MODULE 1

Engineering
Department
Finance
Department
Human
Resource
Department
Management
Information
System
Department
Raw
Materials
Stores
Materials
Management
Division
Researc
!
Development
"lant
Engineering
Department
Mar#eting
$epartment
%ustomer
In
&arget Mar#et
'en$or(
Suppliers
"ro$uction
Department
)sop floor*
+uality
,ssurance
Department
%ustomer
Support
Department
Sales
Department
Factory
Management
!
Liasioning
, -ir$ view of "ro$uction System
Introduction
Production and operations management (POM) is the
management of an organizations production system.
A production system takes inputs and converts them into
outputs.
The conversion process is the predominant activity of a
production system.
The primary concern of an operations manager is the activities
of the conversion process.
Todays !actors Affecting POM
"#o$a# %ompetition
&.'. (ua#ity) %ustomer 'ervice) and %ost %ha##enges
%omputers and Advanced Production Techno#ogy
"ro*th of &.'. 'ervice 'ector
'carcity of Production +esources
Issues of 'ocia# +esponsi$i#ity
,ifferent -ays to 'tudy POM
Production as a 'ystem
Production as an Organization !unction
,ecision Making in POM
Inputs of a Production 'ystem
./terna#
0ega#) .conomic) 'ocia#) Techno#ogica#
Market
%ompetition) %ustomer ,esires) Product Info.
Primary +esources
Materia#s) Personne#) %apita#) &ti#ities
%onversion 'u$system
Physica# (Manufacturing)
0ocation 'ervices (Transportation)
./change 'ervices (+etai#ing)
'torage 'ervices (-arehousing)
Other Private 'ervices (Insurance)
"overnment 'ervices (!edera#) 'tate) 0oca#)
Production as a 'ystem
Inputs Inputs Inputs Inputs
Outputs Outputs Outputs Outputs
Conversion Conversion
Subsystem Subsystem
Conversion Conversion
Subsystem Subsystem
Production System Production System
Control Control
Subsystem Subsystem
Control Control
Subsystem Subsystem
Outputs of a Production 'ystem
,irect
Products
'ervices
Indirect
-aste
Po##ution
Techno#ogica# Advances
Production as an Organization !unction
1 &.'. companies
cannot compete using marketing) finance) accounting) and
engineering a#one.
1 -e focus on POM as
*e think of g#o$a# competitiveness) $ecause that is *here the vast
ma2ority of a firms *orkers) capita# assets) and e/penses reside.
1 To succeed) a firm
must have a strong operations function teaming *ith the other
organization functions.
,ecision Making in POM
1 'trategic ,ecisions
1 Operating ,ecisions
1 %ontro# ,ecisions
'trategic ,ecisions
1 These decisions are
of strategic importance and have #ong3term significance for the
organization.
1 ./amp#es inc#ude
deciding4
5 the design for a ne*
products production process
5 *here to #ocate a
ne* factory
5 *hether to #aunch a
ne*3product deve#opment p#an
Operating ,ecisions
1 These decisions are
necessary if the ongoing production of goods and services is to
satisfy market demands and provide profits.
1 ./amp#es inc#ude
deciding4
5 ho* much finished3
goods inventory to carry
5 the amount of
overtime to use ne/t *eek
5 the detai#s for
purchasing ra* materia# ne/t month
%ontro# ,ecisions
1 These decisions
concern the day3to3day activities of *orkers) 6ua#ity of products and
services) production and overhead costs) and machine maintenance.
1 ./amp#es inc#ude
deciding4
5 #a$or cost standards
for a ne* product
5 fre6uency of
preventive maintenance
5 ne* 6ua#ity contro#
acceptance criteria
-hat %ontro#s the Operations 'ystem7
1 Information a$out the
outputs) the conversions) and the inputs is fed $ack to management.
1 This information is
matched *ith managements e/pectations
1 -hen there is a
difference) management must take corrective action to maintain
contro# of the system
.at is Operations Management/
Defined
Operations management (OM) is defined as the design) operation)
and improvement of the systems that create and de#iver the firms
primary products and services
1 The !uture of
Operations
5 Outsourcing
everything
5 'mart factories
5 Ta#king inventory
5 Industria# army of
ro$ots
5 -hats in the $o/
5 Mass customization
.y Stu$y Operations
Management/
-usiness E$ucation
Systematic ,pproac
to Org0 "rocesses
%areer Opportunities
%ross1Functional
,pplications
Operations
Management
5 Persona#ized
recommendations
5 'ign here) p#ease
Operations Management Decision &ypes
1 'trategic (#ong3term)
1 Tactica#
(intermediate3term)
1 Operationa# p#anning
and contro# (short3term)
.at is a &ransformation "rocess/
Defined
A transformation process is defined as a use of resources to
transform inputs into some desired outputs Transformations
1 Physica#33
manufacturing
1 0ocation33
transportation
1 ./change33retai#ing
1 'torage33
*arehousing
1 Physio#ogica#33hea#th
care
1 Informationa#33
te#ecommunications
%ore Services "erformance O23ectives
Operations
Management
Fle4i2ility
+uality
Spee$
"rice )or cost
Re$uction*
&e Importance of Operations Management
1 'yner
gies must e/ist *ith other functiona# areas of the organization
1 Operat
ions account for 893:9; of the direct e/penses that $urden a firms
profit.
The Basics of Operations Management
1 Operat
ions Management
5 The
process of managing the resources that are needed to produce an
organizations goods and services.
5 Operat
ions managers focus on managing the <five Ps= of the firms
operations4
1 Peop#e
) p#ants) parts) processes) and p#anning and contro# systems.
The Production 'ystem
1 Input
5 A
resource re6uired for the manufacture of a product or service.
1 %onve
rsion 'ystem
5 A
production system that converts inputs (materia# and human
resources) into outputs (products or services)> a#so the production
process or techno#ogy.
1 Output
5 A
direct outcome (actua# product or service) or indirect outcome (ta/es)
*ages) sa#aries) of a production system.
?asic Types of Production Processes
1 Intermi
ttent Production 'ystem
5 Produc
tion is performed on a start3and3stop $asis) such as for the
manufacture of made3to3order products.
1 Mass
Production
5 A
specia# type of intermittent production process using standardized
Types of Production system
Manufacturing System
Service System
%ontinuous "ro$uction
Intermittent "ro$uction
-atc "ro$uction
5o2 "ro$uction
Mass pro$uction) Flow*
"rocessing "ro$uction
methods and sing#e3use machines to produce #ong runs of
standardized items.
Mass Customization
5 ,esign
ing) producing) and de#ivering customized products to customers for
at or near the cost and convenience of mass3produced items.
5 Mass
customization com$ines high production vo#ume *ith high product
variety.
5 .#eme
nts of mass customization4
1 Modu#
ar product design
1 Modu#
ar process design
1 Agi#e
supp#y net*orks
Continuous Production Processes
5 A
production process) such as those used $y chemica# p#ants or
refineries) that runs for very #ong periods *ithout the start3and3stop
$ehavior associated *ith intermittent production.
5 .norm
ous capita# investments are re6uired for high#y automated faci#ities
that use specia#3purpose e6uipment designed for high vo#umes of
production and #itt#e or no variation in the type of outputs.
Mass Production 'ystem (!#o*)
Continuous Production
1 Anticip
ation of demand
1 May
not have uniform production
1 'tanda
rdized +a* materia#
1 ?ig
vo#ume of #imited product #ine
1 'tanda
rd faci#ity3 high standardization.
1 !i/ed
se6uence of operation
1 Materi
a# hand#ing is easier
1 @igh
ski##ed operator not re6uired
1 More
@uman pro$#em is foreseen
1 @uge
investment.
1 @igh
ra* materia# inventory.
Processing Production System
1 ./tend
ed form of mass production system
1 !." of
one stage is fed to ne/t stage
1 More
automatic machines
1 One
$asic ra* materia# is transferred into severa# products at severa#
stages.
1 0ess
high#y ski##ed *orkers re6uired
1 More
human pro$#ems foreseen
1 @igh#y
standardized system
Batch Production System
1 @igh#y
specia#ized @uman resource is re6uired
1 @igh#y
specia#ized mu#ti tasking machines
1 Machi
nes are shared.
1 Produc
tion in $atches
1 Produc
tion #ots are $ased on customer demand or order.
1 Ao
sing#e se6uence of operation
1 !inish
ed goods are heterogeneous
Custom built / job order production system
1 @igh#y
specia#ized @uman resource is re6uired
1 @igh#y
specia#ized mu#ti tasking machines
1 Machi
nes are shared
1 +a*
materia# is not standardized
1 Proces
s is not standardized
1 Ao
scope for repetition of production
%omparative stu$y of $ifferent pro$uction systems
&ype
"arameter
MassB !#o* Process Co$ ?atch
"er unit
manf0cost
Hig Low Hig Hig
Si6e !
%apital
Invest0
Large
Less
'0 Large
Hig
Small
Low
Me$ium
Hig
Fle4i2ility 7o 7o More More
&ecnical
a2ility S#ills
Less Less Hig Hig
Orgn0
Structure
Line staff Line staff Functional Functional
In$ustrial
application
,utomo2ile
Sugar
Refinery
%emical
"etroleum
Mil# proces0
%onstruction
-ri$ges
S"M
%onsumer
pro$0
M(c0 &ools
%ompetitiveness8 Strategy8 an$ "ro$uctivity
%ompetitiveness9
@o* effective#y an organization meets the *ants and needs of
customers re#ative to others that offer simi#ar goods or services
?usinesses %ompete &sing Marketing
1 Identif
ying consumer *ants and needs
1 Pricing
1 Adverti
sing and promotion
?usinesses %ompete &sing Operations
1 Produc
t and service design
1 %ost
1 0ocati
on
1 (ua#ity
1 (uick
response
?usinesses %ompete &sing Operations
1 !#e/i$i#
ity
1 Invent
ory management
1 'upp#y
chain management
1 'ervic
e
-hy 'ome Organizations !ai#
1 Too
much emphasis on short3term financia# performance
1 !ai#ing
to take advantage of strengths and opportunities
1 !ai#ing
to recognize competitive threats
1 Aeg#ec
ting operations strategy
-hy 'ome Organizations !ai#
1 Too
much emphasis in product and service design and not enough on
improvement
1 Aeg#ec
ting investments in capita# and human resources
1 !ai#ing
to esta$#ish good interna# communications
1 !ai#ing
to consider customer *ants and needs
Strategy
'trategies
P#ans for achieving organizationa# goa#s
Mission
The reason for e/istence for an organization
Mission 'tatement
Ans*ers the 6uestion <-hat $usiness are *e in7=
"oa#s
Provide detai# and scope of mission
Tactics
The methods and actions taken to accomp#ish strategies
MissionB'trategyBTactics
How does mission, strategies and tactics relate to
decision making and distinctive competencies?
Strategy Strategy &actics &actics Mission Mission
Strategy and Tactics
,istinctive %ompetencies
The special attributes or abilities that give an organization a
competitive edge
Price
(ua#ity
Time
!#e/i$i#ity
'ervice
0ocation
P#anning and ,ecision Making
Mission
"oa#s
Organizationa# 'trategies
!unctiona# "oa#s
!inance
'trategies
Marketing
'trategies
Operations
'trategies
Tactics Tactics Tactics
Operating
procedures
Operating
procedures
Operating
procedures
Operations Strategy
1 Operations
strategy 5 The approach) consistent *ith organization strategy) *hich
is used to guide the operations function.
'trategy !ormu#ation
1 ,istinctive
competencies
1 .nvironmenta#
scanning
1 '-OT
1 Order 6ua#ifiers
Banks, ATMs Convenience
ocation ocation
!isneyland
"ordstroms
Superior customer
service
Service Service
Bur#er $in#
Supermarkets
%ariety
%olume
&le'ibility &le'ibility
('press Mail, &ede',
One)*our p*oto, +PS
,apid delivery
On)time delivery
Time Time
Sony T%
e'us, Cadillac
Pepsi, $odak, Motorola
-i#*)per.ormance desi#n
or *i#* /uality Consistent
/uality
0uality 0uality
+1S1 .irst)class posta#e
Motel)2, ,ed ,oo. Inns
o3 Cost
Price Price
./amp#es of ,istinctive
%ompetencies
1 Order *inners
Strategy !ormulation
1 Order 6ua#ifiers
5 %haracteristics
that customers perceive as minimum standards of accepta$i#ity to $e
considered as a potentia# purchase
1 Order *inners
5 %haracteristics
of an organizations goods or services that cause it to $e perceived
as $etter than the competition
"ey #$ternal !actors
1 .conomic
conditions
1 Po#itica#
conditions
1 0ega#
environment
1 Techno#ogy
1 %ompetition
1 Markets
"ey %nternal !actors
1 @uman
+esources
1 !aci#ities and
e6uipment
1 !inancia#
resources
1 %ustomers
1 Products and
services
1 Techno#ogy
1 'upp#iers
&uality and Time Strategies
1 (ua#ity3$ased
strategies
5 !ocuses on
maintaining or improving the 6ua#ity of an organizations products or
services
5 (ua#ity at the
source
1 Time3$ased
strategies
5 !ocuses on
reduction of time needed to accomp#ish tasks
Operations Strategy and Competitiveness
1 Operations
'trategy
1 A !rame*ork
for Operations 'trategy
1 Meeting the
%ompetitive %ha##enge
1 Productivity
Measurement
Operations Priorities
%ost
(ua#ity
,e#ivery 'peed (A#so) Ae* Product Introduction 'peed)
,e#ivery !#e/i$i#ity
"reenness
,e#ivery +e#ia$i#ity
%oping *ith %hanges in ,emand
4
Operations 'trategy 5 'trategic
A#ignment
Customer "eeds Corporate Strate#y
Operations Strate#y
Alignmen
t
Core
Competencie
s
Decision
s
Processes, In.rastructure, and Capabilities
Other Product3'pecific %riteria
OP#'(T%O)S ST'(T#*+ OB,#CT%-#S
u &R,7SL,&E M,R:E& +.(MT' TO 'P.%I!I%
OP.+ATIOA' P+IMA+D MI''IOA'
u ,SSURE O"ER,&IO7S IS %,",-LE TO A%%OMP0I'@
P+IMA+D MI''IOA.
E) '."M.AT MA+F.T ?D P+O,&%T "+O&P'
G) I,.ATI!D P+O,&%T +.(&I+.M.AT'
H) ,.T.+MIA. O+,.+ -IAA.+' AA, (&A0I!I.+'
I) %OAJ.+T O+,.+ -IAA.+' IATO 'P.%I!I% P.+!O+MAA%.
+.(MT'
5
A !rame*ork for Organizationa#
'trategy
Customer
"eeds
"e3 and Current
Products
Per.ormance Priorities
and ,e/uirements
0uality, !ependability,
Service
Speed, &le'ibility, and
Price
Operations 6 Supplier Capabilities
Tec*nolo#y People Systems ,6! CIM 7IT T0M !istribution
Support Plat.orms
&inancial Mana#ement -uman ,esource Mana#ement In.ormation Mana#ement
(nterprise
Capabilities
Strate#ic
%ision
#lements of operation strategy
Positioning the production system
A. Product !ocused
?. Process !ocused
Product B 'ervice p#ans
Out sourcing p#ans
Process techno#ogy p#ans
'trategic a##ocation of resources
!aci#ity p#ans

K%apacity p#ans
K0ocation
.conomic
DE'ELO"I7; "RODU%&IO7 ,7D O"ER,&IO7 S&R,&E;<
%orporate Mission
,ssessment
of 2usiness con$ition
-usiness Strategy
Distinctive %ompetencies
Or .ea#nesses
"ro$uct ( Service "lans
%ompetitive priorities
%ost8 &ime8 +uality !
Fle4i2ility
"ro$uction ( operation Strategy
"ositioning te pro$uction system
"ro$uct ( service plans
"rocess an$ tecnology plans
Strategic allocation of resources
Facility "lan8 %apacity "lan8 Location an$ Layout0
Po#itica#
0ega#
'ocia#
Market
Ana#ysis
%ompetition
-orn out Prod. 'ystem
Automation
'ki##ed @+
@i3tech
Machines
,is 3advantage in
capturing market
0o* prod. cost
,e#ivery performance
@igh 6ua#ity products L
service
%ustomer service L
!#e/i$i#ity
K0ayout
Productivity
A measure of the effective use of resources) usua##y e/pressed as the
ratio of output to input Productivity ratios are used for P#anning
*orkforce re6uirements 'chedu#ing e6uipment
financia# ana#ysis
M%T Commission on %ndustrial Productivity
./01 'ecommendations 2 Still -ery (ccurate Today
1 0ess emphasis on short3term financia# payoffs and
invest more in +L,.
1 +evise corporate strategies to inc#ude responses
to foreign competition.
5 greater investment in peop#e and e6uipment
1 Fnock do*n communication $arriers *ithin
organizations and recognize mutua#ity of interests *ith other
companies and supp#iers.
M%T Commission on Industria# Productivity
./01 'ecommendations
1 +ecognize that the #a$or force is a resource to $e
nurtured) not 2ust a cost to $e avoided.
1 "et $ack to $asics in managing productionB
operations.
5 ?ui#d in 6ua#ity at the design stage.
5 P#ace more emphasis on process innovations
rather than focusing so#e attention on product innovations 3
dramatica##y improve costs) 6ua#ity) speed) L f#e/.
&. '. %ompetitiveness ,rivers
1 "ro$uct(Service Development 3 7"D
5 Teams speed deve#opment and enhance
manufactura$i#ity
1 .aste Re$uction (0.AABCIT Phi#osophy)
5 -IP) space) too# costs) and human effort
1 Improve$ %ustomer1Supplier Relationsips
5 0ook for -in3-inM Taken from Capanese Feiretsu
1 Early ,$option of I& &ecnology Inc#uding
5 P% Techno#ogy 5 --- 3 .+P'
Productivity
Inputs
Outputs
8 ty Productivi
Partia# measures
outputB(sing#e input)
Mu#ti3factor measures
outputB(mu#tip#e inputs)
Tota# measure
outputB(tota# inputs)
Productivity "ro*th Productivity "ro*th
%urrent Period Productivity 5 Previous Period
Productivity
Previous Period Productivity
"ro$uctivity ;rowt =
+nits o. output per kilo3att)*our
!ollar value o. output per kilo3att)
*our
(ner#y
Productivity
+nits o. output per dollar input
!ollar value o. output per dollar input
Capital
Productivity
+nits o. output per mac*ine *our
mac*ine *our
Mac*ine
Productivity
+nits o. output per labor *our
+nits o. output per s*i.t
%alue)added per labor *our
abor
Productivity
./amp#es of Partia# Productivity Measures ./amp#es of Partia# Productivity Measures
!actors Affecting Productivity
%apita
#
(ua#it
y
Techno#og
y
Managemen
t
Other !actors (ffecting Productivity
1 'tandardization
1 (ua#ity
1 &se of Internet
1 %omputer viruses
1 'earching for #ost
or misp#aced items
1 'crap rates
1 Ae* *orkers
1 'afety
1 'hortage of IT
*orkers
1 0ayoffs
1 0a$or turnover
1 ,esign of the
*orkspace
1 Incentive p#ans that
re*ard productivity
Improving Productivity
1 ,eve#op
productivity measures
1 ,etermine critica#
($ott#eneck) operations
1 ,eve#op methods
for productivity improvements
1 .sta$#ish
reasona$#e goa#s
1 "et management
support
1 Measure and
pu$#icize improvements
1 ,ont confuse
productivity *ith efficiency
MO,&0. G
Typical Phases of Product 3evelopment
1 P#anning
1 %oncept ,eve#opment
1 'ystem30eve# ,esign
1 ,esign ,etai#
1 Testing and +efinement
1 Production +amp3up
#conomic (nalysis of Project 3evelopment Costs
1 &sing measura$#e factors to he#p determine4
5 Operationa# design and deve#opment decisions
5 "oBno3go mi#estones
1 ?ui#ding a ?ase3%ase !inancia# Mode#
5 A financia# mode# consisting of ma2or cash f#o*s
5 'ensitivity Ana#ysis for <*hat if= 6uestions
Designing for te %ustomer
+uality Function
Deployment
'alue ,nalysis(
'alue
Engineering
I$eal
%ustomer
"ro$uct
House of +uality
3esigning for the Customer4 &uality !unction 3eployment
1 Interventiona# teams from marketing) design engineering) and
manufacturing
1 Joice of the customer
1 @ouse of (ua#ity
,esigning for the %ustomer4 Ja#ue Ana#ysisBJa#ue .ngineering
1 Achieve e6uiva#ent or $etter performance at a #o*er cost *hi#e
maintaining a## functiona# re6uirements defined $y the customer
5 ,oes the item have any design features that are not
necessary7
5 %an t*o or more parts $e com$ined into one7
5 @o* can *e cut do*n the *eight7
5 Are there nonstandard parts that can $e e#iminated7
,esign for Manufactura$i#ity
1 Traditiona# Approach
5 <-e design it) you $ui#d it= or <Over the *a##=
%oncurrent .ngineering
5 <0ets *ork together simu#taneous#y=
,esign for Manufacturing and Assem$#y
1 "reatest improvements re#ated to ,!MA arise from
simp#ification of the product $y reducing the num$er of separate
parts4
1 ,uring the operation of the product) does the part move re#ative
to a## other parts a#ready assem$#ed7
1 Must the part $e of a different materia# or $e iso#ated from other
parts a#ready assem$#ed7
1 Must the part $e separate from a## other parts to a##o* the
disassem$#y of the product for ad2ustment or maintenance7
Product ,esign
'tandard parts
Modu#ar design
@igh#y capa$#e production systems
%oncurrent
engineering
Measuring "ro$uct Development
"erformance
Measures
&re/1 o. ne3 products introduced
Time to market introduction
"umber stated and number completed
Actual versus plan
Percenta#e o. sales .rom ne3 products
&re/1 o. ne3 products introduced
Time to market introduction
"umber stated and number completed
Actual versus plan
Percenta#e o. sales .rom ne3 products
Time3to3market
Time3to3market
Productivity
Productivity
(ua#ity
(ua#ity
(n#ineerin# *ours per pro9ect
Cost o. materials and toolin# per pro9ect
Actual versus plan
(n#ineerin# *ours per pro9ect
Cost o. materials and toolin# per pro9ect
Actual versus plan
Con.ormance)reliability in use
!esi#n)per.ormance and customer satis.action
:ield).actory and .ield
Con.ormance)reliability in use
!esi#n)per.ormance and customer satis.action
:ield).actory and .ield
Per.ormance
!imension
Process ,esign
'ma## #ot sizes
'etup time reduction
Manufacturing ce##s
0imited *ork in process
(ua#ity improvement
Production f#e/i$i#ity
0itt#e inventory storage
Production !#e/i$i#ity
1 +educe do*ntime $y reducing changeover time
1 &se preventive maintenance to reduce $reakdo*ns
1 %ross3train *orkers to he#p c#ear $ott#enecks
1 &se many sma## units of capacity
1 &se off3#ine $uffers
1 +eserve capacity for important customers
?enefits of 'ma## 0ot 'izes
Re$uces
inventory
Less storage
space
Less
rewor#
"ro2lems are more
apparent
Increases pro$uct
fle4i2ility
Easier to 2alance
operations
&uality %mprovement
1 Autonomation
5 Automatic detection of defects during production
1 Cidoka
5 Capanese term for autonomation
Personnel/Organizational #lements
1 -orkers as assets
1 %ross3trained *orkers
1 %ontinuous improvement
1 %ost accounting
1 0eadershipBpro2ect management
Manufacturing Planning and Control
1 0eve# #oading
1 Pu## systems
1 Jisua# systems
1 %#ose vendor re#ationships
1 +educed transaction processing
1 Preventive maintenance
Pull/Push Systems
1 Pull system 4 'ystem for moving *ork *here a *orkstation pu##s
output from the preceding station as needed. (e.g. Fan$an)
1 Push system 4 'ystem for moving *ork *here output is pushed
to the ne/t station as it is comp#eted
Fan$an Production %ontro# 'ystem
1 "anban 4 %ard or other device that communicates demand for
*ork or materia#s from the preceding station
1 Fan$an is the Capanese *ord meaning <signa#= or <visi$#e
record=
1 Paper#ess production contro# system
1 Authority to pu##) or produce comes
from a do*nstream process.
Kanban Formula
A N Tota# num$er of containers
, N P#anned usage rate of using *ork center
T N Average *aiting time for rep#enishment of parts p#us average
production time for a container of parts
O N Po#icy varia$#e set $y management 3 possi$#e inefficiency in the
system
% N %apacity of a standard container
N =
DT(1+X)
C
Traditiona# 'upp#ier Aet*ork Traditiona# 'upp#ier Aet*ork
Buyer
Buyer
Suppl
ier
Suppl
ier
Suppl
ier
Suppl
ier
Suppl
ier
Suppl
ier
Suppl
ier
Suppl
ier
Suppl
ier
Suppl
ier
Suppl
ier
Suppl
ier
Suppl
ier
Suppl
ier
Product and Service 3esign
Ma2or factors in design strategy
%ost
(ua#ity
Time3to3market
%ustomer satisfaction
%ompetitive advantage
Product and service design 5 or redesign 5 shou#d $e
c#ose#y tied to an organizations strategy
Product or Service 3esign (ctivities
1 Trans#ate customer *ants and needs into product and service
re6uirements
1 +efine e/isting products and services
1 ,eve#op ne* products and services
1 !ormu#ate 6ua#ity goa#s
1 !ormu#ate cost targets
1 %onstruct and test prototypes
1 ,ocument specifications
'easons for Product or Service 3esign
1 .conomic
1 'ocia# and demographic
1 Po#itica#) #ia$i#ity) or #ega#
1 %ompetitive
1 Techno#ogica#
Objectives of Product and Service 3esign
1 Main focus
5 %ustomer satisfaction
1 'econdary focus
5 !unction of productBservice
5 %ostBprofit
5 (ua#ity
5 Appearance
5 .ase of productionBassem$#y
5 .ase of maintenanceBservice
3esigning !or Operations
Taking into account the capa$i#ities of the organization in designing
goods and services
5egal6 #thical6 and #nvironmental %ssues
1 0ega#
5 Product #ia$i#ity
5 &niform commercia# code
1 .thica#
5 +e#easing products *ith defects
1 .nvironmenta#
5 .PA
'egulations 7 5egal Considerations
1 Product 5iability 2 A manufacturer is #ia$#e for any in2uries or
damages caused $y a fau#ty product.
1 8niform Commercial Code 2 Products carry an imp#ication of
merchanta$i#ity and fitness.
Standardization
1 'tandardization
5 ./tent to *hich there is an a$sence of variety in a product)
service or process
1 'tandardized products are immediate#y avai#a$#e to customers
(dvantages of Standardization
1 !e*er parts to dea# *ith in inventory L manufacturing
1 ,esign costs are genera##y #o*er
1 +educed training costs and time
1 More routine purchasing) hand#ing) and inspection procedures
1 Orders fa##i$#e from inventory
1 Opportunities for #ong production runs and automation
1 Aeed for fe*er parts 2ustifies increased e/penditures on
perfecting designs and improving 6ua#ity contro# procedures.
3isadvantages of Standardization
1 ,esigns may $e frozen *ith too many imperfections remaining.
1 @igh cost of design changes increases resistance to
improvements.
1 ,ecreased variety resu#ts in #ess consumer appea#.
1 Mass customization4
5 A strategy of producing standardized goods or services) $ut
incorporating some degree degree of customization
5 ,e#ayed differentiation
5 Modu#ar design
3elayed 3ifferentiation
1 ,e#ayed differentiation is a postponement tactic
5 Producing $ut not 6uite comp#eting a product or service unti#
customer preferences or specifications are kno*n
Modular 3esign
Modular design is a form of standardization in *hich component parts
are su$divided into modu#es that are easi#y rep#aced or interchanged.
It a##o*s4
5 easier diagnosis and remedy of fai#ures
5 easier repair and rep#acement
5 simp#ification of manufacturing and assem$#y
'eliability
1 'eliability 4 The a$i#ity of a product) part) or system to perform its
intended function under a prescri$ed set of conditions
1 !ailure 4 'ituation in *hich a product) part) or system does not
perform as intended
1 )ormal operating conditions 4 The set of conditions under *hich
an items re#ia$i#ity is specified
Improving +e#ia$i#ity
%omponent design
ProductionBassem$#y techni6ues
Testing
+edundancyB$ackup
Preventive maintenance procedures
&ser education
'ystem design
Product 3esign
1 Product 0ife %yc#es
1 +o$ust ,esign
1 %oncurrent .ngineering
1 %omputer3Aided ,esign
1 Modu#ar ,esign
'obust 3esign4 ,esign that resu#ts in products or services that
can function over a $road range of conditions
Taguchi (pproach 'obust 3esign
1 ,esign a ro$ust product
5 Insensitive to environmenta# factors either in manufacturing or
in use.
1 %entra# feature is Parameter 3esign
1 ,etermines4
5 factors that are contro##a$#e and those not contro##a$#e
5 their optima# #eve#s re#ative to ma2or product advances
3egree of )e9ness
1 Modification of an e/isting productBservice
1 ./pansion of an e/isting productBservice
1 %#one of a competitors productBservice
1 Ae* productBservice
,egree of ,esign %hange
Type of ,esign
%hange
Ae*ness of the
organization
Ae*ness to the
market
Modification 0o* 0o*
./pansion 0o* 0o*
%#one @igh 0o*
Ae* @igh @igh
Phases in Product 3evelopment Process
E. Idea generation
G. !easi$i#ity ana#ysis
H. Product specifications
I. Process specifications
P. Prototype deve#opment
8. ,esign revie*
Q. Market test
:. Product introduction
R. !o##o*3up eva#uation
Idea "eneration
Ideas
%ompetitor $ased
'upp#y chain $ased
+esearch $ased
+everse .ngineering
'everse engineering is the dismant#ing and inspecting of a
competitors product to discover product improvements.
'esearch 7 3evelopment :'73;
Organized efforts to increase scientific kno*#edge or product
innovation L may invo#ve4
Basic 'esearch advances kno*#edge a$out a su$2ect
*ithout near3term e/pectations of commercia#
app#ications.
(pplied 'esearch achieves commercia# app#ications.
3evelopment converts resu#ts of app#ied research into
commercia# app#ications.
Manufacturability
Manufactura$i#ity is the ease of fa$rication andBor assem$#y
*hich is important for4
%ost
Productivity
(ua#ity
,esigning for Manufacturing ?eyond the overa## o$2ective to achieve
customer satisfaction *hi#e making a reasona$#e profit is4
,esign for Manufacturing (,!M)
The designers consideration of the organizations manufacturing
capa$i#ities *hen designing a product.
The more genera# term design for operations encompasses services
as *e## as manufacturing
Concurrent #ngineering
Concurrent engineering is the $ringing together of engineering design
and manufacturing personne# ear#y in the design phase.
Computer2(ided 3esign
Computer2(ided 3esign :C(3; is product design using
computer graphics.
increases productivity of designers) H to E9 times
creates a data$ase for manufacturing information on
product specifications
provides possi$i#ity of engineering and cost ana#ysis on
proposed designs
Product design
,esign for manufacturing (,!M)
,esign for assem$#y (,!A)
,esign for recyc#ing (,!+)
+emanufacturing
,esign for disassem$#y (,!,)
+o$ust design
'ecycling
1 +ecyc#ing4 recovering
materia#s for future use
1 +ecyc#ing reasons
5 %ost savings
5 .nvironment
concerns
5 .nvironment
regu#ations
Service 3esign
1 'ervice is an act
1 'ervice de#ivery
system
5 !aci#ities
5 Processes
5 'ki##s
1 Many services are
$und#ed *ith products
1 'ervice design
invo#ves
5 The physica#
resources needed
5 The goods that are
purchased or consumed $y the customer
5 ./p#icit services
5 Imp#icit services
1 'ervice
5 'omething that is
done to or for a customer
1 'ervice de#ivery
system
5 The faci#ities)
processes) and ski##s needed to provide a service
1 Product $und#e
5 The com$ination of
goods and services provided to a customer
1 'ervice package
5 The physica#
resources needed to perform the service
3ifferences bet9een Product and Service 3esign
1 Tangi$#e 5 intangi$#e
1 'ervices created and
de#ivered at the same time
1 'ervices cannot $e
inventoried
1 'ervices high#y visi$#e
to customers
1 'ervices have #o*
$arrier to entry
1 0ocation important to
service
Phases in 'ervice ,esign
1 %onceptua#ize
1 Identify service
package components
1 ,etermine
performance specifications
1 Trans#ate
performance specifications into design specifications
1 Trans#ate design
specifications into de#ivery specifications
Service Blueprinting
1 'ervice $#ueprinting
5 A method used in
service design to descri$e and ana#yze a proposed service
1 A usefu# too# for
conceptua#izing a service de#ivery system
Major Steps in Service Blueprinting
1 .sta$#ish $oundaries
1 Identify steps invo#ved
1 Prepare a f#o*chart
1 Identify potentia#
fai#ure points
1 .sta$#ish a time frame
1 Ana#yze profita$i#ity
Characteristics of <ell 3esigned Service Systems
1 %onsistent *ith the
organization mission
1 &ser friend#y
1 +o$ust
1 .asy to sustain
1 %ost effective
1 Ja#ue to customers
1 .ffective #inkages
$et*een $ack operations
1 'ing#e unifying theme
1 .nsure re#ia$i#ity and
high 6ua#ity
%ha##enges of 'ervice ,esign
1 Jaria$#e re6uirements
1 ,ifficu#t to descri$e
1 @igh customer
contact
1 'ervice 5 customer
encounter
&uality !unction 3eployment
1 (ua#ity !unction
,ep#oyment
5 Joice of the customer
5 @ouse of 6ua#ity
+FD4 An approach that integrates the <voice of the customer= into the
product and service deve#opment process.
Operations 'trategy
E. Increase emphasis on component commona#ity
G. Package products and services
H. &se mu#tip#e3use p#atforms
I. %onsider tactics for mass customization
P. 0ook for continua# improvement
8. 'horten time to market
'horten Time to Market
E. &se standardized components
G. &se techno#ogy
H. &se concurrent engineering
Process 'e#ection
Jariety
@o* much
!#e/i$i#ity
-hat degree
Jo#ume
./pected output
Process Types
Co$ shop
'ma## sca#e
?atch
Moderate vo#ume
+epetitiveBassem$#y #ine
@igh vo#umes of standardized goods or services
%ontinuous
Jery high vo#umes of non3discrete goods
Process design
The comp#ete de#ineation and description of specific steps in the
production process and the #inkage among the steps that *i## ena$#e
the production system to produce products of the
desired 6ua#ity
re6uired 6uantity
at re6uired time
at the economica# cost
./pected $y the customer
Types of Process
Pro2ect
Co$ 'hop
?atch
Assem$#y #ine
%ontinuous
Process ,esign
Interrelationsip of "ro$uct an$ "rocess
Design
Feasi2ility Stu$ies
Feasi2ility Stu$ies
"ro$uct I$ea
"ro$uct I$ea
"ro$uct Design
"ro$uct Design
"rocess Design
"rocess Design
,$vance$ "ro$uct "lanning
,$vance$ Design
"ro$uction "rocess Design
"ro$uct evaluation an$ improvement
"ro$uct use an$ support
,$vance$ "ro$uct "lanning
,$vance$ Design
"ro$uction "rocess Design
"ro$uct evaluation an$ improvement
"ro$uct use an$ support
Organi6ing te process flow
Relation of process Design to
process Flow
Evaluating te "rocess Design
Organi6ing te process flow
Relation of process Design to
process Flow
Evaluating te "rocess Design
&o "ro$uce an$ Mar#et 7ew "ro$ucts
&o "ro$uce an$ Mar#et 7ew "ro$ucts
Production Technology
The method or Techni6ue used in %onverting the +a* materia#
into '!" or !" .conomica##y) .ffective#y and efficient#y is
termed as Production Techno#ogy.
The Selection of Technology
Time
%ost
Type of Product
Jo#ume of production
./pected Productivity
Technica# %omp#e/ity invo#ved
,egree of @uman ski## re6uired
,egree of (ua#ity re6uired
Avai#a$i#ity of Techno#ogy
The ,egree of O$so#escence e/pected.
MO,&0. H
!aci#ity P#anning
0ong range capacity p#anning)
!aci#ity #ocation
!aci#ity #ayout
Strategic %apacity "lanning
Defined
%apacity can $e defined as the a$i#ity to ho#d) receive) store) or
accommodate.
Strategic capacity planning is an approach for determining
the overa## capacity #eve# of capita# intensive resources)
inc#uding faci#ities) e6uipment) and overa## #a$or force size.
%apacity Utili6ation
%apacity uti#ization rate N %apacity used
?est operating #eve#
%apacity used
rate of output actua##y achieved
?est operating #eve#
capacity for *hich the process *as designed
E4ample of %apacity Utili6ation
,uring one *eek of production) a p#ant produced :H units of a
product. Its historic highest or $est uti#ization recorded *as EG9
units per *eek. -hat is this p#ants capacity uti#ization rate7
Ans*er4
%apacity uti#ization rate N %apacity used .
?est operating #eve#

N :HBEG9
N9.8R or 8R;
-est Operating Level
&nderuti#ization
?est
Operating
0eve#
Average
unit cost
of output
Jo#ume
Overuti#ization
Economies ! Diseconomies
of Scale
E993unit
p#ant
G993unit
p#ant
H993unit
p#ant
I993unit
p#ant
Jo#ume
Average
unit cost
of output
.conomies of 'ca#e and the ./perience %urve *orking
,iseconomies of 'ca#e start *orking
Capacity !ocus
The concept of the focused factory ho#ds that production
faci#ities *ork $est *hen they focus on a fair#y #imited set of
production o$2ectives.
P#ants -ithin P#ants (P-P) (from 'kinner)
./tend focus concept to operating #eve#
Capacity !le$ibility
!#e/i$#e p#ants
!#e/i$#e processes
&e E4perience %urve
Tota# accumu#ated production of units
%ost or
price
per unit
As p#ants produce more products) they
gain e/perience in the $est production
methods and reduce their costs per
unit.
!#e/i$#e *orkers
%apacity "lanning
!re6uency of %apacity Additions
./terna# 'ources of %apacity
Determining %apacity Re>uirements
!orecast sa#es *ithin each individua# product #ine.
%a#cu#ate e6uipment and #a$or re6uirements to meet the
forecasts.
Pro2ect e6uipment and #a$or avai#a$i#ity over the p#anning
horizon.
%apacity "lanning9 -alance
Maintaining 'ystem ?a#ance
'tage E 'tage G 'tage H
&nits
per
month
8)999 Q)999 I)P99
E4ample of %apacity Re>uirements
A manufacturer produces t*o #ines of mustard) !ancy !ine and
"eneric #ine. .ach is so#d in sma## and fami#y3size p#astic $ott#es.
The fo##o*ing ta$#e sho*s forecast demand for the ne/t four years.
:ear; < = 4 >
FancyFine
Small ?@@@sA B@ 2@ 5@ <@@
&amily ?@@@sA 4B B@ C@ D@
Generic
Small ?@@@sA <@@ <<@ <=@ <>@
&amily ?@@@sA 5@ D@ <@@ <<@
E4ample of %apacity Re>uirements9 E>uipment an$ La2or
Re>uirements
:ear; < = 4 >
Small ?@@@sA <B@ <C@ =@@ =>@
&amily ?@@@sA <<B <>@ <C@ =@@
Three E99)999 units3per3year machines are avai#a$#e for sma##3$ott#e
production. T*o operators re6uired per machine.
T*o EG9)999 units3per3year machines are avai#a$#e for fami#y3sized3
$ott#e production. Three operators re6uired per machine.
12.= Capacity Planning
(uestion4 -hat are the Dear E va#ues for capacity) machine) and #a$or7
<B@,@@@E4@@,@@@8B@F At < mac*ine .or <@@,@@@, it
takes <1B mac*ines .or <B@,@@@
At = operators .or
<@@,@@@, it takes 4
operators .or <B@,@@@
GThe McGraw-Hill Companies, Inc., 2001
<2
12.> Capacity Planning
(uestion4 -hat are the va#ues for co#umns G) H and I i n the ta$#e $e#o*7
B212CF
<1C@
41>@
B5144F
<1<C
41B@
2212CF
=1@@
>1@@
C@154F
<1>=
>1=B
5@1@@F
=1>@
>15@
54144F
<12C
B1@@
<C
GThe McGraw- Hill Companies, Inc., 2001
Planning Service Capacity
Time
0ocation
Jo#ati#ity of ,emand
Capacity 8tilization 7 Service &uality
?est operating point is near Q9; of capacity
!rom Q9; to E99; of service capacity) *hat do you think
happens to service 6ua#ity7
Capacity Planning
%apacity is the upper #imit or cei#ing on the #oad that an
operating unit can hand#e.
The $asic 6uestions in capacity hand#ing are4
-hat kind of capacity is needed7
@o* much is needed7
-hen is it needed7
%mportance of Capacity 3ecisions
E. Impacts a$i#ity to meet future demands
G. Affects operating costs
H. Ma2or determinant of initia# costs
I. Invo#ves #ong3term commitment
P. Affects competitiveness
8. Affects ease of management
Q. "#o$a#ization adds comp#e/ity
:. Impacts #ong range p#anning
Capacity
,esign capacity
ma/imum output rate or service capacity an operation)
process) or faci#ity is designed for
.ffective capacity
,esign capacity minus a##o*ances such as persona# time)
maintenance) and scrap
Actua# output
rate of output actua##y achieved33cannot
e/ceed effective capacity.
.fficiency and 8tilization
,ctual output
Efficiency =
Effective capacity
,ctual output
Utili6ation =
Design capacity
Both measures e$pressed as percentages
3eterminants of #ffective Capacity
!aci#ities
Product and service factors
Process factors
@uman factors
Operationa# factors
'upp#y chain factors
./terna# factors
Strategy !ormulation
%apacity strategy for #ong3term demand
,emand patterns
"ro*th rate and varia$i#ity
!aci#ities
%ost of $ui#ding and operating
Techno#ogica# changes
+ate and direction of techno#ogy changes
?ehavior of competitors
Avai#a$i#ity of capita# and other inputs
"ey 3ecisions of Capacity Planning
E. Amount of capacity needed
G. Timing of changes
H. Aeed to maintain $a#ance
I. ./tent of f#e/i$i#ity of faci#ities
Capacity cushion ? e$tra demand intended to offset uncertainty
Steps for Capacity Planning
E. .stimate future capacity re6uirements
G. .va#uate e/isting capacity
H. Identify a#ternatives
I. %onduct financia# ana#ysis
P. Assess key 6ua#itative issues
8. 'e#ect one a#ternative
Q. Imp#ement a#ternative chosen
:. Monitor resu#ts
Ma@e or Buy
E. Avai#a$#e capacity
G. ./pertise
H. (ua#ity considerations
I. Aature of demand
P. %ost
8. +isk
,eve#oping %apacity A#ternatives
E. ,esign f#e/i$i#ity into systems
G. Take stage of #ife cyc#e into account
H. Take a <$ig picture= approach to capacity changes
I. Prepare to dea# *ith capacity <chunks=
P. Attempt to smooth out capacity re6uirements
8. Identify the optima# operating #eve#
#conomies of Scale
.conomies of sca#e
If the output rate is #ess than the optima# #eve#) increasing
output rate resu#ts in decreasing average unit costs
,iseconomies of sca#e
If the output rate is more than the optima# #eve#) increasing
the output rate resu#ts in increasing average unit costs
.va#uating A#ternatives
Minimu
m
cost
,
v
e
r
a
g
e

c
o
s
t

p
e
r

u
n
i
t
?
Rate of
output
Production units have an optima# rate of output for minima# cost.
Minimum average cost per unit
Planning Service Capacity
Aeed to $e near customers
%apacity and #ocation are c#ose#y tied
Ina$i#ity to store services
%apacity must $e matched *ith timing of demand
,egree of vo#ati#ity of demand
Peak demand periods
(ssumptions of Cost2-olume (nalysis
. One product is involved
G. .verything produced can $e so#d
H. Jaria$#e cost per unit is the same regard#ess of vo#ume
.va#uating A#ternatives
Minimum cost ! optimal operating rate are
functions of si6e of pro$uction unit0
,
v
e
r
a
g
e

c
o
s
t

p
e
r

u
n
i
t
?
Small
plant
Me$ium
plant Large
plant
Output rate
I. !i/ed costs do not change *ith vo#ume
P. +evenue per unit constant *ith vo#ume
8. +evenue per unit e/ceeds varia$#e cost per unit
!inancial (nalysis
%ash !#o* 3 the difference $et*een cash received from sa#es
and other sources) and cash outf#o* for #a$or) materia#)
overhead) and ta/es.
Present Ja#ue 3 the sum) in current va#ue) of a## future cash
f#o*s of an investment proposa#.
Calculating Processing 'eAuirements


Product

Annua#
,emand
'tandard
processing time
per unit (hr.)

Processing time
needed (hr.)

SE

SG

SH

I99

H99

Q99

P.9

:.9

G.9

G)999

G)I99

E)I99
P):99



Product

Annua#
,emand
'tandard
processing time
per unit (hr.)

Processing time
needed (hr.)

SE

SG

SH

I99

H99

Q99

P.9

:.9

G.9

G)999

G)I99

E)I99
P):99

5ocation Planning and (nalysis
)eed for 5ocation 3ecisions
Marketing 'trategy
%ost of ,oing ?usiness
"ro*th
,ep#etion of +esources
)ature of 5ocation 3ecisions
'trategic Importance
0ong term commitmentBcosts
Impact on investments) revenues) and operations
'upp#y chains
O$2ectives
Profit potentia#
Ao sing#e #ocation may $e $etter than others
Identify severa# #ocations from *hich to choose
Options
./pand e/isting faci#ities
Add ne* faci#ities
Move
Ma@ing 5ocation 3ecisions
,ecide on the criteria
Identify the important factors
,eve#op #ocation a#ternatives
.va#uate the a#ternatives
Make se#ection
5ocation 3ecision !actors
10 Regional Factors
0ocation of ra* materia#s
0ocation of markets
0a$or factors
%#imate and ta/es
@0 %ommunity %onsi$erations
(ua#ity of #ife
'ervices
Attitudes
Ta/es
.nvironmenta# regu#ations
&ti#ities
,eve#oper support
A0 Multiple "lant Strategies
Product p#ant strategy
Market area p#ant strategy
Process p#ant strategy
B0 Site1relate$ Factors
0and
Transportation
.nvironmenta#
0ega#
%omparison of 'ervice and Manufacturing %onsiderations
ManufacturingB,istri$ution 'erviceB+etai#
%ost !ocus +evenue focus
Transportation modesBcosts ,emographics4
age)income)etc
.nergy avai#a$i#ity) costs Popu#ationBdra*ing area
0a$or costBavai#a$i#ityBski##s %ompetition
?ui#dingB#easing costs Traffic vo#umeBpatterns
%ustomer accessBparking
.va#uating 0ocations
%ost3Profit3Jo#ume Ana#ysis
,etermine fi/ed and varia$#e costs
P#ot tota# costs
,etermine #o*est tota# costs
0ocation %ost3Jo#ume Ana#ysis
Assumptions
!i/ed costs are constant
Jaria$#e costs are #inear
Output can $e c#ose#y estimated
On#y one product invo#ved
.va#uating 0ocations
Transportation Mode#
,ecision $ased on movement costs of ra* materia#s or
finished goods
!actor +ating
,ecision $ased on 6uantitative and 6ua#itative inputs
%enter of "ravity Method
,ecision $ased on minimum distri$ution costs
!acility 5ayout
5ayout4 the configuration of departments) *ork centers) and
e6uipment) *ith particu#ar emphasis on movement of *ork
(customers or materia#s) through the system
Importance of 0ayout ,ecisions
+e6uires su$stantia# investments of money and effort
Invo#ves #ong3term commitments
@as significant impact on cost and efficiency of short3term
operations
The )eed for 5ayout 3ecisions
Inefficient
operations
!or ./amp#e4
@igh %ost
?ott#eneck
s
%hanges in the
design
of products or
services
The introduction of
ne*
products or services
Accident
s
'afety
hazards
?asic 0ayout Types
Product #ayouts
Process #ayouts
!i/ed3Position #ayout
%om$ination #ayouts
?asic 0ayout Types
Product #ayout
0ayout that uses standardized processing operations to
achieve smooth) rapid) high3vo#ume f#o*
Process #ayout
0ayout that can hand#e varied processing re6uirements
!i/ed Position #ayout
0ayout in *hich the product or pro2ect remains stationary)
and *orkers) materia#s) and e6uipment are moved as
needed
%hanges in
environmenta
#
or other #ega#
re6uirements
%hanges in vo#ume
of
output or mi/ of
products
%hanges in
methods
and e6uipment
Mora#e
pro$#ems
The Aeed for 0ayout ,esign
(dvantages of Product 5ayout

Advantages of Product 0ayout
@igh rate of output
0o* unit cost
0a$or specia#ization
0o* materia# hand#ing cost
@igh uti#ization of #a$or and e6uipment
.sta$#ished routing and schedu#ing
+outing accounting and purchasing
,isadvantages of Product 0ayout
%reates du##) repetitive 2o$s
Poor#y ski##ed *orkers may not maintain e6uipment or 6ua#ity of
output
!air#y inf#e/i$#e to changes in vo#ume
@igh#y suscepti$#e to shutdo*ns
Aeeds preventive maintenance
Individua# incentive p#ans are impractica#
Raw
materials
or customer
Finished
item
Station
2
Station
2
Station
3
Station
3
Station
4
Station
4
Material

and/or
laor
Station
!
Material

and/or
laor
Material

and/or
laor
Material

and/or
laor
Used for Repetitive or Continuous Processing
Figure 6.4 Product 0ayout
Advantages of Process 0ayouts
%an hand#e a variety of processing re6uirements
Dept. A
Dept. B Dept. D
Dept. C
Dept. F
Dept. E
Used for intermittent processing
Job Shop or Btch
Process Layout
(u!ctio!al)
Figure 6."
Process 0ayout
!or"
Sttion #
!or"
Sttion $
!or"
Sttion %
Pro#uct Layout
(se$ue!tial)
Used for Repetitive Processing
Repetitive or Continuous
Product 0ayout
Aot particu#ar#y vu#nera$#e to e6uipment fai#ures
.6uipment used is #ess cost#y
Possi$#e to use individua# incentive p#ans
,isadvantages of Process 0ayouts
In3process inventory costs can $e high
%ha##enging routing and schedu#ing
.6uipment uti#ization rates are #o*
Materia# hand#ing s#o* and inefficient
%omp#e/ities often reduce span of supervision
'pecia# attention for each product or customer
Accounting and purchasing are more invo#ved
%e##u#ar 0ayouts
%e##u#ar Production
0ayout in *hich machines are grouped into a ce## that can
process items that have simi#ar processing re6uirements
"roup Techno#ogy
The grouping into part fami#ies of items *ith simi#ar design
or manufacturing characteristics
!unctional vs Cellular 5ayouts
Dimension Functional %ellular
Aum$er of moves
$et*een
departments
many fe*
Trave# distances #onger shorter
Trave# paths varia$#e fi/ed
Co$ *aiting times greater shorter
Throughput time higher #o*er
Amount of *ork in
process
higher #o*er
'upervision
difficu#ty
higher #o*er
'chedu#ing
comp#e/ity
higher #o*er
.6uipment #o*er higher
uti#ization
Other 'ervice 0ayouts
-arehouse and storage #ayouts
+etai# #ayouts
Office #ayouts
,esign Product 0ayouts4 0ine ?a#ancing
0ine ?a#ancing is the process of assigning tasks to *orkstations in
such a *ay that the *orkstations have appro/imate#y
e6ua# time re6uirements.
Cycle Time
Cycle time is the ma/imum time a##o*ed at each *orkstation to
comp#ete its set of tasks on a unit.
3etermine Ma$imum Output
!
OT
8 time cycle 8 CT
rate output !esired 8 !
day per time operatin# OT
CT
OT
8 capacity Output
=
3etermine the Minimum )umber of <or@stations 'eAuired
Calculate Percent %dle Time
.fficiency N E 5 Percent id#e time
,esigning Process 0ayouts
Information +e6uirements4
E. 0ist of departments
G. Pro2ection of *ork f#o*s
H. ,istance $et*een #ocations
I. Amount of money to $e invested
P. 0ist of specia# considerations
8. 0ocation of key uti#ities
s task time o. sum 8 t
OT
tA ?!A?
8 "

?"A?CTA
cycle per time Idle
8 time idle Percent
"rocess Layout 1 wor# travels
to $e$icate$ process centers
Millin
g
,ssem2l
y
! &est
;rin$in
g
Drillin
g
"latin
g
Process 0ayout
M"#$%& 4 '() Hours*
+apacit, Management-
7ob !esi#n, (r#onomics,
Met*ods Study and Hork Measurement,
(mployee Productivity,
earnin# Curve, S*ort)term Capacity Plannin#
A##re#ate plannin# and Capacity re/uirement plannin#
?Problems in Hork Measurement and S*ort term Capacity Plannin#A
#esign o.
/ork S,stems
7ob !esi#n, (r#onomics,
Met*ods Study and Hork Measurement,
(mployee Productivity,
0o #esign
Job design involves speci.yin# t*e content and met*ods o. 9ob
H*at 3ill be done
H*o 3ill do t*e 9ob
-o3 t*e 9ob 3ill bob 3ill be done
H*ere t*e 9ob 3ill be done
(r#onomics
#esign o. /ork S,stems
SpecialiIation
Be*avioral Approac*es to 7ob !esi#n
Teams
Met*ods Analysis
Motions Study
Horkin# conditions
0o #esign Success
Successful Job Design must be:
Carried out by e'perienced personnel 3it* t*e necessary trainin# and back#round
Consistent 3it* t*e #oals o. t*e or#aniIation
In 3ritten .orm
+nderstood and a#reed to by bot* mana#ement and employees
Speciali1ation in 2usiness- 3dvantages
Table C1<
#isadvantages
2ehavioral 3pproaches to 0o #esign
7ob (nlar#ement
Jivin# a 3orker a lar#er portion o. t*e total task by *oriIontal loadin#
7ob ,otation
Horkers periodically e'c*an#e 9obs
7ob (nric*ment
Increasin# responsibility .or plannin# and coordination tasks, by vertical
loadin#
For Management
:
10 Simplifies
training
@0 Hig
pro$uctivity
A0 Low wage
costs
For Labor
:

10 Low e$ucation
an$
s#ill
re>uirements
@
0
Minimu
m
responsi2ilitie
s
A
0
Little mental
effort
nee$e
$
For Management:
10
Difficult to motivate
>uality

@0 .or#er $issatisfaction8
possi2ly resulting in
a2senteeism8 ig
turnover8 $isruptive
tactics8 poor attention
to >uality
For Labor:
10 Monotonous wor#
@0 Limite$ opportunities
for a$vancement
A0 Little control over wor#
B0 Little opportunity for
self1fulfillment
Motivation and 4rust
Motivation
In.luences /uality and productivity
Contributes to 3ork environment
Trust
In.luences productivity and employee)mana#ement relations
4eams
Bene.its o. teams
-i#*er /uality
-i#*er productivity
Jreater 3orker satis.action
Sel.)directed teams
Jroups o. empo3ered to make certain c*an#es in t*eir 3ork process
Methods 3nal,sis
Met*ods analysis
AnalyIin# *o3 a 9ob #ets done
Be#ins 3it* overall analysis
Moves to speci.ic details
Methods 3nal,sis
The need for methods analysis can come
from a number of different sources:
C*an#es in tools and e/uipment
C*an#es in product desi#n
or ne3 products
C*an#es in materials or procedures
Ot*er .actors ?e1#1 accidents, /uality problemsA
Methods 3nal,sis 5rocedure
<1 Identi.y t*e operation to be studied
=1 Jet employee input
41 Study and document current met*od
>1 AnalyIe t*e 9ob
B1 Propose ne3 met*ods
21 Install ne3 met*ods
C1 &ollo3)up to ensure improvements *ave been ac*ieved
3nal,1ing the 0o
&lo3 process c*art
C*art used to e'amine t*e overall se/uence o. an operation by .ocusin# on
movements o. t*e operator or .lo3 o. materials
Horker)mac*ine c*art
C*art used to determine portions o. a 3ork cycle durin# 3*ic* an operator
and e/uipment are busy or idle
Motion Stud,
Motion study is t*e systematic study o. t*e *uman motions used to per.orm an operation1
Motion Stud, 4echni6ues
Motion study principles ) #uidelines .or desi#nin# motion)e..icient 3ork
procedures
Analysis of therbligs ) basic elemental motions into 3*ic* a 9ob can be broken
do3n
Micromotion study - use o. motion pictures and slo3 motion to study motions t*at
ot*er3ise 3ould be too rapid to analyIe
Charts
#eveloping /ork Methods
<1 (liminate unnecessary motions
=1 Combine activities
41 ,educe .ati#ue
>1 Improve t*e arran#ement o. t*e 3orkplace
B1 Improve t*e desi#n o. tools and e/uipment
F&'! PR'CESS C(AR)
5o2 Re>uisition of petty cas
Details of Meto$
,7,L<S&
D0 :ol2
",;E
1 of @

O
p
e
r
a
t
i
o
n



M
o
v
e
m
e
n
t




I
n
s
p
e
c
t
i
o
n
D
e
l
a
y
S
t
o
r
a
g
e
Re>uisition ma$e 2y $epartment ea$
"ut in Cpic#1upD 2as#et
&o accounting $epartment
,ccount an$ signature verifie$
,mount approve$ 2y treasurer
,mount counte$ 2y casier
,mount recor$e$ 2y 2oo##eeper
"etty cas seale$ in envelope
"etty cas carrie$ to $epartment
"etty cas cec#e$ against re>uisition
Receipt signe$
"etty cas store$ in safety 2o4
!igure Q3G
/orking +onditions
/ork Measurement
Standard time
Stop3atc* time study
-istorical times
Predetermined data
Hork Samplin#
Temperature L
@umidity
Jenti#ation

I##umination




%o#or


Aoise L
Ji$ration
%auses of
Accidents
'afet
y
-ork
?reaks
+ompensation
Time)based system
Compensation based on time an employee *as 3orked durin# a pay period
Output)based ?incentiveA system
Compensation based on t*e amount o. output an employee produces
durin# a pay period
Form o. 7ncentive 5lan
Accurate
(asy to apply
Consistent
(asy to understand
&air
+ompensation
Individual Incentive Plans
Jroup Incentive Plans
$no3led#e)Based Pay System
Mana#ement Compensation
%earning +urves
Learning curves ; t*e time re/uired to per.orm a task decreases 3it* increasin#
repetitions
%earning &..ect
%earning with 7mprovements
&
i
m
e

p
e
r

r
e
p
e
t
i
t
i
o
n
7um2er of repetitions
3pplications o. %earning +urves
<1 Manpo3er plannin# and sc*edulin#
=1 "e#otiated purc*asin#
41 Pricin# ne3 products
>1 Bud#etin#, purc*asin#, and inventory plannin#
B1 Capacity Plannin#
/orker %earning +urves
&
i
m
e

p
e
r

u
n
i
t
&ime
,verage
Improvements may create a
scallop effect in te curve0
+autions and +riticisms
earnin# rates may di..er .rom or#aniIation to or#aniIation
Pro9ections based on learnin# curves s*ould be vie3ed as appro'imations
(stimates based t*e .irst unit s*ould be c*ecked .or valid times
At some point t*e curve mi#*t level o.. or even tip up3ard
Some improvements may be more apparent t*an real
&or t*e most part, t*e concept does not apply to mass production
3ggregate 5lanning
Operations Plannin# Overvie3
T*e *ierarc*ical plannin# process
A##re#ate production plannin#
('amples; C*ase and evel strate#ies
"perations 5lanning "verview
on#)ran#e plannin#
Jreater t*an t*ree year plannin# *oriIon
+sually 3it* yearly increments
Intermediate)ran#e plannin#
,
)un$er>ualifie$*
-
)average*
%
)over>ualifie$*
&
i
m
e
(
c
y
c
l
e
s
One
wee#
Stan$ar$
time
&raining
time
< to 4 years
+sually 3it* mont*ly or /uarterly increments
S*ort)ran#e plannin#
One year
+sually 3it* 3eekly increments
Hierarchical 5roduction 5lanning
Master Production Sc*edulin#
ProductEService Sc*edule
,esource ,e/uirements Plannin#
MatKls, Capacity, Manpo3er
Order Sc*edulin#
ProductionEPurc*ases
Hork.orce 6
Customer Sc*edulin#
!aily Hork.orce 6
Customer Sc*edulin#
Strate#ic Plannin#
Sales Plannin#
A##re#ate Plannin#
on#)
ran#e
Intermediate)
ran#e
S*ort)
ran#e
3ggregate 5lanning
Joal; Speci.y t*e optimal combination o.
production rate ?units completed per unit o. timeA
3ork.orce level ?number o. 3orkersA
inventory on *and ?inventory carried .rom previous periodA
Product #roup or broad cate#ory ?A##re#ationA
Intermediate)ran#e plannin# period; 2)<5 mont*s
2alancing 3ggregate #emand and 3ggregate 5roduction +apacit,
Annual demand by
item and by re#ion
Mont*ly demand
.or <B mont*s by
product type
Mont*ly demand
.or B mont*s by
item
Forecasts needed
Allocates
production
amon# plants
!etermines
seasonal plan by
product type
!etermines
mont*ly
item production
sc*edules
#ecision 5rocess #ecision %evel
Corporate
Plant mana#er
S*op
superintendent
./hi$it EG.G
./hi$it EG.G
8e, Strategies .or Meeting #emand
C*ase
evel
Some combination o. t*e t3o
S4R34&97&S 3+47:& /R4 #&M3;#
$S& M3R8&47;9 4" SM""4H #&M3;#
(LAMP(S
P,IC(
P,O!+CT
PAC(
P,OMOTIO"
5roactive #emand Management to &6uate Suppl, and #emand
@
=@@@
>@@@
2@@@
5@@@
<@@@@
7an &eb Mar Apr May 7un
>B@@
BB@@
C@@@
<@@@@
5@@@
2@@@
@
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2@@@
5@@@
<@@@@
7an &eb Mar Apr May 7un
>B@@ >@@@
D@@@
5@@@
>@@@
2@@@
'uppose the figure to the
right represents forecast
demand in units.
Ao* suppose this #o*er
figure represents the
aggregate capacity of the
company to meet
demand.
-hat *e *ant to do is
$a#ance out the production
rate) *orkforce #eve#s) and
inventory to make these
figures match up.
5roactive #emand Management to &6uate Suppl, and #emand
0ason &nterprises 3ggregate 5lanning &<amples- $nit #emand and +ost #ata
@
=@@@
>@@@
2@@@
5@@@
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@
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S(ASO"A
!(MA"! )
S"OH S$IIS
CO"T,A)
S(ASO"A
!(MA"! )
MMMMMMMMMMMMMMM
@
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C:CICA
!(MA"! )
"(H CA,S
CO"T,A)C:CICA
!(MA"! )
MMMMMMMMMMMMMMMMMM
+apacit, 5lanning
Capacity is t*e upper limit or ceilin# on t*e load t*at an operatin# unit can *andle1
T*e basic /uestions in capacity *andlin# are;
H*at kind o. capacity is neededN
-o3 muc* is neededN
H*en is it neededN
7mportance o. +apacit, #ecisions
<1 Impacts ability to meet .uture demands
=1 A..ects operatin# costs
41 Ma9or determinant o. initial costs
>1 Involves lon#)term commitment
B1 A..ects competitiveness
21 A..ects ease o. mana#ement
C1 JlobaliIation adds comple'ity
51 Impacts lon# ran#e plannin#
+apacit,
!esi#n capacity
Materials O<@@Eunit
-oldin# costs O<@Eunit per mo1
Mar#inal cost o. stockout O=@Eunit per mo1
-irin# and trainin# cost OB@E3orker
ayo.. costs O<@@E3orker
abor *ours re/uired 1 > *rsEunit
Strai#*t time labor costEOT O<=1B@E<51CBE*our
Be#innin# inventory =@@ units
Productive *oursE3orkerEday 51@@
Paid strai#*t *rsEday 5
'uppose *e have the fo##o*ing unit demand and cost information4
!emandEmo 7an &eb Mar Apr May 7un
B@@ 2@@ 2B@ 5@@ D@@ 5@@
!ays per mont* == <D =< =< ==
ma'imum output rate or service capacity an operation, process, or .acility
is desi#ned .or
(..ective capacity
!esi#n capacity minus allo3ances suc* as personal time, maintenance,
and scrap
Actual output
rate o. output actually ac*ieved))cannot
e'ceed e..ective capacity1
&..icienc, and $tili1ation
3ctual output
&..icienc, =
&..ective capacit,
3ctual output
$tili1ation =
#esign capacit,
oth measures e!pressed as percentages
&..icienc,/$tili1ation &<ample
#eterminants o. &..ective +apacit,
&acilities
Actua# output N H8 unitsBday
.fficiency N N R9;
.ffective capacity I9 unitsB day

&ti#ization N Actua# output N H8 unitsBday
N QG;
,esign capacity P9 unitsBday
!esi#n capacity 8 B@ trucksEday
(..ective capacity 8 >@ trucksEday
Actual output 8 42 unitsEday
Product and service .actors
Process .actors
-uman .actors
Operational .actors
Supply c*ain .actors
('ternal .actors
Strateg, Formulation
Capacity strate#y .or lon#)term demand
!emand patterns
Jro3t* rate and variability
&acilities
Cost o. buildin# and operatin#
Tec*nolo#ical c*an#es
,ate and direction o. tec*nolo#y c*an#es
Be*avior o. competitors
Availability o. capital and ot*er inputs
8e, #ecisions o. +apacit, 5lanning
<1 Amount o. capacity needed
=1 Timin# o. c*an#es
41 "eed to maintain balance
>1 ('tent o. .le'ibility o. .acilities
Capacity cus*ion e'tra demand intended to o..set uncertainty
Steps .or +apacit, 5lanning
<1 (stimate .uture capacity re/uirements
=1 (valuate e'istin# capacity
41 Identi.y alternatives
>1 Conduct .inancial analysis
B1 Assess key /ualitative issues
21 Select one alternative
C1 Implement alternative c*osen
51 Monitor results
Make or 2u,
<1 Available capacity
=1 ('pertise
41 0uality considerations
>1 "ature o. demand
B1 Cost
21 ,isk
#eveloping +apacit, 3lternatives
<1 !esi#n .le'ibility into systems
=1 Take sta#e o. li.e cycle into account
41 Take a Pbi# pictureQ approac* to capacity c*an#es
>1 Prepare to deal 3it* capacity Pc*unksQ
B1 Attempt to smoot* out capacity re/uirements
21 Identi.y t*e optimal operatin# level
&conomies o. Scale
(conomies o. scale
I. t*e output rate is less t*an t*e optimal level, increasin# output rate
results in decreasin# avera#e unit costs
!iseconomies o. scale
I. t*e output rate is more t*an t*e optimal level, increasin# t*e output rate
results in increasin# avera#e unit costs
&valuating 3lternatives
&valuating 3lternatives
Minimu
m
cost
,
v
e
r
a
g
e

c
o
s
t

p
e
r

u
n
i
t
?
Rate of
output
Production units have an optima# rate of output for minima# cost.
!igure P.H
Minimum average cost per unit
5lanning Service +apacit,
"eed to be near customers
Capacity and location are closely tied
Inability to store services
Capacity must be matc*ed 3it* timin# o. demand
!e#ree o. volatility o. demand
Peak demand periods
+ost>:olume Relationships
Minimum cost ! optimal operating rate are
functions of si6e of pro$uction unit0
,
v
e
r
a
g
e

c
o
s
t

p
e
r

u
n
i
t
?
Small
plant
Me$ium
plant Large
plant
Output rate
!igure P.I
+ost>:olume Relationships
,
m
o
u
n
t

)
E
*
?
+ )volume in
units*
&
o
t
a
l

c
o
s
t

=

'
%

F

F
%
&
o
t
a
l

v
a
r
i
a
2
l
e

c
o
s
t

)
'
%
*
Fi4e$ cost
)F%*
+ost>:olume Relationships
2reak>&ven 5rolem with Step Fi<ed +osts
,
m
o
u
n
t

)
E
*
+ )volume in
units*
?
&
o
t
a
l

r
e
v
e
n
u
e
,
m
o
u
n
t

)
E
*
+ )volume in units*
?
-E" units
"
r
o
f
i
t
&
o
t
a
l

r
e
v
e
n
u
e

&
o
t
a
l

c
o
s
t
+uantity
F
%

F

'
%

=

&
%
F
%

F

'
%

=

&
%
F
%

F

'
%

=

&
%
Step fi4e$ costs an$ varia2le costs0
1 macine
@ macines
A macines
2reak>&ven 5rolem with Step Fi<ed +osts
3ssumptions o. +ost>:olume 3nal,sis
<1 One product is involved
=1 (veryt*in# produced can be sold
41 %ariable cost per unit is t*e same re#ardless o. volume
>1 &i'ed costs do not c*an#e 3it* volume
B1 ,evenue per unit constant 3it* volume
21 ,evenue per unit e'ceeds variable cost per unit
Financial 3nal,sis
Cas* &lo3 ) t*e di..erence bet3een cas* received .rom sales and ot*er sources,
and cas* out.lo3 .or labor, material, over*ead, and ta'es1
Present %alue ) t*e sum, in current value, o. all .uture cas* .lo3s o. an investment
proposal1
+alculating 5rocessing Re6uirements
E
&
%
&
%
&
%
-E
"
@
-E"
A
&
R
+uantit
y
1
@
A
Multiple 2rea#1even
points


Product

Annua#
,emand
'tandard
processing time
per unit (hr.)

Processing time
needed (hr.)

SE

SG

SH

I99

H99

Q99

P.9

:.9

G.9

G)999

G)I99

E)I99
P):99



Product

Annua#
,emand
'tandard
processing time
per unit (hr.)

Processing time
needed (hr.)

SE

SG

SH

I99

H99

Q99

P.9

:.9

G.9

G)999

G)I99

E)I99
P):99

M"#$%& ? '!( Hours*
Materials Management-
Scope o. Materials Mana#ement, .unctions,
in.ormation systems .or Materials Mana#ement,
Purc*asin# .unctions, Stores Mana#ement,
Inventory Mana#ement,
Materials re/uirement plannin#,
7ust in Time ?7ITA and (nterprise ,esource Plannin# ?(,PA,
?Problems in Inventory Mana#ement and %endor SelectionA
7nventor, Management
7nventor,
Types o. Inventory Items
Raw materials and purchased parts .rom outside suppliers1
+omponents- subassemblies t*at are a3aitin# .inal assembly1
/ork in process- all materials or components on t*e production .loor in
various sta#es o. production1
Finished goods- .inal products 3aitin# .or purc*ase or to be sent to
customers1
Supplies- all items needed but t*at are not part o. t*e .inis*ed product,
suc* as paper clips, duplicatin# mac*ine toner, and tools1
4he Role o. 7nventor, Management
Inventory Mana#ement
T*e process o. ensurin# t*at t*e .irm *as ade/uate inventories o. all parts
and supplies needed, 3it*in t*e constraint o. minimiIin# total inventory
costs1
Inventory Costs
Orderin# ?setupA costs
Ac/uisition costs
-oldin# ?carryin#A costs
Stockout costs
7nventor, +osts
Orderin# ?SetupA
Costs
T*e costs, usually .i'ed, o. placin# an order or settin# up mac*ines .or
a production run1
Ac/uisition Costs
T*e total costs o. all
units bou#*t to .ill an order, usually varyin# 3it* t*e siIe o. t*e
order1
Inventory)-oldin# ?Carryin#A Costs
All t*e costs associated 3it* carryin# parts or materials in inventory1
Stockout Costs
T*e costs associated 3it* runnin# out o. ra3 materials, parts, or .inis*ed)
#oods inventory1
2asic 7nventor, Management S,stems
ABC Inventory Mana#ement
Inventory is divided into t*ree dollar)volume cate#oriesRA, B, and CR3it* t*e
A parts bein# t*e most active ?lar#est dollar volumeA1
Inventory surveillance concentrates most on c*eckin# t*e A parts to #uard
a#ainst costly stockouts1
T*e idea is to .ocus most on t*e *i#*)annual)dollar)volume A inventory
items, to a lesser e'tent on t*e B items, and even less on t*e C items1
&conomic "rder @uantit, '&"@*
(conomic Order 0uantity ?(O0A
An inventory mana#ement system based on a simple .ormula t*at is used
to determine t*e most economical /uantity to order so t*at t*e total o.
inventory and setup costs is minimiIed1
Assumptions;
Constant per unit *oldin# and orderin# costs
Constant 3it*dra3als .rom inventory
"o discounts .or lar#e /uantity orders
Constant lead time .or receipt o. orders
4he &conomic "rder @uantit, Model
+ontrolling For @ualit, 3nd 5roductivit,
0uality
T*e e'tent to 3*ic* a product or service is able to meet customer needs
and e'pectations1
CustomerKs needs are t*e basic standard .or measurin# /uality
-i#* /uality does not *ave to mean *i#* price1
ISO D@@@
T*e /uality standards o. t*e International Standards Or#aniIation1
Total 0uality Mana#ement ?T0MA
A speci.ic or#aniIation)3ide pro#ram t*at inte#rates all t*e .unctions and
related processes o. a business suc* t*at t*ey are all aimed at ma'imiIin#
customer satis.action t*rou#* on#oin# improvements1
Also called; Continuous improvement, Sero de.ects, Si')Si#ma, and
$aiIen ?7apanA
Malcolm Baldrid#e A3ard
A priIe created in <D5C by t*e +1S1 !epartment o. Commerce to reco#niIe
outstandin# ac*ievement in /uality control mana#ement1
Inventory- a stock or store o. goods
In$epen$ent
Deman$
3
2'4
*
+'2
*
#'2
*
&'!
*
#'3
*
F'2
*
Depen$ent Deman$
In$epen$ent $eman$ is uncertain0
Depen$ent $eman$ is certain0
4,pes o. 7nventories
,a3 materials 6 purc*ased parts
Partially completed #oods called
"or# in progress
&inis*ed)#oods inventories
?manufacturing firmsA
or merc*andise
?retail storesA
,eplacement parts, tools, 6 supplies
Joods)in)transit to 3are*ouses or customers
Functions o. 7nventor,
To meet anticipated demand
To smoot* production re/uirements
To decouple operations
To protect a#ainst stock)outs
To take advanta#e o. order cycles
To *elp *ed#e a#ainst price increases
To permit operations
To take advanta#e o. /uantity discounts
"Aective o. 7nventor, +ontrol
To ac*ieve satis.actory levels o. customer service 3*ile keepin# inventory costs
3it*in reasonable bounds
evel o. customer service
Costs o. orderin# and carryin# inventory
&..ective 7nventor, Management
A system to keep track o. inventory
A reliable .orecast o. demand
$no3led#e o. lead times
,easonable estimates o.
-oldin# costs
Orderin# costs
S*orta#e costs
A classi.ication system
7nventor, +ounting S,stems
$eriodic System
P*ysical count o. items made at periodic intervals
$erpetual %nventory System
System t*at keeps track
o. removals .rom inventory
continuously, t*us
monitorin#
current levels o.
eac* item
T"o-in System - T3o containers o. inventoryT reorder 3*en t*e .irst is empty
&niversal ar Code - Bar code
printed on a label t*at *as
in.ormation about t*e item
to 3*ic* it is attac*ed
8e, 7nventor, 4erms
Lead time ; time interval bet3een orderin# and receivin# t*e order
'olding (carrying) costs ; cost to carry an item in inventory .or a len#t* o. time,
usually a year
*rdering costs ; costs o. orderin# and receivin# inventory
Shortage costs ; costs 3*en demand e'ceeds supply
(
2!4)(( 232()BBC)
32+ +lassi.ication S,stem
Classi.yin# inventory accordin# to some measure o. importance and allocatin# control
e..orts accordin#ly1
3 > very important
2 > mod1 important
+ > least important
+,cle +ounting
A p*ysical count o. items in inventory
Cycle countin# mana#ement
-o3 muc* accuracy is neededN
H*en s*ould cycle countin# be per.ormedN
H*o s*ould do itN
&conomic "rder @uantit, Models
(conomic order /uantity model
(conomic production model
0uantity discount model
3ssumptions o. &"@ Model
Only one product is involved
Annual demand re/uirements kno3n
!emand is even t*rou#*out t*e year
ead time does not vary
(ac* order is received in a sin#le delivery
T*ere are no /uantity discounts
4he 7nventor, +,cle
,nnual
E value
of items
,
,
-
-
%
%
Hig

Lo
w
Few
Man
y
7um2er of
Items
4otal +ost
+ost Minimi1ation 9oal
"rofile of Inventory Level Over &ime
+uantity
on an$
+
Receive
or$er
"lace
or$er
Receive
or$er
"lace
or$er
Receive
or$er
Lea$
time
Reor$er
point
Usage
rate
&ime
,nnual
carrying
cost
,nnual
or$ering
cost
&otal cost = F
Q
2
H
D
Q
S
&% =
F
#eriving the &"@
+sin# calculus, 3e take t*e derivative o. t*e total cost .unction and set t*e derivative
?slopeA e/ual to Iero and solve .or 01
Minimum 4otal +ost
T*e total cost curve reac*es its minimum 3*ere t*e carryin# and orderin# costs
are e/ual1
&conomic 5roduction @uantit, '&5@*
Production done in batc*es or lots
Or$er +uantity
)+*
&e &otal1%ost %urve is U1Sape$
Or$ering %osts
+
O
,
n
n
u
a
l

%
o
s
t
)optimal or$er >uantity*
TC
+
'
D
+
S = +
=
( N
G,'
@
N
G(Annua# ,emand)(Order or 'etup %ost)
Annua# @o#ding %ost
OPT
( N
G,'
@
N
G(Annua# ,emand)(Order or 'etup %ost)
Annua# @o#ding %ost
OPT
Capacity to produce a part e'ceeds t*e partKs usa#e or demand rate
Assumptions o. (P0 are similar to (O0 e'cept orders are received incrementally
durin# production
&conomic 5roduction @uantit, 3ssumptions
Only one item is involved
Annual demand is kno3n
+sa#e rate is constant
+sa#e occurs continually
Production rate is constant
ead time does not vary
"o /uantity discounts
&conomic Run Si1e
4otal +osts with 5urchasing +ost
,nnual
carrying
cost
"urcasing
cost
&%
=
F
Q
2
H
D
Q
S
&% =
F
F
,nnual
or$ering
cost
PD
F
+
DS
'
p
p u
@
=
=

4otal +osts with 5#

%
o
s
t
EO+
&% wit "D
&% witout "D
"D
( +uantity
,$$ing "urcasing cost
$oesnGt cange EO+
4otal +ost with +onstant +arr,ing +osts
/hen to Reorder with &"@ "rdering
,eorder $oint ) H*en t*e /uantity on *and o. an item drops to t*is amount, t*e
item is reordered
Safety Stoc# - Stock t*at is *eld in e'cess o. e'pected demand due to variable
demand rate andEor lead time1
Service Level - Probability t*at demand 3ill not e'ceed supply durin# lead time1
O
%
EO
+
+uantity
&
o
t
a
l

%
o
s
t
&%
a
&%
c
&%
2
Decreasin
g
"rice
%%
a828c
#eterminants o. the Reorder 5oint
T*e rate o. demand
T*e lead time
!emand andEor lead time variability
Stockout risk ?sa.ety stockA
Sa.et, Stock
Reorder 5oint
L
&
&im
e
E4pecte$
$eman$
$uring lea$ time
Ma4imum pro2a2le
$eman$
$uring lea$ time
RO
"
+
u
a
n
t
i
t
y
Safety
stoc#
Fi<ed>"rder>7nterval Model
Orders are placed at .i'ed time intervals
Order /uantity .or ne't intervalN
Suppliers mi#*t encoura#e .i'ed intervals
May re/uire only periodic c*ecks o. inventory levels
,isk o. stockout
Fi<ed>7nterval 2ene.its
Ti#*t control o. inventory items
Items .rom same supplier may yield savin#s in;
Orderin#
Packin#
S*ippin# costs
May be practical 3*en inventories cannot be closely monitored
Fi<ed>7nterval #isadvantages
,e/uires a lar#er sa.ety stock
Increases carryin# cost
Costs o. periodic revie3s
Single 5eriod Model
R"5
Ris# of
a stoc#out
Service
level
"ro2a2ility of
no stoc#out
E4pecte
$
$eman$
Safety
stoc#
? z
+uantity
61
scale
The +OP $ased on a norma#
,istri$ution of #ead time demand
Single period model ; model .or orderin# o. peris*ables and ot*er items 3it*
limited use.ul lives
Shortage cost ; #enerally t*e unrealiIed pro.its per unit
-!cess cost ; di..erence bet3een purc*ase cost and salva#e value o. items le.t over
at t*e end o. a period
Continuous stockin# levels
Identi.ies optimal stockin# levels
Optimal stockin# level balances unit s*orta#e and e'cess cost
!iscrete stockin# levels
Service levels are discrete rat*er t*an continuous
!esired service level is e/ualed or e!ceeded
"perations Strateg,
Too muc* inventory
Tends to *ide problems
(asier to live 3it* problems t*an to eliminate t*em
Costly to maintain
Hise strate#y
,educe lot siIes
,educe sa.ety stock
&conomic 5roduction @uantit,
Material Re6uirement 5lanning and 0ust 7n 4ime
Material Re6uirements 5lanning 7n.ormation S,stem
Inventory control 6 production plannin#
I
n
v
e
n
t
o
r
y

e
v
e
l
+sa#e
+sa#e
P
r
o
d
u
c
t
i
o
n
6

+
s
a
#
e
P
r
o
d
u
c
t
i
o
n
6

+
s
a
#
e
Sc*edules component items 3*en t*ey are needed ) no earlier and no later
Contrast 3it* Porder pointQ replenis*ment systems
/hen to $se MR5
7ob s*op production
Assemble)to)order
Any dependent demand environment
MR5 7nputs D "utputs
Master 5roduction Schedule
Master Production 'chedu#e
Materia#
+e6uirements
P#anning
P#anned Order +e#eases
'hop Orders
Purchase Orders
Product
'tructure
!i#e
Inventory
Master
!i#e
4o, +ar
MP' Period
Item E G H I P 8 Q :
%#ip$oard :8 RH EER E99 E99 E99 E99 E99
0ap$oard 9 P9 9 P9 9 P9 9 P9
0apdesk QP EG9 IQ G9 EQ E9 9 9
Penci# %ase EGP EGP EGP EGP EGP EGP EGP EGP
Assumption; P3*eel assemblyQ is produced as a 3ork)in)process item
4o, +ar 5roduct Structure 4ree
4o, +ar 5roduction Schedule &<ample
Body
A'les
H*eels
Toy %ar
A/e# (E)
-hee# Assem$#y
(G)
?ody
(E)
-hee# (G)
&<ample "rder Release Schedule
Item "umber Period
H*eels =5 4
A'les <> 4
H*eel assembly <> B
Bodies 2 =
Bodies 5 >
&inal assembly 2 2
&inal assembly 5 5
Rules .or &valuating 4o, +ar 5roduction Schedules
&inal product cannot s*ip be.ore t*e re/uired date
ASAP orders can s*ip as soon as done
Toy %ar
0ead time N E
A/e# (E)
0ead time N G
-hee# Assem$#y (G)
0ead time N E
?ody(E)
0ead time N I
-hee# (G)
0ead time N E
Period
Item E G H I P 8 Q : R
%ar 9 9 9 9 9 9 8 : 9
Master Production Sc*edule;
Product Structure Tree
?includes Bill o. Materials in.oA
Production 'chedu#e
E G H I P 8 Q : R E9
!ina# Assem$#y O 8 O :
?odies O O 8 :
-hee# Assem$#ies O EI
A/#es O EI
-hee#s O G:
Period
Cost o. > units .or every 3eek late on every car
&or ASAP orders, credit o. > .or every 3eek earlier t*an B, c*ar#e o. > .or
every 3eek later t*an B
Carryin# cost o. one unit .or every part .rom t*e time it arrives until t*e .inal
product s*ips
Carryin# cost o. one unit .or every assembly operation .rom t*e time it is .inis*ed
until t*e .inal product s*ips
+ost .or &<ample Schedule
Master Production Sc*edule;
4o, +ar &<ercise
Production 'chedu#e
E G H I P 8 Q : R E9
!ina# Assem$#y O 8 O :
?odies O O 8 :
-hee# Assem$#ies O EI
A/#es O EI
-hee#s O G:
Period
Cost 8 ?=5U=5U=5U<2U<2A U ?<>U<>U5U5A U ?<>U5U5A U?2U5A U >V5
Cost 8 =42
Period
Item E G H I P 8 Q : R
%ar 9 9 9 9 9 9 8 : 9
+ar 5roduction Schedule
Find the least cost order release and production schedule
Toy %ar
0ead time N E
A/e# (E)
0ead time N G
-hee# Assem$#y (G)
0ead time N E
?ody(E)
0ead time N I
-hee# (G)
0ead time N E
Period
Item E G H I P 8 Q : R
%ar 9 9 9 E97 9 9 9 G9 9
Master Production Sc*edule;
E G H I P 8 Q : R E9
!ina# Assem$#y
?odies
-hee# Assem$#ies
A/#es
-hee#s
E G H I P 8 Q : R E9
!ina# Assem$#y
?odies
-hee# Assem$#ies
A/#es
-hee#s
Toy %ar
0ead time N
E
A/e# (E)
0ead time N G
-hee# Assem$#y (G)
0ead time N E
?ody(E)
0ead time N I
-hee# (G)
0ead time N E
Period
Item E G H I P 8 Q : R
%ar 9 9 9 E97 9 9 9 G9 9
Master Production Sc*edule
Product Structure Tree
Eour ;ames-
Hork s*eet
Ans3er s*eet Cost 8
%east +ost 5roduction Schedule
&or one car;
H*eels?>A and a'les?=A 3ait = periods, 3*eel assemblies?=A and bodies
3ait one period; cost8<B
&or <@ ASAP cars add >@ ?.or < 3eek later t*an tar#etA to <B@ to #et <D@
&or =@ 3eek 5 cars, cost is 4@@
east cost total 8 >D@
Real /orld MR5 7nputs
Bill o. materialsE Product structure tree, lead times, costs ?as in our
e'erciseA
('istin# inventory
Capacity
ots siIes .or e..icient production
(/uipment do3ntime
Ot*er uncertainties
+apacit, Re6uirements 5lanning '+R5*
Toy %ar
0ead time N E
A/e# (E)
0ead time N G
-hee# Assem$#y (G)
0ead time N E
?ody(E)
0ead time N I
-hee# (G)
0ead time N E
Period
Item E G H I P 8 Q : R
%ar 9 9 9 E97 9 9 9 G9 9
Master Production Sc*edule;
E G H I P 8 Q : R E9
!ina# Assem$#y O E9 O G9
?odies O O E9 G9
-hee# Assem$#ies O G9 O I9
A/#es O G9)O I9
-hee#s O I9 O :9
ComputeriIed system t*at pro9ects load .rom material re/uirements plan
Creates load pro.ile
Identi.ies under)loads and over)loads
+apacit, Re6uirements 5lanning- 7nputs and outputs
"pen %oop MR5 'MR5 7*
M+P p#anned
order
re#eases
+outing
fi#e
%apacity
re6uirements
p#anning
Open
orders
fi#e
0oad profi#e for
each machine center
Matching %oad to +apacit,
Dispatc List
Is
specific
capacity
a$e>uate/
Material
Re>uirements
)$etaile$*
Desire$ Master
"ro$uction
Sce$ule
Realistic/
"riority %ontrol
"riority "lanning
"ro$uction "lan
7o
<es
7o
+losed %oop MR5 'MR5 77*
&nterprise Resource 5lanning '&R5*
('tension o. M,P
E G H I P 8
Time (*eeks)
-ork an
e/tra shift
Push $ack
Push $ack
Pu## ahead
Overtime
@ours of
capacity
Dispatc List
Is
specific
capacity
a$e>uate/
Is
average
capacity
a$e>uate/
Material
Re>uirements
)$etaile$*
%apacity
Re>uirements
)$etaile$*
Input(Output
Desire$ Master
"ro$uction
Sce$ule
Realistic/
"riority %ontrol
%apacity "lanning
"riority "lanning
%apacity %ontrol
Resource
"lanning
First %ut
%apacity
"ro$uction "lan
7o 7o
7o
<es <es
Inte#rates in.ormation on all resources needed .or runnin# a business
(specially sales, purc*asin#, and *uman resources
0ust>7n>4ime
ike M,P aim is to minimiIe inventory
But people .ocus is di..erent
M,P computer optimiIation
7IT empo3erment o. 3orkers doin# t*e 9ob
And inventory tec*nical approac* is di..erent
M,P Ppus*Q by computer sc*edule
7IT PpullQ by need .or replenis*ment as parts are used up
('perience ?e1#1 ToyotaA .avors 7IT in many situations
7ob s*op vs repetitive
:ideo
7IT implementation at &ederal Si#nal
Specialty li#*ts .or emer#ency ve*icles
!urin# t*e video, make a list o. 7IT elements in t3o cate#ories;
Tec*nical stu.. ?e1#1 use o. $anban systemA
People stu.. ?e1#1 3orker o3ners*ipA
F5ullG s,stem 5roduction +ontrol
8anan > :isual 5roduction +ontrol
$anban maintains discipline o. pull production
$anban card moves 3it* empty and .ull containers o. parts
Production $anban aut*oriIes production
And contains production in.ormation
4he 2roader Sense o. 074
Producin# only 3*at is needed, 3*en it is needed
Production at 'tep <G= in contro##ed $y step <H=
Production
Step 4
In.ormation &lo3
Material &lo3
Send more 3id#ets
Production
Step =
In.ormation &lo3
Material &lo3
Send more 3id#ets
) eliminate all 3aste, not 9ust unproductive inventory
An inte#rated mana#ement system1
7ITKs ob9ective; Improve Pro.its and ,1O1I
PHorld ClassQ cost, /uality, delivery
Overlap with !ality "hilosophies #e.$. TM%
Some &<amples o. /aste
Haitin# .or parts
Countin# parts
Multiple inspections
Over)runs in production
Movin# parts over lon# distances
Storin# and retrievin# inventory
ookin# .or tools
Mac*ine breakdo3n
,e3ork
&..ect o. 074 on /orkers
Multi.unction 3orkers
Cross)trainin#
"e3 pay system to re.lect skills variety
Team3ork
Su##estion system
M"#$%& C () Hours*
5roduction scheduling-
Master Production sc*edulin#, detailed sc*edulin#,
.acility loadin# se/uencin# operations,
priority se/uencin# tec*ni/ues,
line balancin# and line o. balance ?OBA,
?Problems in Priority se/uencin#, 7o*nsonKs rule and ine Balancin#A
Scheduling
Sc*edulin#; (stablis*in# t*e timin# o. t*e use o. e/uipment, .acilities and *uman
activities in an or#aniIation
(..ective sc*edulin# can yield
Cost savin#s
Increases in productivity
High>:olume S,stems
.lo" system ; -i#*)volume system 3it* StandardiIed e/uipment and activities
.lo"-shop scheduling ; Sc*edulin# .or *i#*)volume .lo3 system
Scheduling Manu.acturing "perations
High>:olume Success Factors
.or# %enter H1 .or# %enter SG
Output
Build A
A Done
Build B
B Done
Build C
C Done
Build D
Shi
5,7 FE- M,R ,"R M,< 5U7
On
timeI
@igh3vo#ume
Intermediate3
vo#ume
0o*3vo#ume
'ervice
operations
Process and product desi#n
Preventive maintenance
,apid repair 3*en breakdo3n occurs
Optimal product mi'es
MinimiIation o. /uality problems
,eliability and timin# o. supplies
7ntermediate>:olume S,stems
Outputs are bet3een standardiIed *i#*)volume systems and made)to)order 9ob
s*ops
,un siIe, timin#, and se/uence o. 9obs
(conomic run siIe;
Scheduling %ow>:olume S,stems
Loading ) assi#nment o. 9obs to process centers
Se/uencing ) determinin# t*e order in 3*ic* 9obs 3ill be processed
7ob)s*op sc*edulin#
Sc*edulin# .or lo3)volume
systems 3it* many
variations
in re/uirements
9antt %oad +hart
0antt chart ) used as a visual aid .or loadin# and sc*edulin#
%oading
-ork
%enter
Mon. Tues. -ed. Thurs. !ri.
E Co$ H Co$ I
G Co$ H Co$ Q
H Co$ E Co$ 8 Co$ Q
I Co$ E9

+
DS
'
p
p u
@
=
=

In.inite loadin#
&inite loadin#
%ertical loadin#
-oriIontal loadin#
&or3ard sc*edulin#
Back3ard sc*edulin#
Sc*edule c*art
Se6uencing
Se/uencing ; !etermine t*e order in 3*ic* 9obs at a 3ork center 3ill be processed1
1or#station ; An area 3*ere one person 3orks, usually 3it* special e/uipment, on
a specialiIed 9ob1
$riority rules ; Simple *euristics
used to select t*e order in
3*ic* 9obs 3ill be processed1
Job time ; Time needed .or
setup and processin# o. a 9ob1
5riorit, Rules
&C&S ) .irst come, .irst served
SPT ) s*ortest processin# time
(!! ) earliest due date
C, ) critical ratio
SEO ) slack per operation
,us* ) emer#ency
&<ample 2
&op
"riority
4wo /ork +enter Se6uencing
Johnson2s ,ule ; tec*ni/ue .or minimiIin# completion time .or a #roup o. 9obs to
be processed on t3o mac*ines or at t3o 3ork centers1
MinimiIes total idle time
Several conditions must be satis.ied
0ohnsonHs Rule +onditions
7ob time must be kno3n and constant
7ob times must be independent o. se/uence
7obs must .ollo3 same t3o)step se/uence
7ob priorities cannot be used
All units must be completed at t*e .irst
3ork center be.ore movin# to second
0ohnsonHs Rule "ptimum Se6uence
<1 ist t*e 9obs and t*eir times at eac* 3ork center
=1 Select t*e 9ob 3it* t*e s*ortest time
41 (liminate t*e 9ob .rom .urt*er consideration
>1 ,epeat steps = and 4 until all 9obs *ave been sc*eduled
Scheduling #i..iculties
%ariability in
41=> D12C ==1<C C,
=125 2144 <5144 (!!
=124 212C <51@@ SPT
=1D4 D1@@ =@1@@ &C&S
Avera#e
"umber o.
7obs at t*e
Hork Center
Avera#e
Tardiness
?daysA
Avera#e
&lo3 Time
?daysA ,ule
Setup times
Processin# times
Interruptions
C*an#es in t*e set o. 9obs
"o met*od .or identi.yin# optimal sc*edule
Sc*edulin# is not an e'act science
On#oin# task .or a mana#er
Minimi1ing Scheduling #i..iculties
Set realistic due dates
&ocus on bottleneck operations
Consider lot splittin# o. lar#e 9obs
Scheduling Service "perations
Appointment systems
Controls customer arrivals .or service
,eservation systems
(stimates demand .or service
Sc*edulin# t*e 3ork.orce
Mana#es capacity .or service
Sc*edulin# multiple resources
Coordinates use o. more t*an one resource
+,clical Scheduling
-ospitals, policeE.ire departments, restaurants, supermarkets
,otatin# sc*edules
Set a sc*edulin# *oriIon
Identi.y t*e 3ork pattern
!evelop a basic employee sc*edule
Assi#n employees to t*e sc*edule
Service "peration 5rolems
Cannot store or inventory services
Customer service re/uests are random
Sc*edulin# service involves
Customers
Hork.orce
(/uipment
M"#$%& B '() Hours*
0uality Mana#ement;
Inspection and 0uality control,
Statistical 0uality Control Tec*ni/ues
?Control C*arts and acceptance samplin#A,
/uality circles
Introduction to Total 0uality Mana#ement ?T0MA,
?Problems in Control C*artsA
"Aectives
To introduce t*e /uality mana#ement process and key /uality mana#ement
activities
To e'plain t*e role o. standards in /uality mana#ement
To e'plain t*e concept o. a so.t3are metric, predictor metrics and control metrics
To e'plain *o3 measurement may be used in assessin# so.t3are /uality and t*e
limitations o. so.t3are measurement
@ualit, +ontrol
+ontrolling For @ualit, 3nd 5roductivit,
0uality
T*e e'tent to 3*ic* a product or service is able to meet customer needs
and e'pectations1
CustomerKs needs are t*e basic standard .or measurin# /uality
-i#* /uality does not *ave to mean *i#* price1
ISO D@@@
T*e /uality standards o. t*e International Standards Or#aniIation1
+ontrolling For @ualit, 3nd 5roductivit,
Total 0uality Mana#ement ?T0MA
A speci.ic or#aniIation)3ide pro#ram t*at inte#rates all t*e .unctions and
related processes o. a business suc* t*at t*ey are all aimed at ma'imiIin#
customer satis.action t*rou#* on#oin# improvements1
Also called; Continuous improvement, Sero de.ects, Si')Si#ma, and
$aiIen ?7apanA
Malcolm Baldrid#e A3ard
A priIe created in <D5C by t*e +1S1 !epartment o. Commerce to reco#niIe
outstandin# ac*ievement in /uality control mana#ement1
+hecklist !?I!How to /in a 2aldridge 3ward
Is t*e company e'*ibitin# senior e'ecutive leaders*ipN
Is t*e company obtainin# /uality in.ormation and analysisN
Is t*e company en#a#in# in strate#ic /uality plannin#N
Is t*e company developin# its *uman resourcesN
Is t*e company mana#in# t*e entire /uality processN
-o3 does t*e company measure operational resultsN
!oes t*e company e'*ibit a customer .ocusN
@ualit, +ontrol Methods
Acceptance Samplin#
a met*od o. monitorin# product /uality t*at re/uires t*e inspection o. only
a small portion o. t*e produced items1
&<ample o. a @ualit, +ontrol +hart
+ommonl, $sed 4ools .or 5rolem Solving and +ontinuous 7mprovement
Fishone +hart 'or +ause>and>&..ect #iagram* .or 5rolems with 3irline +ustomer
Service
5areto 3nal,sis +hart
5hases o. @ualit, 3ssurance
,cceptance
sampling
"rocess
control
%ontinuous
improvemen
t
Inspection
2efore(after
pro$uction
Inspection an$
corrective
action $uring
pro$uction
+uality 2uilt
into te
process
&e least
progressive
&e most
progressive
7nspection
-o3 Muc*E-o3 O.ten
H*ereEH*en
CentraliIed vs1 On)site
7nspection +osts
%
o
s
t
Optimal
,mount of Inspection
Inspection %osts
%ost of
inspection
%ost of
passing
$efectives
&otal %ost
/here to 7nspect in the 5rocess
,a3 materials and purc*ased parts
&inis*ed products
Be.ore a costly operation
Be.ore an irreversible process
Be.ore a coverin# process
Input
s
&ransformatio
n
Output
s
,cceptance
sampling
"rocess
control
,cceptance
sampling
&<amples o. 7nspection 5oints
Statistical $rocess Control ;
Statistical evaluation o. t*e output o. a process durin# production
+uality of Conformance:
A product or service con.orms to speci.ications
+ontrol +hart
Control C*art
$urpose: to monitor process output to see i. it is random
A time ordered plot representative sample statistics obtained .rom an on
#oin# process ?e1#1 sample meansA
+pper and lo3er control limits de.ine t*e ran#e o. acceptable variation
&ype of
2usiness
Inspection
points
%aracteristics
!ast !ood %ashier
%ounter area
.ating area
?ui#ding
Fitchen
Accuracy
Appearance) productivity
%#ean#iness
Appearance
@ea#th regu#ations
@ote#Bmote# Parking #ot
Accounting
?ui#ding
Main desk
'afe) *e## #ighted
Accuracy) time#iness
Appearance) safety
-aiting times
'upermarket %ashiers
,e#iveries
Accuracy) courtesy
(ua#ity) 6uantity

%ontro# %hart
? 1 @ A B J K L M N 1? 11 1@ 1A 1B 1J
U%L
L%L
Sample num2er
Mean
Out of
control
7ormal variation
$ue to cance
,2normal variation
$ue to assigna2le sources
,2normal variation
$ue to assigna2le sources
Statistical 5rocess +ontrol
T*e essence o. statistical process control is to assure t*at t*e output o. a process is
random so t*at future output 3ill be random1
Statistical 5rocess +ontrol
T*e Control Process
!e.ine
Measure
Compare
(valuate
Correct
Monitor results
Statistical 5rocess +ontrol
%ariations and Control
,andom variation ; "atural variations in t*e output o. a process, created by
countless minor .actors
Assignable variation ; A variation 3*ose source can be identi.ied
Sampling #istriution
;ormal #istriution
+ontrol %imits
Sampling
$istri2ution
"rocess
$istri2ution
Mean
Mean
3

+2

+3

NJ0BB
O
NN0LB
O
= Stan$ar$
$eviation
S5+ &rrors
Type I error
Concludin# a process is not in control 3*en it actually is1
Type II error
Concludin# a process is in control 3*en it is not1
4,pe 7 &rror
"servations .rom Sample #istriution
Sampling
$istri2ution
"rocess
$istri2ution
Mean
Lower
control
limit
Upper
control
limit
Mean
L%
L
U%
L
(
@
(
@
= "ro2a2ility
of &ype I error
+ontrol +harts .or :ariales
:ariales generate data that are meas!re&I
Mean control c*arts
+sed to monitor t*e central tendency o. a process1
L bar c*arts
,an#e control c*arts
+sed to monitor t*e process dispersion
, c*arts
Mean and Range +harts
Mean and +ange %harts
U%L
L%L
U%L
L%L
R1cart
41%art
Detects si ft
Does not
$etect sift
*process men is
shifting up+rd,
Smp-ing
Distribution
Sample num2er
U%L
L%L
1 @ A B
41%art
U%L
Does not
reveal increase
Mean and +ange %harts
U%L
L%L
L%L
R1cart Reveals increase
*process vribi-ity is incresing,
Smp-ing
Distribution
+ontrol +hart .or 3ttriutes
p)C*art ) Control c*art used to monitor t*e proportion o. de.ectives in a process
c)C*art ) Control c*art used to monitor t*e number o. de.ects per unit
3ttriutes generate data that are co!nte&I
$se o. p>+harts
H*en observations can be placed into t3o cate#ories1
Jood or bad
Pass or .ail
Operate or donKt operate
H*en t*e data consists o. multiple samples o. several observations eac*
$se o. c>+harts
+se only 3*en t*e number o. occurrences per unit o. measure can be countedT
non)occurrences cannot be counted1
Scratc*es, c*ips, dents, or errors per item
Cracks or .aults per unit o. distance
Breaks or Tears per unit o. area
Bacteria or pollutants per unit o. volume
Calls, complaints, .ailures per unit o. time
$se o. +ontrol +harts
At 3*at point in t*e process to use control c*arts
H*at siIe samples to take
H*at type o. control c*art to use
%ariables
Attributes
Run 4ests
,un test a test .or randomness
Any sort o. pattern in t*e data 3ould su##est a non)random process
All points are 3it*in t*e control limits ) t*e process may not be random
;onrandom 5atterns in +ontrol charts
Trend
Cycles
Bias
Mean s*i.t
Too muc* dispersion
+ounting 3ove/2elow Median Runs 'B runs*
+ounting $p/#own Runs ') runs*
$ $ # $ # $ # $ $ #
2 3 3 2 3 2 2 2 3 3 2
!igure E9.EG
!igure E9.EH
%ounting +uns %ounting +uns
5rocess +apailit,
Tolerances or speci.ications
,an#e o. acceptable values establis*ed by en#ineerin# desi#n or customer
re/uirements
Process variability
"atural variability in a process
Process capability
Process variability relative to speci.ication
Process %apa$i#ity
Lower
Specification
Upper
Specification
,0 "rocess varia2ility
matces specifications
Lower
Specification
Upper
Specification
-0 "rocess varia2ility
well witin specifications
Lower
Specification
Upper
Specification
%0 "rocess varia2ility
e4cee$s specifications
!igure E9.EP
5rocess +apailit, Ratio
Process capability ratio, Cp 8
speci.ication 3idt*
process 3idt*
+pper speci.ication lo3er speci.ication
2
Cp 8
5rocess
mean
%ower
speci.icati on
$pper
speci.icati on
!3?( ppm
!3?( ppm
!IB ppm !IB ppm
J/> 3 Sigma
J/> C Sigma
H 'igma and 8 'igma (ua#ity H 'igma and 8 'igma (ua#ity
7mproving 5rocess +apailit,
Simpli.y
StandardiIe
Mistake)proo.
+p#rade e/uipment
Automate
Taguchi 0oss !unction
+ost
4arget
%ower
spec
$pper
spec
4raditional
cost .unction
4aguchi
cost .unction
!igure E9.EQ
%imitations o. +apailit, 7nde<es
<1 Process may not be stable
=1 Process output may not be normally distributed
41 Process not centered but Cp is used
'&&itional "ower"oint sli&es
contri(!te& (y
Geo)) *illis,
+niversity o) Central O,lahoma
Statistical 5rocess +ontrol 'S5+*
Invented by Halter S*e3*art at Hestern (lectric
!istin#uis*es bet3een
common cause variability ?randomA
special cause variability ?assi#nableA
Based on repeated samples .rom a process
&mpirical Rule
)4 )< )= U< U= U4
25F
DBF
DD1CF
+ontrol +harts in 9eneral
Are named accordin# to t*e statistics bein# plotted, i1e1, L bar, ,, p, and c
-ave a center line t*at is t*e overall avera#e
-ave limits above and belo3 t*e center line at W 4 standard deviations ?usuallyA
Center line
o3er Control imit ?CA
+pper Control imit ?+CA
:ariales #ata +harts
Jaria$#es ,ata %harts
1 Process %entering
5 O $ar chart
5 O $ar is a samp#e mean
1 Process ,ispersion (consistency)
5 + chart
5 + is a samp#e range
O $ar charts
1 %enter #ine is the grand mean (O dou$#e
$ar)
1 Points are O $ars
)O,)
R +harts
Center line is t*e #rand mean ?, barA
Points are ,
!4 and !> values are tabled accordin# to n ?sample siIeA

$se o. K ar D R charts
C*arts are al3ays used in tandem
!ata are collected ?=@)=B samplesA
Sample statistics are computed
All data are plotted on t*e = c*arts
C*arts are e'amined .or randomness
I. random, t*en limits are used P.oreverQ
Attri$ute %harts
1 c charts 5 used to count defects in a
constant samp#e size
, D &CL
>
= , D LCL
4
=
Attri$ute %harts
1 p charts 5 used to track
a proportion (fraction)
defective
Process %apa$i#ity
The ratio of process varia$i#ity to design
specifications
+pper
Spec
o3er
Spec
"atural data
spread
T*e natural spread
o. t*e data is 2X
)<X
U=X
)=X
U<X U4X
)4X
Y
4raining
M0>
7ob rotationE/uality .ati#ue at -onda
@ualit, Measurement
Services/Measurement
STAO4
SurveyE(..iciency, AdmissionE!isc*ar#e
7nspection 3cceptance Sampling
Sampling 5lans
'cceptance samplin$ - &orm o. inspection applied to lots or batc*es o. items
be.ore or a.ter a process, to 9ud#e con.ormance 3it* predetermined standards
-amplin$ plans ; Plans t*at speci.y lot siIe, sample siIe, number o. samples, and
acceptanceEre9ection criteria
Sin#le)samplin#
!ouble)samplin#
Multiple)samplin#
Operating %haracteristic %urve
@
@1<
@1=
@14
@1>
@1B
@12
@1C
@15
@1D
<
@ 1@B 1<@ 1<B 1=@ 1=B
5
r
o

i
l
i
t
,

o
.

a
c
c
e
p
t
i
n
g

l
o
t
%ot 6ualit, '.raction de.ective*
4F
,ecision %riteria
@
<1@@
5
r
o

i
l
i
t
,

o
.

a
c
c
e
p
t
i
n
g

l
o
t
%ot 6ualit, '.raction de.ective*
<"ood= <?ad=
Idea#
Aot very
discriminating
!igure E9'.G
Sampling 4erms
'cceptance .!ality level #'/% - t*e percenta#e o. de.ects at 3*ic* consumers
are 3illin# to accept lots as P#oodQ
/ot tolerance percent &e)ective #/T"0% - t*e upper limit on t*e percenta#e o.
de.ects t*at a consumer is 3illin# to accept
Cons!mer1s ris, - t*e probability t*at a lot contained de.ectives e'ceedin# t*e
TP! 3ill be accepted
"ro&!cer1s ris, ; t*e probability t*at a lot containin# t*e acceptable /uality level
3ill be re9ected
%onsumers and Producers
+isk
@
@1<
@1=
@14
@1>
@1B
@12
@1C
@15
@1D
<
@ 1@B 1<@ 1<B 1=@ 1=B
5
r
o

i
l
i
t
,

o
.

a
c
c
e
p
t
i
n
g

l
o
t
%ot 6ualit, '.raction de.ective*
N .E9
N .E9
<"ood=
A(0
<?ad= Indifferent
0TP,
!igure E9'.H
(% %urve for n N E9) c N E (% %urve for n N E9) c N E
!igure E9'.I
@
@1<
@1=
@14
@1>
@1B
@12
@1C
@15
@1D
<
@ 1<@ 1=@ 14@ 1>@ 1B@
5
r
o

i
l
i
t
,

o
.

a
c
c
e
p
t
a
n
c
e
Fraction de.ective in lot
1D<4D
1C42<
1B>>4
14CB5
1=>>@
1<>D4
1@52@
Average (ua#ity
1 Average outgoing 6ua#ity (AO()4
Average of inspected #ots (E99;) and
uni nspected #ots
Pac 8 Probability o. acceptin# lot
p 8 &raction de.ective
" 8 ot siIe
n 8 Sample siIe
./amp#e G4 AO(
,ppro4imate ,O+L = 0?M@
,
O
+

)
F
r
a
c
t
i
o
n

$
e
f
e
c
t
i
v
e

o
u
t
*
Incoming fraction $efective
O% %urves
"
r
o
2
a
2
i
l
i
t
y

o
f

,
c
c
e
p
t
i
n
g

L
o
t
Lot +uality )Fraction Defective*
E99;
QP;
P9;
GP;
.9H .98 .9R
O% %urves come in
various shapes
depending on the
samp#e size and risk of
and errors
This curve is more
discriminating
This curve is #ess
discriminating
"
r
o
2
a
2
i
l
i
t
y

o
f

,
c
c
e
p
t
i
n
g

L
o
t
Lot +uality )Fraction Defective*
E99;
QP;
P9;
GP;
.9H .98 .9R
This curve distinguishes
perf ect#y $et*een good
and $ad #ots.
The Perfect O% %urve
-hat *ou#d a##o* you
to achieve a curve #ike
this7
"+ +urve 4erms
Acceptable 0uality evel ?A0A
Percenta#e o. de.ective items a customer is 3illin# to accept .rom you ?a
property o. m.#1 processA
ot Tolerance Percent !e.ective ?TP!A
+pper limit on t*e percenta#e o. de.ects a customer is 3illin# to accept ? a
property o. t*e consumerA
Avera#e Out#oin# 0uality ?AO0A
Avera#e o. re9ected lots and accepted lots
Avera#e Out#oin# 0uality imit ?AO0A
Ma'imum AO0 .or a ran#e o. .ractions de.ective
O% ,efinitions on the %urve
"
r
o
2
a
2
i
l
i
t
y

o
f

,
c
c
e
p
t
i
n
g

L
o
t
Lot +uality )Fraction Defective*
E99;
QP;
P9;
GP;
.9H .98 .9R
N 9.E9
R9;
N 9.E9
A
(
0
0
T
P
,
Indifferent
"
o
o
d
?ad
Statistical @ualit, +ontrol 4echni6ues
Topics covered
Process and product /uality
0uality assurance and standards
0uality plannin#
0uality control
So.tware 6ualit, management
Concerned 3it* ensurin# t*at t*e re/uired level o. /uality is ac*ieved in a
so.t3are product1
Involves de.inin# appropriate /uality standards and procedures and ensurin# t*at
t*ese are .ollo3ed1
S*ould aim to develop a Z/uality cultureK 3*ere /uality is seen as everyoneKs
responsibility1
/hat is 6ualit,?
0uality, simplistically, means t*at a product s*ould meet its speci.ication1
T*is is problematical .or so.t3are systems
T*ere is a tension bet3een customer /uality re/uirements ?e..iciency,
reliability, etc1A and developer /uality re/uirements ?maintainability,
reusability, etc1AT
Some /uality re/uirements are di..icult to speci.y in an unambi#uous 3ayT
So.t3are speci.ications are usually incomplete and o.ten inconsistent1
4he 6ualit, compromise
He cannot 3ait .or speci.ications to improve be.ore payin# attention to /uality
mana#ement1
He must put /uality mana#ement procedures into place to improve /uality in
spite o. imper.ect speci.ication1
Scope o. 6ualit, management
0uality mana#ement is particularly important .or lar#e, comple' systems1 T*e
/uality documentation is a record o. pro#ress and supports continuity o.
development as t*e development team c*an#es1
&or smaller systems, /uality mana#ement needs less documentation and s*ould
.ocus on establis*in# a /uality culture1
@ualit, management activities
0uality assurance
(stablis* or#anisational procedures and standards .or /uality1
0uality plannin#
Select applicable procedures and standards .or a particular pro9ect and
modi.y t*ese as re/uired1
0uality control
(nsure t*at procedures and standards are .ollo3ed by t*e so.t3are
development team1
0uality mana#ement s*ould be separate .rom pro9ect mana#ement to ensure
independence1
@ualit, management and so.tware development
Software development
process
Quality management
process
D1 D2 D3 D4 D5
Standards and
procedures
Quality
plan
Quality review repor ts
5rocess and product 6ualit,
T*e /uality o. a developed product is in.luenced by t*e /uality o. t*e production
process1
T*is is important in so.t3are development as some product /uality attributes are
*ard to assess1
-o3ever, t*ere is a very comple' and poorly understood relations*ip bet3een
so.t3are processes and product /uality1
5rocess>ased 6ualit,
T*ere is a strai#*t.or3ard link bet3een process and product in manu.actured
#oods1
More comple' .or so.t3are because;
T*e application o. individual skills and e'perience is particularly imporant
in so.t3are developmentT
('ternal .actors suc* as t*e novelty o. an application or t*e need .or an
accelerated development sc*edule may impair product /uality1
Care must be taken not to impose inappropriate process standards ) t*ese could
reduce rat*er t*an improve t*e product /uality1
5rocess>ased 6ualit,
Define process
Develop
product
Assess pr oduct
quality
Standar dise
process
Improve
process
Quality
!
"o #es
5ractical process 6ualit,
!e.ine process standards suc* as *o3 revie3s s*ould be conducted,
con.i#uration
mana#ement, etc1
Monitor t*e development process to ensure
t*at standards are bein# .ollo3ed1
,eport on t*e process to pro9ect mana#ement and so.t3are procurer1
!onKt use inappropriate practices simply because standards *ave been establis*ed1
@ualit, assurance and standards
Standards are t*e key to e..ective /uality mana#ement1
T*ey may be international, national, or#aniIational or pro9ect standards1
5roduct standards de.ine c*aracteristics t*at all components s*ould e'*ibit e1#1
a common pro#rammin# style1
5rocess standards de.ine *o3 t*e so.t3are process s*ould be enacted1
7mportance o. standards
(ncapsulation o. best practice) avoids
repetition o. past mistakes1
T*ey are a .rame3ork .or /uality assurance processes ) t*ey involve c*eckin#
compliance to standards1
T*ey provide continuity ) ne3 sta.. can understand t*e or#anisation by
understandin# t*e standards t*at are used1
5roduct and process standards
Product and process standards
5rolems with standards
T*ey may not be seen as relevant and up)to)date by so.t3are en#ineers1
T*ey o.ten involve too muc* bureaucratic .orm .illin#1
I. t*ey are unsupported by so.t3are tools, tedious manual 3ork is o.ten involved
to maintain t*e documentation associated 3it* t*e standards1
Standards development
Involve practitioners in development1 (n#ineers s*ould understand t*e rationale
underlyin# a standard1
,evie3 standards and t*eir usa#e re#ularly1
Standards can /uickly become outdated and t*is reduces t*eir credibility amon#st
practitioners1
!etailed standards s*ould *ave associated tool
support1 ('cessive clerical 3ork is t*e most
si#ni.icant complaint a#ainst standards1
7S" L(((
An international set o. standards .or /uality mana#ement1
Applicable to a ran#e o. or#anisations .rom manu.acturin# to service industries1
ISO D@@< applicable to or#anisations 3*ic* desi#n, develop and maintain
products1
ISO D@@< is a #eneric model o. t*e /uality process t*at must be instantiated .or
eac* or#anisation usin# t*e standard1
I'O R99E
7S" L((( certi.ication
0uality standards and procedures s*ould be documented in an or#anisational
/uality manual1
An e'ternal body may certi.y t*at an or#anisationKs /uality manual con.orms to
ISO D@@@ standards1
Some customers re/uire suppliers to be ISO D@@@ certi.ied alt*ou#* t*e need .or
.le'ibility *ere is increasin#ly reco#nised1
7S" L((( and 6ualit, management
$ro% ect 1
quality plan
$ro% ect 2
quality plan
$ro% ect 3
quality plan
$ro% ect quality
mana gement
rganisa tion
quality man ual
IS &'''
quality models
rganisa tion
quality pr ocess
is used to de velop instantia ted as
instantia ted as
documents
Suppor ts
#ocumentation standards
Particularly important ) documents are t*e tan#ible mani.estation o. t*e so.t3are1
!ocumentation process standards
Concerned 3it* *o3 documents s*ould be developed, validated and
maintained1
!ocument standards
Concerned 3it* document contents, structure, and appearance1
!ocument interc*an#e standards
Concerned 3it* t*e compatibility o. electronic documents1
#ocumentation process
(rea te
initial dr aft
)eview
draft
Incorporate
review
comments
)e*draft
document
$roofread
te+t
$roduce
final dr aft
(,ec-
final dr aft
.ayout
te+t
)eview
layout
$roduce
print masters
$rint
copies
Stage 1:
Creation
Stage 2:
Polishing
Stage 3:
Production
Appr oved document
Appr oved document
#ocument standards
!ocument identi.ication standards
-o3 documents are uni/uely identi.ied1
!ocument structure standards
Standard structure .or pro9ect documents1
!ocument presentation standards
!e.ine .onts and styles, use o. lo#os, etc1
!ocument update standards
!e.ine *o3 c*an#es .rom previous versions are re.lected in a document1
#ocument interchange standards
Interc*an#e standards allo3 electronic documents to be e'c*an#ed, mailed, etc1
!ocuments are produced usin# di..erent systems and on di..erent computers1
(ven 3*en standard tools are used, standards are needed to de.ine conventions .or
t*eir use e1#1 use o. style s*eets and macros1
"eed .or arc*ivin#1 T*e li.etime o. 3ord processin# systems may be muc* less
t*an t*e li.etime o. t*e so.t3are bein# documented1 An arc*ivin# standard may be
de.ined to ensure t*at t*e document can be accessed in .uture1
@ualit, planning
A /uality plan sets out t*e desired product /ualities and *o3 t*ese are assessed
and de.ines t*e most si#ni.icant /uality attributes1
T*e /uality plan s*ould de.ine t*e /uality assessment process1
It s*ould set out 3*ic* or#anisational standards s*ould be applied and, 3*ere
necessary, de.ine ne3 standards to be used1
@ualit, plans
0uality plan structure
Product introductionT
Product plansT
Process descriptionsT
0uality #oalsT
,isks and risk mana#ement1
0uality plans s*ould be s*ort, succinct documents
I. t*ey are too lon#, no)one 3ill read t*em1
So.tware 6ualit, attriutes
'oft*are 6ua#ity attri$utes
@ualit, control
T*is involves c*eckin# t*e so.t3are development process to ensure t*at
procedures and standards are bein# .ollo3ed1
T*ere are t3o approac*es to /uality control
0uality revie3sT
Automated so.t3are assessment and so.t3are measurement1
@ualit, reviews
T*is is t*e principal met*od o. validatin# t*e /uality o. a process or o. a product1
A #roup e'amines part or all o. a process or system and its documentation to .ind
potential problems1
T*ere are di..erent types o. revie3 3it* di..erent ob9ectives
Inspections .or de.ect removal ?productAT
,evie3s .or pro#ress assessment ?product and processAT
0uality revie3s ?product and standardsA1
Types of revie*
@ualit, reviews
A #roup o. people care.ully e'amine part or all
o. a so.t3are system and its associated
documentation1
Code, desi#ns, speci.ications, test plans,
standards, etc1 can all be revie3ed1
So.t3are or documents may be [si#ned o..[ at a
revie3 3*ic* si#ni.ies t*at pro#ress to t*e ne't
development sta#e *as been approved by
mana#ement1
Review .unctions
0uality .unction ) t*ey are part o. t*e #eneral /uality mana#ement process1
Pro9ect mana#ement .unction ) t*ey provide in.ormation .or pro9ect mana#ers1
Trainin# and communication .unction ) product kno3led#e is passed bet3een
development team members1
@ualit, reviews
T*e ob9ective is t*e discovery o. system de.ects and inconsistencies1
Any documents produced in t*e process may be revie3ed1
,evie3 teams s*ould be relatively small and revie3s s*ould be .airly s*ort1
,ecords s*ould al3ays be maintained o. /uality revie3s1
Review results
Comments made durin# t*e revie3 s*ould be
classi.ied
"o action1 "o c*an#e to t*e so.t3are or documentation is
re/uiredT
,e.er .or repair1 !esi#ner or pro#rammer s*ould correct an identi.ied
.aultT
,econsider overall desi#n1 T*e problem identi.ied in t*e
revie3 impacts ot*er parts o. t*e desi#n1 Some overall
9ud#ement must be made about t*e most cost)e..ective 3ay o. solvin# t*e
problemT
,e/uirements and speci.ication errors may
*ave to be re.erred to t*e client1
So.tware measurement and metrics
So.t3are measurement is concerned 3it* derivin# a numeric value .or an attribute
o. a so.t3are product or process1
T*is allo3s .or ob9ective comparisons bet3een tec*ni/ues and processes1
Alt*ou#* some companies *ave introduced measurement pro#rammes, most
or#anisations still donKt make systematic use o. so.t3are measurement1
T*ere are .e3 establis*ed standards in t*is area1
So.tware metric
Any type o. measurement 3*ic* relates to a so.t3are system, process or related
documentation
ines o. code in a pro#ram, t*e &o# inde', number o. person)days
re/uired to develop a component1
Allo3 t*e so.t3are and t*e so.t3are process to
be /uanti.ied1
May be used to predict product attributes or to control t*e so.t3are process1
Product metrics can be used .or #eneral predictions or to identi.y anomalous
components1
5redictor and control metrics
/ana gement
decisions
(ontr ol
measur ements
Software
process
$redictor
measur ements
Software
product
Metrics assumptions
A so.t3are property can be measured1
T*e relations*ip e'ists bet3een 3*at 3e can
measure and 3*at 3e 3ant to kno31 He can only measure internal attributes but
are o.ten more interested in e'ternal so.t3are attributes1
T*is relations*ip *as been .ormalised and
validated1
It may be di..icult to relate 3*at can be measured to desirable e'ternal /uality
attributes1
7nternal and e<ternal attriutes
)elia 0ility
"um0er of procedur e
par ameters
(yclomatic comple +ity
$rogram si1 e in lines
of code
"um0er of error
messa ges
.engt, of user man ual
/aintaina 0ility
2sa0ility
$or ta0ility
4he measurement process
A so.t3are measurement process may be part o. a /uality control process1
!ata collected durin# t*is process s*ould be maintained as an or#anisational
resource1
Once a measurement database *as been establis*ed, comparisons across pro9ects
become possible1
5roduct measurement process
/easur e
component
c,aracteristics
Identify
anomalous
measur ements
Analyse
anomalous
components
Select
components to
0e assessed
(,oose
measur ements
to 0e made
#ata collection
A metrics pro#ramme s*ould be based on a set o. product and process data1
!ata s*ould be collected immediately ?not in retrospectA and, i. possible,
automatically1
T*ree types o. automatic data collection
Static product analysisT
!ynamic product analysisT
Process data collation1
#ata accurac,
!onKt collect unnecessary data
T*e /uestions to be ans3ered s*ould be decided in advance and t*e
re/uired data identi.ied1
Tell people 3*y t*e data is bein# collected1
It s*ould not be part o. personnel evaluation1
!onKt rely on memory
Collect data 3*en it is #enerated not a.ter a pro9ect *as .inis*ed1
5roduct metrics
A /uality metric s*ould be a predictor o.
product /uality1
Classes o. product metric
!ynamic metrics 3*ic* are collected by measurements made o. a pro#ram
in e'ecutionT
Static metrics 3*ic* are collected by measurements made o. t*e system
representationsT
!ynamic metrics *elp assess e..iciency and reliabilityT static metrics *elp
assess comple'ity, understandability and maintainability1
#,namic and static metrics
!ynamic metrics are closely related to so.t3are /uality attributes
It is relatively easy to measure t*e response time o. a system ?per.ormance
attributeA or t*e number o. .ailures ?reliability attributeA1
Static metrics *ave an indirect relations*ip 3it* /uality attributes
:ou need to try and derive a relations*ip bet3een t*ese metrics and
properties suc* as comple'ity, understandability and maintainability1
So.tware product metrics
So.t ware metric #escription
&an inE&an)out &an)in is a measure o. t*e number o. .unctions or met*ods t*at call some ot*er .unction
or met*od ?say LA1 &an)out is t*e number o. .unctions t*at are called by .unction L1 A
*i#* value .or .an)in means t*at L i s ti#*tly coupled to t*e rest o. t*e desi#n and
c*an#es to L 3ill *ave e'tensive knock)on e..ects1 A *i#* value .or .an)out su##ests
t*at t*e overall comple'ity o. L m ay be *i#* because o. t*e comple'ity o. t*e control
lo#ic needed to coordinate t*e called components1
en#t* o. code T*is is a measure o. t*e siIe o. a pro#ram1 Jenerally, t*e lar#er t*e siIe o. t*e code o. a
component, t*e more comple' and error)prone t*at component is likely to be1 en#t* o.
code *as been s*o3n to be one o. t*e most reliable metrics .or predictin# error)
proneness in components1
Cyclomatic comple'ity T*is is a measure o. t*e control comple'ity o. a p ro#ram1 T*is control comple'ity may
be related to pro#ram understandabil ity1 I discuss *o3 to compute cyclomatic
comple'ity in C*apter ==1
en#t* o. identi.iers T*is is a measure o. t*e avera#e len#t* o. distinct identi.iers in a p ro#ram1 T*e lon#er
t*e identi.iers, t*e more likely t*ey are to be m eanin#.ul and *ence t*e more
understandable t*e pro#ram1
!ept* o. conditional
nestin#
T*is is a measure o. t*e dept* o. nestin# o. i.)statements in a pro#ram1 !eeply nested i.
statements are *ard to understand and are potentially error)prone1
&o# inde' T*is is a measure o. t*e avera#e len#t* o. 3ords and sentences in documents1 T*e *i#*er
t*e value .or t*e &o# inde', t*e more di..icult t*e document is to understand1
"Aect>oriented metrics
Object-orient ed
metric
Descri ption
Dep th of i nhe ritance
tree
This represents the numbe r of discrete leve ls i n the inher itance tree whe re sub-
classes inhe rit a ttributes and operat ions (methods ) from supe r-classes. The
deep er the inhe ritance tree, the more complex the design . Many di fferent object
classes may have to be unde rstood to unde rstand the ob ject classes at t he l eave s
of the tree.
Method fan-in/fan -
out
This is directly related t o fan-in and fan-ou t as de scribed above and means
essentially the same thing. However , it may be app ropr iate to make a
distinction between calls from other methods within t he obj ect and calls from
external methods.
Weighted methods
pe r class
This is the number of methods that are inc luded i n a class we ighted by t he
complexity o f each method. The refore, a simple method may hav e a co mplexity
of 1 and a large and complex method a much high er va lue . The larger the va lue
for this metric, the more complex t he ob ject class. Complex ob jects are more
likely to be more difficult to under stand . They may not be logically cohesive so
canno t be reused effective ly as sup er-classes in an inhe ritance t ree.
Number of
ove rriding
ope rations
This is the number of ope rations i n a super -class that are ove r-ridden in a sub-
class. A h igh va lue f or t his metric indicates t hat the super-class used may no t be
an app ropr iate parent for the sub-class.
Measurement anal,sis
It is not al3ays obvious 3*at data means
Analysin# collected data is very di..icult1
Pro.essional statisticians s*ould be consulted i. available1
!ata analysis must take local circumstances into account1
Measurement surprises
,educin# t*e number o. .aults in a pro#ram leads to an increased number o. *elp
desk calls
T*e pro#ram is no3 t*ou#*t o. as more reliable and so *as a 3ider more
diverse market1 T*e percenta#e o. users 3*o call t*e *elp desk may *ave
decreased but t*e total may increaseT
A more reliable system is used in a di..erent 3ay .rom a system 3*ere
users 3ork around t*e .aults1 T*is leads to more *elp desk calls1
8e, points
So.t3are /uality mana#ement is concerned 3it* ensurin# t*at so.t3are meets its
re/uired standards1
0uality assurance procedures s*ould be documented in an or#anisational /uality
manual1
So.t3are standards are an encapsulation o. best practice1
,evie3s are t*e most 3idely used approac* .or assessin# so.t3are /uality1
So.t3are measurement #at*ers in.ormation about bot* t*e so.t3are process and
t*e so.t3are product1
Product /uality metrics s*ould be used to identi.y potentially problematical
components1
T*ere are no standardised and universally applicable so.t3are metrics1
M"#$%& ) '(C Hours*
Tec*nolo#y Mana#ement;
Advanced Manu.acturin# Tec*nolo#y,
Automation and ,obotics,
Mana#in# Tec*nolo#ical C*an#e,
Applications o. In.ormation Tec*nolo#y in POM,
Maintenance Mana#ement
and Total Productive Maintenance
#esign .or Manu.acturailit,
!esi#nin# .or Manu.acturability ?!&MA
!esi#nin# products 3it* ease o. manu.acturin# and /uality in mind1 !&M
Joals;
('*ibit t*e desired level o. /uality and reliability1
Be desi#ned in t*e least time 3it* t*e least development cost1
Make t*e /uickest and smoot*est transition into production1
Be produced and tested 3it* t*e minimum cost in t*e minimum
amount o. time1
Satis.y customersK needs and compete in t*e marketplace1
Concurrent (n#ineerin#
!esi#nin# products in multidisciplinary teams so t*at all departments
involved in t*e productKs success
contribute to its
desi#n1
Rapid 5lant 3ssessment Rating Sheet
/orld>+lass "perations Management Methods
Total 0uality Mana#ement ?T0MA
7ust)In)Time ?7ITA manu.acturin#
Computer)Aided !esi#n and Manu.acturin# ?CA!CAMA
&le'ible Manu.acturin# Systems ?&MSA Computer)Inte#rated Manu.acturin#
?CIMA, Supply)C*ain Mana#ement
(nterprise ,esource Plannin# ?(,PA
0ust>7n>4ime '074*
7ust)In)Time ?7ITA
A production control met*od used to attain minimum inventory levels by
ensurin# delivery o. materials and assemblies 9ust 3*en t*ey are to be
used1
A p*ilosop*y o. lean or value)added manu.acturin# manu.acturin# t*at
aims to optimiIe production processes by continuously reducin# 3aste1
A mana#ement p*ilosop*y t*at assumes t*at any manu.acturin# process
t*at does not add value to t*e product .or t*e customer is 3aste.ul1
Seven Hastes and T*eir Solutions
Overproduction; reduce by producin# only 3*at is needed as it is needed1
Haitin#; sync*roniIe t*e 3ork.lo31
Transportation; minimiIe transport 3it* better layouts1
Processin#; PH*y do 3e need t*is process at allNQ
Stock; reduce inventories1
Motion; reduce 3asted employee motions1
!e.ective products; improve /uality to reduce re3ork1
+omputer>3ided #esign and Manu.acturing
Computer)Aided !esi#n ?CA!A
A computeriIed process .or desi#nin# ne3 products, modi.yin# e'istin#
ones, or simulatin# conditions t*at may a..ect t*e desi#ns1
Computer)Aided Manu.acturin# ?CAMA
A computeriIed process .or plannin# and pro#rammin# production
processes and e/uipment1
Fle<ile Manu.acturing S,stems
&le'ible Manu.acturin# System ?&MSA
T*e or#aniIation o. #roups o. production mac*ines t*at are connected by
automated materials)*andlin# and trans.er mac*ines, and inte#rated into a
computer system .or t*e purpose o. combinin# t*e bene.its o. made)to)
order .le'ibility and mass)production e..iciency1
Automation
T*e automatic operation o. a system, process, or mac*ine1
+omputer>7ntegrated Manu.acturing
Computer)Inte#rated Manu.acturin# ?CIMA
T*e total inte#ration o. all production)related business activities t*rou#*
t*e use o. computer systems1
Automation, 7IT, .le'ible manu.acturin#, and CA!ECAM are inte#rated
into one sel.)re#ulatin# production system1
4he &lements o. +7M
Suppl, +hain Management
Supply C*ain Mana#ement
T*e inte#ration o. t*e activities t*at procure materials, trans.orm t*em into
intermediate #oods and .inal product, and deliver t*em to customers1
4rends in Suppl, +hain Management
Supplier Partnerin#
C*oosin# to do business 3it* a limited number o. suppliers, 3it* t*e aim
o. buildin# relations*ips t*at improve /uality and reliability rat*er t*an
9ust improve costs1
C*annel assembly
Or#aniIin# t*e product assembly process so t*at t*e company doesnKt
send .inis*ed products to its distribution c*annel partners, but instead
sends t*e partners components and modules1 Partners become an e'tension
o. t*e .irmKs product assembly process1
C*annel Assembly
Or#aniIin# t*e product assembly process so t*at a company sends its
distribution c*annel partners components and modules rat*er t*an .inis*ed
products1 T*e partners t*en become an e'tension o. t*e .irmKs product
assembly process1
Internet Purc*asin# ?e)ProcurementA
%endors interact 3it* ot*er .irms via t*e Internet to accept, place and
ackno3led#e orders via t*e Heb1
4he Suppl, +hain
Managing Services
Service Mana#ement
A total or#aniIation)3ide approac* t*at makes /uality o. service t*e
businessKs number one drivin# .orce1
H*y Service Mana#ement Is Important
Service is a competitive advanta#e1
Bad service leads to lost customers1
Customer de.ections drain pro.its1
Moment o. Trut*
T*e instant 3*en t*e customer comes into contact 3it* any aspect o. a
business and, based on t*at contact, .orms an opinion about t*e /uality o.
t*e service or product1
Cycle o. Service
Includes all o. t*e moments o. trut* e'perienced by a typical customer,
.rom .irst to last1
4he Service 4riangle '8arl 3lrecht*
How to 7mplement a Service Management 5rogram
.ell1%onceive$ .ell1%onceive$
Service Service
Strategy Strategy
.ell1%onceive$ .ell1%onceive$
Service Service
Strategy Strategy
%ustomer1 %ustomer1
Oriente$ Oriente$
Front1line "eople Front1line "eople
%ustomer1 %ustomer1
Oriente$ Oriente$
Front1line "eople Front1line "eople
%ustomer1Frien$ly %ustomer1Frien$ly
Systems Systems
%ustomer1Frien$ly %ustomer1Frien$ly
Systems Systems
Step I9 &e Service ,u$it Step I9 &e Service ,u$it
Step I9 &e Service ,u$it Step I9 &e Service ,u$it
Step @9 Strategy Development Step @9 Strategy Development
Step @9 Strategy Development Step @9 Strategy Development
Step A9 E$ucation Step A9 E$ucation
Step A9 E$ucation Step A9 E$ucation
Step B9 Implementation Step B9 Implementation
Step B9 Implementation Step B9 Implementation
Step J9 Step J9 MaintenanceP MaintenanceP
Ma#ing te %ange "ermanent Ma#ing te %ange "ermanent
Step J9 Step J9 MaintenanceP MaintenanceP
Ma#ing te %ange "ermanent Ma#ing te %ange "ermanent
+hapter ?
5roduction 4echnolog,- Selection and Management
Overvie3
Introduction
Proli.eration o. Automation
Types o. Automation
Automated Production Systems
&actories o. t*e &uture
Automation in Services
Automation Issues
!ecidin# Amon# Automation Alternatives
Hrap)+p; H*at Horld)Class Producers !o
7ntroduction
In t*e past, automation meant t*e replacement o. *uman e..ort 3it* mac*ine
e..ort1
Today, automation means inte#ratin# a .ull ran#e o. advanced in.ormation and
en#ineerin# discoveries into production processes .or strate#ic purposes1
3dvanced 5roduction 4echnolog,
Types o. Automation
Automated Production Systems
&actories o. t*e &uture
Automation in Services
Automation Issues
!ecision Approac*es
4,pes o. 3utomation
Mac*ine Attac*ments ) one operation
"umerically Controlled ?"ECA ) reads computer or tape inputs
,obots ) simulates *uman movements
Automated 0uality Control ) veri.ies con.ormance to speci.ications
Auto I! Systems ) automatic ac/uisition o. data
Automated Process Control ) ad9usts processes per set parameters
3utomated 5roduction S,stems
Automated &lo3 ines ?&i'ed AutomationA
Automated processes linked by automated material trans.er
Automated Assembly Systems
Automated assembly processes linked by automated material trans.er
&le'ible Manu.acturin# Systems ?&MSA
Jroups o. processes, arran#ed in se/uence, connected by automated
material trans.er, and inte#rated by a computer system
:olume D :ariet, o. 5roducts
Jo#ume L Jariety
of products
0o* Jo#ume @igh
Jariety Process
(Intermittent)
+epetitive
process
(modu#ar)
@igh Jo#ume 0o*
Jariety Process
(%ontinuous)
One or very fe*
units per #ot
Pro2ect Poor strategy
(!i/ed costs and
cost of changing
to other products
Jery sma## runs)
high variety
Co$ shop are high)
Modest runs)
modest variety
,isconnected
+epetitive

0ong runs)
modest
variations

Poor 'trategy
%onnected
+epetitive

Jery #ong runs)
changes in
attri$utes
(@igh varia$#e
costs)
%ontinuous
.6uipment
uti#ization
P;3GP; G9;3QP; Q9;3:9;


5rocess #esign #epends on 5roduct #iversit, and 2atch Si1e
?
a
t
c
h

'
i
z
e
Aum$er of Product ,esigns
Product Product
!ocused) !ocused)
,edicated ,edicated
'ystems 'ystems
Product Product
!ocused) !ocused)
?atch ?atch
'ystem 'ystem
Process3!ocused) Process3!ocused)
Co$ 'hop Co$ 'hop
%e##u#ar %e##u#ar
Manufacturing Manufacturing
T*is is an area o. todayKs T*is is an area o. todayKs
automation pro#rams automation pro#rams
Fle<ile Manu.acturing S,stem
#esign 5roducts .or 3utomation
,educe amount o. assembly re/uired11.e3er parts
,educe number o. .asteners needed
!esi#n parts to be automatically deliveredEpositioned
!esi#n .or layered assembly111 base to top
!esi#n parts to sel.)ali#n
!esi#n parts into ma9or modules
Increase /uality o. components to avoid 9ams
Material>Handling 3utomation
Automated Stora#e 6 ,etrieval System ?AS,SA
,eceive orders, pick parts, maintain inventory records
Bene.its; increase stora#e density and t*rou#*put, reduce labor costs,
improve product /uality
!ra3backs; added maintenance costs
Automated Juided %e*icle ?AJ%SA
&ollo3s 3ire or track in .loor1 "e3er versions use sensors placed around
t*e .actory to .i#ure out 3*ere t*ey are1
!onKt build monuments to mana#e inventory\
Most .actories movin# to3ards point)o.)use stocks
,eceivin# docks built all around t*e e'terior o. buildin#s
1??? 1???
1?? 1??
1? 1?
1 1
1 1 1? 1? 1?? 1?? 1??? 1??? 1???? 1???? 1????? 1????? 1?????? 1??????
;eneral ;eneral
purpose purpose
.or# cells .or# cells
%IM %IM
Fle4i2le Fle4i2le
Manufacturing Manufacturing
System System
Focuse$ Focuse$
automation automation
De$icate$ De$icate$
automation automation
"ro$ucts "ro$ucts
'olume 'olume
+omputer>2ased S,stems
Computer)Aided !esi#n ?CA!A ) +se o. computer in interactive en#ineerin#
dra3in# and stora#e o. desi#ns
Computer)Aided Manu.acturin# ?CAMA ) +se o. computers to pro#ram, direct
and control processes
CA!ECAM ) mer#er and interaction bet3een t*e t3o systems
+omputer 7ntegrated Manu.acturing '+7M*
+haracteristics o. Factories o. the Future
-i#* product /uality
-i#* .le'ibility
&ast delivery o. customer orders
C*an#ed production economics
Computer)driven and computer)inte#rated systems
Or#aniIation structure c*an#es
3utomation in Services
Trend developin# to3ard more)standardiIed services and less customer contact1
Service standardiIation brin#s trade)o..s;
Service not custom)desi#ned .or eac* customer
Price o. service reduced, or at least contained
Bankin# industry is becomin# increasin#ly automated
Service .irm can *ave a manualEautomated mi';
Manual ) P.ront roomQ operations
Automated ) Pback roomQ operations
AS,S AS,S
CA!ECAM CA!ECAM
AJ% AJ%
Order (ntry Order (ntry
Automated Automated
Assembly Assembly
"C "C
Mac*inin# Mac*inin#
Incorporates a## manufacturing processes
3utomation 7ssues
"ot all automation pro9ects are success.ul1
Automation cannot make up .or poor mana#ement1
(conomic analysis cannot 9usti.y automation o. some operations1
It is not tec*nically .easible to automate some operations1
Automation pro9ects may *ave to 3ait in small and start)up businesses1
3utomation @uestions
H*at level o. automation is appropriateN
-o3 3ould automation a..ect t*e .le'ibility o. an operation systemN
-o3 can automation pro9ects be 9usti.iedN
-o3 s*ould tec*nolo#ical c*an#e be mana#edN
H*at are some o. t*e conse/uences o. implementin# an automation pro9ectN
/atch "ut For MMM
Success 1111 many pro9ects are not111 *i#* tec* skills re/uired to mana#e advanced
tec*nolo#ies
Tec*nical .easibility1111 T*ere al3ays are bu#s 3it* ne3 tec*nolo#y
(conomic analysis 111 include bot* /ualitative and /uantitative
Managing 4echnological +hange
-ave a master plan .or automation1
,eco#niIe t*e risks in automatin#1
(stablis* a ne3 production tec*nolo#y department
Allo3 ample time .or completion o. automation1
!o not try to automate everyt*in# at once1
People are t*e key to makin# automation success.ul1
!onKt move too slo3ly in adoptin# ne3 production tec*nolo#yT you mi#*t loose
your competitive ed#e1
#eciding 3mong 3utomation 3lternatives
T*ree approac*es commonly used in industry;
(conomic Analysis
,atin# Scale Approac*
,elative)A##re#ate)Scores Approac*
&conomic 3nal,sis
Provides an idea o. t*e direct impact o. automation alternatives on pro.itability1
Break)even analysis and .inancial analysis are .re/uently used1
&ocus mi#*t be on;
cas* .lo3s
variable cost per unit
annual .i'ed costs
avera#e production cost per unit
Rating Scale 3pproach
Automation alternatives are rated usin#, say, a .ive)
point scale on a variety o. .actors suc* as;
(conomic measures
(..ect on market s*are
(..ect on /uality
(..ect on manu.acturin# .le'ibility
(..ect on labor relations
Amount o. time re/uired .or implementation
(..ect on on#oin# production
Relative>3ggregate>Scores 3pproach
Similar to ,atin# Scale Approac*, but 3ei#*ts are .ormally assi#ned to eac*
.actor 3*ic* permits t*e direct calculation o. an overall ratin# .or eac*
alternative1
/rap>$p- /orld>+lass 5ractice
Horld)Class producers utiliIe t*e latest tec*nolo#iesEpractices1 &or e'ample;
!esi#n products to be automation).riendly
+se CA!ECAM .or desi#nin# products
Convert .i'ed automation to .le'ible automation
Move to3ards smaller batc* siIes
Plan .or automation
Build teams to develop automated systems
7usti.y automation based on multiple .actors
Maintenance
Introduction
Maintenance
All activities t*at maintain .acilities and e/uipment in #ood 3orkin# order
so t*at a system can per.orm as intended
Breakdo3n maintenance
,eactive approac*T dealin# 3it* breakdo3ns or problems 3*en t*ey occur
Preventive maintenance
Proactive approac*T reducin# breakdo3ns t*rou#* a pro#ram o.
lubrication, ad9ustment, cleanin#, inspection, and replacement o. 3orn
parts
Maintenance Reasons
,easons .or keepin# e/uipment runnin#
Avoid production disruptions
"ot add to production costs
Maintain *i#* /uality
Avoid missed delivery dates
2reakdown +onse6uences
Production capacity is reduced
Orders are delayed
"o production
Over*ead continues
Cost per unit increases
0uality issues
Product may be dama#ed
Sa.ety issues
In9ury to employees
In9ury to customers
4otal Maintenance +ost
5reventive Maintenance
"reventive maintenance ; #oal is to reduce t*e incidence o. breakdo3ns or
.ailures in t*e plant or e/uipment to avoid t*e associated costs
Preventive maintenance is periodic
-rea#$own an$
repair cost
Optimum ,mount of
preventive maintenance
%
o
s
t
4otal
+ost
"reventive
maintenance cost
,esult o. planned inspections
Accordin# to calendar
A.ter predetermined number o. *ours
&<ample S>!
&<ample S>! Solution
;umer o.
2reakdowns
Fre6uenc, o.
"ccurrence
&<pected numer o.
2reakdowns
(
!
2
3
I2(
I3(
I4(
I!(
!I((
(
I3(
I)(
I3(
!I4(
&<pected cost to repair = !I4 reakdowns per month K N!((( = N!4((
5reventive maintenance = N!2?(
5M results in savings o. N!?( per month
!re6uency of $reakdo*n
If the average cost of a $reakdo*n is TE)999) and
the cost of preventative maintenance is TE)GP9 per
month) shou#d *e use preventive maintenance7
7um2er of
2rea#$owns
? # $ %
Fre>uency of
occurrence
0
@?
0
A?
0
B?
0
1?
5redictive Maintenance
Predictive maintenance
An attempt to determine 3*en best to per.orm preventive maintenance
activities
Total productive maintenance
7IT approac* 3*ere 3orkers per.orm preventive maintenance on t*e
mac*ines t*ey operate
2reakdown 5rograms
Standby or backup e/uipment t*at can be /uickly pressed into service
Inventories o. spare parts t*at can be installed as needed
Operators 3*o are able to per.orm minor repairs
,epair people 3*o are 3ell trained and readily available to dia#nose and correct
problems 3it* e/uipment
Replacement
Trade)o.. decisions
Cost o. replacement vs cost o. continued maintenance
"e3 e/uipment 3it* ne3 .eatures vs maintenance
Installation o. ne3 e/uipment may cause disruptions
Trainin# costs o. employees on ne3 e/uipment
&orecasts .or demand on e/uipment may re/uire ne3 e/uipment capacity
H*en is it time .or replacementN