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Strategic Operations Issues

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Strategic Operation Issues Executive Summary This paper reviews a core process of the Light and Power organisation with a view to seeking opportunity for change in the performance of process against the organisation’s strategic objectives. The organisation is currently not performing to target and improvement is required. By examining the design of a core process of the business and mapping process flow the impact of current design and capacity on outputs is able to be quantified and possible gains that can be made by changing the process design discussed. Investigation supports the premise that changing process design can increase the organisations performance against strategic objectives and set targets. The recommendation is made to pursue process change based on the theories discussed and the benefits the change can bring which will increase the organisations productivity and asset readiness whilst working to reduce costs. This result would increase the organisations performance to target.

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Strategic Operation Issues

Table of Contents Executive Summary ................................................................................................................... 1 The Organisation ........................................................................................................................ 3 Operation Issue .......................................................................................................................... 4 Examining the Process Issues .................................................................................................... 6 The Process ............................................................................................................................ 6 Task Statistics ........................................................................................................................ 7 Opportunity for Change ............................................................................................................. 9 Process Capacity .................................................................................................................... 9 Process Task Configuration ................................................................................................. 10 Innovation ............................................................................................................................ 11 Redesign the Process............................................................................................................ 12 Increased Management of Procedure ................................................................................... 12 Recommendation ..................................................................................................................... 13 Appendix 1 ............................................................................................................................... 15 Reference List .......................................................................................................................... 16

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Strategic Operation Issues

The Organisation The business is an equipment hire business specialising in the supply and maintenance of Power Generation and Lighting to construction and events industries. The business inventory consists of self-contained diesel motor driven electricity generators configured to supply electric power and as lighting towers designed to illuminate work and event areas. Inventory also includes electrical distribution accessory equipment for the power generators such as cables, leads and electrical switchboards. The rental of equipment may be short term one or may be longer term on sites, particularly construction projects from multiple nights to several months. The equipment before hire requires Run Up (pre hire safety check) as well as periodical maintenance and damage repair. As well the organisation provides breakdown support on site 24/7. The inventory includes 358 lighting towers and 159 Generators of varying size from 20 to 80kVA (small), 100 to 300 kVA (medium) to 500,1000 and 1250kVA (Large). Front office staff of four is responsible for the administrative operation. As well there is 9 tradesman staff. Made up equally of Fitter Mechanics and Electricians to prepare and maintain the equipment. Due to requirement to meet field repair and in field service only 7 of those tradesman can operate within the core process. There is additionally a leading hand overseeing operational process and directing work. Some complex repair work is outsourced to specialist suppliers and transport operations and casual labour is sub contracted. Quality in the organisation is systemically controlled by a “Silver Service” process overlaying all work accredited to AS9000 standards.

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Strategic Operation Issues Operation Issue In this organisation the utilisation of the inventory measured by the time it is on hire to the customer is one key driver of profitability. Inventory that is either not on hire or not available for hire represents a cost to the business. Therefore the completion of the overall process between equipment arriving to the organisation returning from rental and being available for delivery back to rental is a key driver of profitability. The micro inventory process of the business is summated in figure 1.1

Figure 1.1 Inventory Micro process of Light & Power rental operation. NB: Run Up = Preparation of equipment for rental including safety and quality checks to company quality standard.

The Throughput rate (or flow rate) is currently resulting in the business not having inventory available to rent directly from stored rental ready stock. Figure 1.1 shows by the relative output arrow sizes the relative proportion of output on a daily basis. Ideally the outputs should be balanced and inventory should be available to for other than today’s orders. Figure 2.1 maps the current process and productivity is measured weekly (Appendix one). 4

Strategic Operation Issues In this business inventory not ready for rental may be requiring one of three processes. Run Up, Periodical Maintenance Service or Repair. Inventory in stock and not ready for rental is denoted as ‘RED’ stock. Stock ready to rent is denoted as ‘GREEN’ Stock.

Figure 1.1 represents the outputs currently as imbalanced and focussed on meeting todays order rather than supporting the storage of ‘Green’ stock. Figure 1.1 also shows that the capacity of the available resource is not met. This indicates that to change process to alter the flow rate would benefit the organisation by helping to meet its objectives. Slack et al. (2012) describes the design factors that will influence the flow objectives as  The variability of input arrival to the process  The configuration of the resources and activities within the process  The capacity of the resources at each point in the process  The variability of the activities within the process The objectives of the organisation affected by the flow are directly influenced by the process. Those objectives are  Profit Before Tax (PBT) as a % of revenue. Current 13-17% - Target 22%  Repair & Maintenance (R&M) costs as a % of revenue. 27-32% - Target 22%  Equipment Availability Red to Green Ratio – Current 51/49% - Target 22/78% or > Figure 1.1 showing that the outputs are not meeting known capacity indicates that we can analyse the process design included in the flow to look for improvements in the process design to influence performance against objectives for this flow. Examining the flow against Strategic performance objectives we should consider Quality, Speed, Dependability, Flexibility and Cost as the process design objectives (Slack et al. 2012).

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Strategic Operation Issues

Examining the Process Issues There are no apparent technology or manpower issues evident to restrict change in the current process. The output of process to capacity suggests there is opportunity through process analysis to find areas of process design that can be altered to achieve improved performance to objectives. If we look to the design factors mentioned by Slack et al. (2012) there is no control available to variability of input arrival as the process exists. The capacity of the resources appears adequate as it is measured by productivity (appendix one). This leaves both the configuration of resources and activities within the process and the variability of activities within the process as possible target areas to find improvement. The Process The current process is mapped in figure 2.1.

Figure 2.1 Current Process Map for RED to GREEN process at Light & Power Rental

The process as depicted operates in a closed yard workshop environment therefore the process a very low degree of visibility to the customer. In this process the output is defined as the ‘in branch stock’ which is then available for delivery to the customer.

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Strategic Operation Issues Currently the process can be seen to be a simple and serial process. That is the work flow is step following step. There is a set task precedence however that precedence is not necessarily a good design and results in bottleneck well down the process at an investigation stage that follows the customer order and then seeks to determine if parts are available. Each possible answer to the question of which task is required involves different process times depending on parts availability completion of task may or may not be possible and time to complete will vary greatly. Hammer (1990) believes that reengineering outmoded process takes bold changes. He states that: At the heart of reengineering is the notion of discontinuous thinking. We cannot achieve breakthroughs in performance by cutting fat or automating processes. Rather, we must challenge old assumptions and shed old rules that made the business underperform. The process as it exists now was developed by trial and error and carried forward during business growth. It is out dated for the size and objectives of the business. Low productivity is evident by the weekly measurements (Appendix one) and analysis of the process can lead to benefit for the organisations objectives. Task Statistics The tasks within the process vary according to state of the asset when it arrives at the yard as an input to the process and they type of asset it is. Table 3.1 Depicts average task time.

Average TASK TIME (Minutes) ASSET Run Up Service Light Tower 30 60 Small Gen. 30 60 Medium Gen. 45 90 Large Gen. 60 120
Table3.1 Average task time in minutes by asset type

Repair 120 120 240 360

By this table it can be seen that the type of task and asset will impact on the flow rate of the process and is a major variability in the activity within the process. It will impact the speed design objective of the process. 7

Strategic Operation Issues The very next step in the process investigates are required parts available. A negative in this step directly affects the dependability design objective of the process. The possibility of either of these design objectives impacting the flow rate will also then result in possible process waste through in-process delays and impact the cost design objective of the process. Table 3.2 Depict the average task demand per day
Average TASK Demand (per day) ASSET Light Tower Small Gen. Medium Gen. Large Gen. Run Up 25 2 5 0.5 Service 10 1 2 0.2 Repair 2 1 2 0.1

Table 3.2 Average Task Demand per day

Table 3.3 Depict the average process demand per day
Average Process Demand (per day - Minutes ) ASSET Light Tower Small Gen. Medium Gen. Large Gen. Total = 2805 Run Up 750 60 225 30 1065 Service 600 60 180 24 864 Repair 240 120 480 36 876

Table 3.3 Average Process Demand per Day

Utilising the tables above we can calculate that for the process to meet demand we require Total Process time per day = 2805 minutes Resource = 7 x 420 minutes (average working day per man) = 2940 minutes The required productivity to meet process requirements would need to be 8

Strategic Operation Issues Process time per day/ Available time = 2805/2940 = 95.4% Current measured productivity of the process (appendix one) is averaging 56 – 65 per cent. This is a reason that the business objective of ‘Red to Green’ asset ratio is falling behind resulting in cost to the company in inventory not available for hire therefore decreased asset utilisation. This also results in increased overtime to meet demand raising repair and maintenance cost (R&M) all of which affect the profitability before tax of the operation (PBT). These are the key objectives of the organisation. Opportunity for Change Climent, Mula and Hernandez (2009) state ‘The process to which reengineering will be applied must be identified. Then the process must be modelled and the measurements taken to establish and develop the corresponding diagnoses. Finally the system must be improved by considering previous results’. In this case the process is a core process of the organisation and is shown to be demanding a rate of productivity that it is not able to achieve. It will help to model the process in terms task precedence to determine capacity configuration and the existence of any bottle neck and its impact. What we seek is a change to process that will help it to better meet the company objectives. Process Capacity We know from the Task statistics that the process as it stands demands a 95.4% productivity in order to keep pace with requirements. This requires that each man (resource) is participating in successful cycle completion for 94.5% of the available 420 minutes. It requires 396.9 productive minutes per man. We can also calculate over 2805 minutes (table3.3) divided by an average task requirement per day of 51(table3.2) that an average cycle time is 55 minutes. With 51 jobs required and 7 men = each man must complete 5.6 jobs per day

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Strategic Operation Issues These calculations are a result of averages and give us an indication of the task requirement so we must look to the process to determine what bottlenecks exist and where they affect the timing required. Process Task Configuration By taking the process described in figure 2.1 and mapping task precedence against time we get clearer picture of opportunity. Figure 2.2 maps the process in a precedence diagram and clearly shows where the process is bottle necked. That bottle neck impacts on the process flow taking valuable time and impacts directly on the speed of the process flow.

Figure 2.2 Precedence Diagram showing relationship between activities for Light & Power Rental Workshop
Proces Task Details Light & Power Workshop
Activity Code Activity Name Equipment Offhired return to yard refuelled moved to stock receive order Tech. assigned Tech Evalutes Machine Status Determine Run Up Determine Service Determine Repair Check source parts Source Repair parts complete job reject to go row and select new job Immediate Predecessor Activity Time

a b c d e f g h i j k l m n

a b c d e f g g g i j h,I,j, I,j

0 0 10 5 0 5 5 5 10 15 15 15 30-240 10

Table 4.1 process Task Details for Light & Power Rental Workshop It can be seen that the task activity of codes g,h,i,j,k and l measure time requirements of between 10 and 25 minutes which it time that impacts on the cycle. 10

Strategic Operation Issues The opportunity that is evident is to change the process so that this valuable time is not lost in the process which requires the technician to identify the machine status and source or check part availability. If as calculations show each man is required to process an average 5.6 jobs per day then on average the lost time by following this process averages between 56 and 140 minutes. The process has been modelled in a way that demonstrates what is impacting on the speed, cost and dependability which directly impacts the strategic performance objectives of the organisation. Considering these result we can now work to improve the system. Innovation Hammer M. (2004) in examining operational innovation states ‘ Operational innovation means coming up with entirely new ways of filling orders, developing products, providing customer service or doing any other activity that an enterprise performs.’ In this case of Light and Power workshop operation the gains required call for a complete new way of doing the workshop activity. Billaut J. and Roubellat F. (1996) maintain that improving the efficiency of management procedures is certainly one of the key factors in increasing productivity. As part of their theory they advocate ‘assign each operation to one of the possible resources’. The theory also considers modifying the process by removing an operation located on the critical path of the process that will ‘reduce the length of the critical path’. This approach to considering the process issue can be adapted to the problem and change the way the organisation currently operates and provide a different activity path for the process that will align with organisational objectives. By reviewing the modelling of the present process and looking for ways to shorten the critical path to job completion by removing the bottle neck we can target shorter process time, that is increased throughput rate and faster flow time can gain the greater achievement of objectives. Further by adopting the concept of assigning each operation to one of the possible resources in an altered process, rather than the current random allocation of operations we can improve process balancing which will reduce un-productive time and increase productivity (Slack et al. 2102 p.155). 11

Strategic Operation Issues Redesign the Process Considering precedence diagram view of the process (figure 2.2) and required productivity impact of task g,h,i,j,k and l to shorten the critical path for job completion the process needs to change. The micro process parameters for technicians in workshop need be narrowed (figure 2.3) to simplify the process boundaries and remove the time factor involved in the investigation and subsequent parts steps of the process the tasks removed must be performed elsewhere in the organisation.

Figure 2.3 Redesigned Micro process for Workshop Technician Light & Power The impact of the time, cost and productivity of those tasks must then be factored into other roles within the organisation. The workshop process is the core process in the business operations output and has the most critical effect on the organisations strategic objectives of PBT, R&M cost and Red to Green performance. Increased Management of Procedure Billaut J. & Roubellat F. (1996) approach increases the management of procedure and seeks to assign each operation to possible resource. Management of procedure can be implemented by rearranging the task precedence and changing procedure to identify the machine status and parts availability and provide that as an

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Strategic Operation Issues input to the technician’s micro process. Further by increasing management of procedure the capacity of the resource can be ascertained and the task allocated to maximum flow rate. This allows for not only increased speed of process also increased flexibility and dependability by control of variable resource. ‘In most practical situations one has to handle a dynamic environment in which unforseen events and disturbances may (and will) occur.’ (Billaut J. & Roubellat F. 1996) Increased management is achieved by pre identifying machine status and therefore task time. Increased management also aids capacity and works to flexibility by assigning each operation to one of the possible resources. Understanding the average task time (table3.1) and resource availability (Man hours) work issue can be managed to best possible capacity. Recommendation Examining the possible benefits of redesigning the current process it is recommended that process redesign be modelled with a view to confirming the viability and benefits and if suitable implement process change. The recommendation to narrow the workshop technician’s workflow providing a process whereby input is an asset task with pre- determined status and parts availability confirmed allowing task completion in average task time means that valuable technician resource is utilised only on process task and productivity will increase. In real terms the increased productivity wold translate to increased Green line assets which ensures assets are available for hire. Reduces overtime and maximises resource utilisation all of which impact Repair & Maintenance cost and available stock has the opportunity to increase revenue. Decreased R&M and with or without increased revenue will increase PBT. The potential then is to better meet the organisations key strategic objectives by making the process change. Quality is managed systematically (i.e. through adherence to audited Silver Service process) and is already factored into the average task time. Some modelling on cost and capacity will need to be done to ensure the tasks removed from the process are able to be accommodated in the new process for those tasks which will be 13

Strategic Operation Issues taken over by the leading hand and administrative resource. It is likely however that this process can resourced without cost increase. Implementing change to process design can improve the organisations achievement against set strategic performance objectives.

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Example of the weekly task completed measurements used to determine current productivity at Light & Power.

Light & Power - Work Completion _ Productivity - Week Ending 06/12/13 2-Dec 3-Dec 4-Dec Monday Tuesday Wednesday Assets Other Assets Other Assets Other 5-Dec Thursday Assets Other 3 0 5 2 2 0 8 0 10 28 0 0 ARL 23 31 2.5 5.3 14.5 4.5 18 24.5 5.75 168 192.3 129.05 HRS Paid leave Unacctd 38 38 38 38 38 30 38 38 38 36.5 31 35.8 37.8 39.5 27.25 37 36.5 40 0 321.35 349 8 19.65 PL 0 41.25 0 Sdown 0 0 25 30 0 0 5 0 6 7 4 0 7.5 0 7 0 36.5 0 2 7.5 1 1 4 0 0 7.5 1 0 0 24 Person 1 S Hanna 2 R Jones 3 S Reedy 4 J Cooke 5 T Tunnicliffe 6 R Waller 7 E Jones 8 A Laage 9 S Franklyn 0 0 4 5 1 5 0 0 8 23 0 0 Asset S Hanna R Jones S Reedy J Cooke T Tunnicliffe R Waller E Jones A Laage S Franklyn 9 0 31 20 10 24 23 10 41 13.5 0 33.3 32.5 25 22.75 19 12 34.25 Hrs Other Time On Hrs 0 30.8 0 0 0 37.25 37 0 0 0 48.75 0 0 0 20.8 0 0 7.3 5.25 6 5 0 0 7.25 8 8 0.5 2 2 1 7.5 7.5 0.75 0 0 4 5 5 5 7 2 9 0 0 7.5 7.25 8 7.5 6.5 4.5 7.5 8 8 0 0.3 0 0 1 3 0.5 4 0 3 1 2 6 0 5 7 6.5 0 6.5 6.5 7 4.25 0 3 7.5 1 7.5 1 1 1 2.5 7.5 3.5 0 Assets Asset time Other

6-Dec Friday Assets Other 2 15 7 0 8 8 3 9 52 0 0 2 6 6.5 0 6 5 4.5 7.5 0 37.5 0

45

40
35

7-Dec Saturday Assets Other
30

4 25
20

0 1 7.5 1 2 3 0 0 0 18.5

15
10 5

0

0 0 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 0 0

Asset

Hrs

Other

Time On

170 Assets 194.8 Asset Time 125.55 Other Time

Unaccounted 6%

Leave 2%

% WE 061213
Av Asset 8 Asset time Other Time Unaccounted Leave 8 349 0 8 27.65 1.144643 % WE 061213 56% 36% 6% 2% 100%

Strategic Operation Issues

Other Time 36%

Asset time 56%

Appendix 1

Capacity

305

Productivity

56%

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Strategic Operation Issues

Reference List Billaut J. and Roubellat F. A new method for workshop real time scheduling INT. J. PROD. RES., 1996, VOL. 34 NO. 6. 1555-1579 Climent C., Mula J. and Hernandez J. 2009 Improving the business processes of a bank Business Process Management Journal Vol. 15 No. 2 pp. 201 - 224 Hammer M. 2004 Deep Change How operational Innovation Can Transform Your Company Harvard Business Review April pp. 84 – 93 Hammer M. 1990 Reengineering Work: Don’t Automate, Obliterate. Harvard business Review July-August pp.104 -112 Slack N., Brandon-Jones A., Johnston R. and Betts A. 2012 Operations and process management Principles and practice for strategic impact 3rd Ed. Pearson

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