The Context of Operations Management of Services - Essay Example

? Lean operations Operations Management (N1078) David Twigg 13 March Introduction Operation management has experienced a transition from mass production to practical and holistic operations (Alptekinoglu & Corbett, 2008; Chinnaiah, & Kamarthi, 2002). Lean operations have supported this transition. Lean operations, however, have been more widely applied, tested, and studied in the manufacturing industry, and only recently has practitioners and the academe have implemented and reviewed it for the service sector (Coronado, Lyons, Kehoe, & Coleman, 2004; Dean, Xue, & Tu, 2009). Some scholars argued that the differences between the service and manufacturing (product) firms may interfere with the effectiveness of lean operations for the service sector (Atkinson, 2010; Lee et al., 2008). Services are intangible and can hardly be evaluated after “production,” so evaluation of efficiency and effectiveness can render complications. Other scholars stressed that lean operations are viable in the service firms, but important “actors,” such as managers, champions, enthusiast converters and implementers, must have fully prepared a change management plan (Esain, Williams, & Massey, 2008; Hines, Martins, & Beale, 2008). This essay explores how lean operations can be applied to the service industry, particularly to the United Kingdom’s National Health Service (NHS). The NHS has applied Six Sigma and lean operations concepts to develop process and quality improvements. This paper begins with an overview of operation management, and then it discusses the theory of lean operations and lean operations at the NHS. This paper also identifies the advantages and disadvantages of lean services. Operation Management Operations management generally refers to managing processes that produce products or render services (Greasley, 2008, p.3). During the twentieth century, developments in the theory of operations management progressed. The “scientific management” theory of F.W. Fayol in (1911) and its later applications to Henry Ford’s mass production system broke work into simple and standard tasks (Seddonand, & O'Donovan, 2010, p.34). Workers had “narrowly-defined” tasks that sometimes only took thirty seconds, but were done a thousand times each day (Seddonand, & O'Donovan, 2010, p.34). Factory management slowly evolved into operations management on the supposition that manufacturing ideas could also be implemented for service organizations (Seddonand, & O'Donovan, 2010, p.34). Operation management has increasingly adopted quality management philosophies, such as Just-in-time (JIT) or lean operations and Six Sigma. These management philosophies or strategies have different objectives, but they generally agree about continued incremental quality improvements that will streamline operations and make production of goods and services more effective and efficient (Coronad et al., 2004; Dean, et al., 2009). They also have the same perspective on being part of the broader strategic management objectives of the company, and the lack of this integration has led to many lean operations efforts (Seddonand, & O'Donovan, 2010, p.34). Theory of Lean Operations Lean operations started from the theory of “lean manufacturing” that was popularized by Toyota’s Production System (TPS). In the 1950s, Toyota created a set of techniques that concentrated on the supply chain side of production (Lee et al., 2008, p.973). Founder of Toyota and a renowned inventor Sakichi Toyoda started the development of the lean manufacturing concept, where the management focused on constantly improving work flow to reduce costs (Karanjkar, 2008, p.10.1). With his son Kiichiro Toyoda, they perfected the operations management concept of lean manufacturing (Karanjkar, 2008, p.10.1). Nevertheless, although lean operations is closely connected with the Japanese, in reality, some elements of its framework can be linked to Henry Ford’s production system, who also designed his production system, so that he could make customized products by improving work flow and decreasing waste (Hobbs, 2004, p.14). Henry Ford created a mass production system that was efficient enough to bring costs down, so that he could achieve his vision of his own workers being able to afford the cars that they were making (Hobbs, 2004, p.14). Soon, lean operations turned into a supply chain organisational design that could also have practical applications for service firms, particularly in streamlining work activities to reduce production costs and improve quality in the work system itself and the products (Seddonand, & O'Donovan, 2010, p.34). The theory of lean operations is based on five principles: 1. Identify the specific value that customers want (Lee et al., 2008, p.973). 2. Recognize the value stream for each product by specifying the value and reducing waste for each value stream (Lee et al., 2008, p.973). 3. Ensure that the product flow works in a constant stream (Lee et al., 2008, p.973). 4. Integrate pull between all steps where there is impracticable continuous flow (Lee et al., 2008, p.973). 5. Monitor the operations to the level of perfection so that the number of steps and the quantity of time and information required by the customers are met all the time (Lee et al., 2008, p.973). These five principles have been applied variedly by different service firms. Several authors contended that lean operations and Six Sigma can be combined to make a more holistic Lean Operations Theory (Guarraia et al., 2009; Hines, et al., 2008). Lean and Six Sigma have components that can complement each other to achieve “synergy” and are more and more being incorporated in practice (Guarraia et al., 2009; Hines, et al., 2008), although there is lack of general agreement among scholars on how it should be done (Proudlove, Moxham, & Boaden, 2008, p.28). Together, these two approaches can reduce the costs of complex operations, even for service firms (Proudlove et al., 2008, p.28). The differences between Lean and Six Sigma in practice are not as clear as the academic literature suggested. For instance, Lean employs data-analytic techniques, while Six Sigma has swift development “workout” (Proudlove et al., 2008, p.28). The two take a process view and unite in their focus on variation, flow and the customer, but the main concentration of Six Sigma is variation, while Lean opts to focus more on flow (Proudlove et al., 2008, p.28). The two can enjoy a natural marriage and be termed as “Lean Six Sigma” with goals of improving both flow and variation (Proudlove et al., 2008, p.28). Lean Sigma has had its share of applications and positive reviews, but the absence of a concrete methodology is glaring (Proudlove et al., 2008, p.28). One tool that can be used is the DMAIC roadmap (Define, Measure, Analyze, Improve, Control), as it uses flow diagnosis and solution tools when suitable, in particular during the Measure and Improve stages (Proudlove et al., 2008, p.28). Nave (2002) stressed that Six Sigma and Lean have similar outcomes, when the secondary effects are evaluated, aside from the primary focus, so they may lead to the same consequences (Proudlove et al., 2008, p.28). The author makes a good point on how different tools and perspectives can be integrated to achieve holistic analyses and decision-making processes. Dan Jones (2006) confirmed that specific guidelines are lacking of Lean Six Sigma, but there are possible ways of mixing the two models (qtd. in Proudlove et al., 2008, p.28). These scholars indicate the richness of combining Lean operations and Six Sigma and to make the needed modifications to make it fit the unique conditions of service firms. Lean Operations and NHS NHS has adopted widespread measures to advance processes and quality, although central coordination of its projects has not been applied ( Proudlove et al., 2008, p.28). The efforts made to improve/re-engineer NHS processes may be one of the largest of its kind (NHS Modernisation Board, 2002 qtd. in Proudlove et al., 2008, p.28). The NHS Modernisation Agency (MA) and its descendant, the NHS Institute for Innovation and Improvement (NHSII) have enjoyed the influences of the improvement movements in the United States, as led by the Institute for Healthcare Improvement (IHI), and has particularly concentrated on improvement and redesign of processes and used operations management expertise ( Proudlove et al., 2008, p.28). The impetus to check the prospective of Six Sigma in the NHS was the acknowledgment by the MA that it was rare for improvement projects to have measurements, despite encouragement of Plan–Do–Study–Act (PDSA) as an improvement method ( Proudlove et al., 2008, p.28). The MA agreed that Six Sigma has a great potential to improve the measurement of project performances ( Proudlove et al., 2008, p.28). Six Sigma could offer a rigorous methodology that can analyze root causes and this can increase confidence in developing new solutions ( Proudlove et al., 2008, p.28). The MA created a Six Sigma Green Belt (GB) project to test the feasibility of Six Sigma in the NHS, and also to generate Six Sigma capability and to be aware of the issues concerned in converting the approach to healthcare sector ( Proudlove et al., 2008, pp.28-29). The decisions of what to change and how to change them, however, were approached differently by Lean and Six Sigma. Six Sigma is more of a top-down, pre-DMAIC (Define, Measure, Analyze, Improve, Control) stage (Proudlove et al., 2008, p.29). Lean operations are more participative and pursue a bottom-up approach than Six Sigma, since the former relies on intuition and insight (Proudlove et al., 2008, p.29). GB projects identified the issue of poor link to business strategy in the organizations where the projects were happening, even if they had national targets and priority areas (Proudlove et al., 2008, p.29). This is beyond the scope of the GB project, but it created costs of difficulties in buy-in from the hosts (Proudlove et al., 2008, p.29). The Green Belts also found it hard to define ‘customers’ and ‘processes,’ because organizations were not “structured around key processes” (Proudlove et al., 2008, p.29). The organization also had difficulties defining what to change to and how to do it. In the GB projects, management and leadership were complicated, both in the host organization and nationally (NHS is restructuring that time, which could partially affect lean implementations) (Proudlove et al., 2008, p.32). There is also the problem that Six Sigma projects were not included into any greater strategic approach to improvement, or had a “meso-structure in the host organizations” (Proudlove et al., 2008, p.32). A case study identified the need for a more “unified” management of process improvement approaches (counting also the combinations of Lean and Six Sigma) and “more strategic improvement support functions in organizations” (Proudlove et al., 2008, p.33). Without these unified approaches, any problems or issues analyzed by the GB projects would also be sidetracked by the upper management. It is important then for Six Sigma to also be part of strategic management tools and that the management fully acknowledges and uses its full potential. Advantages and Disadvantages of Lean Services in Service Industry The advantage of lean operations in this case is that through DMAIC, for instance, it promotes creative thinking inside the organization (Proudlove et al., 2008, p.29). This can be a crucial step in energizing how the management and employees think about their work. For instances, some services had been done for a long time that no one has questioned their assumptions and consequences. DMAIC can set a critical thinking tool for which people will realize that traditions are not always necessarily the best way of doing business at present. Another advantage of lean operations is that lean operation integrates principles for enhancing work flow and adding some tried-and-tested recommendations (Proudlove et al., 2008, p.30). These may employed at an early stage to build a visualization of the future arrangement of the value stream, which may assist the co-ordination of various improvements (Proudlove et al., 2008, p.30). Tried-and-tested solutions are optimal for change efforts that need solid “wins,” so that succeeding changes will also be followed up. Furthermore, the 5 principles of Lean strengthen specific improvement projects (Proudlove et al., 2008, p.30). Many of the tools that are used by Lean can be used to support other improvement measures or projects. This means that these various tools can be synchronized and greater potential cost reductions can be met. Lean also has people-centered advantages. The ‘people’ aspects of Lean are believed to be less than the original TPS, although it can influence morale and motivation (Proudlove et al., 2008, p.30). Scholars argued for the importance of human resource management to the success of lean operations (Alptekinoglu & Corbett, 2008; Chinnaiah, & Kamarthi, 2002). Lean should be seen as a long-term change project and empowerment is a crucial outcome and input (Alptekinoglu & Corbett, 2008; Chinnaiah, & Kamarthi, 2002). Lean can also be applied to engage people and make them active participants of the change effort. This can negate the views of Six Sigma that is top-bottom and disregards culture and people’s needs and concerns (Atkinson, 2010, p.36). The disadvantage of lean operations is that it may fail to look widely enough to determine a holistic macro-assessment of root problems (Proudlove et al., 2008, p.29). Lean can be too firm-centric and other environmental measures might be disregarded (Atkinson, 2010, p.36). For instance, the NHS also works in a political environment, as a producer of public goods and services. Lean operations should consider political factors and how they affect change management strategies (Atkinson, 2010, p.36). Six Sigma, however, can complement this weakness and introduce a macro perspective to issue analysis and recommendations (Proudlove et al., 2008, p.29). The foremost weakness of Six Sigma were poor emphasis on the soft/people/ cultural factors, which had been a grave concern for the MA and so this can lead to lack of buy-in in the organization (Proudlove et al., 2008, p.30). Management and employee engagement are both critical to implementing performance and management changes (Proudlove et al., 2008, p.30). Atkinson (2010) argued that lean operation is also a cultural issue. For him, it is a misconception to think that “lean has little to do with culture change” (p.36). Organizations are social systems that are naturally made of conflicting interests that impact what strategic goals are and how they are achieved (Atkinson, 2010, p.36). Cultural change is required, when there are changes in how the management thinks about its strategies and applies them, as well as changes in tools for performance engagement and management (Atkinson, 2010, p.36). Without cultural changes, lean efforts and Six Sigma would be perceived as one of the tools that were once applied by the organization, but never actually took flight, because of resistance to change and doubt in such efforts. Conclusion This case study shows that Lean Six Sigma is still in its infancy stage as a theory and practice. Lean operations, in particular, needs a more specific roadmap for service firms. The main advantages of lean operations are creative thinking, enhancements of work flow, and people empowerment, while the weaknesses are limited perspective and potential loose connection with larger organizational strategies. Six Sigma has its own weaknesses and strengths too. Its main weakness is poor focus on people, while its strength is its macro view and ability to improve variation in the work system. It is clear that Six Sigma and Lean operations can complement each other theoretically and practically, but there is still a need to enhance theory on this, particular in the context of operations management of services. References Atkinson, P. (2010). 'Lean' is a cultural issue. Management Services, 54 (2), 35-41. Alptekinoglu, A. & Corbett, C.J. (2008). Mass customization vs. mass production: variety and price competition. Manufacturing & Service Operations Management, 10 (2), 204-217. Chinnaiah, P.S.S. & Kamarthi, S.V. (2002). Chapter 24: Mass customization and manufacturing. 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