Foundation · Operations and risk
Making operations better, and planning for what can go wrong
How work actually gets done and what it costs: the slowest step that sets output, how much you get from your machines and people, lean thinking as economics, the cost of defects, when automation pays, risk in plain numbers, and planning for several possible futures. Then how to use all of it in operations and cost cases.
Key takeaways
- A process can never make more than its slowest step. So an hour lost at that step is an hour lost for the whole business, and an hour saved anywhere else is worth almost nothing.
- Three numbers tell you how well a business uses what it has: utilization (how much of the time a machine or person is busy), OEE (how much good output a machine makes against what it could make), and labour productivity (output per hour worked).
- Lean means doing only the work customers pay for and keeping that work flowing without waiting.
- A defect is cheapest to fix where it is made and most expensive when a customer finds it.
- Automation swaps a cost that moves with volume (people paid by the hour) for a cost that stays the same (a machine you have already paid for).
- Find the bottleneck when steps have several machines or people, and put a money value on fixing it
- Explain utilization, OEE and labour productivity in plain words, and why queues explode near full utilization
- Show the money in lean: shorter lead times, less cash in stock, more output from the same beds or machines
- Compare prevention, inspection and failure costs, and judge an automation case on payback, volume risk and people
- Rank risks by probability times impact, build a base, upside and downside case, and decide when you cannot know
Lessons
Capacity and bottlenecks: the slowest step sets output
When each step has several machines or people, work out each step's capacity, find the slowest one, value an hour there, and see where the limit moves next. A worked example from a dairy plant in India.
Productivity and utilization: how much you get from what you have
Utilization, OEE as lost minutes, labour productivity, and why a team that is busy all the time makes customers wait. Examples from a bakery in Egypt and a pharmacy in Singapore.
Lean basics as economics: waste, flow, and the hidden cost of inventory
What lean thinking removes, why stock sitting between steps costs real money, and how better flow frees cash in a factory in Vietnam and beds in a hospital in Abu Dhabi.
The cost of quality: defects, prevention and inspection
Why a defect costs more the later it is found, the four kinds of quality cost, and why preventing defects usually beats inspecting for them. A worked example from an appliance maker in the United States.
The business case for automation: payback, utilization risk, and people
How to judge a machine or software that replaces manual work: what it saves, how volume changes the answer, and how to handle the effect on staff. A worked example from a warehouse in the Netherlands.
Risk in plain numbers: probability times impact, the risk register, expected value
How to size a risk, list risks so someone acts on them, and decide which ones are worth paying to reduce. A worked example from a food factory in Malaysia.
Scenario planning: base, upside, downside, and deciding when you cannot know
Build three versions of the future from the few drivers that matter, compare options across all of them, and choose one that holds up, with a trigger for when to change course. A worked example from a cold store in Saudi Arabia.
Using this in a case: operations and cost cases
What to ask, what to calculate and what to say when a case is about capacity, cost or risk, with a full worked case from a parcel hub in Dubai.
Worked cases in this module
- A dairy plant in Gujarat that cannot keep up in summer
- Where a bread line in Cairo loses its minutes
- A clinic pharmacy in Singapore with one pharmacist
- A parts factory in Vietnam moves from big batches to flow
- A hospital in Abu Dhabi where patients wait to go home
- An appliance maker in Ohio: more inspectors, or fewer defects?
- Should a warehouse near Rotterdam automate its picking?
- Which risks should a food factory in Johor pay to reduce?
- Build big now, or build in phases?
- A parcel hub in Dubai that cannot cope with peak season
Look it up
Key terms