LSM733-PRODUCTION OPERATIONS MANAGEMENT By: OSMAN BIN SAIF LECTURE 9 1

 Global Company Profile: Arnold Palmer Hospital  Quality and Strategy  Defining Quality  Implications of Quality  Malcolm Baldrige National Quality Award  Cost of Quality (COQ)  Ethics and Quality Management Summary of last session 2

 International Quality Standards  ISO 9000  ISO14000 Summary of last session (Contd.) 3

 Total Quality Management  Continuous Improvement  Six Sigma  Employee Empowerment  Benchmarking  Just-in-Time (JIT)  Taguchi Concepts  Knowledge of TQM Tools Summary of last session (Contd.) 4

 Tools of TQM  Check Sheets  Scatter Diagrams  Cause-and-Effect Diagrams  Pareto Charts  Flowcharts  Histograms  Statistical Process Control (SPC) Agenda for this session 5

 The Role of Inspection  When and Where to Inspect  Source Inspection  Service Industry Inspection  Inspection of Attributes versus Variables  TQM in Services Agenda for this session (Contd.) 6

 Tools for Generating Ideas  Check sheets  Scatter diagrams  Cause-and-effect diagrams  Tools to Organize the Data  Pareto charts  Flowcharts  Tools for Identifying Problems  Histogram  Statistical process control chart Agenda for this session (Contd.) 7

//// ////// ///// ////// /// // / Hour Defect A B C / // / Seven Tools of TQM (a)Check Sheet: An organized method of recording data Figure 6.6 8

Seven Tools of TQM (b)Scatter Diagram: A graph of the value of one variable vs. another variable Absenteeism Productivity Figure 6.6 9

Seven Tools of TQM (c)Cause-and-Effect Diagram: A tool that identifies process elements (causes) that might effect an outcome Figure 6.6 CauseMaterialsMethods ManpowerMachinery Effect 10

Seven Tools of TQM (d)Pareto Chart: A graph to identify and plot problems or defects in descending order of frequency Figure 6.6 Frequency Percent ABCDEABCDEABCDEABCDE 11

Seven Tools of TQM (e)Flowchart (Process Diagram): A chart that describes the steps in a process Figure

Seven Tools of TQM (f)Histogram: A distribution showing the frequency of occurrences of a variable Figure 6.6 Distribution Repair time (minutes) Frequency 13

Seven Tools of TQM (g)Statistical Process Control Chart: A chart with time on the horizontal axis to plot values of a statistic Figure 6.6 Upper control limit Target value Lower control limit Time 14

Cause-and-Effect Diagrams Material(ball) Method (shooting process) Machine (hoop & backboard) Manpower(shooter) Missed free-throws Figure 6.7 Rim alignment Rim size Backboard stability Rim height Follow-through Hand position Aiming point Bend knees Balance Size of ball Lopsidedness Grain/Feel (grip) Air pressure TrainingConditioning Motivation Concentration Consistency 15

Pareto Charts Number of occurrences Room svcCheck-inPool hoursMinibarMisc. 72%16%5%4%3% – – – – – – – – – – – 0 0 – Frequency (number) Causes and percent of the total Cumulative percent Data for October 16

Flow Charts MRI Flowchart 1.Physician schedules MRI 2.Patient taken to MRI 3.Patient signs in 4.Patient is prepped 5.Technician carries out MRI 6.Technician inspects film 7.If unsatisfactory, repeat 8.Patient taken back to room 9.MRI read by radiologist 10.MRI report transferred to physician 11.Patient and physician discuss % %

Statistical Process Control (SPC)  Uses statistics and control charts to tell when to take corrective action  Drives process improvement  Four key steps  Measure the process  When a change is indicated, find the assignable cause  Eliminate or incorporate the cause  Restart the revised process 18

An SPC Chart Upper control limit Coach’s target value Lower control limit Game number ||||||||| ||||||||| %10%0% Plots the percent of free throws missed Figure

Inspection  Involves examining items to see if an item is good or defective  Detect a defective product  Does not correct deficiencies in process or product  It is expensive  Issues  When to inspect  Where in process to inspect 20

When and Where to Inspect 1.At the supplier’s plant while the supplier is producing 2.At your facility upon receipt of goods from the supplier 3.Before costly or irreversible processes 4.During the step-by-step production process 5.When production or service is complete 6.Before delivery to your customer 7.At the point of customer contact 21

Inspection  Many problems  Worker fatigue  Measurement error  Process variability  Cannot inspect quality into a product  Robust design, empowered employees, and sound processes are better solutions 22

Source Inspection  Also known as source control  The next step in the process is your customer  Ensure perfect product to your customer Poka-yoke is the concept of foolproof devices or techniques designed to pass only acceptable product 23

Service Industry Inspection Organization What is Inspected Standard Jones Law Office Receptionist performance BillingAttorney Is phone answered by the second ring Accurate, timely, and correct format Promptness in returning calls Table

Service Industry Inspection Organization What is Inspected Standard Hard Rock Hotel Reception desk DoormanRoomMinibar Use customer’s name Greet guest in less than 30 seconds All lights working, spotless bathroom Restocked and charges accurately posted to bill Table

Service Industry Inspection Organization What is Inspected Standard Arnold Palmer Hospital BillingPharmacyLabNursesAdmissions Accurate, timely, and correct format Prescription accuracy, inventory accuracy Audit for lab-test accuracy Charts immediately updated Data entered correctly and completely Table

Service Industry Inspection Organization What is Inspected Standard Olive Garden Restaurant BusboyBusboyWaiter Serves water and bread within 1 minute Clears all entrée items and crumbs prior to dessert Knows and suggest specials, desserts Table

Service Industry Inspection Organization What is Inspected Standard Nordstrom Department Store Display areas StockroomsSalesclerks Attractive, well-organized, stocked, good lighting Rotation of goods, organized, clean Neat, courteous, very knowledgeable Table

Attributes Versus Variables  Attributes  Items are either good or bad, acceptable or unacceptable  Does not address degree of failure  Variables  Measures dimensions such as weight, speed, height, or strength  Falls within an acceptable range  Use different statistical techniques 29

TQM In Services  Service quality is more difficult to measure than the quality of goods  Service quality perceptions depend on  Intangible differences between products  Intangible expectations customers have of those products 30

Service Quality The Operations Manager must recognize: 1.The tangible component of services is important 2.The service process is important 3.The service is judged against the customer’s expectations 4.Exceptions will occur 31

Service Specifications at UPS 32

Determinants of Service Quality  Reliability  Responsiveness  Competence  Access  Courtesy  Communication  Credibility  Security  Understanding/ knowing the customer  Tangibles 33

Service Recovery Strategy  Managers should have a plan for when services fail  Marriott’s LEARN routine  Listen  Empathize  Apologize  React  Notify 34

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Dell Computer Company Mass customization provides a competitive advantage  Sell custom-built PCs directly to consumer  Lean production processes and good product design allow responsiveness  Integrate the Web into every aspect of its business  Focus research on software designed to make installation and configuration of its PCs fast and simple 36

Process, Volume, and Variety Process Focus projects, job shops (machine, print, carpentry) Standard Register Repetitive (autos, motorcycles) Harley-Davidson Product Focus (commercial baked goods, steel, glass) Nucor Steel High Variety one or few units per run, high variety (allows customization) Changes in Modules modest runs, standardized modules Changes in Attributes (such as grade, quality, size, thickness, etc.) long runs only Mass Customization (difficult to achieve, but huge rewards) Dell Computer Poor Strategy (Both fixed and variable costs are high) Low Volume Repetitive Process High Volume Volume Figure

Process Strategies  How to produce a product or provide a service that  Meets or exceeds customer requirements  Meets cost and managerial goals  Has long term effects on  Efficiency and production flexibility  Costs and quality 38

Process Strategies Four basic strategies  Process focus  Repetitive focus  Product focus  Mass customization Within these basic strategies there are many ways they may be implemented 39

Process Focus  Facilities are organized around specific activities or processes  General purpose equipment and skilled personnel  High degree of product flexibility  Typically high costs and low equipment utilization  Product flows may vary considerably making planning and scheduling a challenge 40

Process Focus Many inputs Many variety of outputs Job Shop Many departments and many routings 41

Accounting Process Flow Diagram Information flow Material flow Figure 7.2 COLLATING DEPT GLUING, BINDING, STAPLING, LABELING POLYWRAP DEPT SHIPPING Customer PRINTING DEPT PREPRESS DEPT Vendors Receiving Warehouse PurchasingCustomer Customer sales representative 42

Repetitive Focus  Facilities often organized as assembly lines  Characterized by modules with parts and assemblies made previously  Modules may be combined for many output options  Less flexibility than process-focused facilities but more efficient 43

Repetitive Focus Raw materials and module inputs Modules combined for many output options Few modules Automobile Assembly Line 44

Process Flow Diagram THE ASSEMBLY LINE TESTING 28 tests Oil tank work cell Shocks and forks Handlebars Fender work cell Air cleaners Fluids and mufflers Fuel tank work cell Wheel work cell Roller testing Incoming parts From Milwaukee on a JIT arrival schedule Engines and transmissionsFrame tube bending Frame-building work cells Frame machining Hot-paint frame painting Crating Figure

Product Focus  Facilities are organized by product  High volume but low variety of products  Long, continuous production runs enable efficient processes  Typically high fixed cost but low variable cost  Generally less skilled labor 46

Product Focus Few inputs Output variations in size, shape, and packaging Continuous Work Flow 47

Product Focus Nucor Steel Plant Continuous caster Continuous cast steel sheared into 24-ton slabs Hot tunnel furnace ft Hot mill for finishing, cooling, and coiling DE F G H I Scrap steel Ladle of molten steel Electric furnace A B C 48

Mass Customization  The rapid, low-cost production of goods and service to satisfy increasingly unique customer desires  Combines the flexibility of a process focus with the efficiency of a product focus 49

Mass Customization Vehicle models Vehicle types181,212 Bicycle types819 Software titles0400,000 Web sites098,116,993 Movie releases New book titles40,53077,446 Houston TV channels5185 Breakfast cereals Items (SKUs) in 14,000150,000 supermarkets supermarkets LCD TVs0102 Number of Choices Item1970s21 st Century Table

Mass Customization Effective scheduling techniques Rapid throughput techniques Repetitive Focus Flexible people and equipment Process-Focused High variety, low volume Low utilization (5% to 25%) General-purpose equipment Product-Focused Low variety, high volume High utilization (70% to 90%) Specialized equipment Figure 7.5 Modular techniques Supportive supply chains 51

 Tools of TQM  Check Sheets  Scatter Diagrams  Cause-and-Effect Diagrams  Pareto Charts  Flowcharts  Histograms  Statistical Process Control (SPC) Summary of this Session 52

 The Role of Inspection  When and Where to Inspect  Source Inspection  Service Industry Inspection  Inspection of Attributes versus Variables  TQM in Services Summary of this Session (Contd.) 53

 Tools for Generating Ideas  Check sheets  Scatter diagrams  Cause-and-effect diagrams  Tools to Organize the Data  Pareto charts  Flowcharts  Tools for Identifying Problems  Histogram  Statistical process control chart Summary of this Session (Contd.) 54

THANK YOU 55