OPERATIONS MANAGEMENT for MBAs Fourth Edition Meredith and Shafer Prepared by: Al Ansari Seattle University John Wiley and Sons, Inc. Chapter 3: Controlling Processes 1 Chapter 3 Controlling Processes Chapter 3: Controlling Processes 2 Introduction Chapter 3: Controlling Processes 3 Texas Instruments Wanted to design new Accounts Receivable using new technologies To monitor and control their cost They identified variety of measures to track including actual versus projected spending Problem – the planned budget exceeded the contract funs available Chapter 3: Controlling Processes 4 Automotive Systems Group of Johnson Controls Having trouble controlling their product development process Each manager used a different process Workers did not know who was responsible for the work Developments were failing because of rapid company growth New employees were having trouble fitting into the culture. Chapter 3: Controlling Processes 5 Monitoring and Control Monitor processes, output, and environment to make sure that strategy is appropriate to achieve goals. ◦ First, identify the key factors to be controlled. ◦ Second, identify the relevant information to be collected. Chapter 3: Controlling Processes 6 Stages of Operational Effectiveness Internally Neutral Minimize manufacturing’s negative potential Externally Neutral Industry practice is followed Internally Supportive Manufacturing investment support the business strategy Externally Supportive Manufacturing is involved up front in strategic decision Chapter 3: Controlling Processes 7 Benefits of Balanced Scorecard An effective way to clarify and gain consensus of the strategy A mechanism for communicating the strategy throughout the entire organization A mechanism for aligning departmental and personal goals to the strategy A way to ensure that strategic objectives are linked to annual budgets Timely feedback related to improving the strategy Chapter 3: Controlling Processes 8 ISO 9000 ISO 9000 was developed by International Organization for Standardization. ISO 9000 was developed as a guideline for designing , manufacturing, selling, and servicing products. It is a “checklist” of good business practices. Chapter 3: Controlling Processes 9 ISO 9000 Guidelines for designing, manufacturing, selling, and servicing products. Selecting an ISO 9000 certified supplier provides some assurance that supplier follows accepted business practices in areas covered by the standard Chapter 3: Controlling Processes 10 Elements of ISO 9000 Management Responsibility Quality System Contract Review Design Control Document and Data Control Purchasing Control of Customer Supplied Product Product Identification and Traceability Process Control Inspection and Testing Control of Inspection, Measuring, and Test Equipment Inspection and Test Status Control of Nonconforming Product Corrective and Preventive Action Handling, Storage, Packaging, Preservation, and Delivery Internal Quality Audits Training Servicing Statistical Techniques Chapter 3: Controlling Processes 11 ISO 14000 Series of standards covering environmental management systems, environmental auditing, evaluation of environmental performance, environmental labeling, and life-cycle assessment. Intent is to help organizations improve their environmental performance through documentation control, operational control, control of records, training, statistical techniques, and corrective and preventive actions. Chapter 3: Controlling Processes 12 Process Control Chapter 3: Controlling Processes 13 Process Control Process control is the act of reducing difference between plan and reality for each process. Control is one of the manager’s most difficult tasks involving mechanistic and human elements. Chapter 3: Controlling Processes 14 Process Control Characteristic of a good control system: Should be flexible Should be cost effective Should be simple Must operate in a timely manner Should be precise Should be fully documented Chapter 3: Controlling Processes 15 Control Based on Attributes and Variables Inspection for Variables: measuring a variable that can be scaled such as weight, length, temperature, and diameter. Inspection of Attributes: determining the existence of a characteristic such as acceptable-defective, timely-late, and rightwrong. Chapter 3: Controlling Processes 16 Chance Versus Assignable Variation Chance variation is variability built into the system. Assignable variation occurs because some element of the system or some operating condition is out of control. Quality control seeks to identify when assignable variation is present so that corrective action can be taken. Chapter 3: Controlling Processes 17 Control Charts Chapter 3: Controlling Processes 18 Control Charts Developed in 1920s to distinguish between chance variation in a system and variation caused by the system’s being out of control - assignable variation. Chapter 3: Controlling Processes 19 Control Charts continue Repetitive operation will not produce exactly the same outputs. Pattern of variability often described by normal distribution. Random samples that fully represent the population being checked are taken. Sample data plotted on control charts to determine if the process is still under control. Chapter 3: Controlling Processes 20 Control Chart with Limits Set at Three Standard Deviations Chapter 3: Controlling Processes 21 Control Charts for Variables Chapter 3: Controlling Processes 22 Two Control Charts Sample Means Chart Range Chart Chapter 3: Controlling Processes 23 Sample Data of Weights of Tacos (Ounces) Sample Scenario 1 Scenario 2 1 4, 5, 6 4, 5, 6 2 6, 7, 8 3, 5, 7 3 7, 8, 9 2, 5, 8 Chapter 3: Controlling Processes 24 Analysis of Scenario 1 Sample Mean Range 1 5 2 2 7 2 3 8 2 Sample means show problem having increased from 5 ounces to 8 ounces. Sample ranges have not changed from sample to sample. Chapter 3: Controlling Processes 25 Analysis of Scenario 2 Sample Mean Range 1 5 2 2 5 4 3 5 6 Sample ranges show problem having increased from 2 ounces to 6 ounces. Sample means have not changed from sample to sample. Chapter 3: Controlling Processes 26 Patterns of Change in Process Distributions Chapter 3: Controlling Processes 27 Control Limits Sample Means Chart: UCL X X A 2 R LCL X X A 2 R Range Chart: UCL R D 4 R LCL R D 3 R Chapter 3: Controlling Processes 28 Constructing Control Charts X X N R R N Chapter 3: Controlling Processes 29 Mean Age of Ice Cream Chapter 3: Controlling Processes 30 Range in Ice Cream Age Chapter 3: Controlling Processes 31 Control Charts for Attributes Chapter 3: Controlling Processes 32 Fraction-Defective (p) Charts total number of defects p total number of units sampled p p (1 p ) n UCL p p z p LCL p p z p Chapter 3: Controlling Processes 33 Number-of-Defects (c) Charts number of incidents observed c number of units sampled c c UCL c c z c LCL c c z c Chapter 3: Controlling Processes 34 Service Defections Organizations should monitor customer defections ◦ feedback from defecting customers can be used to identify problem areas ◦ can determine what is needed to win them back ◦ changes in defection rate can be used as early warning signal Chapter 3: Controlling Processes 35 Chapter 3: Controlling Processes 36 Copyright Copyright 2010 John Wiley & Sons, Inc. 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