10 OM Decisions - Part 3

This is the 3rd post of a 10 part series providing a high level 30,000 ft overview of the 10 operations management (OM) decisions. If you need a refresher on the different levels of leadership you can catch up here quickly. So let’s zoom through the questions again before we circle back to Process and Capacity Design

1. Goods and Services 2. Quality Management 3. Process and Capacity Design 4. Location 5. Layout 6. HR and Job Design 7. Supply Chain Mgmt 8. Inventory 9. Scheduling 10. Maintenance As you establish your quality program around your goods or services, you then have decisions to make regarding process and capacity design. In my personal opinion I want tactical leaders to spend 40% of their time on these decisions. Here’s the thought process. Operationally, you can either reduce operating cost or improve capacity/capability. Pretty straightforward and logical right? Process and capacity design in layman’s terms is developing processes which has measurable results (capacity/capability) This is how the job is getting done and the maximum extent which it is accomplished. Strategic leaders rely on tactical leaders to continuously improve processes and capability to better position the company for growth. I have found that reacting to growth is much more painful than preparing for it. Most all business majors or those exposed to the life lesson understand Sun Tzu’s quote, “Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win”. It’s better to have a winning strategy than to go in and try to win. If you’ve waited until the battle to prepare you’ve already lost. Invest in creating capacity and capability early so you don’t fail later. There are a lot of tools to continuous improvements that are too lengthy for this article but it’s worth the research. When I decide on processes for capacity/capability I have a series of questions that I answer prior to conducting continuous improvement efforts. Is this output sustainable? Do not measure output right away. Capacity/capability should be measured with ‘rate of diminishing return’ in mind. Don’t jade yourself you’ll help no one. Does this process increase capacity or improve quality?

If not trim the fat...ask your self is it a necessary step

Does the value of your output exceed your cost of goods/services sold?

If not improve your capacity/capability until it does. It’s out of the scope of OM pros to determine pricing but you can have input for RFQs. A true OM professional knows that a price increase is the easy way out and process design/improvement is where you get to challenge yourself and showcase your skills. Hopefully this article stimulated your curiosity on process capacity/capability design. Remember the importance of spending ample time here and always come back to it (continuous improvement) when operations have stabilized and become more steady.

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