LECTURE 9 LSM 733 PRODUCTION OPERATIONS MANAGEMENT By

LECTURE 9 LSM 733 -PRODUCTION OPERATIONS MANAGEMENT By: OSMAN BIN SAIF 1

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

Summary of last session (Contd. ) þ International Quality Standards þ ISO 9000 þ ISO 14000 3

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

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

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

Agenda for this session (Contd. ) þ Tools for Generating Ideas þCheck sheets þScatter diagrams þCause-and-effect diagrams þ Tools to Organize the Data þPareto charts þFlowcharts þ Tools for Identifying Problems þHistogram þStatistical process control chart 7

Seven Tools of TQM (a) Check Sheet: An organized method of recording data Defect 1 2 A B C /// // 3 Hour 4 5 / / 6 7 8 / // //// Figure 6. 6 8

Seven Tools of TQM Productivity (b) Scatter Diagram: A graph of the value of one variable vs. another variable Absenteeism 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 Cause Materials Methods Effect Manpower Machinery Figure 6. 6 10

Seven Tools of TQM Percent Frequency (d) Pareto Chart: A graph to identify and plot problems or defects in descending order of frequency A B C D E Figure 6. 6 11

Seven Tools of TQM (e) Flowchart (Process Diagram): A chart that describes the steps in a process Figure 6. 6 12

Seven Tools of TQM Histogram: A distribution showing the frequency of occurrences of a variable Distribution Frequency (f) Repair time (minutes) Figure 6. 6 13

Seven Tools of TQM (g) Statistical Process Control Chart: A chart with time on the horizontal axis to plot values of a statistic Upper control limit Target value Lower control limit Time Figure 6. 6 14

Cause-and-Effect Diagrams Method (shooting process) Material (ball) Grain/Feel (grip) Size of ball Aiming point Bend knees Air pressure Hand position Lopsidedness Follow-through Training Conditioning Consistency Missed free-throws Rim size Motivation Rim alignment Concentration Manpower (shooter) Balance Machine (hoop & backboard) Rim height Backboard stability Figure 6. 7 15

Pareto Charts Data for October 70 – Frequency (number) 60 – 54 – 72 50 – 40 – Number of occurrences 30 – 20 – 12 10 – 4 3 2 Pool hours 5% Minibar 4% Misc. 3% 0 – Room svc 72% Check-in 16% Cumulative percent – 100 – 93 – 88 Causes and percent of the total 16

Flow Charts MRI Flowchart 1. 2. 3. 4. 5. 6. 1 7. 8. 9. 10. Physician schedules MRI Patient taken to MRI Patient signs in Patient is prepped Technician carries out MRI Technician inspects film 2 3 4 If unsatisfactory, repeat Patient taken back to room MRI read by radiologist MRI report transferred to physician 11. Patient and physician discuss 5 6 7 80% 8 11 9 10 20% 17

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

An SPC Chart Plots the percent of free throws missed 20% Upper control limit 10% Coach’s target value 0% | | | | | 1 2 3 4 5 6 7 8 9 Lower control limit Game number Figure 6. 8 19

Inspection þ Involves examining items to see if an item is good or defective þ Detect a defective product þ Does not correct deficiencies in process or product þ It is expensive þ Issues þ When to inspect þ 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 þ Many problems þ Worker fatigue þ Measurement error þ Process variability þ Cannot inspect quality into a product þ Robust design, empowered employees, and sound processes are better solutions 22

Source Inspection þ Also known as source control þ The next step in the process is your customer þ 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 Jones Law Office Receptionist performance Standard Is phone answered by the second ring Billing Accurate, timely, and correct format Attorney Promptness in returning calls Table 6. 5 24

Service Industry Inspection Organization Hard Rock Hotel What is Inspected Standard Reception desk Use customer’s name Doorman Greet guest in less than 30 seconds Room All lights working, spotless bathroom Minibar Restocked and charges accurately posted to bill Table 6. 5 25

Service Industry Inspection Organization Arnold Palmer Hospital What is Inspected Standard Billing Accurate, timely, and correct format Pharmacy Prescription accuracy, inventory accuracy Lab Audit for lab-test accuracy Nurses Charts immediately updated Admissions Data entered correctly and completely Table 6. 5 26

Service Industry Inspection Organization Olive Garden Restaurant What is Inspected Standard Busboy Serves water and bread within 1 minute Busboy Clears all entrée items and crumbs prior to dessert Waiter Knows and suggest specials, desserts Table 6. 5 27

Service Industry Inspection Organization Nordstrom Department Store What is Inspected Standard Display areas Attractive, well-organized, stocked, good lighting Stockrooms Rotation of goods, organized, clean Salesclerks Neat, courteous, very knowledgeable Table 6. 5 28

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

TQM In Services þ Service quality is more difficult to measure than the quality of goods þ Service quality perceptions depend on þ Intangible differences between products þ 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 þ Reliability þ Responsiveness þ Competence þ Access þ Courtesy þ Communication þ Credibility þ Security þ Understanding/ knowing the customer þ Tangibles 33

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

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

Process, Volume, and Variety Volume Repetitive Process Figure 7. 1 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 Low Volume Process Focus projects, job shops (machine, print, carpentry) Standard Register High Volume Mass Customization (difficult to achieve, but huge rewards) Dell Computer Repetitive (autos, motorcycles) Harley-Davidson Poor Strategy (Both fixed and variable costs are high) Product Focus (commercial baked goods, steel, glass) Nucor Steel 37

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

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

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

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

Process Flow Diagram Customer Purchasing Accounting Customer sales representative Vendors PREPRESS DEPT Receiving PRINTING DEPT Warehouse Information flow Material flow COLLATING DEPT GLUING, BINDING, STAPLING, LABELING POLYWRAP DEPT SHIPPING Customer Figure 7. 2 42

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

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

Process Flow Diagram Frame tube bending Frame-building work cells Frame machining Hot-paint frame painting THE ASSEMBLY LINE TESTING 28 tests Roller testing Engines and transmissions Incoming parts Air cleaners Oil tank work cell Fluids and mufflers Shocks and forks Fuel tank work cell Handlebars Wheel work cell Fender work cell From Milwaukee on a JIT arrival schedule Crating Figure 7. 3 45

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

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

Product Focus D Continuous caster Nucor Steel Plant C E Scrap steel A B Ladle of molten steel Continuous cast steel sheared into 24 -ton slabs Hot tunnel furnace - 300 ft Electric furnace F Hot mill for finishing, cooling, and coiling I H G 48

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

Mass Customization Table 7. 1 Item Vehicle models Vehicle types Bicycle types Software titles Web sites Movie releases 267 New book titles 40, 530 Houston TV channels Breakfast cereals 160 Items (SKUs) in 14, 000 supermarkets LCD TVs Number of Choices 1970 s 21 st Century 140 18 8 0 0 458 77, 446 5 340 150, 000 286 1, 212 19 400, 000 98, 116, 993 0 102 185 50

Mass Customization Repetitive Focus Figure 7. 5 Supportive supply chains Flexible people and equipment Modular techniques Mass Customization Effective scheduling techniques Process-Focused High variety, low volume Low utilization (5% to 25%) General-purpose equipment Rapid throughput techniques Product-Focused Low variety, high volume High utilization (70% to 90%) Specialized equipment 51

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

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

Summary of this Session (Contd. ) þ Tools for Generating Ideas þCheck sheets þScatter diagrams þCause-and-effect diagrams þ Tools to Organize the Data þPareto charts þFlowcharts þ Tools for Identifying Problems þHistogram þStatistical process control chart 54

THANK YOU 55