6

Process Flexibility
High General purpose Low utilization

Levers for Reducing Flow Time

Project
(Consulting, Construction)

Levers for Increasing Capacity

Increase capacity of bottleneck resource(s)
Increase the scale (no. of units) or speed (processing rate)

Decrease work content of critical activities

Work smarter, faster, simplify, streamline

Service Businesses
Versatile Jumbled flow Specialized Intermittent flow

Job Shop
(Machine shop, Auto repair)

Eliminate non-value adding activities

Rework, waiting, movement

Reduce work from the bottleneck resource

Eliminate non-value adding activities

Batch Shop
(Auto assembly, Airline service)

Move work off the critical path

To non-critical activities or to outer loop

Shift work from bottlenecks to non-bottlenecks

Increase flexibility of non-bottleneck resources Outsource, subcontract

A service business is the management of Dedicated, rigid Flow Shop organizations whose refinery primary business Continuous flow (Oil Low requires interactionBeer brewery)the customer to with Low produce the serviceStandardized Few Products Customized Medium volume Low volume High volume
OM

Weaken precedence relationships

From sequential to parallel processing

Increase the availability of bottleneck resources

Reduce the idle down time, set up or changeover time

High Unique Long time

Product Variety
S. D. Deshmukh

Expedite critical activities

Allocate more resources to critical activities

Maximize the utilization of bottleneck resources

Synchronize flows to the bottleneck to avoid starvation
S. D. Deshmukh

OM

S. D. Deshmukh OM

Facilities-based services: Where the customer must go to the service facility Field-based services: Where the production and consumption of the service takes place in the customers environment

Functional:

Product 1

Pizza Pazza: Flow Rate Analysis Variation in Flow Rate and Inventory What is the maximum number of orders that PP can fill per hour in steady state? Norris Pizza sells pizzas to students during lunch
B D

A
Product 2

If the Jacqueline calls in sick one day, what is the maximum number of orders that PP can fill?

Product: The Customer Centered View

Product 2

Product 1

A C

D B

If they can Service-System Design Matrix rent additional ovens at $10 an

A

hour, how many should they rent?

Degree of customer/server contact

A philosophical view that suggests the organization exists to serve the customer, and the systems and the OPMG employees exist to facilitate the process of service.
OM

The Service Strategy

S. D. Deshmukh OM

S. D. Deshmukh

hours from 11am to 2pm. Average student demand is 20 pizzas per hour from 11am to 12pm, 30 per hour from 12pm to 1pm, and 10 per hour from 1pm to 2pm. At 11am, Norris starts producing pizzas to stock at its capacity of 60 pizzas per hour. Finished pizzas wait on a heat lane until students pick them up. Norris shuts down its ovens when it has made enough pizzas for the lunch hour. How does the average pizza inventory on heat lane vary over the lunch hour?
S. D. Deshmukh

High
OPMG

Buffered core (none)

Permeable system (some)

Reactive system (much)

Face-to-face total customization

OM

Low
S. D. Deshmukh
Production Efficiency

S. D. Deshmukh
Sales Opportunity
Phone Internet & Contact on-site Mail contacttechnology Face-to-face loose specs Face-to-face tight specs

OPMG

S. D. Deshm

The Customer

The Systems

The People
Low

High

Characteristics of Workers, Operations, and Innovations Relative to the Degree of Customer/Service Contact

Characteristics of Workers, Operations, and Innovations Relative to the Degree of Customer/Service Contact

Impacts choice of location, facility layout, product design, process design, scheduling, planning, worker skills, quality control, time standards, capacity, wage basis

shadri

Quality Philosophy
Deming Crosby Crosbys Four Absolutes Juran Quality Management

Crosbys Four Absolutes of Quality Management

of
1. What is quality? Quality is conformance to requirements, not goodness. i d 2. What system is needed to cause quality? Prevention, not detection.
Operations Seshadri

products and services that Costs of to the are importantQuality (Contd) customer Costs - costs of inspection of Appraisal
incoming material, during manufacturing, in laboratory tests, and by outside inspectors.
Prevention Costs - costs associated with the prevention of non-conformities, such as the d i i f f ii h h design of new quality equipment, training and education, and data gathering and analysis.

1. What is quality? Quality is conformance to 3. What performance standard should be used? Operations requirements, not goodness. Seshadri i d Zero-defects, Zero defects not thats close enough. that s enough 2. What system is needed to cause quality? 4. What measurement system is required? Prevention, not detection. Price of conformance and non-conformance. Operations Seshadri 3. What performance standard should be used? Zero-defects, Zero defects not thats close enough that s enough. 4. What measurement system is required? Price of conformance and non-conformance.

Juran Trilogy
Planning, Control, Improvement
Juran Trilogy

Total quality management is defined as managing the entire organization so that it excels on all dimensions of products and services that are important to the customer

Design versus Conformance Quality

Conformance quality: Degree to which the product or service design specifications are met Design quality: Inherent value of the product in the marketplace

Is there an optimal quality?

Deming popularized simple statistics based techniques + !

Defect Rate

Planning
40

Control

Improvement

Control

35

Costs of Quality
Sporadic Spike

Costs of Quality (Contd)

30

Internal + External failure cost

Total quality cost

- costs of inspection of Cost per good Internal Failure Costs - costs associated with Appraisal Costs unit of product Pareto analysis (stratified sampling, data mining) Design versus Conformance Quality Minimum COQ failures detected before they leave the ownership of incoming material, during manufacturing, in Let us take a quick look back at Ford Firestone the firm, such as scrap, rework, re-inspection, and laboratory tests, and by outside inspectors. Chronic Waste Conformance quality: Degree to which the Ishikawa or fishbone cause-and-effect diagrams low production yields. product or service design specifications are met Appraisal cost + Internal Failure Costs - diagrams Histograms, flow charts, scatter costs associated with Chronic Waste Prevention cost P ti t Prevention Costs - costs associated with the Measurement tools failures detected before they leave the ownership of Design quality: Inherent value of the product in External Failure Costs - costs associated with prevention of non-conformities, such as the d i i f f ii h h design the marketplace the firm, such as control Statistical processscrap, rework, re-inspection, and 100% defective 100% good failures d f il detected b the consumer, such a warranty d by h h Source: David Juran of new quality equipment, training and education, low production yields. Sampling claims, repairs, and service costs. and data gathering and analysis. Points for Top Management Operations Seshadri Standard Maintaining versus Continuous Improvement systems External Failure Costs - costs associated with failures d f il detected b the consumer, such a warranty d by h h Planning, Control, costs. claims, repairs, and serviceImprovement
Diagnostic tools
25 20

Costs of Quality

15

10

10

12

14

16

18

20

22

24

26

28

30

32

34

36

38

-10

Time

Juran Trilogy
Juran Trilogy

Planning
40

Control

Improvement

Control

35

Sporadic Spike

Six Sigma Quality 3

40

-8

-6

-4

-2

30

25
Defect Rate

20

15

10

Chronic Waste

0
10 12 14 16 18 20 22 24 -10 -8 -6 -4 -2 0 2 4 6 8

Chronic Waste
26 28 30 32 34 36 38

Time

Source: David Juran

A philosophy and set of methods Assignable variation caused by factors that can Is there an optimal quality? be clearly identified and possibly managed companies use to eliminate defects in The important assumption behind SPC is that all their products and processes 6 Internal + External Total quality assignable causes have been eliminated, and the only failure cost cost variations are random. Seeks to reduce variation in the Examples of assignable causes processes that lead to product defectsCost per good Common variation is inherent in the unit of product Minimum COQ production process Combines the customer and process Can be reduced only through process improvement aspects focus on defects Examples of common variation
Appraisal cost + Prevention cost P ti t

Assignable versus natural (common) 6 variations

40

Credit Juran for most of these ideas.

100% defective

100% good

In Control Assume Process is OK Take Corrective Action Correct Decision ERROR (Type I)

Out of Control ERROR (Type II) Correct Decision

Operations Seshadri
Operations Seshadri

What does a Cpk of .4253 mean?

An index that shows how well the units being b i produced fi within the specification d d fit i hi h ifi i limits. This is a process that will produce a 14 relatively high number of defects. (how do I know that? Next slide) M Many companies l k f a Cpk of 1.0 or i look for f10 better 6-Sigma company wants 1.5!

Six Sigma Process

A Process in which the Specification Limits Li it are Si Standard Deviations Six St d d D i ti above and below the Process Mean One that produces less than 3.4 ppm defects If this process were perfectly centered it will produce 2 ppb defects. So what gives?

PPM (parts per milllion definition with 1.5 std dev shift)
Sigma Level 1 2 3 4 5 6 Cp Cpk PPM 0.333 -0.167 697,672 0.667 0.167 308,770 1.000 0.500 66,810 1.333 0.833 6,210 1.667 1.167 232.7 2.000 1.500 3.4

Where Does 3.4 PPM Come From? (why did they select 1.5 std dev?)
The 3 4 defective parts per million 3.4 definition of Six Sigma includes a worst case scenario of a 1.5 standard deviation shift in the process. It is assumed that there is a very high probability that such a shift would be detected by SPC methods (low probability of Type II error).

1. Can go from ppm to Cpk and vice versa 2. Defects (ppm) and Cpk are computed with a shift in the mean!

38

36