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Slides of a portion in Management of production systems taught at NIT Calicut


Click to edit Master subtitle style




Warehouses & Distribution Centers


Material Costs

Transportation Costs Manufacturing Costs

Transportation Costs Inventory Costs

Transportation Costs


The Supply Chain Another ViewPlan Source Make Deliver Buy



Warehouses & Distribution Centers


Material Costs

Transportation Transportation Costs Transportation Costs Manufacturing Costs Inventory Costs Costs


What Is Supply Chain Management (SCM)?Plan Make Buy Source Deliver

A set of approaches used to efficiently integrate

Suppliers Manufacturers Warehouses Distribution centers

So that the product is produced and distributed

In the right quantities To the right locations And at the right time


System-wide costs are minimized and

Why Is SCM Difficult?Plan Source Make Deliver Buy

Uncertainty is inherent to every supply chain

Travel times Breakdowns of machines and vehicles Weather, natural catastrophe, war Local politics, labor conditions, border issues

The complexity of the problem to globally optimize a supply chain is significant

Minimize internal costs Minimize uncertainty Deal with remaining uncertainty


The Objective of a Supply Chain

Maximize overall value created Supply chain value: difference between what the final product is worth to the customer and the effort the supply chain expends in filling the customers request Value is correlated to supply chain profitability (difference between revenue generated from the 12/29/12 customer and the overall cost across

The Objective of a Supply Chain

Supply chain incurs costs (information, storage, transportation, components, assembly, etc.) Supply chain profitability is total profit to be shared across all stages of the supply chain Supply chain success should be measured by total supply chain profitability, not profits at an 12/29/12 individual stage

The Objective of a Supply Chain

Sources of supply chain revenue: the


Sources of supply chain cost: flows of information, products, or funds between stages of the supply chain Supply chain management is the management of flows between and among supply chain stages to maximize total supply chain 12/29/12 profitability

Decision Phases of a Supply Chain

Supply chain strategy or design Supply chain planning Supply chain operation


Supply Chain Strategy or Design

Decisions about the structure of the supply chain and what processes each stage will perform Strategic supply chain decisions

Locations and capacities of facilities Products to be made or stored at various locations Modes of transportation Information systems

Supply chain design must support strategic objectives12/29/12

Supply chain design decisions are long-term and expensive to reverse must take into account

Supply Chain Planning

Definition of a set of policies that govern short-term operations Fixed by the supply configuration from previous phase Starts with a forecast of demand in the coming year


Supply Chain Planning

Planning decisions:

Which markets will be supplied from which locations Planned buildup of inventories Subcontracting, backup locations Inventory policies Timing and size of market promotions

Must consider in planning decisions demand uncertainty, exchange rates, 12/29/12

Supply Chain Operation

Time horizon is weekly or daily Decisions regarding individual customer orders Supply chain configuration is fixed and operating policies are determined Goal is to implement the operating policies as effectively as possible Allocate orders to inventory or production, set order due dates, generate pick lists at a warehouse, allocate an order to a particular shipment, set delivery schedules, place replenishment orders 12/29/12

Process View of a Supply Chain

Cycle view: processes in a supply chain are divided into a series of cycles, each performed at the interfaces between two successive supply chain stages Push/pull view: processes in a supply chain are divided into two categories depending on whether they are executed in response to a customer order (pull) or in 12/29/12

Cycle View of Supply ChainsCustomer Order Cycle Replenishment Cycle

Custom er Retail er Distribut or Manufactur er Suppli er

Manufacturing Cycle Procurement Cycle12/29/12

Each cycle occurs at the interface between two successive stages Customer order cycle (customer-retailer) Replenishment cycle (retailer-distributor) Manufacturing cycle (distributormanufacturer) Procurement cycle (manufacturer-supplier) Cycle view clearly defines processes involved and the owners of each process. Specifies the roles and responsibilities of 12/29/12 each member and the desired outcome of

Cycle View of a Supply Chain

Customer Order Cycle

Involves all processes directly involved in receiving and filling the customers order Customer arrival Customer order entry Customer order fulfillment Customer order receiving12/29/12

Replenishment Cycle

All processes involved in replenishing retailer inventories (retailer is now the customer) Retail order trigger Retail order entry Retail order fulfillment Retail order receiving12/29/12

Manufacturing Cycle

All processes involved in replenishing distributor (or retailer) inventory Order arrival from the distributor, retailer, or customer Production scheduling Manufacturing and shipping Receiving at the distributor, retailer, or customer12/29/12

Procurement Cycle

All processes necessary to ensure that materials are available for manufacturing to occur according to schedule Manufacturer orders components from suppliers to replenish component inventories However, component orders can be determined precisely from production schedules (different from retailer/distributor orders that are based on uncertain customer demand) Important that suppliers be linked to the manufacturers production schedule 12/29/12

Push/Pull View of Supply ChainsProcureme Manufacturing nt, and Replenishment cyclesCustomer Order Cyc le

PUSH PROCESSES Custom er Order Arrives



Push/Pull View of Supply Chain Processes

Supply chain processes fall into one of two categories depending on the timing of their execution relative to customer demand Pull: execution is initiated in response to a customer order (reactive) Push: execution is initiated in anticipation of customer orders (speculative)12/29/12

Push/pull boundary separates push

Push/Pull View of Supply Chain Processes

Useful in considering strategic decisions relating to supply chain design more global view of how supply chain processes relate to customer orders Can combine the push/pull and cycle views

L.L. Bean (Figure 1.6) Dell (Figure 1.7)


The relative proportion of push and pull processes can have an impact on supply chain performance

Summary of Learning Objectives

What are the cycle and push/pull views of a supply chain? How can supply chain macro processes be classified? What are the three key supply chain decision phases and what is the significance of each? What is the goal of a supply chain and what is the impact of supply 12/29/12 chain decisions on the success of the


Traditional management Supply chain management

(1)Inventory management approach (2)Total cost approach (3)Time horizon

Independent efforts inventories Minimize firm costs

Joint reduction of channel Channel-wide cost efficiencies

Short term

Long term

(4)Amount of information sharing and monitoring (5)Amount of coordination between levels in of multiple levels in the channel (6)Joint planning (7)Compatibility of corporate philosophies

Limited to needs of current As required for planning and transaction monitoring processes Multiple contacts

Single contact for the transaction between channel pairs

firms and levels of channel

Transaction-based Not relevant

Ongoing Compatibility at least for key relationships Small to increase

12/29/12 (8)Breadth of supplier base Large to increase competition coordination

Achieving a strategic fit

Strategic fit means that both the competitive and supply chain strategy must fit together. i.e. both the competitive and supply chain strategies have aligned goals. It refers to consistency between the customer priorities that the competitive strategy hopes of satisfy and the supply chain capabilities that 12/29/12 supply chain aims to build the

How strategic fit is achieved

Understanding the customer and supply chain uncertainty

The quantity of the product needed in each lot The response time that customers are willing to tolerate The variety of products needed The service level required The price of the product


Drivers of Supply Chain

Facilities Inventory Transportation Information Sourcing Pricing12/29/12

Decision areas of SCM

There are four major decision areas in 1) location, 2) production, 3) inventory, and 4) transportation (distribution),

and There are both strategic and 12/29/12 operational elements in each of these

Facility PlanningModule edit Click to III Master subtitle style Session 17


Facility LocationClick to edit Master subtitle style


Location and Costs

Location decisions based on low cost require careful consideration Once in place, locationrelated costs are fixed in place and difficult to reduce Determining optimal facility location is a good investment


Location Decisions

Long-term decisions Decisions made infrequently Decision greatly affects both fixed and variable costs Once committed to a location, many resource and cost issues are difficult to change


Location DecisionsCountry Decision Critical Success FactorsPolitical risks, government rules, attitudes, incentives Cultural and economic issues Location of markets Labor talent, attitudes, productivity, costs Availability of supplies, communications, energy



3. 4.


Figure 8.1 12/29/12

Location DecisionsRegion/ Communit y DecisionM N1. 2. 3.

Critical Success Factors Corporate desiresAttractiveness of region Labor availability, costs, attitudes towards unions Costs and availability of utilities Environmental regulations Government incentives and fiscal policies Proximity to raw materials and customers Land/construction costs




5. 6.


Figure 8.1 12/29/12


Location DecisionsSite Decision Critical Success Factors1. 2.

3. 4.


Site size and cost Air, rail, highway, and waterway systems Zoning restrictions Proximity of services/ supplies needed Environmental impact issues

Figure 8.1 12/29/12

Factors That Affect Location Decisions

Labor productivity

Wage rates are not the only cost Lower production may increase total costLabor cost per day Production (units per day) = Cost per unit

Connecticut $70 60 units = $1.17 per unit12/29/12

Juarez $25 20 units = $1.25 per unit

Factors That Affect Location Decisions

Exchange rates and currency risks

Can have a significant impact on cost structure Rates change over time Tangible - easily measured costs such as utilities, labor, materials, taxes Intangible - less easy to quantify and include education, public transportation, community, quality-of-life



Factors That Affect Location Decisions

Exchange rates and currency risks Location

can create Costs difficult ethical Tangible - easily measured costs such as utilities, situations labor, materials,

Can have a significant impact on decisions based cost structure on costs alone Rates change over time


taxes Intangible - less easy to quantify and include education, public transportation, community, quality-of-life

Factors That Affect Location Decisions

Political risk, values, and culture

National, state, local governments attitudes toward private and intellectual property, zoning, pollution, employment stability may be in flux Worker attitudes towards turnover, unions, absenteeism Globally cultures have different attitudes towards punctuality, legal, and ethical issues


Factors That Affect Location Decisions

Proximity to markets

Very important to services JIT systems or high transportation costs may make it important to manufacturers Perishable goods, high transportation costs, bulky products

Proximity to suppliers


Factor-Rating Method

Popular because a wide variety of factors can be included in the analysis Six steps in the method1.

2. 3. 4. 5.



Develop a list of relevant factors called critical success factors Assign a weight to each factor Develop a scale for each factor Score each location for each factor Multiply score by weights for each factor for each location Recommend the location with the highest point score

Factor-Rating ExampleCritical Scores Success (out of 100) Weighted Scores Factor Weight France Denmark France Labor Denmark availability and attitude .25 70 60 (.25)(70) = 17.5 (.25)(60) = 15.0People-tocar ratio .05 Per capita income .10 Tax structure .39 Education and health .21 Totals 1.0012/29/12

50 85 75 60

60 80 70 70

(.05)(50) = 2.5 (.10)(85) = 8.5 (.39)(75) = 29.3 (.21)(60) = 12.6 70.4

(.05)(60) = 3.0 (.10)(80) = 8.0 (.39)(70) = 27.3 (.21)(70) = 14.7 68.0

Locational Break-Even Analysis

Method of cost-volume analysis used for industrial locations Three steps in the method1.

2. 3.

Determine fixed and variable costs for each location Plot the cost for each location Select location with lowest total cost for expected production volume


Locational Break-Even Analysis ExampleThree locations: Selling price = $120 Expected volume = 2,000 units Fixed Variable Total City Cost Cost Cost Akron $30,000 $75 $180,000 Bowling Green $60,000 $45 $150,000 Chicago $110,000 $25 $160,000 Total Cost = Fixed Cost + (Variable Cost x Volume) 12/29/12

Locational Break-Even Analysis Example $180,000 $160,000 $150,000 rve st c u $130,000 o co Chicag $110,000 n re e g G ve $80,000 o lint cur w B cos t $60,000 cos on e kr urv A c $30,000 Akron $10,000 lowest cost| | | |

Annual cost

Bowling Green lowest cost| |

Chicago lowest cost|


0 3,000







Center-of-Gravity Method

Finds location of distribution center that minimizes distribution costs Considers

Location of markets Volume of goods shipped to those markets Shipping cost (or distance)


Center-of-Gravity Method

Place existing locations on a coordinate grid

Grid origin and scale is arbitrary Maintain relative distances

Calculate X and Y coordinates for center of gravity


Assumes cost is directly proportional to distance and volume shipped

Center-of-Gravity MethoddixQ x - coordinate =i i

Qi i diyQ y - coordinate =where i i

Qi idix = xcoordinate of location i diy = ycoordinate of location i Qi = Quantity


Center-of-Gravity MethodNorth-South 120 90

Chicago (30, 120)

New York (130, 130) Pittsburgh (90, 110)

60 30



Atlanta (60, 40)|




30 Arbitrary origin





East-West Figure 8.3


Center-of-Gravity MethodStore Location Chicago (30, 120) Pittsburgh (90, 110) New York (130, 130) Atlanta (60, 40)x-coordinate =

Number of Containers Shipped per Month 2,000 1,000 1,000 2,000

(30)(2000) + (90)(1000) + (130)(1000) + (60)(2000) 2000 + 1000 + 1000 + 2000 = 66.7 (120)(2000) + (110)(1000) + (130)(1000) + (40)(2000) 2000 + 1000 + 1000 + 2000 = 93.3

y-coordinate =12/29/12

Center-of-Gravity MethodNorth-South 120 90

Chicago (30, 120)

New York (130, 130)

60 30


Pittsburgh (90, 110) Center of gravity (66.7, 93.3)



Atlanta (60, 40)|




30 Arbitrary origin







Assembly Chart


Documents for Production

Assembly drawing Assembly chart Route sheet Work order Engineering change notices (ECNs)


Assembly Drawing

Shows exploded view of product Details relative locations to show how to assemble the productFigure 5.11 (a)


Assembly Chart1 2 3 4 5 6 7 8 9 10 11 R 209 Angle R 207 Angle Bolts w/nuts (2) R 209 Angle R 207 Angle Bolts w/nuts (2) Bolt w/nut R 404 Roller Lock washer Part number tag A4 Box w/packing material A5 A3 SA 2 Right bracket assembly A2 SA 1 Left bracket assembly A1

Identifies the point of production where components flow into subassemblies and ultimately Poka-yokeinto the final inspection productFigure 5.11 (b)


Route SheetLists the operations and times required to produce a componentProcess 1 2 3 4 Machine Auto Insert 2 Manual Insert 1 Wave Solder Test 4 Operations Insert Component Set 56 Insert Component Set 12C Solder all components to board Circuit integrity test 4GY 1.5 .5 1.5 .25

Setup Time

Operation Time/Unit .4 2.3 4.1 .5


Work OrderInstructions to produce a given quantity of a particular item, usually to a scheduleWork Order Item 157C Quantity 125 Start Date 5/2/08 Delivery Location Dept K11 Due Date 5/4/08

Production Dept F3212/29/12

Engineering Change Notice (ECN)

A correction or modification to a products definition or documentation

Engineering drawings Bill of material


Quite common with long product life cycles, long manufacturing lead times, or rapidly changing technologies

Operation Process //open the pdf


Process Chart

Figure 7.9

Scrap estimation

The market estimate specifies the annual volume to be produced for each product. To produce the required amount of product, the number of units scheduled through production must equal the market estimate plus a scrap estimate Let Pk represent the percentage of 12/29/12 scrap produced on the kth operation

Scrap estimation

Thus the expected number of units to start into a production for a part having n operations is



A product has a market estimate of 97,000 components, and requires three processing steps (turning, milling and drilling) having scrap estimates of P1 = 0.04, P2=0.01, and P3- 0.03 Ans: 105,21912/29/12

Equipment fractions

The quantity of equipment fraction required for an operation is called as the equipment fraction. The equipment fraction may be determined for an operation by dividing the total time required to perform the operations by the time available to complete the operation12/29/12

Deterministic model


Where F = number of machines required per shift S = standard time (minutes) per unit produced Q= number of units to be produced per shift E= actual performance, expressed as a percentage of standard time H = amount of time available per machine R = reliability of machine, expressed as percent of uptime

INPUT DATA AND ACTIVITIES 1. Flow Of Materials 2. Activity Relationship

3. String diagram 4. Space Requirement 5. Space Available

6. Space Relationship Diagram 7. Modifying considerations 9. Develop Layout 8. Practical Limitations


10. Evaluation

Systematic Layout Proceedure

1. Flows in a layout

a) F lujo e n lnea rec ta

d) Flu jo en L

b) F lu jo en U

d ) F lujo circ ular en O


c) F lu jo en serp en tn

e) F lujo en S

2. REL chart REL diagram

From REL chart, we construct activity relationship diagram (REL diagram). The purpose is to depict spatially the relationships of the activities. The basic premise is that geographic proximity can be used to satisfy particular relationships. For example, when the activity relationships reflect the magnitudes of material flows, pairs of activities having the greatest pair wise flow are located next to each other. Similarly, pairs of activities having an A rating are located adjacently.12/29/12 6969

2. REL chart example



2. Activity relationship diagram



Relationship diagram process



Relationship diagram process



Designing a layout

After the block layout is ready, estimate is made of the space requirements. This includes space required for machines, equipments, products. Estimation of human resources needed is made based on the number of machines operated and production rate. Then, space relationship diagrams are made.



Capacity Levels - Example 1

What is the average number of patients demanding treatment? What is 150% of average estimated demand? What is the service level for the 150% average demand?


Mid point X 75 125 175 225 275 325

Probability P(x) 0.10 0.20 0.30 0.20 0.15 0.05

X*P(x) 7.5 25 52.5 45 41.25 16.25 187.5

The average number of patients demanding treatment is 188 b. For 150%, average demand capacity is (1.5) (188)=282 patient treatment capacity is required c. A 95% service level would require a 300 patient 12/29/12 treatment capacitya.

Capacity Levels - Example 2

An organization must install enough automatic processors to provide 800,000 good units per year. Processing time is 30 seconds. But the processors are only 80% efficient. How many automatic processors are required if the firm operates 2000 hours per year?12/29/12

Capacity Levels - Example 2

Individual processor capacity = 3600 sec/hr 30 sec / unit = 120 units/mac hour

Required capacity = units/year


(2000 hr/year)(0.8) 500 units / hour12/29/12

Sample: Space relationship table



Example: Alternate block diagram



Example: Alternate block diagram



Dell Computer CompanyMass customization provides a competitive advantage

Sell custom-built PCs directly to consumer Lean production processes and good product design allow responsiveness Integrate the Web into every aspect of its business Focus research on software designed to make installation and configuration of its PCs fast and simple


Process, Volume, and VarietyFigure 7.1

Low Volume

Volume Repetitive Process

High Volume

High Variety one or few units per run, high variety (allows customization) Changes in Modules modest runs, standardized modules Changes in Attributes (such as grade, quality, size, thickness, etc.) long runs only 12/29/12

Process Focus projects, job shops (machine, print, carpentry) Standard Register

Mass Customization (difficult to achieve, but huge rewards) Dell Computer

Repetitive (autos, motorcycles) Harley-Davidson Poor Strategy (Both fixed and variable costs are high)

Product Focus (commercial baked goods, steel, glass) Nucor Steel

Process Strategies

How to produce a product or provide a service that

Meets or exceeds customer requirements Meets cost and managerial goals Efficiency and production flexibility Costs and quality

Has long term effects on


Process StrategiesFour basic strategies Process focus Repetitive focus Product focus Mass customization Within these basic strategies there are many ways they may be implemented 12/29/12

Process Focus

Facilities are organized around specific activities or processes General purpose equipment and skilled personnel High degree of product flexibility Typically high costs and low equipment utilization Product flows may vary considerably making planning and scheduling a challenge


Process FocusJob Shop

Many departments and many routings

Many inputs

Many variety of outputs


Process Flow DiagramCustomer Customer sales representative PurchasingPREPRESS DEPT

Vendors Accounting Receiving WarehouseCOLLATING DEPT PRINTING DEPT


Information flow Material flow




Figure 7.2

Repetitive FocusFacilities often organized as assembly lines Characterized by modules with parts and assemblies made previously Modules may be combined for many output options Less flexibility than processfocused facilities but more efficient 12/29/12

Repetitive FocusAutomobile Assembly LineRaw materials and module inputs Modules combined for many output options

Few modules 12/29/12

Process Flow DiagramFrame tube bendingTESTING 28 tests

Frame-building work cells

Frame machining THE ASSEMBLY LINEIncoming parts

Hot-paint frame painting Engines and transmissionsFrom Milwaukee on a JIT arrival schedule

Air cleaners Fluids and mufflers Fuel tank work cell Wheel work cell Roller testing

Oil tank work cell Shocks and forks Handlebars Fender work cell


Figure 7.3 12/29/12

Product Focus

Facilities are organized by product High volume but low variety of products Long, continuous production runs enable efficient processes Typically high fixed cost but low variable cost Generally less skilled labor


Product FocusContinuous Work FlowOutput variations in size, shape, and packaging

Few inputs


Product FocusD

Nucor Steel PlantB


Scrap steel

Continuous caster


Ladle of molten steel

Electric furnace


Continuous cast steel sheared into 24-ton slabs Hot tunnel furnace - 300 ft


Hot mill for finishing, cooling, and coiling




Mass Customization

The rapid, low-cost production of goods and service to satisfy increasingly unique customer desires Combines the flexibility of a process focus with the efficiency of a product focus


Mass CustomizationTable 7.1

Item Vehicle models Vehicle types18 Bicycle types8 Software titles Web sites Movie releases New book titles Houston TV channels Breakfast cereals Items (SKUs) in supermarkets LCD TVs

Number of Choices 1970s 21st Century 140 286 1,212 19 0 400,000 0 98,116,993 267 458 40,530 77,446 5 185 160 340 14,000 150,000 0 102


Mass CustomizationFigure 7.5

Repetitive FocusFlexible people and equipment

Supportive supply chains

Modular techniques

Mass Customization Effective scheduling techniques Process-Focused Rapid throughput techniques Product-Focused

High variety, low volume Low utilization (5% to 25%) General-purpose equipment 12/29/12

Low variety, high volume High utilization (70% to 90%) Specialized equipment

Comparison of ProcessesProcess Focus Repetitive Focus Product Focus Mass Customization (Low volume, high (Modular) (High-volume, lowvariety) variety) (High-volume, highvariety) Small quantity, large variety of products General purpose equipment Long runs, Large quantity, standardized small variety of product made from products modules Special equipment Special purpose aids in use of equipment assembly line Large quantity, large variety of products Rapid changeover on flexible equipment


Table 7.2

Comparison of ProcessesProcess Focus Repetitive Focus Product Focus Mass Customization (Low volume, high (Modular) (High-volume, lowvariety) variety) (High-volume, highvariety) Operators are broadly skilled Employees are modestly trained Operators are less Flexible operators broadly skilled are trained for the necessary customization Few work orders and job instructions because jobs standardized Custom orders require many job instructions

Many job Repetition reduces instructions as training and each job changes changes in job instructions


Table 7.2

Comparison of ProcessesProcess Focus Repetitive Focus Product Focus Mass Customization (Low volume, high (Modular) (High-volume, lowvariety) variety) (High-volume, highvariety) Raw material inventories high JIT procurement techniques used Raw material Raw material inventories are low inventories are low

Work-in-process is JIT inventory high techniques used

Work-in-process inventory is low

Work-in-process inventory driven down by JIT, lean production


Table 7.2

Comparison of ProcessesProcess Focus Repetitive Focus Product Focus Mass Customization (Low volume, high (Modular) (High-volume, lowvariety) variety) (High-volume, highvariety) Units move slowly Movement is Swift movement of Goods move through the plant measured in hours unit through the swiftly through the and days facility is typical facility

Finished goods made to order

Finished goods made to frequent forecast

Finished goods made to forecast and stored

Finished goods often build-to-order (BTO)


Table 7.2

Comparison of ProcessesProcess Focus Repetitive Focus Product Focus Mass Customization (Low volume, high (Modular) (High-volume, lowvariety) variety) (High-volume, highvariety) Scheduling is complex, tradeoffs between inventory, availability, customer service Scheduling based on building various models from a variety of modules to forecasts Relatively simple scheduling, establishing output rate to meet forecasts Sophisticated scheduling required to accommodate custom orders


Table 7.2

Comparison of ProcessesProcess Focus Repetitive Focus Product Focus Mass Customization (Low volume, high (Modular) (High-volume, lowvariety) variety) (High-volume, highvariety) Fixed costs low, Fixed costs variable costs high dependent on flexibility of the facility Costing estimated Costs usually before job, known known due to only after the job extensive experience Fixed costs high, Fixed costs high, variable costs low variable costs must be low High fixed costs mean costs dependent on utilization of capacity High fixed costs and dynamic variable costs make costing a challenge


Table 7.2

Crossover ChartsVariable costs


Variable costs Fixed costsLow volume, high variety Process A


Variable costs Fixed costsRepetitive Process Bost lc ta cost otal To T

$Fixed costsHigh volume, low variety Process C

400,000 300,000 200,000Fixed cost Process A Fixed cost Process B

Figure 7.612/29/12

To tal co st



V 1

V 2


Fixed cost Volume Process C

Focused Processes

Focus brings efficiency Focus on depth of product line rather than breadth Focus can be

Customers Products Service Technology


Changing Processes

Difficult and expensive May mean starting over Process strategy determines transformation strategy for an extended period Important to get it right


Process Analysis and Design

Flow Diagrams - Shows the movement of materials Time-Function Mapping - Shows flows and time frame Value-Stream Mapping - Shows flows and time and value added beyond the immediate organization Process Charts - Uses symbols to show key activities Service Blueprinting - focuses on customer/provider interaction


Baseline Time-Function MapCustomer Order product Process order Wait Receive product Sales Production control Plant A






Plant B


Transport 12 days Figure 7.7 12/29/12 13 days 1 day 4 days

Move 1 day 52 days 10 days 1 day 0 day

Move 1 day

Target Time-Function MapCustomer Order product Process order Receive product

Sales Production control Plant






Transport 1 day Figure 7.7 12/29/12 2 days 6 days 1 day 1 day

Move 1 day

Value-Stream Mapping


Figure 7.8

Service Blueprint

Focuses on the customer and provider interaction Defines three levels of interaction Each level has different management issues Identifies potential failure points


Service BlueprintPersonal Greeting Level #1Customer arrives for service

Service Diagnosis

Perform Service

Friendly CloseCustomer departs Customer pays bill

FWarm greeting and obtain service request No Standard request Direct customer to waiting room Determine specifics Notify customer and recommend an alternative provider No

F FNotify customer the car is ready

Level #2

Can service be done and does customer approve?

F Leve l #3


FYes Perform required work

FPrepare invoice

Figure 12/29/12 7.10


Process Analysis Tools

Flowcharts provide a view of the big picture Time-function mapping adds rigor and a time element Value-stream analysis extends to customers and suppliers Process charts show detail Service blueprint focuses on customer interaction

Service Process MatrixDegree of Customization Lo Massw ServiceCommercial banking Full-service stockbroker Boutiques Retailing

Hig h Professional ServicePrivate banking

Hig h Degree of Labor

Generalpurpose law firms

Service FactoryWarehouse and catalog stores Airlines No-frills airlines

Service Law clinics Specialized Limited-service hospitals stockbrokerFast-food restaurants Fine-dining restaurants


Lo w


Figure 12/29/12 7.11

Service Process MatrixMass Service and Professional Service

Labor involvement is high Selection and training highly important Focus on human resources Personalized services

Service Factory and Service Shop

Automation of standardized services Low labor intensity responds well to process technology and scheduling Tight control required to maintain standards


Improving Service ProductivityStrategy Separation Technique Example Structure service so Bank customers go to a customers must go manager to open a new where service is offered account, to loan officers for loans, and to tellers for deposits Self-service so Supermarkets and customers examine, department stores, compare, and evaluate Internet ordering at their own pace



Table 7.3

Improving Service ProductivityStrategy Postponement Technique Example Customizing at delivery Customizing vans at delivery rather than at production Restricting the offerings Modular selection of service, modular production Limited-menu restaurant Investment and insurance selection, prepackaged food modules in restaurants

Focus Modules


Table 7.3

Improving Service ProductivityStrategy Automation Technique Separating services that may lend themselves to automation Precise personnel scheduling Example Automatic teller machines


Scheduling ticket counter personnel at 15minute intervals at airlines


Clarifying the service Investment counselor, options, explaining how funeral directors, afterto avoid problems sale maintenance personnelTable 7.3


Improving Service Processes


Product exposure, customer education, product enhancement Recruiting and training Impact of flexibility

Human Resources


Equipment and Technology

Often complex decisions Possible competitive advantage

Flexibility Stable processes

May allow enlarging the scope of the processes


Production Technology

Machine technology Automatic identification systems (AISs) Process control Vision system Robot Automated storage and retrieval systems (ASRSs) Automated guided vehicles (AGVs) Flexible manufacturing systems (FMSs) Computer-integrated manufacturing (CIM)


Machine Technology

Increased precision Increased productivity Increased flexibility Improved environmental impact Reduced changeover time Decreased size Reduced power requirements


Automatic Identification Systems (AISs)

Improved data acquisition Reduced data entry errors Increased speed Increased scope of process automationExample Bar codes and RFID


Process Control

Increased process stability Increased process precision Real-time provision of information for process evaluation Data available in many forms


Process Control Software


Vision Systems

Particular aid to inspection Consistently accurate Never bored Modest cost Superior to individuals performing the same tasks



Perform monotonous or dangerous tasks Perform tasks requiring significant strength or endurance Generally enhanced consistency and accuracy


Automated Storage and Retrieval Systems (ASRSs)

Automated placement and withdrawal of parts and products Reduced errors and labor Particularly useful in inventory and test areas of manufacturing firms


Automated Guided Vehicle (AGVs)

Electronically guided and controlled carts Used for movement of products and/or individuals


Flexible Manufacturing Systems (FMSs)

Computer controls both the workstation and the material handling equipment Enhance flexibility and reduced waste Can economically produce low volume at high quality Reduced changeover time and increased utilization Stringent communication requirement between components


Computer-Integrated Manufacturing (CIM)

Extension of flexible manufacturing systems

Backwards to engineering and inventory control Forward into warehousing and shipping Can also include financial and customer service areas

Reducing the distinction between low-volume/high-variety, and highvolume/low-variety production


ComputerIntegrated Manufacturing (CIM)


Figure 7.12

Technology in ServicesService Industry Example Financial Services Debit cards, electronic funds transfer, ATMs, Internet stock trading Education Utilities and government Restaurants and foods Electronic bulletin boards, on-line journals, WebCT and Blackboard Automated one-man garbage trucks, optical mail and bomb scanners, flood warning systems Wireless orders from waiters to kitchen, robot butchering, transponders on cars that track sales at drive-throughs

Communications Electronic publishing, interactive TV12/29/12


Technology in ServicesService Industry Hotels Wholesale/retail trade Example Electronic check-in/check-out, electronic key/lock system ATM-like kiosks, point-of-sale (POS) terminals, e-commerce, electronic communication between store and supplier, bar coded data Automatic toll booths, satellite-directed navigation systems Online patient-monitoring, online medical information systems, robotic surgery Ticketless travel, scheduling, Internet purchasesTable

Transportation Health care Airlines


Process RedesignThe fundamental rethinking of business processes to bring about dramatic improvements in performance Relies on reevaluating the purpose of the process and questioning both the purpose and the underlying assumptions Requires reexamination of the basic process and its objectives Focuses on activities that cross functional lines Any process is a candidate for redesign 12/29/12

Ethics and Environmentally Friendly ProcessesReduce the negative impact on the environment

Encourage recycling Efficient use of resources Reduction of waste byproducts Use less harmful ingredients Use less energy


Quality ManagementIntroduction Click to edit Master subtitle style Session 31



Defining Quality

The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needsAmerican Society for Quality



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 product139139


Further Definitions

Quality is customer satisfaction "fitness for use (the product should be suitable for the intended purpose) and "right first time" (mistakes should be eliminated). Unfolding the above definition, defining the word customer: A customer is anyone who is impacted by the product or process:

External customers customers140140

Internal 12/29/12

What is Product?

A product is the output of any process. Three categories Goods Software Service



Customer Satisfaction

Customer Satisfaction is achieved through two components

Product features and Freedom from deficiencies



Customer Satisfaction

Product features

Refers to the quality of design The customer population can be segmented by the level or grade of quality desired It refers to quality of conformance It is stated in different units, e.g. errors, defects, failures143143

Freedom from deficiencies


Customer SatisfactionProduct features Performance Freedom from deficiencies Product free of defects and errors at delivery, during usage, and during servicing Sales, billing, and other business free of errors

Reliability Durability Ease of use Serviceability Aesthetics Accuracy Timeliness Perceived quality Value12/29/12 Reputation


JURANS TRILOGY AND QUALITY COSTSSession 32 Click to edit Master subtitle style



Universal Process of Managing QualityQuality Planning Quality control Quality Improvement Prove the need Identify projects Organize project teams Establish quality goals Identify customers Discover customer needs Develop product features Develop process features Establish process controls, transfer to operations12/29/12

Choose control subjects Choose unit of measure Set goals

Create a sensor Diagnose the causes Measure actual performance Interpret the difference Take action on the difference Provide remedies, prove that remedies are effective Deal with resistance to change Control to hold the 146146 gains

Freedom From Deficiencies

An emphasis on quality can be supportive by identifying and eliminating

the causes of errors and rework, thereby reducing costs and making more units of product Not overavailable emphasis ormisguided quality!



Freedom From Deficiencies

Warrant y



Quality Costs

Internal failure costs External failure costs Appraisal costs Prevention costs



Internal failure costs

These are costs associated with defects (errors, nonconformance, etc.) that are found prior to transfer of the product to the customer



Internal failure costs

Scrap : the labour, material, and overhead on productive products that cannot be economically repaired Rework: the cost of correcting defectives to make them conform to specifications Failure analysis: cost of analysing nonconforming 12/29/12 151151 product to determine causes

Internal failure costs

Scrap and rework supplies: costs of scrap and rework due to nonconforming product received from suppliers One hundred per cent sorting inspection: costs of finding defective units in product lots which contain unacceptably high levels of defectives152152 Reinspection and retesting: costs


Internal failure costs

Avoidable process losses: costs of losses that occur even with conforming product Downgrading : the difference between the normal selling price and the reduced produce due to quality reasons



External Failure CostsThese are costs associated with defects that are found after product is shipped to the customer.

Warranty charges: Costs involved in replacing or making repairs to products that are still within the warranty period Complaint adjustment: costs of investigation and adjustment of 12/29/12 154154

Appraisal costsThese are costs incurred in determining the degree of conformance to quality requirements

Incoming inspection and testing In-process inspection and testing Final inspection and testing Product quality audits Maintaining accuracy of testing 12/29/12 155155 equipments

Prevention costsThese are costs incurred in keeping failure and appraisal costs to a minimum

Quality planning : the activities that create overall quality plan New product review: cost of reliability engineering and other quality related activities associated with the launching of new designs Process control: costs of in-process inspection and testing the status of the process156156


Prevention costs

Quality audits: costs of evaluating the execution of activities Supplier quality evaluation: costs of evaluating a supplier prior to supplier selection, auditing the activities during the contract Training: costs of preparing and conducting the training 157157 12/29/12

Quality CostsHead Cost of quality failures Defective stock Repairs to product Collect scrap Waste scrap Consumer adjustments Downgrading products Customer ill will Customer policy adjustment12/29/12



3,276 73,329 2,288 1,87,428 4,08,200 22,838 Not counted Not counted 6,97,259158158

0.37% 8.31 0.26 21.26 46.31 2.59


Quality CostsCost of appraisal Incoming inspection Inspection 1 Inspection 2 Spot-check inspection Cost of Prevention Local plant quality Control engineering, corporate quality Grand Total12/29/12

32,655 32,582 25,200 65,910 1,47,347 7,848 30,000 37,848 8,82,454

2.68 3.70 2.86 7.37 16.61% 0.89 3.40 4.29% 100.00%


Optimum segment of quality cost model

Zone of improvement projects Failure costs >70%12/29/12

Zone of indifference Failure costs ~ 50% Emphasize is on Quality control

Zone of indifference Failure costs 50%160160

Gurus of QualityName Shewart Contribution Control chart theory with control limits, assignable and chance causes of variation and rational subgroups Deming 14 point theory provides the management to improve quality, productivity and competitive position Juran Jurans Trilogy for managing quality being carried out by quality planning, control and improvement Feiganbaum Customer satisfaction, genuine management involvement, employee involvement, first-line supervision leadership, and company-wide quality control 12/29/12 161161

Gurus of QualityIshikawa Crosby Taguchi Cause and effect diagram Quality is free doing it right the first time Developed loss function concept that combines cost, target and variation in to one metric. Because the lost function is reactive, he developed the signal to noise ratio as a proactive equivalent162162


STATISTICAL PROCESS CONTROLClick to edit Master subtitle style



Statistical Process Control (SPC)

Variability is inherent in every process

Natural or common causes Special or assignable causes

Provides a statistical signal when assignable causes are present Detect and eliminate assignable causes of variation164164



Three categories of variation

Within piece variation Piece to piece variation that occurs among pieces produced at the same time Time-to-time variation that occurs in product produced at different times of the day



Variation is present due to a combination of factors

Men Material Machine Environment Inspection


STATISTICAL PROCESS CONTROLSession 35 Click to edit Master subtitle style



Natural VariationsAlso called common causes Affect virtually all production processes Expected amount of variation Output measures follow a probability distribution For any distribution there is a measure of central tendency and dispersion If the distribution of outputs falls within acceptable limits, the process is said to be in control 12/29/12 168168

Assignable Variations

Also called special causes of variation

Generally this is some change in the process

Variations that can be traced to a specific reason The objective is to discover when assignable causes are present

Eliminate the bad causes Incorporate the good causes169169


SamplesTo measure the process, we take samples and analyze the sample statistics following these steps(a) Samples of the product, say five boxes of cereal taken off the filling machine line, vary from each other in weight12/29/12

Each of these represents one sample of five boxes of cereal

Frequenc y

# # # # # # # # # # # # # # # # # # # # # #


# # Weigh# t


SamplesTo measure the process, we take samples and analyze the sample statistics following these steps(b) After enough samples are taken from a stable process, they form a pattern called a distribution12/29/12

The solid line represents the distribution

Frequenc y Weigh t171171

SamplesTo measure the process, we take samples and analyze the sample statistics following these steps(c) There are many types of distributions, including the normal (bellshaped) distribution, but distributions do differ in terms of central tendency (mean), standard deviation or variance, and shape Central Variati Shap tendency on e Weig ht Weig ht Weig ht172172


F re q u e n c y

SamplesTo measure the process, we take samples and analyze the sample statistics following these steps(d) If only natural causes of variation are present, the output of a process forms a distribution that is stable over time and is 12/29/12predictable

Freque ncy

Predicti onTi me173173

Weig ht

SamplesTo measure the process, we take samples and analyze the sample statistics following these steps(e) If assignable causes are present, the process output is not stable over time and is not predicable? ?? ?? ? ? ? ? ? ? ? ? ? ? ?? ??

Freque ncy

Predicti onTi me174174

Weig ht12/29/12

Control ChartsConstructed from historical data, the purpose of control charts is to help distinguish between natural variations and variations due to assignable causes



Process Control(a) In statistical control and capable of producing within control limits

Frequen cy Lower control limit

Upper control limit (b) In statistical control

but not capable of producing within control limits

(c) Out of control

Siz (weight, length, speed, etc.) e12/29/12


Types of DataVariabl es Attribut es Defect-related

Characteristics that can take any real value May be in whole or in fractional numbers Continuous random variables12/29/12

characteristics Classify products as either good or bad or count defects Categorical or discrete random variables177177

Central Limit TheoremRegardless of the distribution of the population, the distribution of sample means drawn from the population will tend to follow a normal curve1.

The mean of the sampling distribution (x) will be the same as the population x = mean



The standard deviation of the sampling distribution ( ) () = , 178178

Population and Sampling DistributionsThree population distributionsBeta

Distribution of sample means

Normal Uniform| -3 | | |

Mean of sample means = x Standard deviation = of the = sample means| | |



+ 1

+ 2

+ 3


95.45% fall within 2 99.73% of all x fall within


Sampling DistributionSampling distribution of means Process distribution of means

x= ()12/29/12 180180

Control charts for VariablesX bar and Master Click to editR chart subtitle style



Control Charts for Variables

For variables that have continuous dimensions

Weight, speed, length, strength, etc.

x-charts are to control the central tendency of the process R-charts are to control the dispersion of the process These two charts must be used together182182


Variable control charts

Quality characteristic

Should be measurable and can be expressed in numbers A rational subgroup is one in which the variations within the group is only Within group variation is used to determine the control limits between subgroups is

Subgroup size and Method

12/29/12 Variation

Setting Chart LimitsFor x-Charts when we know

Upper control limit (UCL) = x + z Lower control limit (LCL) = x - z



x =mean of the sample means or a target value set for the process z =number of normal standard deviations = = / = 184184

Setting Control LimitsHour 1 Sample Weight of Number Oat Flakes 1 17 2 13 3 16 4 18 5 17 n=9 6 16 7 15 8 17 9 16 Mean 16.1 = 112/29/12

Hour Mean 1 16.1 2 16.8 3 15.5 4 16.5 5 16.5 6 16.4

Hour Mean 7 15.2 8 16.4 9 16.3 10 14.8 11 14.2 12 17.3

For 99.73% control limits, z = 3 UCLx = x + z = 16 + 3(1/3) = 17 LCLx = x - z = 16 3(1/3) = 15 185185

Setting Control LimitsControl Chart for sample of 9 boxes

Out of control

17 = UCL 16 = Mean 15 = LCL| | | | | | | | | | | | 1 2 3 4 5 6 7 8 9 10 11 12

Variation due to assignable causes Variation due to natural causes Variation due to Out of assignable control causes186186

Sample number12/29/12

Setting Control LimitsFor x-Charts when we dont know Upper control limit (UCL) = A2R Lower control limit (LCL) = A2Rwhere Table

x+ x-

R =average range of the samples A2 =control chart factor found in x =mean of the sample means



Control Chart FactorsSample Size n 2 3 4 5 6 7 8 9 10 1212/29/12

Mean Factor A2 1.880 1.023 .729 .577 .483 .419 .373 .337 .308 .266

Upper Range D4 3.268 2.574 2.282 2.115 2.004 1.924 1.864 1.816 1.777 1.716

Lower Range D3 0 0 0 0 0 0.076 0.136 0.184 0.223 0.284188188

Setting Control LimitsProcess average x = 12 ounces Average range R = .25 Sample size n = 5



Setting Control LimitsProcess average x = 12 ounces Average range R = .25 Sample size n = 5 UCLx = x + A2R = 12 + (.577)(.25) = 12 + .144 = 12.144 ounces From previous Table12/29/12 190190

Setting Control LimitsProcess average x = 12 ounces Average range R = .25 Sample size n = 5 UCLx = x + A2R = 12 + (.577)(.25) = 12 + .144 = 12.144 ounces LCLx = x - A2R = 12 - .144 = 11.857 ounces12/29/12

UCL = 12.144 Mean = 12 LCL = 11.857191191

R ChartType of variables control chart Shows sample ranges over time

Difference between smallest and largest values in sample

Monitors process variability Independent from process mean192192


Setting Chart LimitsFor RCharts

Upper control limit (UCLR) = D4R Lower control limit (LCLR) = D3R

where R =average range of the samples D3 and D4 =control chart factors from Table



Setting Control LimitsAverage range R = 5.3 pounds Sample size n = 5 From Table S6.1 D4 = 2.115, D3 = 0 UCLR = D4R = (2.115)(5.3) = 11.2 pounds UCL = 11.2 Mean = 5.3 LCL =0194194

LCLR = D3R = (0)(5.3) = 0 pounds12/29/12

Mean and Range Charts(a) These sampling distributio ns result in the charts below xchart Rchart12/29/12

(Sampling mean is shifting upward but range is consistent)UC L



(x-chart detects shift in central tendency) (R-chart does not detect change in mean)195195

Mean and Range Charts(b) These sampling distributio ns result in the charts below xchart Rchart12/29/12




(Sampling mean is constant but dispersion is increasing) (x-chart does not detect the increase in dispersion) (R-chart detects increase in dispersion)196196

CONTROL CHARTS FOR ATTRIBUTESSession 36 Click to edit Master subtitle style


Construction of X and R charts

When setting up X and R charts, first set the R chart Because the control limits on the X chart depend on the process variability Unless process variability is in control, there is no meaning in the control limits12/29/12 198198

Process capabilitySpecification Limits Ri is given as 8.1302

X = 37.64 And sample size is 5

are: 1.500.50

Sample Number is 25 Hence R = 8.1302/25 = 0.32521 LCLR=R*D3= 0.32521*0=0 UCLR = R*D4=0.3252*(2.114) The process standard deviation may 199199


Process Capability

X (double bar) = 1.5056; UCL = 1.69325; LCL=1.31795 The process capability can be measured as, estimating the fraction of non-conforming products produced as


That is, 0.035% of the product will be outside of the specification 200200

Steps In Creating Control Charts1.






Take samples from the population and compute the appropriate sample statistic Use the sample statistic to calculate control limits and draw the control chart Plot sample results on the control chart and determine the state of the process (in or out of control) Investigate possible assignable causes and take any indicated actions Continue sampling from the process and reset the control limits when necessary201201

Types of Attribute Charts

Control chart for fraction non conforming fraction of nonconforming or defective product produced (p chart) Control chart for nonconformities is used to deal with the number of defects or nonconformities ( c chart) Control chart for non12/29/12 conformities per unit

The Control chart for fraction nonconforming

The fraction non conforming is defined as the ratio of the number of non conforming items in a population to the total number of items in that population The statistics principles for fraction nonconforming is

binomial distribution12/29/12

The Control chart for fraction nonconforming

The sample fraction non conforming is defined as the ratio of the number of non conforming units in the sample D to the sample size n; that is P

The distribution of can be obtained from the binomial


Fraction non conforming control chart



Frozen orange juice concentrate is packed in 6-oz cardboard cans. These cans are formed on a machine by spinning them from cardboard stock and attaching a metal bottom panel. By inspection of a can, we may determine whether, when filled it could possibly leak either on the side seam or around the bottom joint. Such a non conforming can has an improper seal on either the side seam or the bottom panel. Set up a control to improve the fraction of non conforming cans produced by this machine To establish the control chart, 30 samples of n=50 cans each were selected at hour intervals over a 3-shift period in which the machine was in continuous operations. The data are shown in the table. We construct a preliminary control chart to see whether the process was in control when this data was collected.


Sample Number

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Number of Sample nonfraction conforming noncans Di conforming Pi 12 0.24 15 0.30 8 0.16 10 0.20 4 0.08 7 0.14 16 0.32 9 0.18 14 0.28 10 0.20 5 0.10 6 0.12 17 0.34 12 0.24 22 0.44

Sample Number

16 17 18 19 20 21 22 23 24 25 26 27 28 29 30


Number of Sample nonfraction conforming noncans Di conforming Pi 8 0.16 10 0.20 5 0.10 13 0.26 11 0.22 20 0.40 18 0.36 24 0.48 15 0.30 9 0.18 12 0.24 7 0.14 13 0.26 9 0.18 6 0.12 347 P(bar)=0.23 13



Sample Number

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Number of nonconforming cans Di 12 15 8 10 4 7 16 9 14 10 5 6 17 12 22

Sample fraction nonconforming Pi 0.24 0.30 0.16 0.20 0.08 0.14 0.32 0.18 0.28 0.20 0.10 0.12 0.34 0.24 0.44

Sample Number

16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Number of Sample nonfraction nonconforming conforming Pi cans Di 8 0.16 10 5 13 11 20 18 24 15 9 12 7 13 9 6 347 0.20 0.10 0.26 0.22 0.40 0.36 0.48 0.30 0.18 0.24 0.14 0.26 0.18 0.12 P(bar)=0.231 3


Revised Center Line

The new center line is calculated as


The process is under control But the fraction

Sample Number of Sample Sample Number of Numbe nonfraction non- Number nonr conforming conforming conforming cans Di Pi cans Di 31 32 33 34 35 36 37 38 39 40 41 42 9 6 12 5 6 4 6 3 7 6 2 4 0.18 0.12 0.24 0.10 0.12 0.08 0.12 0.06 0.14 0.12 0.04 0.08 43 44 45 46 47 48 49 50 51 52 53 54 3 6 5 4 8 5 6 7 5 6 3 5 133

Sample fraction nonconforming Pi

0.06 0.12 0.10 0.08 0.16 0.10 0.12 0.14 0.10 0.12 0.06 0.10 P(bar)=0.1108


Revised Control Limits


A hypothesis test that the process fraction nonconforming in the current process differs from the fraction nonconforming of the previous process H0: p1=p2 H1: p1>p2

The test statistic is



Zo = 7.10 > Z0.05= 1.645 So we reject the Null hypothesis Hence, it is concluded that there is a significant decrease in the process fallout



Control charts for non conformities per unit

The average number of non conformities per unit is


X is a Poisson random variableU bar represents the observed average number of non conformities per unit in a preliminary set of data



A personal computer manufacturer wishes to establish a control chart for nonconformities per unit on the final assembly line in 20 samples or 5 computers each are shown in the table


Sample Sample size, n Total number of Average number No. i Non conformities, of Non xi conformities per unit, ui=xi/n 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 10 12 8 14 10 16 11 7 10 15 9 5 7 11 12 6 8 10 7 5 193 2.0 2.4 1.6 2.8 2.0 3.2 2.2 1.4 2.0 3.0 1.8 1.0 1.4 2.2 2.4 1.2 1.6 2.0 1.4 1.0 38.6


Calculation of Control Limits


Construction of the u Control Chart12 10 8 6 4 2 012/29/12

Linear Regressio n for

CONTROL CHART FOR ATTRIBUTESClick to edit Master subtitle style



Procedures with Variable Sample Size Roll No. of Total no. Number No. of nonNo. Square of of conformiti meters nonconf inspectio es per ormities n units in inspection roll, n unit ui 500 400 650 500 475 500 600 525 600 625 14 12 20 11 7 10 21 16 19 23 153 10.0 8.0 13.0 10.0 9.5 10.0 12.0 10.5 12.0 12.5 107.50 1.40 1.50 1.54 1.10 0.74 1.00 1.75 1.52 1.58 1.84

1 2 3 4 5 6 7 8 9 1012/29/12

Calculation of Upper and Lower Control LimitsRoll No. ni No. of non conformities per inspection unit ui 1.40 1.50 1.54 1.10 0.74 1.00 1.75 1.52 1.58 1.84 2.55 2.68 2.41 2.55 2.58 2.55 2.45 2.52 2.45 2.43 0.29 0.16 0.43 0.29 0.26 0.29 0.39 0.32 0.39 0.41

1 2 3 4 5 6 7 8 9 1012/29/12

10.0 8.0 13.0 10.0 9.5 10.0 12.0 10.5 12.0 12.5

Construction of the u Control Chart12 10 8 6 4 2 012/29/12

Choice between Attributes and Variable Control Charts

Attributes control charts

Several quality characteristics can be considered jointly and the unit classified as nonconforming if it fails to meet the specification on any one characteristic Expensive and time consuming measurements can be avoided



Choice between Attributes and Variable control chartsVariable control charts

Provides more useful information about process performance Specific information about the process mean and variability can be obtained They often provide leading indicators of impending trouble12/29/12

The attribute charts will react only 226226


Manufacturing Execution SystemsSession 30 Click to edit Master subtitle style


Manufacturing Execution System

Operations scheduling is at the heart of what is currently referred to as Manufacturing Execution systems (MES) An MES is an information system that schedules, dispatches, tracks, monitors and controls production on the factory floor12/29/12

Work Center

It is an area in a business in which productive resources are organized and work is completed A work center may be a single machine, a group of machines, or an area where a particular type of work is done These work centers are grouped according to function in a12/29/12

job-shop environment; or


Scheduling involves determining the order for running the jobs, and also assigning a machine for each job Scheduling systems can use either infinite or finite loading Scheduling systems are distinguished in how they consider the capacity, in determining the schedule Another distinguishing feature is 12/29/12 whether the schedule is generated

Infinite and Finite Loading

Infinite loading when work is assigned to a work center simply based on what is needed over time. No consideration is given directly regarding the capacity, except for a rough cut capacity check Finite loading: Schedules in detail each resource using the setup time and run time required for each order. Theoretically, all schedules are 12/29/12

Forward and Backward Scheduling

Forward Scheduling: refers the method in which the system takes an order and then schedules each operation that must be completed forward in time Backward scheduling: Starts from some date in the future (possibly due date) and schedules the required operations in reverse sequence MRP system is an example of an


Machine/Labour limited

Processes are referred to as either machine limited or labour limited Machine Limited: Equipment is the critical resources to be scheduled Labour Limited: People are the key resource to schedule


Type Continuous process


Typical scheduling approach

Chemicals, steel, wires Finite forward scheduling and cables, liquids, of the process; machine canned goods limited Finite forward scheduling of the line; machine limited; parts are pulled to the line using just-in-time system

High-volume Automobiles, manufacturing telephones, fasteners, textiles, motors, household fixtures

Mid-volume Industrial Parts, High- Infinite forward scheduling manufacturing end consumer of the line; labour limited products and machine limited as well; parts are pulled to the line using just-in-time system Low-volume job shops12/29/12

Custom or prototype Infinite, forward scheduling equipment, specialized of jobs: usually labour instruments, lowlimited, but certain volume industrial functions may be machine

Job sequencing

The process of determining the job order on some machine or in some work center is known as sequencing Priority rules are the rules used in obtaining a sequence


Measures of schedule performance

Meeting due dates of customers or downstream operations Minimizing the flow times Minimizing work-in-process inventory Minimizing idle time of machines or workers


Example Single machine scheduling

A firm received five orders. Specific scheduling data are provided in the table. There is only one machine. The firm must decide the sequence for the five orders. The evaluation criteria is minimum flow time. Use FCFS and SPT priority rule to decide the sequenceJob (in order of arrival) A B C D E 12/29/12 Processing time (days) 3 4 2 6 1 Due date (days hence) 5 6 7 9 2

First Come First Served (FCFS) RuleJob sequence A B C D E Processing time (days) 3 4 2 6 1 Due date (days hence) 5 6 7 9 2 Flow time (days) 0+3 = 3 3 + 4=7 7+2=9 9+6=15 15+1=16

TOTAL FLOW TIME = 3+7+9+15+16=50 DAYS MEAN FLOW TIME = 50/5 = 10 DAYS Comparing the due date of each job, with its flow time, we observe that only job A will be on time Jobs B, C, D and E will be late by 1, 2,6 and 14 days respectively On average, a job will be late by 12/29/12 (0+1+2+6+14)/5=4.6 days

Shortest Processing Time (SPT Rule)Job sequence E C A B D Processing time (days) 1 2 3 4 6 Due date (days hence) 2 7 5 6 9 Flow time (days) 0+1 = 1 1 +2 =3 3 + 3=6 6+4 = 10 10+6=16

TOTAL FLOW TIME = 1+3+6+10+16 =36 DAYS MEAN FLOW TIME = 36/5 = 7.2 DAYS SPT results in a lower average flow time than FCFS rule, in addition, Job C and E will be ready before the due date, and job A is late by only one day. On average a job will be late by (0+0+1+4+7)/5=2.4 days 12/29/12

Scheduling n jobs on two machines

Referred to as Johnsons rule Objective is to minimize the flow time from the beginning of the first job until the finish of the last It consists of the following steps:

List the operation time for each job on both the machines Select the shortest operation time If the shortest time is for the first


Scheduling n jobs on two machines - ExampleJob A B C D Operation time on machine 1 3 6 5 7 Operation time on machine 2 2 8 6 4

Step 2 and 3: Select the shortest operation Job A is shortest on Machine 2 Ist Hence job A is assigned first and scheduled last Assig Once assigned it is not available further nmen t 1 2 3 4 A


Scheduling n jobs on two machines - ExampleJob A B C D Operation time on machine 1 3 6 5 7 Operation time on machine 2 2 8 6 4

Step 4: Select the shortest operation among the remaining jobs Job D is shortest and again on Machine 2 Hence job D is assigned second to last Once assigned it is not available further 1 2 3 D 12/29/12 4 A

Scheduling n jobs on two machines - Example

Step 4: Job C is shortest on machine 1, among the remaining jobs, hence performed first 1 2 3 4C D A

The remaining job is B, with the 1 2 3 4 shortest operationDtime in machine 1 C B A12/29/12 All the jobs are sequenced . The flow time is 25 days

Scheduling n jobs on two machines - ExampleMachine 1 Job C Job B Job D Job A Idle but available for other work Job A 25

Machine 2 Idle 0

Job C 5

Job B

Job D

11 19 Cumulative time in days


Production Activity Control (PAC)

Also referred as shop-floor control A system for utilizing data from the shop floor as well as data processing files to maintain and communicate status information on shop orders and work centers



The major functions of PAC are:

Assigning priority of each shop order Maintaining work-in-process quantity information Providing actual output data for capacity control purpose Providing quantity by location by shop order for WIP inventory and accounting purpose efficiency, utilization, and

Measuring 12/29/12

Gantt Charts

Smaller job shops and individual departments of large ones employ the Gantt chart to help plan and tract jobs It is a type of bar chart that plot tasks against time


Gantt chart representation

Job A B C D

Monday Tuesday Wed




Tools of PAC1.

The daily dispatch list which jobs are to be run, there priority and how long each will take Various status and exception reports includinga.


Anticipated delay report made out by the shop planner Scrap reports Rework reports




Input output control

It is a major feature of a manufacturing planning and control system Its major percept is that the planned work input to a work center should never exceed the planned work output When the input exceeds the output, back logs builds at the work center, 12/29/12 which in turn increases the lead time

Input output control reportWork ending 505 Planned input 210 Actual input Cumulative deviation Planned output 110 - 100 210 512 210 150 - 160 210 120 - 160 519 210 140 - 230 210 160 - 210 526 210 130 -310 210 120 -300

Actual output 140 Cumulative deviation - 70


Input output control report

Looking first at the output part of the report, output is far below plan It would seem that the serious capacity problem exists for this work center. However, a look at the input part of the plan, makes it the serious capacity problem exists at an upstream work center, feeding this 12/29/12 work center

Input output control report

The basic solution is simple Either increase capacity at the bottleneck station or reduce the input to it (input reduction at bottleneck work center)


Product DesignProcess of Product subtitle Click to edit MasterDesign style Session 23



Organizing for Product Development

Historically distinct departments

Duties and responsibilities are defined Difficult to foster forward thinking Product manager drives the product through the product development system and related organizations256256

A Champion


Product Design & Process SelectionProduct design the process of defining all of the companies product characteristics

Product design must support product manufacturability (the ease with which a product can be made)


Product design defines a products appearan tolerance characteristics of: ce, s, and materials performa , nce dimensio standard Process Selection the development of the ns, s. process necessary to produce the designed product.


Organizing for Product Development

Team approach

Cross functional representatives from all disciplines or functions Product development teams, design for manufacturability teams, value engineering teams

Japanese whole organization approach

No organizational divisions258258


Concurrent Engineering



The Product Design ProcessIdea development: all products begin with an idea whether from:

customers, competitors or suppliers

Reverse engineering: buying a competitors product12/29/12 260260

The Product Design ProcessStep 1 - Idea Development - Someone thinks of a need and a product/service design to satisfy it: customers, marketing, engineering, competitors, benchmarking, reverse engineering Step 2 - Product Screening - Every business needs a formal/structured evaluation process: fit with facility and labor skills, size of market, contribution margin, break-even analysis, return on sales Step 3 Preliminary Design and Testing Technical specifications are developed, prototypes built, testing starts Step 4 Final Design - Final design based on test 12/29/12 261261 results, facility, equipment, material, & labor skills

The Product Design Process

Idea developments selection affects

Product quality Product cost Customer satisfaction Overall manufacturability the ease with which the product can be made



Research-DevelopmentEngineering(Idea Generation)


DEVELOPME NT(Product Screening & Testing)

(Final Design )


PLANT ENGINEERIN G(Product continuity)




Phase 0 : Planning

Phase 1: Phase 2: Phase 3: Phase 4: Phase 5: Concept System level Detail Design Testing and Production development design refinement Rampup

Marketing Design Investigate Generate Define part Reliability Consider feasibility of alternative geometry testing Product product product Choose Life testing platform concepts architecture materials Performanc and Develop s Assign e testing architectur industrial Define major tolerances Obtain e design subsystems Compete regulatory Assess new concepts and industrial approvals technologie Build and testinterfaces design Implement s experimental Refine documentatio design prototypes industrial n changes design Evaluate early production outputs

Manufacturi ng Other 12/29/12 functions

Product Decisions

Preliminary Design Detailed Design

Functional Design Form Design Production Design



Preliminary Design

Transition from concept to reality Prototypes are developed Prototypes are tested for performance characteristics The process of finding the best design is called optimization



DETAILED DESIGN1. Functional Design

Market quality level Materials Selection Reliability Maintainability Packaging267267

2. Form Design

3. Production Design12/29/12

1. Functional Design

Concerned with how the product works ( its performance) Management must be concerned with the relationships among market quality level, reliability and cost in deciding the technical specifications



1 a. Market Quality Level

Is related to the market segments the product will serve High, moderate or low quality markets The market quality will determine the material selection, reliability and thereby the cost There is a point of diminishing returns where costs increased 12/29/12 269269 beyond a value

1 b. Materials Selection

For a given market quality level The quality and reliability of the materials should meet specifications as prescribed by the standards



1 c. Reliability

The life of a product is dependent on its design, the manufacturing quality, the conditions under which it is used Reliability refers to a product performing its intended function for a specified period of time (consistency of operation) under given conditions satisfactorily (without failure) It is expressed as a number that indicates as a measure of probability12/29/12 271271

1 d. Maintainability

Refers to the ability of a product or system to stay in operating condition with a reasonable amount of effort It is expressed as a number that indicates the probability, that when specified maintenance is taken, a failed device will be restored to operable condition in a specified downtime Maintainability relates to 12/29/12 272272 maintenance costs, frequency of

1 d. Maintainability

Average availability =


MTBF + MTTR MRBF = Operating time / number of failures MTTR = nonoperating time / number of failures MTBF = Mean time between failures, 12/29/12 273273 or how long on the average the


Relates to the physical appearance or shape of the product It is important for consumer goods



2 a. Packaging

Package may be a box, can, bag, tube etc Packaging is the use of containers, wrapping materials, decorations and labelling to protect, promote, secure, preserve to increase the utility of the product




Product design take care of function, form and producibility. The producibility aspect is looked in to during the production design



3 a. Product Simplification

Determination of optimum number of variety Too much variety raises costs, too less retard sales Elimination of marginal product lines, types and models Simplification will reduce design complexity, and the range of purchased products



3 b. Product Diversification

Opposite to simplification Increased product lines and modes Horizontal diversification Vertical diversification Lateral diversification



Product DesignDesign edit Master subtitle Click to for Manufacturabilitystyle Session 24



3 c. Standardization

To gain uniformity in the characteristics of a product such as shape, size, colour, quantity and performance Uniformity in work methods, equipment, machine parts, procedures and processes Permits interchangeability of parts and simplifies maintainability of the 12/29/12 280280 product

3 d. Modular Design

Products designed in easily segmented components Adds flexibility to both production and marketing Improved ability to satisfy customer requirements



3 d. Modularity

Modularity develops building blocks The modularity designs, develops and produce parts in multitude of ways



3 e. Value Analysis

Focuses on design improvement during production Seeks improvements leading either to a better product or a product which can be produced more economically



Cost Reduction of a Bracket via Value Engineering



Issues for Product Development

Computer-aided design (CAD) Computer-aided manufacturing (CAM) Virtual reality technology Environmentally friendly design



Robust Design

Product is designed so that small variations in production or assembly do not adversely affect the product Typically results in lower cost and higher quality



Computer Aided Design (CAD)

Using computers to design products and prepare engineering documentation Shorter development cycles, improved accuracy, lower cost Information and designs can be deployed worldwide



Computer-Aided Manufacturing (CAM)

Utilizing specialized computers and program to control manufacturing equipment Often driven by the CAD system (CAD/CAM)



Benefits of CAD/CAMProduct quality Shorter design time Production cost reductions Database availability New range of capabilities

1. 2. 3. 4. 5.



Virtual Reality Technology

Computer technology used to develop an interactive, 3-D model of a product from the basic CAD data Allows people to see the finished design before a physical model is built Very effective in large-scale designs such as plant layout290290


Time-Based Competition

Product life cycles are becoming shorter and the rate of technological change is increasing Developing new products faster can result in a competitive advantage



Product-by-Value Analysis

Lists products in descending order of their individual dollar contribution to the firm Lists the total annual dollar contribution of the product Helps management evaluate alternative strategies



Product-by-Value AnalysisA Furniture FactoryLove Seat Arm Chair Foot Stool Recliner

Individual Contribution ($) $102 $87 $12 $136

Total Annual Contribution ($) $36,720 $51,765 $6,240 $51,000



Documents for Production

Engineering drawing Bill of Material Assembly drawing Assembly chart Route sheet Work order Engineering change notices (ECNs)294294


Engineering Drawings



Bills of MaterialBOM for Panel Weldment NUMBER DESCRIPTION QTY A 60-71 A 60-7 R 60-17 R 60-428 P 60-2 A 60-72 R 60-57-1 A 60-4 PANEL WELDMT 1



Assembly DrawingShows exploded view of product Details relative locations to show how to assemble the product297297


Assembly ChartR 209 Angle R 207 Angle Bolts w/nuts (2) R 209 Angle R 207 Angle Bolts w/nuts (2) Bolt w/nut R 404 Roller Lock washer Part number tag A4 Box w/packing material 11 A5 A3 SA 2 Right bracket assembly A2 SA 1 Left bracket assembly A1

1 2 3 4 5 6 7 8 9 10

Identifies the point of production where components flow into subassemblies and ultimately Poka-yokeinto the final inspection product298298


Route SheetLists the operations and times required to produce a componentProcess 1 2 3 4 Machine Auto Insert 2 Manual Insert 1 Wave Solder Test 4 Operations Insert Component Set 56 Insert Component Set 12C Solder all components to board Circuit integrity test 4GY 1.5 .5 1.5 .25

Setup Time

Operation Time/Unit .4 2.3 4.1 .5



Work OrderInstructions to produce a given quantity of a particular item, usually to a scheduleWork Order Item 157C Quantity 125 Start Date 5/2/08 Delivery Location Dept K11300300

Due Date 5/4/08

Production Dept F3212/29/12

Engineering Change Notice (ECN)

A correction or modification to a products definition or documentation

Engineering drawings Bill of material

Quite common with long product life cycles, long manufacturing lead times, or rapidly changing technologies12/29/12 301301

Transition to Production

Responsibility must also transition as the product moves through its life cycle

Line management takes over from design

Three common approaches to managing transition

Project managers Product development teams Integrate product development and manufacturing organizations302302



Product decisions determine what will be produced Process decisions establish how the product will be produced Process decisions are concerned with the transformation of inputs to outputs The basic factors that affect the selection of a process are:



Process Strategies

How to produce a product or provide a service that

Meets or exceeds customer requirements Meets cost and managerial goals Efficiency and production flexibility Costs and quality

Has long term effects on



Process Selection StrategiesFour basic strategies Process focus Repetitive focus Product focus Mass customization Within these basic strategies there are many ways they may be implemented 12/29/12 305305

Process Selection

Product design considerations must include the process Intermittent processes:

Processes used to produce a variety of products with different processing requirements in lower volumes. (such as healthcare facility) Processes used to produce one or a few standardized products in high volume. (such as a cafeteria, or car wash)306306

Repetitive processes:


Product-Process Grid



Process Types

Process types can be:

Project process make a one-at-a-time product exactly to customer specifications Batch process small quantities of product in groups or batches based on customer orders or specifications Line process large quantities of a standard product Continuous process very high volumes of a fully standard product308308

Process types exist on a continuum12/29/12

Process SelectionContinuo us


Intermitte nt

Specia l Project One of a kind 12/29/12 Off-the Custo shelf m PRODUCT Commodi ty 309309

Linking Product Design & Process Selection

Impact of Competitive Priorities: Intermittent operations are typically less competitive on cost than repetitive operations.



Linking Product Design & Process Selection: Summary

Organizational Decisions appropriate for different types of operations



Flowchart for Different Product Strategies at Pizzaria



Process Decisions-Vertical Integration & Make or Buy

A firms Make-or-Buy choices should be based on the following considerations:

Strategic impact Available capacity Expertise Quality considerations Speed

Cost (fixed cost + variable cost)make = Cost(fixed cost + Variable cost)buy313313


Example 1Quantity needed Total material Rs.600 Rs.10,000 Rs.9000 cost Total direct 200 1500 2000 labour hours Lowest Rs.0.80 Rs.50.00 Rs.2.00 supplier bid (price per unit) Should you make or buy the following components? The direct labour cost is estimated as Rs.8.00 per hour The fixed overhead rate per direct labour hour is 12/29/12 314314 Rs.6.00 . Item A 4000 Item B 700 Item C 12000

Item A

Total cost to buy = (Rs.0.80 x 4000) =Rs.3200 Total cost to make =Rs.600+ (Rs.8.00)200+(Rs.6.00)200 =Rs.3400 Va