To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Process Performance and Quality Chapter 5

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Implement changes 6 Redesign process 5 Evaluating Process Performance Document process 3 Define scope 2 Evaluate performance 4 Figure 5.1 Identify opportunity 1

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. The Costs of Poor Quality  Prevention Costs  Appraisal Costs  Internal Failure Costs  External Failure Costs

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Customer satisfaction TQM Wheel Figure 5.2

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Customer-Driven Definitions of Quality  Conformance to Specifications  Value  Fitness for Use  Support  Psychological Impressions

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Employee Involvement  Cultural Change  Teams

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Plan Do Check ActDemingWheel Figure 5.3

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Common Causes Mean Standard Deviation/ Spread

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Assignable Causes (a) Location GramsAverage Figure 5.4 Average

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Assignable Causes (b) Spread GramsAverage Figure 5.4

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Assignable Causes (c) Shape GramsAverage Figure 5.4

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Sample Means and the Process Distribution Figure 5.5 MeanProcessdistribution Time Distribution of sample means

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts UCLNominal LCL Samples Figure 5.6 Assignable causes likely 123

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Using Control Charts for Process Improvement  Sample the process  When changes are indicated, find the assignable cause  Eliminate problems, incorporate improvements  Repeat the procedure

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Chart Examples Nominal UCL LCL Sample number Variations Figure 5.7 (a)

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Chart Examples Nominal UCL LCL Sample number Variations Figure 5.7 (b)

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Chart Examples Nominal UCL LCL Sample number Variations Figure 5.7 (c)

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Chart Examples Nominal UCL LCL Sample number Variations Figure 5.7 (d)

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Chart Examples Nominal UCL LCL Sample number Variations Figure 5.7 (e)

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Variables West Allis Industries

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Variables Example 5.1 Sample Number1234R x Special Metal Screw _

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Variables Example 5.1 Sample Number1234R x Special Metal Screw _ – =0.0018

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Variables Example 5.1 Sample Number1234R x Special Metal Screw _ – =0.0018

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Variables Example 5.1 Sample Number1234R x Special Metal Screw _ ( )/4= )/4= – =0.0018

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Variables Sample Number1234R x R = x = Special Metal Screw Example 5.1 = _

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 5.1 Control Charts for Variables Control Charts – Special Metal Screw R -Charts R = UCL R = D 4 R LCL R = D 3 R

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 5.1 Control Charts for Variables Table 5.1 Control Chart Factors Factor for UCLFactor forFactor Size ofand LCL forLCL forUCL for Samplex-ChartsR-ChartsR-Charts (n)(A 2 )(D 3 )(D 4 )

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 5.1 Control Charts for Variables Control Charts—Special Metal Screw R -Charts R = D 4 = D 3 = 0 UCL R = D 4 R LCL R = D 3 R

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 5.1 Control Charts for Variables Control Charts—Special Metal Screw R -Charts R = D 4 = D 3 = 0 UCL R = (0.0021) = in. UCL R = D 4 R LCL R = D 3 R

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 5.1 Control Charts for Variables Control Charts—Special Metal Screw R -Charts R = D 4 = D 3 = 0 UCL R = (0.0021) = in. LCL R = 0 (0.0021) = 0 in. UCL R = D 4 R LCL R = D 3 R

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 5.1 Control Charts for Variables Control Charts—Special Metal Screw R -Charts R = D 4 = D 3 = 0 UCL R = (0.0021) = in. LCL R = 0 (0.0021) = 0 in. UCL R = D 4 R LCL R = D 3 R

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Range Chart - Special Metal Screw Figure 5.8

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 5.1 Control Charts for Variables Control Charts—Special Metal Screw X -Charts UCL x = x + A 2 R LCL x = x - A 2 R = = R = x = =

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 5.1 Control Charts for Variables Control Charts—Special Metal Screw X -Charts UCL x = x + A 2 R LCL x = x - A 2 R = = R = x = = Table 5.1 Control Chart Factors Factor for UCLFactor forFactor Size ofand LCL forLCL forUCL for Samplex-ChartsR-ChartsR-Charts (n)(A 2 )(D 3 )(D 4 )

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 5.1 Control Charts for Variables Control Charts—Special Metal Screw x -Charts UCL x = x + A 2 R LCL x = x - A 2 R = = R = A 2 = x = =

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 5.1 Control Charts for Variables Control Charts—Special Metal Screw x -Charts UCL x = (0.0021) = in. UCL x = x + A 2 R LCL x = x - A 2 R = = R = A 2 = x = =

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 5.1 Control Charts for Variables Control Charts—Special Metal Screw x -Charts UCL x = (0.0021) = in. LCL x = – (0.0021) = in. UCL x = x + A 2 R LCL x = x - A 2 R = = R = A 2 = x = =

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. x -Chart— Special Metal Screw Figure 5.9

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. x -Chart— Special Metal Screw Figure 5.9   Sample the process   Find the assignable cause   Eliminate the problem   Repeat the cycle

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Variables Using  UCL x = (1.5)/ 6 = 6.20 min UCL x = 5.0 – 1.96(1.5)/ 6 = 3.80 min Example 5.2 UCL x = x + z  x LCL x = x – z  x  x =  /  n == Sunny Dale Bank x =5.0 minutes  =1.5 minutes n =6 customers z =1.96 =

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Attributes HOMETOWN BANK Hometown Bank

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Attributes Hometown Bank UCL p = p + z  p LCL p = p – z  p  p = p (1 – p )/ n Example 5.3

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 5.3 Control Charts for Attributes Hometown Bank UCL p = p + z  p LCL p = p - z  p  p = p (1 - p )/ n SampleWrong NumberAccount Number Total 147 Total defectives Total observations p = n = 2500

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 5.3 Control Charts for Attributes Hometown Bank UCL p = p + z  p LCL p = p - z  p  p = p (1 - p )/ n SampleWrong NumberAccount Number Total (2500) p = n = 2500

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 5.3 Control Charts for Attributes Hometown Bank UCL p = p + z  p LCL p = p - z  p  p = p (1 - p )/ n SampleWrong NumberAccount Number Total 147 p = n = 2500

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 5.3 Control Charts for Attributes Hometown Bank UCL p = p + z  p LCL p = p - z  p  p = p (1 - p )/ n SampleWrongProportion NumberAccount NumberDefective Total 147 p = n = 2500

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Attributes Hometown Bank UCL p = p + z  p LCL p = p – z  p  p = p (1 – p )/ n n = 2500 p = Example 5.3

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Attributes Hometown Bank UCL p = p + z  p LCL p = p – z  p  p = (1 – )/2500 n = 2500 p = Example 5.3

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Attributes Hometown Bank UCL p = p + z  p LCL p = p – z  p  p = n = 2500 p = Example 5.3

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Attributes Hometown Bank  p = n = 2500 p = Example 5.3 UCL p = (0.0014) LCL p = – 3(0.0014)

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. UCL p = LCL p = Control Charts for Attributes Hometown Bank  p = n = 2500 p = Example 5.3

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. p -Chart Wrong Account Numbers Figure 5.10

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. p -Chart Wrong Account Numbers Figure 5.10   Sample the process   Find the assignable cause   Eliminate the problem   Repeat the cycle

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Attributes Woodland Paper Company

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Attributes c = 20 z = 2 UCL c = c + z c LCL c = c – z c Example 5.4 Woodland Paper Company

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Attributes Example 5.4 c = 20 z = 2 UCL c = LCL c = 20 – 2 20 Woodland Paper Company

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Attributes Example 5.4 c = 20 z = 2 UCL c = LCL c = Woodland Paper Company

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Attributes Example 5.4 Woodland Paper Company

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Control Charts for Attributes Woodland Paper Company Example 5.4   Sample the process   Find the assignable cause   Incorporate the improvement   Repeat the cycle

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved Minutes Upperspecification LowerspecificationNominalvalue Process Capability (a) Process is capable Figure 5.12 Process distribution

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Process Capability (b) Process is not capable Minutes Upperspecification LowerspecificationNominalvalue Figure 5.12 Process distribution

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Lowerspecification Mean Upperspecification Nominal value Process Capability Six sigma Four sigma Two sigma Figure 5.13

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Process Capability C pk = Minimum of Upper specification – x 3  x – Lower specification 3 ,== Cp =Cp =Cp =Cp = Upper specification - Lower specification 6  Process Capability Ratio Process Capability Index

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Process Capability Intensive Care Lab Upper specification = 30 minutes Lower specification = 20 minutes Average service = 26.2 minutes  = 1.35 minutes Example 5.5

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Process Capability Intensive Care Lab Upper specification = 30 minutes Lower specification = 20 minutes Average service = 26.2 minutes  = 1.35 minutes Example 5.5 C pk = Minimum of ProcessCapabilityIndex Upper specification – x 3  x – Lower specification 3 ,==

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Process Capability Intensive Care Lab Upper specification = 30 minutes Lower specification = 20 minutes Average service = 26.2 minutes  = 1.35 minutes Example 5.5 ProcessCapabilityIndex C pk = Minimum of 26.2 – (1.35), 30.0 – (1.35)

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Process Capability Intensive Care Lab Upper specification = 30 minutes Lower specification = 20 minutes Average service = 26.2 minutes  = 1.35 minutes Example 5.5 ProcessCapabilityIndex C pk = Minimum of 1.53, 0.94

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Process Capability Intensive Care Lab Upper specification = 30 minutes Lower specification = 20 minutes Average service = 26.2 minutes  = 1.35 minutes Example 5.5 ProcessCapabilityIndex C pk = 0.94 ProcessCapabilityRatio Cp =Cp =Cp =Cp = Upper specification - Lower specification Lower specification 6 

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Process Capability Intensive Care Lab Upper specification = 30 minutes Lower specification = 20 minutes Average service = 26.2 minutes  = 1.35 minutes Example 5.5 ProcessCapabilityIndex C pk = 0.94 ProcessCapabilityRatio Cp =Cp =Cp =Cp = (1.35)

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Process Capability Intensive Care Lab Upper specification = 30 minutes Lower specification = 20 minutes Average service = 26.2 minutes  = 1.35 minutes Example 5.5 ProcessCapabilityIndex C pk = 0.94 ProcessCapabilityRatio C p = 1.23

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Process Capability Intensive Care Lab Upper specification = 30 minutes Lower specification = 20 minutes Average service = 26.1 minutes  = 1.20 minutes Example 5.5 ProcessCapabilityIndexProcessCapabilityRatio C pk = 1.08 C p = 1.39 After process modification

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Taguchi's Quality Loss Function Figure 5.14 Loss (dollars) LowerNominalUpper specificationvaluespecification

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Six Sigma Improvement Model Define the current process using characteristics critical to customer satisfaction and determine gapsDefine the current process using characteristics critical to customer satisfaction and determine gaps Measure the work processes that affect the gapMeasure the work processes that affect the gap Analyze the data focusing on process analysisAnalyze the data focusing on process analysis Improve the processImprove the process Control the revised process to maintain new performance levelsControl the revised process to maintain new performance levels

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Six Sigma Implementation Top Down CommitmentTop Down Commitment Measurement Systems to Track ProgressMeasurement Systems to Track Progress Tough Goal SettingTough Goal Setting EducationEducation CommunicationCommunication Customer PrioritiesCustomer Priorities ASQ 6 Sigma Forum

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. ISO9000 ISO14000 International Quality Documentation Environmental Management SystemsEnvironmental Management Systems Environmental Performance EvaluationEnvironmental Performance Evaluation Environmental LabelingEnvironmental Labeling Life-Cycle AssessmentLife-Cycle Assessment

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.  Category 1—Leadership 120 points  Category 2—Strategic Planning 85 points  Category 3—Customer and Market Focus 85 points  Category 4—Information and Analysis 90 points  Category 5—Human Resource Focus 85 points  Category 6—Process Management 85 points  Category 7—Business Results 450 points Criteria for Performance Excellence

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.  Leadership— Leadership system, values, expectations, and public responsibilities  Strategic Planning— The effectiveness of strategic and business planning and deployment of plans, focusing on performance requirements  Customer and Market Focus— How the company determines customer and market requirements and achieves customers satisfaction  Information and Analysis— The effectiveness of information systems to support customer driven performance excellence and marketplace success  Human Resource Focus— The success of efforts to realize the full potential of the work force to create a high-performance organization  Process Management— The effectiveness of systems and processes for assuring the quality of products and services  Business Results— Performance results and competitive benchmarking in customer satisfaction, financials, human resources, suppliers, and operations