growth performance measures: how to build capabilities over time

Types of benchmarking

Internal benchmarking: comparison between operations or parts of operationswhich are within the same total organization

External benchmarking: comparison between an operation and other operationswhich are part of a different organization

Non-competitive benchmarking: benchmarking against external organizationswhich do not compete directly in the same markets

Performance benchmarking: comparison between the levels of achievedperformance in different operations

Practice benchmarking: comparison between an organization's operationspractices and those adopted by another operation

Nine-point scale of importance (1–3: better than competitors, 4–6: same ascompetitor, 7–9: worse than competitors)

1. Provide a crucial advantage with customers

2. Provide an important advantage with most customers

3. Provide a useful advantage with most customers

4. Need to be up to good industry standard

5. Need to be around median industry standard

6. Need to be with close range of the rest of the industry

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7. Not usually important but could become more so

8. Very rarely rate as being important

9. Never come into consideration

Nine-point scale of performance (1–3: better than competitors, 4–6: same ascompetitor, 7–9: worse than competitors)

1. Considerably better than our nearest competitors

2. Clearly better than our nearest competitor

3. Marginally better than our nearest competitor

4. Often marginally better than most competitors

5. About the same as most competitors

6. Often close to main competitors

7. Usually marginally worse than main competitors

8. Usually worse than most competitors

9. Consistently worse than most competitors

Importance — Performance matrix

Measure against performance against competitors and importance for customers

A company should be at least perform the same as competitors

As the performance is positively related to the importance for customers

Sand-cone model of improvement (you have to satisfy the lower priority first beforeyou can start targeting higher priority aspects. In this case, an organization have tofirst achieve quality then start with other aspects)

1. Quality

2. Dependability

3. Speed

4. Flexibility

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5. Cost

Double loop learning

Learning loopLearn new insight and capability

Make improvements

Access operations performances

Compare performance with objectives

Loop based on stuff you've learnt

Question relevance of objective

Develop more relevant new objectives

Compare performance with objectives

Total quality management

Principles of TQM

Customer-oriented

Leadership

Strategic planning

Employee responsibility

Continuous Improvement

Cooperation

Statistical methods

Training and education

TQM include

All parts of the organization

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All staff of the organization

Consideration of all costs

All the systems that affect quality

Every opportunity to get things right

Approaches in TQM

Prevent 'out of specification' products and services reaching market —>inspection

e.g. Error detection

Solves the root cause of quality problems —> quality control

e.g. Statistical quality control, process analysis, quality standards

Broaden the organizational responsibility for quality —> qualityassurance

e.g. Quality systems, problem solving, quality planning

Make quality central and strategic in the organization —> TQM

e.g. staff empowerment, teamwork, involve customers andsuppliers

TQM is about people

Employees are valuable resource

Employee training and education are long-term investment

Employees have decision making power to improve quality and customerservice

Teamwork and group participation required to achieve strategic goal forquality and customer satisfaction

TQM's target is ISO9000

1. Quality management should be customer-based. Customer satisfactionshould be measured through surveys and focus groups and improvement

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against customer standards should be documented

2. Quality performance should be measured. Measures should related bothto processes that create products and services and customer satisfactionwith those products and services

3. Quality management should be improvement-driven. Improvement mustbe demonstrated in both process performance and customer satisfaction

4. Top management must demonstrate their commitment to maintaining andcontinually improving management systems. This commitment shouldinclude communicating the importance of meeting customer and otherrequirements, establishing a quality policy and quality objectives,conducting management reviews to ensure the adherence to qualitypolicies, and ensuring the availability of the necessary resources tomaintain quality systems.

Benefits of ISO9000 and quality awards

Give detailed guidance on how to design their control procedures.

Provide assurance to customers that the products and services theypurchase are produced by an operation working to a defined standard.

Lead to error reduction, reduced customer complaints and reduced costsof quality.

Marketing benefit — demonstrates that an organization takes qualityseriously

Provide a focused structure for the organization to assess its own qualitymanagement and improvement efforts

Deming's 14 points for quality improvement

Create constancy of purpose

Adopt new philosophy

Cease dependence on inspection

End awarding business on price

Improve constantly the system of production and service

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Institute training on the job

Institute leadership

Drive out fear

Break down barriers between departments

Eliminate slogans and exhortations

Eliminate quotas or work standards

Give people pride in their job

Institute education and a self-improvement program

Put everyone to work to accomplish it

EFQM business excellence model

5 Enablers

Leadership — how leaders develop and facilitate the achievement of themission and vision, develop and implement values required for long termsuccess

Policy and strategy — how the organization implements its mission andvision through clear stakeholder-focused strategy, supported by relevantpolicies, planes, target and processes.

People — how the organization manages, develop and releases theknowledge and potential of its people

Partnership and resources — how the organization plans and manages itsexternal partnership and internal resources

Processes — how the organization designs, manages and improves itsprocesses and generate increasing values for its customers stakeholders

4 Results

People — motivation, satisfaction, performance and services theorganization provides for its people

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Customer — loyalty and perception of customers to the organization'simage, product and services

Society — the organization's performance as a responsible citizen andinvolvement in community

Key performance — the financial and non financial outcomes of the

organization's planned performance, including cash flow, profit, meetingbudget, success rate and value of intellectual property

If an organization is able to do the 5 enablers right, then it will be able toachieve the 4 results

GAP model of quality

Gap between internal quality specification and external quality expectation ofcustomers

Gap between internal quality specification and intended concept of design

Gap between internal quality specification and actual product or service qualityconformance

Gap between actual product quality and customer's expectation of the product,can the expectations derived

Quality characteristics of goods and services

Functionality — how well the product or service does the job for which it wasintended

Appearance — look and feel, sound and sell of the product and services

Reliability — consistency of product or service performance over time

Durability — total useful life of the product or service

Recovery — ease with which problems with the product or service can berectified or resolved

Contact — nature of the person to person contact that take place

Total cost of quality decrease overtime if you use TQM, and at the end the cost will beconstant as time goes by

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Prevention

Appraisal

Internal failure

Appraisal

Statistics control — behaviors that require investigation

Alternating and erratic behavior

Suspiciously average behavior (might have wrong scale)

Two points near control limit

Five points on one side of center line

Apparent trend in one direction

Sudden change in level

Six Sigma DMAIC methodology

Define — identify problem, define requirements and set the goal

Measure — gather data, refine problem and measure inputs and outputs

Analyze — develop problem hypothesis, identify root causes and validatehypotheses

Improve — develop improvement ideas, test, establish solution and measureresults

Control — establish performance standards and deal with any problems

PDCA cycle philosophy

Plan — establish a target for improvement

Do — implement the improvement plan

Check — assess whether the implementation remains on track

Standardize the procedure and set goal for new improvement

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6–M

Measurement

Man

Machine

Method

Material

Mother nature

Lean operations — moving towards the elimination of all waste in order to develop anoperation that is faster, more dependable, produces higher quality products andservices and operates at low cost

Process-oriented

Quality is created during the process, assessment of result would be toolate to assure and to restore the quality. Therefore, an operation can onlybe controlled in the process, not in the output

Continuous improvement

Kaizen

Good housekeeping — 5S

Sort out (Seiri) / Cleaning up — Eliminate what is not needed and keepwhat is needed

Set in order (Seiton) / Arranging — Position things in such a way thatthey can be easily reached whenever they are needed

Shine (Seiso) / Neatness — Keep things clean and tidy, no refuse or dirtin the work area

Standardize (Seiketsu) / Discipline — Maintain cleanliness and order,perpetual neatness

Sustain (Shitsuke) / Ongoing improvement— Develop a commitment andpride in keeping to standards

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Benefits:

Reduce defects —> higher quality

Reduce wastes —> lower costs

Reduce delays —> reliable deliveries

Reduce injuries —> improved safety

Reduce breakdowns —> higher availability rate

Eliminate waste

Over production —> production ahead of demand

Excess inventory —> WIP & finished products not being used

Defective products —> effort involved in inspection & repair

Excess motion —> unneeded movement of people / equipment

Unneeded process —> poor tool / product design creating waste

Waiting —> waiting for the net production step

Transportation —> products moving not for processing

Just in time inventory control

Focus on producing only when needed

Lower-capacity utilization

No surplus production goes into inventory

Low inventory so problems are exposed and solved

Fewer stoppages

Kanban systems

Standard containers for parts with the content displayed in a card

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Conveyance Kanban as used with a conveyer

Production Kanban as used in a production system

Containers holding parts can be moved only when a card isattached, always use standard containers, each container must befilled only with the standard number of units

The next process is the customer

Internal customer = the next process

Each process has its own customer and supplier

The preceding process myst always do what the next process says

Quality first

Speaking with data

ISO 31000

Provides generic guidelines for the design, implementation and maintenance ofrisk management process in an organization

Defines risk as the effect of uncertainty on objectives, therefore, risk can beboth undesirable possibilities and also positive possibilities

Scope is to enable all strategy, management and operational tasks of anorganization throughout projects, functions, and processes to be aligned to acommon set of risk management objectives

Failure management (Prevention, Mitigation, Recovery)

Discover what happened and what are the consequences

Act — inform, contain, follow up

Learn — Find root cause, engineer out

Plan — Analyze failure, plan recovery

FMEA (Failure Mode and Effects Analysis)

Probability of failure

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Degree of severity

Likelihood of detection

P x S x D = Risk priority number

Total Productive Maintenance (TPM)

Adopt the team-working and workers empowerment principles, as well as acontinuous improvement approach to failure prevention

See maintenance as an organization-wide issue, which is similar to the TQMapproach

Principles of TPM

Improve equipment effectiveness by examine all the losses which occur

Allow staff to take responsibility for some of the maintenance tasks andfor the improvement of maintenance performance

Plan maintenance with a fully worked out approach to all maintenanceactivities involving everyone

Train all staff in relevant maintenance skills so that both maintenance andoperating staff have all the skills to carry out their roles

Achieve early equipment management by maintenance prevention, whichinvolves considering failure causes and the maintainability of equipment

Quality Function Deployment (QFD)

Customer requirements (WHAT) — list of competitive factors which customersfind significant

Design characteristics (HOW) — various dimensions of the design which willenable the product or service to meet customer requirements

Relationship matrix —> interrelationship between the customer requirementsand design characteristics, the score is either 1, 3, 9

Roof of the house captures information the team has about the correlationsbetween the various design characteristics

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Type 1 error — rejects product that's actually of good quality

Type 2 error — accepts product that's actually of bad quality

Taguchi quality loss function

L = total cost of loss to society

D = deviation from target performance

K = constant

L = KD^2

Cost of quality loss is in the form of an inverted bell shape

Reduce variation = reduce risks

Ethical and financial performance always exist a trade-off

5 dimensions of CSR

Social dimension

Stakehoder dimension

Economic dimension

Environmental dimension

Voluntariness dimension

Triple Bottom Line concept

Profit and loss account — measure of corporate financial performance

People account — measure of how socially responsible an organization has beethroughout its operations

Planet account — measure of how environmentally responsible it has been

Bearable, Equitable and Viable conditions are the Triple Bottom Lines of asustainable society

CSR issues = TBL issues

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Environmental issues — pollution, waste disposal, emission, climate change,use of energy

Social issues — basic labor rights, no chid labor or forced labor, safety andhealth for workers / stakeholders

Financial issues — poverty, jobs, public revenues, tax and fair trade, education,skills and knowledge transfer

GlobalizationPros

The increasing reliance of economies on each other

The opportunities to be able to buy ad sell any country in the world

The opportunities for labor and capital to locate anywhere in the world

The growth of global markets in finance

Increased choice

Greater potential for growth

Increase international economies of scale

Greater employment opportunities

Cons

Damage to the environment. — Environmental Burden (EB = P x A x T,P = population, A = affluence of the population, T = technology)

Exploitation of labor

Monopoly power

Economic degradation

Non-renewable resources

Damage to cultures

Increase in gap between the rich and poor

Dominance of global trade by the rich, northern hemisphere countries

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Lack of opportunities for the poor to be able to have access to markets

Exploitation of workers and growers

ISO 26000

Definition — the responsibility of an organization for the impacts of itsdecisions and activities on society and the environment, through transparent andethical behavior that:

Contributes to sustainable development, including health and the welfareof society

Takes into account the expectations of stakeholders

Is in compliance with applicable law and consistent with internationalnorms of behavior

Is integrated throughout the organization and practiced in its relationships

Principles

Accountability — an organization should be accountable for its impactson society, the economy and the environment

Transparency — an organization should be transparent in its decisionsand activities that impact on society and the environment

Ethical behavior — an organization should behave ethically

Respect for stakeholder interests — an organization should respect,consider and respond to the interests of its stakeholders

Respect for the rule of law — an organization should accept that respectfor the rule of law is mandatory

Respect for international norms of behavior — an organization shouldrespect international norms of behavior, while adhering to the principle ofrespect for the rule of law

Respect for human rights — an organization should respect human rightsand recognize both their importance and their universality

Core subjects

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Organizational governance

Human rights

Labor practices

Employment and employment relationships

Conditions of work and social protection

Social dialogue

Health and safety at work

Human development and training in the workplace

Environment

Fair operating practices

Consumer issues

Community involvement and development

Benefits of implementing ISO 26000

Competitive advantage / reputation of organization

Ability to attract and retain workers, customers, clients or users

Maintenance of employees' morale, commitment and productivity

View of investors, owners, donors, sponsors and the financial community

Relationship with companies, governments, to media, suppliers, peers,customers, and the community in which it operates.

Building an integrated management system

Voice of stakeholders

Policy & objectives

Processes & responsibilities

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Resources allocation

Documentation and measure

Audit and reports

Corrective action

Continuous improvement

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