OPS MGMT Exam 2 Study Guide

Chapter 6:  Quality Manage

What is TQM? 

·         Total Quality Management

o   Encompasses entire organization from supplier to customer

o   Stresses a commitment by management to have a continuing companywide drive toward excellence in all aspects of products and services that are important to the customer

o   Six Sigma,

§  Two meanings

·         In a statistical sense, it describes a process, product, or service with an extremely high capability

·         A program designed to reduce defects, lower costs, save time, and improve customer satisfaction

§  DMAIC Approach

·         Defines, Measures, Analyzes, Improves, Controls

o   Just In Time

§  ’Pull’ system of production scheduling including supply management

§  Production only when signaled

§  Allows reduced inventory levels

§  Inventory costs money and hides process and material problems

§  Encourages improved process and product quality

§  J I T cuts the cost of quality

§  J I T improves quality

o   Continuous Improvement

§  Never-ending process of continuous improvement

§  Covers people, equipment, suppliers, materials, procedures

§  Every operation can be improved

§  End goal is perfection, which is never achieved but always sought.

Who is responsible for quality? 

·         Leadership/Top Management: Sets the vision, objectives, and standards for quality, ensuring alignment with organizational goals.

·         Managers and Supervisors: Oversee processes, enforce standards, and support continuous improvement efforts.

·         Employees: Everyone has a role in upholding quality by adhering to standards, reporting issues, and actively contributing to improvements.

Who is responsible for developing the culture?

·         Top management is primarily responsible for fostering a culture that emphasizes quality. They must:

o    Lead by example. (tone at the top, Mission Statement)

o    Communicate the importance of quality values.

o    Create an environment where employees feel empowered to contribute to continuous improvement.

Who has to understand and use TQM tools?

·         Every level of the organization should understand and apply TQM tools to varying degrees:

·         Leadership and Managers: Must know these tools deeply to drive decision-making and strategic improvements.

·         Team Leaders and Employees: Need working knowledge to identify problems, implement improvements, and ensure quality on a day-to-day basis.

·         TQM tools

o   Tools for Generating Ideas

§  Check Sheet

§  Scatter Diagram

§  Cause-and-Effect Diagram

o   Tools to Organize the Data

§  Pareto Chart (: A graph to identify and plot problems or defects in descending order of frequency)

§  Flowchart (Process Diagram)

o   Tools for Identifying Problems

§  Histogram

§  Statistical Process Control Chart

·         Definitions of quality? 

o   Quality Robustness

§  Ability to produce products uniformly in adverse manufacturing and environmental conditions

§  Remove the effects of adverse conditions

§  Small variations in materials and process do not destroy product quality

o   Quality Loss Function

§  Shows that costs increase as the product moves away from what the customer wants

§  Costs include customer dissatisfaction, warranty and service, internal scrap and repair, and costs to society

§  Traditional conformance specifications are too simplistic

§  Target-oriented quality

Chapter 6s:  Statistical Process Control and Process Capability

Types of control charts and how are they used?

·         Control Charts for Variables are X bar and R charts These two charts must be used together

o   X-bar chart (mean chart):  Z and A2

§  tracks changes in the central tendency

o   R chart (range chart): D3 and D4

§  Type of control chart for variables

§  Shows sample ranges over time

§  Difference between smallest and largest values in sample

§  Monitors process variability

§  Independent from process mean

Control Charts for Attributes: P chart & C chart

·         P Chart Percent defective

o    

·         C chart Number of defects

How are the control charts developed?  How are they used to monitor a process?

·         Statistical process control

o   The objective of a process control system is to provide a statistical signal when assignable causes of variation are present

·         How are control charts developed?

o   Collect Data: Gather data from the process you want to monitor.

o   Calculate Averages: Find the process mean and determine control limits (typically ±3 standard deviations from the mean).

o   Plot the Chart: Chart the data points over time, including the mean and control limits.

o   Monitor: Identify trends or points outside control limits to detect variability and take corrective action if needed

What does it mean to be statistically out of control?

·         A process is statistically out of control when its data points show variability that goes beyond what is expected by random chance. This could mean:

o   Points Outside Control Limits: Data falls outside the upper or lower control limits on a control chart.

o   Patterns or Trends: Unusual patterns, such as a consistent upward or downward trend or recurring cycles, are observed.

o   Non-Random Variation: The process is influenced by special causes (external factors), rather than common, random variation.

Types of variations

·         Natural Variations

o   Also called common causes

o   Affect virtually all production processes

o   Expected amount of variation

o   Output measures follow a probability distribution

o   For any distribution there is a measure of central tendency and dispersion

o   If the distribution of outputs falls within acceptable limits, the process is said to be "in control"

·         Assignable Variations

o   Also called special causes of variation

o   Generally this is some change in the process

o   Variations that can be traced to a specific reason

o   The objective is to discover when assignable causes are present

§  Eliminate the bad causes

§  Incorporate the good causes

What is the relationship between statistically in control, but patterns?

1. Statistically in Control, But Patterns:

A process can be statistically in control (all data points fall within control limits) but still exhibit patterns, such as trends, cycles, or clustering. These patterns indicate non-random variation due to special causes that need investigation, even though the process appears stable. Being "in control" does not guarantee randomness or optimal performance.

What is the relationship between statistically in control and design specifications?

2. Statistically in Control and Design Specifications:

·         Statistically in Control: Refers to maintaining process stability with variation confined to common causes.

·         Design Specifications: Set upper and lower limits for acceptable product quality as defined by the customer or design requirements.

A process can be statistically in control but still produce outputs that fall outside design specifications, indicating the process mean or variability doesn’t align with the required tolerance. Conversely, meeting design specifications doesn’t ensure the process is statistically controlled.

Chapter 8:  Location Analysis

Factors at the country, regional, and site levels

·         Country

o   Political risks, government rules, attitudes, incentives

o   Cultural and economic issues

o   Location of markets

o   Labor talent, attitudes, productivity, costs

o   Availability of supplies, communications, energy

o   Exchange rates and currency risks

·         Regional

o   Corporate desires

o   Attractiveness of region

o   Labor availability and costs

o   Costs and availability of utilities

o   Environmental regulations

o   Government incentives and fiscal policies

o   Proximity to raw materials and customers

o   Land/construction costs

·         Site

o   Site size and cost

o   Air, rail, highway, and waterway systems

o   Zoning restrictions

o   Proximity of services/supplies needed

o   Environmental impact issues

o   Customer density and demographics

Factors for manufacturing, retail and service companies

·         Services

o   Proximity to markets

§  JIT systems or high transportation costs may make it important to manufacturers

o   customer convenience and operational locations.

·         Manufacturing

o   Proximity to suppliers

§  Perishable goods, high transportation costs, bulky products

o   Access to natural resources

·         Retail

o   proximity to customers and distribution networks to ensure quick delivery and better market response

Chapter 9:  Facility Layout

What makes a good layout? 

·         The objective of layout strategy is to develop an effective and efficient layout that will meet the firm’s competitive requirements

·         Good layouts consider:

o   Material-handling equipment

o   Capacity and space requirements

o   Environment and aesthetics

o   Flows of information

o   Cost of moving between various work areas

Characteristics of process focused vs product focused layouts

·         Process-Focused (ex: Hospital)

o   Like machines and equipment are grouped together

o   Flexible and capable of handling a wide variety of products or services

o   Scheduling can be difficult and setup, material handling, and labor costs can be high

o   Arrange work centers so as to minimize the costs of material handling

o   Basic cost elements are

o   Number of loads (or people) moving between centers

o   Distance loads (or people) move between centers

·         Product-Focused (ex: Assembly line)

o   Organized around products or families of similar high-volume, low-variety products

§  Assumptions

·         Volume is adequate for high equipment utilization

·         Product demand is stable enough to justify high investment in specialized equipment

·         Product is standardized or approaching a phase of life cycle that justifies investment

·         Supplies of raw materials and components are adequate and of uniform quality

How is load distance techniques used to design facilities?

·         Departments that have a lot of interaction should be close together

o   Minimize travel effort and cost

Chapter 11:  Supply Chain

Factors affecting Make or Buy Decisions

·         Make-or-buy decisions

o   Choosing between obtaining products and services externally as opposed to producing them internally

·         Outsourcing

o   Transfer traditional internal activities and resources to outside vendors

o   Efficiency in specialization

o   Focus on core competencies

What is the effect of better management of supply chain and its importance to a company

·         Large portion of sales dollars spent on purchases

·         Supplier relationships increasingly integrated and long term

·         Improve innovation, speed design, reduce costs

·         Managing supplier relationships has added emphasis

Integration

·         Vertical integration

o   a business strategy where a company takes control of multiple stages of its supply chain, from production to distribution, to reduce costs, improve efficiency, or gain competitive advantage.

o   Ex: Apple is a great example of vertical integration. They design their products (e.g., iPhones, iPads), manufacture some components, and own their retail stores where they sell directly to customers

o   Risky in industries with rapid technological change

·         Vertical Integration may be forward, towards the customer, or backward, towards suppliers

o   Forward Ex: A farmer who grows vegetables decides to open a farm-to-table restaurant where they sell dishes made from their own produce. By doing so, the farmer eliminates middlemen like grocery stores and directly connects with the customers, enhancing profits and customer relationships.

o   Backward Example: A car manufacturer like Tesla producing its own batteries for electric vehicles is a great example. By owning battery production facilities, Tesla reduces dependency on third-party suppliers, ensures better control over quality, and potentially lowers costs.

Bullwhip effect

·         Bullwhip effect occurs when orders are relayed through the supply chain with fluctuations increasing at each step

How to effectively manage supply chain

·         Opportunities

o   Accurate “pull” data, shared information

o   Lot size reduction, shipping, discounts, reduced ordering costs

o   Vendor managed inventory (V M I) (is a system where the supplier takes responsibility for managing and replenishing inventory at the buyer’s location, ensuring that stock levels meet the buyer's needs without the buyer having to place orders manually.)

o   Blanket orders against which actual orders are released

o   Postponement withholds modification as long as possible

Chapter 16:  Lean Production

Relationship between TQM, Lean Production and JIT

·         TQM, Lean, and JIT share a focus on waste reduction and continuous improvement, driving efficiency and ensuring zero defects.

·         Lean production aligns with JIT principles by minimizing inventory and lot sizes, reducing variability, and improving scheduling through tools like Kanban.

·         Supplier partnerships are critical for both Lean and JIT, fostering long-term collaboration to reduce costs, enhance flexibility, and improve throughput.

·         TQM complements Lean and JIT by emphasizing quality management at every stage, creating a cohesive strategy for operational excellence.

Pull vs Push

·         Throughput

o   The rate at which units move through a process

o   Pull systems increase throughput

§  Pull System Example:

·         In contrast, a Lean-focused car manufacturer like Toyota uses a pull system, where cars are only produced when there’s a confirmed order from a customer. This minimizes excess inventory, reduces waste, and ensures resources are used efficiently, aligning production closely with real demand.

o   Push systems The rate at which units move through a process

§  Push System Example:

·         A car manufacturer produces vehicles based on forecasted demand and fills up dealership lots with inventory. Even if customer demand doesn’t match the forecast, cars are still produced and shipped. This approach can lead to overproduction, excess inventory, and wasted resources—issues Lean principles aim to eliminate.

How to implement JIT?  What is required to be successful?

Implementing JIT:

·         Establish strong supplier partnerships to ensure timely delivery of materials when needed.

·         Minimize inventory levels by aligning production schedules with actual demand.

·         Implement Kanban systems to signal and control workflow efficiently.

·         Focus on continuous improvement, reducing setup times and lot sizes.

Requirements for Success:

·         Build a reliable and flexible supply chain.

·         Foster employee engagement and cross-training for adaptability.

·         Ensure consistent quality through Total Quality Management (TQM) practices.

·         Utilize real-time data for effective scheduling and monitoring.

What does JIT require?

·         JIT Requires:

o   Reliable supplier partnerships to ensure materials arrive exactly when needed.

o   Effective workflow management, such as Kanban, to coordinate production and inventory.

o   Employee involvement and training to adapt to a demand-driven system.

o   Consistent quality control to prevent defects from disrupting the process.

What is the impact on operations of implementing JIT on inventory?

·         Minimized Inventory Levels: JIT reduces on-hand inventory to the bare minimum, decreasing storage costs and waste.

·           Improved Inventory Turnover: Inventory moves quickly through the system, ensuring fresher products and better cash flow.

·         Reduced Risk of Obsolescence: Lower inventory levels mean less chance of stock becoming outdated or unused.

·          Increased Dependency on Suppliers: Operations rely heavily on timely deliveries, requiring strong supplier relationships to avoid disruptions.

Kanban

•      Kanban is the Japanese word for card

o   The card is an authorization for the next container of material to be produced

o   A sequence of kanbans pulls material through the process