Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Quality Management
Six Sigma Quality – An introduction
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Six Sigma QualityAn introduction
• Generally six sigma quality points to very high quality levels that defects are a rarity in operations
• It also points to
– A disciplined way of handling issues in operations
– A structured way of addressing quality issues
– A trajectory to an unambiguous destination in the quality management journey in an organization
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
IntroductionAbout Six sigma quality• The moment we talk about quality, the word Six sigma comes to
our mind
• A number of progressive companies are working hard to build six sigma quality level– Motorola and GE are supposed to have pioneered this concept of 6
sigma
– Dabbawallahs of Mumbai has baffled the business world with their six sigma quality standard in their operations involving delivering 200,000 tiffin boxes from home to work place and again from work place back home every day
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
What is six sigma?
• A mechanisms to deliver near zero defect in operations using principles of process control
• A defect is an unacceptable state of a product or a service for a customer
• Defect becomes an extraordinarily a rare event– For example a few defects in a million potential opportunity in a
service
– One or two defective parts in a million that was produced in a manufacturing shop
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Why near zero defects?
Source: Company Presentation, Own Research
CriterionBusiness
CustomersRetail
CustomersTotal
No. of policies issued during the year 247,010 2,520,874 2,767,884
Error Rate 0.50% 1.10% 1.05%
Defective Policies 1,235 27,730 28,965
This implies that at a nearly 99% quality level, 28,965 customers would have been unsatisfied with the service that they have received from the company during the year.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Superior Qualitycontrol
Fewer Disruptionsin Operations
SmootherOutput
Better Quality Management System
Fewer Rework
High qualityFinished goods
GreaterProductivity
Lessinventory
Less Indirect costs
Less inventory, labour, indirect costs & better quality
Why high levels of quality?
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Quality ManagementChanging Perceptions…
It is often uneconomical to make quality improvements since it brings down productivity, increases cost and investment.
Productivity goes up and cost comesdown as quality goes up. This fact is
known, but not necessarily to everyone.
Yesterday…
Today…
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Metrics for Quality ManagementPPM and DPMO
• If we want defects to really become an extraordinarily a rare event we can think of two measures:
– Manufacturing: Parts per million (PPM) defect rate
– Services: Defects per Million Opportunities (DPMO)
• Six sigma uses these two measures.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Defects Per Million Opportunities (DPMO)
• If in a process
– Number of opportunities for making a defect per unit of execution of that process = “k”
– Number of units of observation of the process = “n”
– Number of defects that occurred in that process during the observation = “d”
– DPMO then will be = 000,000,1**
nk
d
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
DPMO Computation ExampleA hotel in a tourist location
• Potential opportunities to make a defect in a check-in process = 11
• No. of guests handled during a season = 1,250
• Number of defects observed = 357
• 𝐷𝑃𝑀𝑂 =𝑑
𝑘∗𝑛∗ 1,000,000
=357
1,250∗11∗ 1,000,000 = 𝟐𝟓, 𝟗𝟔𝟑.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Premises of Quality Management
• Premise 1: All Quality initiatives must be continuous and data driven
• Premise 2: System of Quality is one of Prevention & Elimination
– Not Detection & Correction
• Premise 3: The Performance Standard is Zero Defects
• Premise 4: The responsibility for Quality lies primarily with those who produce & deliver products & services
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Six Sigma Program
• A six sigma program requires certain enabling mechanisms for an organization–A structured program for quality management &
improvement
– Facilitating mechanisms for the Operations personnel to own, solve and obliterate the quality problems
–Organization structure and mandate for quality improvement issue on a continuous basis
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
DMAIC Methodology
Define Measure
Analyze
Improve
Control
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 575.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
DMAIC Methodology • Define
– Define the problem, the requirements, project scope, project charter – Set goals for improvement
• Measure– Identify variables to be measured, the type of measurement – Data collection and synthesis
• Analyze– Develop a set of tools for analysis– Apply graphical tools of analysis– Identify possible sources of variation and “vital” few root causes– Explore means of eliminating them
• Improve– Generate & validate improvement alternatives
– Creating new process maps for the process• Control
– Develop control plan– Establish revised standard measures to maintain performance– Develop relevant training plans to maintain standards
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Organization for six sigma
• In order that the organization sustainably improves the quality to near zero defect levels,
–A good organizational structure
–Mandate to make changes
–Ownership of processes and results and
–Continuous and closer review are required
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Organization for six sigma
• Process Owner
– Supervisor or a manager who takes responsibility for various steps of a process that delivers some output to the customer.
– It could be the in a particular work area where the improvement project has been identified
• Team Leader & Members
– Team leader (the project leader) and the members will comprise of the employees in the chosen work area
– They will have day-to-day operational control of activities
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Organization for six sigma
• In a six sigma organizational structure three terminologies are used to indicate these organizational entities.
• This includes Master Black Belt, Black Belt and Green Belt.
• The depth of training and experience differentiates these three.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Organization for six sigma
• Six sigma coach
– A consultant or a senior person in the organization who offers expert knowledge on various aspects of six sigma.
– This includes statistical tools, process design & analysis, change management, small group improvement, use of QC tools for improvement etc.
• Sponsor
– A member of the senior management who oversees the overall progress and implementation
– Helps the team refine the project scope, sorts out issues cutting across other parts of the organization, approves projects and provides the necessary support in terms of resources
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Quality Management
Total Quality Management
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Quality GurusDeming’s contributions
• New perceptions to quality management
–Critical Role of Top Management
• Plan – Do – Check – Act (PDCA) Cycle
• 14 point agenda for quality improvement
• Considered father of Japanese Quality Management Systems
–Highest Award in Japan named after him
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Juran’s Quality Trilogy
• Quality planning: the process of preparing to meet quality goals
• Quality control: the process of making quality goals during operations; importance of using statistical methods
• Quality improvement: the process of breaking through to unprecedented levels of performance
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Philip CrosbyAbsolutes of Quality
• I Absolute: Definition of quality is conformance to standards
• II Absolute: The system of Quality is prevention
• III Absolute: The performance standard is zero defects
• IV Absolute: Measurement of Quality is the price of non-conformance
• V Absolute: There is no such thing as Quality Problem
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Other quality gurus
• Karou Ishikawa
–Cause & Effect (Fishbone) Diagram
–Cause & Effect Diagram with Action Card (CEDAC)
• Shigeo Shingo
–Poka Yoke
• Genichi Taguchi
– Loss function
–Design of experiments
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Quality Revolution in the 1980’sSalient features
• Alternative ideas about what constitutes good quality
• Newer methods to build quality into products and services that we offer
• New tools to assess performance of an organization with respect to quality
• Changed roles of middle managers and supervisors from one of control to facilitation of the process of building quality into the products and services
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Total Quality Management (TQM)
• The definition points to four critical aspects of any good TQM program
– Role of Top Management
– Employee Involvement & Training
– Use of Tools & Techniques
– Development of a good quality system
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Total Quality ManagementElements
QualitySystem
Role ofTop Management
Tools & TechniquesEmployee InvolvementTraining & Team Work
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Role of Top Management
• Total in TQM refers to “every one”, every where” and “every time”. This will be possible only when the Top Management gets actively involved in this process
• Possible roles for Top Management
– Lead from the front by example
– Signal the importance of quality for the organization
– Help Middle Management resolve difficult trade-offs by providing guidance & directions
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Employee Involvement
• It is about creating certain structures, culture and practices to make employee involvement a reality
– Build a culture of process ownership – facilitate this process
– Role of middle management and experts go through some change
– Provide training on some tools & techniques that people can use in their work place to address quality issues
– Build a climate and culture for team working
– Put in a system of project by project continuous improvement
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Elements of a Quality Assurance System
•Understand customer needs•Translate them to meaningful measures for the operating system
Mechanisms for identifying quality
problems
Tools & techniques for the employees
•For tracking problems to their root causes•Identifying corrective measures
Methods for preventing
recurrence of problems
Documentation of all quality related initiatives for
continuous learning & improvement
Employee involvement for continuous focus
on quality improvement
Quality Certifications & Benchmarking
exercises
Top Management Commitment to
Quality
QualityAssurance
System
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 350.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Tools for Quality Management
• Available tools for Quality Management can be broadly categorized into two:
– Quality Management @ Operations
• Highlighting Problems
• Identifying Improvement Opportunities
• Analyzing problems & their root causes
– Quality Planning & Design
• Building Quality into Products & Services
• Strategic Planning
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Quality Management ToolsPurpose of Use Quality Control Quality Management
Highlighting Problems • Control Charts
Identifying ImprovementOpportunities
• Histograms• Check Sheets• Pareto Diagrams• Scatter Diagrams• Graphs
Analyzing problems & their root causes
• Cause & Effect (Fishbone) Diagram
• CEDAC
• Affinity Diagram• Relationship Diagram
Building Quality into Products & Services
• Tree Diagram• Matrix Diagram• Matrix Data Analysis• Process Decision Program Chart (PDPC)• Arrow Diagram• Poka Yoke (Fool Proofing)
Strategic Planning • Quality Function Deployment (QFD)• Quality Costing
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
HistogramCauses for adjustment snags
Number of occurrences
Leakage 25Missing 24Fouling 5Reworks 26Poor routing 5Loose fitting 15
25.0 24.0
5.0
26.0
5.0
15.0
LEAKAGE MISSING FOULING REWORKS POOR ROUTING
LOOSE FITTING
Nu
mb
er o
f o
ccu
ren
ces
Categories of problems
Causes for adjustment snags
05
05
10
15
20
25
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 339.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Pareto Diagram
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Reworks Leakage Missing Loose fitting Poor routing Fouling
Cu
mu
lati
ve o
ccu
ren
ces
(%)
Nu
mb
er o
f o
ccu
ren
ces
Categories of problems
Adjustment Snags Analysis
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 340.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Rework AnalysisCauses for rework
Number of occurrences
Lack of drawing clarity 23Tooling problems 15Process control issues 6Design issues 33Vendor related problems 23
0.010.020.030.040.050.060.070.080.090.0100.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Designissues
Lack ofdrawingclarity
Vendorrelated
problems
Toolingproblems
ProcessControlIssues
Cu
mu
lati
ve o
ccu
rren
ces
(%)
Nu
mb
er o
f o
ccu
ren
ces
Categories of problems
Reworks Analysis
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Lack ofdrawingclarity
Toolingproblems
Processcontrolissues
Designissues
Vendorrelated
problems
Nu
mb
er o
f o
ccu
ren
ces
Categories of problems
Causes for Rework
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Cause and Effect DiagramA generic representation
Materials Work methods
EquipmentLabour
Quality
Cause Effect
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 340.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Cause & Effect DiagramAn example
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 328.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Cause Effect Diagram with Action Card (CEDAC) An example
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 341.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Poka Yoke
• Poka Yoke, which means fool proofing is a technique which works on the basic premise that several defects that creep into an operation are indeed avoidable
• Further, Errors & Defects have a Cause & Effect relationship
• Poka Yoke ensures that a defect once detected can be eliminated once and for all by modifying the process or design of the product or service
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
POKA YOKE
An example
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Matrix Diagram
• A two dimensional matrix to portray and analyze a problem at a strategic level
• Once the two dimensions are identified it lends itself to the analysis of the problem in a structured way
• A visual approach that helps management to identify problems and possible solutions
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Matrix Diagram: An ExampleEarth Moving Equipment Manufacturer
Order
WinningQualifying
Less
Important
Bet
ter
Sam
eW
ors
t
Pe
rfo
rman
ce o
f th
e c
om
pan
y
Importance of the Attribute
A - Product costB - Product qualityC - Engg. QualityD - Enquiry lead timeE - Mfg. lead timeF - Delivery reliabilityG - Design flexibilityH - Delivery flexibilityI - Volume flexibilityJ - Service support
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 343.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Quality Function Deployment (QFD)The four houses of quality
- -
- -
- - - -
Links
customer
needs to
design
attributes
Links
design
attributes to
actions firms
can take
Links
actions to
implement-
action
decisions
Links
implement-
action to
process
plans
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 344.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
House of Quality
7. Technical assessment & target values
1. Customerrequirements
4. Relationship matrix
3. Productcharacteristics
2. Importance
6. Benchmarks
5. Tradeoffs
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 315.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
House of Quality
An illustration
for a Restaurant
Correlation:
++: Strong Positive
+: Positive
+ -: Negative
-- --: Strong Negative
+
+ + +
Competitive Evaluation
X- Own Company
A - Competitor A
B - Competitor B
(5 is best)
1 2 3 4 5
Steaming hot 7 ++ ++ A B X
Enough space to sit & eat 4 - ++ ++ X A B
Less time during peak hours 6 - -- ++ + X B A
Easy to carry home 2 ++ A X B
Quick order processing 2 - -- + + X A B
7 6 9 4 6 4
5
4 X A,B A,B X
3 A X B X,B X,A,B
2 B X A A
1
Num
ber
of t
able
s
avai
labl
e
Mai
ntai
n cu
rren
t Le
vel
Red
uce
it by
10%
of
the
curr
ent
leve
l
Red
uce
time
to 2
min
utes
Mai
ntai
n cu
rren
t le
vel
Incr
ease
the
cou
nter
s by
one
Mai
ntai
n cu
rren
t le
vel
Importance Scale:
Strong: 9
Medium: 3
Small: 1
Tem
pera
ture
of
cook
ed
item
Tim
e ta
ken
to c
ook
the
food
Ord
er p
roce
ssin
g tim
e
Thi
ckne
ss o
f pa
ckin
g
mat
eria
l
Num
ber
of s
ervi
ce
coun
ters
in p
eak
time
Target Values
Technical Evaluation
(5 is best)
Importance Weighting
TechnicalCharacteristics
CustomerRequirements
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 315.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Quality Management
Statistical Process Control (SPC) - Fundamentals
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
SPC – An Introduction
• Statistics is at the core of modern quality management
– Helps operationalize some decisions and keep performance and outcome with in limits
– Provides basic framework to systematically analyze the quality problem in various business processes
– A good mechanism to highlight either an existing quality problem or an impending problem
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Variations in Business Processes
• Two types of variations occur in business processes; Common Causes & Assignable Causes
• Chance variations due to common causes
– causes due to random events that cannot be controlled
• Ambient temperature and humidity
• Normal wear and tear
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Statistical Process Control
• Business processes always exhibit variations
– Filling a 500 gms detergent powder in a sachet
– Guest check-out time in a 5 star hotel
• SPC is a collective set of tools & techniques used to develop a quality assurance system that enables one to make meaningful sense of these variations
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Assignable Causes
• Non-random variations due to assignable causes
– When observed variations are not statistically found to be due to random events, it clearly points to the existence of assignable causes
• Errors due to operator skill level differences
• Changes in the operating condition of an equipment
• Changes introduced in the standard operating procedure
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Issues addressed thru SPC
• Key issues addressed in SPC based quality assurance system:
– How do we know whether the observed changes are due to random variations or assignable causes?
– How does one ensure that the random events are indeed rare events?
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Quality Assurance using SPCSome terminologies: Designed Standard
• Centre of specification limits (Target)
• Upper Specification Limit (USL)• Lower Specification Limit (LSL)
• (USL – LSL): Desired tolerance
This represents the “Voice” of the Customer
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Voice of the CustomerExamples
• Customer check-out time
in a 5 star Hotel: 90 ±20 𝑆𝑒𝑐𝑜𝑛𝑑𝑠
– Target = 90 seconds
– USL = 110 seconds
– LSL = 70 Seconds
– Desired tolerance is
70 – 110 Seconds
• Diameter of the pen manufactured: 8 ±0.5 𝑚𝑚
– Target = 8.0 millimeter
– USL = 8.5 millimeter
– LSL = 7.5 millimeter
– Desired tolerance is 7.5 – 8.5 millimeter
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Quality Assurance using SPCSome terminologies: Status of process
• Centre of the process (Process Average)
• Upper Control Limit (UCL)• Lower Control Limit (LCL)
• (UCL – LCL): Spread of the process
This represents the “Voice” of the Process
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
SPC – Attribute to study
• At the outset the questions that we need to address are:
–What is the attribute in a process that needs to be measured for the purpose of quality control?
–How should we measure for the purpose of analysis?
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Characteristics for process controlSome examples
Type of Applications Characteristic for Measurement
Manufacturing Number of defects in the product Conformance to test specifications Number of missing elements
Service Systems Number of defects in various business processes
Errors in processing documents Conformance to waiting time/lead time
related specifications
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 581.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Choosing a characteristicExamples from service industry
• Time taken to complete the
– Settlement of claims in insurance
– Loan approval in a financial institution
–Patient admission process in a hospital
• Voice of the customer: 𝟐𝟎 ± 𝟔𝑴𝒊𝒏𝒖𝒕𝒆𝒔
–How to measure the quality performance in this case?
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Methods of measuring defects
• Method A: Count the number of occasions patients were indeed admitted after 26 minutes as defects in the process.
– In 100 observations, let us say there were 7 occasions – this means the proportion of defects is 7%
• Method B: Make detailed measurements of the actual admission time in the 100 cases
– 24.95, 21.87, 25.45, 19.75 …
– Use this data and do analysis
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Measurement MethodsAttribute Based
• Simple clustering of the characteristic into a few categories (such as good or bad)
• Measurements are easy to make, quick & less expensive
• Will reveal very little information about the process
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Measurement MethodsVariable Based
• Detailed observation of the characteristic (such as length, diameter, weight, time)
• This is called variable based…
• Measurement will be expensive and more time consuming
• Will provide a wealth of information about the process
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Types of Charts
• For attribute based measures we have
– p chart
– C chart
• For variable based measures we have
– R Chart
• Before we see the specifics of each of these let us get to know the process of setting up a control chart
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Logic of Charts
• We use certain well known statistical principles pertaining to a random process
– The mean (which is the measure of central tendency)
– The Standard Deviation (which is a measure of dispersion)
– In a Normal Distribution, the area covered within ± 𝟑 𝒔𝒕𝒅. 𝒅𝒆𝒗 will be 99.73%
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Normal Distribution
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Logic of Charts
• What it means is that any variations happening in this range has a 99.73 probability that it is due to random events.
• Once we cross these limits the probability that the variation is due to random is so low that we begin to suspect there is an assignable cause
• This is an indication that the process may be out of control
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Control ChartA generalized representation
Process Average
Upper Control Limit (UCL)
Lower Control Limit (LCL)
Plot of
sample data
Process in a state of “Statistical Control”
+𝟑𝝈
−𝟑𝝈
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 583.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Control ChartA generalized representation
Process Average
Upper Control Limit (UCL)
Lower Control Limit (LCL)
Out of control
indication
Process not in a state of “Statistical Control”
+𝟑𝝈
−𝟑𝝈
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Quality Management
Setting up a Control Chart
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Setting up a process control system
Choose the characteristicfor process control
Choose the Measurement method
Choose the type ofControl Chart
Collect Data, Establish Control Limits
Plot the data & Analyse
• Attribute Based• Variable Based
• P chart, c chart• 𝑿𝑪𝒉𝒂𝒓𝒕, 𝑹 𝑪𝒉𝒂𝒓𝒕
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 580.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
• Step 1: Choose the measurement characteristic:
Diameter of a cylindrical component (cm)
• Step 2: Choose the measurement method
Actual measurement of diameter (variable based)
• Step 3: Choose the Control Chart:
• Step 4: Decide on a Sampling Plan
• Step 5: Collect Data & Establish Control Limits
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Data for the chart
Sub-groups
Observations in each sub-group*
1 2 3 4 5
1 12.45 12.39 12.55 12.38 12.40
2 12.55 12.39 12.40 12.38 12.44
3 12.46 12.44 12.44 12.35 12.36
4 12.38 12.39 12.55 12.38 12.40
5 12.37 12.44 12.45 12.41 12.41
6 12.45 12.37 12.44 12.38 12.41
7 12.46 12.38 12.35 12.50 12.44
8 12.44 12.39 12.37 12.45 12.39
9 12.44 12.55 12.44 12.37 12.55
10 12.35 12.38 12.45 12.44 12.38
11 12.36 12.37 12.41 12.40 12.40
12 12.51 12.36 12.41 12.37 12.39
13 12.38 12.50 12.45 12.37 12.44
14 12.41 12.37 12.45 12.40 12.36
15 12.37 12.44 12.45 12.41 12.37
Sampling Plan
• Sample every 20 minutes• Each time take five
consecutive samples (Sample size is 5)
• Take 15 such samples
* All values in the table in centimeters
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 584.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Extract the process parameters
Sub-groups
Observations in each sub-group Average 𝑿
Range (R)1 2 3 4 5
1 12.45 12.39 12.55 12.38 12.40 12.434 0.17
2 12.55 12.39 12.40 12.38 12.44 12.432 0.17
3 12.46 12.44 12.44 12.35 12.36 12.410 0.11
4 12.38 12.39 12.55 12.38 12.40 12.420 0.17
5 12.37 12.44 12.45 12.41 12.41 12.416 0.08
6 12.45 12.37 12.44 12.38 12.41 12.410 0.08
7 12.46 12.38 12.35 12.50 12.44 12.426 0.15
8 12.44 12.39 12.37 12.45 12.39 12.408 0.08
9 12.44 12.55 12.44 12.37 12.55 12.470 0.18
10 12.35 12.38 12.45 12.44 12.38 12.400 0.10
11 12.36 12.37 12.41 12.40 12.40 12.388 0.05
12 12.51 12.36 12.41 12.37 12.39 12.408 0.15
13 12.38 12.50 12.45 12.37 12.44 12.428 0.13
14 12.41 12.37 12.45 12.40 12.36 12.398 0.09
15 12.37 12.44 12.45 12.41 12.37 12.408 0.08
Average of all 15 observations 12.417 0.119
* All values in the table in centimeters
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 584.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Establish Control Limits
Sample size (n)
A2 D3 D4
2 1.880 0 3.268
3 1.023 0 2.574
4 0.729 0 2.282
5 0.577 0 2.114
6 0.483 0 2.004
7 0.419 0.076 1.924
8 0.373 0.136 1.864
9 0.337 0.184 1.816
10 0.308 0.223 1.777
Table for selecting values for establishing the control limits for 𝑿 𝒂𝒏𝒅 𝑹 𝑪𝒉𝒂𝒓𝒕𝒔*
* Source: Juran, J.M. and F.M. Gryna, (1995), “Quality Planning and Analysis”, Tata McGraw-Hill, 3rd Edition, New Delhi, pp 385.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Establish Control Limits
In our example,• A2 = 0.577; D3 = 0; D4 = 2.144
* All values in centimeters
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
𝑿𝑪𝒉𝒂𝒓𝒕
X-bar Chart
12.34
12.35
12.36
12.37
12.38
12.39
12.40
12.41
12.42
12.43
12.44
12.45
12.46
12.47
12.48
12.49
12.50
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15Sample Number
Mea
n D
iam
eter
(cm
s)
Sample Means Centre Line UCL LCL
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 585.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
R ChartAn example
R Chart
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
0.18
0.20
0.22
0.24
0.26
0.28
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15Sample Number
Mea
n R
ange
(cm
s)
Sample Range Centre Line UCL LCL
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 585.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
P Chart
• Suppose the same cylinders are subjected to a much simpler testing of merely classifying them as defect
• When the cylinder is beyond the acceptable limits (too small or too big in diameter) it is classified as defect
• Sampling Plan is as follows:
– Sample 100 pieces every 30 minutes for testing
– Collect 12 such samples
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
𝐏 𝐂𝐡𝐚𝐫𝐭
• Step 1: Choose the measurement characteristic:– Diameter of a cylindrical component (cm)
• Step 2: Choose the measurement method– Classify as good or bad (attribute based)
• Step 3: Choose the Control Chart:
– 𝑷 𝑪𝒉𝒂𝒓𝒕
• Step 4: Decide on a Sampling Plan
• Step 5: Collect Data & Establish Control Limits
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Data for the chart
Sampling Plan
• Sample every 30 minutes• Each time take 100
consecutive samples• Take 12 such samples
* All values in the table in centimeters
Sample no. Number of defects
1 10
2 9
3 8
4 11
5 7
6 12
7 7
8 10
9 13
10 12
11 13
12 14
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 586.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Extract the process parameters
* All values in the table in centimeters
Sample no.Number of
defectsp
(%)
1 10 0.10
2 9 0.09
3 8 0.08
4 11 0.11
5 7 0.07
6 12 0.12
7 7 0.07
8 10 0.10
9 13 0.13
10 12 0.12
11 13 0.13
12 14 0.14
Average of all 12 observations 0.105
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Establish Control Limits
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
P Chart p Chart
0.00
0.03
0.06
0.09
0.12
0.15
0.18
0.21
1 2 3 4 5 6 7 8 9 10 11 12Sample No.
Pro
po
rtio
n o
f de
fect
sp Centre Line UCL LCL
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 587.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
C Charts
• Similar to p chart, Instead of proportion of defects, we merely count the number of defects
• Appropriate in certain situations
–Number of knots in a square meter of a cloth
–Number of scratches in a square meter of a smooth finished surface etc.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Computing the limits for C Chart
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Quality Management
Using the Control Charts
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Using the Control Charts
• There are two questions that comes to our mind when it comes to using the control charts:
– Is the process of out of control? What are we supposed to do in that case?
– Is there a way we can detect an impending out of control situation much earlier?
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Process out of controlPoints outside the control limit
0
3
6
9
12
15
18
21
24
1 2 3 4 5 6 7 8 9 10
Num
ber
of
defe
cts
Sample No.
c Chart
c Centre Line UCL LCL
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 588.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Steps to be taken
• Step 1: Remove the outlier and re-compute the control limits (revise the chart parameters)
• Step 2: Perform a detailed investigation to explore any assignable causes for the drift in the performance
• Step 3: If there are no assignable causes, resume the process with revised control parameters
• Step 4: If there are assignable causes implement countermeasures, and resume the process
• Step 5: Stabilize the process, re-establish control limits and ensure the process is in control
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Early Detection of Problems
• The other question pertains to early detection of an impending problem
• Over several years, some useful rules have been created that helps operating personnel to detect a possible drift in the process
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Zones A, B and C
Mean
Zone A Zone B Zone C
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 590.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
When to Stop the Process
• One point beyond Zone A
• Nine points in a row in Zone C or beyond
• Six points in a row, steadily increasing or decreasing
• Fourteen points in a row, alternating up & down
• Two out of three points in a row in Zone A or beyond
• Four out of five points in a row in Zone B and beyond
• Fifteen points in a row in Zone C
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Predictive capability of processesWhich process is better?
• Process B is better than Process A
• Spread of a process is indicative of its capability
• Lesser the spread better is the process
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 591.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Predictive capability of processesWhich process is better?
TargetLSL USL
Process B
Process A
Offset
• Process A is better than Process B
• A process that is aligned closer to the desired target is likely to be more capable
Source: Mahadevan, B. (2015), “Operations Management: Theory & Practice”, Pearson Education, 3rd Edition, pp 592.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Process Capability
• Process Capability is defined by the spread of the process
• Potential capability (Cp) is defined as the ratio of the difference in specification limits to the process spread
Cp =
• Actual capability (Cpk) takes into consideration the extent to which the process has deviated from the desired target
Cpk =
6
)(
Pr
LSLUSL
Capabilityocess
RangeionSpecificat
3
Pr,
3
Pr CentreocessUSLLSLCentreocessMin
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Process Capability & Defects
Process Capability Index (Cpk)
Total Products outside the specification limits
0.25 453,255 ppm
0.50 133,614 ppm
0.60 71,861 ppm
0.80 16,395 ppm
1.00 2,700 ppm
1.20 318 ppm
1.50 7 ppm
1.70 0.34 ppm
2.00 0.0018 ppm
Source: Quality Planning & Analysis, Juran & Gryna, Chapter 17, 3e
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Six sigma Organization
• Cpk is a good measure to predict the defects coming out of a process
– It could be used to target improvements in the process
– Suppliers could be asked to submit their Cpk levels and it can be continuously monitored
• A six sigma organization is one which is able to achieve a Cpk
value of 2
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Quality Management
Issues in Service Quality
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Service Quality IssuesExample
• A flight that is supposed to take off at 7.30 pm is getting delayed.
• The airline customer relationship officer has kept the passengers in the dark about the delay.
• Further, upon mounting pressure announces a departure time which never happened.
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Service Quality IssuesExample
• A week end program in a business school was a disaster as it was nowhere near the expectations of the participants
• A number of e-retailers in the US failed miserably during the Christmas season of 1999. They could not deliver the Christmas gift before Christmas.
• Instead they returned the money paid by the customers with a $ 50 add on to it and an apology note..
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Intangibility
• Performances rather than objects, therefore precise specs. can be rarely set
• Cannot be counted, measured, inventoried, tested and verified in advance to assure quality
• Difficult to understand how consumers perceive & evaluate their services
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Heterogeneity
• Performance vary from producer to producer, consumer to consumer, day to day
• Consistency of behavior from service personnel is difficult to assure
• What firms intend to deliver may be different from what the consumer receives
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Simultaneity
• Not engineered in a plant and then delivered in tact to the consumer
• Quality occurs during service delivery while the consumer interacts with the service personnel
• Consumers’ input may be critical to quality
• The service firm may have less managerial control in real time
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Service Quality Some considerations…
• Service quality is –A measure of how well the service delivered
matches with expectations
–Pre-dominantly is a function of perceptions of the
customers
(Example of the weekend course in a Business School)
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Service Quality Some considerations…
• Quality evaluations are
–Not made solely on the outcome of the service
–They also involve evaluation of the process of delivery
• (Example of Airline Delays & the way it was handled)
• (Example of e-tailers inability to deliver Christmas Gifts)
• Points to difficulty in Service Recovery (after a failure)
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Service QualityThe five gaps model
Gap 1
Gap 4
Gap 5
Gap 3
Gap 2
Source: Parasuraman, A., Zeithhaml, V.A. and Berry, L.L., (1985), “A conceptual model of service quality & its
implications for future research”, Journal of Marketing, 49 (4), 41 – 50.
Firm
Consumer
Expected Service
Perceived Service
Service Delivery
Translation of perceptions
into Service Qlty. Specs.
Management perceptions of
Consumer Expectations
External Communications
to Consumers
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Gaps in Service QualityWhy do they occur?
• Gap 1: Service firm executives may not always understand
– What the consumer wants?
– What features a service must have?
– What levels of performance?
• Gap 2: Means to meet the expectations absent
– Knowledge of consumer expectations exist but not the perceived means to deliver
– Absence of management commitment to quality
• Gap 3: Variability in employee performance
• Gap 4: Problems arising out of communication
– Firms tend to promise more in communications than what they deliver in reality
– Firms tend to neglect to inform consumers of special efforts to assure quality that are not visible to consumers
• Gap 5 = f (Gap 1, Gap 2, Gap 3, Gap 4)
Introduction to Operations Management - IB MahadevanWeek 5
© All Rights Reserved, Indian Institute of Management Bangalore
Service QualityConcluding Remarks…
• Service Quality is more challenging than product quality as it is a function of the perceptions of the customers
• Organizations can use the notion of gaps in service delivery to identify specific improvement opportunities in the service delivery process