Operations Management, Compelte Slides,Supply chain Management

7/23/2019 Operations Management, Compelte Slides,Supply chain Management

1/917

Operations Management

Operations Management

ChapterChapter 11--1717

Roberta Russell & Bernard W. Taylor, IIIRoberta Russell & Bernard W. Taylor, III


2/917

Organization of This Text:Organization of This Text:Part IPart I Operations ManagementOperations Management

Intro. to Operations andIntro. to Operations andSupply Chain Management:Supply Chain Management: ChapterChapter 1 (Slide 5)1 (Slide 5)

Quality Management:Quality Management: ChapterChapter 22 (Slide(Slide 67)67)

11--22

tat st ca ua ty ontro :tat st ca ua ty ontro : apterapter 33 ee 2020 Product Design:Product Design: ChapterChapter 44 (Slide(Slide 186)186)

Service Design:Service Design: ChapterChapter 55 (Slide(Slide 231)231)

Processes and Technology:Processes and Technology: ChapterChapter 66 (Slide(Slide 276)276)

Facilities:Facilities: ChapterChapter 77 (Slide(Slide 321)321)

Human Resources:Human Resources: ChapterChapter 88 (Slide(Slide 402)402)

Project Management:Project Management: ChapterChapter 99 (Slide(Slide 450)450)


3/917

Supply ChainSupply ChainStrategy and Design:Strategy and Design: ChapterChapter 10 (Slide 507)10 (Slide 507)

Global Supply ChainGlobal Supply Chain

Organization of This Text:Organization of This Text:Part IIPart II Supply Chain ManagementSupply Chain Management

11--33

rocurement an str ut on:rocurement an str ut on: apterapter ee 33 Forecasting:Forecasting: ChapterChapter 1212 (Slide(Slide 575)575)

Inventory Management:Inventory Management: ChapterChapter 1313 (Slide(Slide 641)641)

Sales andSales and

Operations Planning:Operations Planning: ChapterChapter 1414 (Slide(Slide 703)703)

Resource Planning:Resource Planning: ChapterChapter 1515 (Slide(Slide 767)767)

Lean Systems:Lean Systems: ChapterChapter 1616 (Slide(Slide 827)827)

Scheduling:Scheduling: ChapterChapter 1717 (Slide(Slide 878)878)


4/917


5/917

Introduction to Operations andIntroduction to Operations andSu l Chain Mana ementSu l Chain Mana ement

Chapter 1Chapter 1

Operations ManagementOperations Management



6/917

Lecture OutlineLecture Outline

What Operations and Supply ChainWhat Operations and Supply ChainManagers DoManagers Do

11--66

Evolution of Operations and Supply ChainEvolution of Operations and Supply ChainManagementManagement

Globalization and CompetitivenessGlobalization and Competitiveness

OperationsOperations Strategy and Organization of the TextStrategy and Organization of the Text Learning Objectives for This CourseLearning Objectives for This Course


7/917

What Operations andWhat Operations andSupply Chain Managers DoSupply Chain Managers Do

What is Operations Management?What is Operations Management? design, operation, and improvement of productivedesign, operation, and improvement of productive

systemssystems

11--77

a function or system that transforms inputs into outputs ofa function or system that transforms inputs into outputs of

greater valuegreater value

What is a Transformation Process?What is a Transformation Process? a series of activities along aa series of activities along a value chainvalue chainextending fromextending from

supplier to customersupplier to customer

activities that do not add value are superfluous andactivities that do not add value are superfluous andshould be eliminatedshould be eliminated


8/917

Physical:Physical:as in manufacturing operationsas in manufacturing operations

Locational:Locational:as in transportation oras in transportation or

Transformation ProcessTransformation Process

11--88

ware ouse opera onsware ouse opera ons Exchange:Exchange:as in retail operationsas in retail operations

Physiological:Physiological:as in health careas in health care

Psychological:Psychological:as in entertainmentas in entertainment Informational:Informational:as in communicationas in communication


9/917

INPUT

Operations as aOperations as aTransformation ProcessTransformation Process

11--99

MachinesLaborManagementCapital

TRANSFORMATIONPROCESS

OUTPUTGoodsServices

Feedback & RequirementsFeedback & Requirements


10/917

Operations FunctionOperations Function

OperationsOperations

MarketingMarketing

11--1010

nance annance anAccountingAccounting

HumanHuman

ResourcesResources OutsideOutside

SuppliersSuppliers


11/917

How is Operations Relevant to myHow is Operations Relevant to myMajor?Major?

AccountingAccounting As an auditor you mustAs an auditor you must

understand the fundamentals ofunderstand the fundamentals ofoperations management.operations management.

11--1111

InformationInformationTechnologyTechnology

ManagementManagement

IT is a tool, and theres no betterIT is a tool, and theres no betterplace to apply it than inplace to apply it than inoperations.operations.

We use so many things youWe use so many things youlearn in an operations classlearn in an operations classscheduling, lean production,scheduling, lean production,theory of constraints, and tons oftheory of constraints, and tons of

quality tools.quality tools.


12/917

How is Operations Relevant to myHow is Operations Relevant to myMajor? (cont.)Major? (cont.)

EconomicsEconomics Its all about processes. I liveIts all about processes. I liveby flowcharts and Paretoby flowcharts and Paretoanalysis.analysis.

11--1212

ar e ngar e ng

FinanceFinance

w y uw y umarketing a product if youremarketing a product if youreunsure of its quality or deliveryunsure of its quality or deliverystatus?status?

Most of our capital budgetingMost of our capital budgetingrequests are from operations,requests are from operations,and most of our cost savings,and most of our cost savings,too.too.


13/917

Evolution of Operations andEvolution of Operations andSupply Chain ManagementSupply Chain Management

Craft productionCraft production process of handcrafting products orprocess of handcrafting products or

services for individual customersservices for individual customers

11--1313

dividing a job into a series of small tasksdividing a job into a series of small taskseach performed by a different workereach performed by a different worker

Interchangeable partsInterchangeable parts standardization of parts initially asstandardization of parts initially asreplacement parts; enabled massreplacement parts; enabled mass

productionproduction


14/917

Scientific managementScientific management

systematic analysis of work methodssystematic analysis of work methods

Evolution of Operations andEvolution of Operations andSupply Chain Management (cont.)Supply Chain Management (cont.)

11--1414

Mass productionMass production highhigh--volume production of a standardizedvolume production of a standardized

product for a mass marketproduct for a mass market

Lean productionLean production adaptation of mass production that prizesadaptation of mass production that prizes

quality and flexibilityquality and flexibility


15/917

Historical Events inHistorical Events inOperations ManagementOperations Management

Era Events/Concepts Dates Originator

IndustrialSteam engine 1769 James Watt

Division of labor 1776 Adam Smith

11--1515

Interchangeable parts 1790 Eli Whitney

Scientific

Management

Principles of scientific

management1911 Frederick W. Taylor

Time and motion studies 1911Frank and LillianGilbreth

Activity scheduling chart 1912 Henry Gantt

Moving assembly line 1913 Henry Ford


16/917

Historical Events inHistorical Events inOperations ManagementOperations Management (cont.)(cont.)

Era Events/Concepts Dates Originator

Human

Hawthorne studies 1930 Elton Mayo

1940s Abraham Maslow

11--1616

1960s Douglas McGregor

OperationsResearch

Linear programming 1947 George Dantzig

Digital computer 1951 Remington RandSimulation, waiting

line theory, decision

theory, PERT/CPM

1950s Operations researchgroups

MRP, EDI, EFT, CIM1960s,1970s

Joseph Orlicky, IBM

and others


17/917


Era Events/Concepts Dates OriginatorJIT (just-in-time) 1970s Taiichi Ohno (Toyota)TQM (total quality W. Edwards Deming,

11--1717

Quality

Revolution

management) Joseph JuranStrategy and

operations1980s

Wickham Skinner,

Robert Hayes

Business process

reengineering

1990sMichael Hammer,

James ChampySix Sigma 1990s GE, Motorola


18/917


Era Events/Concepts Dates OriginatorInternetRevolution

Internet, WWW, ERP,supply chain management

1990s ARPANET, Tim

Berners-Lee SAP,

11--1818

ec no og es,

ORACLEE-commerce 2000s Amazon, Yahoo,

eBay, Google, andothers

Globalization WTO, European Union,and other tradeagreements, global supplychains, outsourcing, BPO,

Services Science

1990s

2000s

Numerous countries

and companies


19/917

Evolution of Operations andEvolution of Operations andSupply Chain Management (cont.)Supply Chain Management (cont.)

Supply chain managementSupply chain management management of the flow of information, products, and services acrossmanagement of the flow of information, products, and services across

a network of customers, enterprises, and supply chain partnersa network of customers, enterprises, and supply chain partners

11--1919


20/917

Globalization andGlobalization andCompetitivenessCompetitiveness

Why go global?Why go global? favorable costfavorable cost

access to international marketsaccess to international markets

11--2020

response to changes in demandresponse to changes in demand reliable sources of supplyreliable sources of supply

latest trends and technologieslatest trends and technologies

Increased globalizationIncreased globalization results from the Internet and falling traderesults from the Internet and falling trade

barriersbarriers


21/917

Globalization andGlobalization andCompetitiveness (cont.)Competitiveness (cont.)

11--2121

Hourly Compensation Costs for Production WorkersHourly Compensation Costs for Production Workers

Source:Source:U.S. Bureau of Labor Statistics, 2005.U.S. Bureau of Labor Statistics, 2005.


22/917


11--2222

World Population DistributionWorld Population Distribution

Source:Source:U.S. Census Bureau, 2006.U.S. Census Bureau, 2006.


23/917


11--2323

Trade in Goods as % of GDPTrade in Goods as % of GDP

(sum of merchandise exports and imports divided by GDP, valued in U.S. dollars)(sum of merchandise exports and imports divided by GDP, valued in U.S. dollars)


24/917

Productivity andProductivity andCompetitivenessCompetitiveness

CompetitivenessCompetitiveness degree to which a nation can produce goods anddegree to which a nation can produce goods and

services that meet the test of internationalservices that meet the test of internationalmarketsmarkets

11--2424

ro uct v tyro uct v ty ratio of output to inputratio of output to input OutputOutput

sales made, products produced, customerssales made, products produced, customersserved, meals delivered, or calls answeredserved, meals delivered, or calls answered

InputInput labor hours, investment in equipment, materiallabor hours, investment in equipment, material

usage, or square footageusage, or square footage


25/917

Productivity andProductivity andCompetitiveness (cont.)Competitiveness (cont.)

11--2525

Measures of Productivity


26/917


11--2626

Average Annual Growth Rates in Productivity, 1995Average Annual Growth Rates in Productivity, 1995--2005.2005.Source:Source:Bureau of Labor Statistics. A Chartbook ofBureau of Labor Statistics. A Chartbook of

International Labor Comparisons. January 2007, p. 28.International Labor Comparisons. January 2007, p. 28.


27/917


11--2727

Average Annual Growth Rates in Output and Input, 1995Average Annual Growth Rates in Output and Input, 1995--20052005

Source:Source:Bureau of Labor Statistics. A Chartbook of InternationalBureau of Labor Statistics. A Chartbook of International

Labor Comparisons, January 2007, p. 26.Labor Comparisons, January 2007, p. 26.

Dramatic Increase inOutput w/ Decrease in

Labor Hours


28/917

RetrenchingRetrenching productivity is increasing, but both output and inputproductivity is increasing, but both output and input

decrease with in ut decreasin at a faster ratedecrease with in ut decreasin at a faster rate


11--2828

Assumption that more input would causeAssumption that more input would causeoutput to increase at the same rateoutput to increase at the same rate

certain limits to the amount of output may not becertain limits to the amount of output may not be

consideredconsidered output producedoutput producedis emphasized, notis emphasized, not output soldoutput sold;;

increased inventoriesincreased inventories


29/917

StrategyStrategy Provides direction for achieving a missionProvides direction for achieving a mission

Five Steps for Strategy FormulationFive Steps for Strategy Formulation

Strategy and OperationsStrategy and Operations

11--2929

Defining a primary taskDefining a primary task What is the firm in the business of doing?What is the firm in the business of doing?

Assessing core competenciesAssessing core competencies What does the firm do better than anyone else?What does the firm do better than anyone else?

Determining order winners and order qualifiersDetermining order winners and order qualifiers

What qualifies an item to be considered for purchase?What qualifies an item to be considered for purchase? What wins the order?What wins the order?

Positioning the firmPositioning the firm How will the firm compete?How will the firm compete?

Deploying the strategyDeploying the strategy


30/917

Strategic PlanningStrategic Planning

Missionand Vision

11--3030

CorporateStrategy

OperationsStrategy

MarketingStrategy

FinancialStrategy


31/917

Order WinnersOrder Winnersand Order Qualifiersand Order Qualifiers

11--3131

Source:Source:Adapted from Nigel Slack, Stuart Chambers, Robert Johnston, and AlanAdapted from Nigel Slack, Stuart Chambers, Robert Johnston, and AlanBetts,Betts, Operations and Process ManagementOperations and Process Management, Prentice Hall, 2006, p. 47, Prentice Hall, 2006, p. 47


32/917

Positioning the FirmPositioning the Firm

CostCost

SpeedSpeed

11--3232

ua yua y

FlexibilityFlexibility


33/917

Positioning the Firm:Positioning the Firm:CostCost

Waste eliminationWaste elimination relentlessly pursuing the removal of all wasterelentlessly pursuing the removal of all waste

11--3333

looking at the entire cost structure forlooking at the entire cost structure for

reduction potentialreduction potential

Lean productionLean production providing low costs through disciplinedproviding low costs through disciplined

operationsoperations


34/917

Positioning the Firm:Positioning the Firm:SpeedSpeed

fast moves, fast adaptations, tight linkagesfast moves, fast adaptations, tight linkages InternetInternet

conditioned customers to expect immediate responsesconditioned customers to expect immediate responses

11--3434

always competed on speed (McDonalds, LensCrafters, andalways competed on speed (McDonalds, LensCrafters, and

Federal Express)Federal Express)

ManufacturersManufacturers timetime--based competition: buildbased competition: build--toto--order production andorder production and

efficient supply chainsefficient supply chains

Fashion industryFashion industry twotwo--week designweek design--toto--rack lead time of Spanish retailer, Zararack lead time of Spanish retailer, Zara


35/917

Positioning the Firm:Positioning the Firm:QualityQuality

Minimizing defect rates or conforming toMinimizing defect rates or conforming todesign specifications; please the customerdesign specifications; please the customer

RitzRitz--CarltonCarlton -- one customer at a timeone customer at a time

11--3535

Service system is designed to move heavenService system is designed to move heavenand earth to satisfy customerand earth to satisfy customer

Every employee is empowered to satisfy aEvery employee is empowered to satisfy aguests wishguests wish

Teams at all levels set objectives and deviseTeams at all levels set objectives and devisequality action plansquality action plans

Each hotel has a quality leaderEach hotel has a quality leader


36/917

Positioning the Firm:Positioning the Firm:FlexibilityFlexibility

ability to adjust to changes in product mix,ability to adjust to changes in product mix,production volume, or designproduction volume, or design National Bicycle Industrial CompanyNational Bicycle Industrial Company

11--3636

offers 11,231,862 variationsoffers 11,231,862 variations delivers within two weeks at costs only 10%delivers within two weeks at costs only 10%

above standard modelsabove standard models mass customizationmass customization: the mass production of: the mass production of

customized partscustomized parts


37/917

Policy DeploymentPolicy Deployment

Policy deploymentPolicy deployment translates corporate strategy into measurabletranslates corporate strategy into measurable

ob ectivesob ectives

11--3737

HoshinsHoshins action plans generated from the policyaction plans generated from the policy

deployment processdeployment process


38/917

Policy DeploymentPolicy Deployment

11--3838Derivation of an Action Plan Using Policy DeploymentDerivation of an Action Plan Using Policy Deployment


39/917

Balanced ScorecardBalanced Scorecard

Balanced scorecardBalanced scorecard measuring more than financial performancemeasuring more than financial performance

financesfinances

11--3939

customerscustomers processesprocesses

learning and growinglearning and growing

Key performance indicatorsKey performance indicators a set of measures that help managers evaluatea set of measures that help managers evaluate

performance in critical areasperformance in critical areas


40/917

Balanced ScorecardBalanced ScorecardBalancedBalanced Scorecard WorksheetScorecard Worksheet

11--4040


41/917

Balanced ScorecardBalanced Scorecard

11--4141

Radar ChartRadar Chart DashboardDashboard


42/917

Operations StrategyOperations Strategy

ProductsProducts

ServicesServices ProcessProcess

andand

TechnologyTechnology

11--4242

CapacityCapacity

HumanHuman

ResourcesResources QualityQuality

FacilitiesFacilities SourcingSourcing OperatingOperating

SystemsSystems


43/917

Chapter 1 SupplementChapter 1 Supplement

Decision AnalysisDecision Analysis

OperationsOperations ManagementManagementOperationsOperations ManagementManagement



44/917



Decision Making without ProbabilitiesDecision Making without Probabilities

Supplement 1Supplement 1--4444

Decision Analysis with ExcelDecision Analysis with Excel Decision Analysis with OM ToolsDecision Analysis with OM Tools

Decision Making with ProbabilitiesDecision Making with Probabilities

Expected Value of Perfect InformationExpected Value of Perfect Information Sequential Decision TreeSequential Decision Tree


45/917


Quantitative methodsQuantitative methods a set of tools for operations managera set of tools for operations manager


a set of quantitative decisiona set of quantitative decision--makingmakingtechniques for decision situations in whichtechniques for decision situations in whichuncertainty existsuncertainty exists

Example of an uncertain situationExample of an uncertain situation demand for a product may vary between 0 and 200demand for a product may vary between 0 and 200

units, depending on the state of marketunits, depending on the state of market


46/917

Decision MakingDecision MakingWithout ProbabilitiesWithout Probabilities

States of natureStates of nature Events that may occur in the futureEvents that may occur in the future

Examples of states of nature:Examples of states of nature:


high or low demand for a producthigh or low demand for a product

good or bad economic conditionsgood or bad economic conditions

Decision making under riskDecision making under risk probabilities can be assigned to the occurrence ofprobabilities can be assigned to the occurrence of

states of nature in the futurestates of nature in the future Decision making under uncertaintyDecision making under uncertainty

probabilities can NOT be assigned to theprobabilities can NOT be assigned to theoccurrence of states of nature in the futureoccurrence of states of nature in the future


47/917

Payoff TablePayoff Table

Payoff tablePayoff table method for organizing and illustrating payoffs from differentmethod for organizing and illustrating payoffs from different

decisions given various states of naturedecisions given various states of nature

PayoffPayoff


outcome of a decisionoutcome of a decision

States Of NatureStates Of Nature

DecisionDecision aa bb

11 Payoff 1aPayoff 1a Payoff 1bPayoff 1b22 Payoff 2aPayoff 2a Payoff 2bPayoff 2b


48/917

Decision Making Criteria UnderDecision Making Criteria UnderUncertaintyUncertainty

MaximaxMaximax choose decision with the maximum of thechoose decision with the maximum of the

maximum payoffsmaximum payoffs


MaximinMaximin choose decision with the maximum of thechoose decision with the maximum of the

minimum payoffsminimum payoffs

Minimax regretMinimax regret choose decision with the minimum of thechoose decision with the minimum of the

maximum regrets for each alternativemaximum regrets for each alternative


49/917

Decision Making Criteria UnderDecision Making Criteria UnderUncertainty (cont.)Uncertainty (cont.)

HurwiczHurwicz choose decision in which decision payoffs arechoose decision in which decision payoffs are

wei hted b coefficient of o timism l hwei hted b coefficient of o timism l h


coefficient of optimism is a measure of acoefficient of optimism is a measure of adecision makers optimism, fromdecision makers optimism, from 00(completely(completelypessimistic) topessimistic) to 11 (completely optimistic)(completely optimistic)

Equal likelihood (La Place)Equal likelihood (La Place) choose decision in which each state of nature ischoose decision in which each state of nature is

weighted equallyweighted equally


50/917

Southern TextileSouthern TextileCompanyCompany

STATES OF NATURESTATES OF NATURE


Good ForeignGood Foreign Poor Foreign Poor Foreign

DECISIONDECISION Competitive ConditionsCompetitive Conditions Competitive ConditionsCompetitive Conditions

ExpandExpand $ 800,000$ 800,000 $ 500,000$ 500,000

Maintain status quoMaintain status quo 1,300,0001,300,000 --150,000150,000

Sell nowSell now 320,000320,000 320,000320,000


51/917

Maximax SolutionMaximax Solution




Ex andEx and $ 800 000$ 800 000 $ 500 000$ 500 000



Sell nowSell now 320,000320,000 320,000320,000

Expand:Expand: $800,000$800,000

Status quo:Status quo: 1,300,0001,300,000 MaximumMaximumSell:Sell: 320,000320,000

Decision: Maintain status quoDecision: Maintain status quo


52/917

Maximin SolutionMaximin SolutionSTATES OF NATURESTATES OF NATURE



Ex andEx and $ 800 000$ 800 000 $ 500 000$ 500 000



Sell nowSell now 320,000320,000 320,000320,000

Expand:Expand: $500,000$500,000 MaximumMaximum

Status quo:Status quo: --150,000150,000

Sell:Sell: 320,000320,000

Decision: ExpandDecision: Expand


53/917

Minimax Regret SolutionMinimax Regret SolutionGood ForeignGood Foreign Poor ForeignPoor Foreign

Competitive ConditionsCompetitive Conditions Competitive ConditionsCompetitive Conditions

$1,300,000$1,300,000 -- 800,000 = 500,000800,000 = 500,000 $500,000$500,000 -- 500,000 = 0500,000 = 0


, ,, , -- , , =, , = ,, -- -- , = ,, = ,

1,300,0001,300,000 -- 320,000 = 980,000320,000 = 980,000 500,000500,000 -- 320,000= 180,000320,000= 180,000

Expand:Expand: $500,000$500,000 MinimumMinimum

Status quo:Status quo: 650,000650,000

Sell:Sell: 980,000980,000



54/917

Hurwicz CriteriaHurwicz CriteriaSTATES OF NATURESTATES OF NATURE



Ex andEx and $ 800 000$ 800 000 $ 500 000$ 500 000



Sell nowSell now 320,000320,000 320,000320,000

= 0.3= 0.3 11 -- = 0.7= 0.7

Expand:Expand:$800,000(0.3) + 500,000(0.7) = $590,000$800,000(0.3) + 500,000(0.7) = $590,000 MaximumMaximumStatus quo:Status quo:1,300,000(0.3)1,300,000(0.3) --150,000(0.7) = 285,000150,000(0.7) = 285,000

Sell:Sell:320,000(0.3) + 320,000(0.7) = 320,000320,000(0.3) + 320,000(0.7) = 320,000



55/917

Equal Likelihood CriteriaEqual Likelihood CriteriaSTATES OF NATURESTATES OF NATURE



Ex andEx and $ 800 000$ 800 000 $ 500 000$ 500 000



Sell nowSell now 320,000320,000 320,000320,000

Two states of nature each weighted 0.50Two states of nature each weighted 0.50

Expand:Expand:$800,000(0.5) + 500,000(0.5) = $650,000$800,000(0.5) + 500,000(0.5) = $650,000 MaximumMaximum

Status quo:Status quo:1,300,000(0.5)1,300,000(0.5) --150,000(0.5) = 575,000150,000(0.5) = 575,000

Sell:Sell:320,000(0.5) + 320,000(0.5) = 320,000320,000(0.5) + 320,000(0.5) = 320,000



56/917

Decision Analysis withDecision Analysis withExcelExcel



57/917

Decision Analysis withDecision Analysis withOM ToolsOM Tools



58/917

Decision Making withDecision Making withProbabilitiesProbabilities

Risk involves assigning probabilities toRisk involves assigning probabilities to


Expected valueExpected value a weighted average of decision outcomes ina weighted average of decision outcomes in

which each future state of nature iswhich each future state of nature is

assigned a probability of occurrenceassigned a probability of occurrence


59/917

Expected valueExpected value

EV (EV (xx) =) =pp((xxii))xxii

nn


xxii = outcome= outcome ii

pp((xxii)) = probability of outcome= probability of outcome ii

wherewhere

D i i M ki ithD i i M ki ith


60/917

Decision Making withDecision Making withProbabilities: ExampleProbabilities: Example




ExpandExpand $ 800,000$ 800,000 $ 500,000$ 500,000



Sell nowSell now 320,000320,000 320,000320,000

p(good) = 0.70 p(poor) = 0.30p(good) = 0.70 p(poor) = 0.30EV(expand):EV(expand): $800,000(0.7) + 500,000(0.3) = $710,000$800,000(0.7) + 500,000(0.3) = $710,000

EV(status quo): 1,300,000(0.7)EV(status quo): 1,300,000(0.7) --150,000(0.3) = 865,000150,000(0.3) = 865,000 MaximumMaximumEV(sell):EV(sell): 320,000(0.7) + 320,000(0.3) = 320,000320,000(0.7) + 320,000(0.3) = 320,000

Decision: Status quoDecision: Status quo

D i i M ki ithD i i M ki ith


61/917

Decision Making withDecision Making withProbabilities: ExcelProbabilities: Excel


Expected Value ofExpected Value of


62/917

Expected Value ofExpected Value ofPerfect InformationPerfect Information

EVPIEVPI maximum value of perfect information tomaximum value of perfect information to


the decision makerthe decision maker

maximum amount that would be paid tomaximum amount that would be paid togain information that would result in again information that would result in adecision better than the one madedecision better than the one madewithout perfect informationwithout perfect information


63/917

EVPI ExampleEVPI Example

Good conditions will existGood conditions will exist 70%70%of the timeof the time choose maintain status quo with payoff ofchoose maintain status quo with payoff of $1,300,000$1,300,000 Poor conditions will existPoor conditions will exist 30%30%of the timeof the time

choose ex and with a off ofchoose ex and with a off of $500,000$500,000


Expected value given perfect informationExpected value given perfect information= $1,300,000 (0.70) + 500,000 (0.30)= $1,300,000 (0.70) + 500,000 (0.30)= $1,060,000= $1,060,000

Recall that expected value without perfectRecall that expected value without perfect

information was $865,000 (maintain status quo)information was $865,000 (maintain status quo)EVPIEVPI== $1,060,000$1,060,000 -- 865,000 = $195,000865,000 = $195,000


64/917

SequentialSequentialDecision TreesDecision Trees

A graphical method for analyzingA graphical method for analyzingdecision situations that require adecision situations that require a


Decision tree consists ofDecision tree consists of Square nodesSquare nodes -- indicating decision pointsindicating decision points Circles nodesCircles nodes -- indicating states of natureindicating states of nature

ArcsArcs -- connecting nodesconnecting nodes


65/917

Evaluations at NodesEvaluations at Nodes

Compute EV at nodes 6 & 7Compute EV at nodes 6 & 7EVEV((node 6node 6)= 0.80($3,000,000) + 0.20($700,000) = $2,540,000)= 0.80($3,000,000) + 0.20($700,000) = $2,540,000EVEV((node 7node 7)= 0.30($2,300,000) + 0.70($1,000,000)= $1,390,000)= 0.30($2,300,000) + 0.70($1,000,000)= $1,390,000


ec s on a no e s e weenec s on a no e s e ween

$2,540,000$2,540,000for Expand andfor Expand and$450,000$450,000for Sell landfor Sell land

Choose ExpandChoose ExpandRepeat expected value calculations and decisions atRepeat expected value calculations and decisions at

remaining nodesremaining nodes

Decision Tree AnalysisDecision Tree Analysis


66/917

66

22

$1,740,000$1,740,000

$2,540,000$2,540,000

0.600.60

0.400.40

$225,000$225,000

Market growthMarket growth$2,000,000$2,000,000

$3,000,000$3,000,000

$700,000$700,000

0.800.80

$1,290,000$1,290,000

0.200.20

yy


77

11

33

55

, ,, ,

$1,360,000$1,360,000$790,000$790,000

$1,390,000$1,390,000 $2,300,000$2,300,000

$1,000,000$1,000,000

$210,000$210,000

0.400.40

0.700.70

0.300.30

0.600.60

$450,000$450,000


67/917

Chapter 2Chapter 2

Quality ManagementQuality Management

Operations ManagementOperations Management

Roberta Russell & Bernard W. Taylor, III


68/917


What Is Quality?What Is Quality? Evolution of QualityEvolution of Quality

ManagementManagement

Quality in ServiceQuality in ServiceCompaniesCompanies

Six SigmaSix Sigma

22--6868

Quality ToolsQuality Tools TQM and QMSTQM and QMS

Focus of QualityFocus of QualityManagementManagementCustomersCustomers

Role of Employees inRole of Employees inQuality ImprovementQuality Improvement

Cost of QualityCost of Quality Effect of QualityEffect of Quality

Management onManagement onProductivityProductivity

Quality AwardsQuality Awards

ISO 9000ISO 9000


69/917

What Is Quality?What Is Quality?

Oxford American DictionaryOxford American Dictionary a degree or level of excellencea degree or level of excellence

22--6969

American Society for QualityAmerican Society for Quality totality of features and characteristicstotality of features and characteristicsthat satisfy needs without deficienciesthat satisfy needs without deficiencies

Consumers and producersConsumers and producersperspectiveperspective

What Is Quality:What Is Quality:


70/917

What Is Quality:What Is Quality:Customers PerspectiveCustomers Perspective

Fitness for useFitness for use how well product orhow well product or

service does what it isservice does what it is

22--7070

Quality of designQuality of design designing qualitydesigning quality

characteristics into acharacteristics into aproduct or serviceproduct or service

A Mercedes and a Ford areA Mercedes and a Ford areequally fit for use, but withequally fit for use, but withdifferent design dimensions.different design dimensions.


71/917

Dimensions of Quality:Dimensions of Quality:Manufactured ProductsManufactured Products

PerformancePerformance basic operating characteristics of a product; howbasic operating characteristics of a product; how

well a car handles or its gas mileagewell a car handles or its gas mileage

22--7171

extra items added to basic features, such as aextra items added to basic features, such as astereo CD or a leather interior in a carstereo CD or a leather interior in a car

ReliabilityReliability probability that a product will operate properlyprobability that a product will operate properly

within an expected time frame; that is, a TV willwithin an expected time frame; that is, a TV willwork without repair for about seven yearswork without repair for about seven years


72/917

Dimensions of Quality:Dimensions of Quality:


73/917

AestheticsAesthetics how a product looks, feels, sounds,how a product looks, feels, sounds,

smells, or tastessmells, or tastes

Dimensions of Quality:Dimensions of Quality:Manufactured Products (cont.)Manufactured Products (cont.)

22--7373

assurance that customer will not sufferassurance that customer will not sufferinjury or harm from a product; aninjury or harm from a product; anespecially important consideration forespecially important consideration forautomobilesautomobiles

PerceptionsPerceptions subjective perceptions based on brandsubjective perceptions based on brand

name, advertising, and likename, advertising, and like



74/917

Dimensions of Quality:Dimensions of Quality:ServicesServices

Time and timelinessTime and timeliness how long must a customer wait for service,how long must a customer wait for service,

22--7474

is an overnight package delivered overnight?is an overnight package delivered overnight?

Completeness:Completeness:

is everything customer asked for provided?is everything customer asked for provided?

is a mail order from a catalogue companyis a mail order from a catalogue companycomplete when delivered?complete when delivered?



75/917

Dimensions of Quality:Dimensions of Quality:Service (cont.)Service (cont.)

Courtesy:Courtesy: how are customers treated by employees?how are customers treated by employees?

22--7575

their voices pleasant?their voices pleasant?

ConsistencyConsistency is same level of service provided to eachis same level of service provided to each

customer each time?customer each time?

is your newspaper delivered on time everyis your newspaper delivered on time everymorning?morning?



76/917

Accessibility and convenienceAccessibility and convenience how easy is it to obtain service?how easy is it to obtain service? does service representative answer you calls quickly?does service representative answer you calls quickly?

Q yQ yService (cont.)Service (cont.)

22--7676

ccuracyccuracy

is service performed right every time?is service performed right every time? is your bank or credit card statement correct every month?is your bank or credit card statement correct every month?

ResponsivenessResponsiveness how well does company react to unusual situations?how well does company react to unusual situations?

how well is a telephone operator able to respond to ahow well is a telephone operator able to respond to acustomers questions?customers questions?



77/917

Q yQ yProducers PerspectiveProducers Perspective

Quality of conformanceQuality of conformance

makin sure roduct or service is roducedmakin sure roduct or service is roduced

22--7777

according to designaccording to design if new tires do not conform to specifications, theyif new tires do not conform to specifications, they

wobblewobble

if a hotel room is not clean when a guest checksif a hotel room is not clean when a guest checksin, hotel is not functioning according toin, hotel is not functioning according tospecifications of its designspecifications of its design


78/917

Meaning of QualityMeaning of Quality

22--7878



79/917

Q yQ yA Final PerspectiveA Final Perspective

Customers and producers perspectivesCustomers and producers perspectivesdepend on each otherdepend on each other

22--7979

Producers perspective:Producers perspective: production process and COSTproduction process and COST

Customers perspective:Customers perspective: fitness for use and PRICEfitness for use and PRICE

Customers view must dominateCustomers view must dominate

Evolution of Quality Management:Evolution of Quality Management:


80/917

Q y gQ y gQuality GurusQuality Gurus

Walter ShewartWalter Shewart In 1920s, developed control chartsIn 1920s, developed control charts Introduced term Introduced term quality assurancequality assurance

22--8080

.. Developed courses during World War II to teachDeveloped courses during World War II to teach

statistical qualitystatistical quality--control techniques to engineers andcontrol techniques to engineers andexecutives of companies that were military suppliersexecutives of companies that were military suppliers

After war, began teaching statistical quality control toAfter war, began teaching statistical quality control toJapanese companiesJapanese companies

Joseph M. JuranJoseph M. Juran Followed Deming to Japan in 1954Followed Deming to Japan in 1954 Focused on strategic quality planningFocused on strategic quality planning Quality improvement achieved by focusing on projectsQuality improvement achieved by focusing on projects

to solve problems and securing breakthrough solutionsto solve problems and securing breakthrough solutions


81/917


82/917

Demings 14 PointsDemings 14 Points

1.1. Create constancy of purposeCreate constancy of purpose

22--8282

..

3.3. Cease mass inspectionCease mass inspection4.4. Select a few suppliers based onSelect a few suppliers based on

qualityquality

5.5. Constantly improve system andConstantly improve system andworkersworkers


83/917

6.6. Institute worker trainingInstitute worker training7.7. Instill leadership amongInstill leadership among

Demings 14 Points (cont.)Demings 14 Points (cont.)

22--8383

supervisorssupervisors

8.8. Eliminate fear among employeesEliminate fear among employees

9.9. Eliminate barriers betweenEliminate barriers between

departmentsdepartments

10.10. Eliminate slogansEliminate slogans


84/917

11.11. Remove numerical quotasRemove numerical quotas12.12. Enhance worker prideEnhance worker pride

Demings 14 Points (cont.)Demings 14 Points (cont.)

22--8484

13.13. Institute vigorous training andInstitute vigorous training andeducation programseducation programs

14.14. Develop a commitment from topDevelop a commitment from top

management to implementmanagement to implementabove 13 pointsabove 13 points


85/917

Deming Wheel: PDCA CycleDeming Wheel: PDCA Cycle

22--8585


86/917

Quality ToolsQuality Tools

Process FlowProcess FlowChartChart

HistogramHistogram

22--8686

CauseCause--andand--Effect DiagramEffect Diagram

Check SheetCheck Sheet

Pareto AnalysisPareto Analysis

Statistical ProcessStatistical ProcessControl ChartControl Chart


87/917

CC dd Eff DiEff Di


88/917

CauseCause--andand--Effect DiagramEffect Diagram

CauseCause--andand--effect diagram (fishbone diagram)effect diagram (fishbone diagram)

chart showing different categories of problem causeschart showing different categories of problem causes

22--8888

CC dd Eff M iEff M i


89/917

CauseCause--andand--Effect MatrixEffect Matrix

CauseCause--andand--effect matrixeffect matrix grid used to prioritize causes of quality problemsgrid used to prioritize causes of quality problems

22--8989

Ch k Sh t d Hi tCh k Sh t d Hi t


90/917

Check Sheets and HistogramsCheck Sheets and Histograms

22--9090

P t A l iP t A l i


91/917

Pareto AnalysisPareto Analysis

Pareto analysisPareto analysis

most quality problems result from a few causesmost quality problems result from a few causes

22--9191

P t Ch tP t Ch t


92/917

Pareto ChartPareto Chart

22--9292

S tt DiS tt Di


93/917

Scatter DiagramScatter Diagram

22--9393

C t l Ch tC t l Ch t


94/917

Control ChartControl Chart

22--9494


95/917

Focus of Quality ManagementFocus of Quality Management

CustomersCustomers


96/917

CustomersCustomers

TQM and QMSsTQM and QMSs serve to achieve customer satisfactionserve to achieve customer satisfaction

22--9696

a relationship between a company anda relationship between a company andits supplier based on mutual qualityits supplier based on mutual qualitystandardsstandards

Measuring customer satisfactionMeasuring customer satisfaction important component of any QMSimportant component of any QMS customer surveys, telephone interviewscustomer surveys, telephone interviews

Role of Employees inRole of Employees inQuality ImprovementQuality Improvement


97/917

Quality ImprovementQuality Improvement

ParticipativeParticipativeproblem solvingproblem solving employees involved inemployees involved in

22--9797

--

every employee hasevery employee hasundergone extensiveundergone extensivetraining to provide qualitytraining to provide qualityservice to Disneys guestsservice to Disneys guests

KaizenKaizen involves everyone ininvolves everyone in

process of continuousprocess of continuousimprovementimprovement


98/917

Quality in ServicesQuality in Services


99/917

Quality in ServicesQuality in Services

Service defects are not always easyService defects are not always easyto measure because service outputto measure because service output

22--9999

Services tend to be labor intensiveServices tend to be labor intensive Services and manufacturingServices and manufacturing

companies have similar inputs butcompanies have similar inputs but

different processes and outputsdifferent processes and outputs


100/917

Six SigmaSix Sigma


101/917

Six SigmaSix Sigma

A process for developing and deliveringA process for developing and deliveringvirtually perfect products and servicesvirtually perfect products and services

Measure of how much a processMeasure of how much a process

22--101101

ev a es rom per ec onev a es rom per ec on

3.4 defects per million opportunities3.4 defects per million opportunities Six Sigma ProcessSix Sigma Process

four basic steps of Six Sigmafour basic steps of Six Sigmaalign,align,mobilize, accelerate, and governmobilize, accelerate, and govern

ChampionChampion an executive responsible for project successan executive responsible for project success


102/917

Six Sigma:Six Sigma:Black Belts andBlack Belts andGreen BeltsGreen Belts


103/917

Green BeltsGreen Belts

Black BeltBlack Belt project leaderproject leader

22--103103

a teacher and mentora teacher and mentorfor Black Beltsfor Black Belts

Green BeltsGreen Belts

project teamproject teammembersmembers

Six SigmaSix Sigma


104/917

Six SigmaSix Sigma

Design for Six Sigma (DFSS)Design for Six Sigma (DFSS) a systematic approach to designing products anda systematic approach to designing products and

rocesses th t will chieve Six Si mrocesses th t will chieve Six Si m

22--104104

ProfitabilityProfitability typical criterion for selection Six Sigma projecttypical criterion for selection Six Sigma project

one of the factors distinguishing Six Sigma fromone of the factors distinguishing Six Sigma fromTQMTQM

Quality is not only free, it is anQuality is not only free, it is an

honesthonest--toto--everything profit maker.everything profit maker.

Cost of QualityCost of Quality


105/917

Cost of QualityCost of Quality

Cost of Achieving Good QualityCost of Achieving Good Quality Prevention costsPrevention costs costs incurred during product designcosts incurred during product design

22--105105

ppra sa costsppra sa costs

costs of measuring, testing, and analyzingcosts of measuring, testing, and analyzing Cost of Poor QualityCost of Poor Quality

Internal failure costsInternal failure costs include scrap, rework, process failure, downtime,include scrap, rework, process failure, downtime,

and price reductionsand price reductions External failure costsExternal failure costs

include complaints, returns, warranty claims,include complaints, returns, warranty claims,liability, and lost salesliability, and lost sales

Prevention CostsPrevention Costs


106/917

Prevention CostsPrevention Costs

Quality planning costsQuality planning costs costs of developing andcosts of developing and

implementing qualityimplementing qualitymanagement programmanagement program

Training costsTraining costs costs of developing andcosts of developing and

putting on quality trainingputting on quality trainingro rams for em lo eesro rams for em lo ees

22--106106

ro uctro uct-- es gn costses gn costs

costs of designingcosts of designingproducts with qualityproducts with qualitycharacteristicscharacteristics

Process costsProcess costs costs expended to makecosts expended to make

sure productive processsure productive processconforms to qualityconforms to qualityspecificationsspecifications

and managementand management

Information costsInformation costs costs of acquiringcosts of acquiring

and maintaining dataand maintaining datarelated to quality, andrelated to quality, anddevelopment anddevelopment andanalysis of reports onanalysis of reports onquality performancequality performance

Appraisal CostsAppraisal Costs


107/917

Appraisal CostsAppraisal Costs

Inspection and testingInspection and testing costs of testing and inspecting materials, parts, andcosts of testing and inspecting materials, parts, andproduct at various stages and at end of processproduct at various stages and at end of process

22--107107

costs of maintaining equipment used in testingcosts of maintaining equipment used in testing

quality characteristics of productsquality characteristics of products

Operator costsOperator costs costs of time spent by operators to gather data forcosts of time spent by operators to gather data for

testing product quality, to make equipmenttesting product quality, to make equipment

adjustments to maintain quality, and to stop work toadjustments to maintain quality, and to stop work toassess qualityassess quality

Internal Failure CostsInternal Failure Costs


108/917

Internal Failure CostsInternal Failure Costs

Scrap costsScrap costs costs of poorcosts of poor--qualityquality

products that must beproducts that must bediscarded, including labor,discarded, including labor,

Process downtime costsProcess downtime costs

costs of shutting downcosts of shutting downproductive process to fixproductive process to fix

22--108108

,,

Rework costsRework costs costs of fixing defectivecosts of fixing defective

products to conform toproducts to conform toquality specificationsquality specifications

Process failure costsProcess failure costs costs of determining whycosts of determining whyproduction process isproduction process is

producing poorproducing poor--qualityqualityproductsproducts

PricePrice--downgrading costsdowngrading costs costs of discounting poorcosts of discounting poor--

quality productsquality productsthat is,that is,selling products asselling products as

secondsseconds

External Failure CostsExternal Failure Costs


109/917

External Failure CostsExternal Failure Costs

Customer complaint costsCustomer complaint costs costs of investigating andcosts of investigating and

satisfactorily responding to asatisfactorily responding to acustomer complaint resultingcustomer complaint resulting

Product liability costsProduct liability costs litigation costslitigation costs

resulting from productresulting from productliabilit and customerliabilit and customer

22--109109

--

Product return costsProduct return costs costs of handling and replacingcosts of handling and replacing

poorpoor--quality products returnedquality products returnedby customerby customer

Warranty claims costsWarranty claims costs

costs of complying withcosts of complying withproduct warrantiesproduct warranties

injuryinjury

Lost sales costsLost sales costs costs incurredcosts incurred

because customersbecause customersare dissatisfied withare dissatisfied withpoorpoor--quality productsquality productsand do not makeand do not makeadditional purchasesadditional purchases


110/917

QualityQualityCost RelationshipCost Relationship


111/917

Q yQ y pp

Cost of qualityCost of quality difference between price ofdifference between price of

22--111111

noncon ormance an con ormancenoncon ormance an con ormance

cost of doing things wrongcost of doing things wrong 20 to 35% of revenues20 to 35% of revenues

cost of doing things rightcost of doing things right

3 to 4% of revenues3 to 4% of revenues


112/917

Computing ProductComputing Product

Cost per UnitCost per Unit


113/917

pp

RKIK rd ))(())(( +=Product Cost

22--113113

where:Kd= direct manufacturing cost per unit

I= inputKr= rework cost per unit

R= reworked unitsY= yield

Computing Product YieldComputing Product Yield

for Multistage Processesfor Multistage Processes


114/917

gg

Y =(I)(%g1)(%g2) (%gn)

22--114114

where:I= input of items to the production process that will

result in finished productsgi= good-quality, work-in-process products at stage i


115/917


116/917


117/917


118/917

ISO 9000 Certification,ISO 9000 Certification,

Implications, and RegistrarsImplications, and Registrars


119/917

ISO 9001:2000ISO 9001:2000onlyonlystandard that carries thirdstandard that carries third--partyparty certificationcertification

22--119119

Many overseas companiesMany overseas companies

will not do business with awill not do business with asupplier unless it has ISOsupplier unless it has ISO9000 certification9000 certification

ISO 9000 accreditationISO 9000 accreditation

ISO registrarsISO registrars

Chapter 3Chapter 3


120/917

Statistical Process ControlStatistical Process Control

pp




121/917

Basics of StatisticalBasics of Statistical

Process ControlProcess Control


122/917

Statistical Process ControlStatistical Process Control

(SPC)(SPC) monitoring production processmonitoring production process

33--122122

qualityquality

SampleSample subset of items produced tosubset of items produced to

use for inspectionuse for inspection

Control ChartsControl Charts process is within statisticalprocess is within statistical

control limitscontrol limits

LCLLCL


123/917

SPC in Quality ManagementSPC in Quality Management


124/917

SPCSPC tool for identifying problems intool for identifying problems in

33--124124

contributes to the TQM goal ofcontributes to the TQM goal ofcontinuous improvementscontinuous improvements

Quality Measures:Quality Measures:

Attributes and VariablesAttributes and Variables


125/917

AttributeAttribute a product characteristic that can bea product characteristic that can be

33--125125

goodgood bad; yesbad; yes -- nono

Variable measureVariable measure a product characteristic that is continuousa product characteristic that is continuous

and can be measuredand can be measured weightweight -- lengthlength

SPC Applied toSPC Applied to

ServicesServices


126/917

Nature of defect is different in servicesNature of defect is different in services

33--126126

customer requirementscustomer requirements Monitor time and customer satisfactionMonitor time and customer satisfaction


127/917


128/917

Where to Use Control ChartsWhere to Use Control Charts


129/917

Process has a tendency to go out of controlProcess has a tendency to go out of control

Process is particularly harmful and costly if itProcess is particularly harmful and costly if itgoes out of controlgoes out of control

33--129129

at the beginning of a process because it is a waste ofat the beginning of a process because it is a waste of

time and money to begin production process with badtime and money to begin production process with badsuppliessupplies before a costly or irreversible point, after whichbefore a costly or irreversible point, after which

product is difficult to rework or correctproduct is difficult to rework or correct before and after assembly or painting operations thatbefore and after assembly or painting operations that

might cover defectsmight cover defects before the outgoing final product or service isbefore the outgoing final product or service is

delivereddelivered


130/917


131/917


132/917


133/917

Control Charts forControl Charts forAttributesAttributes


134/917

pp--chartchart

33--134134

uses portion defective in a sampleuses portion defective in a sample

cc--chartchart uses number of defective items inuses number of defective items in

a samplea sample


135/917


136/917

Construction of pConstruction of p--Chart (cont.)Chart (cont.)


137/917

= 200 / 20(100) = 0.10= 200 / 20(100) = 0.10

total defectivestotal defectives

total sample observationstotal sample observationsp =p =

33--137137

UCL =UCL = pp++ zz = 0.10 + 3= 0.10 + 3--

nn

.. -- ..

100100

UCL = 0.190UCL = 0.190

LCL = 0.010LCL = 0.010

LCL =LCL = pp-- zz = 0.10= 0.10 -- 33pp(1(1 -- pp))

nn

0.10(10.10(1 -- 0.10)0.10)

100100

0.160.16

0.180.18

0.200.20

UCL = 0.190UCL = 0.190

C t tiC t ti


138/917

0.120.12

0.140.14

ndefect

ive

ndefect

ive

pp= 0.10= 0.10

ConstructionConstructionof pof p--ChartChart

33--138138

0.020.02

0.040.04

0.060.06

0.080.08

Proporti

Proporti

Sample numberSample number

22 44 66 88 1010 1212 1414 1616 1818 2020

LCL = 0.010LCL = 0.010

con .con .

cc--ChartChart


139/917

UCL =UCL = cc++ zzcc

33--139139

LCL =LCL = cc-- cc

wherewhere

cc= number of defects per sample= number of defects per sample

cc


140/917


141/917

Control Charts forControl Charts for

VariablesVariables


142/917

Range chart ( RRange chart ( R--Chart )Chart ) uses amount of dispersion in auses amount of dispersion in a

33--142142

samplesample

Mean chart ( xMean chart ( x --Chart )Chart ) uses process average of auses process average of a

samplesample

xx--bar Chart:bar Chart:

Standard Deviation KnownStandard Deviation Known


143/917

UCL =UCL =UCL =UCL =UCL =UCL =UCL =UCL =xxxxxxxx

++++++++ zzxx LCL =LCL =LCL =LCL =LCL =LCL =LCL =LCL =xxxxxxxx

-------- zzxxUCL =UCL =UCL =UCL =UCL =UCL =UCL =UCL =xxxxxxxx

++++++++ zzxx LCL =LCL =LCL =LCL =LCL =LCL =LCL =LCL =xxxxxxxx

-------- zzxx

================ ================

33--143143

xxxxxxxx11111111 xxxxxxxx22222222 ........................ xxxxxxxxnnnnnnnnnnnnnnnn

xxxxxxxx11111111 xxxxxxxx22222222 ........................ xxxxxxxxnnnnnnnnnnnnnnnn

xxxxxxxx ========xxxxxxxx ========================

wherewhere

xx = average of sample means= average of sample means

wherewhere

xx = average of sample means= average of sample means================

xx--bar Chart Example:bar Chart Example:

Standard Deviation Known (cont.)Standard Deviation Known (cont.)


144/917

33--144144


Standard Deviation Known (cont.)Standard Deviation Known (cont.)


145/917

33--145145


Standard Deviation UnknownStandard Deviation Unknown


146/917

UCL =UCL =UCL =UCL =UCL =UCL =UCL =UCL = xxxxxxxx++++++++ AAAAAAAA22222222RRRRRRRR LCL =LCL =LCL =LCL =LCL =LCL =LCL =LCL = xxxxxxxx-------- AAAAAAAA22222222RRRRRRRRUCL =UCL =UCL =UCL =UCL =UCL =UCL =UCL = xxxxxxxx++++++++ AAAAAAAA22222222RRRRRRRR LCL =LCL =LCL =LCL =LCL =LCL =LCL =LCL = xxxxxxxx-------- AAAAAAAA22222222RRRRRRRR================ ================

33--146146

wherewherewherewherewherewherewherewhere

xxxxxxxx = average of sample means= average of sample means= average of sample means= average of sample means= average of sample means= average of sample means= average of sample means= average of sample means

wherewherewherewherewherewherewherewhere

xxxxxxxx = average of sample means= average of sample means= average of sample means= average of sample means= average of sample means= average of sample means= average of sample means= average of sample means


147/917


Standard Deviation UnknownStandard Deviation UnknownOBSERVATIONS (SLIPOBSERVATIONS (SLIP-- RING DIAMETER, CM)RING DIAMETER, CM)

SAMPLESAMPLE kk 11 22 33 44 55 xx RR


148/917

11 5.025.02 5.015.01 4.944.94 4.994.99 4.964.96 4.984.98 0.080.0822 5.015.01 5.035.03 5.075.07 4.954.95 4.964.96 5.005.00 0.120.12

33--148148

Example 15.4Example 15.4

.. .. .. .. .. .. ..

44 5.035.03 4.914.91 5.015.01 4.984.98 4.894.89 4.964.96 0.140.14

55 4.954.95 4.924.92 5.035.03 5.055.05 5.015.01 4.994.99 0.130.13

66 4.974.97 5.065.06 5.065.06 4.964.96 5.035.03 5.015.01 0.100.10

77 5.055.05 5.015.01 5.105.10 4.964.96 4.994.99 5.025.02 0.140.14

88 5.095.09 5.105.10 5.005.00 4.994.99 5.085.08 5.055.05 0.110.11

99 5.145.14 5.105.10 4.994.99 5.085.08 5.095.09 5.085.08 0.150.15

1010 5.015.01 4.984.98 5.085.08 5.075.07 4.994.99 5.035.03 0.100.10

50.0950.09 1.151.15


149/917


150/917


151/917

RR--Chart ExampleChart Example

OBSERVATIONS (SLIPOBSERVATIONS (SLIP--RING DIAMETER, CM)RING DIAMETER, CM)

SAMPLESAMPLE kk 11 22 33 44 55 xx RR


152/917

11 5.025.02 5.015.01 4.944.94 4.994.99 4.964.96 4.984.98 0.080.0822 5.015.01 5.035.03 5.075.07 4.954.95 4.964.96 5.005.00 0.120.12

33--152152

.. .. .. .. .. .. ..

44 5.035.03 4.914.91 5.015.01 4.984.98 4.894.89 4.964.96 0.140.14

55 4.954.95 4.924.92 5.035.03 5.055.05 5.015.01 4.994.99 0.130.1366 4.974.97 5.065.06 5.065.06 4.964.96 5.035.03 5.015.01 0.100.10

77 5.055.05 5.015.01 5.105.10 4.964.96 4.994.99 5.025.02 0.140.14

88 5.095.09 5.105.10 5.005.00 4.994.99 5.085.08 5.055.05 0.110.11

99 5.145.14 5.105.10 4.994.99 5.085.08 5.095.09 5.085.08 0.150.15

1010 5.015.01 4.984.98 5.085.08 5.075.07 4.994.99 5.035.03 0.100.10

50.0950.09 1.151.15Example 15.3Example 15.3

RR--Chart Example (cont.)Chart Example (cont.)


153/917

UCL =UCL =UCL =UCL =UCL =UCL =UCL =UCL = DDDDDDDD44444444RRRRRRRR= 2.11(0.115) = 0.243= 2.11(0.115) = 0.243= 2.11(0.115) = 0.243= 2.11(0.115) = 0.243= 2.11(0.115) = 0.243= 2.11(0.115) = 0.243= 2.11(0.115) = 0.243= 2.11(0.115) = 0.243UCL =UCL =UCL =UCL =UCL =UCL =UCL =UCL = DDDDDDDD44444444RRRRRRRR= 2.11(0.115) = 0.243= 2.11(0.115) = 0.243= 2.11(0.115) = 0.243= 2.11(0.115) = 0.243= 2.11(0.115) = 0.243= 2.11(0.115) = 0.243= 2.11(0.115) = 0.243= 2.11(0.115) = 0.243

33--153153

Example 15.3Example 15.3

Retrieve Factor Values DRetrieve Factor Values D33 and Dand D44

LCL =LCL =LCL =LCL =LCL =LCL =LCL =LCL = DDDDDDDD33333333RRRRRRRR= 0(0.115) = 0= 0(0.115) = 0= 0(0.115) = 0= 0(0.115) = 0= 0(0.115) = 0= 0(0.115) = 0= 0(0.115) = 0= 0(0.115) = 0LCL =LCL =LCL =LCL =LCL =LCL =LCL =LCL = DDDDDDDD33333333RRRRRRRR= 0(0.115) = 0= 0(0.115) = 0= 0(0.115) = 0= 0(0.115) = 0= 0(0.115) = 0= 0(0.115) = 0= 0(0.115) = 0= 0(0.115) = 0

RR--Chart Example (cont.)Chart Example (cont.)

0.280.28


154/917

UCL = 0.243UCL = 0.2430.240.24

0.200.20

33--154154

LCL = 0LCL = 0

Range

Range

Sample numberSample number

RR= 0.115= 0.115

||11 ||22 ||33 ||44 ||55 ||66 ||77 ||88 ||99 ||1010

0.160.16

0.120.12

0.080.08

0.040.04 00

Using xUsing x-- bar and Rbar and R--ChartsCharts

TogetherTogether


155/917

Process average and process variability must be in controlProcess average and process variability must be in control

33--155155

s poss e or samp es o ave very narrow ranges, us poss e or samp es o ave very narrow ranges, utheir averages might be beyond control limitstheir averages might be beyond control limits

It is possible for sample averages to be in control, butIt is possible for sample averages to be in control, butranges might be very largeranges might be very large

It is possible for an RIt is possible for an R--chart to exhibit a distinct downwardchart to exhibit a distinct downwardtrend, suggesting some nonrandom cause is reducingtrend, suggesting some nonrandom cause is reducing

variationvariation

Control Chart PatternsControl Chart Patterns

RunRun

sequence of sample values that display same characteristicsequence of sample values that display same characteristic


156/917

sequence of sample values that display same characteristicsequence of sample values that display same characteristic

Pattern testPattern test determines if observations within limits of a control chart display adetermines if observations within limits of a control chart display a

33--156156

nonran om patternnonran om pattern

To identify a pattern:To identify a pattern:

8 consecutive points on one side of the center line8 consecutive points on one side of the center line 8 consecutive points up or down8 consecutive points up or down

14 points alternating up or down14 points alternating up or down

2 out of 3 consecutive points in zone A (on one side of center line)2 out of 3 consecutive points in zone A (on one side of center line)

4 out of 5 consecutive points in zone A or B (on one side of center4 out of 5 consecutive points in zone A or B (on one side of centerline)line)

Control Chart Patterns (cont.)Control Chart Patterns (cont.)

UCLUCL


157/917

UCLUCL

33--157157

LCLLCL

Sample observationsSample observationsconsistently above theconsistently above the

center linecenter line

LCLLCL

Sample observationsSample observations

consistently below theconsistently below the

center linecenter line

Control Chart Patterns (cont.)Control Chart Patterns (cont.)

UCLUCL


158/917

UCLUCL

33--158158

LCLLCL

Sample observationsSample observations

consistently increasingconsistently increasing LCLLCL

Sample observationsSample observationsconsistently decreasingconsistently decreasing


159/917

Performing a Pattern TestPerforming a Pattern Test

11 4.984.98 BB BB

SAMPLESAMPLE xx ABOVE/BELOWABOVE/BELOW UP/DOWNUP/DOWN ZONEZONE


160/917

22 5.005.00 BB UU CC33 4.954.95 BB DD AA

33--160160

55 4.994.99 BB UU CC

66 5.015.01 UU CC77 5.025.02 AA UU CC

88 5.055.05 AA UU BB

99 5.085.08 AA UU AA

1010 5.035.03 AA DD BB

Sample Size DeterminationSample Size Determination


161/917

33--161161

50 to 100 parts in a sample50 to 100 parts in a sample

Variable charts require smaller samplesVariable charts require smaller samples 2 to 10 parts in a sample2 to 10 parts in a sample


162/917

SPC with Excel and OM ToolsSPC with Excel and OM Tools


163/917

33--163163

Process CapabilityProcess Capability

TolerancesTolerances


164/917

design specifications reflecting productdesign specifications reflecting product

33--164164

uu

Process capabilityProcess capability range of natural variability in a processrange of natural variability in a process

what we measure with control chartswhat we measure with control charts


165/917

Process Capability (cont.)Process Capability (cont.)

(c) Design specifications(c) Design specificationsgreater than naturalgreater than natural

DesignDesignSpecificationsSpecifications


166/917

variation; process isvariation; process iscapable of alwayscapable of alwaysconforming toconforming to

33--166166

..

ProcessProcess

(d) Specifications greater(d) Specifications greaterthan natural variation,than natural variation,but process off center;but process off center;

capable but some outputcapable but some outputwill not meet upperwill not meet upperspecification.specification.

DesignDesignSpecificationsSpecifications

ProcessProcess

Process Capability MeasuresProcess Capability Measures

Process Capability RatioProcess Capability Ratio


167/917

33--167167

CCpp ==

==

process rangeprocess rangeupper specification limitupper specification limit --

lower specification limitlower specification limit

66


168/917


169/917

Computing CComputing Cpkpk

Net weight specification = 9.0 ozNet weight specification = 9.0 oz 0.5 oz0.5 oz

Process mean = 8.80 ozProcess mean = 8.80 oz


170/917

Process standard deviation = 0.12 ozProcess standard deviation = 0.12 oz

33--170170

CCpkpk = minimum= minimum

= minimum , = 0.83= minimum , = 0.83

xx -- lower specification limitlower specification limit

33

==

upper specification limitupper specification limit -- xx

33

==

,,

8.808.80 -- 8.508.503(0.12)3(0.12)

9.509.50 -- 8.808.803(0.12)3(0.12)


with Excelwith Excel


171/917

33--171171


with Excel and OM Toolswith Excel and OM Tools


172/917

33--172172

Chapter 3 SupplementChapter 3 Supplement

A S liA S li


173/917

Acceptance SamplingAcceptance Sampling




174/917

Acceptance SamplingAcceptance Sampling

Accepting or rejecting a production lot basedAccepting or rejecting a production lot based

th b f d f t i lth b f d f t i l


175/917

on the number of defects in a sampleon the number of defects in a sample Not consistent with TQM or Zero DefectsNot consistent with TQM or Zero Defects


philosophyphilosophy

producer and customer agree on the number ofproducer and customer agree on the number ofacceptable defectsacceptable defects

a means of identifying not preventing poor qualitya means of identifying not preventing poor quality

percent of defective parts versus PPMpercent of defective parts versus PPM

Sampling planSampling plan provides guidelines for accepting a lotprovides guidelines for accepting a lot

SingleSingleSampleSample

Attribute PlanAttribute Plan

Single sampling planSingle sampling plan

NN lot sizelot size


176/917

NN= lot size= lot size


==

cc= acceptance number= acceptance number

dd= number of defective items in sample= number of defective items in sample

IfIf ddcc, accept lot; else reject, accept lot; else reject

Producers andProducers and

Consumers RiskConsumers Risk

AQL or acceptable quality levelAQL or acceptable quality level proportion of defects consumer will accept inproport

Date post:	11-Feb-2018
Category:	Documents
Upload:	sadiq-sagheer
View:	218 times
Download:	5 times

Operations Management, Compelte Slides,Supply chain Management

Documents