9/21/16

Hometown Bank

Control Charts
for A-ributes

Example

p-chart: A chart used for controlling the

propor7on of defec7ve services or
products generated by the process.
p =

The operations manager of the booking services department of Hometown Bank

is concerned about the number of wrong customer account numbers recorded by
Hometown personnel.
Each week a random sample of 2,500 deposits is taken, and the number of
incorrect account numbers is recorded. The results for the past 12 weeks are
shown in the following table.

p(1 p)/n

Where
n = sample size
p = central line on the chart, which can be either the historical
average population proportion defective or a target value.

Control limits are: UCLp = p+zp and LCLp = pzp

z = normal deviate (number of standard deviations from the average)

Is the booking process out of statistical control? Use three-sigma control limits.

Hometown Bank

Hometown Bank

Using a p-Chart to monitor a process

Using a p-Chart to monitor a process

n = 2500

p=
p =
p =

147
= 0.0049
12(2500)

p(1 p)/n
0.0049(1 0.0049)/2500

p = 0.0014
UCLp = 0.0049 + 3(0.0014)
= 0.0091
LCLp = 0.0049 3(0.0014)
= 0.0007

Sample
Number

Wrong
Account #

Proportion
Defective

1
2
3
4
5
6
7
8
9
10
11
12

15
12
19
2
19
4
24
7
10
17
15
3

0.006
0.0048
0.0076
0.0008
0.0076
0.0016
0.0096
0.0028
0.004
0.0068
0.006
0.0012

Total

147

In class Problem

Example

Control Charts
Two types of error are possible with control
charts
A type I error occurs when a process is
thought to be out of control when in fact
it is not
A type II error occurs when a process is
thought to be in control when it is
actually out of sta7s7cal control
These errors can be controlled by the
choice of control limits

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Process Capability

Process Capability

Process capability is the ability of the

process to meet the design specica7ons
for a service or product.
Nominal value is a target for design
specica7ons.
Tolerance is an allowance above or below
the nominal value.

Nominal
value
Process distribution
Lower
specification

20

Upper
specification

25

30

Process is capable

Process Capability

Process Capability Ra7o, Cp

Process capability ra7o, Cp, is the tolerance width divided by 6 standard
devia7ons (process variability).

Nominal
value
Process distribution
Lower
specification

20

Upper
specification

25

Cp =

Upper specification - Lower specification

6

30

Process is not capable

Intensive Care Lab

Process Capability Index, Cpk

Example

Process Capability Index, Cpk, is an index that measures the poten7al

for a process to generate defec7ve outputs rela7ve to either upper
or lower specica7ons.

Cpk = Minimum of

=
x Lower specica7on
3

Upper specica7on x=
3

We take the minimum of the two ra7os because it gives the worstcase situa7on.

The intensive care unit lab process has an average turnaround 7me
of 26.2 minutes and a standard devia7on of 1.35 minutes.

The nominal value for this service is 25 minutes with an upper

specica7on limit of 30 minutes and a lower specica7on limit of 20
minutes.

The administrator of the lab wants to have three-sigma performance

for her lab. Is the lab process capable of this level of performance?
Upper specification = 30 minutes
Lower specification = 20 minutes
Average service = 26.2 minutes
= 1.35 minutes

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Intensive Care Lab

Intensive Care Lab

Assessing Process Capability

Example

Example

Upper specica7on = 30 minutes

Lower specica7on = 20 minutes
Average service = 26.2 minutes
= 1.35 minutes
=
x Lower specica7on

Cpk = Minimum of

Assessing Process Capability

Cpk =

Minimum of

Cpk =

Minimum of

26.2 20.0
3(1.35)

1.53, 0.94

Cp =

Upper specica7on x

Cp =

30.0 26.2
3(1.35)

= 0.94

Process
Capability
Index

In Class Problem

What it means to operate at 6-sigma

Nominal value
Six sigma

Four sigma
Two sigma

Lower
specification

Upper
specification

= 1.23 Process Capability Ra7o

Before Process Modification

Upper specification = 30.0 minutes Lower specification = 20.0 minutes
Average service = 26.2 minutes
= 1.35 minutes Cpk = 0.94 Cp = 1.23

In Class Problem

Eects of Reducing
Variability on Process Capability

30 - 20
6(1.35)

Does not meet 3 (1.00 Cpk) target due to a shift in mean

(Note variability is ok since Cp is over 1.0)

Upper specica7on - Lower specica7on

6

Range

Popula7on in range

Expected frequency outside

range

Approx. frequency for daily

event

0.682689492137

1 in 3

Twice a week

0.954499736104

1 in 22

Every three weeks

0.997300203937

1 in 370

Yearly

0.999936657516

1 in 15,787

Every 43 years (twice in a

life7me)

0.999999426697

1 in 1,744,278

Every 5,000 years (once in

history)

0.999999998027

1 in 506,842,372

Every 1.5 million years

Mean

9/21/16

Six Sigma
3.4 defects per million
Cpk = 2
Impact of number of parts or produc7on steps
on yield:
6 sigma

1 100%
5 100%
10 100%
100 99.97%

4 sigma

3 sigma

99%
97%
94%
54%

99%
71%
50%
0%

Designing in 6-sigma
Reduce the number of parts in a product
Reduce the number of steps in a process

Six Sigma
Improvement Model

Six Sigma
Six Sigma is a comprehensive and exible system for
achieving, sustaining, and maximizing business success
by minimizing defects and variability in processes.
It relies heavily on the principles and tools of TQM.
It is driven by a close understanding of customer needs;
the disciplined use of facts, data, and sta7s7cal analysis;
and diligent a-en7on to managing, improving, and
reinven7ng business processes.

1. Dene Determine the current process

characteris7cs cri7cal to customer sa7sfac7on
and iden7fy any gaps.
2. Measure Quan7fy the work the process does
that aects the gap.
3. Analyze Use data on measures to perform
process analysis.
4. Improve Modify or redesign exis7ng methods to
meet the new performance objec7ves.
5. Control Monitor the process to make sure high
performance levels are maintained.

Six Sigma
Implementa7on
Top Down Commitment from corporate leaders.
Measurement Systems to Track Progress
Tough Goal Sejng through benchmarking bestin-class companies.
Educa7on: Employees must be trained in the
whys and how-tos of quality.
Communica7on: Successes are as important to
understanding as failures.
Customer Priori7es: Never lose sight of the
customers priori7es.

Six Sigma Educa7on

Green Belt: An employee who achieved the rst level of
training in a Six Sigma program and spends part of his
or her 7me teaching and helping teams with their
projects.

Black Belt: An employee who reached the highest level

of training in a Six Sigma program and spends all of his
or her 7me teaching and leading teams involved in Six
Sigma projects.

Master Black Belt: Full-7me teachers and mentors to

several black belts.

9/21/16

International Quality
Documentation Standards

ISO
9000
ISO
14000

Malcolm Baldrige Na7onal Quality

Award
Named ater the late secretary of commerce, a strong proponent of
enhancing quality as a means of reducing the trade decit. The
award promotes, recognizes, and publicizes quality strategies and
achievements.

A set of standards governing documenta7on

of a quality program.
1.
2.
3.
4.
Documenta7on standards that require par7cipa7ng
companies to keep track of their raw materials use
and their genera7on, treatment, and disposal of
hazardous wastes.

Category 1 Leadership
120 points
Category 2 Strategic Planning
85 points
Category 3 Customer and Market Focus
85 points
Category 4 Measurement, Analysis, and
Knowledge Management
90 points

5. Category 5 Human Resource Focus

6. Category 6 Process Management
7. Category 7 Business Results

85 points
85 points
450 points