Simulation Debrief Slides
https://cb.hbsp.harvard.edu/cbmp/access/30407606
This PowerPoint presentation was prepared by Indiana University Professor Barbara Flynn for the sole purpose of aiding classroom instructors in the use of
Operations Management Simulation: Quality Analytics, HBP No. 4404. HBP educational materials are developed solely as the basis for class discussion. These
materials are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2014 Harvard Business School Publishing. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted,
without the permission of Harvard Business Publishing.
Common (Natural) Causes of Variation
• Appear to be inherent in a process
• Pervasive, affect all production unless they are
addressed
• Addressing common causes requires
significant investments
• Only management can address common
causes, because of the investments required
• Determines the control limits
Assignable Causes of Variation
• Can be readily addressed by process operators
• Do not require a significant investment
• Variation that occurs outside of the control
limits
• Addressing assignable causes returns the
process to its “normal” variability (determined
by common causes)
Sample Means from Beer-Filling Line
Mean Chart for Samples from Beer-Filling
Line
Mean Charts for Two Processes
Mean Charts for Two Beer-Filling Lines
Range Chart for Samples from Beer-Filling
Line
Stylized Control Charts for Two Different
Processes
Target Shooting Results
Control Charts for Factory
Factory Control Charts, One for Each Shift
Examples of Control Chart Patterns
When to Recalculate Control Limits?
• Control limits should remain constant, unless
there is reason to believe that the underlying
common causes have changed
– Change in the process design
– Purchase of a new piece of equipment
– Significant change in materials
• Changing control limits without a good reason
can lead to erroneous conclusions about the
process
Type I Error: False Positive
• Concluding that a process is out of control,
when it actually is in control
• Caused by control limits that are narrower
than they should be
Type II Error: False Negative
• Concluding that a process is in control when,
in fact, it is our of control
• Caused by control limits that are wider than
they should be
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
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 gauges and
measurement devices
• Destructive testing costs, where applicable
Prevention Costs
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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
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Internal defect costs
External defect costs
Appraisal costs
Prevention costs
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
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Internal defect costs
External defect costs
Appraisal costs
Prevention costs
Optimal Amount of Inspection