Operations Management Performance Modeling 1 2 3

Operations Management & Performance Modeling 1 2 3 4 5 Operations Strategy Process Analysis Lean Operations Supply Chain Management Capacity Management in Service 6 Quality Management – Class 7 b: Quality & the Voice of the Customer » The Goal: summary » What is Quality? » Hank Kolb » Voice of the Customer 7 Business Process Reengineering OM&PM/Class 7 b 1

Levers for Reducing Flow Time u “is to decrease the work content of (only ? ) critical activities”, and/or move it to non critical activities. u u Reduce waiting time: – reduce variability » arrivals & service requests » synchronize flows within the process – increase safety capacity » lower utilization » Pooling – Match resource availability with flows in and out of process OM&PM/Class 7 b 2

E. g. : Analysis of Service Systems u u u Divide day into blocks based on arrival rates For each block evaluate performance measures given current staffing Quantify financial impact of each action – Workforce training: reduces mean and variability of service time – Work flexibility from workforce: pools available capacity – Time flexibility from workforce: better synchronization – Retain experienced employees: increased safety capacity – Additional workforce: Increases safety capacity – Improved Scheduling: better synchronization – Incentives to affect arrival patterns: better synchronization – Decrease product variety: reduces variability of service time – Increase maximum queue capacity – Consignment program, fax, e-mail etc. OM&PM/Class 7 b S D 3

Framework for Process Flow Management Flow Chart Process Identify Bottlenecks Maximal Flow Rate mean Identify Critical Path Minimal Flow Time Macro Average Performance Demand Pattern variability Competitive? Process Re-Design No Demand & Supply Mgt Yes Micro Variability Performance Competitive? Yes OM&PM/Class 7 b No Continuous Improvement 4

Dimensions of Quality u Performance u Features u Reliability u Conformance u Durability u Serviceability u Aesthetics u Perceived OM&PM/Class 7 b Quality 5

Elements of TQM u Management by fact u Cross-functional (process) approach u Culture and leadership – Customer focus – Employee focus – High performance focus » Continuous improvement » Benchmarking u External alliances - the value chain Source: Eitan Zemel OM&PM/Class 7 b 6

Malcolm Baldrige National Quality Award u u 1 Leadership 110 2 Strategic Planning 80 – Strategy Development Process u u 3 Customer and Market Focus 80 4 Information and Analysis 80 5 Human Resource Development and Management 100 6 Process Management 100 – Product and Service Processes – Support Processes – Supplier and Partnering Processes u 7 Business Results 450 u OM&PM/Class 7 b TOTAL POINTS 1000 7

Malcolm Baldridge Award Winners u u u Ames Rubber Corporation (1993) Armstrong World Industries Building Products Operations (1995) AT&T Consumer Communications Services (1994) AT&T Network Systems Group (1992) AT&T Universal Card Services (1992) Cadillac Motor Car Company (1990) Corning Telecommunications Products Division (1995) Eastman Chemical Company (1993) Federal Express Corporation (1990) Globe Metallurgical Inc. (1988) Granite Rock Company (1992) GTE Directories Corporation (1994) u u u IBM Rochester (1990) Marlow Industries (1991) Milliken & Company (1989) Motorola Inc. (1988) The Ritz-Carlton Hotel Company (1992) Solectron Corporation (1991) Texas Instruments Incorporated Defense Systems & Electronics Group (1992) Wainwright Industries, Inc. (1994) Wallace Co. , Inc. (1990) Westinghouse Electric Corporation Commerical Nuclear Fuel Division (1988) Xerox Corporation - Business Products & Systems (1989) Zytec Corporation (1991) Last Updated: November 8, 1996 OM&PM/Class 7 b 8

ISO 9000 u Series of standards agreed upon by the International Organization for Standardization (ISO) u Adopted in 1987 u More than 100 countries u A prerequisite for global competition? u ISO 9000: “document what you do and then do as you documented. ” Design Procurement Production Final test Installation Servicing ISO 9003 ISO 9002 Source: Adapted from Chase & Aquilano OM&PM/Class 7 b ISO 9001 9

Costs of Quality u Cost Quality Lever Benefits of Building Q in Early of Conformance – Cost of Appraisal Product Design Process Design Production – Cost of Prevention Improve Product 100: 1 u Cost of Non-Conformance 10: 1 1: 1 – Cost of Internal Failure – Cost of External Failure OM&PM/Class 7 b Low Visibility Reward Time High Visibility Reward 10

Components of Quality u Voice of the customer – Customer Needs – Quality of Design u Voice of the process – Quality of Conformance – Process Capability u Process Control and Improvement OM&PM/Class 7 b 11

Voice of the Customer: Linking Customer Needs to Business Processes Business Process Customer Need Internal Metric Reliability (40 %) Supervisor Observations Response (25%) % Proposals Mad on Time % Follow-Up Made Delivery Interval (30%) Installation (10%) Function Performance Test Follow-Up (10%) Overall Quality % Calls for Help Knowledge (30%) Sales (30%) Easy to Use (20%) Features/Functions (40%) Product (30%) % Repair Call Average Order Interval Fixed Fast (25%) Average Speed of Repair % Customers Informed Accuracy, No Surprise (45%) OM&PM/Class 7 b % Repeat Reports Kept Informed (10%) Source: Kordupleski et al. , CMR ‘ 93. % Installed on Due Date No Repeat Trouble (30%) Billing (15%) % Repair Reports Installed When Promised Repair (15%) Does Not Break (25%) % Billing Inquiries Response on First Call (35%) % Respolved First Call Easy to Understand (10%) % Billing Inquiries 12

Voice of the Customer: Quality Function Deployment u u u u What do customers want? Are all preferences equally important? Will delivering perceived needs deliver a competitive advantage? How can we change the product? How do engineering characteristics influence customer perceived quality? How does one engineering attribute affect another? What are the appropriate targets for the engineering characteristics? OM&PM/Class 7 b 13

Correlation: House of Quality Strong positive X Positive X X Easy to close 3 No road noise X = Ours A = Comp. A B = Comp. B (5 is best) 1 2 3 4 2 5 AB 3 Doesn’t leak in rain Competitive evaluation X 5 Easy to open X 7 Stays open on a hill Water resistance us t. * Accoust. Trans. Window to C Energy needed to open door Customer Requirements Check force on level ground tan ce Door seal resistance po r Engineering Characteristics Energy needed to close door Im Negative Strong negative X X AB XAB A XB X A 10 Importance weighting 6 6 9 2 3 B Relationships: OM&PM/Class 7 b A X Maintain current level B Reduce energy to 7. 5 ft/lb. Technical evaluation (5 is best) 5 4 3 2 1 Reduce force to 9 lb. Target values Maintain current level Reduce energy level to 7. 5 ft/lb Strong = 9 B BXA Medium = 3 BA X B A X X Small = 1 A Source: Hauser and Clausing 1988 14

Linked Houses From Customer To Manufacturing House of Quality OM&PM/Class 7 b Parts Deployment III Process Planning Production Characteristics Key Process Characteristics II Key Process Characteristics Parts Characteristics I Parts Characteristics Engineering Characteristics Customer Attributes Engineering Characteristics IV Production Planning 15

Benefits of QFD Startup and Preproduction costs at Toyota Auto Body Japanese automaker with QFD made fewer changes than US company without QFD Design Changes US Japan Before QFD After QFD 90% of total Japanese changes complete (39% of pre. QFD costs) Job # 1 t 20 - 24 months 14 - 17 months 1 - 3 Job # 1 months 1 -3 months time Source: Hauser and Clausing 1988 OM&PM/Class 7 b 16

More New Product Development Tools u Value analysis / Value engineering u Design for manufacturability u Robust design OM&PM/Class 7 b 17

Value Analysis/Value Engineering u Achieve equivalent or better performance at a lower cost while maintaining all functional requirements defined by the customer – Does the item have any design features that are not necessary? – Can two or more parts be combined into one? – How can we cut down the weight? – Are there nonstandard parts that can be eliminated? OM&PM/Class 7 b 18

Robust Quality: Taguchi’s View of Cost of Variability Non-conformance to design cost $$$ 0 Lower Tolerance Design Spec Upper Tolerance Traditional View OM&PM/Class 7 b Actual value Lower Tolerance Design Spec Upper Tolerance Taguchi’s View 19

Class 7 b: Key Learning Objectives u Elements u Costs of TQM / Baldridge / ISO 9000 of Quality u Components u Voice of Quality of the Customer – Linking business processes to customer needs – Product Design Methodologies: » Convert customer needs to product and process specifications: QFD » Value Engineering OM&PM/Class 7 b 20