Spring 11 Slides - GSPA

Service Management of OperationsMGSC 6206 – Spring 2011

Prof. R. BalachandraGraduate School of Business AdministrationNortheastern University, Boston, MA 02115617.373.4755 [email protected]

© (2010) R. Balachandra

Operations Management

To manage (plan, organize, staff, direct and control)

the activities relating to the production of

goods and/or services with

maximum efficiency (at the lowest cost).

© (2010) R. Balachandra© 2007 R. Balachandra

PRODUCTIVITY

Productivity is a measure of how effectively resources are being utilized.

Productivity = Output / Input

Most common measure of productivity is

Labor Productivity.

Other measures are

Multi Factor Productivity

Total Productivity


Productivity of Nations

According to the UN (ILO) report (2007)1. The US leads the world in labor productivity.

2. The average US worker produces $ 63,885 per year.

3. The US employee puts in 1804 hours of work per year.

(compared to 1564 for the French and 1406 for the Norwegians.)

4. Output per hour is $35.63, while the Norwegians produce $37.90(the French produce $35.13 per hour).


The Big Mac IndexThe Big Mac Index is an informal way of measuring the purchase power parity (PPP) between two currencies.

It "seeks to make exchange-rate theory a bit more digestible”.

© 2007 R. Balachandra

Five most expensiveIceland - USD 7.45 Norway - USD 6.63 Réunion - USD 6.23 Finland - USD 6.11 Sweden - USD 5.33

Five most affordableIndia - USD 1.40 China - USD 1.41 Hong Kong - USD 1.54 Malaysia - USD 1.57 Venezuela - USD 1.58

Ten fastest earnedTokyo, Japan - 10 minutes Los Angeles, United States - 11 minutes Chicago, United States - 12 minutes Miami, United States - 12 minutes New York City, United States - 13 minutes Auckland, New Zealand - 14 minutes Sydney, Australia - 14 minutes Toronto, Canada - 14 minutes Zürich, Switzerland - 15 minutes Dublin, Ireland - 15 minutes

Ten slowest earnedBogotá, Colombia - 97 minutes Nairobi, Kenya - 91 minutes Jakarta, Indonesia - 86 minutes Lima, Peru - 86 minutes Caracas, Venezuela - 85 minutes Mexico City, Mexico - 82 minutes Manila, Philippines - 81 minutes Mumbai, India - 70 minutes Sofia, Bulgaria - 69 minutes Bucharest, Romania - 69 minutes

http://en.wikipedia.org/wiki/Iceland

http://en.wikipedia.org/wiki/Norway

http://en.wikipedia.org/wiki/R%C3%A9union

http://en.wikipedia.org/wiki/Finland

http://en.wikipedia.org/wiki/Sweden

http://en.wikipedia.org/wiki/India

http://en.wikipedia.org/wiki/China

http://en.wikipedia.org/wiki/Hong_Kong

http://en.wikipedia.org/wiki/Malaysia

http://en.wikipedia.org/wiki/Venezuela

http://en.wikipedia.org/wiki/Tokyo

http://en.wikipedia.org/wiki/Los_Angeles,_California

http://en.wikipedia.org/wiki/Chicago

http://en.wikipedia.org/wiki/Miami,_Florida

http://en.wikipedia.org/wiki/New_York_City

http://en.wikipedia.org/wiki/Auckland

http://en.wikipedia.org/wiki/Sydney

http://en.wikipedia.org/wiki/Toronto

http://en.wikipedia.org/wiki/Z%C3%BCrich

http://en.wikipedia.org/wiki/Dublin

http://en.wikipedia.org/wiki/Bogot%C3%A1

http://en.wikipedia.org/wiki/Nairobi

http://en.wikipedia.org/wiki/Jakarta

http://en.wikipedia.org/wiki/Lima

http://en.wikipedia.org/wiki/Caracas

http://en.wikipedia.org/wiki/Mexico_City

http://en.wikipedia.org/wiki/Manila

http://en.wikipedia.org/wiki/Mumbai

http://en.wikipedia.org/wiki/Sofia

http://en.wikipedia.org/wiki/Bucharest

http://en.wikipedia.org/wiki/Image:BigMacAustralia.jpg


Significant Developments (I)

• Division of Labor• Standardized Parts• Scientific Management

– Time and Motion Study– Efficiency Improvement– Wage Incentives

• Assembly Lines• Motivation and Behavioral Issues


Significant Developments (I)

• Division of Labor• Standardized Parts• Scientific Management

– Time and Motion Study– Efficiency Improvement– Wage Incentives

• Assembly Lines• Motivation and Behavioral Issues

Adam SmithEconomist and Philosopher

1723 - 1790

Virtue is more to be feared than vice,because its excesses are not subject to

the regulation of conscience.

Wealth of Nations, 1776.


Standardized Parts

Eli Whitney1765-1825

Inventor of the cotton Gin and Interchangeable parts

Whitney invented the American system of manufacturing – the combination of power machinery, interchangeable parts,

and division of labor that would underlie the USA’s subsequent industrial revolution.

http://en.wikipedia.org/wiki/American_system_of_manufacturing


Scientific Management

Four principles of scientific management:• Replace rule-of-thumb work methods with

methods based on a scientific study of the tasks.

• Scientifically select, train, and develop each worker rather than passively leaving them to train themselves.

• Cooperate with the workers to ensure that the scientifically developed methods are being followed.

• Divide work nearly equally between managers and workers, so that the managers apply scientific management principles to planning the work and the workers actually perform the tasks.

Frederick Winslow Taylor1856 - 1915


Assembly Lines

Henry Ford1863 - 1947

Father of the modern assembly line and mass production.

Prolific inventor with 161 patents.

His assembly line could produce a car in 98 minutes.

Ford workers were paid a high wage ($ 5 per day in 1914)


Behavioral IssuesHawthorne Experiments

The experiments began in 1927 at the Hawthorne Works of the Western Electric Company in Cicero, Illinois (1927-1932).

The company studied the relationship between the intensity of illumination at work and the output of workers.

Within the limits of the test room, physical changes appeared to have no effect on output rate.

Researchers concluded that changes in output could be attributed to changes not only in work conditions but also

work attitudes and social relations.

What actually happened was that six individuals became a team and the team gave itself wholeheartedly and spontaneously to

cooperation in the experiment. The consequence was that they felt themselves to be participating freely and without afterthought, and

were happy in the knowledge that they were working without coercion from above or limitation from below.

G. Elton Mayo1880 - 1949


Significant Developments (II)

• Operations Research• Computers and Information Technology

- Computer Aided Design (CAD)

- Computer Aided Manufacture (CAM)

- Computer Integrated Manufacture (CIM)• JIT, Logistics• Flexible Manufacturing Systems (FMS)• Mass Customization• Synthesizing parts (?)


The Operations System

The Operations System transforms inputs into desired goods and services.

INPUTS• Raw Materials• Labor• Capital• Management

TRANSFORMATIONPROCESS

OUTPUTS• GOODS• SERVICES

FEEDBACK

EXTERNAL INFLUENCES• Economy• Trends• Weather, etc.

Information flow

Material flow


Product DesignOLD WAY

RESEARCH

DEVELOPMENT

ENGINEERING

MANUFACTURING

PRODUCT

NEW WAY

RESEARCH, DEVELOPMENTAND ENGINEERING

MANUFACTURING PRODUCT


House of QualityW

HA

Ts c

usto

mer

nee

ds

Impo

rtan

ce R

anki

ng

Competitive Evaluation

Performance Goals

WHATs

HOWs

Relationship betweenHOWs and WHATs

Potential Ways to achieve the WHATs in technical terms

HOWsCorrelation Matrix


House of Quality – Pizza DeliveryW

HA

Ts c

usto

mer

nee

ds

Impo

rtan

ce R

anki

ng

Competitive Evaluation

Performance Goals

WHATs

Pizza arrives quickly

Pizza arrives hot

Toppings are of sufficient quantity

Pizza tastes good

Pizza is consistent with order

Tim

e (m

inut

es)

Tem

p. a

t D

epar

ture

No.

of

piec

es o

f ea

chto

ppin

g

Ran

king

in P

izza

rev

iew

Per

cent

age

ofC

orre

ct O

rder

s

1st Last

<20 Min.

130 Deg.

100% Top 2 99%

1

2

3

4

5

x

x

x

x

x

DirectRelationship

IndirectRelationship

Taken from Byron J. Finch, Operations now.com.


FORECASTING

GOALS OF THEORGANIZATION

LONG TERMDEMAND FORECASTS

SHORT TERMDEMAND FORECASTS

OPERATING PLANSPRODUCTION PLANS

LABOR PLANSMATERIAL PLANS

BUDGETSPLANT DESIGN

CAPACITYLOCATION


Planning Horizons

Today 3 months i year 5 years

Short Range Plans - Scheduling - job assignment - Dispatching

Intermediate Range Plans - Sales Planning - Production Planning - Employment planning - Operating Plans

Long Range Plans - R&D Planning - New Product Plans - Facility Plan

Planning Horizon


Components of a Demand Pattern

0

10

20

30

40

50

60

70

1 5 9 13 17 21 25 29 33 37 41 45 49 53 57

Month

De

man

d

Basic Trend

B+Cyclical

B+C+Seasonal

B+C+S+Random Component

Components of a Demand Pattern1. Basic Trend 2. Cyclical Pattern3. Seasonal Pattern 4. Random Component

A good forecast will attempt to isolate the first three components minimizing the effects of the random component


Forecasting Methods - Some Common Approaches

• Qualitative Methods:– Executive Opinion– Jury Method– Delphi Method– Sales Person Composite– Consumer Survey– Market Research (?)


• Quantitative Methods– Time Series Methods

• Naïve forecast• Moving Averages

– unweighted– weighted

• Exponential smoothing– simple– trend adjusted

– Causal Methods• Linear Regression• Non-linear regression• Econometric Methods

– Market Research

Forecasting Methods - Some Common Approaches


Accuracy and Reliability of Forecasts

• Forecast Error (Actual - Forecast)• Absolute Deviation (Absolute value of Error)• Mean Absolute Deviation (MAD)• Mean Squared Error (MSE)

The forecasting procedure that produces the least MAD or MSE is to be preferred.

• Tracking Signal (RSFE/MAD)

The Tracking Signal should lie between +4 and -4.


Forecasting for New Products• Usually very complicated and possibly end up as a guess.• Procedure:

– Identify potential customers’ profile• age, income, education etc.

– Estimate total population with this profile– From focus groups of this population

• determine purchase interest and price sensitivity– Determine total market– Assume initial market penetration rate and future

growth rate


Capacity PlanningEconomies of Scale

OUTPUT RATE

AV

ER

AG

E C

OS

T P

ER

UN

IT

LARGE PLANT

MEDIUM PLANT

SMALL PLANT

OS OLOM

CL

CS

CM


Capacity Planning

• Cost-Volume Analysis– Break Even Analysis

• Financial Analysis– Cash Flow– Present Value

• Decision Theory


Capacity Planning

Break Even Analysis

VOLUME UNITS

$FIXED COSTS

REVENUES

TOTAL COSTS

VARIABLE COSTS

BREAK EVEN POINT


Capacity Planning

Break Even Analysis

VOLUME UNITS

$

FIXED COSTS (A)

TOTAL COSTS (A)

BREAK EVEN POINT

FIXED COSTS (B)

TOTAL COSTS (B)


Capacity Planning

• Financial Analysis– Cash Flow

• Determine the cash flows resulting from expected sales and investment and operating expenses.

– Present Value• Determine the present value of the overall cash flows for

the planning horizon.


Capacity Planning

Year

An

nu

al

De

ma

nd

2 2 3 4 5 6

7000

6000

5000

4000

3000

2000

2000

C

B

A

Now

Information needed:– Long Term Demand and Seasonal variations– Funds available– Economic size of facility

Alternatives:A - Build facility of 40,000 B - Build facility of 60,000C - Build facility of 80,000


Capacity PlanningDecision Theory (contd.)

BUILD PLANT A$1.0 M

BUILD PLANT B$1.5 M

BUILD PLANT C

$1.8 M

1

2

3

1

2

3

1 – SALES > FORECAST p=0.32 – SALES = FORECAST p=0.63 – SALES < FORECAST p=0.1

1

2

3


Types of Processes

• Job shop• Batch Production• Assembly Line• Continuous Production• Cellular Manufacturing• Flexible Production


Fixed Position LayoutBuilding Construction Ship Building


Process Layout

Turning

Milling

Painting

Drilling

Grinding

Assembly& Test

Shipping

RM Storage2

3

4

2

2

3

3

3

2

2

22

A TYPICAL JOB SHOP A TYPICAL SERVICE OPERATION (HMO)

2

2

2

RECEPTION

PEDIATRICS

X-RAY

LABORATORY

INTERNALMEDICINE

PHARMACY

OB-GYN

4

2

22

2

2

Can handle varied processing requirements.Work travels to dedicated processing centers.Total material handling traveled should be a minimum.

Numbers refer tojobs or patients


Process Layout

Objective:

Minimize total material handling costs, orMinimize total people movement costs.

Arrange departments/ processes such thatdepartments/ processes with large inter-departmental traffic are close to one another.


Developing Process LayoutJob Shop or Batch Production

Objective: Minimize total material handling or people movement costs.

1. Start with an initial trial layout.

2. Compute the total material handling costs for this layout.(sum of distance between dept.s x amount of material to be moved)

3. Try a newer arrangement of departments.

4. Choose the arrangement that gives the least costs.

A computer program, CRAFT, is available to perform these calculations.

For service operations, where there is not much material handling but there is lot of people movement, use relationships, instead of loads.

The computer program to do this is called CORELAP.


Product Layout - Line Flow ProcessCan handle high volumes of the same product

Station 2 Station 3Station 1 Station n-1 Station n. . .

INPUTS orCUSTOMERS

FinishedGoods

Additional Material,components or labor

Total idle time at the stations should be a minimum.

Work moves through a fixed route


Developing Product LayoutAssembly Lines

Objective: Minimize total idle time of the work stations.

Some definitions and calculations:1. Cycle Time: Maximum time allowed on any work station

C = Production Time per day(PT)/Require output per day (D)

2. Minimum number of stations requiredN = Total Task Time (T)/Cycle Time (C)

(Rounded up to the next integer)

3. Distribute the tasks to the stations taking into account the technological sequence. The total amount of work in any station should not exceed the cycle time.

4. Efficiency of the line: E = T/N*C

5. Balance Delay: BD = 1.00 - E


Product Lifecycle

One ofa kind

LowVolume

MassProduction

BulkProduction

JobShop

BatchProduction

AssemblyLine

ContinuousProduction

CustomTailor

MachineShop

AutoAssembly

OilRefinery

PoorStrategy

High Fixed CostsHigh Changeover costs

PoorStrategy

High Variable Costs

Product variety

Eq

uip

men

t fl

exib

ilit

y

High Low

High

Low

Product - Process Matrix


Process AnalysisSome Useful Terms:

Throughput TimeAmount of time an item spends in the process (includes

processing time, movement time and waiting time).

CapacityAmount of finished items produced by the process in unit time.

Bottleneck OperationThe resource or process which takes the longest time to process

an item.

This determines the capacity of the process or facility.

In a line flow process the bottleneck time is also called the cycle time.

Identifying the bottleneck operation in a process is very critical to process analysis.


Facilities Layout

• Fixed Position Layout– Huge and immovable items (Ships, buildings etc.)

• Product Layout– Focus on one product (Assembly Lines)

• Process Layout– Focus on Process (Batch Production)

• Manufacturing Cells– Focus on Part families (with similar characteristics)


Process Layout

LathesMilling

Machines

Drills HeatTreating

Gear-cutting

Machines

Shapers

GrindingMachines

Shipping

1

1

2

2

3

3

4

4

A typical process layoutJobs are flowing through the facility in all directions.


MillingMachine Lathe Drill Grind

LatheMilling

Machine Gear cut

GrindHeatTreatLathe Drill

ShapeMilling

MachineHeatTreat Grind

Sh

ipp

ing

1

2

3

4

Machines are grouped and arranged into cells.The cells work on only one type of product or job.

Cellular Manufacturing Layout


Comparison of three layout types

Item

Throughput TimeWIP InventoryFlexibility - Volume - Product MixUtilization - Equipment - LaborLabor skills requiredType of equipmentProduction Planning and ControlMaterial Handling

Process

HighHigh

HighHigh

LowLowHighGeneral

DifficultHigh

Product

LowLow

LowLow

HighHighLowSpecial

EasyLow

Cell

LowLow

HighHigh

HighHighHighGeneral

DifficultLow


Why do we need inventories?

(in Manufacturing)

1. To meet variation in product demand

2. To decouple production processes

3. To smooth production operations

4. To have flexibility in production scheduling

5. To protect oneself against uncertain supplies.

Inventory Management


Two Basic Questions

1. How much to order?

2. When to order?

These decisions should be made such that the overall cost of purchasing and maintaining inventory is the least, and the desired service level (availability of inventory items) is maintained.



Relevant Costs in Inventory Management

1. Holding Cost

all costs pertaining to keeping an item in inventory -usually expressed as $/year, or as a percentage of the cost of the item.

2. Set up or order Cost

all costs pertaining to placing an order or all costs incurred to set up the machine to produce a batch of the item.

3. Stock out Cost

all costs resulting from not having the item when needed.




Time

Qua

ntity

on

Han

d

Order Quantity (Q)

Average Inventory

Basic EOQ ModelAssumptions:1. Constant Demand2. No quantity discounts

EOQ (Q*) = 2*D*S/HwhereD = Annual DemandS = Set up or Ordering CostH = Cost of holding one unit in inventory for one year.



ORDER QUANTITY

CO

ST

HOLDING COSTS

ORDERING COSTS

TOTAL COSTS

Q*


When to Order?• We should reorder such that the items are received before current inventory runs out.• If it takes one week to receive the item after placing the order, the stock on hand

should be equal to at least one week’s demand when we place the order.

ROP = d * Lwhere ROP = Re Order Point (Stock Level)

d = Average demand per unit time

L = Lead time • If demand and/or lead time are variable, we should provide some safety stock.

safety stock = z * SDwhere z = safety factor

SD = standard deviation of demand during the lead time

ROP = d * L + z * SD



With firms entering into long term relationships with vendors, the two basic inventory questions have become:

When and how many should be delivered?



The ABC Analysis1. Arrange items in decreasing order of

annual $ usage.

2. Determine cumulative totals.

3. Plot cumulative total $ value (%) against cumulative total items (%).

4. Identify break points in the graph at around 70-80% of value and at around 90-95%. A items are those before the first break point, B items are the next, and the rest are C.

This is also known as the 80/20 rule.


20 60 1000

80

100

A B C

Cumulative % of items

Cu

mu

lativ

e %

of

an

nu

al $

usa

ge


Time

ROP

Order placed here

Inventory Systems

Fixed Order Quantity (EOQ/ROP) SystemOrder a fixed quantity (usually the EOQ) whenever

stock on hand reaches the ROP level.


Aggregate PlanningINPUT PROCESS OUTPUT

MaterialLaborCapital

Production Rate GoodsServices

Time Horizon1. Long term demand (3 - 8 years)

2. Medium term demand (3 mos. - 3 years)

3. Short term demand (less than 3 mos.)

DecisionPlant locationand Design

Aggregate Plan

Scheduling andSequencing

Output should match demand requirements.


Aggregate PlanningThe objective of aggregate planning is to determine the production rate for each period (week or month) so that:the overall forecast demand is met at the lowest cost.

Desired production rate can be achieved by:

1. regular production2. overtime production3. additional shift production4. subcontracting5. changing work force levels

- hiring - firing

6. keeping workers idle.


Relevant Costs• Costs from changing production rate

(keeping the same work force size)

- overtime costs

- idle time costs

- subcontracting costs

• Costs from changing work force size

- hiring and training costs

- firing costs

- shift change costs

• Costs from changing inventory levels

- inventory carrying costs

- stock out costs

Aggregate Planning


Strategies

Pure Strategies:

a) Level Strategy - Keep production rate constant.

Allow inventory levels to fluctuate.

b) Chase Strategy - Change production rate to equal

demand in every period.

c) Mixed Strategies - Keep production rate constant for some periods, and change rates when needed,

maintaining a close control of inventories.

Aggregate Planning


Aggregate Planning

20

30

40

50

X-Axis

Quan

tity

pe

r period

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

Demand & Chase Plan Level Plan Mixed Plan

Aggregate PlanningExample of three strategies


Materials Requirement Planning

Independent Demand:Demand for items from market place.

Dependent Demand:Demand for items and components based on

production schedules.

Knowing the lead time for manufacture and delivery of components, we can calculate precisely how many of each component are needed and when they are needed.

MRP takes advantage of this knowledge.


Materials Requirement PlanningMajor Components:

1. Master Production Schedule (MPS) States which end items are to produced, and when and how many are needed.

2. Bill of Materials (BOM) A list of all raw materials, components, subassemblies, and assemblies needed

to produce one end item.

3. Product Structure Tree A visual representation of the items in the BOM showing their levels in the

manufacturing process.

4. Lead Times

The time required to receive an item at the process stage from the stage where it is produced or bought.


The MRP Process1. Determine Gross Requirements for each period from Master

Production Schedule.

2. Determine Net Requirement, after adjusting for inventories on hand and any anticipated receipts.

3. Go back the lead time number of periods and release orders for all components and items needed at the next level.

4. Calculate the capacity required at each process center for the schedule. If there is an imbalance in capacity, make adjustments.



Benefits:

1. Low work-in-process inventories.

2. Provides a better picture of material requirements.

3. Provides a better handle on needed capacities at all process centers.

4. Provides a better means of allocating production time.



What do we need for a good MRP System?

1. Computer and software.

2. Accurate and current

- Master Production Schedule

- Bills of Materials

- Inventory records.

3. Data Integrity.



Goals of JIT:

1. Reduce waste

2. Reduce set up and lead times

3. Reduce inventories

4. Minimize disruptions

5. Improve quality.

Just-In-Time (JIT)


Just-in-Time Production

• Usually for repetitive manufacture• Get the exact amount of good items

to the place just as they are needed.• Reduce the variability in

- demand

- quality• Use pull system - produce and move

items only when they are needed.


Process Design for JIT:

a) Reduce set up times

b) Reduce batch sizes

c) Set up manufacturing cells

d) Utilize U - type layout

e) Focus on quality improvement

f) Focus on worker flexibility

g) Reduce work in process

Just-In-Time (JIT)


Quality Management

Dimensions of quality:1. Performance

2. Features - appearance etc.

3. Reliability

4. Durability

5. Perceived quality

6. Service


Two types of Quality :

1. Quality of Design

- Product design and development

2. Quality of Conformance

- Manufacturing and service providing

Quality Management


PLAN

DOACT

CHECK

Quality Management

IDENTIFY AND ANALYZE THE PROBLEM

DATA COLLECTIONPARETO ANALYSISFLOW CHARTSCAUSE AND EFFECT DIAGRAMSCONTROL CHARTS

IMPLEMENT CHANGES ON A SMALL SCALE

EVALUATE NEW DATA

DOCUMENT CHANGESIMPLEMENT IN REST OF

THE ORGANIZATION

CONTINUOUS IMPROVEMENT - THE DEMING WHEEL


Continuous ImprovementThe P-D-C-A Cycle

Plan: Identify the problem and analyze.

Tools: Process Flow Chart

Data Collection

Pareto Analysis

Cause and Effect Diagram

Control and Run Charts

Check sheet etc.

Develop improvements

Do: Implement changes on a small scale

Check: Evaluate new data

Act: Document changes and implement

in rest of the organization.


Quality Assurance

Achieved through

1. Inspection

2. Process Control

Inspection is carried out at all three stages to assure quality.

INPUT PROCESS OUTPUT

Two types of inspection:1. 100% inspection2. Sampling Inspection


Quality and Inspection Costs

Cost ofInspection

Cost of passingDefects

Total Costs

Amount of Inspection

Co

st

Optimum amountof inspection


Quality Assurance

Where to inspect?– Raw materials and purchased parts– Before a costly operation– Before an irreversible process– Before a covering or closing operation– Finished goods


Quality Assurance

Any process has some inherent random variation due to a number of factors.

We cannot do anything about this.

Processes also have assignable variation resulting from a source or sources which can be identified.

Statistical Process Control (SPC) helps in identifying situations when assignable variation exists.

With this information, we can then look for the source of the variation.

Process Control


Control Chart

How to develop:• Identify the process you want to study• Check whether the process is running OK• Take sample outputs at some fixed intervals • For each sample - calculate the Average and the Range• After taking sufficient samples,

Calculate the average of the sample averages, and of the ranges

Calculate the Std. Dev.s for both.• Set the UCL (Upper Control Limit) at Average + 3*Std.Dev.• Set the LCL (Lower Control Limit) at Average - 3*Std. Dev.


Control Charts

mean

mean + z* sd

mean - z* sd

UCL

LCL


Control ChartsControl Charts:• Variable Control Chart (assumes normal distribution)• Range Chart• p - chart

– also known as fraction defective chart (assumes binomial distribution)– s.d. = SQRT(f.d.*(1 - f.d.)/n) {f.d. = fraction defective}

• c - chart– also known as defective chart (assumes Poisson distribution)– s.d. = SQRT(mean)

For any control chart:• UCL (Upper Control Limit) = mean + z*s.d.• LCL (Lower Control Limit) = mean - z*s.d. where z is set to reflect the assurance that the process is in control.


Control Charts

mean

mean + z* sd

mean - z* sd

UCL

LCL

*

** *

**

*

*

InvestigateProcess is likely to be out of control


Operations Management

Some important concepts:1. Processes: Bottlenecks

ThroughputCycle time

2. Human aspects: Work designMotivation

3. Operation: PlanningInventory - 80/20 ruleMinimize wip

4. Quality: Make it right the first timeSQCDesign quality into

productprocess

5. Manufacturing strategy: GlobalizationLogisticsProduct design


Operations Management(Past, present and future)

Past (before 1850): Craftsman

Individual production

Expensive

Present (after 1850): Taylorism

Fordism

Mass Production

Flexible manufacturing

Lean Production

Mass customization


Custom Production: Individualized products

Make to order

Zero or very low inventories of finished goods.

Computer Integrated Manufacture Automation with individual or very small batch processing

Throughput times close to processing times.

New Manufacturing Technologies Plastics and synthetic materials

Metal depositing instead of cutting

Assembly by robots.

Service Operations More focus on customer service

Higher service quality

Service delivered to the customer

Shorter waiting times.

Operations Management(Future - 21st century)

Documents

Spring 11 Slides - GSPA