Beruflich Dokumente
Kultur Dokumente
Engineering
Department
Finance
Department
Human
Resource
Department
Management
Information
System
Department
Raw
Materials
Stores
Materials
Management
Division
Researc
!
Development
"lant
Engineering
Department
Mar#eting
$epartment
%ustomer
In
&arget Mar#et
'en$or(
Suppliers
"ro$uction
Department
)sop floor*
+uality
,ssurance
Department
%ustomer
Support
Department
Sales
Department
Factory
Management
!
Liasioning
, -ir$ view of "ro$uction System
Introduction
Production and operations management (POM) is the
management of an organizations production system.
A production system takes inputs and converts them into
outputs.
The conversion process is the predominant activity of a
production system.
The primary concern of an operations manager is the activities
of the conversion process.
Todays !actors Affecting POM
"#o$a# %ompetition
&.'. (ua#ity) %ustomer 'ervice) and %ost %ha##enges
%omputers and Advanced Production Techno#ogy
"ro*th of &.'. 'ervice 'ector
'carcity of Production +esources
Issues of 'ocia# +esponsi$i#ity
,ifferent -ays to 'tudy POM
Production as a 'ystem
Production as an Organization !unction
,ecision Making in POM
Inputs of a Production 'ystem
./terna#
0ega#) .conomic) 'ocia#) Techno#ogica#
Market
%ompetition) %ustomer ,esires) Product Info.
Primary +esources
Materia#s) Personne#) %apita#) &ti#ities
%onversion 'u$system
Physica# (Manufacturing)
0ocation 'ervices (Transportation)
./change 'ervices (+etai#ing)
'torage 'ervices (-arehousing)
Other Private 'ervices (Insurance)
"overnment 'ervices (!edera#) 'tate) 0oca#)
Production as a 'ystem
Inputs Inputs Outputs Outputs
Conversion Conversion
Subsystem Subsystem
Production System Production System
Control Control
Subsystem Subsystem
Outputs of a Production 'ystem
,irect
Products
'ervices
Indirect
-aste
Po##ution
Techno#ogica# Advances
Production as an Organization !unction
1&.'. companies cannot compete using marketing) finance)
accounting) and engineering a#one.
1-e focus on POM as *e think of g#o$a# competitiveness) $ecause
that is *here the vast ma2ority of a firms *orkers) capita# assets) and
e/penses reside.
1To succeed) a firm must have a strong operations function teaming
*ith the other organization functions.
,ecision Making in POM
1'trategic ,ecisions
1Operating ,ecisions
1%ontro# ,ecisions
'trategic ,ecisions
1These decisions are of strategic importance and have #ong3term
significance for the organization.
1./amp#es inc#ude deciding4
5the design for a ne* products production process
5*here to #ocate a ne* factory
5*hether to #aunch a ne*3product deve#opment p#an
Operating ,ecisions
1These decisions are necessary if the ongoing production of goods
and services is to satisfy market demands and provide profits.
1./amp#es inc#ude deciding4
5ho* much finished3goods inventory to carry
5the amount of overtime to use ne/t *eek
5the detai#s for purchasing ra* materia# ne/t month
%ontro# ,ecisions
1These decisions concern the day3to3day activities of *orkers) 6ua#ity
of products and services) production and overhead costs) and
machine maintenance.
1./amp#es inc#ude deciding4
5#a$or cost standards for a ne* product
5fre6uency of preventive maintenance
5ne* 6ua#ity contro# acceptance criteria
-hat %ontro#s the Operations 'ystem7
1Information a$out the outputs) the conversions) and the inputs is fed
$ack to management.
1This information is matched *ith managements e/pectations
1-hen there is a difference) management must take corrective action
to maintain contro# of the system
.at is Operations Management/
Defined
Operations management (OM) is defined as the design) operation)
and improvement of the systems that create and de#iver the firms
primary products and services
1The !uture of Operations
5Outsourcing everything
5'mart factories
5Ta#king inventory
5Industria# army of ro$ots
5-hats in the $o/
5Mass customization
5Persona#ized recommendations
5'ign here) p#ease
.y Stu$y Operations
Management/
-usiness E$ucation
Systematic ,pproac
to Org0 "rocesses
%areer Opportunities
%ross1Functional
,pplications
Operations
Management
Operations Management Decision &ypes
1'trategic (#ong3term)
1Tactica# (intermediate3term)
1Operationa# p#anning and contro# (short3term)
.at is a &ransformation "rocess/
Defined
A transformation process is defined as a use of resources to
transform inputs into some desired outputs Transformations
1Physica#33manufacturing
10ocation33transportation
1./change33retai#ing
1'torage33*arehousing
1Physio#ogica#33hea#th care
1Informationa#33te#ecommunications
&e Importance of Operations Management
1'ynergies must e/ist *ith other functiona# areas of the organization
1Operations account for 893:9; of the direct e/penses that $urden a
firms profit.
%ore Services "erformance O23ectives
Operations
Management
Fle4i2ility
+uality
Spee$
"rice )or cost
Re$uction*
The Basics of Operations Management
1Operations Management
5The process of managing the resources that are needed to produce
an organizations goods and services.
5Operations managers focus on managing the <five Ps= of the firms
operations4
1Peop#e) p#ants) parts) processes) and p#anning and contro# systems.
The Production 'ystem
1Input
5A resource re6uired for the manufacture of a product or service.
1%onversion 'ystem
5A production system that converts inputs (materia# and human
resources) into outputs (products or services)> a#so the production
process or techno#ogy.
1Output
5A direct outcome (actua# product or service) or indirect outcome
(ta/es) *ages) sa#aries) of a production system.
?asic Types of Production Processes
1Intermittent Production 'ystem
5Production is performed on a start3and3stop $asis) such as for the
manufacture of made3to3order products.
1Mass Production
5A specia# type of intermittent production process using standardized
methods and sing#e3use machines to produce #ong runs of
standardized items.
Types of Production system
Manufacturing System
Service System
%ontinuous "ro$uction
Intermittent "ro$uction
-atc "ro$uction
5o2 "ro$uction
Mass pro$uction) Flow*
"rocessing "ro$uction
Mass Customization
5,esigning) producing) and de#ivering customized products to
customers for at or near the cost and convenience of mass3produced
items.
5Mass customization com$ines high production vo#ume *ith high
product variety.
5.#ements of mass customization4
1Modu#ar product design
1Modu#ar process design
1Agi#e supp#y net*orks
Continuous Production Processes
5A production process) such as those used $y chemica# p#ants or
refineries) that runs for very #ong periods *ithout the start3and3stop
$ehavior associated *ith intermittent production.
5.normous capita# investments are re6uired for high#y automated
faci#ities that use specia#3purpose e6uipment designed for high
vo#umes of production and #itt#e or no variation in the type of outputs.
Mass Production 'ystem (!#o*)
Continuous Production
1Anticipation of demand
1May not have uniform production
1'tandardized +a* materia#
1?ig vo#ume of #imited product #ine
1'tandard faci#ity3 high standardization.
1!i/ed se6uence of operation
1Materia# hand#ing is easier
1@igh ski##ed operator not re6uired
1More @uman pro$#em is foreseen
1@uge investment.
1@igh ra* materia# inventory.
Processing Production System
1./tended form of mass production system
1!." of one stage is fed to ne/t stage
1More automatic machines
1One $asic ra* materia# is transferred into severa# products at severa#
stages.
10ess high#y ski##ed *orkers re6uired
1More human pro$#ems foreseen
1@igh#y standardized system
Batch Production System
1@igh#y specia#ized @uman resource is re6uired
1@igh#y specia#ized mu#ti tasking machines
1Machines are shared.
1Production in $atches
1Production #ots are $ased on customer demand or order.
1Ao sing#e se6uence of operation
1!inished goods are heterogeneous
Custom built / job order production system
1@igh#y specia#ized @uman resource is re6uired
1@igh#y specia#ized mu#ti tasking machines
1Machines are shared
1+a* materia# is not standardized
1Process is not standardized
1Ao scope for repetition of production
%omparative stu$y of $ifferent pro$uction systems
&ype
"arameter
MassB !#o* Process Co$ ?atch
"er unit
manf0cost
Hig Low Hig Hig
Si6e !
%apital
Invest0
Large
Less
'0 Large
Hig
Small
Low
Me$ium
Hig
Fle4i2ility 7o 7o More More
&ecnical
a2ility S#ills
Less Less Hig Hig
Orgn0
Structure
Line staff Line staff Functional Functional
In$ustrial
application
,utomo2ile
Sugar
Refinery
%emical
"etroleum
Mil# proces0
%onstruction
-ri$ges
S"M
%onsumer
pro$0
M(c0 &ools
%ompetitiveness8 Strategy8 an$ "ro$uctivity
%ompetitiveness9
@o* effective#y an organization meets the *ants and needs of
customers re#ative to others that offer simi#ar goods or services
?usinesses %ompete &sing Marketing
1Identifying consumer *ants and needs
1Pricing
1Advertising and promotion
?usinesses %ompete &sing Operations
1Product and service design
1%ost
10ocation
1(ua#ity
1(uick response
?usinesses %ompete &sing Operations
1!#e/i$i#ity
1Inventory management
1'upp#y chain management
1'ervice
-hy 'ome Organizations !ai#
1Too much emphasis on short3term financia# performance
1!ai#ing to take advantage of strengths and opportunities
1!ai#ing to recognize competitive threats
1Aeg#ecting operations strategy
-hy 'ome Organizations !ai#
1Too much emphasis in product and service design and not enough
on improvement
1Aeg#ecting investments in capita# and human resources
1!ai#ing to esta$#ish good interna# communications
1!ai#ing to consider customer *ants and needs
Strategy
'trategies
P#ans for achieving organizationa# goa#s
Mission
The reason for e/istence for an organization
Mission 'tatement
Ans*ers the 6uestion <-hat $usiness are *e in7=
"oa#s
Provide detai# and scope of mission
Tactics
The methods and actions taken to accomp#ish strategies
MissionB'trategyBTactics
How does mission, strategies and tactics relate to
decision making and distinctive competencies?
Strategy Strategy &actics &actics Mission Mission
Strategy and Tactics
,istinctive %ompetencies
The special attributes or abilities that give an organization a
competitive edge
Price
(ua#ity
Time
!#e/i$i#ity
'ervice
0ocation
P#anning and ,ecision Making
Mission
"oa#s
Organizationa# 'trategies
!unctiona# "oa#s
!inance 'trategies Marketing 'trategies
Operations
'trategies
Tactics Tactics Tactics
Operating procedures Operating procedures
Operating procedures
Operations Strategy
1Operations strategy 5 The approach) consistent *ith organization
strategy) *hich is used to guide the operations function.
'trategy !ormu#ation
1,istinctive competencies
1.nvironmenta# scanning
1'-OT
1Order 6ua#ifiers
1Order *inners
Banks, ATMs Convenience
ocation ocation
!isneyland
"ordstroms
Superior customer
service
Service Service
Bur#er $in#
Supermarkets
%ariety
%olume
&le'ibility &le'ibility
('press Mail, &ede',
One)*our p*oto, +PS
,apid delivery On)time
delivery
Time Time
Sony T%
e'us, Cadillac
Pepsi, $odak, Motorola
-i#*)per.ormance desi#n
or *i#* /uality Consistent
/uality
0uality 0uality
+1S1 .irst)class posta#e
Motel)2, ,ed ,oo. Inns
o3 Cost
Price Price
./amp#es of ,istinctive
Strategy !ormulation
1Order 6ua#ifiers
5%haracteristics that customers perceive as minimum standards of
accepta$i#ity to $e considered as a potentia# purchase
1Order *inners
5%haracteristics of an organizations goods or services that cause it
to $e perceived as $etter than the competition
"ey #$ternal !actors
1.conomic conditions
1Po#itica# conditions
10ega# environment
1Techno#ogy
1%ompetition
1Markets
"ey %nternal !actors
1@uman +esources
1!aci#ities and e6uipment
1!inancia# resources
1%ustomers
1Products and services
1Techno#ogy
1'upp#iers
&uality and Time Strategies
1(ua#ity3$ased strategies
5!ocuses on maintaining or improving the 6ua#ity of an organizations
products or services
5(ua#ity at the source
1Time3$ased strategies
5!ocuses on reduction of time needed to accomp#ish tasks
Operations Strategy and Competitiveness
1Operations 'trategy
1A !rame*ork for Operations 'trategy
1Meeting the %ompetitive %ha##enge
1Productivity Measurement
4
Operations 'trategy 5 'trategic
A#ignment
Customer "eeds Corporate Strate#y
Operations Strate#y
Alignmen
t
Core
Competencie
s
Decision
s
Processes, In.rastructure, and Capabilities
Operations Priorities
%ost
(ua#ity
,e#ivery 'peed (A#so) Ae* Product Introduction 'peed)
,e#ivery !#e/i$i#ity
"reenness
,e#ivery +e#ia$i#ity
%oping *ith %hanges in ,emand
Other Product3'pecific %riteria
OP#'(T%O)S ST'(T#*+ OB,#CT%-#S
u &R,7SL,&E M,R:E& +.(MT' TO 'P.%I!I%
OP.+ATIOA' P+IMA+D MI''IOA'
u ,SSURE O"ER,&IO7S IS %,",-LE TO A%%OMP0I'@
P+IMA+D MI''IOA.
E) '."M.AT MA+F.T ?D P+O,&%T "+O&P'
G) I,.ATI!D P+O,&%T +.(&I+.M.AT'
H) ,.T.+MIA. O+,.+ -IAA.+' AA, (&A0I!I.+'
I) %OAJ.+T O+,.+ -IAA.+' IATO 'P.%I!I% P.+!O+MAA%.
+.(MT'
5
A !rame*ork for Organizationa#
'trategy
Customer
"eeds
"e3 and Current
Products
Per.ormance Priorities
and ,e/uirements
0uality, !ependability,
Service
Speed, &le'ibility, and
Operations 6 Supplier Capabilities
Tec*nolo#y People Systems ,6! CIM 7IT T0M !istribution
Support Plat.orms
&inancial Mana#ement -uman ,esource Mana#ement In.ormation Mana#ement
(nterprise
Capabilities
Strate#ic
%ision
#lements of operation strategy
Positioning the production system
A. Product !ocused
?. Process !ocused
Product B 'ervice p#ans
Out sourcing p#ans
Process techno#ogy p#ans
'trategic a##ocation of resources
!aci#ity p#ans
K%apacity p#ans
K0ocation
K0ayout
.conomic
DE'ELO"I7; "RODU%&IO7 ,7D O"ER,&IO7 S&R,&E;<
%orporate Mission
,ssessment
of 2usiness con$ition
-usiness Strategy
Distinctive %ompetencies
Or .ea#nesses
"ro$uct ( Service "lans
%ompetitive priorities
%ost8 &ime8 +uality !
Fle4i2ility
"ro$uction ( operation Strategy
"ositioning te pro$uction system
"ro$uct ( service plans
"rocess an$ tecnology plans
Strategic allocation of resources
Facility "lan8 %apacity "lan8 Location an$ Layout0
Po#itica#
0ega#
'ocia#
Market
Ana#ysis
%ompetition
-orn out Prod. 'ystem
Automation
'ki##ed @+
@i3tech
Machines
,is 3advantage in
capturing market
0o* prod. cost
,e#ivery performance
@igh 6ua#ity products L
service
%ustomer service L
!#e/i$i#ity
Productivity
A measure of the effective use of resources) usua##y e/pressed as the
ratio of output to input Productivity ratios are used for P#anning
*orkforce re6uirements 'chedu#ing e6uipment
financia# ana#ysis
M%T Commission on %ndustrial Productivity
./01 'ecommendations 2 Still -ery (ccurate Today
10ess emphasis on short3term financia# payoffs and invest more in
+L,.
1+evise corporate strategies to inc#ude responses to foreign
competition.
5greater investment in peop#e and e6uipment
1Fnock do*n communication $arriers *ithin organizations and
recognize mutua#ity of interests *ith other companies and supp#iers.
M%T Commission on Industria# Productivity
./01 'ecommendations
1+ecognize that the #a$or force is a resource to $e nurtured) not 2ust a
cost to $e avoided.
1"et $ack to $asics in managing productionB operations.
5?ui#d in 6ua#ity at the design stage.
5P#ace more emphasis on process innovations rather than focusing
so#e attention on product innovations 3 dramatica##y improve costs)
6ua#ity) speed) L f#e/.
&. '. %ompetitiveness ,rivers
1"ro$uct(Service Development 3 7"D
5Teams speed deve#opment and enhance manufactura$i#ity
1.aste Re$uction (0.AABCIT Phi#osophy)
5-IP) space) too# costs) and human effort
1Improve$ %ustomer1Supplier Relationsips
50ook for -in3-inM Taken from Capanese Feiretsu
1Early ,$option of I& &ecnology Inc#uding
5P% Techno#ogy 5 --- 3 .+P'
Productivity
Partia# measures
outputB(sing#e input)
Mu#ti3factor measures
outputB(mu#tip#e inputs)
Tota# measure
Inputs
Outputs
8 ty Productivi
outputB(tota# inputs)
Productivity Growth
Productivity Growth
%urrent Period Productivity 5 Previous Period
Productivity
Previous Period Productivity
"ro$uctivity ;rowt =
+nits o. output per kilo3att)*our
!ollar value o. output per kilo3att)
*our
(ner#y
Productivity
+nits o. output per dollar input
!ollar value o. output per dollar input
Capital
Productivity
+nits o. output per mac*ine *our
mac*ine *our
Mac*ine
Productivity
+nits o. output per labor *our
+nits o. output per s*i.t
%alue)added per labor *our
abor
Productivity
Examples of Partial Productivity Examples of Partial Productivity
Other !actors (ffecting Productivity
1'tandardization
1(ua#ity
1&se of Internet
1%omputer viruses
1'earching for #ost or misp#aced items
1'crap rates
1Ae* *orkers
1'afety
1'hortage of IT *orkers
10ayoffs
10a$or turnover
1,esign of the *orkspace
1Incentive p#ans that re*ard productivity
!actors Affecting Productivity
%apita
#
(ua#it
y
Techno#og
y
Managemen
t
Improving Productivity
1,eve#op productivity measures
1,etermine critica# ($ott#eneck) operations
1,eve#op methods for productivity improvements
1.sta$#ish reasona$#e goa#s
1"et management support
1Measure and pu$#icize improvements
1,ont confuse productivity *ith efficiency
MO,&0. G
Typical Phases of Product 3evelopment
1P#anning
1%oncept ,eve#opment
1'ystem30eve# ,esign
1,esign ,etai#
1Testing and +efinement
1Production +amp3up
#conomic (nalysis of Project 3evelopment Costs
1&sing measura$#e factors to he#p determine4
5Operationa# design and deve#opment decisions
5"oBno3go mi#estones
1?ui#ding a ?ase3%ase !inancia# Mode#
5A financia# mode# consisting of ma2or cash f#o*s
5'ensitivity Ana#ysis for <*hat if= 6uestions
Designing for te %ustomer
+uality Function
Deployment
'alue ,nalysis(
'alue
Engineering
I$eal
%ustomer
"ro$uct
House of +uality
3esigning for the Customer4 &uality !unction 3eployment
1Interventiona# teams from marketing) design engineering) and
manufacturing
1Joice of the customer
1@ouse of (ua#ity
,esigning for the %ustomer4 Ja#ue Ana#ysisBJa#ue .ngineering
1Achieve e6uiva#ent or $etter performance at a #o*er cost *hi#e
maintaining a## functiona# re6uirements defined $y the customer
5,oes the item have any design features that are not necessary7
5%an t*o or more parts $e com$ined into one7
5@o* can *e cut do*n the *eight7
5Are there nonstandard parts that can $e e#iminated7
,esign for Manufactura$i#ity
1Traditiona# Approach
5<-e design it) you $ui#d it= or <Over the *a##=
%oncurrent .ngineering
5<0ets *ork together simu#taneous#y=
,esign for Manufacturing and Assem$#y
1"reatest improvements re#ated to ,!MA arise from simp#ification of
the product $y reducing the num$er of separate parts4
1,uring the operation of the product) does the part move re#ative to a##
other parts a#ready assem$#ed7
1Must the part $e of a different materia# or $e iso#ated from other parts
a#ready assem$#ed7
1Must the part $e separate from a## other parts to a##o* the
disassem$#y of the product for ad2ustment or maintenance7
Product ,esign
'tandard parts
Modu#ar design
@igh#y capa$#e production systems
%oncurrent
engineering
Process ,esign
Measuring "ro$uct Development
"erformance
Measures
&re/1 o. ne3 products introduced
Time to market introduction
"umber stated and number completed
Actual versus plan
Percenta#e o. sales .rom ne3 products
Time3to3market
Productivity
(ua#ity
(n#ineerin# *ours per pro9ect
Cost o. materials and toolin# per pro9ect
Actual versus plan
Con.ormance)reliability in use
!esi#n)per.ormance and customer satis.action
:ield).actory and .ield
Per.ormance
!imension
'ma## #ot sizes
'etup time reduction
Manufacturing ce##s
0imited *ork in process
(ua#ity improvement
Production f#e/i$i#ity
0itt#e inventory storage
Production !#e/i$i#ity
1+educe do*ntime $y reducing changeover time
1&se preventive maintenance to reduce $reakdo*ns
1%ross3train *orkers to he#p c#ear $ott#enecks
1&se many sma## units of capacity
1&se off3#ine $uffers
1+eserve capacity for important customers
?enefits of 'ma## 0ot 'izes
Re$uces
inventory
Less storage
space
Less
rewor#
"ro2lems are more
apparent
Increases pro$uct
fle4i2ility
Easier to 2alance
operations
&uality %mprovement
1Autonomation
5Automatic detection of defects during production
1Cidoka
5Capanese term for autonomation
Personnel/Organizational #lements
1-orkers as assets
1%ross3trained *orkers
1%ontinuous improvement
1%ost accounting
10eadershipBpro2ect management
Manufacturing Planning and Control
10eve# #oading
1Pu## systems
1Jisua# systems
1%#ose vendor re#ationships
1+educed transaction processing
1Preventive maintenance
Pull/Push Systems
1Pull system 4 'ystem for moving *ork *here a *orkstation pu##s
output from the preceding station as needed. (e.g. Fan$an)
1Push system 4 'ystem for moving *ork *here output is pushed to the
ne/t station as it is comp#eted
Fan$an Production %ontro# 'ystem
1"anban 4 %ard or other device that communicates demand for *ork
or materia#s from the preceding station
1Fan$an is the Capanese *ord meaning <signa#= or <visi$#e record=
1Paper#ess production contro# system
1Authority to pu##) or produce comes
from a do*nstream process.
Kanban Formula
A N Tota# num$er of containers
, N P#anned usage rate of using *ork center
T N Average *aiting time for rep#enishment of parts p#us average
production time for a container of parts
O N Po#icy varia$#e set $y management 3 possi$#e inefficiency in the
system
% N %apacity of a standard container
N =
DT(1
+X !
Traditio"al #upplier Networ$ Traditio"al #upplier Networ$
Buyer
# #
# #
#
#
#
Product and Service 3esign
Ma2or factors in design strategy
%ost
(ua#ity
Time3to3market
%ustomer satisfaction
%ompetitive advantage
Product and service design 5 or redesign 5 shou#d $e
c#ose#y tied to an organizations strategy
Product or Service 3esign (ctivities
1Trans#ate customer *ants and needs into product and service
re6uirements
1+efine e/isting products and services
1,eve#op ne* products and services
1!ormu#ate 6ua#ity goa#s
1!ormu#ate cost targets
1%onstruct and test prototypes
1,ocument specifications
'easons for Product or Service 3esign
1.conomic
1'ocia# and demographic
1Po#itica#) #ia$i#ity) or #ega#
1%ompetitive
1Techno#ogica#
Objectives of Product and Service 3esign
1Main focus
5%ustomer satisfaction
1'econdary focus
5!unction of productBservice
5%ostBprofit
5(ua#ity
5Appearance
5.ase of productionBassem$#y
5.ase of maintenanceBservice
3esigning !or Operations
Taking into account the capa$i#ities of the organization in designing
goods and services
5egal6 #thical6 and #nvironmental %ssues
10ega#
5Product #ia$i#ity
5&niform commercia# code
1.thica#
5+e#easing products *ith defects
1.nvironmenta#
5.PA
'egulations 7 5egal Considerations
1Product 5iability 2 A manufacturer is #ia$#e for any in2uries or
damages caused $y a fau#ty product.
18niform Commercial Code 2 Products carry an imp#ication of
merchanta$i#ity and fitness.
Standardization
1'tandardization
5./tent to *hich there is an a$sence of variety in a product) service
or process
1'tandardized products are immediate#y avai#a$#e to customers
(dvantages of Standardization
1!e*er parts to dea# *ith in inventory L manufacturing
1,esign costs are genera##y #o*er
1+educed training costs and time
1More routine purchasing) hand#ing) and inspection procedures
1Orders fa##i$#e from inventory
1Opportunities for #ong production runs and automation
1Aeed for fe*er parts 2ustifies increased e/penditures on perfecting
designs and improving 6ua#ity contro# procedures.
3isadvantages of Standardization
1,esigns may $e frozen *ith too many imperfections remaining.
1@igh cost of design changes increases resistance to improvements.
1,ecreased variety resu#ts in #ess consumer appea#.
1Mass customization4
5A strategy of producing standardized goods or services) $ut
incorporating some degree degree of customization
5,e#ayed differentiation
5Modu#ar design
3elayed 3ifferentiation
1,e#ayed differentiation is a postponement tactic
5Producing $ut not 6uite comp#eting a product or service unti#
customer preferences or specifications are kno*n
Modular 3esign
Modular design is a form of standardization in *hich component parts
are su$divided into modu#es that are easi#y rep#aced or interchanged.
It a##o*s4
5easier diagnosis and remedy of fai#ures
5easier repair and rep#acement
5simp#ification of manufacturing and assem$#y
'eliability
1'eliability 4 The a$i#ity of a product) part) or system to perform its
intended function under a prescri$ed set of conditions
1!ailure 4 'ituation in *hich a product) part) or system does not
perform as intended
1)ormal operating conditions 4 The set of conditions under *hich an
items re#ia$i#ity is specified
Improving +e#ia$i#ity
%omponent design
ProductionBassem$#y techni6ues
Testing
+edundancyB$ackup
Preventive maintenance procedures
&ser education
'ystem design
Product 3esign
1Product 0ife %yc#es
1+o$ust ,esign
1%oncurrent .ngineering
1%omputer3Aided ,esign
1Modu#ar ,esign
'obust 3esign4 ,esign that resu#ts in products or services that
can function over a $road range of conditions
Taguchi (pproach 'obust 3esign
1,esign a ro$ust product
5Insensitive to environmenta# factors either in manufacturing or in
use.
1%entra# feature is Parameter 3esign
1,etermines4
5factors that are contro##a$#e and those not contro##a$#e
5their optima# #eve#s re#ative to ma2or product advances
3egree of )e9ness
1Modification of an e/isting productBservice
1./pansion of an e/isting productBservice
1%#one of a competitors productBservice
1Ae* productBservice
,egree of ,esign %hange
Type of ,esign
%hange
Ae*ness of the
organization
Ae*ness to the
market
Modification 0o* 0o*
./pansion 0o* 0o*
%#one @igh 0o*
Ae* @igh @igh
Phases in Product 3evelopment Process
E. Idea generation
G. !easi$i#ity ana#ysis
H. Product specifications
I. Process specifications
P. Prototype deve#opment
8. ,esign revie*
Q. Market test
:. Product introduction
R. !o##o*3up eva#uation
+everse .ngineering
Idea "eneration
Ideas
%ompetitor $ased
'upp#y chain $ased
+esearch $ased
'everse engineering is the dismant#ing and inspecting of a
competitors product to discover product improvements.
'esearch 7 3evelopment :'73;
Organized efforts to increase scientific kno*#edge or product
innovation L may invo#ve4
Basic 'esearch advances kno*#edge a$out a su$2ect
*ithout near3term e/pectations of commercia#
app#ications.
(pplied 'esearch achieves commercia# app#ications.
3evelopment converts resu#ts of app#ied research into
commercia# app#ications.
Manufacturability
Manufactura$i#ity is the ease of fa$rication andBor assem$#y
*hich is important for4
%ost
Productivity
(ua#ity
,esigning for Manufacturing ?eyond the overa## o$2ective to achieve
customer satisfaction *hi#e making a reasona$#e profit is4
,esign for Manufacturing (,!M)
The designers consideration of the organizations manufacturing
capa$i#ities *hen designing a product.
The more genera# term design for operations encompasses services
as *e## as manufacturing
Concurrent #ngineering
Concurrent engineering is the $ringing together of engineering design
and manufacturing personne# ear#y in the design phase.
Computer2(ided 3esign
Computer2(ided 3esign :C(3; is product design using
computer graphics.
increases productivity of designers) H to E9 times
creates a data$ase for manufacturing information on
product specifications
provides possi$i#ity of engineering and cost ana#ysis on
proposed designs
Product design
,esign for manufacturing (,!M)
,esign for assem$#y (,!A)
,esign for recyc#ing (,!+)
+emanufacturing
,esign for disassem$#y (,!,)
+o$ust design
'ecycling
1+ecyc#ing4 recovering materia#s for future use
1+ecyc#ing reasons
5%ost savings
5.nvironment concerns
5.nvironment regu#ations
Service 3esign
1'ervice is an act
1'ervice de#ivery system
5!aci#ities
5Processes
5'ki##s
1Many services are $und#ed *ith products
1'ervice design invo#ves
5The physica# resources needed
5The goods that are purchased or consumed $y the customer
5./p#icit services
5Imp#icit services
1'ervice
5'omething that is done to or for a customer
1'ervice de#ivery system
5The faci#ities) processes) and ski##s needed to provide a service
1Product $und#e
5The com$ination of goods and services provided to a customer
1'ervice package
5The physica# resources needed to perform the service
3ifferences bet9een Product and Service 3esign
1Tangi$#e 5 intangi$#e
1'ervices created and de#ivered at the same time
1'ervices cannot $e inventoried
1'ervices high#y visi$#e to customers
1'ervices have #o* $arrier to entry
10ocation important to service
Phases in 'ervice ,esign
1%onceptua#ize
1Identify service package components
1,etermine performance specifications
1Trans#ate performance specifications into design specifications
1Trans#ate design specifications into de#ivery specifications
Service Blueprinting
1'ervice $#ueprinting
5A method used in service design to descri$e and ana#yze a
proposed service
1A usefu# too# for conceptua#izing a service de#ivery system
Major Steps in Service Blueprinting
1.sta$#ish $oundaries
1Identify steps invo#ved
1Prepare a f#o*chart
1Identify potentia# fai#ure points
1.sta$#ish a time frame
1Ana#yze profita$i#ity
Characteristics of <ell 3esigned Service Systems
1%onsistent *ith the organization mission
1&ser friend#y
1+o$ust
1.asy to sustain
1%ost effective
1Ja#ue to customers
1.ffective #inkages $et*een $ack operations
1'ing#e unifying theme
1.nsure re#ia$i#ity and high 6ua#ity
%ha##enges of 'ervice ,esign
1Jaria$#e re6uirements
1,ifficu#t to descri$e
1@igh customer contact
1'ervice 5 customer encounter
&uality !unction 3eployment
1(ua#ity !unction ,ep#oyment
5Joice of the customer
5@ouse of 6ua#ity
+FD4 An approach that integrates the <voice of the customer= into the
product and service deve#opment process.
Operations 'trategy
E. Increase emphasis on component commona#ity
G. Package products and services
H. &se mu#tip#e3use p#atforms
I. %onsider tactics for mass customization
P. 0ook for continua# improvement
8. 'horten time to market
'horten Time to Market
E. &se standardized components
G. &se techno#ogy
H. &se concurrent engineering
Process 'e#ection
Jariety
@o* much
!#e/i$i#ity
-hat degree
Jo#ume
./pected output
Process Types
Co$ shop
'ma## sca#e
?atch
Moderate vo#ume
+epetitiveBassem$#y #ine
@igh vo#umes of standardized goods or services
%ontinuous
Jery high vo#umes of non3discrete goods
Process design
The comp#ete de#ineation and description of specific steps in the
production process and the #inkage among the steps that *i## ena$#e
the production system to produce products of the
desired 6ua#ity
re6uired 6uantity
at re6uired time
at the economica# cost
./pected $y the customer
Types of Process
Pro2ect
Co$ 'hop
?atch
Assem$#y #ine
%ontinuous
Process ,esign
Interrelationsip of "ro$uct an$ "rocess
Design
Feasi2ility Stu$ies
"ro$uct I$ea
"ro$uct Design
"rocess Design
,$vance$ "ro$uct "lanning
,$vance$ Design
"ro$uction "rocess Design
"ro$uct evaluation an$ improvement
"ro$uct use an$ support
Organi6ing te process flow
Relation of process Design to
process Flow
Evaluating te "rocess Design
&o "ro$uce an$ Mar#et 7ew "ro$ucts
Production Technology
The method or Techni6ue used in %onverting the +a* materia#
into '!" or !" .conomica##y) .ffective#y and efficient#y is
termed as Production Techno#ogy.
The Selection of Technology
Time
%ost
Type of Product
Jo#ume of production
./pected Productivity
Technica# %omp#e/ity invo#ved
,egree of @uman ski## re6uired
,egree of (ua#ity re6uired
Avai#a$i#ity of Techno#ogy
The ,egree of O$so#escence e/pected.
MO,&0. H
!aci#ity P#anning
0ong range capacity p#anning)
!aci#ity #ocation
!aci#ity #ayout
Strategic %apacity "lanning
Defined
%apacity can $e defined as the a$i#ity to ho#d) receive) store) or
accommodate.
Strategic capacity planning is an approach for determining
the overa## capacity #eve# of capita# intensive resources)
inc#uding faci#ities) e6uipment) and overa## #a$or force size.
%apacity Utili6ation
%apacity uti#ization rate N %apacity used
?est operating #eve#
%apacity used
rate of output actua##y achieved
?est operating #eve#
capacity for *hich the process *as designed
E4ample of %apacity Utili6ation
,uring one *eek of production) a p#ant produced :H units of a
product. Its historic highest or $est uti#ization recorded *as EG9
units per *eek. -hat is this p#ants capacity uti#ization rate7
Ans*er4
%apacity uti#ization rate N %apacity used .
?est operating #eve#
N :HBEG9
N9.8R or 8R;
-est Operating Level
&nderuti#ization
?est
Operating
0eve#
Average
unit cost
of output
Jo#ume
Overuti#ization
Economies ! Diseconomies
of Scale
E993unit
p#ant
G993unit
p#ant
H993unit
p#ant
I993unit
p#ant
Jo#ume
Average
unit cost
of output
.conomies of 'ca#e and the ./perience %urve *orking
,iseconomies of 'ca#e start *orking
Capacity !ocus
The concept of the focused factory ho#ds that production
faci#ities *ork $est *hen they focus on a fair#y #imited set of
production o$2ectives.
P#ants -ithin P#ants (P-P) (from 'kinner)
./tend focus concept to operating #eve#
Capacity !le$ibility
!#e/i$#e p#ants
!#e/i$#e processes
&e E4perience %urve
Tota# accumu#ated production of units
%ost or
price
per unit
As p#ants produce more products) they
gain e/perience in the $est production
methods and reduce their costs per
unit.
!#e/i$#e *orkers
%apacity "lanning
!re6uency of %apacity Additions
./terna# 'ources of %apacity
Determining %apacity Re>uirements
!orecast sa#es *ithin each individua# product #ine.
%a#cu#ate e6uipment and #a$or re6uirements to meet the
forecasts.
Pro2ect e6uipment and #a$or avai#a$i#ity over the p#anning
horizon.
%apacity "lanning9 -alance
Maintaining 'ystem ?a#ance
'tage E 'tage G 'tage H
&nits
per
month
8)999 Q)999 I)P99
E4ample of %apacity Re>uirements
A manufacturer produces t*o #ines of mustard) !ancy !ine and
"eneric #ine. .ach is so#d in sma## and fami#y3size p#astic $ott#es.
The fo##o*ing ta$#e sho*s forecast demand for the ne/t four years.
:ear; < = 4 >
FancyFine
Small ?@@@sA B@ 2@ 5@ <@@
&amily ?@@@sA 4B B@ C@ D@
Generic
Small ?@@@sA <@@ <<@ <=@ <>@
&amily ?@@@sA 5@ D@ <@@ <<@
E4ample of %apacity Re>uirements9 E>uipment an$ La2or
Re>uirements
:ear; < = 4 >
Small ?@@@sA <B@ <C@ =@@ =>@
&amily ?@@@sA <<B <>@ <C@ =@@
Three E99)999 units3per3year machines are avai#a$#e for sma##3$ott#e
production. T*o operators re6uired per machine.
T*o EG9)999 units3per3year machines are avai#a$#e for fami#y3sized3
$ott#e production. Three operators re6uired per machine.
12.= Capacity Planning
:ear; < = 4 >
Small ?@@@sA <B@ <C@ =@@ =>@
&amily ?@@@sA <<B <>@ <C@ =@@
Small Mac*1 Cap1 4@@,@@@ abor 2
Family-size Mac*1 Cap1 =>@,@@@ abor 2
Small
Percent capacity used B@1@@E
Mac*ine re/uirement <1B@
abor re/uirement 41@@
Family-size
Percent capacity used >C1D=E
Mac*ine re/uirement @1D2
abor re/uirement =155
(uestion4 -hat are the Dear E va#ues for capacity) machine) and #a$or7
<B@,@@@F4@@,@@@8B@E At < mac*ine .or <@@,@@@, it
takes <1B mac*ines .or <B@,@@@
At = operators .or
<@@,@@@, it takes 4
operators .or <B@,@@@
The McGraw-Hill Companies, Inc., 2001
<2
12.> Capacity Planning
:ear; < = 4 >
Small ?@@@sA <B@ <C@ =@@ =>@
&amily ?@@@sA <<B <>@ <C@ =@@
Small Mac*1 Cap1 4@@,@@@ abor 2
Family-size Mac*1 Cap1 =>@,@@@ abor 2
Small
Percent capacity used B@1@@E
Mac*ine re/uirement <1B@
abor re/uirement 41@@
Family-size
Percent capacity used >C1D=E
Mac*ine re/uirement @1D2
abor re/uirement =155
(uestion4 -hat are the va#ues for co#umns G) H and I i n the ta$#e $e#o*7
B212CE
<1C@
41>@
B5144E
<1<C
41B@
2212CE
=1@@
>1@@
C@154E
<1>=
>1=B
5@1@@E
=1>@
>15@
54144E
<12C
B1@@
<C
The McGraw-Hill Companies, Inc., 2001
Planning Service Capacity
Time
0ocation
Jo#ati#ity of ,emand
Capacity 8tilization 7 Service &uality
?est operating point is near Q9; of capacity
!rom Q9; to E99; of service capacity) *hat do you think
happens to service 6ua#ity7
Capacity Planning
%apacity is the upper #imit or cei#ing on the #oad that an
operating unit can hand#e.
The $asic 6uestions in capacity hand#ing are4
-hat kind of capacity is needed7
@o* much is needed7
-hen is it needed7
%mportance of Capacity 3ecisions
E. Impacts a$i#ity to meet future demands
G. Affects operating costs
H. Ma2or determinant of initia# costs
I. Invo#ves #ong3term commitment
P. Affects competitiveness
8. Affects ease of management
Q. "#o$a#ization adds comp#e/ity
:. Impacts #ong range p#anning
Capacity
,esign capacity
ma/imum output rate or service capacity an operation)
process) or faci#ity is designed for
.ffective capacity
,esign capacity minus a##o*ances such as persona# time)
maintenance) and scrap
Actua# output
rate of output actua##y achieved33cannot
e/ceed effective capacity.
.fficiency and 8tilization
,ctual output
Efficiency =
Effective capacity
,ctual output
Utili6ation =
Design capacity
Both measures e$pressed as percentages
3eterminants of #ffective Capacity
!aci#ities
Product and service factors
Process factors
@uman factors
Operationa# factors
'upp#y chain factors
./terna# factors
Strategy !ormulation
%apacity strategy for #ong3term demand
,emand patterns
"ro*th rate and varia$i#ity
!aci#ities
%ost of $ui#ding and operating
Techno#ogica# changes
+ate and direction of techno#ogy changes
?ehavior of competitors
Avai#a$i#ity of capita# and other inputs
"ey 3ecisions of Capacity Planning
E. Amount of capacity needed
G. Timing of changes
H. Aeed to maintain $a#ance
I. ./tent of f#e/i$i#ity of faci#ities
Capacity cushion ? e$tra demand intended to offset uncertainty
Steps for Capacity Planning
E. .stimate future capacity re6uirements
G. .va#uate e/isting capacity
H. Identify a#ternatives
I. %onduct financia# ana#ysis
P. Assess key 6ua#itative issues
8. 'e#ect one a#ternative
Q. Imp#ement a#ternative chosen
:. Monitor resu#ts
Ma@e or Buy
E. Avai#a$#e capacity
G. ./pertise
H. (ua#ity considerations
I. Aature of demand
P. %ost
8. +isk
,eve#oping %apacity A#ternatives
E. ,esign f#e/i$i#ity into systems
G. Take stage of #ife cyc#e into account
H. Take a <$ig picture= approach to capacity changes
I. Prepare to dea# *ith capacity <chunks=
P. Attempt to smooth out capacity re6uirements
8. Identify the optima# operating #eve#
#conomies of Scale
.conomies of sca#e
If the output rate is #ess than the optima# #eve#) increasing
output rate resu#ts in decreasing average unit costs
,iseconomies of sca#e
If the output rate is more than the optima# #eve#) increasing
the output rate resu#ts in increasing average unit costs
.va#uating A#ternatives
Minimu
m
cost
,
v
e
r
a
g
e
c
o
s
t
p
e
r
u
n
i
t
?
Rate of
output
Production units have an optima# rate of output for minima# cost.
Minimum average cost per unit
Planning Service Capacity
Aeed to $e near customers
%apacity and #ocation are c#ose#y tied
Ina$i#ity to store services
%apacity must $e matched *ith timing of demand
,egree of vo#ati#ity of demand
Peak demand periods
(ssumptions of Cost2-olume (nalysis
. One product is involved
G. .verything produced can $e so#d
H. Jaria$#e cost per unit is the same regard#ess of vo#ume
.va#uating A#ternatives
Minimum cost ! optimal operating rate are
functions of si6e of pro$uction unit0
,
v
e
r
a
g
e
c
o
s
t
p
e
r
u
n
i
t
?
Small
plant
Me$ium
plant Large
plant
Output rate
I. !i/ed costs do not change *ith vo#ume
P. +evenue per unit constant *ith vo#ume
8. +evenue per unit e/ceeds varia$#e cost per unit
!inancial (nalysis
%ash !#o* 3 the difference $et*een cash received from sa#es
and other sources) and cash outf#o* for #a$or) materia#)
overhead) and ta/es.
Present Ja#ue 3 the sum) in current va#ue) of a## future cash
f#o*s of an investment proposa#.
Calculating Processing 'eAuirements
Product
Annua#
,emand
'tandard
processing time
per unit (hr.)
Processing time
needed (hr.)
SE
SG
SH
I99
H99
Q99
P.9
:.9
G.9
G)999
G)I99
E)I99
P):99
5ocation Planning and (nalysis
)eed for 5ocation 3ecisions
Marketing 'trategy
%ost of ,oing ?usiness
"ro*th
,ep#etion of +esources
)ature of 5ocation 3ecisions
'trategic Importance
0ong term commitmentBcosts
Impact on investments) revenues) and operations
'upp#y chains
O$2ectives
Profit potentia#
Ao sing#e #ocation may $e $etter than others
Identify severa# #ocations from *hich to choose
Options
./pand e/isting faci#ities
Add ne* faci#ities
Move
Ma@ing 5ocation 3ecisions
,ecide on the criteria
Identify the important factors
,eve#op #ocation a#ternatives
.va#uate the a#ternatives
Make se#ection
5ocation 3ecision !actors
10 Regional Factors
0ocation of ra* materia#s
0ocation of markets
0a$or factors
%#imate and ta/es
@0 %ommunity %onsi$erations
(ua#ity of #ife
'ervices
Attitudes
Ta/es
.nvironmenta# regu#ations
&ti#ities
,eve#oper support
A0 Multiple "lant Strategies
Product p#ant strategy
Market area p#ant strategy
Process p#ant strategy
B0 Site1relate$ Factors
0and
Transportation
.nvironmenta#
0ega#
%omparison of 'ervice and Manufacturing %onsiderations
ManufacturingB,istri$ution 'erviceB+etai#
%ost !ocus +evenue focus
Transportation modesBcosts ,emographics4
age)income)etc
.nergy avai#a$i#ity) costs Popu#ationBdra*ing area
0a$or costBavai#a$i#ityBski##s %ompetition
?ui#dingB#easing costs Traffic vo#umeBpatterns
%ustomer accessBparking
.va#uating 0ocations
%ost3Profit3Jo#ume Ana#ysis
,etermine fi/ed and varia$#e costs
P#ot tota# costs
,etermine #o*est tota# costs
0ocation %ost3Jo#ume Ana#ysis
Assumptions
!i/ed costs are constant
Jaria$#e costs are #inear
Output can $e c#ose#y estimated
On#y one product invo#ved
.va#uating 0ocations
Transportation Mode#
,ecision $ased on movement costs of ra* materia#s or
finished goods
!actor +ating
,ecision $ased on 6uantitative and 6ua#itative inputs
%enter of "ravity Method
,ecision $ased on minimum distri$ution costs
!acility 5ayout
5ayout4 the configuration of departments) *ork centers) and
e6uipment) *ith particu#ar emphasis on movement of *ork
(customers or materia#s) through the system
Importance of 0ayout ,ecisions
+e6uires su$stantia# investments of money and effort
Invo#ves #ong3term commitments
@as significant impact on cost and efficiency of short3term
operations
The )eed for 5ayout 3ecisions
Inefficient
operations
!or ./amp#e4
@igh %ost
?ott#eneck
s
%hanges in the
design
of products or
The introduction of
ne* products or
services
Accident
s
'afety
hazards
?asic 0ayout Types
Product #ayouts
Process #ayouts
!i/ed3Position #ayout
%om$ination #ayouts
?asic 0ayout Types
Product #ayout
0ayout that uses standardized processing operations to
achieve smooth) rapid) high3vo#ume f#o*
Process #ayout
0ayout that can hand#e varied processing re6uirements
!i/ed Position #ayout
0ayout in *hich the product or pro2ect remains stationary)
and *orkers) materia#s) and e6uipment are moved as
needed
%hanges in
environmenta
#
or other #ega#
re6uirements
%hanges in vo#ume
of
output or mi/ of
products
%hanges in
methods
and e6uipment
Mora#e
pro$#ems
The Aeed for 0ayout ,esign
(dvantages of Product 5ayout
Advantages of Product 0ayout
@igh rate of output
0o* unit cost
0a$or specia#ization
0o* materia# hand#ing cost
@igh uti#ization of #a$or and e6uipment
.sta$#ished routing and schedu#ing
+outing accounting and purchasing
,isadvantages of Product 0ayout
%reates du##) repetitive 2o$s
Poor#y ski##ed *orkers may not maintain e6uipment or 6ua#ity of
output
!air#y inf#e/i$#e to changes in vo#ume
@igh#y suscepti$#e to shutdo*ns
Aeeds preventive maintenance
Individua# incentive p#ans are impractica#
Raw
materials
or customer
Finished
item
Station
2
Station
3
Station
4
Material
and/or
laor
Station
!
Material
and/or
laor
Material
and/or
laor
Material
and/or
laor
Used for Repetitive or Continuous Processing
%i&ure '() Product 0ayout
Advantages of Process 0ayouts
%an hand#e a variety of processing re6uirements
Dept
. A
Dept
. B
Dept
. D
Dept
. C
Dept
. F
Dept
. E
Used for intermittent processing
Job Shop or Btch
Process *ayout
(fu"ctio"al
%i&ure '(+
Process 0ayout
!or"
Sttio
n #
!or"
Sttio
n $
!or"
Sttio
n %
Product *ayout
(se,ue"tial
Used for Repetitive Processing
Repetitive or Continuous
Product 0ayout
Aot particu#ar#y vu#nera$#e to e6uipment fai#ures
.6uipment used is #ess cost#y
Possi$#e to use individua# incentive p#ans
,isadvantages of Process 0ayouts
In3process inventory costs can $e high
%ha##enging routing and schedu#ing
.6uipment uti#ization rates are #o*
Materia# hand#ing s#o* and inefficient
%omp#e/ities often reduce span of supervision
'pecia# attention for each product or customer
Accounting and purchasing are more invo#ved
%e##u#ar 0ayouts
%e##u#ar Production
0ayout in *hich machines are grouped into a ce## that can
process items that have simi#ar processing re6uirements
"roup Techno#ogy
The grouping into part fami#ies of items *ith simi#ar design
or manufacturing characteristics
!unctional vs Cellular 5ayouts
Dimension Functional %ellular
Aum$er of moves
$et*een
departments
many fe*
Trave# distances #onger shorter
Trave# paths varia$#e fi/ed
Co$ *aiting times greater shorter
Throughput time higher #o*er
Amount of *ork in
process
higher #o*er
'upervision
difficu#ty
higher #o*er
'chedu#ing
comp#e/ity
higher #o*er
.6uipment #o*er higher
uti#ization
Other 'ervice 0ayouts
-arehouse and storage #ayouts
+etai# #ayouts
Office #ayouts
,esign Product 0ayouts4 0ine ?a#ancing
0ine ?a#ancing is the process of assigning tasks to *orkstations in
such a *ay that the *orkstations have appro/imate#y
e6ua# time re6uirements.
Cycle Time
Cycle time is the ma/imum time a##o*ed at each *orkstation to
comp#ete its set of tasks on a unit.
3etermine Ma$imum Output
!
OT
8 time cycle 8 CT
rate output !esired 8 !
day per time operatin# OT
CT
OT
8 capacity Output
=
3etermine the Minimum )umber of <or@stations 'eAuired
Calculate Percent %dle Time
.fficiency N E 5 Percent id#e time
,esigning Process 0ayouts
Information +e6uirements4
E. 0ist of departments
G. Pro2ection of *ork f#o*s
H. ,istance $et*een #ocations
I. Amount of money to $e invested
P. 0ist of specia# considerations
8. 0ocation of key uti#ities
s task time o. sum 8 t
OT
tA ?!A?
8 "
?"A?CTA
cycle per time Idle
8 time idle Percent
"rocess Layout 1 wor# travels to $e$icate$ process centers
Millin
g
,ssem2l
y ! &est
;rin$in
g
Drillin
g
"latin
g
Process 0ayout
M"#$%& 4 '() Hours*
+apacit, Management-
7ob !esi#n, (r#onomics,
Met*ods Study and Gork Measurement,
(mployee Productivity,
earnin# Curve, S*ort)term Capacity Plannin#
A##re#ate plannin# and Capacity re/uirement plannin#
?Problems in Gork Measurement and S*ort term Capacity Plannin#A
#esign o.
/ork S,stems
7ob !esi#n, (r#onomics,
Met*ods Study and Gork Measurement,
(mployee Productivity,
0o #esign
Job design involves speci.yin# t*e content and met*ods o. 9ob
G*at 3ill be done
G*o 3ill do t*e 9ob
-o3 t*e 9ob 3ill bob 3ill be done
G*ere t*e 9ob 3ill be done
(r#onomics
#esign o. /ork S,stems
SpecialiHation
Be*avioral Approac*es to 7ob !esi#n
Teams
Met*ods Analysis
Motions Study
Gorkin# conditions
0o #esign Success
Successful Job Design must be:
Carried out by e'perienced personnel 3it* t*e necessary trainin# and back#round
Consistent 3it* t*e #oals o. t*e or#aniHation
In 3ritten .orm
+nderstood and a#reed to by bot* mana#ement and employees
Speciali1ation in 2usiness- 3dvantages
Table C1<
#isadvantages
2ehavioral 3pproaches to 0o #esign
7ob (nlar#ement
Iivin# a 3orker a lar#er portion o. t*e total task by *oriHontal loadin#
7ob ,otation
Gorkers periodically e'c*an#e 9obs
7ob (nric*ment
Increasin# responsibility .or plannin# and coordination tasks, by vertical
loadin#
For Management
10 Simplifies
@0 Hig
A0 Low wage
For Labor
10 Low e$ucation
s#ill
@ Minimu
responsi2ilitie
A Little mental
nee$e
For Management:
10
Difficult to motivate
>uality
@0 .or#er $issatisfaction8
possi2ly resulting in
a2senteeism8 ig
turnover8 $isruptive
tactics8 poor attention
to >uality
For Labor:
10 Monotonous wor#
@0 Limite$ opportunities
for a$vancement
A0 Little control over wor#
B0 Little opportunity for
self1fulfillment
Motivation and 4rust
Motivation
In.luences /uality and productivity
Contributes to 3ork environment
Trust
In.luences productivity and employee)mana#ement relations
4eams
Bene.its o. teams
-i#*er /uality
-i#*er productivity
Ireater 3orker satis.action
Sel.)directed teams
Iroups o. empo3ered to make certain c*an#es in t*eir 3ork process
Methods 3nal,sis
Met*ods analysis
AnalyHin# *o3 a 9ob #ets done
Be#ins 3it* overall analysis
Moves to speci.ic details
Methods 3nal,sis
The need for methods analysis can come
from a number of different sources:
C*an#es in tools and e/uipment
C*an#es in product desi#n
or ne3 products
C*an#es in materials or procedures
Ot*er .actors ?e1#1 accidents, /uality problemsA
Methods 3nal,sis 5rocedure
<1 Identi.y t*e operation to be studied
=1 Iet employee input
41 Study and document current met*od
>1 AnalyHe t*e 9ob
B1 Propose ne3 met*ods
21 Install ne3 met*ods
C1 &ollo3)up to ensure improvements *ave been ac*ieved
3nal,1ing the 0o
&lo3 process c*art
C*art used to e'amine t*e overall se/uence o. an operation by .ocusin# on
movements o. t*e operator or .lo3 o. materials
Gorker)mac*ine c*art
C*art used to determine portions o. a 3ork cycle durin# 3*ic* an operator
and e/uipment are busy or idle
Motion Stud,
Motion study is t*e systematic study o. t*e *uman motions used to per.orm an operation1
Motion Stud, 4echni6ues
Motion study principles ) #uidelines .or desi#nin# motion)e..icient 3ork
procedures
Analysis of therbligs ) basic elemental motions into 3*ic* a 9ob can be broken
do3n
Micromotion study - use o. motion pictures and slo3 motion to study motions t*at
ot*er3ise 3ould be too rapid to analyHe
Charts
#eveloping /ork Methods
<1 (liminate unnecessary motions
=1 Combine activities
41 ,educe .ati#ue
>1 Improve t*e arran#ement o. t*e 3orkplace
B1 Improve t*e desi#n o. tools and e/uipment
F&'! PR'CESS
C(AR)
Details of Meto$
,7,L<S&
D0 :ol2
",;E
1 of @
O
p
e
r
a
t
i
o
n
M
o
v
e
m
e
n
t
I
n
s
p
e
c
t
i
o
n
D
e
l
a
y
S
t
o
r
a
g
e
Re>uisition ma$e 2y $epartment ea$
"ut in Cpic#1upD 2as#et
&o accounting $epartment
,ccount an$ signature verifie$
,mount approve$ 2y treasurer
,mount counte$ 2y casier
,mount recor$e$ 2y 2oo##eeper
"etty cas seale$ in envelope
"etty cas carrie$ to $epartment
"etty cas cec#e$ against re>uisition
Receipt signe$
"etty cas store$ in safety 2o4
!igure Q3G
/orking +onditions
/ork Measurement
Standard time
Stop3atc* time study
-istorical times
Predetermined data
Gork Samplin#
Temperature L
@umidity
Jenti#ation
I##umination
%o#or
Aoise L
Ji$ration
%auses of
Accidents
'afet
y
-ork
?reaks
+ompensation
Time)based system
Compensation based on time an employee *as 3orked durin# a pay period
Output)based ?incentiveA system
Compensation based on t*e amount o. output an employee produces
durin# a pay period
Form o. 7ncentive 5lan
Accurate
(asy to apply
Consistent
(asy to understand
&air
+ompensation
Individual Incentive Plans
Iroup Incentive Plans
$no3led#e)Based Pay System
Mana#ement Compensation
%earning +urves
Learning curves ; t*e time re/uired to per.orm a task decreases 3it* increasin#
repetitions
%earning &..ect
%earning with 7mprovements
&
i
m
e
p
e
r
r
e
p
e
t
i
t
i
o
n
7um2er of repetitions
3pplications o. %earning +urves
<1 Manpo3er plannin# and sc*edulin#
=1 "e#otiated purc*asin#
41 Pricin# ne3 products
>1 Bud#etin#, purc*asin#, and inventory plannin#
B1 Capacity Plannin#
/orker %earning +urves
&
i
m
e
p
e
r
u
n
i
t
&ime
,verage
Improvements may create a
scallop effect in te curve0
+autions and +riticisms
earnin# rates may di..er .rom or#aniHation to or#aniHation
Pro9ections based on learnin# curves s*ould be vie3ed as appro'imations
(stimates based t*e .irst unit s*ould be c*ecked .or valid times
At some point t*e curve mi#*t level o.. or even tip up3ard
Some improvements may be more apparent t*an real
&or t*e most part, t*e concept does not apply to mass production
3ggregate 5lanning
Operations Plannin# Overvie3
T*e *ierarc*ical plannin# process
A##re#ate production plannin#
('amples; C*ase and evel strate#ies
"perations 5lanning "verview
on#)ran#e plannin#
Ireater t*an t*ree year plannin# *oriHon
+sually 3it* yearly increments
Intermediate)ran#e plannin#
,
)un$er>ualifie$*
-
)average*
%
)over>ualifie$*
&
i
m
e
(
c
y
c
l
e
s
One
wee#
Stan$ar$
time
&raining
time
< to 4 years
+sually 3it* mont*ly or /uarterly increments
S*ort)ran#e plannin#
One year
+sually 3it* 3eekly increments
Hierarchical 5roduction 5lanning
Master Production Sc*edulin#
ProductFService Sc*edule
,esource ,e/uirements Plannin#
MatJls, Capacity, Manpo3er
Order Sc*edulin#
ProductionFPurc*ases
Gork.orce 6
Customer Sc*edulin#
!aily Gork.orce 6
Customer Sc*edulin#
Strate#ic Plannin#
Sales Plannin#
A##re#ate Plannin#
on#)
ran#e
Intermediate)
ran#e
S*ort)
ran#e
3ggregate 5lanning
Ioal; Speci.y t*e optimal combination o.
production rate ?units completed per unit o. timeA
3ork.orce level ?number o. 3orkersA
inventory on *and ?inventory carried .rom previous periodA
Product #roup or broad cate#ory ?A##re#ationA
Intermediate)ran#e plannin# period; 2)<5 mont*s
2alancing 3ggregate #emand and 3ggregate 5roduction +apacit,
Annual demand by
item and by re#ion
Mont*ly demand
.or <B mont*s by
product type
Mont*ly demand
.or B mont*s by
item
Forecasts needed
Allocates
production
amon# plants
!etermines
seasonal plan by
product type
!etermines
mont*ly
item production
sc*edules
#ecision 5rocess #ecision %evel
Corporate
Plant mana#er
S*op
superintendent
./hi$it EG.G
8e, Strategies .or Meeting #emand
C*ase
evel
Some combination o. t*e t3o
S4R34&97&S 3+47:& /R4 #&M3;#
$S& M3R8&47;9 4" SM""4H #&M3;#
(KAMP(S
P,IC(
P,O!+CT
PAC(
P,OMOTIO"
5roactive #emand Management to &6uate Suppl, and #emand
@
=@@@
>@@@
2@@@
5@@@
<@@@@
7an
&eb
Mar Apr May 7un
>B@@
BB@@
C@@@
<@@@@
5@@@
2@@@
@
=@@@
>@@@
2@@@
5@@@
<@@@@
7an
&eb
Mar Apr May 7un
>B@@ >@@@
D@@@
5@@@
>@@@
2@@@
'uppose the figure to the
right represents forecast
demand in units.
Ao* suppose this #o*er
figure represents the
aggregate capacity of the
company to meet
demand.
-hat *e *ant to do is
$a#ance out the production
rate) *orkforce #eve#s) and
inventory to make these
figures match up.
5roactive #emand Management to &6uate Suppl, and #emand
0ason &nterprises 3ggregate 5lanning &<amples- $nit #emand and +ost #ata
@
=@@@
>@@@
2@@@
5@@@
<@@@@
@
=@@@
>@@@
2@@@
5@@@
<@@@@
S(ASO"A
!(MA"! )
S"OG S$IIS
CO"T,A)
S(ASO"A
!(MA"! )
LLLLLLLLLLLLLLL
@
=@@@
>@@@
2@@@
5@@@
<@@@@
@
=@@@
>@@@
2@@@
5@@@
<@@@@
C:CICA
!(MA"! )
"(G CA,S
CO"T,A)C:CICA
!(MA"! )
LLLLLLLLLLLLLLLLLL
+apacit, 5lanning
Capacity is t*e upper limit or ceilin# on t*e load t*at an operatin# unit can *andle1
T*e basic /uestions in capacity *andlin# are;
G*at kind o. capacity is neededM
-o3 muc* is neededM
G*en is it neededM
7mportance o. +apacit, #ecisions
<1 Impacts ability to meet .uture demands
=1 A..ects operatin# costs
41 Ma9or determinant o. initial costs
>1 Involves lon#)term commitment
B1 A..ects competitiveness
21 A..ects ease o. mana#ement
C1 IlobaliHation adds comple'ity
51 Impacts lon# ran#e plannin#
+apacit,
!esi#n capacity
Materials N<@@Funit
-oldin# costs N<@Funit per mo1
Mar#inal cost o. stockout N=@Funit per mo1
-irin# and trainin# cost NB@F3orker
ayo.. costs N<@@F3orker
abor *ours re/uired 1 > *rsFunit
Strai#*t time labor costFOT N<=1B@F<51CBF*our
Be#innin# inventory =@@ units
Productive *oursF3orkerFday 51@@
Paid strai#*t *rsFday 5
'uppose *e have the fo##o*ing unit demand and cost information4
!emandFmo 7an &eb Mar Apr May 7un
B@@ 2@@ 2B@ 5@@ D@@ 5@@
!ays per mont* == <D =< =< ==
ma'imum output rate or service capacity an operation, process, or .acility
is desi#ned .or
(..ective capacity
!esi#n capacity minus allo3ances suc* as personal time, maintenance,
and scrap
Actual output
rate o. output actually ac*ieved))cannot
e'ceed e..ective capacity1
&..icienc, and $tili1ation
3ctual output
&..icienc, =
&..ective capacit,
3ctual output
$tili1ation =
#esign capacit,
oth measures e!pressed as percentages
&..icienc,/$tili1ation &<ample
#eterminants o. &..ective +apacit,
&acilities
Actua# output N H8 unitsBday
.fficiency N N R9;
.ffective capacity I9 unitsB day
&ti#ization N Actua# output N H8 unitsBday
N QG;
,esign capacity P9 unitsBday
!esi#n capacity 8 B@ trucksFday
(..ective capacity 8 >@ trucksFday
Actual output 8 42 unitsFday
Product and service .actors
Process .actors
-uman .actors
Operational .actors
Supply c*ain .actors
('ternal .actors
Strateg, Formulation
Capacity strate#y .or lon#)term demand
!emand patterns
Iro3t* rate and variability
&acilities
Cost o. buildin# and operatin#
Tec*nolo#ical c*an#es
,ate and direction o. tec*nolo#y c*an#es
Be*avior o. competitors
Availability o. capital and ot*er inputs
8e, #ecisions o. +apacit, 5lanning
<1 Amount o. capacity needed
=1 Timin# o. c*an#es
41 "eed to maintain balance
>1 ('tent o. .le'ibility o. .acilities
Capacity cus*ion e'tra demand intended to o..set uncertainty
Steps .or +apacit, 5lanning
<1 (stimate .uture capacity re/uirements
=1 (valuate e'istin# capacity
41 Identi.y alternatives
>1 Conduct .inancial analysis
B1 Assess key /ualitative issues
21 Select one alternative
C1 Implement alternative c*osen
51 Monitor results
Make or 2u,
<1 Available capacity
=1 ('pertise
41 0uality considerations
>1 "ature o. demand
B1 Cost
21 ,isk
#eveloping +apacit, 3lternatives
<1 !esi#n .le'ibility into systems
=1 Take sta#e o. li.e cycle into account
41 Take a Obi# pictureP approac* to capacity c*an#es
>1 Prepare to deal 3it* capacity Oc*unksP
B1 Attempt to smoot* out capacity re/uirements
21 Identi.y t*e optimal operatin# level
&conomies o. Scale
(conomies o. scale
I. t*e output rate is less t*an t*e optimal level, increasin# output rate
results in decreasin# avera#e unit costs
!iseconomies o. scale
I. t*e output rate is more t*an t*e optimal level, increasin# t*e output rate
results in increasin# avera#e unit costs
&valuating 3lternatives
&valuating 3lternatives
Minimu
m
cost
,
v
e
r
a
g
e
c
o
s
t
p
e
r
u
n
i
t
?
Rate of
output
Production units have an optima# rate of output for minima# cost.
!igure P.H
Minimum average cost per unit
5lanning Service +apacit,
"eed to be near customers
Capacity and location are closely tied
Inability to store services
Capacity must be matc*ed 3it* timin# o. demand
!e#ree o. volatility o. demand
Peak demand periods
+ost>:olume Relationships
Minimum cost ! optimal operating rate are
functions of si6e of pro$uction unit0
,
v
e
r
a
g
e
c
o
s
t
p
e
r
u
n
i
t
?
Small
plant
Me$ium
plant Large
plant
Output rate
!igure P.I
+ost>:olume Relationships
,
m
o
u
n
t
)
E
*
?
+ )volume in
units*
&
o
t
a
l
c
o
s
t
=
'
%
F
F
%
&
o
t
a
l
v
a
r
i
a
2
l
e
c
o
s
t
)
'
%
*
Fi4e$ cost
)F%*
+ost>:olume Relationships
2reak>&ven 5rolem with Step Fi<ed +osts
,
m
o
u
n
t
)
E
*
+ )volume in
units*
?
&
o
t
a
l
r
e
v
e
n
u
e
,
m
o
u
n
t
)
E
*
+ )volume in units*
?
-E" units
"
r
o
f
i
t
&
o
t
a
l
r
e
v
e
n
u
e
&
o
t
a
l
c
o
s
t
+uantity
F
%
F
'
%
=
&
%
F
%
F
'
%
=
&
%
F
%
F
'
%
=
&
%
Step fi4e$ costs an$ varia2le costs0
1 macine
@ macines
A macines
2reak>&ven 5rolem with Step Fi<ed +osts
3ssumptions o. +ost>:olume 3nal,sis
<1 One product is involved
=1 (veryt*in# produced can be sold
41 %ariable cost per unit is t*e same re#ardless o. volume
>1 &i'ed costs do not c*an#e 3it* volume
B1 ,evenue per unit constant 3it* volume
21 ,evenue per unit e'ceeds variable cost per unit
Financial 3nal,sis
Cas* &lo3 ) t*e di..erence bet3een cas* received .rom sales and ot*er sources,
and cas* out.lo3 .or labor, material, over*ead, and ta'es1
Present %alue ) t*e sum, in current value, o. all .uture cas* .lo3s o. an investment
proposal1
+alculating 5rocessing Re6uirements
E
&
%
&
%
&
%
-E
"
@
-E"
A
&
R
+uantit
y
1
@
A
Multiple 2rea#1even
points
Product
Annua#
,emand
'tandard
processing time
per unit (hr.)
Processing time
needed (hr.)
SE
SG
SH
I99
H99
Q99
P.9
:.9
G.9
G)999
G)I99
E)I99
P):99
M"#$%& ? '!( Hours*
Materials Management-
Scope o. Materials Mana#ement, .unctions,
in.ormation systems .or Materials Mana#ement,
Purc*asin# .unctions, Stores Mana#ement,
Inventory Mana#ement,
Materials re/uirement plannin#,
7ust in Time ?7ITA and (nterprise ,esource Plannin# ?(,PA,
?Problems in Inventory Mana#ement and %endor SelectionA
7nventor, Management
7nventor,
Types o. Inventory Items
Raw materials and purchased parts .rom outside suppliers1
+omponents- subassemblies t*at are a3aitin# .inal assembly1
/ork in process- all materials or components on t*e production .loor in
various sta#es o. production1
Finished goods- .inal products 3aitin# .or purc*ase or to be sent to
customers1
Supplies- all items needed but t*at are not part o. t*e .inis*ed product,
suc* as paper clips, duplicatin# mac*ine toner, and tools1
4he Role o. 7nventor, Management
Inventory Mana#ement
T*e process o. ensurin# t*at t*e .irm *as ade/uate inventories o. all parts
and supplies needed, 3it*in t*e constraint o. minimiHin# total inventory
costs1
Inventory Costs
Orderin# ?setupA costs
Ac/uisition costs
-oldin# ?carryin#A costs
Stockout costs
7nventor, +osts
Orderin# ?SetupA
Costs
T*e costs, usually .i'ed, o. placin# an order or settin# up mac*ines .or
a production run1
Ac/uisition Costs
T*e total costs o. all
units bou#*t to .ill an order, usually varyin# 3it* t*e siHe o. t*e
order1
Inventory)-oldin# ?Carryin#A Costs
All t*e costs associated 3it* carryin# parts or materials in inventory1
Stockout Costs
T*e costs associated 3it* runnin# out o. ra3 materials, parts, or .inis*ed)
#oods inventory1
2asic 7nventor, Management S,stems
ABC Inventory Mana#ement
Inventory is divided into t*ree dollar)volume cate#oriesQA, B, and CQ3it* t*e
A parts bein# t*e most active ?lar#est dollar volumeA1
Inventory surveillance concentrates most on c*eckin# t*e A parts to #uard
a#ainst costly stockouts1
T*e idea is to .ocus most on t*e *i#*)annual)dollar)volume A inventory
items, to a lesser e'tent on t*e B items, and even less on t*e C items1
&conomic "rder @uantit, '&"@*
(conomic Order 0uantity ?(O0A
An inventory mana#ement system based on a simple .ormula t*at is used
to determine t*e most economical /uantity to order so t*at t*e total o.
inventory and setup costs is minimiHed1
Assumptions;
Constant per unit *oldin# and orderin# costs
Constant 3it*dra3als .rom inventory
"o discounts .or lar#e /uantity orders
Constant lead time .or receipt o. orders
4he &conomic "rder @uantit, Model
+ontrolling For @ualit, 3nd 5roductivit,
0uality
T*e e'tent to 3*ic* a product or service is able to meet customer needs
and e'pectations1
CustomerJs needs are t*e basic standard .or measurin# /uality
-i#* /uality does not *ave to mean *i#* price1
ISO D@@@
T*e /uality standards o. t*e International Standards Or#aniHation1
Total 0uality Mana#ement ?T0MA
A speci.ic or#aniHation)3ide pro#ram t*at inte#rates all t*e .unctions and
related processes o. a business suc* t*at t*ey are all aimed at ma'imiHin#
customer satis.action t*rou#* on#oin# improvements1
Also called; Continuous improvement, Rero de.ects, Si')Si#ma, and
$aiHen ?7apanA
Malcolm Baldrid#e A3ard
A priHe created in <D5C by t*e +1S1 !epartment o. Commerce to reco#niHe
outstandin# ac*ievement in /uality control mana#ement1
Inventory- a stock or store o. goods
In$epen$ent
Deman$
3
2
'4*
+
'2*
#
'2*
&
'!*
#
'3*
F
'2*
Depen$ent Deman$
In$epen$ent $eman$ is uncertain0 Depen$ent $eman$ is certain0
4,pes o. 7nventories
,a3 materials 6 purc*ased parts
Partially completed #oods called
"or# in progress
&inis*ed)#oods inventories
?manufacturing firmsA
or merc*andise
?retail storesA
,eplacement parts, tools, 6 supplies
Ioods)in)transit to 3are*ouses or customers
Functions o. 7nventor,
To meet anticipated demand
To smoot* production re/uirements
To decouple operations
To protect a#ainst stock)outs
To take advanta#e o. order cycles
To *elp *ed#e a#ainst price increases
To permit operations
To take advanta#e o. /uantity discounts
"Aective o. 7nventor, +ontrol
To ac*ieve satis.actory levels o. customer service 3*ile keepin# inventory costs
3it*in reasonable bounds
evel o. customer service
Costs o. orderin# and carryin# inventory
&..ective 7nventor, Management
A system to keep track o. inventory
A reliable .orecast o. demand
$no3led#e o. lead times
,easonable estimates o.
-oldin# costs
Orderin# costs
S*orta#e costs
A classi.ication system
7nventor, +ounting S,stems
$eriodic System
P*ysical count o. items made at periodic intervals
$erpetual %nventory System
System t*at keeps track
o. removals .rom inventory
continuously, t*us
monitorin#
current levels o.
eac* item
T"o-in System - T3o containers o. inventoryS reorder 3*en t*e .irst is empty
&niversal ar Code - Bar code
printed on a label t*at *as
in.ormation about t*e item
to 3*ic* it is attac*ed
8e, 7nventor, 4erms
Lead time ; time interval bet3een orderin# and receivin# t*e order
'olding (carrying) costs ; cost to carry an item in inventory .or a len#t* o. time,
usually a year
*rdering costs ; costs o. orderin# and receivin# inventory
Shortage costs ; costs 3*en demand e'ceeds supply
(
2!4)(( 232()BBC)
32+ +lassi.ication S,stem
Classi.yin# inventory accordin# to some measure o. importance and allocatin# control
e..orts accordin#ly1
3 > very important
2 > mod1 important
+ > least important
+,cle +ounting
A p*ysical count o. items in inventory
Cycle countin# mana#ement
-o3 muc* accuracy is neededM
G*en s*ould cycle countin# be per.ormedM
G*o s*ould do itM
&conomic "rder @uantit, Models
(conomic order /uantity model
(conomic production model
0uantity discount model
3ssumptions o. &"@ Model
Only one product is involved
Annual demand re/uirements kno3n
!emand is even t*rou#*out t*e year
ead time does not vary
(ac* order is received in a sin#le delivery
T*ere are no /uantity discounts
4he 7nventor, +,cle
,nnual
E value
of items
,
,
-
-
%
%
H
ig
Lo
w
Few
M
any
7um2er of
Items
4otal +ost
+ost Minimi1ation 9oal
"rofile of Inventory Level Over &ime
+uantity
on an$
+
Receive
or$er
"lace
or$er
Receive
or$er
"lace
or$er
Receive
or$er
Lea$
time
Reor$er
point
Usage
rate
&ime
,nnual
carrying
cost
,nnual
or$ering
cost
&otal cost =
F
Q
2
H
D
Q
S
&% =
F
#eriving the &"@
+sin# calculus, 3e take t*e derivative o. t*e total cost .unction and set t*e derivative
?slopeA e/ual to Hero and solve .or 01
Minimum 4otal +ost
T*e total cost curve reac*es its minimum 3*ere t*e carryin# and orderin# costs
are e/ual1
&conomic 5roduction @uantit, '&5@*
Production done in batc*es or lots
Or$er +uantity
)+*
&e &otal1%ost %urve is U1Sape$
Or$ering %osts
+
O
,
n
n
u
a
l
%
o
s
t
)optimal or$er >uantity*
TC
+
'
D
+
S = +
=
( N
G,'
@
N
G(Annua# ,emand)(Order or 'etup %ost)
Annua# @o#ding %ost
OPT
( N
G,'
@
N
G(Annua# ,emand)(Order or 'etup %ost)
Annua# @o#ding %ost
OPT
Capacity to produce a part e'ceeds t*e partJs usa#e or demand rate
Assumptions o. (P0 are similar to (O0 e'cept orders are received incrementally
durin# production
&conomic 5roduction @uantit, 3ssumptions
Only one item is involved
Annual demand is kno3n
+sa#e rate is constant
+sa#e occurs continually
Production rate is constant
ead time does not vary
"o /uantity discounts
&conomic Run Si1e
4otal +osts with 5urchasing +ost
,nnual
carrying
cost
"urcasing
cost
&% F
Q
2
H
D
Q
S
&% =
F
F
,nnual
or$ering
cost
PD
F
+
DS
'
p
p u
@
=
=
e
v
e
l
+sa#e
+sa#e
P
r
o
d
u
c
t
i
o
n
6
+
s
a
#
e
P
r
o
d
u
c
t
i
o
n
6
+
s
a
#
e
Sc*edules component items 3*en t*ey are needed ) no earlier and no later
Contrast 3it* Oorder pointP replenis*ment systems
/hen to $se MR5
7ob s*op production
Assemble)to)order
Any dependent demand environment
MR5 7nputs D "utputs
Master 5roduction Schedule
Master Production 'chedu#e
Materia#
+e6uirements
P#anning
P#anned Order +e#eases
'hop Orders
Purchase Orders
Product
'tructure
!i#e
Inventory
Master
!i#e
4o, +ar
MP' Period
Item E G H I P 8 Q :
%#ip$oard :8 RH EER E99 E99 E99 E99 E99
0ap$oard 9 P9 9 P9 9 P9 9 P9
0apdesk QP EG9 IQ G9 EQ E9 9 9
Penci# %ase EGP EGP EGP EGP EGP EGP EGP EGP
Assumption; O3*eel assemblyP is produced as a 3ork)in)process item
4o, +ar 5roduct Structure 4ree
4o, +ar 5roduction Schedule &<ample
Body
A'les
G*eels
Toy %ar
A/e# (E)
-hee# Assem$#y
(G)
?ody
(E)
-hee# (G)
&<ample "rder Release Schedule
Item "umber Period
G*eels =5 4
A'les <> 4
G*eel assembly <> B
Bodies 2 =
Bodies 5 >
&inal assembly 2 2
&inal assembly 5 5
Rules .or &valuating 4o, +ar 5roduction Schedules
&inal product cannot s*ip be.ore t*e re/uired date
ASAP orders can s*ip as soon as done
Toy %ar
0ead time N E
A/e# (E)
0ead time N G
-hee# Assem$#y (G)
0ead time N E
?ody(E)
0ead time N I
-hee# (G)
0ead time N E
Period
Item E G H I P 8 Q : R
%ar 9 9 9 9 9 9 8 : 9
Master Production Sc*edule;
Product Structure Tree
?includes Bill o. Materials in.oA
Production 'chedu#e
E G H I P 8 Q : R E9
!ina# Assem$#y O 8 O :
?odies O O 8 :
-hee# Assem$#ies O EI
A/#es O EI
-hee#s O G:
Period
Cost o. > units .or every 3eek late on every car
&or ASAP orders, credit o. > .or every 3eek earlier t*an B, c*ar#e o. > .or
every 3eek later t*an B
Carryin# cost o. one unit .or every part .rom t*e time it arrives until t*e .inal
product s*ips
Carryin# cost o. one unit .or every assembly operation .rom t*e time it is .inis*ed
until t*e .inal product s*ips
+ost .or &<ample Schedule
Master Production Sc*edule;
4o, +ar &<ercise
Production 'chedu#e
E G H I P 8 Q : R E9
!ina# Assem$#y O 8 O :
?odies O O 8 :
-hee# Assem$#ies O EI
A/#es O EI
-hee#s O G:
Period
Cost 8 ?=5T=5T=5T<2T<2A T ?<>T<>T5T5A T ?<>T5T5A T?2T5A T >U5
Cost 8 =42
Period
Item E G H I P 8 Q : R
%ar 9 9 9 9 9 9 8 : 9
+ar 5roduction Schedule
Find the least cost order release and production schedule
Toy %ar
0ead time N E
A/e# (E)
0ead time N G
-hee# Assem$#y (G)
0ead time N E
?ody(E)
0ead time N I
-hee# (G)
0ead time N E
Period
Item E G H I P 8 Q : R
%ar 9 9 9 E97 9 9 9 G9 9
Master Production Sc*edule;
E G H I P 8 Q : R E9
!ina# Assem$#y
?odies
-hee# Assem$#ies
A/#es
-hee#s
E G H I P 8 Q : R E9
!ina# Assem$#y
?odies
-hee# Assem$#ies
A/#es
-hee#s
Toy %ar
0ead time N
A/e# (E)
0ead time N G
-hee# Assem$#y (G)
0ead time N E
?ody(E)
0ead time N I
-hee# (G)
0ead time N E
Period
Item E G H I P 8 Q : R
%ar 9 9 9 E97 9 9 9 G9 9
Master Production Sc*edule
Product Structure Tree
Eour ;ames-
Gork s*eet
Ans3er s*eet Cost 8
%east +ost 5roduction Schedule
&or one car;
G*eels?>A and a'les?=A 3ait = periods, 3*eel assemblies?=A and bodies
3ait one period; cost8<B
&or <@ ASAP cars add >@ ?.or < 3eek later t*an tar#etA to <B@ to #et <D@
&or =@ 3eek 5 cars, cost is 4@@
east cost total 8 >D@
Real /orld MR5 7nputs
Bill o. materialsF Product structure tree, lead times, costs ?as in our
e'erciseA
('istin# inventory
Capacity
ots siHes .or e..icient production
(/uipment do3ntime
Ot*er uncertainties
+apacit, Re6uirements 5lanning '+R5*
Toy %ar
0ead time N E
A/e# (E)
0ead time N G
-hee# Assem$#y (G)
0ead time N E
?ody(E)
0ead time N I
-hee# (G)
0ead time N E
Period
Item E G H I P 8 Q : R
%ar 9 9 9 E97 9 9 9 G9 9
Master Production Sc*edule;
E G H I P 8 Q : R E9
!ina# Assem$#y O E9 O G9
?odies O O E9 G9
-hee# Assem$#ies O G9 O I9
A/#es O G9)O I9
-hee#s O I9 O :9
ComputeriHed system t*at pro9ects load .rom material re/uirements plan
Creates load pro.ile
Identi.ies under)loads and over)loads
+apacit, Re6uirements 5lanning- 7nputs and outputs
"pen %oop MR5 'MR5 7*
M+P p#anned
order
re#eases
+outing
fi#e
%apacity
re6uirements
p#anning
Open
orders
fi#e
0oad profi#e for
each machine center
Matching %oad to +apacit,
Dispatc List
Is
specific
capacity
a$e>uate/
Material
Re>uirements
)$etaile$*
Desire$ Master
"ro$uction
Sce$ule
Realistic/
"riority %ontrol
"riority "lanning
"ro$uction "lan
7o
<es
7o
+losed %oop MR5 'MR5 77*
&nterprise Resource 5lanning '&R5*
('tension o. M,P
E G H I P 8
Time (*eeks)
-ork an
e/tra shift
Push $ack
Push $ack
Pu## ahead
Overtime
@ours of
capacity
Dispatc List
Is
specific
capacity
a$e>uate/
Is
average
capacity
a$e>uate/
Material
Re>uirements
)$etaile$*
%apacity
Re>uirements
)$etaile$*
Input(Output
Desire$ Master
"ro$uction
Sce$ule
Realistic/
"riority %ontrol
%apacity "lanning
"riority "lanning
%apacity %ontrol
Resource
"lanning
First %ut
%apacity
"ro$uction "lan
7o 7o
7o
<es <es
Inte#rates in.ormation on all resources needed .or runnin# a business
(specially sales, purc*asin#, and *uman resources
0ust>7n>4ime
ike M,P aim is to minimiHe inventory
But people .ocus is di..erent
M,P computer optimiHation
7IT empo3erment o. 3orkers doin# t*e 9ob
And inventory tec*nical approac* is di..erent
M,P Opus*P by computer sc*edule
7IT OpullP by need .or replenis*ment as parts are used up
('perience ?e1#1 ToyotaA .avors 7IT in many situations
7ob s*op vs repetitive
:ideo
7IT implementation at &ederal Si#nal
Specialty li#*ts .or emer#ency ve*icles
!urin# t*e video, make a list o. 7IT elements in t3o cate#ories;
Tec*nical stu.. ?e1#1 use o. $anban systemA
People stu.. ?e1#1 3orker o3ners*ipA
F5ullG s,stem 5roduction +ontrol
8anan > :isual 5roduction +ontrol
$anban maintains discipline o. pull production
$anban card moves 3it* empty and .ull containers o. parts
Production $anban aut*oriHes production
And contains production in.ormation
4he 2roader Sense o. 074
Producin# only 3*at is needed, 3*en it is needed
Production at 'tep <G= in contro##ed $y step <H=
Production
Step 4
In.ormation &lo3
Material &lo3
Send more 3id#ets
Production
Step =
In.ormation &lo3
Material &lo3
Send more 3id#ets
) eliminate all 3aste, not 9ust unproductive inventory
An inte#rated mana#ement system1
7ITJs ob9ective; Improve Pro.its and ,1O1I
OGorld ClassP cost, /uality, delivery
Overlap with Quality Philosophies (e.g. TQ!
Some &<amples o. /aste
Gaitin# .or parts
Countin# parts
Multiple inspections
Over)runs in production
Movin# parts over lon# distances
Storin# and retrievin# inventory
ookin# .or tools
Mac*ine breakdo3n
,e3ork
&..ect o. 074 on /orkers
Multi.unction 3orkers
Cross)trainin#
"e3 pay system to re.lect skills variety
Team3ork
Su##estion system
M"#$%& C () Hours*
5roduction scheduling-
Master Production sc*edulin#, detailed sc*edulin#,
.acility loadin# se/uencin# operations,
priority se/uencin# tec*ni/ues,
line balancin# and line o. balance ?OBA,
?Problems in Priority se/uencin#, 7o*nsonJs rule and ine Balancin#A
Scheduling
Sc*edulin#; (stablis*in# t*e timin# o. t*e use o. e/uipment, .acilities and *uman
activities in an or#aniHation
(..ective sc*edulin# can yield
Cost savin#s
Increases in productivity
High>:olume S,stems
.lo" system ; -i#*)volume system 3it* StandardiHed e/uipment and activities
.lo"-shop scheduling ; Sc*edulin# .or *i#*)volume .lo3 system
Scheduling Manu.acturing "perations
High>:olume Success Factors
.or# %enter H1 .or# %enter SG
Output
Build A
A Done
Build B
B Done
Build C
C Done
Build D
Shi
5,7 FE- M,R ,"R M,< 5U7
On
timeI
@igh3vo#ume
Intermediate3
vo#ume
0o*3vo#ume
'ervice operations
Process and product desi#n
Preventive maintenance
,apid repair 3*en breakdo3n occurs
Optimal product mi'es
MinimiHation o. /uality problems
,eliability and timin# o. supplies
7ntermediate>:olume S,stems
Outputs are bet3een standardiHed *i#*)volume systems and made)to)order 9ob
s*ops
,un siHe, timin#, and se/uence o. 9obs
(conomic run siHe;
Scheduling %ow>:olume S,stems
Loading ) assi#nment o. 9obs to process centers
Se/uencing ) determinin# t*e order in 3*ic* 9obs 3ill be processed
7ob)s*op sc*edulin#
Sc*edulin# .or lo3)volume
systems 3it* many
variations
in re/uirements
9antt %oad +hart
0antt chart ) used as a visual aid .or loadin# and sc*edulin#
%oading
-ork
%enter
Mon. Tues. -ed. Thurs. !ri.
E Co$ H Co$ I
G Co$ H Co$ Q
H Co$ E Co$ 8 Co$ Q
I Co$ E9
+
DS
'
p
p u
@
=
=
In.inite loadin#
&inite loadin#
%ertical loadin#
-oriHontal loadin#
&or3ard sc*edulin#
Back3ard sc*edulin#
Sc*edule c*art
Se6uencing
Se/uencing ; !etermine t*e order in 3*ic* 9obs at a 3ork center 3ill be processed1
1or#station ; An area 3*ere one person 3orks, usually 3it* special e/uipment, on
a specialiHed 9ob1
$riority rules ; Simple *euristics
used to select t*e order in
3*ic* 9obs 3ill be processed1
Job time ; Time needed .or
setup and processin# o. a 9ob1
5riorit, Rules
&C&S ) .irst come, .irst served
SPT ) s*ortest processin# time
(!! ) earliest due date
C, ) critical ratio
SFO ) slack per operation
,us* ) emer#ency
&<ample 2
&op
"riority
4wo /ork +enter Se6uencing
Johnson2s ,ule ; tec*ni/ue .or minimiHin# completion time .or a #roup o. 9obs to
be processed on t3o mac*ines or at t3o 3ork centers1
MinimiHes total idle time
Several conditions must be satis.ied
0ohnsonHs Rule +onditions
7ob time must be kno3n and constant
7ob times must be independent o. se/uence
7obs must .ollo3 same t3o)step se/uence
7ob priorities cannot be used
All units must be completed at t*e .irst
3ork center be.ore movin# to second
0ohnsonHs Rule "ptimum Se6uence
<1 ist t*e 9obs and t*eir times at eac* 3ork center
=1 Select t*e 9ob 3it* t*e s*ortest time
41 (liminate t*e 9ob .rom .urt*er consideration
>1 ,epeat steps = and 4 until all 9obs *ave been sc*eduled
Scheduling #i..iculties
%ariability in
41=> D12C ==1<C C,
=125 2144 <5144 (!!
=124 212C <51@@ SPT
=1D4 D1@@ =@1@@ &C&S
Avera#e
"umber o. 7obs
at t*e Gork
Center
Avera#e
Tardiness
?daysA
Avera#e
&lo3 Time
?daysA
,ule
Setup times
Processin# times
Interruptions
C*an#es in t*e set o. 9obs
"o met*od .or identi.yin# optimal sc*edule
Sc*edulin# is not an e'act science
On#oin# task .or a mana#er
Minimi1ing Scheduling #i..iculties
Set realistic due dates
&ocus on bottleneck operations
Consider lot splittin# o. lar#e 9obs
Scheduling Service "perations
Appointment systems
Controls customer arrivals .or service
,eservation systems
(stimates demand .or service
Sc*edulin# t*e 3ork.orce
Mana#es capacity .or service
Sc*edulin# multiple resources
Coordinates use o. more t*an one resource
+,clical Scheduling
-ospitals, policeF.ire departments, restaurants, supermarkets
,otatin# sc*edules
Set a sc*edulin# *oriHon
Identi.y t*e 3ork pattern
!evelop a basic employee sc*edule
Assi#n employees to t*e sc*edule
Service "peration 5rolems
Cannot store or inventory services
Customer service re/uests are random
Sc*edulin# service involves
Customers
Gork.orce
(/uipment
M"#$%& B '() Hours*
0uality Mana#ement;
Inspection and 0uality control,
Statistical 0uality Control Tec*ni/ues
?Control C*arts and acceptance samplin#A,
/uality circles
Introduction to Total 0uality Mana#ement ?T0MA,
?Problems in Control C*artsA
"Aectives
To introduce t*e /uality mana#ement process and key /uality mana#ement
activities
To e'plain t*e role o. standards in /uality mana#ement
To e'plain t*e concept o. a so.t3are metric, predictor metrics and control metrics
To e'plain *o3 measurement may be used in assessin# so.t3are /uality and t*e
limitations o. so.t3are measurement
@ualit, +ontrol
+ontrolling For @ualit, 3nd 5roductivit,
0uality
T*e e'tent to 3*ic* a product or service is able to meet customer needs
and e'pectations1
CustomerJs needs are t*e basic standard .or measurin# /uality
-i#* /uality does not *ave to mean *i#* price1
ISO D@@@
T*e /uality standards o. t*e International Standards Or#aniHation1
+ontrolling For @ualit, 3nd 5roductivit,
Total 0uality Mana#ement ?T0MA
A speci.ic or#aniHation)3ide pro#ram t*at inte#rates all t*e .unctions and
related processes o. a business suc* t*at t*ey are all aimed at ma'imiHin#
customer satis.action t*rou#* on#oin# improvements1
Also called; Continuous improvement, Rero de.ects, Si')Si#ma, and
$aiHen ?7apanA
Malcolm Baldrid#e A3ard
A priHe created in <D5C by t*e +1S1 !epartment o. Commerce to reco#niHe
outstandin# ac*ievement in /uality control mana#ement1
+hecklist !?I!How to /in a 2aldridge 3ward
Is t*e company e'*ibitin# senior e'ecutive leaders*ipM
Is t*e company obtainin# /uality in.ormation and analysisM
Is t*e company en#a#in# in strate#ic /uality plannin#M
Is t*e company developin# its *uman resourcesM
Is t*e company mana#in# t*e entire /uality processM
-o3 does t*e company measure operational resultsM
!oes t*e company e'*ibit a customer .ocusM
@ualit, +ontrol Methods
Acceptance Samplin#
a met*od o. monitorin# product /uality t*at re/uires t*e inspection o. only
a small portion o. t*e produced items1
&<ample o. a @ualit, +ontrol +hart
+ommonl, $sed 4ools .or 5rolem Solving and +ontinuous 7mprovement
Fishone +hart 'or +ause>and>&..ect #iagram* .or 5rolems with 3irline +ustomer
Service
5areto 3nal,sis +hart
5hases o. @ualit, 3ssurance
,cceptance
sampling
"rocess
control
%ontinuous
improvemen
t
Inspection
2efore(after
pro$uction
Inspection an$
corrective
action $uring
pro$uction
+uality 2uilt
into te
process
&e least
progressive
&e most
progressive
7nspection
-o3 Muc*F-o3 O.ten
G*ereFG*en
CentraliHed vs1 On)site
7nspection +osts
%
o
s
t
Optimal
,mount of Inspection
Inspection %osts
%ost of
inspection
%ost of
passing
$efectives
&otal %ost
/here to 7nspect in the 5rocess
,a3 materials and purc*ased parts
&inis*ed products
Be.ore a costly operation
Be.ore an irreversible process
Be.ore a coverin# process
Input
s
&ransformatio
n
Output
s
,cceptance
sampling
"rocess
control
,cceptance
sampling
&<amples o. 7nspection 5oints
Statistical $rocess Control ;
Statistical evaluation o. t*e output o. a process durin# production
+uality of Conformance:
A product or service con.orms to speci.ications
+ontrol +hart
Control C*art
$urpose: to monitor process output to see i. it is random
A time ordered plot representative sample statistics obtained .rom an on
#oin# process ?e1#1 sample meansA
+pper and lo3er control limits de.ine t*e ran#e o. acceptable variation
&ype of
2usiness
Inspection
points
%aracteristics
!ast !ood %ashier
%ounter area
.ating area
?ui#ding
Fitchen
Accuracy
Appearance) productivity
%#ean#iness
Appearance
@ea#th regu#ations
@ote#Bmote# Parking #ot
Accounting
?ui#ding
Main desk
'afe) *e## #ighted
Accuracy) time#iness
Appearance) safety
-aiting times
'upermarket %ashiers
,e#iveries
Accuracy) courtesy
(ua#ity) 6uantity
%ontro# %hart
? 1 @ A B J K L M N 1? 11 1@ 1A 1B 1J
U%L
L%L
Sample num2er
Mean
Out of
control
7ormal variation
$ue to cance
,2normal variation
$ue to assigna2le sources
,2normal variation
$ue to assigna2le sources
Statistical 5rocess +ontrol
T*e essence o. statistical process control is to assure t*at t*e output o. a process is
random so t*at future output 3ill be random1
Statistical 5rocess +ontrol
T*e Control Process
!e.ine
Measure
Compare
(valuate
Correct
Monitor results
Statistical 5rocess +ontrol
%ariations and Control
,andom variation ; "atural variations in t*e output o. a process, created by
countless minor .actors
Assignable variation ; A variation 3*ose source can be identi.ied
Sampling #istriution
;ormal #istriution
+ontrol %imits
Sampling
$istri2ution
"rocess
$istri2ution
Mean
Mean
3 2 +2 +3
NJ0BB
O
NN0LB
O
= Stan$ar$
S5+ &rrors
Type I error
Concludin# a process is not in control 3*en it actually is1
Type II error
Concludin# a process is in control 3*en it is not1
4,pe 7 &rror
"servations .rom Sample #istriution
Sampling
$istri2ution
"rocess
$istri2ution
Mean
Lower control
limit
Upper control limit
Mean
L%
L
U%
L
= "ro2a2ility of
&ype I error
+ontrol +harts .or :ariales
:ariales generate data that are measure"I
Mean control c*arts
+sed to monitor t*e central tendency o. a process1
K bar c*arts
,an#e control c*arts
+sed to monitor t*e process dispersion
, c*arts
Mean and Range +harts
Mean and +ange %harts
U%L
L%L
U%L
L%L
R1cart
41%art
Detects si ft
Does not
$etect sift
*process men is
shifting up+rd,
Smp-ing
Distribution
Sample num2er
U%L
L%L
1 @ A B
41%art
U%L
Does not
reveal increase
Mean and +ange %harts
U%L
L%L
L%L
R1cart Reveals increase
*process vribi-ity is incresing,
Smp-ing
Distribution
+ontrol +hart .or 3ttriutes
p)C*art ) Control c*art used to monitor t*e proportion o. de.ectives in a process
c)C*art ) Control c*art used to monitor t*e number o. de.ects per unit
3ttriutes generate data that are counte"I
$se o. p>+harts
G*en observations can be placed into t3o cate#ories1
Iood or bad
Pass or .ail
Operate or donJt operate
G*en t*e data consists o. multiple samples o. several observations eac*
$se o. c>+harts
+se only 3*en t*e number o. occurrences per unit o. measure can be countedS
non)occurrences cannot be counted1
Scratc*es, c*ips, dents, or errors per item
Cracks or .aults per unit o. distance
Breaks or Tears per unit o. area
Bacteria or pollutants per unit o. volume
Calls, complaints, .ailures per unit o. time
$se o. +ontrol +harts
At 3*at point in t*e process to use control c*arts
G*at siHe samples to take
G*at type o. control c*art to use
%ariables
Attributes
Run 4ests
,un test a test .or randomness
Any sort o. pattern in t*e data 3ould su##est a non)random process
All points are 3it*in t*e control limits ) t*e process may not be random
;onrandom 5atterns in +ontrol charts
Trend
Cycles
Bias
Mean s*i.t
Too muc* dispersion
+ounting 3ove/2elow Median Runs 'B runs*
+ounting $p/#own Runs ') runs*
$ $ # $ # $ # $ $ #
2 3 3 2 3 2 2 2 3 3 2
!igure E9.EG
!igure E9.EH
!ou"ti"& -u"s !ou"ti"& -u"s
5rocess +apailit,
Tolerances or speci.ications
,an#e o. acceptable values establis*ed by en#ineerin# desi#n or customer
re/uirements
Process variability
"atural variability in a process
Process capability
Process variability relative to speci.ication
Process %apa$i#ity
Lower
Specification
Upper
Specification
,0 "rocess varia2ility
matces specifications
Lower
Specification
Upper
Specification
-0 "rocess varia2ility
well witin specifications
Lower
Specification
Upper
Specification
%0 "rocess varia2ility
e4cee$s specifications
!igure E9.EP
5rocess +apailit, Ratio
Process capability ratio, Cp 8
speci.ication 3idt*
process 3idt*
+pper speci.ication lo3er speci.ication
2
Cp 8
5rocess
mean
%ower
speci.icati on
$pper
speci.icati on
!3?( ppm
!3?( ppm
!IB ppm !IB ppm
J/> 3 Sigma
J/> C Sigma
. #i&ma a"d ' #i&ma /uality . #i&ma a"d ' #i&ma /uality
7mproving 5rocess +apailit,
Simpli.y
StandardiHe
Mistake)proo.
+p#rade e/uipment
Automate
Taguchi 0oss !unction
+ost
4arget
%ower
spec
$pper
spec
4raditional
cost .unction
4aguchi
cost .unction
!igure E9.EQ
%imitations o. +apailit, 7nde<es
<1 Process may not be stable
=1 Process output may not be normally distributed
41 Process not centered but Cp is used
#""itional PowerPoint sli"es
contri$ute" $y
Geo%% &illis'
(niversity o% )entral O*lahoma
Statistical 5rocess +ontrol 'S5+*
Invented by Galter S*e3*art at Gestern (lectric
!istin#uis*es bet3een
common cause variability ?randomA
special cause variability ?assi#nableA
Based on repeated samples .rom a process
&mpirical Rule
)4 )< )= T< T= T4
25E
DBE
DD1CE
+ontrol +harts in 9eneral
Are named accordin# to t*e statistics bein# plotted, i1e1, K bar, ,, p, and c
-ave a center line t*at is t*e overall avera#e
-ave limits above and belo3 t*e center line at V 4 standard deviations ?usuallyA
Center line
o3er Control imit ?CA
+pper Control imit ?+CA
:ariales #ata +harts
Jaria$#es ,ata %harts
1 Process %entering
5 O $ar chart
5 O $ar is a samp#e mean
1 Process ,ispersion (consistency)
5 + chart
5 + is a samp#e range
n
3
3
n
i
i
=
=
<
A min? A ma'?
i i
3 3 , =
O $ar charts
1 %enter #ine is the grand mean (O dou$#e
$ar)
1 Points are O $ars
!
4 3 &CL + =
n
!
F =
!
4 3 LCL =
m
3
3
m
5
5
=
=
<
, A 3 &CL
=
+ = , A 3 LCL
=
=
)O,)
R +harts
Center line is t*e #rand mean ?, barA
Points are ,
!4 and !> values are tabled accordin# to n ?sample siHeA
$se o. K ar D R charts
C*arts are al3ays used in tandem
!ata are collected ?=@)=B samplesA
Sample statistics are computed
All data are plotted on t*e = c*arts
C*arts are e'amined .or randomness
I. random, t*en limits are used O.oreverP
Attri$ute %harts
1 c charts 5 used to count defects in a
constant samp#e size
centerline
m
c
c
n
i
= =
=<
c 4 c &CL + =
c 4 c LCL =
, D &CL
>
= , D LCL
4
=
Attri$ute %harts
1 p charts 5 used to track
a proportion (fraction)
defective
centerline
nm
!
m
p
p
i5
m
5
= = =
=<
n
p p
4 p &CL
A < ?
+ =
n
p p
4 p LCL
A < ?
=
n
!
p
n
i
i
i
=
=
<
Process %apa$i#ity
The ratio of process varia$i#ity to design
specifications
+pper
Spec
o3er
Spec
"atural data
spread
Te/t Te/t Te/t Te/t Te/t Te/t
Tit#e
T*e natural spread
o. t*e data is 2W
)<W
T=W
)=W
T<W T4W
)4W
X
4raining
M0>
7ob rotationF/uality .ati#ue at -onda
@ualit, Measurement
Services/Measurement
STAO4
SurveyF(..iciency, AdmissionF!isc*ar#e
7nspection 3cceptance Sampling
Sampling 5lans
#cceptance sampling - &orm o. inspection applied to lots or batc*es o. items
be.ore or a.ter a process, to 9ud#e con.ormance 3it* predetermined standards
Sampling plans ; Plans t*at speci.y lot siHe, sample siHe, number o. samples, and
acceptanceFre9ection criteria
Sin#le)samplin#
!ouble)samplin#
Multiple)samplin#
Operating %haracteristic %urve
@
@1<
@1=
@14
@1>
@1B
@12
@1C
@15
@1D
<
@ 1@B 1<@ 1<B 1=@ 1=B
5
r
o
i
l
i
t
,
o
.
a
c
c
e
p
t
i
n
g
l
o
t
%ot 6ualit, '.raction de.ective*
4E
,ecision %riteria
@
<1@@
5
r
o
i
l
i
t
,
o
.
a
c
c
e
p
t
i
n
g
l
o
t
%ot 6ualit, '.raction de.ective*
<"ood= <?ad=
Idea#
Aot very
discriminating
!igure E9'.G
Sampling 4erms
#cceptance +uality level (#Q,! - t*e percenta#e o. de.ects at 3*ic* consumers
are 3illin# to accept lots as O#oodP
,ot tolerance percent "e%ective (,TP-! - t*e upper limit on t*e percenta#e o.
de.ects t*at a consumer is 3illin# to accept
)onsumer.s ris* - t*e probability t*at a lot contained de.ectives e'ceedin# t*e
TP! 3ill be accepted
Pro"ucer.s ris* ; t*e probability t*at a lot containin# t*e acceptable /uality level
3ill be re9ected
%onsumers and Producers
+isk
@
@1<
@1=
@14
@1>
@1B
@12
@1C
@15
@1D
<
@ 1@B 1<@ 1<B 1=@ 1=B
5
r
o
i
l
i
t
,
o
.
a
c
c
e
p
t
i
n
g
l
o
t
%ot 6ualit, '.raction de.ective*
N .E9
N .E9
<"ood=
A(0
<?ad= Indifferent
0TP,
!igure E9'.H
/! !urve for " = 101 c = 1 /! !urve for " = 101 c = 1
!igure E9'.I
@
@1<
@1=
@14
@1>
@1B
@12
@1C
@15
@1D
<
@ 1<@ 1=@ 14@ 1>@ 1B@
5
r
o
i
l
i
t
,
o
.
a
c
c
e
p
t
a
n
c
e
Fraction de.ective in lot
1D<4D
1C42<
1B>>4
14CB5
1=>>@
1<>D4
1@52@
Average (ua#ity
1 Average outgoing 6ua#ity (AO()4
Average of inspected #ots (E99;) and
uni nspected #ots
A*+ $ac p
6 n
6
=