operations management - iivkteaching.weebly.com/uploads/1/4/3/9/14393508/om_s02e15.pdf ·...

03-03-2016

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Session 15

Vinay Kumar Kalakbandi

Assistant Professor

Operations & Systems Area

3/3/2016 Vinay Kalakbandi 1

Operations Management - II Post Graduate Program 2015-17

Agenda

• Up next

• Project presentations

• Recap

• Quality Analytics Simulation - debrief

• Six Sigma essentials

• Lean Management


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Rest of the course

• 8th March – Toyota Production system

• 10th March – Esterline technologies

• 11th March – Federal Express + group activity

• 17th March – Cincinnati Children’s Hospital

• 23rd March : Project Presentations


Team project guidelines

• T <= 15 minutes

• Grounded in OM-2 course concepts

• Demonstrated team effort

– You are allowed to disown a team member if he/she

has not contributed

• Not Boring: Role plays, videos, crowd

interaction

• Will be Peer evaluated


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Type I Error: False Positive

• Concluding that a process is in control, when it

actually is not

• Caused by control limits that are wider than they

should be

Type II Error: False Negative

• Concluding that a process is out of control

when, in fact, it is in control

• Caused by control limits that are narrower than

they should be

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Internal Defect Costs

• The cost of defects discovered before the

product is in the hands of the customers

• Cost of scrapping defective items

– Material

– Labor

• Cost of reworking defective items

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External Defect Costs

• The cost of defects discovered after the product

is in the hands of the customers

• Can be very substantial

– Warranty costs

– Recall costs

– Lawsuits

– Negative word of mouth

Appraisal Costs

• The cost of running an internal inspection

operation

• Labor costs for QC inspectors

• Equipment costs, such as gages and

measurement devices

• Destructive testing costs, where applicable

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Prevention Costs

• The cost of preventing defects from occurring

• Training costs

• Cost of changing to a more reliable supplier

• Cost of changing to better raw materials

• Investments in equipment

Relationship Between Costs of Quality

• Investments in appraisal

– More defects found before product is in the hands of the customers

– Increases internal defect costs

– Reduces external defect costs

– Reduces the total cost of quality

• Internal defect costs

• External defect costs

• Appraisal costs

• Prevention costs

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Relationship Between Costs of Quality

• Investments in prevention

– Produces fewer defects, in the first place

– Reduces internal defect costs

– Reduces the need for investments in appraisal

– Reduces the total cost of quality

• Internal defect costs

• External defect costs

• Appraisal costs

• Prevention costs

Cost of quality

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SIX SIGMA

The giant leap approach to quality


Six Sigma Approach to Quality

• Six sigma is an approach to process control first practiced by companies such as General Electric and Motorola to achieve near zero defects in processes

• Elements of six-sigma

– Understanding customer needs well

– Appropriate and disciplined use of data and statistical tools

– Statistical analysis and a closer attention to managing and improving business processes using a set of tools

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How is it different from traditional

approach?

• A new metric, Defects Per Million Opportunities, to

predict/assess the quality of a business process

• A new methodology, DMAIC (Define-Measure-

Analyze-Improve-Control), to ensure that very high

levels of quality could be assured in the chosen

business processes thereby generating favourable

outcomes to both the business and the customers

• An organizational framework for ensuring the above

outcomes are generated on a sustained basis

Defects Per Million Opportunities (DPMO)

• It indicates how many defects a process generates in a million opportunities

– While service industries find it convenient to use DPMO, manufacturing organizations use Parts Per Million (PPM). Both are conceptually same.

• If in a process

– “k” Denotes the number of opportunities for making a defect per unit of execution of that process

– “n” Number of units of observation of the process

– “d” Number of defects that occurred in that process during the observation

– The defects per opportunity =

000,000,1*

*

nk

d

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DMAIC Methodology

DMAIC Methodology • Define

– Define the problem, the requirements, project scope, project charter

– Set goals for improvement

• Measure

– Identify variables to be measured, the type of measurement

– Data collection and synthesis

• Analyze

– Develop a set of tools for analysis

– Apply graphical tools of analysis

– Identify possible sources of variation and “vital” few root causes

– Explore means of eliminating them

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DMAIC Methodology

• Improve

– Generating and validating improvement alternatives

– Creating new process maps for the process

• Control

– Develop control plan

– Establish revised standard measures to maintain performance

– Develop relevant raining plans to maintain standards

Organization for six sigma

• Process Owner

– Supervisor or a manager who takes responsibility for various

steps of a process that is responsible for delivering some

output to the customer. It could be the in a particular work

area where the improvement project has been identified

• Team Leader & Members

– Team leader (the project leader) and the members will

comprise of the employees in the chosen work area

– They will have day-to-day operational control of activities

In six sigma, three terminologies are used to indicate these organizational entities. This includes Master Black Belt, Black Belt and Green Belt.

The depth of training and experience differentiates these three.

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Organization for six sigma • Six sigma coach

– A consultant or a senior person in the organization who offers expert knowledge on various aspects of six sigma.

– This includes statistical tools, process design & analysis, change management, small group improvement, use of QC tools for improvement etc.

• Sponsor

– A member of the senior management who oversees the overall progress and implementation

– Helps the team refine the project scope, sorts out issues cutting across other parts of the organization, approves projects and provides the necessary support in terms of resources

Achieving breakthrough improvement

• Six sigma is a project based approach

• Teams embark on six sigma projects only if

breakthrough improvement can be achieved


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JIT AND LEAN OPERATIONS


Muda - Waste


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Antidote to Muda : Lean thinking

Accurately specify Value

Identify the entire Value stream

Making the value creating steps Flow continuously

Let customer Pull value from the enterprise

Constantly endeavour Perfection


Accurately specify Value

• Defined by the ultimate customer

• Developing products and services from the

perspective of the customer

• Providing wrong good and service the right way

is muda


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Identify the entire Value stream

• Value added (VA): Activities are classified as value added as long as the customer is willing to pay for that activity

• Non-value added (NVA): All those activities for which the customer may not want to pay are classified as non-value added activities

• Necessary but non-value added (NNVA): the set of activities that are to be eventually eliminated as and when better systems are developed in an organization

• Value stream: All activities that need to be performed (VA and NNVA) from the time the customer order is received to the time the order is fulfilled will make up the value stream


Making the value creating steps Flow

continuously

• Make the value-creating steps flow evenly

• Three important flows

– Design; Order taking; Production

• Moving away from Batch and queue

– Single piece flow; Takt, quality at source

• Minimizes WIP, process interruptions, lead and

waiting times

• Increases quality and flexibility


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Let customer Pull value from the

enterprise

• Customer pulls the product from the production

system rather than pushing products

• Minimizes overproduction, inventory, working

capital

• Use of kanban systems to indicate downstream

demand

• https://youtu.be/ZIv2e61SH1A


Constantly endeavour Perfection

• Achieving zero defects through quality at the source - jidoka

• Continuous incremental improvement of processes

• Previous principles interact with each other in a virtuous circle

• Harder you pull, more the impediments to flow are revealed

• Percolate best practices to the rest of the supply chain


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Manufacturing Architectural Changes

Function based structure Product focused structure

grinding milling turning quality

stores materials planning

Marketing

Finance

Sea of waste!


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