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Concept of TQM (Total Quality Management) :

TQM refers to a quest for quality in an organization by looking at the quality of every aspect
of the process that produces the product or service.
Total Quality is:
1. People focused Management System
2. Total systems approach
3. Works across all functions and departments
4. Extends backward to include Supply Chain
5. Extends forward to include Customer Chain
 Total Quality Management term has been used to denote the system of Managing
for Total Quality.
 TQM is a total company-wide effort through participation of the entire workforce
and focus on continuous improvement to achieve customer satisfaction.
Essential steps in implementation of TQM:
 Successful implementation of TQM programs are built through the dedication &
combined efforts of every employee in the organization along with a committed &
involved Top Management. TQM implementation in an Organization would involve
the following approach:
1. Find out what the customer wants {internal customer (the next person in the
process) & external customer (final customer)}
2. Design a product or service that will meet (or exceed) what customer wants.
Make it easy to use & easy to produce
3. Determine the processes that facilitate doing the job right the first time.
Strive to make the process “mistake proof” (fool proofing or pokayoke)
4. Keep track of results, and use them to guide improvement in the system
(continuous improvement or kaizen)
5. Extend the concepts to suppliers & distributors (integrated management)
Important Elements of TQM
1. Continuous Improvement
2. Competitive Benchmarking
3. Employee Empowerment
4. Team Approach
5. Decision based on facts rather than opinions
6. Knowledge of tools
7. Supplier quality
8. Quality at the source
TQM reflects a whole new attitude toward quality. TQM is about the culture of an
organization. For TQM to succeed, the culture of an organization must change

Redesign of Layouts :

 The need for layout planning arises both in the process of designing new facilities
and in redesigning existing facilities.
 The most common reasons for redesign of layouts include
1. Inefficient operations (e.g., high cost, bottlenecks)
2. Accidents or safety hazards
3. Changes in the design of products or services
4. Introduction of new products or services
5. Changes in the volume of output or mix of outputs
6. Changes in methods or equipment
7. Changes in environmental or other legal requirements, and morale
problems (e.g., lack of face-to-face contact).

Process Types: Job Shop


1. It usually operates on a relatively small scale.
2. It is used when a low volume of high variety goods or services are needed.
3. Processing is intermittent; work includes small jobs, each with somewhat different
processing requirements.
4. High Flexibility using general purpose equipment, skilled labor & intermittent
processing are important characteristics of a job shop.
5. A manufacturing example of a job shop is a tool and dies shop that is able to
produce one-of-a-kind tools.
6. A service example is a veterinarian’s office, which is able to process a
variety of animals and a variety of injuries and diseases.

Process Types: Batch Processing


1. It is used for moderate volume of goods & where moderate variety is desired.
2. The equipment need not be as flexible as in a job shop, but processing is still
intermittent.
3. The skill level of workers doesn’t need to be as high as in a job shop
because there is less variety in the jobs being processed.
4. Examples of batch systems for products include bakeries, which make bread,
cakes, or cookies in batches, paint, ice cream, soft drinks, magazines, and books.
5. Examples of services include movie theaters, which show movies to groups
(batches) of people, airlines which carry planeloads (batches) of people from
airport to airport, plays, concerts, music videos, radio and television programs, and
public address announcements.

Process Types: Repetitive

1. It is used for higher volumes of more standardized goods or services.


2. The standardized output means only slight flexibility of equipment is needed. Skill
of workers is generally low.
3. Examples of product system include production lines and assembly lines.
4. This type of system is sometimes referred to as Assembly.
5. Familiar products made by these systems include automobiles, television sets,
pencils, and computers.
6. An example of a service system is an automatic carwash, cafeteria lines and ticket
collectors at sports event and concerts.

Process Types: Continuous Process


1. It is used for a very high volume of highly standardized output.
2. These systems have almost no variety in output and, hence, no need for
equipment flexibility.
3. Workers’ skill requirements can range from low to high, depending on the
complexity of the system (Generally if equipment is highly specialized, workers
skill can be lower).
4. Examples of products made in continuous systems include petroleum products,
steel, sugar, flour, and salt.
5. Examples of Continuous services include air monitoring, supplying electricity to
homes and businesses, and the Internet.

Comparison of Process Types


The Four process types can be compared on four key dimensions: job variety, process
flexibility, unit cost, and output volume.
Job variety, process flexibility, and unit cost are highest for job shop and gets
progressively lower moving from job shop to continuous processing. Conversely,
volume of output is lowest for Job shop and gets progressively higher moving from job
shop to continuous processing.
All efficient process types fall on the diagonal of the Product-Process Matrix.

The following table summarizes the comparison of the four process types on the four
key dimensions: job variety, process flexibility, unit cost, and output volume.
Dimension Job Shop Batch Repetitive Continuous

Job variety Very High Moderate Low Very low

Process flexibility Very High Moderate Low Very low

Unit cost Very High Moderate Low Very low

Volume of output Very Low Low High Very high

Categories of Inventory Cost

 Ordering Cost – is incurred for processing the purchase order, expediting, record
keeping, and receiving the order into the warehouse.
 Stock out costs - In raw-materials inventory, stock out costs can include the cost of
disruptions to production. In finished-goods inventory, stock out costs can include
lost sales and dissatisfied customers.
 Acquisition costs – is the unit cost of the item. For purchased materials,
ordering larger batches may lower unit costs because of quantity
discounts and lower freight and materials-handling costs.
 Carrying costs - Interest on debt, interest income foregone, warehouse rent,
cooling, heating, lighting, cleaning, repairing, protecting, shipping, receiving,
materials handling, taxes, insurance, and management are some of the costs
incurred to insure, finance, store, handle, and manage larger inventories.
Cellular Layout
 Process layouts and product layouts represent two ends of a continuum from small
jobs to continuous production.
 Process layouts are conducive to the production of a wider range of products or
services than product layouts, which is desirable from a customer standpoint
where customized products are often in demand.
 However, process layouts tend to be less efficient and have higher unit production
costs than product layouts. Some manufacturers are moving away from process
layouts in an effort to capture some of the benefits of product layouts.
 Cellular manufacturing and Group technology, represent efforts to move toward a
system that is flexible and yet efficient, with low unit production costs.

Cellular Layout (Cellular Production)


1. Cellular Production is a type of layout in which workstations are grouped into what
is referred to as a cell.
2. Groupings are determined by the operations needed to perform work for a set of
similar items, or part families, that require similar processing.
3. The cells become, in effect, miniature versions of product layouts. The cells may
have a flow line movement of parts between machines (connected by a conveyor).
4. In the cellular layout, machines are arranged to handle all of the operations
necessary for a group (family) of similar parts. Thus, all parts follow the same route
although minor variations (e.g., skipping an operation) are possible.
5. In contrast, the functional layout involves multiple paths for parts. Moreover,
there is little effort or need to identify part families.
Cellular Layout (Group Technology)
1. Effective cellular manufacturing must have groups of identified items with similar
processing characteristics. This strategy for product and process design is known as
group technology and involves identifying items with similarities in either design
characteristics or manufacturing characteristics, and grouping them into part
families. Design characteristics include size, shape, and function; manufacturing or
processing characteristics involve the type and sequence of operations required.
2. Once similar items have been identified, items can be classified according to their
families; then a system can be developed for the retrieval of data base for the
purpose of manufacturing.
3. The conversion to group technology requires a systematic analysis of parts to
identify the part families. Visual inspection is one of the least accurate but the
least costly methods used.
4. The conversion to cellular production can involve costly realignment of equipment.
Consequently, a manager must weigh the benefits of a switch from a process
layout to a cellular one against the cost of moving equipment as well as the cost
and time needed for grouping parts.

Return on Quality (ROQ) approach


 Internal & External Failure costs relate to poor quality, whereas Appraisal &
Prevention cost represent investments for achieving good quality. An important
issue in quality management is the value received from expenditures on
Prevention.
 Prevention costs will be out-weighed by savings in appraisal & failure cost. The net
result is lower total cost (Quality is free)
 The return on quality (ROQ) approach focuses on the economics of quality efforts.
Quality improvement projects are viewed as investments and they are evaluated
like any other investments using metrics related to return on investment (ROI)

The Costs of Quality


Any serious attempt to deal with quality issues must take into account the costs
associated with quality. Major components of cost of quality includes prevention,
appraisal, external failure and internal failure cost
Prevention Costs:
Cost of preventing defects from occurring. They include:
1. Quality planning: Costs of preparing an overall plan, numerous specialized plans,
quality manuals, and procedures.
2. New-product review: Review or prepare quality specifications for new products,
evaluating of new designs, preparation of tests and experimental programs,
evaluation of vendors, marketing studies to determine customers’ quality
requirements.
3. Training: Developing and conducting training programs.
4. Process planning: Design and develop process control devices.
5. Quality data: Collecting data, data analysis & reporting
6. Improvement projects: Planned failure investigations aimed at chronic quality
problems.
Appraisal Costs:
Cost of activities designed to ensure quality or uncover defects. They include:
1. Incoming materials inspection: The cost of determining quality of incoming raw
materials.
2. Process inspection: All tests, sampling procedures and inspections done while the
product is being made.
3. Final goods inspection: All inspections or tests conducted on the finished product
in the plant or the field.
4. Quality laboratories: The cost of operating laboratories to inspect materials at all
stages of production.
Failure costs are caused by defective parts or products or by faulty services. Failures
discovered during production are internal failures and failures discovered after delivery to
the customer are external failures.
Internal Failure Costs include the following:
1. Scrap: The cost of labor and material for product, which cannot be used or sold.
2. Rework: The cost of redoing a product, which can be made to conform.
3. Downgrading: Cost in terms of selling the product at less than full value due to
quality problems.
4. Retest: Cost of inspection and tests after rework.
5. Downtime: Idle facilities and people due to quality failures.
External Failure Costs include the following:
1. Warranty: The cost of refunds, repairing or replacing products on warranty.
2. Returned merchandise: Merchandise, which is returned to the seller due to poor
quality
3. Complaints: The cost of settling customer complaints due to poor quality.
4. Allowances: Cost of concessions made to customers due to substandard quality.

Mutually Supportive Components of JIT


The roots of JIT system can be traced to the Japanese aversion to wastage. It seeks to
eliminate all source of waste by providing the right part at the right place at the right time
JIT manufacturing is a broad philosophy of continuous improvement that includes three
mutually supportive components (Productivity Triad)
1. People Involvement
2. Total Quality Control
3. JIT Flow

People Involvement
JIT has a strong human resource management component i.e. utilizing the full capability
of the worker. Underutilization of Human Talent is considered a waste.
A fundamental tenet of the JIT philosophy is that workers are assets. Well trained and
motivated workers are the heart of a JIT system. They are given authority to take
decisions & are expected to do more than traditional operator job.
Workers are cross trained to perform several parts of a process and operate a variety of
machines. This adds to system flexibility.
Successful people involvement stems from a culture of Teamwork & Trust. It goes beyond
JIT company to include Suppliers. JIT systems typically have close relationships with
Vendors, who are expected to provide frequent small deliveries of high quality goods.
Inspection of incoming goods is viewed as inefficient and therefore the burden of ensuring
quality shifts to the vendor.
The supplier may participate in design review etc. Suppliers can get the feedback to
improve productivity or Quality. The system is designed to provide long term stable
relationship with supplier.
The ultimate goal of the buyer is to certify a vendor as a producer of high quality goods.
Total Quality Control
1. Quality is the sine qua non (without which not) of JIT
2. Quality involves every department & every employee in the company.
Every employee should aim to satisfy its immediate customer.
3. Quality is designed in to the product and the production process
4. Companies like Toyota follow the concept of “Jidoka” i.e. it is better to
make nothing rather than making it incorrectly
5. “Total” in terms of time means it never ends. There is never a
level of quality that is “good enough”
JIT Flow
 JIT system are designed to minimize inventory storage. Inventories are buffers that
tend to cover up recurring problem that are never resolved {Large rocks (problems)
are hidden by a high water level (inventory)}
 Machine breakdown, poor quality, unreliable vendor, poor scheduling problems
can be solved using ample inventories (which allows for smooth production).
However cost of production is high because of inefficient production and problems
are unresolved.
 The JIT approach is to pare down inventories gradually in order to uncover the
problems. {Lower water level reveals rocks (problems such as bottlenecks, waste,
poor timing)}. Efforts are taken to remove these rocks from water
 Reducing Inventory will allow the production problems to surface. Once the
problems are visible, corrective action can be taken to eliminate these problems.
This reduces the cost & results in an efficient manufacturing plant
 As more rocks are removed, the need for water to cover them diminishes.
Likewise, as more of the major production problems are solved, there is less need
to rely on inventory. {The large rocks are removed, the water level (inventory) can
be lowered [Diagram C]}
 Smooth Production resumes at lower levels of inventory once the production
problems are eliminated.
 Inventory level is like a barometer to measure the effectiveness of the
manufacturing system. Lower the inventory level, more effective the
manufacturing system.
 JIT, TQM, TOC are all advocating low levels of inventory
 Excessive Inventory hides the problems and a lot of scrap is already produced
before it is discovered
 In JIT flow, it is easier to trace and solve the problem
 JIT ensures low WIP holding cost and low time required for end to end flow of
product through all work centers
Goal of any JIT flow is “One piece production and conveyance”
All processes approach the condition where each process can produce only one piece,
can convey it one at a time and have only one piece in stock between the processes
Elements that Support JIT Flow
1. A set of Uniform Production Rate and Mixed Model Assembly
2. A Pull method of coordinating work centers
3. Purchasing and Producing in small lots
4. Quick, inexpensive setups
5. Multi skilled workers and flexible facilities
6. High Quality levels
7. Preventive Maintenance and Housekeeping
8. Continuous Improvement
JIT Flow-Uniform Production Rate
• Objective of JIT is to achieve a smooth flow of materials from the company’s
suppliers to the company’s customers with no delays or interruptions.
• JIT system works best when production schedules are kept level and any required
changes are made in small steps.
Mixed Model Assembly
• Each day a mix of models is produced in short repetitive sequence.
• Work load in each work center remains uniform.
• Neither workers nor work centers need to be reassigned.

Productivity and Goal


• Productivity is the act of bringing a company closer to its goal. Productivity is
meaningless unless you know what your goal is.
• List of all the items people think of as being goals: cost-effective purchasing,
employing good people, high technology, producing & selling quality products,
capturing market share, communications and customer satisfaction.
• All of those are essential to running the business successfully. What do they all do?
They enable the company to make money. But they are not the goals themselves;
they’re just the means of achieving the goal. The Real Goal of the
organization is “To Make Money” and all other things are just ways to
achieve that goal.
Financial Measurements
• Starting point is “Setting The Goal” i.e. making money. If the goal is to make
money, then, an action that moves us toward making money is productive. And an
action that takes us away from making money is non-productive
• The problem is How to measure that organization is moving towards the Goal.
What would be the minimum number of measurements you would need in order
to know if we are making money?”
• The Goal is to make money by increasing net profit, while simultaneously
increasing return on investment, and simultaneously increasing cash flow, and
that’s the equivalent of saying the goal is to make money.”
• How to build a direct connection between the three financial measurements and
what goes on in the plant (Operational Rules)?
Operational Rules for Manufacturing Plant
 The measurements which express the goal of making money perfectly well, and
which also permit you to develop operational rules for running your plant are:
1. Throughput: It is the rate at which the system generates money through sales.
2. Inventory: It is all the money that the system has invested in purchasing things,
which it intends to sell.
3. Operational expense: It is all the money the system spends in order to turn
inventory into throughput.
• The Goal is to increase throughput while simultaneously reducing both inventory
and operating expense.
Each one of those definitions contains the word money.
1. Throughput is the money coming in.
2. Inventory is the money currently inside the system.
3. Operational expense is the money we have to pay out to make throughput
happen.
One measurement for the incoming money, one for the money still stuck inside, and one
for the money going out.”
Most of the time, our struggle for high efficiencies is taking us in the opposite direction of
our goal. “A plant in which everyone is working all the time is very inefficient.”

Utilizing & Activating of Resource


• Making an employee work and profiting from the work are two different things i.e.
activating a resource and utilizing a resource are not synonymous.”
• “Utilizing” a resource means making use of the resource in a way that
moves the system toward the goal.
• “Activating” a resource is like pressing the ON switch of a machine; it
runs whether or not there is any benefit to be derived from the work it’s
doing.
• And the implication of these rules is that we must not seek to optimize every
resource in the system. A system of local optimums is not an optimum system at
all; it is a very inefficient system.

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