quality, time, and the

8/7/2019 Quality, Time, and the

1/25

QUALITY, TIME, AND THEQUALITY, TIME, AND THE

THEORY OFTHEORY OFCONSTRAINTSCONSTRAINTS

Chapter 19


2/25

p

Definition and benefits of Quality

Quality the total features and characteristics of aproduct or a service made or performed accordingto specifications to satisfy customers at the timeof purchase and during use. A quality focusreduces costs and increases customer satisfaction

Focusing on the quality of a product will generallybuildexpertise in producing it

lower the costs of making itcreate customer satisfaction for customers using itgenerate higher future revenues for the company selling

it


3/25

The two aspects of Quality Design Quality refers to how closely the characteristics of a

product or service meet the needs and wants of customers

Conformance Quality refers to the performance of aproduct or service relative to its design and productspecifications

ActualPerformance

DesignSpecifications

CustomerSatisfaction

ConformanceQuality

DesignQuality


4/25

Costs of Quality

Prevention costs Appraisal costs

Internal failure costs External failure costs


5/25

Costs of Quality Example:

Vegas Photo Corporation made 10,000photocopying machines last year.

Vegas Photo determines the costs of qualityof its photocopying machines using a 7-step

activity-based costing approach.

Identify cost objects.

10,000 photocopyingmachines

Step 1 Step 2

Identify the direct costsof quality of the products.

No direct costs ofquality


6/25

Select the cost-allocation bases to use forallocating indirect costs of quality to the products.

PreventionAppraisalInternal failure

External failure

Step 3

Information on the totalquantities of each of thesecost-allocation bases usedin all of Vegas operations

is not provided.

Step 4

Identify the indirect costs of quality

associated with each cost-allocation base.

Information about total (fixed and variable)costs is not provided.


7/25

Step 5

Compute therate per unit.

Inspection hours is onecost-allocation base.

Prevention costs:

Design engineering (R&D) $80 per hourProcess engineering (R&D) $60 per hour

Appraisal costs:Inspection (Manufacturing) $40 per hour


8/25

Internal failure costs:

Rework (Manufacturing) $100 per hour

External failure costs:Customer support (Marketing) $ 50 per hourTransportation (Distribution) $240 per load

Warranty repair (Customer Service) $110 per hour

Compute the indirect costs of qualityallocated to the product.

Step 6

Step 5


9/25

Prevention costs: Design engineering (R&D) 20,000 hours Process engineering (R&D) 22,500 hours

Step 6

Appraisal costs:Inspection (Manufacturing) 120,000 hours

Internal failure costs:

Rework (Manufacturing) 50,000 hours

External failure costs:Customer support (Marketing) 6,000 hoursTransportation (Distribution) 1,500 loadsWarranty repair (Customer Service) 60,000 hours

Total cost for design engineering = 20,000 hours $80 = $1,600,000

The total cost for inspection = 120,000 hours $40 = $4,800,000


10/25

Step 6

Cost of Quality and

Value Chain Category Total Costs

Internal failure costs:Rework (Manufacturing) $5,000,000

External failure costs:Customer support (Marketing) 300,000

Transportation (Distribution) 360,000Warranty repair (Customer Service) 6,600,000Total $7,260,000

Step 7

Total costs of quality of the product :

Prevention costs $ 2,950,000Appraisal costs 4,800,000Internal failure costs 5,000,000External failure costs 7,260,000

Total $20,010,000


11/25

Techniques Used to Analyze:Quality Problems

1. Control Charts

Statistical Quality Control (SQC) is a formal means of distinguishing between randomand nonrandom variations in an operating process

Control Charts are a part of SQC

Control Charts are a graph of a series of successive observations of a particular step,procedure, or operation taken at regular intervals of time

Each observation is plotted relative to specified ranges that represent the limits within

which observations are expected to fall

Only those observations outside the control limits are ordinarily regarded as non-random and worth investigating


12/25

Control Charts : Example

0 1 2 3 4 5 6 7 8 9 10

+

2 +

-

-

2

Defe

ctRate

Production Line A


13/25

Pareto Analysis

Observations outside control limits serve asinputs for a Pareto Diagram

Pareto Diagram a chart that indicates howfrequently each type of defect occurs,ordered from the most frequent to the leastfrequent


14/25

Pareto Diagram :Example

Copies are

fuzzy andunclear Copiesare toolight/dark Paper gets

jammed

NumberofTim

es

DefectO

bserv

ed

600

500

400

300200

100

0


15/25

Cause-and-effectDiagrams

Methods andDesign Factors

Human Factors

Machine-relatedFactors

Materials andComponents

Factors

Multiple suppliersIncorrect specification

Variation in purchasedcomponents

Flawed part design

Incorrectmanufacturing

sequence

Inadequate toolsIncorrect speed

Poormaintenance

Inadequate

supervisionPoor trainingNew operator


16/25

The Learning and Growth Perspective forQuality

Employee turnover ratio

Employee empowerment number of processes

in which employees have the right to makedecisions without consulting supervisors

Employee satisfaction

Employee training


17/25

COQ focuses managers attention on the costs ofpoor quality

COQ measures assist in problem solving bycomparing costs and benefits of differentquality-improvement programs and settingpriorities for cost reduction

COQ provides a single, summary measure ofquality performance for evaluating tradeoffsamong the costs of prevention, appraisal,internal failure, and external failure

Advantages of COQ (Financial)Measures


18/25

Advantages of Nonfinancial Measures ofQuality

Nonfinancial measures direct attention tophysical processes and to areas that needimprovement

Nonfinancial measures provide immediateshort-run feedback on whether quality-improvement efforts have succeeded

Nonfinancial measures are useful indicatorsof future long-run performance


19/25

Two Operational Measures of Time

Customer-Response Time how long it takesfrom the time a customer places an orderfor a product or service to be delivered to

the customer

On-Time Performance delivering a productor service by the time it was scheduled to

be delivered


20/25

Time Drivers

Time Driver is any factor in which a changein the factor causes a change in the speedof an activity

Two Time Drivers:1. Uncertainty about when customers will order products

and services

2. Bottlenecks due to limited capacity. A bottleneckoccurs in an operation when the work to be

performed approaches or exceeds the capacityavailable to do it


21/25

Simple Time Presumptions

When demand uncertainty is high, some unusedcapacity is desirable

Increasing the capacity of a bottleneck resource

reduces manufacturing lead times and delays

Reduce set-up times

Invest in new equipment to increase capacity

Careful scheduling of production


22/25

Theory of Constraints and ThroughputContribution Analysis

The Theory of Constraints (TOC) describesmethods to maximize operating income whenfaced with some bottleneck and some nonbottleneck operations.

TOC focuses on a short-run time horizon andassumes that operating costs are fixed costs.

Throughput Contribution equals revenues minusthe direct material cost of the goods sold


23/25

Four Steps in ManagingBottleneck Operations

Recognize that the bottleneck operation determinesthroughput contribution of the entire system

Identify the bottleneck operation by identifying operationswith large quantities of inventory waiting to be workedon

Keep the bottleneck operation busy and subordinate all nonbottleneck operations to the bottleneck operation

Take actions to increase the efficiency and capacity of the

bottleneck operation. The objective is to increase thedifference between throughput contribution and theincremental costs of increasing efficiency and capacity


24/25

Methods to Relieve Bottlenecks

Eliminate idle time at the bottleneck operation

Process only those parts or products that increase throughputcontribution, not parts or products that will remain in finishedgoods or spare parts inventories

Shift products that do not have to be made on the bottleneckoperation to non bottleneck processes, or to outsideprocessing facilities

Reduce setup time and processing time at bottleneck operations

Improve the quality of parts or products manufactured at thebottleneck operation.


25/25

-

THANK YOU

quality, time, and the

Documents