Transcript Diapositive 1

CHAPTER 4-5 PROCESS
PERFORMANCE AND QUALITY
Zoubida SAMLAL - MBA , CFA Member,
PHD candidate for HBS program
How Process Performance and Quality
fits the Operations Management Philosophy
Operations As a Competitive
Weapon
Operations Strategy
Project Management
Process Strategy
Process Analysis
Process Performance and Quality
Constraint Management
Process Layout
Lean Systems
Supply Chain Strategy
Location
Inventory Management
Forecasting
Sales and Operations Planning
Resource Planning
Scheduling
Quality at
Crowne Plaza Christchurch
• The Crowne Plaza is a luxury hotel with 298 guest rooms three
restaurants, two lounges and 260 employees to serve 2,250
guests each week.
• Customers have many opportunities to evaluate the quality of
services they receive.
• Prior to the guest’s arrival, the reservation staff gathers a
considerable amount of information about each guest’s
preferences.
• Guest preferences are shared with housekeeping and other
staff to customize service for each guest.
• Employees are empowered to take preventative, and if
necessary, corrective action.
Costs of Poor
Process Performance
• Defects: Any instance when a process fails to satisfy
its customer.
• Prevention costs are associated with preventing
defects before they happen.
• Appraisal costs are incurred when the firm assesses
the performance level of its processes.
• Internal failure costs result from defects that are
discovered during production of services or products.
• External failure costs arise when a defect is
discovered after the customer receives the service or
product.
Total Quality Management
•
•
Quality: A term used by customers to describe their
general satisfaction with a service or product.
Total quality management (TQM) is a philosophy
that stresses three principles for achieving high
levels of process performance and quality:
1. Customer satisfaction
2. Employee involvement
3. Continuous improvement in performance
TQM Wheel
Customer
satisfaction
Customer Satisfaction
• Customers, internal or external, are satisfied when their
expectations regarding a service or product have been met or
exceeded.
• Conformance: How a service or product conforms to
performance specifications.
• Value: How well the service or product serves its intended
purpose at a price customers are willing to pay.
• Fitness for use: How well a service or product performs its
intended purpose.
• Support: Support provided by the company after a service or
product has been purchased.
• Psychological impressions: atmosphere, image, or aesthetics
Employee Involvement
• One of the important elements of TQM is employee
involvement.
• Quality at the source is a philosophy whereby defects are
caught and corrected where they were created.
• Teams: Small groups of people who have a common purpose,
set their own performance goals and approaches, and hold
themselves accountable for success.
• Employee empowerment is an approach to teamwork that
moves responsibility for decisions further down the
organizational chart to the level of the employee actually
doing the job.
Team Approaches
• Quality circles: Another name for problem-solving
teams; small groups of supervisors and employees who
meet to identify, analyze, and solve process and quality
problems.
• Special-purpose teams: Groups that address issues of
paramount concern to management, labor, or both.
• Self-managed team: A small group of employees who
work together to produce a major portion, or
sometimes all, of a service or product.
Continuous Improvement
•
Continuous improvement is the philosophy of continually
seeking ways to improve processes based on a Japanese
concept called kaizen.
1. Train employees in the methods of statistical
process control and other tools.
2. Make methods a normal aspect of operations.
3. Build work teams and encourage employee
involvement.
4. Utilize problem-solving tools within the work
teams.
5. Develop a sense of operator ownership in the
process.
The Deming Wheel
Plan-Do-Check-Act Cycle
Plan
Act
Do
Check
Statistical
Process Control
• Statistical process control is the application of statistical
techniques to determine whether a process is delivering
what the customer wants.
• Acceptance sampling is the application of statistical
techniques to determine whether a quantity of material
should be accepted or rejected based on the inspection
or test of a sample.
• Variables: Service or product characteristics that can be
measured, such as weight, length, volume, or time.
• Attributes: Service or product characteristics that can be
quickly counted for acceptable performance.
Sampling
• Sampling plan: A plan that specifies a
sample size, the time between successive
samples, and decision rules that
determine when action should be taken.
• Sample size: A quantity of randomly
selected observations of process outputs.
Sample Means and
the Process Distribution
Sample statistics have their own distribution, which we call a sampling
distribution.
Sampling Distributions
A sample mean is the sum of the observations divided by the total
number of observations.
Sample Mean
n
x
i
x
i 1
n
where
xi = observations of a quality
characteristic such as time.
n = total number of observations
x = mean
The distribution of sample means can be
distribution.
approximated by the normal
Sample Range
The range is the difference between the largest observation in a sample and the
smallest.
The standard deviation is the square root of the variance of a distribution.
where

 x
i
 x
n 1
 = standard deviation of a sample
2
n = total number of observations
xi = observations of a quality characteristic
x = mean
Process Distributions
 A process distribution can be characterized by its location, spread, and
shape.
 Location is measured by the mean of the distribution and spread is
measured by the range or standard deviation.
 The shape of process distributions can be characterized as either
symmetric or skewed.
 A symmetric distribution has the same number of observations
above and below the mean.
 A skewed distribution has a greater number of observations
either above or below the mean.
Causes of Variation
• Two basic categories of variation in output include
common causes and assignable causes.
• Common causes are the purely random, unidentifiable
sources of variation that are unavoidable with the
current process.
– If process variability results solely from common causes of
variation, a typical assumption is that the distribution is
symmetric, with most observations near the center.
• Assignable causes of variation are any variation-causing
factors that can be identified and eliminated, such as a
machine needing repair.
Type I and II Errors
 Control charts are not perfect tools for detecting shifts in the process
distribution because they are based on sampling distributions. Two types of
error are possible with the use of control charts.
 Type I error occurs when the employee concludes that the process is out of
control based on a sample result that falls outside the control limits, when
in fact it was due to pure randomness.
 Type II error occurs when the employee concludes that the process is in
control and only randomness is present, when actually the process is out of
statistical control.
Statistical Process
Control Methods
• Control Charts for variables are used to monitor the mean and
variability of the process distribution.
• R-chart (Range Chart) is used to monitor process variability.
• x-chart is used to see whether the process is generating
output, on average, consistent with a target value set by
management for the process or whether its current
performance, with respect to the average of the performance
measure, is consistent with past performance.
– If the standard deviation of the process is known, we can place UCL
and LCL at “z” standard deviations from the mean at the desired
confidence level.
Process Capability
• Process capability is the ability of the
process to meet the design specifications
for a service or product.
• Nominal value is a target for design
specifications.
• Tolerance is an allowance above or below
the nominal value.
Process Capability
Nominal
value
Process distribution
Lower
specification
20
Upper
specification
25
Process is capable
30
Minutes
Using Continuous Improvement to
Determine Process Capability
• Step 1: Collect data on the process output; calculate
mean and standard deviation of the distribution.
• Step 2: Use data from the process distribution to
compute process control charts.
• Step 3: Take a series of random samples from the process
and plot results on the control charts.
• Step 4: Calculate the process capability index, Cpk, and
the process capability ratio, Cp, if necessary. If results
are acceptable, document any changes made to the
process and continue to monitor output. If the results are
unacceptable, further explore assignable causes.
Quality Engineering
• Quality engineering is an approach
originated by Genichi Taguchi that involves
combining engineering and statistical
methods to reduce costs and improve
quality by optimizing product design and
manufacturing processes.
• Quality loss function is the rationale that a
service or product that barely conforms to
the specifications is more like a defective
service or product than a perfect one.
– Quality loss function is optimum (zero) when
the product’s quality measure is exactly on the
target measure.
Loss (dollars)
Taguchi's
Quality Loss Function
Lower
specification
Nominal
value
Upper
specification
Six Sigma
• Six Sigma is a comprehensive and flexible system for
achieving, sustaining, and maximizing business success
by minimizing defects and variability in processes.
• It relies heavily on the principles and tools of TQM.
• It is driven by a close understanding of customer needs;
the disciplined use of facts, data, and statistical analysis;
and diligent attention to managing, improving, and
reinventing business processes.
Six Sigma
Improvement Model
1. Define Determine the current process
characteristics critical to customer satisfaction
and identify any gaps.
2. Measure Quantify the work the process does
that affects the gap.
3. Analyze Use data on measures to perform
process analysis.
4. Improve Modify or redesign existing methods to
meet the new performance objectives.
5. Control Monitor the process to make sure high
performance levels are maintained.
Six Sigma
Implementation
 Top Down Commitment from corporate leaders.
 Measurement Systems to Track Progress
 Tough Goal Setting through benchmarking bestin-class companies.
 Education: Employees must be trained in the
“whys” and “how-tos” of quality.
 Communication: Successes are as important to
understanding as failures.
 Customer Priorities: Never lose sight of the
customer’s priorities.
Six Sigma Education
• Green Belt: An employee who achieved the first level of
training in a Six Sigma program and spends part of his or
her time teaching and helping teams with their projects.
• Black Belt: An employee who reached the highest level
of training in a Six Sigma program and spends all of his
or her time teaching and leading teams involved in Six
Sigma projects.
• Master Black Belt: Full-time teachers and mentors to
several black belts.
International Quality
Documentation Standards
ISO
9000
ISO
14000
A set of standards governing documentation
of a quality program.
Documentation standards that require participating
companies to keep track of their raw materials use
and their generation, treatment, and disposal of
hazardous wastes.