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LSM733-PRODUCTION OPERATIONS MANAGEMENT

By: OSMAN BIN SAIF

LECTURE 8

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Issues for Product DesignRobust DesignModular DesignComputer-Aided Design (CAD)Computer-Aided Manufacturing (CAM)Virtual Reality TechnologyValue AnalysisEthics and Environmentally Friendly Design

Summary of last Session

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Time-Based CompetitionPurchasing Technology by Acquiring a Firm Joint VenturesAlliances

Defining a ProductMake-or-Buy DecisionsGroup Technology

Summary of last Session(Contd.)

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Documents For ProductionProduct Life-Cycle Management (PLM)

Service DesignDocuments for Services

Application of Decision Trees to Product Design

Transition to Production

Summary of last Session(Contd.)

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Global Company Profile: Arnold Palmer Hospital

Quality and Strategy Defining Quality

Implications of QualityMalcolm Baldrige National Quality

AwardCost of Quality (COQ)Ethics and Quality Management

Agenda for this session

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International Quality Standards ISO 9000 ISO14000

Agenda for this session (Contd.)

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Total Quality ManagementContinuous ImprovementSix SigmaEmployee EmpowermentBenchmarkingJust-in-Time (JIT)Taguchi ConceptsKnowledge of TQM Tools

Agenda for this session (Contd.)

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Managing Quality Provides a Competitive Advantage

Arnold Palmer Hospital

Deliver over 13,000 babies annually Virtually every type of quality tool is

employed Continuous improvement Employee empowerment Benchmarking Just-in-time Quality tools

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Quality and Strategy

Managing quality supports differentiation, low cost, and response strategies

Quality helps firms increase sales and reduce costs

Building a quality organization is a demanding task

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Two Ways Quality Improves Profitability

Improved Quality

Increased Profits

Increased productivity Lower rework and scrap costs Lower warranty costs

Reduced Costs via

Improved response Flexible pricing Improved reputation

Sales Gains via

Figure 6.1

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The Flow of Activities

Organizational PracticesLeadership, Mission statement, Effective operating procedures, Staff support, TrainingYields: What is important and what is to be

accomplishedQuality Principles

Customer focus, Continuous improvement, Benchmarking, Just-in-time, Tools of TQMYields: How to do what is important and to be

accomplished

Employee FulfillmentEmpowerment, Organizational commitmentYields: Employee attitudes that can accomplish

what is important

Customer SatisfactionWinning orders, Repeat customersYields: An effective organization with

a competitive advantageFigure 6.2

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Defining Quality

The totality of features and characteristics of a product or service

that bears on its ability to satisfy stated or implied needs

American Society for Quality

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Different Views

User-based – better performance, more features

Manufacturing-based – conformance to standards, making it right the first time

Product-based – specific and measurable attributes of the product

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Implications of Quality

1. Company reputation Perception of new products Employment practices Supplier relations

2. Product liability Reduce risk

3. Global implications Improved ability to compete

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Key Dimensions of QualityKey Dimensions of Quality

Performance Features Reliability Conformance

Durability Serviceability Aesthetics Perceived quality Value

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Malcom Baldrige National Quality Award

Established in 1988 by the U.S. government

Designed to promote TQM practices Few winners

Premier Inc., MESA Products, Sunny Fresh Foods, Park Place Lexus, North Mississippi Medical Center, The Bama Companies, Richland College, Texas Nameplate Company, Inc.

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Baldrige CriteriaApplicants are evaluated on:

Categories PointsLeadership 120Strategic Planning 85Customer & Market Focus 85Measurement, Analysis, and Knowledge Management 90Workforce Focus 85Process Management 85Results 450

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Costs of Quality

Prevention costs - reducing the potential for defects

Appraisal costs - evaluating products, parts, and services

Internal failure - producing defective parts or service before delivery

External costs - defects discovered after delivery

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External Failure

Internal Failure

Prevention

Costs of Quality

Appraisal

Total Cost

Quality Improvement

Total Cost

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Leaders in Quality

W. Edwards Deming 14 Points for Management

Joseph M. Juran Top management commitment, fitness for use

Armand Feigenbaum Total Quality Control

Philip B. Crosby Quality is Free, zero defects

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Ethics and Quality Management

Operations managers must deliver healthy, safe, quality products and services

Poor quality risks injuries, lawsuits, recalls, and regulation

Organizations are judged by how they respond to problems

All stakeholders much be considered

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International Quality Standards

ISO 9000 series (Europe/EC) Common quality standards for products sold in Europe (even

if made in U.S.) 2000 update places greater emphasis on leadership and

customer satisfaction

ISO 14000 series (Europe/EC)

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ISO 14000Environmental Standard

Core Elements:

Environmental management Auditing Performance evaluation Labeling Life cycle assessment

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TQMEncompasses entire organization, from supplier

to customerStresses a commitment by management to have

a continuing, companywide drive toward excellence in all aspects of products and

services that are important to the customer

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Deming’s Fourteen Points1. Create consistency of purpose2. Lead to promote change3. Build quality into the product; stop depending

on inspection4. Build long-term relationships based on

performance, not price5. Continuously improve product, quality, and

service6. Start training7. Emphasize leadership

Table 6.1

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Deming’s Fourteen Points8. Drive out fear9. Break down barriers between departments10. Stop haranguing workers11. Support, help, improve12. Remove barriers to pride in work13. Institute a vigorous program of education and

self-improvement14. Put everybody in the company to work on the

transformation

Table 6.1

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Seven Concepts of TQM

Continuous improvement Six Sigma Employee empowerment Benchmarking Just-in-time (JIT) Taguchi concepts Knowledge of TQM tools

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Continuous Improvement

Represents continual improvement of all processes

Involves all operations and work centers including suppliers and customersPeople, Equipment, Materials,

Procedures

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2. DoTest the plan

3. CheckIs the plan working?

4. ActImplement the

plan

1. PlanIdentify the improvement

and make a plan

Shewhart’s PDCA Model

Figure 6.3

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Six Sigma Two meanings

Statistical definition of a process that is 99.9997% capable, 3.4 defects per million opportunities (DPMO)

A program designed to reduce defects, lower costs, and improve customer satisfaction

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Two meanings Statistical definition of a process that is

99.9997% capable, 3.4 defects per million opportunities (DPMO)

A program designed to reduce defects, lower costs, and improve customer satisfaction

Six Sigma

Mean

Lower limits Upper limits

3.4 defects/million

±6

2,700 defects/million

±3

Figure 6.4

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Six Sigma Program

Originally developed by Motorola, adopted and enhanced by Honeywell and GE

Highly structured approach to process improvement A strategy A discipline - DMAIC 6

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Six Sigma

1. Define critical outputs and identify gaps for improvement

2. Measure the work and collect process data

3. Analyze the data

4. Improve the process

5. Control the new process to make sure new performance is maintained

DMAIC Approach

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Six Sigma Implementation Emphasize defects per million opportunities

as a standard metric Provide extensive training Focus on corporate sponsor support

(Champions) Create qualified process improvement

experts (Black Belts, Green Belts, etc.) Set stretch objectives

This cannot be accomplished without a major commitment from top level management

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Employee Empowerment Getting employees involved in product and

process improvements 85% of quality problems are due

to process and material Techniques

Build communication networks that include employees

Develop open, supportive supervisors Move responsibility to employees Build a high-morale organization Create formal team structures

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Quality Circles

Group of employees who meet regularly to solve problems

Trained in planning, problem solving, and statistical methods

Often led by a facilitator Very effective when done properly

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Use internal

benchmarking if you’re

big enough

BenchmarkingSelecting best practices to use as a standard for performance

Determine what to benchmark

Form a benchmark team Identify benchmarking partners Collect and analyze benchmarking

information Take action to match or exceed the

benchmark

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Benchmarking Factors for Web Sites

Use of meta tags Yes: 70%, No: 30%

Meaningful homepage title Yes: 97%, No: 3%

Unique domain name Yes: 91%, No: 9%

Search engine registration Above 96%

Average loading speed 28K: 19.31, 56K: 10.88, T1: 2.59

Average number of spelling errors 0.16

Visibility of contact information Yes: 74%, No: 26%

Presence of search engine Yes: 59%, No: 41%

Translation to multiple languages Yes: 11%, No: 89%

Table 6.3

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Best Practices for Resolving Customer Complaints

Make it easy for clients to complain Respond quickly to complaints Resolve complaints on first contact Use computers to manage complaints Recruit the best for customer service

jobs

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Just-in-Time (JIT)

Relationship to quality:

JIT cuts the cost of quality JIT improves quality Better quality means less

inventory and better, easier-to-employ JIT system

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Just-in-Time (JIT)

‘Pull’ system of production scheduling including supply management

Production only when signaled

Allows reduced inventory levels Inventory costs money and hides process and material

problems

Encourages improved process and product quality

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Just-In-Time (JIT) Example

ScrapUnreliable Vendors Capacity Imbalances

Work in process inventory level

(hides problems)

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Just-In-Time (JIT) Example

Reducing inventory revealsproblems so they can be solved

ScrapUnreliable Vendors Capacity Imbalances

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Takumi

A Japanese character that symbolizes a broader dimension than quality, a deeper process than education, and a more perfect method than persistence

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Taguchi Concepts Engineering and experimental design

methods to improve product and process design Identify key component and process

variables affecting product variation

Taguchi ConceptsQuality robustnessQuality loss functionTarget-oriented quality

Quality Robustness

Ability to produce products uniformly in adverse manufacturing and environmental conditionsRemove the effects of adverse

conditionsSmall variations in materials and

process do not destroy product quality

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Quality Loss Function Shows that costs increase as the

product moves away from what the customer wants

Costs include customer dissatisfaction, warranty and service, internal scrap and repair, and costs to society

Traditional conformance specifications are too simplistic

Target-

oriented

quality

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Unacceptable

Poor

GoodBest

Fair

Quality Loss FunctionHigh loss

Loss (to producing organization, customer, and society)

Low loss

Frequency

Lower Target Upper

Specification

Target-oriented quality yields more product in the “best” category

Target-oriented quality brings product toward the target value

Conformance-oriented quality keeps products within 3 standard deviations

Figure 6.5

L = D2C

whereL = loss to societyD = distance from target valueC = cost of deviation

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Global Company Profile: Arnold Palmer Hospital

Quality and Strategy Defining Quality

Implications of QualityMalcolm Baldrige National Quality

AwardCost of Quality (COQ)Ethics and Quality Management

Summary of this session

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International Quality Standards ISO 9000 ISO14000

Summary of this session (Contd.)

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Total Quality ManagementContinuous ImprovementSix SigmaEmployee EmpowermentBenchmarkingJust-in-Time (JIT)Taguchi ConceptsKnowledge of TQM Tools

Summary of this session (Contd.)

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THANK YOU