Intro to Operaons/Supply Chain Quality of Conformance (QOC) – degree to which the product or service Goal of SPC – to dierenate between
f SPC – to dierenate between random and assignable 4) Specicaons are greater than natural variaon, but
OM - The design, operaon, and improvement of manufacturing and
service systems to ensure that consumers can get what they want, where
they want it, and at a price they are willing to pay – ops is transformaon
processes that create and deliver rm’s products
Transformaon process types: physical (manufacturing), locaonal
(transportaon), exchange (retailing), storage (warehousing),
physiological (health care), informaonal (telecommunicaons)
Characteriscs of goods: tangible, producon/= consumpon,
inventoried, low customer interacon
Characteriscs of services: intangible, produce=consume, no inventory,
high customer interacon
Decision Making: strategy(design): medium to long-term, $$$ &
operaonal (taccal): day-to-day decisions
Supply Chain Management - Management of the ow of informaon,
people, materials, products, and services across a network of customers,
enterprises, and supply chain partners
Why Go Global – Favourable cost, Access to markets, response to change
in demand, source of supply, trends
Scienc management: systemac analysis of work methods quality
revoluon: emphasis on quality & strategic role of ops lean producon:
adaptaon of mass producon, prizes quality & exibility
Producvity, Compeveness and Strategy
Compeveness – degree to which a rm can produce goods and
services that meet the needs of markets while simultaneously
maintaining or expanding its net income
Producvity - measurement of compeveness and how well resources
are ulized to maintain a certain level of output
Single Factor Producvity – Output/labour
Mul-Factor Producvity – Output/Labour + Materials + Overhead
Total Factor: goods & services produced/all inputs used to produce them
Factors Aecng Producvity – methods and management, equipment
and technology, labour force
Strategy - Provides direcon for achieving the company’s mission
Mission Statement – concise view of what company does and sells and
the marketplace it operates in
Vision – direcon to take the company (5 to 10 years)
Values – common beliefs that individuals share within the company
Strategy formulaon
Dene Primary Task: purpose of rm/what they do
Assess core competencies: what rm does beer than anyone else
Determine order winners and order qualiers
Posioning the rm: how rm chooses to compete
Deploying strategy: balanced scorecard (nancial, customer, process,
learning)
Factors aecng Firm Compeveness and Posioning
Cost: removing waste, lean producon, examine cost structure
Flexibility: adjust to changes, mass customizaon (Nike ID)
Quality: minimizing defects, conforming to specs (Ritz Carleton)
Speed: fast moves and adaptaons (McDonalds)
Innovaon: corporate culture encourages risk taking, learning
Operaons Strategy
A set of coordinated policies, objecves, and acon plans, directly
aecng the operaons funcon
Quality Management
Quality – ability of good/service to consistently meet/exceed
expectaons of the consumers – sasfy needs
Fitness for use: how well product/service does what it’s supposed to do
Quality of design: degree to which quality characteriscs designed into
product/service (consumers perspecve)
Quality Control – monitoring, tesng, and correcng quality problems
aer they occur
Quality Assurance – providing condence that a products quality will be
good by prevenng defects before they occur
Dimensions of Quality – Products: Performance, Special Features,
Reliability, Conformance, Durability, Serviceability, Aesthecs, Safety,
Percepons
Dimensions of Quality – Services: Timeliness, Completeness, Courtesy,
Consistency, Accessibility and convenience, accuracy, responsiveness
CYCLE (TAKT) TIME= total time available/desired output
# OF WS=sum of task times/cycle time
EFFIECIENCY=total task time/# of WS (workstations)
is produced according to its design. This depends on design of producon
process, performance level of machinery, equipment, technology,
materials, employee training and supervision, and stascal quality
control techniques (employer perspecve)
Total Quality Management – Involves everyone in the organizaon in the
management and connual improvement of quality and customer
sasfacon – CI, data, employee empowerment, team approach, supplier
partnership, fail-safeing
QMS: system to achieve customer sasfacon that complements other
company systems
Sased customers are less likely to switch to a competor
Employee Empowerment is crical for quality improvement
Parcipave Problem solving – employees are directly involved
Kaizen – involves everyone in process of CI
Quality Tools
Process Flow Chart: diagram of steps in the process
Cause and Eect Diagram (shbone) – graph causes of quality
Check Sheet – tallying number of defects
Histogram – diagram showing frequency of data
Pareto Analysis – tallying the % of defects by problem type
Scaer Diagram -relaonship between variables
Stascal Process Control Chart – upper and lower limits and used at
CRITICAL POINTS in the process, or points that normally go out of
control/costly if it does
Quality Circles – voluntary group of workers who address quality
problems
Benets of Quality
Higher Protability from Improved product quality and in turn premium
process or lower manufacturing/warranty expenses
Costs of Quality
Prevenon Costs: incurred in product design including planning, product
design, process, training, and informaon costs
Appraisal(monitoring) Costs: Measuring, tesng, and analysing including
inspecon and tesng, test equipment and operator costs
Internal Failure: discovered before delivery including scrap, rework,
downme, and price reducons
External Failure: Discovered aer delivery including complaints, returns,
warranty, liability
Doing things wrong costs 20-30% of revenues while doing something
right is only 3-4%
Cost of Good Quality (Prevenon/Appraisal) – Fails are COPQ
Quality Index Measures
Labour Index: Quality Cost/ Labour Hours
Cost Index: Quality Cost/Manufacturing Cost
Sales Index: Quality Cost/Sales
Producon Index: Quality cost/ output
Quality index: total quality costs/base*(100)
Yield
Product Yield = (total input) (% good units) + (total input) (1−%good
units) (% reworked)
Product Cost
Cost = (KD*I + KR*R)/Y
KD = Direct Manufacturing Cost
I = Input
KR = Rework Cost Per unit
R = Reworked Units
Y = Yield
Yield for a Mulstage Process
Yield = Input * good quality percentages at dierent stages
Inial Batch Size = Yield/Percentages at dierent stages
Quality Producvity Rao
QPR = [Good Quality Units/ (Input) (Processing Cost) + (Reworked Units)
(Rework cost)] *100
QPR = # good units produced/ total processing cost
Stascal Process Control– method that uses sampling and charts to
monitor the producon process to evaluate, detect and prevent bad
quality.
Process is in control if: 1)No sample points outside of the acceptable
limits 2) Most points are near process average 3) Approximately an even
number of points above and below mean 4) Points are randomly
distributed
variaon and random causes
Assignable Causes – special causes that are idenable and
correctable;
Random Causes – inherent in a process and are natural to
happen
Aributes Charts
Aribute: quality characterisc with discrete response
P-Chart
Proporon of defecve items in each sample
z = standard deviaons from the process average
p ̅ = sample proporon defecve (esmate of process average)
Op = standard deviaon of sample proporon
C-Chart
Use when not possible to count proporons of defecve items,
so a count is used, number of defects per unit
z = number of standard deviaons from the process average
C ̅ = mean number of defects per item
Oc = sample standard deviaon, Oc = √ (C ̅)
Variable Charts
Variable: Quality charac. that is connuous and measurable
Mean
When Sigma is Known – indicates how sample mean relates to
process average or mean
Ox ̅ = standard deviaon of the distribuon of sample
means (Ox ̅ = O/√n)
O = process standard deviaon
n= sample size
k= number of samples
z= number of standard deviaons from the process mean
X̿ = average of the sample means (process mean)
When Sigma is UNKNOWN
A_2 obtained from Control Factors Table
R̅ = average of sample ranges
X̿ = average of the sample means (process mean)
Range
UCL = D4R-bar, LCL = D3R-bar, R-bar = sum(R)/k
Both Process average and variability must be in control.
Xbar chart detects shi in central tendency
R Chart detects increase in dispersion
To idenfy a paern, look for:
8 consecuve points on one side of the center line
8 consecuve points up or down
14 points alternang up or down
2 out of 3 consecuve points in zone A (on one side)
4 out of 5 consecuve points in zone A or B (on one side)
Process Capability – ability of a process to produce acceptable
outputs that conform to design specicaons (tolerance)
Comparing natural variability and design variability
Natural Variability – what is measured with control charts
Design Specicaons – product requirements
4 States
1) Natural variaon exceeds design specicaons; process is not
capable of meeng specs all of the me
2) Natural variaon and design specs are the same; process is
capable of meeng specs almost all of the me
3) Design specs are greater than natural variaon; process is
capable of meeng specs all of the me
process is o centre; capable but some output will not
meet specicaon.
Process Capability Rao
CP
If CP > = 1, process range is less than or equal to design
range, process is capable of meeng specs
If CP < 1, process range is greater than design range,
process is not capable of meeng specs
Use if process is centered
Process Capability Index
CPK
Cpk > 1, process is capable of meeng design specs
Cpk = 1, process is centred on the design target
Cpk < 1, process has shied toward upper or lower design
spec, whichever is the minimum
Use when process is not centered
Product and Service Design
Eecve design can provide a compeve edge
match product (or service) characteriscs with customer
requirements, ensure that customer requirements are met
in the simplest and least costly manner, reduce me
required to design a new product or service, minimize
revisions necessary to make a design workable
Design Process: Idea Generaon (perceptual maps,
benchmarking, reverse engineering), Feasibility Study
(market, economic, tech/strategy, performance),
Prototyping (form design = how product looks, funconal
design = how product performs, producon design = how
product will be made – simplicaon, standardizaon,
modular, design for manufacture), nal design & process
plans
Design denes appearance, sets standards, materials,
dimensions and tolerances
Reliability - probability that a product will perform its
intended funcon for a specied period of me under
normal condions of use
Reliability can be improved through:
Overdesign: Enhance reliability by using more durable,
more expensive materials to avoid a parcular type of
product failure
Design Simplicaon: Reduce the number of parts thereby
reducing failures points and increasing the probability that
the system is going to work as planned
Redundancy in Design (backup): This means that if you
want to increase the probability that the car will start,
provide a second starter that can be used in the event that
the rst starter fails
System Availability (maintainability)
MTBF = me/#failures = mean me between failures
MTTR = mean me to repair
Services are…
characterized by high levels of customer contact
intangible, perishable, and cannot be inventoried
inseparable from the service delivery
oen decentralized and geographically dispersed (e.g.,
hotels, banks, restaurants)
can be easily emulated
output is variable
Elements of Waing Line Analysis: Calling populaon
(source of customers, innite or nite), channels (number
of parallel servers), phases (number of servers in a
sequence customers must go through)
Waing Line Analysis Psychology: anxiety makes waing seem longer,
uncertain & unexplained & solo waing is worse than opposites, give ppl
something to do while waing, more valuable – longer wait worth
Queuing Theory
Arrival rate: rate at which customers arrive at the service facility
follows a probability distribuon, usually Poisson with mean (λ)
Service rate: rate at which customers are served, follows a probability
distribuon, usually Poisson with mean (μ) me required to serve a
customer, usually described by negave exponenal distribuon with
mean (1/ μ)
Mean service rate (per hour) must be greater than mean arrival rate (per
hour) i.e., λ < μ, otherwise the queue will become innitely long.
Liles Law: The average number of customers in the queuing system is
equal to the product of the mean arrival rate into the system and the
average me a customer spends waing in a system
L=λW
Lq= λqWq
Operang Characteriscs
L = average number of customers in system (wait & serve) = λ/ μ- λ
LQ = average number of customers waing in line = λ 2/ μ (μ- λ)
W = Average me customer spends in system (wait & serve) = L/λ
Wq = Average me customer spends in line = Lq / λ
p = probability that server is busy, and a customer must wait = ulizaon
rate = λ/μ
I = Probability that server is idle and another customer can be served
= 1-p = 1- λ/μ = P0
P0 = Probability that no customers are in the system = 1- λ/μ
Pn = Probability of n customers in system = (λ/μ) n (1- λ/μ)
Process Planning and Analysis
Process: a group of related tasks with specic inputs and outputs
Process design: denes what tasks need to be done and how they are
coordinated among funcons, people, and organizaons
Process strategy: an organizaon’s overall approach for physically
producing goods and services (vercal integraon, capital intensity,
process exibility, customer involvement)
Process planning: determines how rm produces product/service
(decide to make/buy, select producon process, develop specicaons of
producon)
Vercal integraon: extent to which rm will produce inputs and control
outputs of each stage of producon process
Capital intensity: mix of capital (i.e., equipment, automaon) and labor
resources used in producon process
Process exibility: ease with which resources can be adjusted in
response to changes in demand, technology, products or services, and
resource availability
Customer involvement: role of the customer in the producon process
Process Selecon Chart:
Outsource or not: cost, capacity, quality, speed, reliability, experse
Process plans are a set of documents and drawings that detail
manufacturing and service delivery specicaons [assembly charts (bill
of materials), operaons sheets, quality-control check-sheets]
Process Analysis: A systemac examinaon of all aspects of a process to
improve its operaon – faster, more ecient, less costly, more responsive
Tools for Process Analysis:
Process Flowchart: show sequence of ops, dene boundaries/capacity
limitaons, dene units of ow, facilitate observaon of process and data
collecon
Process Map: Map out acvies performed by various ppl in the process
Breakeven Analysis
Assumpons: number of units produced can be sold, xed costs are
constant regardless of units produced, variable costs vary with volume of
units produced, TR = TC
Easy Formula:
(Fixed cost B – Fixed Cost A / Variable Cost A – Variable Cost B)
Breakeven Analysis for Process Selecon
1) Formulate total cost equaon for each process considered and order
from smallest xed cost to largest
2) Eliminate redundant ones (if higher FC & VC)
3) Calculate point of indierence (TCA = TCB)
4) For volumes GREATER THAN point of indierence, choose alternave
with HIGHER FC or LOWER VC
5) For volumes LOWER THAN point of indierence, choose alternave with
LOWER FC or HIGHER VC
Capacity and Facility Design
Capacity is the throughput, or the maximum number of units a facility can
hold, receive, store, or produce in a given period of me.
Levels: Long-term (overall level of resources in the long term 1yr+),
intermediate-term (aggregate planning), short-term (capacity requirement
planning)
A boleneck is the operaon with lowest capacity in a process
Factors aecng Capacity
Facilies and Machines: oorspace, layout / Product Mix: standardized vs
high variety / Workers: skills, training / Planning and Operaonal Factors:
scheduling, inventory / External Factors: product standards, polluon
Capacity planning is the process of establishing the overall level of a rm’s
producve resources and involves strategic acvies such as acquiring new
facilies, technologies, or businesses.
When to increase capacity and by how much?
volume and certainty of ancipated demand
strategic objecves (growth, customer service, compeon)
costs of expansion and operaon
Importance of Long-term capacity Planning
Impacts ability to meet future demands and customer responsiveness
Aects operang costs, Major determinant of inial costs, Involves long
term commitment, Aects compeveness, Aects ease of management,
Requires Advanced Planning
Consideraons for capacity planning
1)Design exibility into systems
2)Dierenate between new and mature products
3)Take a “big picture” approach to capacity changes
4)Choose capacity ming and increments
5)Prepare to deal with capacity “chunks” by developing cushion, large (20%)
for industries where demand is variable and customer service, small for
capital-intensive industries
Aempt to smooth out capacity requirements
Use capacity cushion (% of capacity held in reserve for unexpected
occurrences) to oset surges in demand and work stoppages
Aim is to achieve the best operang level
Economies of scale: unit cost down, output volume up – opposite of
diseconomies of scale
Capacity Expansion Strategies
Lead – expanded in ancipaon of demand growth.
Average – expanded to coincide with average expected demand.
Lag – expanded aer an increase in demand has been documented.
Layout refers to the arrangement of acvies, processes, departments,
workstaons, storage areas, aisles, and common areas within a facility
Goal: minimize material handling costs
Cellular layout: (group dissimilar machines into work centres/cells,
combine exibility of process w/ eciency of assembly)
Advantages: reduce material handling/transit me, reduce setup, reduce
WIP inventory, beer use of HR, easier to control, easier to automate
Disadvantages: Inadequate part families, poorly balanced cells, expanded
training & scheduling of workers, capital investment
Flexible Manufacturing System: programmable machine tools, automated
tool changing, controlled by computer
Mixed-model assembly line: produce mulple models,
reduce changeover me, cross-training, u-shape
Many objecves of facility layout design:
Ensure smooth ow of work, material, people, and
informaon
Minimize movement and material-handling costs
Use space and labor eciently
Eliminate producon bolenecks and increase capacity
Facilitate communicaon and interacon (workers,
supervisors, customers)
Reduce manufacturing cycle me and customer service me
Fixed-posion layouts: used for projects in which product
cannot be moved
Process (funconal) layouts: group similar acvies together
according to process or funcon they perform
Product (assembly line) layouts: arrange acvies in line
according to sequence of operaons for a parcular product
or service
Assembly Line Balancing
Assumpons: workstaons in serial, processing mes known
Let j be the number of disnct tasks that must be performed
on each unit processed on the assembly line
Let tj be the me required to complete tasks j
Flow Time (me to complete a unit)
Theorecal Minimum # of Workstaons (round up)
Measures of Line Balance Eciency
n = actual # of workstaons,
Ca = actual cycle me, max(t1, t2, t3)
Desired Cycle Time: Producon me available/desired units
of output = Cd
Line Balancing Procedure: 1) Draw precedence diagram 2)
nd Cd 3) nd N 4) group tasks into workstaons 5)measure
eciency 6) determine if E is good, if not do 4
Learning Curves
The learning curve reects the fact that each me the
number of units produced doubles, the processing me per
unit decreases by a constant percentage
10% decrease in task me is represented by a 90% learning
curve. The lower the learning curve, the greater the benet
The unit me (i.e., the number of direct labor hours
required) for the nth unit can be calculated using the
formula: tn = t1nb
where:
tn = me for the nth unit
t1 = me for the rst unit
n = cumulave number of units produced
b = ln r/ln 2 where r is the learning curve percentage in
decimal (90% = 0.9)
Calculang Number of Units Required
b = ln (learning percentage/100) ÷ ln (2)
Applicaons include:
Negoated selling/purchasing prices
Labor planning and scheduling
Assessing labor training needs and performance
Forecasng our ability to meet future needs for services
such as health care
Changes to pre-producon factors such as tooling and
machine upgrades
Increases pre-process employee training and movaon
Process changes/improvements
Product redesign
Changes in layout
Improvements in support services
Lot size increases
Learning percentage may dier between organizaons and by type
of work, making it beer to base learning percentage on empirical
studies within an organizaon rather than assumed percentage
(from some other organizaon)
Projecons based on learning curves should be regarded as
approximaons of actual mes and treated accordingly
Considerable care should be taken to ensure that the rst unit me
is valid. It may be desirable to revise the rst unit me as it may
change due to me compression, design changes, equipment
problems, etc.
Learning curves are not useful for mass producon because the
associated tasks are usually simple, and learning takes place
quickly before the curve aens
Users of learning curves somemes fail to include carryover eects
that some workers might have from pervious jobs; previous
experience with similar acvies can reduce unit mes
Learning curve applicaons: most important in complex, repeve
operaons where work pace is determined by people, not
machines
Other informaon
Quality Gurus
W. Edwards Deming - Developed courses during WW II to teach
stascal quality-control techniques to engineers and execuves of
military suppliers. Aer war, began teaching stascal quality
control to Japanese companies
Philip Crosby - In 1979, emphasized that costs of poor quality far
outweigh cost of prevenng poor quality. In 1984, dened
absolutes of quality management—conformance to requirements,
prevenon, and “zero defects”
Kaoru Ishikawa - Promoted use of quality circles, developed
“shbone” diagram
Deming’s 14 Points
Create a constancy of purpose toward product improvement to
achieve long-term organizaonal goals.
Adopt a philosophy of prevenng poor-quality products
Eliminate the need for inspecon to achieve quality by relying
instead on stascal quality control to improve product and
process design.
Select a few suppliers or vendors based on quality
Constantly improve the producon process by focusing on the two
primary sources of quality problems, the system and employees,
thus increasing producvity and reducing costs.
Instute worker training that focuses on the prevenon of quality
problems and the use of stascal quality-control techniques.
Insll leadership among supervisors to help employees perform
beer.
Encourage employee involvement by eliminang the fear of
reprisal for asking quesons or idenfying quality problems.
Eliminate barriers between departments, promote cooperaon
and teamwork
Eliminate slogans and numerical targets
Eliminate numerical quotas
Enhance worker pride
Instute vigorous educaon and training programs in the
methods of quality improvement throughout the organizaon,
from top management down, so that connuous improvement can
occur.
Develop a commitment to quality from top management
Wheel: plan, do, check, act PROJECT (JOB) SHOP - one unit of
output at a time, autobody custom workshop ex. worker skills
1, volume 4, flexibility 1, uniformity 4, capital cost 4. BATCH
PROCESSIN - produced in batches, bakery or brewery.
worker skills 2, volume 3, flexibililty 2, uniformity 3, capital
cost 3. REPETITIVE - higher volue of output, car assembly
plant. worker skills 3, volume 2, flexibility 3, uniformity 2,
capital cost 2. CONTINUOUS - highest level out output, steel
mill or paper plant. worker skills 4, volume 1, flexibility 4,
uniformity 1, capital cost 1.