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1-1 Introduction to Operations Management
Introduction-
Operations as a Competitive
Weapon
1-2 Introduction to Operations Management
Operations-A Process ViewOperations-A Process View
Inputs
Land
Labor
Capital
Tra...
1-3 Introduction to Operations Management
Operations Management-Definition
• The operations function
– Consists of all act...
1-4 Introduction to Operations Management
Food ProcessorFood Processor
Inputs Processing Outputs
Raw Vegetables Cleaning C...
1-5 Introduction to Operations Management
Hospital ProcessHospital Process
Inputs Processing Outputs
Doctors, nurses Exami...
1-6 Introduction to Operations Management
Manufacturing vs ServiceManufacturing vs Service
Characteristic Manufacturing Se...
1-7 Introduction to Operations Management
Goods and Services-Key Differences
1. Customer contact
2. Uniformity of input
3....
1-8 Introduction to Operations Management
Business Operations OverlapBusiness Operations Overlap
Operations
FinanceMarketi...
1-9 Introduction to Operations Management
Adding Value-The Value ChainAdding Value-The Value Chain
The difference between ...
1-10 Introduction to Operations Management
Operations-The Supply Chain View
Copyright © 2010 Pearson Education,
Inc. Publi...
1-11 Introduction to Operations Management
Business Operations OverlapBusiness Operations Overlap
Operations
CorporateMark...
1-12 Introduction to Operations Management
1-12
Flows in a Supply Chain
Customer
Information
Product
Funds
1-13 Introduction to Operations Management
Global Environment and Challenges for
Operations Managers
• Global Competition
...
1-14 Introduction to Operations Management
Operations Management Decisions
• Strategic
• Planning
• Tactical
1-15 Introduction to Operations Management
Operations Management Tools and
Techniques
• Forecasting
• Lean Systems
• Opera...
1-16 Introduction to Operations Management
Forecasting
1-17 Introduction to Operations Management
FORECAST:
• A statement about the future
• Used to help managers
– Plan the sys...
1-18 Introduction to Operations Management
Forecast Uses
• Plan the system
– Generally involves long-range plans related t...
1-19 Introduction to Operations Management
• Assumes causal system
past ==> future
• Forecasts rarely perfect because of
r...
1-20 Introduction to Operations Management
Elements of a Good Forecast
Timely
AccurateReliable
M
eaningful
Written
Easy
to...
1-21 Introduction to Operations Management
Steps in the Forecasting Process
Step 1 Determine purpose of forecast
Step 2 Es...
1-22 Introduction to Operations Management
Types of Forecasts
• Judgmental - uses subjective inputs (qualitative)
• Time s...
1-23 Introduction to Operations Management
Judgmental Forecasts
(Qualitative)
•Consumer surveys
•Delphi method
•Executive ...
1-24 Introduction to Operations Management
Time Series Forecasts
• Trend - long-term movement in data
• Seasonality - shor...
1-25 Introduction to Operations Management
Forecast Variations
Trend
Irregular
variation
Seasonal variations
90
89
88
Figu...
1-26 Introduction to Operations Management
Time Series Forecasts-Methods
• Naive
• Averaging
• Trend
• Seasonality
• Expon...
1-27 Introduction to Operations Management
Naive Method
Uh, give me a minute....
We sold 250 wheels last
week.... Now, nex...
1-28 Introduction to Operations Management
Naïve Method
• Simple to use
• Virtually no cost
• Quick and easy to prepare
• ...
1-29 Introduction to Operations Management
Naïve Method
• Stable time series data
• Seasonal variations
– Next value in a ...
1-30 Introduction to Operations Management
Averaging Method
• Simple moving average
• Weighted moving average
1-31 Introduction to Operations Management
Moving Averages
• Simple Moving average – A technique that
averages a number of...
1-32 Introduction to Operations Management
Simple Moving Average
MAn =
n
Aii = 1
∑
n
35
37
39
41
43
45
47
1 2 3 4 5 6 7 8 ...
1-33 Introduction to Operations Management
Trend Method-Linear Trend Equation
• Ft = Forecast for period t
• t = Specified...
1-34 Introduction to Operations Management
Calculating a and b
b =
n (ty) - t y
n t2 - ( t)2
a =
y - b t
n
∑∑∑
∑∑
∑∑
1-35 Introduction to Operations Management
Linear Trend Equation Example
t y
W e e k t
2
S a le s ty
1 1 1 5 0 1 5 0
2 4 1...
1-36 Introduction to Operations Management
Linear Trend Calculation
y = 143.5 + 6.3t
a =
812 - 6.3(15)
5
=
b =
5 (2499) - ...
1-37 Introduction to Operations Management
Seasonality
• Multiplicative Model
Demand=Trend x Seasonality (Seasonal Index)
...
1-38 Introduction to Operations Management
Exponential Smoothing
• Next forecast=α(Actual)+(1- α)(Previous
forecast)
• α i...
1-39 Introduction to Operations Management
Associative Forecasting
• Predictor variables and variables of interest
• Simpl...
1-40 Introduction to Operations Management
Forecast Accuracy
• Error - difference between actual value and predicted
value...
1-41 Introduction to Operations Management
MAD, MSE, and MAPE
MAD =
Actual forecast−∑
n
MSE =
Actual forecast)
-1
2
−∑
n
(...
1-42 Introduction to Operations Management
Example 10
Period Actual Forecast (A-F) |A-F| (A-F)^2 (|A-F|/Actual)*100
1 217 ...
1-43 Introduction to Operations Management
Controlling the Forecast
• Control chart
• Tracking signal
1-44 Introduction to Operations Management
Control chart
• Control chart
– A visual tool for monitoring forecast errors
– ...
1-45 Introduction to Operations Management
Tracking Signal
Tracking signal =
(Actual-forecast)
MAD
∑
•Tracking signal
–Rat...
1-46 Introduction to Operations Management
Sources of Forecast errors
• Model may be inadequate
• Irregular variations
• I...
1-47 Introduction to Operations Management
Choosing a Forecasting Technique
• No single technique works in every situation...
1-48 Introduction to Operations Management
Operations Research
1-49 Introduction to Operations Management
49
What is Operations Research?
• Operations Research is the scientific
approac...
1-50 Introduction to Operations Management
50
Operations Research Models
Deterministic Models Stochastic Models
• Linear P...
1-51 Introduction to Operations Management
CHAPTER
9
Management
of Quality
1-52 Introduction to Operations Management
Agenda
• Insights on Quality Management
– Defining Quality
– Dimensions and Det...
1-53 Introduction to Operations Management
Agenda Contd.
• The Evolution of Quality
• Total Quality Management (TQM)
– TQM...
1-54 Introduction to Operations Management
Defining Quality-Dimensions of Quality
– Performance - main characteristics of ...
1-55 Introduction to Operations Management
Dimensions of Quality (Cont’d)
– Durability - useful life of the product/servic...
1-56 Introduction to Operations Management
Examples of Quality Dimensions
Dimension
1. Performance
2. Aesthetics
3. Specia...
1-57 Introduction to Operations Management
Examples of Quality Dimensions (Cont’d)
Dimension
5. Reliability
6. Durability
...
1-58 Introduction to Operations Management
Defining Quality-Determinants of
Quality
Service
Ease of
use
Conforms
to design...
1-59 Introduction to Operations Management
The Consequences of Poor Quality
• Loss of business
• Liability
• Productivity
...
1-60 Introduction to Operations Management
• Top management
• Design
• Procurement
• Production/operations
• Quality assur...
1-61 Introduction to Operations Management
Costs of Quality
• Failure Costs - costs incurred by defective
parts/products o...
1-62 Introduction to Operations Management
Costs of Quality (continued)
• Appraisal Costs
– Costs of activities designed t...
1-63 Introduction to Operations Management
• Substandard work
– Defective products
– Substandard service
– Poor designs
– ...
1-64 Introduction to Operations Management
1980–TotalQuality1980–TotalQuality
1970–QualityManagementPrograms1970–QualityMa...
1-65 Introduction to Operations Management
Total Quality Management (TQM)
A philosophy that involves everyone in an
organi...
1-66 Introduction to Operations Management
TQM Tools
Purpose of the Tool Quality Control tools Management tools
Problem so...
1-67 Introduction to Operations Management
QFD
 Identify customer wants
 Identify how the good/service will satisfy cust...
1-68 Introduction to Operations Management
QFD House of Quality
Relationship
matrix
How to satisfy
customer wants
Interrel...
1-69 Introduction to Operations Management
House of Quality Example
Your team has been charged withYour team has been char...
1-70 Introduction to Operations Management
House of Quality Example
CustomerCustomer
importanceimportance
ratingrating
(5 ...
1-71 Introduction to Operations Management
House of Quality Example
What the
Customer
Wants
Relationship
Matrix
Technical
...
1-72 Introduction to Operations Management
Lightweight 3
Easy to use 4
Reliable 5
Easy to hold steady 2
Color corrections ...
1-73 Introduction to Operations Management
House of Quality Example
What the
Customer
Wants
Relationship
Matrix
Technical
...
1-74 Introduction to Operations Management
House of Quality Example
WeightedWeighted
ratingrating
What the
Customer
Wants
...
1-75 Introduction to Operations Management
House of Quality Example
CompanyA
CompanyB
G P
G P
F G
G P
P P
Lightweight 3
Ea...
1-76 Introduction to Operations Management
House of Quality ExampleWhat the
Customer
Wants
Relationship
Matrix
Technical
A...
1-77 Introduction to Operations Management
House of Quality Example
CompletedCompleted
House ofHouse of
QualityQuality
Lig...
1-78 Introduction to Operations Management
House of Quality Sequence
Design
characteristics
Specific
components
House
2
Cu...
1-79 Introduction to Operations Management
Six Sigma Quality Control
• Application of statistical tools
• New approach to ...
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  1. 1. 1-1 Introduction to Operations Management Introduction- Operations as a Competitive Weapon
  2. 2. 1-2 Introduction to Operations Management Operations-A Process ViewOperations-A Process View Inputs Land Labor Capital Transformation/ Conversion process Outputs Goods Services Control Feedback FeedbackFeedback
  3. 3. 1-3 Introduction to Operations Management Operations Management-Definition • The operations function – Consists of all activities directly related to producing goods or providing services The management of systems or processes that create goods and/or provide services
  4. 4. 1-4 Introduction to Operations Management Food ProcessorFood Processor Inputs Processing Outputs Raw Vegetables Cleaning Canned vegetablesMetal Sheets Making cans Water Cutting Energy Cooking Labor Packing Building Labeling Equipment Table 1.2
  5. 5. 1-5 Introduction to Operations Management Hospital ProcessHospital Process Inputs Processing Outputs Doctors, nurses Examination Healthy patientsHospital Surgery Medical Supplies Monitoring Equipment Medication Laboratories Therapy Table 1.2
  6. 6. 1-6 Introduction to Operations Management Manufacturing vs ServiceManufacturing vs Service Characteristic Manufacturing Service Output Customer contact Uniformity of input Labor content Uniformity of output Measurement of productivity Opportunity to correct Tangible Low High Low High Easy High Intangible High Low High Low Difficult Low quality problems High
  7. 7. 1-7 Introduction to Operations Management Goods and Services-Key Differences 1. Customer contact 2. Uniformity of input 3. Labor content of jobs 4. Uniformity of output 5. Measurement of productivity 6. Production and delivery 7. Quality assurance 8. Amount of inventory
  8. 8. 1-8 Introduction to Operations Management Business Operations OverlapBusiness Operations Overlap Operations FinanceMarketing
  9. 9. 1-9 Introduction to Operations Management Adding Value-The Value ChainAdding Value-The Value Chain The difference between the cost of inputs and the value or price of outputs. Inputs Land Labor Capital Transformation/ Conversion process Outputs Goods Services Control Feedback FeedbackFeedback Value added
  10. 10. 1-10 Introduction to Operations Management Operations-The Supply Chain View Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Support Processes Externalsuppliers Externalcustomers Supplier relationship process Internal processes Customer relationship management Figure 1.4
  11. 11. 1-11 Introduction to Operations Management Business Operations OverlapBusiness Operations Overlap Operations CorporateMarketing
  12. 12. 1-12 Introduction to Operations Management 1-12 Flows in a Supply Chain Customer Information Product Funds
  13. 13. 1-13 Introduction to Operations Management Global Environment and Challenges for Operations Managers • Global Competition • Productivity Improvement-service sector productivity gains much lower in comparison with the manufacturing sector • Rapid Technological Change • Ethical, Workforce Diversity and Environmental Issues
  14. 14. 1-14 Introduction to Operations Management Operations Management Decisions • Strategic • Planning • Tactical
  15. 15. 1-15 Introduction to Operations Management Operations Management Tools and Techniques • Forecasting • Lean Systems • Operations Research
  16. 16. 1-16 Introduction to Operations Management Forecasting
  17. 17. 1-17 Introduction to Operations Management FORECAST: • A statement about the future • Used to help managers – Plan the system – Plan the use of the system
  18. 18. 1-18 Introduction to Operations Management Forecast Uses • Plan the system – Generally involves long-range plans related to: • Types of products and services to offer • Facility and equipment levels • Facility location • Plan the use of the system – Generally involves short- and medium-range plans related to: • Inventory management • Workforce levels • Purchasing • Budgeting
  19. 19. 1-19 Introduction to Operations Management • Assumes causal system past ==> future • Forecasts rarely perfect because of randomness • Forecasts more accurate for groups vs. individuals • Forecast accuracy decreases as time horizon increases I see that you will get an A this quarter. Common Features
  20. 20. 1-20 Introduction to Operations Management Elements of a Good Forecast Timely AccurateReliable M eaningful Written Easy to use Cost effective
  21. 21. 1-21 Introduction to Operations Management Steps in the Forecasting Process Step 1 Determine purpose of forecast Step 2 Establish a time horizon Step 3 Select a forecasting technique Step 4 Gather and analyze data Step 5 Make the forecast Step 6 Monitor the forecast “The forecast”
  22. 22. 1-22 Introduction to Operations Management Types of Forecasts • Judgmental - uses subjective inputs (qualitative) • Time series - uses historical data assuming the future will be like the past (quantitative) • Associative models - uses explanatory variables to predict the future (quantitative)
  23. 23. 1-23 Introduction to Operations Management Judgmental Forecasts (Qualitative) •Consumer surveys •Delphi method •Executive opinions – Opinions of managers and staff •Sales force.
  24. 24. 1-24 Introduction to Operations Management Time Series Forecasts • Trend - long-term movement in data • Seasonality - short-term regular variations in data • Cycle – wavelike variations of more than one year’s duration • Irregular variations - caused by unusual circumstances • Random variations (Stable)- caused by chance
  25. 25. 1-25 Introduction to Operations Management Forecast Variations Trend Irregular variation Seasonal variations 90 89 88 Figure 3.1 Cycles Random variation
  26. 26. 1-26 Introduction to Operations Management Time Series Forecasts-Methods • Naive • Averaging • Trend • Seasonality • Exponential smoothing
  27. 27. 1-27 Introduction to Operations Management Naive Method Uh, give me a minute.... We sold 250 wheels last week.... Now, next week we should sell.... The forecast for any period equals the previous period’s actual value.
  28. 28. 1-28 Introduction to Operations Management Naïve Method • Simple to use • Virtually no cost • Quick and easy to prepare • Data analysis is nonexistent • Easily understandable • Cannot provide high accuracy • Can be a standard for accuracy
  29. 29. 1-29 Introduction to Operations Management Naïve Method • Stable time series data • Seasonal variations – Next value in a series will equal the previous value in a comparable period • Data with trends – F(t) = A(t-1) + (A(t-1) – A(t-2))
  30. 30. 1-30 Introduction to Operations Management Averaging Method • Simple moving average • Weighted moving average
  31. 31. 1-31 Introduction to Operations Management Moving Averages • Simple Moving average – A technique that averages a number of recent actual values, updated as new values become available. • Weighted moving average – More recent values in a series are given more weight in computing the forecast. MAn = n Aii = 1 ∑ n
  32. 32. 1-32 Introduction to Operations Management Simple Moving Average MAn = n Aii = 1 ∑ n 35 37 39 41 43 45 47 1 2 3 4 5 6 7 8 9 10 11 12 Actual MA3 MA5
  33. 33. 1-33 Introduction to Operations Management Trend Method-Linear Trend Equation • Ft = Forecast for period t • t = Specified number of time periods • a = Value of Ft at t = 0 • b = Slope of the line Ft = a + bt 0 1 2 3 4 5 t Ft
  34. 34. 1-34 Introduction to Operations Management Calculating a and b b = n (ty) - t y n t2 - ( t)2 a = y - b t n ∑∑∑ ∑∑ ∑∑
  35. 35. 1-35 Introduction to Operations Management Linear Trend Equation Example t y W e e k t 2 S a le s ty 1 1 1 5 0 1 5 0 2 4 1 5 7 3 1 4 3 9 1 6 2 4 8 6 4 1 6 1 6 6 6 6 4 5 2 5 1 7 7 8 8 5 Σ t = 1 5 Σ t 2 = 5 5 Σ y = 8 1 2 Σ ty = 2 4 9 9 ( Σ t) 2 = 2 2 5
  36. 36. 1-36 Introduction to Operations Management Linear Trend Calculation y = 143.5 + 6.3t a = 812 - 6.3(15) 5 = b = 5 (2499) - 15(812) 5(55) - 225 = 12495-12180 275-225 = 6.3 143.5
  37. 37. 1-37 Introduction to Operations Management Seasonality • Multiplicative Model Demand=Trend x Seasonality (Seasonal Index) Seasonality is the percentage of average (or trend) amount
  38. 38. 1-38 Introduction to Operations Management Exponential Smoothing • Next forecast=α(Actual)+(1- α)(Previous forecast) • α is the Smoothing Constant
  39. 39. 1-39 Introduction to Operations Management Associative Forecasting • Predictor variables and variables of interest • Simple Linear Regression – linear variation between the two variables • Correlation coefficient r gives an indication of the strength of relationship between the two variables. • http://en.wikipedia.org/wiki/Pearson_product-m • r2>0.8 good prediction;<0.25 poor prediction
  40. 40. 1-40 Introduction to Operations Management Forecast Accuracy • Error - difference between actual value and predicted value • Mean Absolute Deviation (MAD) – Average absolute error • Mean Squared Error (MSE) – Average of squared error • Mean Absolute Percent Error (MAPE) – Average absolute percent error
  41. 41. 1-41 Introduction to Operations Management MAD, MSE, and MAPE MAD = Actual forecast−∑ n MSE = Actual forecast) -1 2 −∑ n ( MAPE = Actual forecast− n / Actual*100)∑(
  42. 42. 1-42 Introduction to Operations Management Example 10 Period Actual Forecast (A-F) |A-F| (A-F)^2 (|A-F|/Actual)*100 1 217 215 2 2 4 0.92 2 213 216 -3 3 9 1.41 3 216 215 1 1 1 0.46 4 210 214 -4 4 16 1.90 5 213 211 2 2 4 0.94 6 219 214 5 5 25 2.28 7 216 217 -1 1 1 0.46 8 212 216 -4 4 16 1.89 -2 22 76 10.26 MAD= 2.75 MSE= 10.86 MAPE= 1.28
  43. 43. 1-43 Introduction to Operations Management Controlling the Forecast • Control chart • Tracking signal
  44. 44. 1-44 Introduction to Operations Management Control chart • Control chart – A visual tool for monitoring forecast errors – Used to detect non-randomness in errors • Control limits: UCL=0+z√MSE;LCL=0-z√MSE (z typically=2 or 3) • Forecasting errors are in control if – All errors are within the control limits – No patterns, such as trends are present
  45. 45. 1-45 Introduction to Operations Management Tracking Signal Tracking signal = (Actual-forecast) MAD ∑ •Tracking signal –Ratio of cumulative error to MAD Bias – Persistent tendency for forecasts to be Greater or less than actual values. Value of zero would be ideal for Tracking signal. Limits of +/-4 or +/- 5are often used for a range of acceptable values of the tracking signal.
  46. 46. 1-46 Introduction to Operations Management Sources of Forecast errors • Model may be inadequate • Irregular variations • Incorrect use of forecasting technique
  47. 47. 1-47 Introduction to Operations Management Choosing a Forecasting Technique • No single technique works in every situation • Two most important factors – Cost – Accuracy • Other factors include the availability of: – Historical data – Computers – Time needed to gather and analyze the data – Forecast horizon
  48. 48. 1-48 Introduction to Operations Management Operations Research
  49. 49. 1-49 Introduction to Operations Management 49 What is Operations Research? • Operations Research is the scientific approach to execute decision making, which consists of: – The art of mathematical modeling of complex situations – The science of the development of solution techniques used to solve these models – The ability to effectively communicate the results to the decision maker
  50. 50. 1-50 Introduction to Operations Management 50 Operations Research Models Deterministic Models Stochastic Models • Linear Programming • Discrete-Time Markov Chains • Network Optimization • Continuous-Time Markov Chains • Integer Programming • Queuing Theory (waiting lines) • Nonlinear Programming • Decision Analysis • Inventory Models Game Theory Inventory models Simulation
  51. 51. 1-51 Introduction to Operations Management CHAPTER 9 Management of Quality
  52. 52. 1-52 Introduction to Operations Management Agenda • Insights on Quality Management – Defining Quality – Dimensions and Determinants – The Consequences of Poor Quality – Responsibility for Quality – The Costs of Quality – Ethics and Quality Management
  53. 53. 1-53 Introduction to Operations Management Agenda Contd. • The Evolution of Quality • Total Quality Management (TQM) – TQM Tools – Quality Function Deployment (QFD) • Six-Sigma Quality Control
  54. 54. 1-54 Introduction to Operations Management Defining Quality-Dimensions of Quality – Performance - main characteristics of the product/service – Aesthetics - appearance, feel, smell, taste – Special Features - extra characteristics – Conformance - how well product/service conforms to customer’s expectations – Reliability - consistency of performance
  55. 55. 1-55 Introduction to Operations Management Dimensions of Quality (Cont’d) – Durability - useful life of the product/service – Perceived Quality - indirect evaluation of quality (e.g. reputation) – Serviceability - service after sale
  56. 56. 1-56 Introduction to Operations Management Examples of Quality Dimensions Dimension 1. Performance 2. Aesthetics 3. Special features (Product) Automobile Everything works, fit & finish Ride, handling, grade of materials used Interior design, soft touch Gauge/control placement Cellular phone, CD player (Service) Auto Repair All work done, at agreed price Friendliness, courtesy, Competency, quickness Clean work/waiting area Location, call when ready Computer diagnostics
  57. 57. 1-57 Introduction to Operations Management Examples of Quality Dimensions (Cont’d) Dimension 5. Reliability 6. Durability 7. Perceived quality 8. Serviceability (Product) Automobile Infrequency of breakdowns Useful life in miles, resistance to rust & corrosion Top-rated car Handling of complaints and/or requests for information (Service) Auto Repair Work done correctly, ready when promised Work holds up over time Award-winning service department Handling of complaints
  58. 58. 1-58 Introduction to Operations Management Defining Quality-Determinants of Quality Service Ease of use Conforms to design Design
  59. 59. 1-59 Introduction to Operations Management The Consequences of Poor Quality • Loss of business • Liability • Productivity • Costs
  60. 60. 1-60 Introduction to Operations Management • Top management • Design • Procurement • Production/operations • Quality assurance • Packaging and shipping • Marketing and sales • Customer service Responsibility for Quality
  61. 61. 1-61 Introduction to Operations Management Costs of Quality • Failure Costs - costs incurred by defective parts/products or faulty services. • Internal Failure Costs – Costs incurred to fix problems that are detected before the product/service is delivered to the customer. • External Failure Costs – All costs incurred to fix problems that are detected after the product/service is delivered to the customer.
  62. 62. 1-62 Introduction to Operations Management Costs of Quality (continued) • Appraisal Costs – Costs of activities designed to ensure quality or uncover defects • Prevention Costs – All TQ training, TQ planning, customer assessment, process control, and quality improvement costs to prevent defects from occurring
  63. 63. 1-63 Introduction to Operations Management • Substandard work – Defective products – Substandard service – Poor designs – Shoddy workmanship – Substandard parts and materials Ethics and Quality Having knowledge of this and failing to correct and report it in a timely manner is unethical.
  64. 64. 1-64 Introduction to Operations Management 1980–TotalQuality1980–TotalQuality 1970–QualityManagementPrograms1970–QualityManagementPrograms 1960–QualityWarranty1960–QualityWarranty 1930–StatisticalControl1930–StatisticalControl 1920–Inspection1920–Inspection 1900–Supervision1900–Supervision 1900–Manpowerpredominance1900–ManpowerpredominanceThe Evolution of Quality-Century of Quality 2000-...2000-...
  65. 65. 1-65 Introduction to Operations Management Total Quality Management (TQM) A philosophy that involves everyone in an organization in a continual effort to improve quality and achieve customer satisfaction. T Q M
  66. 66. 1-66 Introduction to Operations Management TQM Tools Purpose of the Tool Quality Control tools Management tools Problem solving Control charts Histograms Check sheets Pareto diagrams Scatter diagrams Graphs Cause and Effect diagram Operational Planning Arrow diagram Poka yoke Strategic Planning Quality function deployment Plan-Do-Check-Act (PDCA)
  67. 67. 1-67 Introduction to Operations Management QFD  Identify customer wants  Identify how the good/service will satisfy customer wants  Relate customer wants to product hows  Identify relationships between the firm’s hows  Develop importance ratings  Evaluate competing products  Compare performance to desirable technical attributes
  68. 68. 1-68 Introduction to Operations Management QFD House of Quality Relationship matrix How to satisfy customer wants Interrelationships Competitive assessment Technical evaluation Target values What the customer wants CustomerCustomer importanceimportance ratingsratings WeightedWeighted ratingrating
  69. 69. 1-69 Introduction to Operations Management House of Quality Example Your team has been charged withYour team has been charged with designing a new camera for Greatdesigning a new camera for Great Cameras, Inc.Cameras, Inc. The first action isThe first action is to construct ato construct a House of QualityHouse of Quality
  70. 70. 1-70 Introduction to Operations Management House of Quality Example CustomerCustomer importanceimportance ratingrating (5 = highest)(5 = highest) Lightweight 3 Easy to use 4 Reliable 5 Easy to hold steady 2 Color correction 1 What theWhat the customercustomer wantswants What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysisof Competitors
  71. 71. 1-71 Introduction to Operations Management House of Quality Example What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysisof Competitors Lowelectricityrequirements Aluminumcomponents Autofocus Autoexposure Paintpallet Ergonomicdesign How to Satisfy Customer Wants
  72. 72. 1-72 Introduction to Operations Management Lightweight 3 Easy to use 4 Reliable 5 Easy to hold steady 2 Color corrections 1 House of Quality Example What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysisof Competitors High relationshipHigh relationship Medium relationshipMedium relationship Low relationshipLow relationship Relationship matrixRelationship matrix
  73. 73. 1-73 Introduction to Operations Management House of Quality Example What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysisof Competitors Lowelectricityrequirements Aluminumcomponents Autofocus Autoexposure Paintpallet Ergonomicdesign RelationshipsRelationships between thebetween the things we can dothings we can do
  74. 74. 1-74 Introduction to Operations Management House of Quality Example WeightedWeighted ratingrating What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysisof Competitors Lightweight 3 Easy to use 4 Reliable 5 Easy to hold steady 2 Color corrections 1 Our importance ratings 22 9 27 27 32 25
  75. 75. 1-75 Introduction to Operations Management House of Quality Example CompanyA CompanyB G P G P F G G P P P Lightweight 3 Easy to use 4 Reliable 5 Easy to hold steady 2 Color corrections 1 Our importance ratings 22 5 How well doHow well do competing productscompeting products meet customer wantsmeet customer wants What the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysisof Competitors
  76. 76. 1-76 Introduction to Operations Management House of Quality ExampleWhat the Customer Wants Relationship Matrix Technical Attributes and Evaluation How to Satisfy Customer Wants Interrelationships Analysisof Competitors Target values (Technical attributes) Technical evaluation Company A 0.7 60% yes 1 ok G Company B 0.6 50% yes 2 ok F Us 0.5 75% yes 2 ok G 0.5A 75% 2’to∞ 2circuits Failure1per10,000 Panelranking
  77. 77. 1-77 Introduction to Operations Management House of Quality Example CompletedCompleted House ofHouse of QualityQuality Lightweight 3 Easy to use 4 Reliable 5 Easy to hold steady 2 Color correction 1 Our importance ratings Lowelectricityrequirements Aluminumcomponents Autofocus Autoexposure Paintpallet Ergonomicdesign CompanyA CompanyB G P G P F G G P P P Target values (Technical attributes) Technical evaluation Company A 0.7 60% yes 1 ok G Company B 0.6 50% yes 2 ok F Us 0.5 75% yes 2 ok G 0.5A 75% 2’to∞ 2circuits Failure1per10,000 Panelranking 22 9 27 27 32 25
  78. 78. 1-78 Introduction to Operations Management House of Quality Sequence Design characteristics Specific components House 2 Customer requirements Design characteristics House 1 Specific components Production process House 3 Production process Quality plan House 4 Figure 5.4Figure 5.4 Deploying resources through theDeploying resources through the organization in response toorganization in response to customer requirementscustomer requirements
  79. 79. 1-79 Introduction to Operations Management Six Sigma Quality Control • Application of statistical tools • New approach to process control • Enables organizations to improve their quality to near-zero defect levels

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