Operations Management

Dr. Mashkur Zafar

We take 5 minutes to recall what we did in the
previous class and where we left

- What is POM:- General Environment,

Strategy, Design Phase, Planning,
Improvement, Operations Challenges
- Effect of Volume and Variety
- Process Types and Layout Types
 TODAY’S TOPIC’S
-Planning Process
-Capacity Planning
-Location Decisions
Operations Worldwide (Videos)

https://www.youtube.com/watch?v=uoSVfyI
ETaA
(Why demand and capacity planning is
important )

https://www.youtube.com/watch?v=fM4xKf
LZhFI
(Integrated Planning - Optimization for the
entire internal supply chain)
Forecasting

Name a Few variables that we

forecast…………
Why is forecasting Important
(One word Answer)
Forecasting - art & science of predicting
future events
Decreasing time frame for decisions makes
it more important
Increase accuracy & automate process
Forecasting
Techniques of Forecasting:-
1) Quantitative Techniques or Objective Techniques (uses past historic data)
2) Qualitative Techniques or Subjective Techniques ( use personal judgment
or intuition)
  Long Term Forecasting Long Term Planning
(1½ years to 7-10 years)
    - Strategic Capacity Planning
    - Strategic Location Decision
    - Investment in Plant and Technology
    - Introduction of New Products
    - Removal of Old Products
Forecasting Medium Term Forecasting Medium Term Planning
(Time Based) ( 6months to 1½ years)
    - Aggregate Planning
    - Master Production Scheduling (MPS)
     
  Short Term Forecasting Short Term Planning
(hourly, daily, weekly,
monthly – 6 months)
    - Material Requirement Planning (MRP)
    - Inventory Planning
    - Machine Hour and labor hour planning
    - Scheduling, Sequencing, loading etc.
Qualitative Forecasting Techniques
Grass Roots
Market Research
Executive Opinion / Judgement
Panel Consensus / Group
Consensus
Delphi Method
Historical Analogy

(Discuss a few Quantitative

Techniques of Forecasting)
 Exhibit
Exhibit13.1
13.1 Process planning
Long
range Strategic capacity planning

Intermediate Forecasting
& demand Sales and operations (aggregate) planning
range management
Sales plan Aggregate operations plan
Manufacturing
Services
Master scheduling

Material requirements planning

Weekly workforce and

Order scheduling customer scheduling
Short
range Daily workforce and customer scheduling
Process Planning

Process Planning deals with finding the “core”

processes that go into making a product. The
capacities at each stage with the aim of identifying
the “bottleneck” resource. The operations manager
has to take a “make” or “buy” decision. For all core
processes the usual decision is to “make”. For the
non-core processes the usual decision is to “buy”.
When a core process is outsourced it is called
“Business Process Outsourcing”
Process Planning

Car Manufacturing Process

Engine Accessories Body and Chasis Shop Car Accessories Shop

Shop @50 @125 @100

Paint Shop @200

Engine Manufacturing
Shop @75

Final Car Assembly @150

What is the Output of Cars per day

Process Planning
Car Manufacturing Process

Stores Canteen Workers Restroom

Engine Accessories Body and Chasis Shop Car Accessories Shop

Shop @50 @125 @100

Paint Shop @200

Gate
Engine Manufacturing
Shop @75

Parking
Final Car Assembly @150 for
Office Buses
for and
Staff Cars
Open the Power Point “Jacobs_16e_Chap007_Manufacturing Processes
new1” to discuss more on Process Types
 Exhibit
Exhibit13.1
13.1 Process planning
Long
range Strategic capacity planning

Intermediate Forecasting
& demand Sales and operations (aggregate) planning
range management
Sales plan Aggregate operations plan
Manufacturing
Services
Master scheduling

Material requirements planning

Weekly workforce and

Order scheduling customer scheduling
Short
range Daily workforce and customer scheduling
Capacity Planning & Facility Location

A. Measuring Capacity
B. Capacity Strategy
C. Capacity Planning & Evaluation Methods
D. Facility Location
E. Decision Stages & Factors Affecting Facility
Location
F. Scoring Rule For Location Decisions
G. Mathematical Models For Facility Location
H. Locating Facilities Globally
Understanding Capacity and Capacity Expansion through Numeric

AlwaysRain Irrigation, Inc. would like to determine capacity requirements

for the next four years. Currently, two production lines are in place for
making bronze and plastic sprinklers. Three types of sprinklers are available
in both bronze and plastic: 90-degree nozzle sprinklers, 180-degree nozzle
sprinklers, and 360-degree nozzle sprinklers. Management has forecast
demand for the next four years as follows.
  Yearly Demand ('000)
  I II III IV
Plastic 90 32 44 55 56
Plastic 180 15 16 17 18
Plastic 360 50 55 64 67
Bronze 90 7 8 9 10
Bronze 180 3 4 5 6
Bronze 360 11 12 15 18
Both production lines can produce all the different types of nozzles. The
bronze machines needed for the bronze sprinklers require two operators and
can produce up to 12,000 sprinklers. The plastic injection moulding machine
needed for the plastic sprinklers requires four operators and can produce up
to 200,000 sprinklers. Three bronze machines and only one injection
moulding machine are available.
1) What are the capacity requirements for the next four years?
2) Suppose that AlwaysRain Irrigation’s marketing department will undertake
an intense ad campaign for the bronze sprinklers, which are more expensive
but also more durable than the plastic ones. Forecast demand for the next
four years is as follows. What are the capacity implications of the marketing
campaign?
  New Yearly Demand ('000)
I II III IV
Plastic 90 32 44 55 56
Plastic 180 15 16 17 18
Plastic 360 50 55 64 67
Bronze 90 11 15 18 23
Bronze 180 6 5 6 9
Bronze 360 15 16 17 20
3) In anticipation of the ad campaign, AlwaysRain bought an
additional bronze machine. Will this be enough to ensure that
adequate capacity is available?
4)Suppose that operators have enough training to operate both the
bronze machines and the injection moulding machine for the plastic
sprinklers. Currently, AlwaysRain has 10 such employees. In
anticipation of the ad campaign described in problem 5, management
approved the purchase of two additional bronze machines. What are
the labour requirement implications?
A. Measuring Capacity

Capacity - output rate of process

Design capacity - maximum output under ideal
conditions
Effective capacity - extended output rate under
normal conditions
Actual output < effective capacity

Capacity utilization = actual output/design

capacity
Capacity efficiency = actual output/effective
capacity
Measuring Capacity

Individual Machine MBA Student Studying

Design Capacity 14 1000 4

Planned Reason

Effective Capacity 10 800 3

Unplanned Reason

Actual Output 6 600 1

Cap Utilized 0.428 0.6 0.25

Cap efficiency 0.6 0.75 0.33

Capacity utilization = actual output/design capacity

Capacity efficiency = actual output/effective capacity

Factors That Determine Capacity

Process design
Product design
Product variety
Product quality
Production scheduling
Materials management
Maintenance
Job design & personnel management
Graphs Of Capacity Expansion Strategies

Capacity Demand

Cap/Dem
Cap/Dem

Demand
Capacity
Time
Capacity leading (also known Capacity Lagging(also
as “Optimistic Strategy”) Known as “Pessimistic
Demand Strategy”)
Cap/Dem

Capacity .

Capacity Matching (uses “inventory”

to manage demand)
Capacity Expansion Strategies

Capacity leading (excess capacity)

+ can accommodate new/unexpected demand since
there is a capacity cushion
+ Always sufficient capacity to meet demand therefore
revenue is maximized and customer satisfied
+ Any critical startup problems with new plants are
less likely to affect supply to customers
+ can provide quick response
+ low overtime & subcontracting costs
high cost of unused capacity because of low
utilization
Risk of even greater (or even permanent) over-
capacity if demand does not reach forecast levels
Capital spending on the plant early
Capacity lagging (maximum capacity utilization)
+ Always sufficient demand to keep the plants working at
full capacity, therefore unit costs are minimized
+ Over-capacity problems are minimized if forecast are
optimistic.
+ Capital spending on the plant is delayed
+ minimizes facility & equipment costs
-Insufficient capacity to meet demand fully, therefore
reduced revenue and dissatisfied customers
-No ability to exploit short-term increases in demand
cannot accommodate new or unexpected demand
-Under supply position even worse if there are start-up
problems with the new plants
-slow response at peak times
-high overtime and/or subcontracting costs
often add capacity at peaks of business cycles
Demand matching strategy (using Inventory)
+ All demand is satisfied therefore customers are satisfied
and revenue is maximized.
+ Utilization of capacity is high and therefore costs are low
+ Very short term surges in demand can be met from
inventories
+ balances capacity & other costs
+ provides reliable service & responsiveness
must be able to predict demand well or have constant
demand
The cost of inventories in terms of working capital
requirements can be high. This is especially serious at a
time when the company requires funds for its capital
expansion
Risk of product deterioration and obsolescence
C. Capacity Planning & Evaluation
Methods
Forecast capacity requirements
Make decisions
Break-even analysis
Decision analysis
consider probabilities of outcomes &
consequences
use decision trees to study problem
Experience effects increase capacity over time
LOCATION DECISION
 Exhibit
Exhibit13.1
13.1 Process planning
Long
range Strategic capacity planning+Location

Intermediate Forecasting
& demand Sales and operations (aggregate) planning
range management
Sales plan Aggregate operations plan
Manufacturing
Services
Master scheduling

Material requirements planning

Weekly workforce and

Order scheduling customer scheduling
Short
range Daily workforce and customer scheduling
Factors Affecting Facility Location
• Nearness to raw material
• Nearness to Markets
• Availability of Labour
• Availability of Fuel and Power
• Availability of Water
• Climatic Conditions
• Government Policy
• Land
• Community Attitude
• Security
• Transport Facilities
• Momentum of an early start
• Personal Factors
• Other Considerations
Factors Affecting Facility Location
• Community Attitude
• Security
• Transport Facilities
• Momentum of an early start
• Personal Factors
• Other Considerations
D. Facility Location

Manufacturing
raw materials
labor
markets
Services
proximity to customers
Noxious (harmful, injurious) facilities
remote locations
E. Decision Stages & Factors Affecting Facility Location

Identify set of alternatives

Reduce set using evaluation procedures
Hierarchy of decisions
regional
local
site
Regional Decision

Market proximity
Proximity to raw materials
Availability of utilities
Labor supply & unionization
International locations also include
national taxes
legal restrictions
Local Decision

Taxes
Economic incentives
Attractiveness of community
Compatible industry
Transportation network
Government policy & attitude
Environmental regulations
Site Decision

Space for expansion

Proximity of other industry
F. Scoring Rule For Location Decisions
Factor Rating Method or Weighted Score
Method or Linear scoring rule (LSR)
1. Identify important screening factors
2. Assign weights to factors
3. Rate each alternative on each factor
4. Overall rating = sum of factor weight x
rating
Example of LSR

Weighted Score method for the three sites

Factor Rating Method / Weighted Score Method
Scores Sites
Importance A (Ras Al
Criteria Weighting Khaimah) B(Sharjah) C(Dubai)
Cost of the Site 4 40 45 70
Local Tax 2 50 50 30
Skills Availability 1 70 70 60
Access to
MotorWays 1 70 70 60
Access to Airport 1 80 65 45
Potential for
Expansion 1 30 50 70
Total Weighted Scores 510 535 575
Since Dubai has the highest weighted score, it is the preferred site
Centroid Method/Centre of Gravity Method

Used for locating single facilities that  

considers existing facilities, the distances
between them, and the volumes of goods
to be shipped between them.  
Assumes inbound and outbound
transportation costs are equal
Does not include special shipping costs for
less than a full load Cx = X coordinate of centroid
This methodology involves formulas used Cy = Y coordinate of centroid
to compute the coordinates of the two- dix = X coordinate of the ith location
dimensional point that meets the distance diy = Y coordinate of the ith location
Vi = volume of goods moved to or from
and volume criteria stated earlier.
the ith location
Example 15.2

The HiOctane Refining Company needs to locate

an intermediate holding facility between its refining
plant in Long Beach and its major distributors.
Next slide shows the coordinate map and the
amount of gasoline shipped to or from the plant
and distributors. In this example, for the Long
Beach location (the first location),
dix = 325, diy = 75, and Vi = 1,500.
Example 15.2

Excel: Centroid Ca
For the Excel template visit lculation
www.mhhe.com/sie-chase14e
Example 15.2

Cx = X coordinate of centroid
Cy = Y coordinate of centroid
dix = X coordinate of the ith location
diy = Y coordinate of the ith location
Vi = volume of goods moved to or from the ith
location
Example 15.2

Start search for

new location
here
 TODAY’S TOPIC’S
- Aggregate Planning
- MRP
 Exhibit
Exhibit13.1
13.1 Process planning
Long
range Strategic capacity planning+Location

Intermediate Forecasting
& demand Sales and operations (aggregate) planning
range management
Sales plan Aggregate operations plan
Manufacturing
Services
Master scheduling

Material requirements planning

Weekly workforce and

Order scheduling customer scheduling
Short
range Daily workforce and customer scheduling
Operations Worldwide (Videos)

https://www.youtube.com/watch?v=EIfU43
OKqYw
(Operations Management - Aggregate
Planning)

https://www.youtube.com/watch?v=I1YaeGs
Yh4g
(Material Requirement Planning)
What Is Sales and Operations Planning + Aggregate Planning

Sales and operations planning is a process that helps firms

provide better customer service, lower inventory, shorten
customer lead times, stabilize production rates, and give top
management a handle on the business.
The process consists of a series of meetings, finishing with a
high-level meeting where key intermediate-term decisions
are made.
This must occur at an aggregate level and also at the
detailed individual product level.
Aggregate means at the level of major groups of
products.
Sales and Operations Planning Activities – Overview

Sales and operations planning was coined by companies to

refer to aggregate planning.

The new terminology is meant to capture the importance

of cross-functional work.

Aggregation on the supply side is done by product

families, and on the demand side it is done by groups of
customers.
Aggregate Planning
In Strategic Capacity Planning the Capacity gets fixed. Now
we need to determine, with this fixed capacity, what short
term changes in capacity will we make to be able to meet
demand.
Let us analyse capacity and demand for a Car
Manufacturer in the interim period of One year.
Aggregate Planning Strategies

1) Stable workforce variable work hours

( Using Overtime and Shift Change)
2) Chase Strategy ( Hiring and Firing/Layoff
of temporary Workers)
3) Level Strategy (Using Inventory to meet
demand. A stable workforce works at a
constant rate. This strategy could be with
backordering and without backordering)
4) Subcontracting/Outsourcing (Getting it
done from Outside)
5) Mixed Strategy (A combination of above)
The main purpose of the aggregate plan is to specify the optimal
combination of production rate, workforce level, and inventory on
hand. Production rate refers to the number of units completed per
unit of time (such as per hour or per day). Workforce level is the
number of workers needed for production (production = production
rate × workforce level). Inventory on hand is unused inventory
carried over from the previous period.
Product group or broad category (aggregation)
Planning done over an intermediate-range planning period of 3 to 18
months
The idea behind Aggregate Planning is to use any one of the
strategies mentioned previously (known as a Pure Aggregate Plan) or
a combination of the aggregate planning strategies (called a mixed
strategy plan) and find out the cost of each plan. The plan that
gives the least total cost is to be implemented over the planning
horizon.
The emphasis in Aggregate Planning is budgetary. Once the
approval is obtained we can then proceed to lower level of planning.
Inputs to the Production
Planning System
Aggregate Planning Question

Develop a production plan and calculate the annual cost

for a firm whose demand forecast is fall, 10,000; winter,
8,000; spring, 7,000; summer, 12,000. Inventory at the
beginning of fall is 500 units. At the beginning of fall, you
currently have 30 workers, but you plan to hire temporary
workers at the beginning of summer and lay them off at the
end of summer. In addition, you have negotiated with the
union an option to use the regular workforce on overtime
during winter or spring if overtime is necessary to prevent
stock outs at the end of those quarters. Overtime is not
available during the fall. Relevant costs are hiring, $100 for
each temp; layoff, $200 for each worker laid off; inventory
holding, $5 per unit-quarter; backorder, $10 per unit;
straight time, $5 per hour; overtime, $8 per hour. Assume
that the productivity is 0.5 unit per worker hour, with eight
hours per day and 60 days per season.
Use Excel Spreadsheet to Solve Aggregate
Planning Numeric and find out the Total Cost
of Plan by :-
1) Mixed Strategy
2) Overtime (Stable workforce variable work
hours)
3) Chase Strategy( Hiring and Firing Workers)
4) Level Strategy (with backordering)
5) Level Strategy (without backordering)
6) Discuss which Strategy is best. Discuss
which strategy suitable for which industry.
 MRP
-Material
Requirement
Planning
 Exhibit
Exhibit13.1
13.1 Process planning
Long
range Strategic capacity planning

Intermediate Forecasting
& demand Sales and operations (aggregate) planning
range management
Sales plan Aggregate operations plan
Manufacturing
Services
Master scheduling

Material requirements planning

Weekly workforce and

Order scheduling customer scheduling
Short
range Daily workforce and customer scheduling
Enterprise Resource Planning (ERP)
and Material Requirements Planning
(MRP)

ERP – a computer system MRP – a means for

that integrates application determining the number of
programs in accounting, parts, components, and
sales, manufacturing, and the materials needed to produce
other functions in a firm a product
Material Requirements Planning (MRP)

The logic that ties production functions together

from a material planning and control view
A logical, easily understood approach to the
problem of managing the parts, components,
and materials needed to produce end items
How much of each part to obtain?
When to order or produce the parts?
Dependent demand drives the MRP system
MRP Case Study

Case:- Lift All Company(MRP)

A company manufactures two types of lifting aides. The Pax Model and
the Dax Model. A customer has placed the following orders:- He
requires 50 of the Pax Model in week 7 and a further 100 in week 10;
he requires a further 200 of the Dax Model in week 9. The simplified
product structure for the Pax Model is as shown.
MRP Case Study

The Product Structure for the two types of lifting aids Pax and the
Dax Model is as shown above. The Pax Model Requires one
Rain Cover, two Handles and four Pulley Assemblies. The Dax
Model Requires one Handle and two Pulley Assemblies. Each
Pulley Assembly comprises of 20 mtr of Rope and three Pulleys
MRP Case Study
Lot sizes, starting on-hand-inventory and lead times are given
below

The lot sizes shown indicate that orders can only accepted for these
lot sizes or multiples of them. The firm only manufactures products
for which it has firm orders.
Prepare a Master Production Schedule, a complete set of Materials
Requirements Schedules and a Planned Order Release Report
based on the information given ( Separate MRP sheets will be
provided)
Master Production Scheduling

The master schedule deals with end items and is

a major input to the MRP process.
All production systems have limited capacity and
limited resources.
The aggregate plan provides the general range
of operation; the master scheduler must
specify exactly what is to be produced.
To determine an acceptable feasible schedule to
be released to the shop, trial master production
schedules are tested using the MRP program.
Lot Sizing in MRP Systems

Determination of lot sizes

in an MRP system is a
complicated and difficult
problem. Economic order
Lot-for-lot (L4L) quantity (EOQ)
Lot sizes – the part
quantities issued in the Lot Sizing
planned order receipt and Strategies
planned order release
Least total cost Least unit cost
sections of an MRP (LUC)
(LTC)
schedule
 62

Aggregate Forecasts
Firm orders product of demand
from known
plan from random
customers
customers

Engineering Master production

Schedule (MPS) Inventory
design
transactions
changes

Material From
FromExhibit
Exhibit15.6
15.6
planning
Bill of (MRP Inventory
material computer record file
file program)
Secondary reports
Primary reports
Exception reports
Planned order schedule for Planning reports
inventory and production Reports for performance
control control
©The McGraw-Hill Companies, Inc., 2004
 TODAY’S TOPIC’S
- Scheduling
- Inventory
- Quality
Before We Start…..
-How will be go about delivering this entire
course.
-All attempts will be made to explain as much
the concepts and technical terms that are
associated with the concept.
- Software’s will be used wherever necessary.
-Case Study’s, Video’s and Assignment
discussion---
Operations Worldwide (Videos)
https://www.youtube.com/watch?v=9MrL2BxKh1E
(Operations Management - Scheduling)

https://www.youtube.com/watch?v=3qLV6tfLfk0 (8
Best Practices for Inventory Management)

https://www.youtube.com/watch?v=Y-lBvI6u_hw
(Behind the scenes of an Amazon warehouse)

https://www.youtube.com/watch?v=yZC4neLax5o
(Walmart Supply Chain )

https://www.youtube.com/watch?v=18cN8MZvJRA
(Quality Management - Quality Control)
 Exhibit
Exhibit13.1
13.1 Process planning
Long
range Strategic capacity planning

Intermediate Forecasting
& demand Sales and operations (aggregate) planning
range management
Sales plan Aggregate operations plan
Manufacturing
Services
Master scheduling

Material requirements planning

Weekly workforce and

Order scheduling customer scheduling
Short
L range Daily workforce and customer scheduling
Loading

Infinite loading: work is assigned to a work center based on

what is needed
No consideration to capacity

Finite loading: schedules each resource using the setup and

run time required for each order
Determines exactly what will be done by each resource
at every moment during the day
Scheduling

Forward scheduling: the system takes an order and schedules

each operation that must be completed forward in time
Can tell the earliest date an order can be completed

Backward scheduling: starts with due date and schedules the

required operations in reverse sequence
Can tell when an order must be started in order to be done by
a specific date
Limitations

Machine-limited process: equipment is the critical

resource that is scheduled

Labor-limited process: people are the key resource

that is scheduled

Most actual processes are either labor limited or

machine limited but not both
Objectives of Work-Center Scheduling

Meet due dates

Minimize lead time
Minimize setup time or cost
Minimize work-in-process inventory
Maximize machine utilization
Job Sequencing

Sequencing: the process of determining the job order on

machines or work centers
Also known as priority sequencing

Priority rules: the rules used in obtaining a job sequence

Can be simple or complex
Can use one or more pieces of information
Common rules shown on next slide
Priority Rules for Job Sequencing
Standard Measures of Schedule Performance

Meeting due dates

Minimizing the flow time

Minimizing work-in-process inventory

Minimizing idle time

Example 22.1: n Jobs on One Machine
Example 22.1: FCFS and SOT Rules
Example 22.1: EDD and LCFS Rules
Example 22.1: Random and STR Rules
Comparison of Priority Rules
Gantt Chart
 INVENTORY
MANAGEMENT
Selective Inventory Control
ABC Analysis

A B C
Selective Inventory Control
Carry out an ABC Analysis on the items mentioned below
and categorize them
ITEMS UNITS UNIT PRICE
I 30 8
H 300 3.5
J 2900 0.4
G 6000 0.2
D 60 22
C 150 10
F 4000 0.5
L 410 6.2
A 700 5
E 3800 1.5
B 2400 3
K 1150 7.1
 A items: High consumption value
1. Very strict control
2. No safety stocks
3. Frequent ordering or weekly deliveries
4. Weekly control statements
5. Maximum follow-up and expediting
6. Rigorous value analysis
7. As many sources as possible for each item
8. Accurate forecasts in material planning
9. Minimisation of waste, obsolete and surplus
10. Central purchasing and storage
11. Maximum efforts to reduce lead time
12. Must be handled by senior officers
 B items: moderate value

1. Moderate control
2. Low safety stocks
3. Once in three months (as per EOQ)
4. Monthly control report
5. Periodic follow-up
6. Moderate value analysis
7. Two or more reliable sources
8. Estimates based on past data on present plans
9. Quarterly control over surplus and obsolete items
10. Can be handled by middle management
 C items : low consumption value
1. Loose control
2. High safety stock
3. Bulk ordering once in six months
4. Quarterly control reports
5. Follow-up and expediting in exceptional cases
6. Minimum value analysis
7. Two reliable sources for each other item
8. Rough estimates for planning
9. Annual review over surplus and obsolete material
10. Decentralized purchasing
11. Minimum clerical efforts
12. Can be fully delegated
Other Selective Inventory Control Techniques
S. No. Type of Control Criteria Application
1 ABC Analysis Annual Consumption value To control Inventory of raw
(Always Better of the Item material & WIP Inventory.
Control)
2 XYZ Analysis Inventory value of Items in To review the actual inventories
Stores their uses etc. at scheduled
intervals.
3 VED Analysis (Vital Criticality of the item To determine the stocking level
Essential Desirable) of spare parts for machines and
equipment’s
4 FSND Analysis (Fast, Consumption pattern of the To control obsolescence.
Slow, Non-moving, items
Dead)
5 HML Analysis (High, Unit Price (Cost) of the item To control the purchases and to
Medium, Low Cost) develop vendors
6 SOS, Analysis Nature of Supplies and Procurement and holding
(Seasonal, off- seasonality strategy for seasonal item
Seasonal Analysis)
7 GOLF Analysis Source of supply of material Procurement strategy
(Government, Others,
Local, Foreign)
Other Selective Inventory Control Techniques
S. No. Type of Control Criteria Application
1 ABC Analysis (Always Annual Consumption To control Inventory of raw
Better Control) value of the Item material & WIP Inventory.

2 XYZ Analysis Inventory value of Items in To review the actual

Stores inventories their uses etc. at
scheduled intervals.
3 VED Analysis (Vital Criticality of the item To determine the stocking
Essential Desirable) level of spare parts for
machines and equipment’s
4 FSND Analysis (Fast, Consumption pattern of To control obsolescence.
Slow, Non-moving, the items
Dead)
5 HML Analysis (High, Unit Price (Cost) of the To control the purchases
Medium, Low Cost) item and to develop vendors
6 SDE Analysis (Scarce, Purchasing problem in Lead time analysis and
Difficult, easily available) regard to availability purchasing strategies
7 SOS, Analysis Nature of Supplies and Procurement and holding
(Seasonal, off- seasonality strategy for seasonal item
Seasonal Analysis)
8 GOLF Analysis Source of supply of Procurement strategy
(Government, Others, material
Local, Foreign)
 Quality planning and control seeks to deliver
products and services at their required
specification or above it

Quality planning and control

Supply Consistent delivery of Demand

products and services at
The specification or above

operation The market

Required quality of
products and
Operations resources services Customer requirements
 High quality puts costs down and revenue up

Quality up
Processing
Rework and time down
Image up Service scrap costs
costs down down
Inventory
Inspection down
and test
Sales volume up costs down

Complaint and Capital

warranty costs costs down
down
Price Scale
competition economies up
down Productivity
up

Operation costs
Revenue up down
Profits up
Interpretation of Marketing
specification Expectations

Product/ service Product/

specification service

Product/service Operation
development Customer

Evaluation of
conformance

Quality Quality
characteristics planning and
control
 Customers’
expectations for

poor
the product or
service

Customers’

perceptions
perceptions of
Gap

Expectations >
the product or
service

Perceived quality is
Customers’
expectations of
the product or
service

perceptions Customers’
perceptions of
Expectations =

the product or
service
perceptions of the product or service

Customers’
Perceived quality is governed by the gap
between customers’ expectations and their

expectations
for the product
Gap

or service
perceptions

Customers’
Expectations <

perceptions of the
product or service
Perceived quality
is good
 A “Gap” model of Quality

Previous Word of mouth Image of product

Experience communications or service

Customer’s Customer’s
expectations perceptions
concerning a concerning the
product or service product or service

Gap 4
Customer’s own
specification of
quality

The actual product

Gap 1 or service

Management’s Organisation’s
concept of the specification of
product or service quality
Gap 3
Gap 2
 Product characteristics Delivery service characteristics

Delivery
Shelf life vehicle and
(durability) staff
Packaging appearance
(aesthetics) (aesthetics)
Product
availability Staff attitude
(functionality) (contact)
Product taste
(functionality) Service
Product range Accuracy of reliability
(functionality) delivery
(reliability) (reliability)
Coping with
errors
(recovery)
Ease of use
(functionality/
Site uptime aesthetic) Speed of web
(reliability) response
(functionality)

Website characteristics

Some quality characteristics for an on-line shopping service

 Quality

Quality Reliability
fitness for purpose ability to continue
working at
accepted
quality level

Quality of Design Quality of Conformance

degree to which faithfulness with which the
design achieves purpose operation agrees with design

Variables Attributes
things you can measure things you can
assess
accept/reject
 Process control charting

-3 standard +3 standard
deviations deviations
-2 standard +2 standard
deviations deviations
-1 standard +1 standard
deviation deviation
Frequency

A standard
deviation

40 100 160
Elapsed time of call (secs)

The “standard deviation” is a measure of the

“Spread” or “Variation” of a distribution
 Process control charting

99.7% of points
-3 standard 95.4% of points +3 standard
deviations deviations
-2 standard 68% of points +2 standard
deviations deviations
-1 standard +1 standard
deviation deviation
Frequency

A standard
deviation

 = sigma

40 100 160
Elapsed time of call (secs)

The chances of measurement points deviating from the average

is predictable in a normal distribution
 The various definitions of quality

The transcendent approach views quality as synonymous with

innate excellence.

The manufacturing-based approach assumes quality is all

about making or providing error-free products or services.

The user-based approach assumes quality is all about

providing products or services that are fit for their purpose.

The product-based approach views quality as a precise and

measurable set of characteristics.

The value-based approach defines quality in terms of ‘value’.

Quality characteristics of goods and services

Functionality - how well the product or service does the

job for which it was intended.

Appearance - aesthetic appeal, look, feel, sound and

smell of the product or service.

Reliability - consistency of product or services

performance over time.

Durability - the total useful life of the product or service.

Recovery - the ease with which problems with the

product or service can be rectified or resolved.

Contact - the nature of the person-to-person contacts

that take place.
 Total quality management can be viewed
as a natural extension of earlier
approaches to quality management
Whole operation involved
Quality strategy
Teamwork Total Quality
Staff empowerment Management
Involves customers and suppliers
Quality assurance
Quality control
Quality systems Inspection
Quality costing
Problem solving
Quality planning

Statistical methods
Process performance
Quality standards

Error detection
Rectification
TQM

TQM lay particular stress on the following:-

1)Meeting the needs and expectations of customers
2)Covering all parts of the organization
3)Including every person in the organization
4)Examining all costs which are related to quality,
especially failure cost
5)Getting things right first time i.e. designing in quality
rather than inspecting it
6)Developing the system and procedures which support
quality and improvement
7)Developing a continuous process of improvement.
TQM
TQM lay particular stress on the following:-
1) Meeting the needs and expectations of customers (the product is
meant for the customer- it should be designed to fill the needs and
wants of the customer
2) Covering all parts of the organization (Quality is not only the
prerogative of the operations department. Every functional areas
contributes to quality. If there is not inter-functional harmony (internal
customers) then the external customers are bound to feel hassled.
3) Including every person in the organization ( Every person should be included in
quality control programs; from the topmost CEO to the lowest level of peon. Most often quality control
programs tend to fail because of lack of commitment on the part of top management.)
4) Examining all costs which are related to quality, especially failure cost
(prevention cost, appraisal cost, internal failure cost, external failure
cost. It is said in quality that if one spends more in prevention and
appraisal cost then the internal and external failure cost is bound to
go down out of which the external failure cost is most severe.)
TQM
5) Getting things right first time i.e. designing in quality rather than
inspecting it. We follow a structured methodology of
i) Quality Function Deployment (QFD) or House of Quality or Voice of
Customer- developed in Japan by Yoji Akao in the late 1960s while
working for Mitsubishi’s shipyard. It was later adopted by other
companies including Toyota and its supply chain.
ii) Value Analysis and Value Engineering (VA/VE)- Lawrence D. Miles
working for General Electric (GE) developed the concept of VA/VE
during WW II when there was resource shortage; it was formally
announced in 1947
iii) Design for Manufacturing and Assembly (DFMA)
iv) Taguchi Methods- Genichi Taguchi, developed in 1950 while developing
a telephone-switching system for Electrical Communication Laboratory,
a Japanese company. There should be inbuild sturdiness in the design.
v) POKA YOKES or BOKA YOKES or Fail Safing Devices- The term Poka
Yoke (poh-kah yoh-keh) was coined by Shigeo Shingo in Japan during
the 1960s. He also formalized Zero Quality Control. Actually, the initial
term was baka-yoke (boka yoke), meaning ‘fool-proofing’, but was later
changed to Poka Yoke means ‘mistake-proofing’ .}
 X

H a r d - d r iv e s i z e

R a t io = T a r g ./ U S
K e y b o a rd ty p e
C a s e m a t e r ia l

S c r e e n ty p e
Cust.

R A M s iz e
B a t t. ty p e
Tech. Attr. Eval.

Ta rg e t
US C1C2
Cust. Req. Imp
Light weight 4.5 3 3 4 4 1.3
Small size 3.0 3 4 5 4 1.3
Long op time 3.5 5 4 3 5 1.0
Large keys 2.0 2 5 3 3 1.5
Strong Pos. US 3 3 3 4 3 2
Pos. C1 4 4 4 3 4 5
X Neg. C2 3 4 2 3 3 3
* Strong Neg. % imp 8 31 13 13 16 16
TQM
6) Developing the system and procedures which support quality and improvement
A) (In UAE)
Emirates Authority for Standardization and Metrology (ESMA) is a Federal UAE
Authority, established by UAE Federal Law (28), 2001. As the only reference in the UAE in
terms of quality standards, ESMA's strategy aims at supporting the national economy by
establishing a new era of excellence and quality. ESMA has established Technical
Committees in the fields of food products, construction and building materials products,
electrical and electronic products, chemical and plastic products, mechanical products,
petroleum products and lubricants, and metrology and information technology. ESMA is
implementing the Emirates Conformity Assessment Scheme (ECAS) and the Emirates
Quality mark (EQM). Under this scheme, local and imported products are verified for
compliance against National Standards. (
https://www.esma.gov.ae/en-us/Services/Pages/Notified-Bodies.aspx)
(In India)
a) ISI mark (formerly called Indian Standards Institution) in India is issued by Bureau of
Indian Standard (BIS), Manak Bhavan b) The Star Rating for compressor-based products
like room air conditioners and refrigerators is issued by the Bureau of Energy Efficiency
(BEE), RK Puram c) Food Safety and Standards Authority of India (FSSAI)(2006), situated
near Bal Bhawan Delhi is an autonomous body established under the Ministry of Health &
Family Welfare, Government of India is responsible for protecting and promoting public
health through the regulation and supervision of food safety.
TQM
B) ISO ( more details on the slide after this.)
C) Awards:- There are several Awards such as the
i)DEMING Prize/Award (constituted by JUSE- Japanese Union of Scientists and
Engineers http://www.juse.or.jp/deming_en/award/1026.html) - The Deming Prize
is an annual award presented to an organization that has implemented TQM
suitable for its management philosophy, scope/type/scale of business, and
management environment. Regardless of the types of business, any organization
can apply for the Prize under certain conditions, be it public or private, large or
small, domestic or overseas, or part of or entire organization. The winners
receive the Deming Medal with an accompanying Certificate of Merit from the
Deming Prize Committee and supplemental prize money from “Nippon Keizai
Shimbun.”
ii) Malcolm Baldrige Award- (https://www.nist.gov/Baldrige) The Malcolm Baldrige
National Quality Award (MBNQA) is an award established by the U.S. Congress
in 1987 to raise awareness of quality management and recognize U.S.
companies that have implemented successful quality management systems. The
award is the nation's highest presidential honor for performance excellence.
Malcolm Baldrige served as the United States Secretary of Commerce from 1981
until his death in 1987.
TQM
iii) EFQM (the European Foundation for Quality Management)
(https://www.efqm.org/) is a not-for-profit membership foundation in
Brussels, established in 1989 to increase the competitiveness of the
European economy. The initial impetus for forming EFQM was a response
to the work of W. Edwards Deming and the development of the concepts
of Total Quality Management. The foundation was formed in 1989, with 67
members. The first version of the EFQM Excellence Model was created
by a group of experts from various sectors and academic institutions and
launched in 1992. It acted as the framework for assessing applications for
the European Quality Award, the transnational quality awards of Europe.
iv) The Rajiv Gandhi National Quality Award is the national quality award
given by the Bureau of Indian Standards
(https://bis.gov.in/other/rgnqa_geninfo.htm) to Indian organisations that
show excellence in their performance. It is named after Rajiv Gandhi, the
former Prime Minister of India, and was introduced in 1991 after his
death. The award aims to promote quality services to the consumers and
to give special recognition to organisations that contribute significantly
towards the quality movement of India.
TQM
7) Developing a continuous process of improvement.
a) Continuous Improvement
-PDCA Cycle (Plan Do Check Act), Initially it was called PDSA
(Plan, DO, See) invented in 1920 by Mr. Walter A. Shewart, which
was later in 50s changed by Edward W. Deming, to: Plan, Do,
Check, and Act also called Deming Cycle
- Kaizen Cycle incorporating 5 elements teamwork, personal
discipline, improved morale, quality circles, suggestions for
improvement.
TQM

b) Break through Improvement

- Business Process Reengineering- In 1990, Michael Hammer, professor of
computer science at MIT, published the article "Reengineering Work: Don't Automate,
Obliterate" in the Harvard Business Review, in which he claimed that the major
challenge for managers is to obliterate forms of work that do not add value, rather than
using technology for automating it. This statement implicitly accused managers of
having focused on the wrong issues, namely that technology in general, and more
specifically information technology, has been used primarily for automating existing
processes rather than using it as an enabler for making non-value adding work
obsolete.

Kaizen with PDCA Business Process Re-engineering

THANK YOU
Dr. Mashkur Zafar
[email protected]