• intangible products
• Products that cannot be inventoried
• high customer contact
• short response time
• labor intensive

opposite

Ex. customer doesn't have direct contact with the operation

• Quality
• Price
• Speed
• Flexibility

their competitors

Ex. problem solving, field support, sales support, and information

o   Quality, flexibility, speed, and price (or cost reduction)

o   Use technology

o   Have quality, productivity, and response issues

o   Must forecast demand

o   Have capacity, layout, and location issues

o   Have customers and suppliers

o   Have schedule and staffing issues

o   Customers expect better, faster quality

o   Increased cost functional decision making

o   Better management of information using ERP and CRM

o   Inability of people within the organization to understand the OM function

o   The optimizing of the global supplier, production, and distribution networks

§  ERP: enterprise resource planning

   Large, sophisticated software programs for identifying and planning the enterprise-wide resources needed to coordinate all activities involved in producing and delivering products to customers

§  CRM: customer relationship management

·         Software solutions that enable the firm to collect customer specific data

o   Looks at long range plan to be able to be in the competition

o   Helps to differentiate the firm from the competitors

o   Focuses on doing the right task

o   Environmental scanning: (SWOT)

§  Monitors the business environment for market trends, threats, and opportunities

§  Statement that defines what is our business

§  Unique strengths that can help us win in the market

·         The four important operations questions? (core services)

o   Competing on Cost?

o   Competing on Quality?

o   Competing on Cost?

§  Businesses competing on cost usually cut costs on labor, materials, and facilities

·         Used on high volume products

·         Often late in the product life cycle

·         Limited product range and customization

·         Can use lower labor skills

 High-performance design

o   Focusing on the aspects of quality such as superior features, close tolerances, high durability, and excellent customer service

Goods and Services Consistency

o   Measures how often the goods or services meet the exact design specifications

• high performance design
• goods and services consistency

§  refers to how quickly an order is received

·         Shorter time between order placement and delivery

§  the time needed to take an idea to the marketplace

·         Use concurrent processes to shorten the product development time

Product Flexibility

Volume Flexibility

·         the ability to offer a wide variety of goods or services and customize them to the unique needs of clients

o   Can quickly add new products that may be important to customers or easily drop a product that is not doing well

o   EX. Dell or Panasonic

·         the ability to rapidly increase or decrease the amount produced in order to accommodate changes in the demand

o   EX. McDonalds

  Companies that compete based on flexibility often cannot compete based on____________

speed

·         They also don’t compete based on cost

acceptable quality level

o   Old view

o   Stated that it’s okay to have some proportion of a bad product

o   the competitive priorities that win orders in the marketplace

§  Basically the unique characteristics

§  Eventually an order winner becomes an industry standard (qualifier)

o   competitive priorities that must be met for a company to qualify as a competitor in the marketplace

§  Ex. The low price of a fast-food restaurant

§  If companies don’t meet the minimum standard for order qualifiers, they won’t be able to compete or succeed

o   Operations decisions related to the design of the production process, such as facilities, technology, and the flow of goods and services through the facility

o   Service Strategy Capacity Capabilities are:

• process based
• systems based
• organization based

o   a measure of how efficiently an organization converts inputs into outputs

§  productivity computed as a ratio of output to only one input (e.g. labor, materials, machines)

§  productivity computed as a ratio of output to several, but not all, inputs

·         When the company entered the nuclear power business, everything seemed to go wrong. The aftermath brought delivery delays, strikes, lawsuits, red ink and a bizarre suicide. B&W even managed to create new competitors in a market niche they had previously owned outright.

·         Most of the nuclear pressure vessels at Mount Vernon was behind schedule by as much as ______________

President George G. Zipf

• o   Zipf’s predecessor was Chairman Morris Neilson, who was the man who bared the main onus of responsibility

         Mount Vernon didn’t have a pool of skilled labor

They tried to fix it through

automation and massive training

·         John Paul Craven

o   Vice president in charge of the power generation division at Barberton

o   Directly responsible for the Mount Vernon Plant

o   The number 3 man in the company

o   He stepped down and gave George Zipf the title

o   Committed suicide in a dry bathtub        

o   Eventually a Westinghouse man became vice president in charge of the power generation division

·         Westinghouse took B & W to court when they couldn’t reach top management because of their unfinished vessels

o   They won a temporary restraining order to prevent B & W from taking the vessels back to Mount Vernon

·         Nuclear pressure vessels

o   Winning criteria: nuclear experience, few competitors, Mount Vernon as a purpose-built manufacturing capability

o   Qualifying criteria: quality, price, delivery reliability

o   Organizational style was decentralized

o   Labor had to be high skilled

·         Fossil Fuel Boilers

o   Winning criteria was price

o   Qualifying criteria was quality, established supplier, delivery reliability

o   Organizational style was centralized :tight cost controls

o   Supervision was less

·         to rise above or extend beyond ordinary limits

o   You know what it is when you see it

·         Product-based criteria

o   Quality is a function of a specific measurable criteria

o   Quality differences reflected in differences in the quantity of some attribute

·         User- Based Criteria

o   Quality is determined by what the customer wants

§  Customers have different requirements (jeep vs Cadillac)

·         Value- Based Criteria

o   Define quality based on value-the relationship between utility and price

o   Businesses seek to satisfy customer needs at lower prices

·         Manufacturing- Based Criteria

o   Conformance to specifications

§  BUT, specifications are meaningless unless they reflect attributes that are deemed important to the consumer

·         Reliability

o   The probability of a product’s surviving over a specified period of time under stated conditions of use

·         Conformance

o   The degree to which physical and performance characteristics of a product meet pre-established standards

§  Ex. Service at McDonalds

·         Durability

o   The amount of use one gets from a product before it physically deteriorates to the point at which it is more economical to replace it than to repair it

§  Ex. Used car

·         Serviceability

o   Speed, courtesy, and competence of repair

·         Aesthetics

o   How the product looks, feels, sounds, tastes, or smells

o   Ex. Leather in a new Jag

·         Perceived Quality

o   Subjective assessment of quality resulting from image, advertising, or brand names

·         Dimensions of Service Quality

o   Time, timeliness, completeness, courtesy, consistency accessibility and convenience, accuracy, and responsiveness

o   Internal: other people in your organization who use your products and services

o   External: people outside your organization who use your products and services

§  Can be direct and indirect

·         Direct customers: people outside your organization who receive the products and services your organization products

·         Indirect customers: those outside your organization who have some kind of stake in the work it does but are not the primary reason for its existence

o    

o   Benefits of a documented quality system

§  Forces agreement and clarity of policies, procedures, and work instructions

§  Useful for training and reference

§  Provides a basis for changes and improvements

§  Auditable internally and by customers and accreditation body

·         Four quality systems

Artisan

Inspection

Statistical Process Control

Quality Insurance

o   characterized by a formal progression through recognized levels of experience and expertise

§  Apprentice

o   the activity of providing the evidence needed to establish confidence that the quality function is being performed adequately

·         Characteristics of a prevention-oriented approach

o   Change in philosophy, in focus, in responsibility

o   Use of statistics and on-going improvements

·         Documentation Hierarchy

o   Level 1: Quality manual

o   Level 2: Procedures

o   Level 3: Instructions

o   Level 4: Database of records

·         any cost incurred in an effort to prevent a failure in meeting requirements

o   Ex. Applicant screening, vendor evaluation, training

·          any cost incurred in an effort to detect a failure in meeting requirements

o   Ex. Audits, final inspection, receiving inspection

·         any cost incurred for products that don’t meet requirements and haven’t been transferred to the customer

o   Ex. Sorting, premium freight, overtime, retesting

·         any cost incurred for products that don’t meet requirements and have been transferred to the customer

o   Ex. Warranty costs, loss of market share, customer dissatisfaction

                1. The power of team problem solving

                 2. Using control charts to solve quality problems

o   Use of SPC (statistical process control)

o   Capability and analysis (bad head)

o   Developed by Walter Shueheart 1930s

                 3. Quality costs

                 4. Continuous improvement

                 5. Employee involvement

                 6. Communication

                 7. Importance of Deming’s 14 points

                8. Power of Juran’s project system

statistical process control

o   Developed by Walter Shueheart 1930s

o   Competition

o   Parallel with automotive industry in the late 70s

o   Quality improvement must be proactive initiative

o   Customers’ expectations set by best provider

o   “Quality is every body’s business:

o   “A quality effort never ends”

o   Old view: “more inspections to improve quality”

New view?

§  New view: “ prevention, not inspection”

·         Quality is free (Crosby)

old view?

o   Higher quality = higher costs (old view)

The elimination of incoming inspection was the result of...

"right the first time"

·         Crosby – Absolutes of Quality Management

o   Definition: conformance to requirements

o   System: Prevention

o   Performance Standard: ZERO DEFECTS

o   Measurement: The price of Nonconformance

o   conformance to requirements

Absolutes of Quality Management

system:

Absolutes of Quality Management

PERFORMANCE STANDARD

Absolutes of Quality Management

MEASUREMENT

total quality management

o   Meeting quality expectations as defined by the customer

o   Designed to improve quality process at every business level

·         5 ways to define quality

conformance to specifications

fitness for use

support services

value for price paid

psychological

o   how well a product or service meets the targets and tolerances determined by its designers

§  Does it meet targets defined by the designer

o   evaluates how well the product performs for its intended use

§  Usefulness vs. price paid

o   the support provided after the product or service is purchased

§  Quality of support after the sale

o   product or service usefulness for the price paid

§  Evaluation of usefulness vs price paid

o   focuses on judgmental evaluations of what constitutes product or service excellence

§  Ambiance, prestige, friendly staff

o   Quality of design

o   Quality of conformance to design

o   Ease of use

o   Post-sale service

o   Walter A. Shewhart

§  Developed the concept of statistical control charts

§  Contributed to the understanding of process variability

o   W. Edwards Deming

§  Developed “14 points” to guide companies in quality improvement

§  1900-93

§  Was introduced to Walter Shewhard

§  Only talked to top management

o   Philip B. Crosby

§  “quality is free”

Introduced concept of zero defects

·         Plan-Do-Study-Act Cycle (PDSA)

o   A diagram that describes the activities that need to be performed to incorporate continuous improvement into the operation

o   Also called the “Deming Wheel”

o   Circular, never ending problem solving process

o   Plan

§  Evaluate current process

§  Collect information

§  Develop plan

o   Do

§  Implement the plan

o   Study

§  Collect data and evaluate against objectives

o   Act

§  Communicate the results from trial

·         Quality Function Deployment

o   Used to translate customer preferences to design

·         Seven tools of quality control

o   Cause and effect diagrams

o   Flowcharts

o   Checklist

o   Control charts

o   Scatter Diagrams

o   Pareto Analysis

o   Histograms

o   Cause and effect diagrams

§  A chart that identifies potential causes of particular quality problems

§  Fishbone diagram

§  The sequence of steps involved in an operation or process

Used to document the detailed steps in a process

o   Checklist

§  A list of common defects and the number of observed occurrences of these defects

§  Simple data check-off sheet designed to identify type of quality problems at each work station

§  Used to evaluate whether a process is operating within set expectations

§  Important tool used in STATISICAL PROCESS CONTROL

§  The UCL and LCL are calculated limits used to show when process is in or out of control

o   Scatter Diagrams

§  Graphs that show how two variables are related to each other

o   Pareto Analysis

§  A technique used to identify quality problems based on their degree of importance

§  Named after the 19^th century Italian economist

§  Often called the 80 -20 rule

·         Principle is that quality problems are the result of only a few problems (80% of the problems are caused by 20% of causes)

§  You can look at frequency of occurrence or length of occurrence

·         Same data could be looked at in different ways

o   Histograms

§  A chart that shows the frequency distribution of observed values of a variable

·         Ex. Service time at a bank drive up window

§  Displays whether the distribution is symmetrical (normal) or skewed

§  You want to see a bell shaped curve

·         X-axis quantities

·         Y-axis currencies

·         Force field Analysis

o   First there is a recommendation

o   Then find the driving force

o   Identify restraining force

o   Then find a strategy of implementation (specification)

·         Problem of sub optimization

o   The greater the interdependence between the components, the greater the need for communication and cooperation between them. Any attempt to improve the system without taking this fully into account is, at best, sub optimization

·         Purchasing materials at the lowest cost

·         Maximizing sales

·         Minimize cost of manufacture or design

·         Minimizing cost of incoming supplies, without taking into account other stages of production and sales

o   The variation inherent in the process itself. The result of management’s design of the system

o   Is said to be stable or predictable

o   If you have a stable system, there is no use in specifying a numerical goal or target

·         Special cause variation

o   Unpredictable and random variation arising from external sources that are not inherent in the process

o   Must be  removed before a process can be considered to be stable

o   If you don’t have a stable system, there is no point in setting a numerical goal

·         COMMON MISTAKES WITH VARIATION

o   To react to an outcome as if it came from special cause when it actually came from common cause and vise-versa

1.       Create and publish the mission statement of your business for your employees

2.       Learn the new philosophy, top management, everybody

3.       Understand the purpose of inspection, for improvement of processes and reduction of cost

4.       End the practice of awarding business on the basis of price tag alone

5.       Improve constantly and forever the system of production and service

6.       Institute training

7.       Teach and institute leadership

8.       Drive out fear, create trust. Create a climate for innovation

9.       Optimize toward the aims and purposes of the company the efforts of teams, groups, and staff areas

10.   Eliminate exhortations for the work force

11.   Eliminated numerical quotas for production, Eliminate M.B.O.

12.   Remove barriers that robe people of pride of workmanship

13.   Encourage education and self-improvement for everyone

14.   Take action to accomplish the transformation