Operations Management Made Simple

Article OPERATIONS MANAGEMENT MADE SIMPLE implementconsultinggroup.com By Jan Erik Dahl In recent years, many organisations and management and Anders Bogason, [email protected], teams have achieved significant results by working in a Implement Consulting Group structured manner with operations management – both at an operational and tactical level. However, for many of the involved lead- another way, a balanced approach where ers this means that they suddenly find we cultivate skilled, business-oriented themselves in a very different leadership leaders of people who can add life and role in which they are also confronted intelligence to the rationally sound with a vast number of new methods and operations management tools. tools. Seeing that the leaders are the ones who drive operations management, and thus have the key to success, it is of great Operations management does importance that the leaders receive the not need to be complex necessary support to successfully get As specialists, we tend to make opera- through this transformation. The support tions management more complex than is to be found in the operations manage- necessary. An example of this is uncritical ment tools which should be based on a references to a vast number of different more rational operations management toolboxes and tools which all can help theory as well as the actual leadership the organisation’s leaders in relation skills which should be based on a to specific operations management humanistic perspective. Or put in challenges, e.g. implementconsultinggroup.com 1 Operations management made simple • The supply chain management toolbox, to make corrective actions before it is too which contains a number of planning late as well as gather learning based on tools such as Enterprise Resource the deviations from what was expected. Planning (ERP), Capacity Requirements As a result of the built-in correction and Planning, Material Requirements learning mechanisms, the PDCA cycle Planning (MRP) and Forecasting both supports improved goal fulfilment (Arnold et al., 2012). in the short term as well as continuous improvement in the long term. • The policy deployment toolbox, which contains a number of different tools By using the PDCA cycle, the leader for roll-out and execution of strategic gains access to three rational operations plans, performance management etc. management elements: (Dennis, 2006). 1. Operations planning (PLAN) • The Six Sigma toolbox, which contains a 2. Operations follow-up (CHECK) number of tools for professionalisation 3. Operations optimisation (ACT) of the improvement work (Gitlow et al., 2005). The DO element represents the daily work in the teams and is therefore not a The list of toolboxes and tools is, of coordination or governance element. course, much longer. However, the point is that what leaders really need in their work The idea behind the PLAN – DO – CHECK with operations management is simplicity – ACT (PDCA) mechanism is far from new and overview rather than more tools. as it can be traced back to Deming and his mentor Shewhart at the beginning of the last century, but also to the theo- The simple version of operations ries developed from the work of Francis management Bacon around 1620. Others will argue Basically, operations management that it is a rational learning mechanism focuses on supporting the organisation which should be ascribed to other great in achieving the best possible business thinkers dating all the way back to the results both in the short term and in ancient Greeks. The point is, however, that the long term. In a rational operations operations management is based on very management context (as illustrated by simple, well-proven and widely accepted the PDCA cycle in figure 1), the individual mechanisms. leader is expected to have a plan for successful goal fulfilment that the leader continuously follows up upon the execu- Operations management in a tion of. Following up enables the leader local operational team The PDCA cycle provides a good frame of understanding when dealing with operations management in a local Figure 1: GOAL The PDCA cycle operational team. Here we find the everyday version of: PLAN • Local operational planning (For success) • Local operational follow-up • Local operational optimisation ACT DO Expected … typically on a short-term day-week time (Improvement) (Execution) result horizon. Here operations management often takes the form of visual standards such as whiteboards and shelves where CHECK Significant the overall plans for and status of success deviation (Follow-up) are visualised. implementconsultinggroup.com 2 Operations management made simple Figure 2: Figure 2 illustrates a local operational merely a tool which gives the operational Example of a local operational management board for a back-office team a place to meet and discuss their management board team in a financial company where the mutual local operational management, employees are responsible for handling i.e. local operational planning, follow-up a number of case-like tasks as well as in and optimisation. It is the people around direct contact with customers via email the board who create the results – not the and telephone. The local operational plan- board itself. ning on the board takes its starting point in the local operational team’s existing common operations model or best prac- Operations management systems tice which is based on the principle that are also simple the best result is achieved if as much as It is one thing to look at one local opera- possible of the case handling is clarified tional team and another thing is to look at while the customer is on the phone. Thus, an entire organisation which consists of the quality of the input is improved for many local operational teams. Here you the case-handling employees who the both need to take into account that each operational team tries to protect in the operational team has a local PDCA cycle best possible manner against external and that operations management takes disturbances in their everyday work. The place across the individual operational local operational management board teams. In the literature, this is referred supports both the operational team’s to as concentric PDCA (Dennis, 2005), daily and weekly distribution of tasks and which is an illustration of how to talk roles as well as visualises expectations about operations management – both at and status in relation to the expectations, department level and at company level. which provides input for the operational It can be difficult to visualise in practice, team’s mutual optimisation work. which is why we have developed the operations management system as It is important to understand that the illustrated in figure 3. local operational management board is Figure 3: Local operational Operations strategy 3 – 5 years management system (own interpretation) Executives 3 – 18 Act Plan months Check Portfolio of Operations optimisationprojects managers 1 – 3 Act Plan months Check Portfolio of local optimisationprojects Local operational Tactical leaders Week operations Act Plan – month management Check Managing level Optimisation efforts Executing level Well-functioning Local operational local operational Day management teams Act Plan – week Check implementconsultinggroup.com 3 Operations management made simple The structure of the operations local conditions and the local operational management system in brief standards. Thus, it is important that you Before we look into how the operations higher up in the operations management management system works, let us briefly system ensure a good framework and touch upon the structure of the individual support around the operational teams elements. in order for them to be able to meet the customer’s needs in day-to-day opera- The operations management system is tions as well as use their experience to built up around two dimensions, namely improve the local operational standards. a vertical dimension that represents the organisational dimension and a horizontal The balance between tactical operations dimension that represents the leader’s management and local operational three rational operations management management is key to a well-functioning elements in the form of the columns operations management system. The derived from the PDCA cycle in figure 1. important balance between the respect for the common elements from the At the top of the operations management “top-down” governance levels and the system, we find the operations strategy respect for local “bottom-up” involvement which sets the common direction for in the local operational management is how Operations must act and develop to emphasised by the two triangles in the ensure the deliverables together with the operations management system (Imai, market side of the strategy. 1997). Below the strategic level, we find the tactical governance where cross-disci- The operations management plinary tactical operations management system in practice and coordination take place. It is through When working with the operations the tactical operations planning that the management system in practice, it is, common plans, policies, standards and as previously mentioned, important to strategic goals etc. are coordinated and achieve an appropriate balance between rolled out across the organisation (Imai, “the two triangles” in the form of tacti- 1997). Tactical operations management cal operations management and local typically takes place with an increasing operational management. The reason for time horizon as you move up through this is that without effective local opera- the different levels of management in tional management, even the best plans the operations management system. fail, and without common coordination Expressed in popular terms, it is in the we risk running in different directions and tactical operations management that end up working counter to one another. you will find operations management We have already discussed local opera- that addresses the cross-functional tional management. In the following, we co-ordination and the deployment of will therefore focus on tactical operations common goals. management between the operations strategy and the local operational team.

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