Operations Management (ME-601)

UNIT 2,3

Prof. S. N. Varma

Ref.
Stevenson WJ; Operations Management; TMH
Hopp WJ and Spearman ML; Factory Physics; McGraw-Hill
Chary SN; Production and OM; TMH
4-2
Learning Objectives
Explain PLCM, sharing of Product Data across SC
Explain importance of product and service design.
Identify main objectives of product, service design.
Discuss the importance of standardization.
Discuss the importance of environmental issues.
Briefly describe the phases in product development.
Describe some of the main sources of design ideas.
Name several key issues in design for manufacturing.
Name the phases and key issues in service design.
List the characteristics of well-designed service systems.
Name some of the challenges of service design.
4-3
Computer-Aided Design, Engg., mfg. and PLM
Computer-Aided Design, Engg., Mfg., Resource
Planning and Product Data(CAD, CAE, CIM, ERP,
PDM) are components which help overall Product
Lifecycle Management (PLM) mainly within an
organization.
Support concurrent collaborative design
increases productivity of designers, 3 to 10 times
create database for product specifications and mfg.
provides possibility of engineering and cost analysis
on proposed designs to optimize PLM.
SCM and CRM which include outsourcing and DRP
are mainly inter organizational optimization function


COMMUNICATION GAP IN DESIGN
It Happens due to communication lack, close room design
and transfer over the wall (Classical/ Concurrent Design)
11/20/2012 Prof. S.N. Varma 4
4-5
Concurrent Engineering


Concurrent engineering
is the bringing together
of engineering design and
manufacturing personnel
early in the design phase.
4-6
Life Cycles of Products or Services
Time
Introduction
Growth
Maturity
Saturation
Decline
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Product Data Management
11/20/2012 Prof. S.N. Varma 7
PLC management
Product Life Cycle Management is a total
production system that tracks a product from
inception to disposal
PLM or PLC provides a framework to rediscover
the basic stages of product development,
1. Introduction. 2. Growth. 3. maturity. 4. decline
PLM is an IT tool (S/W) which provide facilities
for Product Data Mgt (PDM) and sharing these
data with DFX (Design For X) concurrent design,
suppliers and all along the organizations
11/20/2012 Prof. S.N. Varma 8
More definition of PLM

Advantages of PLM Info System

Importance of more care at design

Organizational pressures and drivers

Organization Effectiveness & Efficiency

Product Innovations to customer
delight (Kano Model)

Input-PLM-xform-ERP-SCM-CRM-Output
Back and Front Engines

IT Support

Digitization of product

Magnifying benefits of PLM

PLM summary

Reasons/ drivers and factors
in product design
Reasons/ Drivers for
product design
Economic
Social and demographic
Political, liability, or legal
Competitive
Cost or availability
Technological

Major factors in
design strategy env.
Cost
Quality
Time-to-market
Customer satisfaction
Competitive
advantage

11/20/2012 Prof. S.N. Varma 20
Product and service design or redesign should be
closely tied to an organizations strategy
4-21
Objectives of Product Design
Main focus
Customer satisfaction
Understand what the customer wants
Secondary focus
Function of product/service
Cost/profit
Quality
Appearance
Ease of production/assembly/ dissembly
Ease of maintenance/service
Evolution, innovation, invention
Evolution is a process of slow modification/ changes
over a long time horizon e.g. a pen, typing m/c, car
Innovations are new things generally driven by
technology and lead to customer delight. Sometimes
they replace and make old things obsolete. e.g.
electronic typewriter (computer-printer), laser printer,
surgical laser knife.
Invention are new things which provide new
functionality. E.g. x-ray machine, IC engines
Discovery is exposing and highlighting existing
things. e.g. gravitational law
21-Feb-12 Prof. S.N. Varma 22
4-23
Global Product Design
Virtual teams
Uses combined efforts of a team of designers
working in different countries
Provides a range of comparative advantages
over traditional teams such as:
Engaging the best human resources around the
world
Possibly operating on a 24-hr basis
Global customer needs assessment
Global design can increase marketability

4-24
A. Design Phases
1. Idea generation and Feasibility study
2. Preliminary design
3. Detailed design
B. Production-Consumption phases
4. Planning for production
5. Planning for distribution
6. Planning for consumption
7. Planning for retirement-disposal-recycle

Asimows Product Design steps/ phases
4-25
Design for functionality
Design for form, structure and asthetics
Design for manufacturing (DFM)
Design for assembly (DFA)
Design for recycling (DFR)
Remanufacturing
Design for disassembly (DFD)
Robust design
Product design
4-26
Phases in Product Development
Process
1. Idea generation
2. Feasibility analysis
3. Product design/specifications
4. Process specifications
5. Prototype development
6. Design review
7. Market test
8. Product introduction
9. Follow-up evaluation
4-27
Idea Generation
Ideas
Competitor based
Supply chain based
Research based
4-28
Reverse Engineering
Reverse engineering is the
dismantling and inspecting
of a competitors product to discover
product improvements.
4-29
Research & Development (R&D)
Organized efforts to increase scientific
knowledge or product innovation & may
involve:
Basic Research advances knowledge
about a subject without near-term
expectations of commercial applications.
Applied Research achieves commercial
applications.
Development converts results of applied
research into commercial applications.
4-30
Regulations & guidelines
Legal regulations
Product Liability - A manufacturer is liable for any
injuries or damages caused by a faulty product.
Uniform Commercial Code - Products carry an
implication of merchantability and fitness.
Guidelines for designers
Produce designs consistent with the goals of company
Give customers the value they expect
Make health and safety a primary concern
Consider potential harm to the environment

4-31
Other Issues in Design
Product/service life cycles
How much standardization
Mass customization
Degree of newness
Cultural differences
Reliability (discussed with process design)
Robust design



4-32
Three S
Simplification is a process to reduce unnecessary
number of parts and variety
Standardization is a process to freeze the design
or specifications to remove variations in something
and make all parts reproducible in conformity with
one another. It is extent to which there is absence
of variety in a part, product, service or process.
Specialization is a process to concentrate on
limited number of product/ services to create core
competency.
The three processes are linked together and develop
as a logical sequence.
4-33
Advantages of Standardization
Fewer parts to deal with in inventory & manufacturing
Design costs are generally lower
Reduced training costs and time
More routine purchasing, handling, and inspection
procedures
Quality is more consistent
Orders can be filled from inventory
Opportunities for long production runs and automation
Need for fewer parts justifies increased expenditures
on perfecting designs and improving quality control
procedures.

4-34
Differentiation and Mass
customization is a strategy to
provide little differentiations and
optional features in the standard
main product or services e.g. color,
deluxe, LXi/ Vxi models
Differentiation and Mass Customization
4-35
Modular Design
Modular design is a form of standardization
in which component parts are subdivided
into modules or sub assemlies that are
easily replaced or interchanged. It allows:

easier diagnosis and remedy of failures
easier repair and replacement
simplification of manufacturing and
assembly
Advantages of Modular design
Ex 1. If one car model has 1000 parts( More?) then
Five car models will have item inventory of 5* 1000=
5000 standard items for exchangeability.
Ex 2. Types of engines 3, gear drives 4, wheelbase 4
and body with doors bumpers 10. Total no of standard
items =21. But permutation of these standard items
can produce 3* 4* 4* 10=480 car models. Thus
modular design increase flexibility, standardization,
variety at the same time keeping lower volume and
type/ no of standard item inventories.

21-Feb-12 Prof. S.N. Varma 36
4-37
Module/ Component Commonality
Multiple products or product families that have a high
degree of similarity can share components
Automakers using internal parts
Engines and transmissions
Fuel injection and Water pumps
Wheel bases, braking systems
Other benefits
Reduced training for assemble and installation
Reduced repair time and costs
4-38
Degree of Newness
Modification/Expansion of existing product/service
Clone of a competitors product/service
New product/service

Type of Design
Change
Newness to the
organization
Newness to the
market
Modification Low Low
Expansion Low Low
Clone High Low
New High High
4-39
Cultural Differences
Multinational companies must take into account
cultural differences related to the product design and
more specifically in service design. Most of offerings
have a core product/ service and extended supply/
services, which may be called a service flower. The
core may be a global standard product but the petals
must satisfy the cultural likings.
Notable failures:
Chevy Nova in Mexico
Ikea beds in U.S.
4-40
Improving Reliability
Component design
Production/assembly techniques
Testing
Redundancy/backup
Preventive maintenance procedures
User education
System design
4-41
Robust Design: Design that results in products
or services that can function over a broad
range of conditions.

Robust Design
Taguchi Loss Function
Goalpost view of losses
Losses are binary-yes/no
Taguchi Loss Function
Losses are continuous,
Continuous improve, kaizen, 6
L(y) = k (y-m)
2

11/20/2012 Prof. S.N. Varma 42
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Good parts,
no losses
Lower Spec Limit Upper spec Limit
LSL Nominal value, m USL
Prime dimension, m y
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10-43
Taguchi Loss Function- Compared
Cost
Target
Lower
spec
Upper
spec
Traditional
cost function
Taguchi
cost function
4-44
Taguchi Approach to Robust Design
Design a robust product
Insensitive to environmental factors either in
manufacturing or in use.
Central feature is Parameter Design.
Determines:
factors that are controllable and those not controllable
their optimal levels relative to major product advances

4-45
Manufacturability
Manufacturability is the ease of fabrication
and/or assembly which is important for:
Cost
Productivity
Quality


4-46
Designing for Manufacturing
Beyond the overall objective to achieve customer
satisfaction while making a reasonable profit is:
Design for Manufacturing(DFM)
It is defined as the designers consideration of the
organizations manufacturing capabilities when
designing a product.
The more general term design for operations
encompasses services as well as manufacturing
Design for manufacturing DFM
21-Feb-12 Prof. S.N. Varma 47
Blunt of serial engg. On manfg.
21-Feb-12 Prof. S.N. Varma 48
Product cost and influence
21-Feb-12 Prof. S.N. Varma 49
Early change is better
21-Feb-12 Prof. S.N. Varma 50
DFM Definition
21-Feb-12 Prof. S.N. Varma 51
Alternative Production Processes
21-Feb-12 Prof. S.N. Varma 52
Process Compatibility
21-Feb-12 Prof. S.N. Varma 53
Production Processes capabilities
21-Feb-12 Prof. S.N. Varma 54
Feedback for Concurrent Engg.
21-Feb-12 Prof. S.N. Varma 55
Use of networking in feedback
21-Feb-12 Prof. S.N. Varma 56
Use of rules in DFM
21-Feb-12 Prof. S.N. Varma 57
General rules
21-Feb-12 Prof. S.N. Varma 58
4-59
Though product design term encompasses quality
of structure and functionality, still special attention
to quality can enhance design for quality planning
QFD, Quality Function Deployment
Voice of the customer
House of quality





Design For Quality, DFQ and QFD
QFD: An approach that integrates the voice of the customer
into the product and service development process.
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Design
Characteristic
House 1 House 2 House 3
House 4
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Specific
Components
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Production
Process
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Quality Plan
4-60
The House of Quality
Correlation
matrix
Design
requirements
Customer
require-
ments
Competitive
assessment
Relationship
matrix
Specifications
or
target values
4-61
Customer
Requirements
Easy to close
Stays open on a hill
Easy to open
Doesnt leak in rain
No road noise
Importance weighting
Engineering
Characteristics
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Correlation:
Strong positive
Positive
Negative
Strong negative
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Competitive evaluation
X = We/ Us
A = Competitor A
B = Competitor B
(5 is best)
1 2 3 4 5
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XAB
A X B
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Relationships:
Strong = 9
Medium = 3
Small = 1
Target values
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Technical evaluation
(5 is best)
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House of Quality Example
Why DFE? Design For Environment
21-Feb-12 Prof. S.N. Varma 62
Responsibility to future generation
21-Feb-12 Prof. S.N. Varma 63
DFE Definition- Green Design
21-Feb-12 Prof. S.N. Varma 64
Scan on responses to DFE
21-Feb-12 Prof. S.N. Varma 65
Automobiles and environment
21-Feb-12 Prof. S.N. Varma 66
Rules for DFE
21-Feb-12 Prof. S.N. Varma 67
Environment and Materials
21-Feb-12 Prof. S.N. Varma 68
4-69
Recycling: recovering materials for future use
Recycling reasons
Cost savings
Environment concerns
Environment regulations
Recycling
Materials Recycling
21-Feb-12 Prof. S.N. Varma 70
Design for disassembly
21-Feb-12 Prof. S.N. Varma 71
Costs and Benefits of Reuse, Recycle
21-Feb-12 Prof. S.N. Varma 72
4-73
Remanufacturing
Remanufacturing: Refurbishing used products by
replacing worn-out or defective components.
Remanufactured products can be sold for 50% of the cost
of a new producr
Remanufacturing can use unskilled labor
Some governments require manufacturers to take back
used products
Design for Disassembly (DFD): Designing products so
that they can be easily taken apart.
4-74
Service Design
Service is an act that is done to or for a customer
Service delivery system
Facilities, processes, and skills needed for a service
Product bundle
Promised combination of goods and services.
Service design involves
The physical resources needed
The goods purchased or consumed by the customer
Explicit services
Implicit services
Service Classification

21-Feb-12 Prof. S.N. Varma 75
People Things
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SERVICE DIRECTED AT
PEOPLES BODIES
Health/ Beauty Care,
Haircut
Passenger transportation
Gymnasium
Restaurants
SERVICE DIRECTED AT THINGS
Freight transport
Industrial maintenance
Janitorial services
Laundry
Landscape, lawn
Veterinary Care
SERVICEICE DIRECTED
AT PEOPLES MINDS
Education
Broadcasting
Info service
Theaters
Museums
SERVICE DIRECTED AT
INTANGIBLE ASSETS
Banking
Legal services
Accounting
Securities
Insurance
The service triangle
All the services are customer centered, so service
strategy, system and peoples must align/ focus on
customers
21-Feb-12 Prof. S.N. Varma 76
Service Strategy
Service System
Service People
Customer
4-77
Challenges of Service Design
1. Variable requirements
2. Difficult to describe
3. High customer contact
4. Service customer encounter
4-78
Service Demand Variability
Demand variability creates waiting lines, idle service
resources. Customer waiting costs and idle resource
costs must be optimized. Plan buffer capacities.
Service registration, queuing order and appointments
are to be used to reduce customer waiting time.
Differential costing at peak hours can smooth demand
Customer participation makes quality and demand
variability hard to manage
Attempts to achieve high efficiency may depersonalize
service and change customers perception of quality
4-79
Phases in Service Design
1.Conceptualize
2.Identify service package components
3.Determine performance specifications
4.Translate performance specifications into design
specifications
5.Translate design specifications into delivery
specifications
4-80
Service Blueprinting
Service blueprinting is a method used in service
design to describe and analyze a proposed service
A tool for conceptualizing a service delivery system
Major steps in service blue printing
1. Establish boundaries
2. Identify sequence of customer interactions
Prepare a flowchart
3. Develop time estimates
4. Identify potential failure points

4-81
Characteristics of Well Designed
Service Systems
1. Consistent with the organization mission
2. User friendly
3. Robust
4. Easy to sustain
5. Cost effective
6. Value to customers
7. Effective linkages between back operations
8. Single unifying theme
9. Ensure reliability and high quality
4-82
Guidelines for Successful Service Design
1. Define the service package
2. Focus on customers perspective
3. Consider image of the service package
4. Recognize that designers perspective is different
from the customers perspective
5. Make sure that managers are involved
6. Define quality for tangible and intangibles
7. Make sure that recruitment, training and rewards
are consistent with service expectations
8. Establish procedures to handle exceptions
9. Establish systems to monitor service
4-83
1. Increase emphasis on component commonality
2. Package products and services
3. Use multiple-use platforms
4. Consider tactics for mass customization
5. Look for continual improvement
6. Shorten time to market
Use standardized components
Use technology
Use concurrent engineering

Service Operations Strategy
Quality of service- Valeries Gaps
This model identify various Gaps in service to take care
G1: Perception gape btwn mgt and customers expectn
G2: Specification gap between mgt perception and
service specifications
G3:Service performance gap btwn specs and delivery
G4: Communication gap between mgt and customers
G5: Overall gap between customer expectations and
the perception of the received services
These gaps are depicted in figure
21-Feb-12 Prof. S.N. Varma 84
Valeries Model of service quality




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21-Feb-12 Prof. S.N. Varma 85
Personal needs
Expected Service
Perceived Service
Service Delivery with
Pre/post contacts
Mgt perception of
consumer expectations
Word of mouth
communications
Past Experience
External
communication
s to consumer
Translate mgt perception
to service specifications
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GAP 1
GAP 3
GAP 2
GAP 5
GAP
4
Unit 3
Process strategy and selection
decisions
21-Feb-12 Prof. S.N. Varma 86
Transformation
Processes
Inputs
Output Product/ services
6-87
Learning Objectives
Explain the strategic importance of process selection
Explain the influence that process selection has on
an organization.
Describe the basic processing types.
Discuss automated approaches to processing.
Explain the need for management of technology.
Describe the basic product, process and cellular
layouts.

6-88
Process selection involve deciding on the way
production of goods or services will be organized
Process selection is based on
Cost of equipments, technology
Quality, tolerances required
Flexibility of equipment and layouts
Major implications
Capacity planning
Layout of facilities
Equipment
Design of work systems
Introduction
6-89
Forecasting
Product and
Service Design
Technological
Change
Capacity
Planning
Process
Selection
Facilities and
Equipment
Layout
Work
Design
System Design-Process Selection
6-90
Key aspects of process strategy
Capital intensive equipment/labor
Process flexibility
Technology
Adjust to changes
Design
Volume
technology
Process Strategy
6-91
Technology
Technology: The application of scientific discoveries
to the development and improvement of products
and services and operations processes.
Technology innovation: The discovery and
development of new or improved products, services,
or processes for producing or providing them.
6-92
Kinds of Technology
Operations management is primarily concerned with
three kinds of technology:
Product and service technology
Process technology
Information technology
All three have a major impact on:
Costs
Productivity
Competitiveness
6-93
Technology Competitive Advantage
Innovations in
Products and services
Cell phones
PDAs
Wireless computing
Processing technology
Increasing productivity
Increasing quality
Lowering costs

Basic Product-Process matrix
21-Feb-12 Prof. S.N. Varma 94
One of a
Kind Low
Volume
Multiple
Products
Moderate
Volumes
Few Major
Products
High
Volume
Commodity
Products
Project
Job Shop
Batch
Line/ Mass Pr
Continuous
Flow
Very Poor Fit
(Unskilled)
Very Poor Fit
(Genius)
Low ----------------VOLUME----------------- High
High --------Time between parts-------------- Low
Jumbled--Flow smoothness---------------- Smooth
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Basic Plant Layouts




21-Feb-12 Prof. S.N. Varma 95
Basic
Processes
Layout Examples
Continuous Flow
Production (Fluid)
Product piping Refinery, Sugar
Commodities
Mass Production Product Layout, Connected
mechanized material
transfer, assembly lines
Automobile, TV,
Packed Food
Batch Production Mixed Flow, Cellular Layout,
Disconnected lines,

Watches, Drilling Rigs
Job-shop Prod.,
Jumbled Flow
Process Layout Tools,
Project work,
Jumbled Flow
Site work layout Dams, Ships, Houses
4-96
Reliability
Reliability: The ability of a product, part, or
system to perform its intended function under a
prescribed set of conditions
Failure: Situation in which a product, part, or
system does not perform as intended
Normal operating conditions: The set of
conditions under which an items reliability is
specified
Reliability - 4 main elements
1. Reliability is expressed as Probability - number
of times that an event occurs (success) divided
by total number trials
2. Satisfactory performance criteria of what is
considered to be satisfactory system operation
3. Specified time Reliability always have reference to
time, a measure against which degree of system
performance can be related
4. Specified operating conditions expect a system to
function at specified environmental factors like
humidity, vibration, shock, temperature cycle,
operational profile, etc.

The bath tub curve

21-Feb-12 Prof. S.N. Varma 98
EARLY LIFE
(burn-in or
break-in or
infant mortality
or teething
period)
(failure rate
decreases with time)
USEFUL LIFE
(or normal life)
(failure rate approx. const)
WEAROUT LIFE
(failure rate
increases with
time)
TIME
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Debugging (Infant mortality) Phase
rapid decrease in failure rate
Weibull distribution with shape parameter |
< 1 is used to describe the occurrences of
failure
Usually covered by warranty period


Chance failure phase

Constant failure rate failure occur in random
manner
Exponential and also Weibull with | =1 can be
used to describe this phase

Wear-out phase
Sharp rise in failure rate fatigue, corrosion (old
age)
Normal distribution is one that best describes this
phase
Also can use Weibull with shape parameter | > 1

Maintainability
Pertains to the ease, accuracy, safety and economy
in the performance of maintenance actions
Ability of an item to be maintained
Maintainability is a design parameter, maintenance is
a result of design
Measures of Maintainability
MTBM mean time between maintenance,
include preventive and corrective maintenance
MTBR mean time between replacement,
generate spare part requirement
- mean active maintenance time

ct
mean corrective maintenance time or mean
time to repair

pt
mean preventive maintenance time


M
M
M
Frequency of maintenance for a given time is highly
dependent on the reliability of that item
Reliability frequency of maintenance
Unreliable system require extensive maintenance
Reliability function [R(t)]
R(t) = 1 F(t)
F(t) = probability of a system will fail by time (t) =
failure distribution function
Eg. If probability of failure F(t) is 20%, then
reliability at time t is
R(t) = 1 0.20 = 0.80 or 80%


Reliability at time (t)
R(t) = e
-t/u

e = 2.7183
u = MTBF
= failure rate

So,
R(t) = e
-t


u

1
=
Failure Rate ()
Rate at which failure occur in a specified time
interval




Can be expected in terms of failures per hour, %
of failure per 1,000 hours or failures per million
hours
= number of failures
total operating hours
Example 1
10 components were tested. The components (not
repairable) failed as follows:
Component 1 failed after 75 ours
Component 2 failed after 125 hours
Component 3 failed after 130 hours
Component 4 failed after 325 hours
Component 5 failed after 525 hours
Determine the MTBF

Solution:
Five failures, operating time = 3805 hours



75
125
130
325
525
5 x 525
Solution
= 5 / 3805 = 0.001314
Example 2
20.2 6.1 7.1 24.4 4.2 35.3 1.8 46.7
Operating time
Down time
2.5
a) Determine the MTBF.
Solution:
Total operating time = 20.2 + 6.1 + 24.4 + 4.2 + 35.3 + 46.7
= 136.9 hours
The chart below shows operating time and breakdown time of a machine.
Solution
= 4 / 136.9 = 0.02922
Therefore;
u = MTBF = 1/ = 34.22 hours

b) What is the system reliability for a mission time of 20
hours?
R = e
-t
t = 20 hours
R= e
-(0.02922)(20)

R = 55.74%



Reliability Component Relationship
Application in series network, parallel and
combination of both


Series Network
Most commonly used and the simplest to analyze


A B C Input Output
All components must operate if the system is to function properly.
R = R
A
x R
B
x R
C
If the series is expected to operate for a specified
time period, then
R
s
(t) =

t
n
e
) ... (
3 2 1
+ + + +
Example
Systems expected to operate for 1000 hours. It
consists of 4 subsystems in series, MTBF
A
=
6000 hours, MTBF
B
= 4500 hours, MTBF
C
=
10,500 hours, MTBF
D
= 3200 hours. Determine
overall reliability.

A
= 1 /MTBF
A
= 1/6000 = 0.000167

B
= 1/MTBF
B
= 1/4500 = 0.000222

C
= 1/MTBF
C
=

1/10500 = 0.000095

D
= 1/MTBF
D
= 1/3200 = 0.000313
Therefore; R = e
-(0.000797)(1000)
= 0.4507

Parallel Network
A number of the same components must fail order to
cause total system failure


A
B
C
Example
Consider two units A and B in parallel. The systems
fails only when A and B failed.

A
B
F
s
(t) = F
a
(t) F
b
(t)
= [1-R
a
(t)][1-R
b
(t)]
= 1-R
a
(t)- R
b
(t) + R
a
(t) R
b
(t)
R
s
(t) = 1- F
s
(t)
= R
a
(t) + R
b
(t) R
a
(t) R
b
(t)
If A and B are constant failure rate units, then:
R
a
(t) = R
b
(t) =
t
a
e

t
b
e

And R
s
(t) =
b a b a
s
dt t R
+
+ =
}

1 1 1
) (
0
u
s
= MTBF

Consider 3 components in parallel
R
s
= 1 F
s
F
a
= 1- R
a
F
b
= 1- R
b
F
c
= 1- R
c
R
s
= 1 (1-R
a
)(1-R
b
)(1-R
c
)

If components

A, B and C are identical, then
the reliability,
R
s
= 1 (1 R)
3
For a system with n identical components,
R
s
=1- (1-R)
n

A
B
C
Combined series parallel network
A
B
C
R
s
= R
A
[R
B
+R
C
-R
B
R
C
]
Combined series parallel network
A
B
C
D
Rs = [1-(1-R
A
)(1-R
B
)][1-(1-R
C
)(1-R
D
)]
Combined series parallel network
A
B
C
D
E
F
Rs=[1-(1-R
A
)(1-R
B
)(1-R
C
)][R
D
] x [R
E
+R
F
-(R
E
)(R
F
)]
Combined series parallel network
For combined series-parallel network, first evaluate
the parallel elements to obtain unit reliability
Overall system reliability is determined by finding the
product of all series reliability
4-125
Improving Reliability
Component design
Production/assembly techniques
Testing
Redundancy/backup
Preventive maintenance procedures
User education
System design
6-126
Product and Process Profiling
Process selection can involve substantial
investment in
Equipment
Layout of facilities
Product profiling: Linking key product or service
requirements to process capabilities
Key dimensions
Range of products or services
Expected order sizes
Pricing strategies
Expected schedule changes
Order winning requirements
6-127
Automation: Machinery that has sensing and control
devices that enables it to operate
Fixed automation
Programmable automation
Automation
6-128
Computer-aided design and
manufacturing systems (CAD/CAM)
Numerically controlled (NC) machines
Robot
Manufacturing cell
Flexible manufacturing systems(FMS)
Computer-integrated manufacturing (CIM)
Automation
Value, Value analysis, Value Engg
The value is what customers are demanding- the right
combination of product quality, fair price and services.
Value is ultimately defined by the customer
Traits: speed, cost, quality and flexibility
Value = performance / cost
Performance = quality + speed + flexibility
Offer products that perform
Give more than the customer expects
Give guarantees
Avoid unreasonable pricing
Give the customer the facts
Build relationship


Value Chain Analysis
Def. A systematic approach to lower cost keeping same/
better level of performance w.r.t. function and quality
A study of the relationship of design, function and cost of
product, material or service with objective to reduce cost

Value Chain analysis was correlated to competitive
Intelligence (CI) by Michael Porter (1995)
It can:
Increase your competitiveness
Reduce your costs
Improve your market share
Bottom Line - improve overall rofitability!


Business Pyramid
Business/ Market
Intelligence
Competitor
Analysis
Competitive
Intelligence
Individual Competitor
Profile
Assimilates all
Competitive Intelligence
Broad environmental
scanning, market research
and analysis

Market Intelligence v/s CI
Market Intelligence:
Tells a company about its environment
Supply and demand for its products
Drivers that influence demand
Who the buyers and suppliers are
Overall economic outlook for the product
Competitive Intelligence:
Helps a company understand what its
competitive position is in a specific
market weaknesses and strengths

Competitive Intelligence what is it?
Competitive Intelligence is:
Information about opportunities and threats
Information which makes companies and
local industries more competitive
Forecasting of changes about the economic
environment
Actionable recommendations from analysis
of the environment
It is the total knowledge, gathered by an
organization in ethical manner,
about the environment in which it competes

Different tools and techniques
Five basic tools :
Strategic Analysis
Product-oriented Analysis
Behavioral Analysis
Financial Analysis
Customer Oriented Analysis
Value Chain Analysis


Three tiers of Value Chain Analysis
Internal Cost Analysis: A firm or a sector
needs to understand its own value chain in
order to compare to its competitors
Internal Differentiation Analysis:A firm or a
sector then needs to identify the processes
that distinguish its products or services from
that of its competitors
Vertical Linkage Analysis


Vertical Linkage Analysis
gaining and sustaining a competitive advantage
requires that a firm understand the entire value
delivery system, not just the portion of the value
chain in which it participates. Suppliers and
customers and suppliers suppliers and customers
customers have profit margins that are important to
identify in understanding a firms cost/differentiation
positioning, because the end-use customers
ultimately pay for all the profit margins along the
entire value chain.
Shank and Govindarajan (1993)


How a firm can use Value Chain Analysis
Three useful strategic frameworks have been
identified for value chain analysis:\
Industry Structure Analysis
Core Competencies
Segmentation Analysis

Value Chain analysis can show
opportunities for participants within the
chain that can have an immediate
effect on your costs

Management
of Quality
9-139
Learning Objectives
Define the term quality.
Explain why quality is important and the
consequences of poor quality.
Identify the determinants of quality.
Describe the costs associated with quality.
Describe the quality awards.
9-140
Learning Objectives
Discuss the philosophies of quality gurus.
Describe TQM.
Give an overview of problem solving.
Give an overview of process improvement.
Describe and use various quality tools.
9-141
Quality Management
What does the term quality mean?
Quality is the ability of a product or service to
consistently meet or exceed customer
expectations.
9-142
Evolution of Quality Management
1924 - Statistical process control charts
1930 - Tables for acceptance sampling
1940s - Statistical sampling techniques
1950s - Quality assurance/TQC
1960s - Zero defects
1970s - Quality assurance in services

9-143
Quality Assurance vs. Strategic Approach
Quality Assurance
Emphasis on finding and correcting defects before
reaching market
Strategic Approach
Proactive, focusing on preventing mistakes from
occurring
Greater emphasis on customer satisfaction
9-144
The Quality Gurus
Walter Shewhart
Father of statistical quality control
W. Edwards Deming
Joseph M. Juran
Armand Feignbaum
Philip B. Crosby
Kaoru Ishikawa
Genichi Taguchi

9-145
Key Contributors to Quality
Management

Contributor

Deming


Juran

Feignbaum

Crosby

Ishikawa


Taguchi

Ohno and
Shingo
Known for

14 points; special & common causes of
variation

Quality is fitness for use; quality trilogy

Quality is a total field

Quality is free; zero defects

Cause-and effect diagrams; quality
circles

Taguchi loss function

Continuous improvenment
Quality

Table 9.2
Deming Funnel Experiment:
Strategies
Strategy 1: Do not react to this random
variation and do not move the funnel
Strategy 2: Measure the distance from
the marbles resting place to the bulls-
eye
Move the funnel and equal distance,
but in the opposite direction
Deming Funnel Experiment:
Strategies
Strategy 3: Measure the distance
from the marbles resting place to the
bulls-eye
Move the funnel this distance, in the
opposite direction, starting at the
bulls-eye
Deming Funnel Experiment
Figure 12.5(a)
Marble
Target paper
with bulls eye
Funnel
Apparatus
Rules of the Nelson Funnel Experiment
Rule 1. Leave the funnel alone
Rule 2. Move the funnel from wherever it is at in
an equal but opposite direction from where
the marble landed in relation to the target
Rule 3. Move the funnel back to its rest position
before moving it in an equal but opposite
direction from where the marble landed in
relation to the target
Rule 4. Move the funnel over the last position of
where the marble landed
Solution: Move the funnel nearer to the target.
This reduces variation
40
45
50
55
60
0 5 10 15 20 25
40
45
50
55
60
0 5 10 15 20 25
40
45
50
55
60
0 5 10 15 20 25
40
45
50
55
60
0 5 10 15 20 25
RULE 1
RULE 3
RULE 4
RULE 2
Sequence
Sequence Sequence
Sequence
SIDE-BY-SIDE COMPARISON OF WALTERS RESULTS
Deming Funnel Experiment
Figure 12.5(b)
CONTROL STRATEGY 1
4.0
0.0
-4.0
Y
| | | | |
-5.0 -2.5 0.0 2.5 5.0
X
Deming Funnel Experiment
Figure 12.5(c)
CONTROL STRATEGY 2
4.0
0.0
-4.0
Y
| | | | |
-5.0 -2.5 0.0 2.5 5.0
X
Deming Funnel Experiment
Figure 12.5(d)
CONTROL STRATEGY 3
4.0
0.0
-4.0
Y
| | | | |
-30 -15 0 15 30
X
9-154
Dimensions of Quality
Performance - main characteristics of the
product/service
Aesthetics - appearance, feel, smell, taste
Special Features - extra characteristics
Conformance - how well product/service conforms
to customers expectations
Reliability - consistency of performance

9-155
Dimensions of Quality (Contd)
Durability - useful life of the product/service
Perceived Quality - indirect evaluation of
quality (e.g. reputation)
Serviceability - service after sale
9-156
Examples of Quality Dimensions
Dimension


1. Performance



2. Aesthetics

3. Special features



(Product)
Automobile

Everything works, fit &
finish
Ride, handling, grade of
materials used
Interior design, soft touch

Gauge/control placement
Cellular phone, CD
player


(Service)
Auto Repair

All work done, at agreed
price
Friendliness, courtesy,
Competency, quickness
Clean work/waiting area

Location, call when ready
Computer diagnostics






9-157
Examples of Quality Dimensions
(Contd)
Dimension


5. Reliability


6. Durability


7. Perceived
quality

8. Serviceability
(Product)
Automobile

Infrequency of breakdowns


Useful life in miles, resistance
to rust & corrosion

Top-rated car


Handling of complaints and/or
requests for information
(Service)
Auto Repair

Work done correctly,
ready when promised

Work holds up over
time

Award-winning service
department

Handling of complaints


9-158
Service Quality
Convenience
Reliability
Responsiveness
Time
Assurance
Courtesy
Tangibles

9-159
Examples of Service Quality
Dimension Examples
1. Convenience Was the service center conveniently located?
2. Reliability Was the problem fixed?
3. Responsiveness Were customer service personnel willing and
able to answer questions?
4. Time How long did the customer wait?
5. Assurance Did the customer service personnel seem
knowledgeable about the repair?
6. Courtesy Were customer service personnel and the
cashierfriendly and courteous?
7. Tangibles Were the facilities clean, personnel neat?
Table 9.4
9-160
Challenges with Service Quality
Customer expectations often change
Different customers have different expectations
Each customer contact is a moment of truth
Customer participation can affect perception of
quality
Fail-safing must be designed into the system
9-161
Determinants of Quality
Service
Ease of
use
Conforms
to design
Design
9-162
Determinants of Quality (contd)
Quality of design
Intension of designers to include or exclude
features in a product or service
Quality of conformance
The degree to which goods or services conform to
the intent of the designers
9-163
The Consequences of Poor Quality
Loss of business
Liability
Productivity
Costs
9-164
Top management
Design
Procurement
Production/operations
Quality assurance
Packaging and shipping
Marketing and sales
Customer service
Responsibility for Quality
9-165
Costs of Quality
Failure Costs - costs incurred by defective
parts/products or faulty services.
Internal Failure Costs
Costs incurred to fix problems that are detected
before the product/service is delivered to the
customer.
External Failure Costs
All costs incurred to fix problems that are
detected after the product/service is delivered to
the customer.
9-166
Costs of Quality (continued)
Appraisal Costs
Costs of activities designed to ensure quality or
uncover defects
Prevention Costs
All TQ training, TQ planning, customer
assessment, process control, and quality
improvement costs to prevent defects from
occurring
9-167
Substandard work
Defective products
Substandard service
Poor designs
Shoddy workmanship
Substandard parts and materials
Ethics and Quality
Having knowledge of this and failing to correct
and report it in a timely manner is unethical.
9-168
Quality Awards
Baldrige Award
Deming Prize
9-169
Malcolm Baldrige National Quality
Award
1.0 Leadership (125 points)
2.0 Strategic Planning (85 points)
3.0 Customer and Market Focus (85 points)
4.0 Information and Analysis (85 points)
5.0 Human Resource Focus (85 points)
6.0 Process Management (85 points)
7.0 Business Results (450 points)
9-170
Benefits of Baldrige Competition
Financial success
Winners share their knowledge
The process motivates employees
The process provides a well-designed quality
system
The process requires obtaining data
The process provides feedback
9-171
European Quality Award
Prizes intended to identify role models
Leadership
Customer focus
Corporate social responsibility
People development and involvement
Results orientation
9-172
The Deming Prize
Honoring W. Edwards Deming
Japans highly coveted award
Main focus on statistical quality control
9-173
Quality Certification
ISO 9000
Set of international standards on quality
management and quality assurance, critical to
international business
ISO 14000
A set of international standards for assessing a
companys environmental performance
9-174
ISO 9000 Standards
Requirements
System requirements
Management
Resource
Realization
Remedial

9-175
ISO 9000 Quality Management
Principles
Customer focus
Leadership
People involvement
Process approach
A systems approach to management
Continual improvement
Factual approach to decision making
Mutually beneficial supplier relationships
9-176
ISO 14000 - A set of international standards for
assessing a companys environmental
performance
Standards in three major areas
Management systems
Operations
Environmental systems
ISO 14000
9-177
Management systems
Systems development and integration of
environmental responsibilities into business
planning
Operations
Consumption of natural resources and energy
Environmental systems
Measuring, assessing and managing emissions,
effluents, and other waste
ISO 14000
9-178
Total Quality Management
A philosophy that involves everyone in an
organization in a continual effort to improve quality
and achieve customer satisfaction.

T Q M
9-179
1.Find out what the customer wants
2.Design a product or service that meets or
exceeds customer wants
3.Design processes that facilitates doing the job
right the first time
4.Keep track of results
5.Extend these concepts to suppliers
The TQM Approach
9-180
Elements of TQM
1. Continual improvement
2. Competitive benchmarking
3. Employee empowerment
4. Team approach
5. Decisions based on facts
6. Knowledge of tools
7. Supplier quality
8. Champion
9. Quality at the source
10. Suppliers
9-181
Continuous Improvement
Philosophy that seeks to make never-
ending improvements to the process of
converting inputs into outputs.
Kaizen: Japanese
word for continuous
improvement.
9-182
Quality at the Source
The philosophy of making
each worker responsible for
the quality of his or her work.
9-183
Six Sigma
Statistically
Having no more than 3.4 defects per million
Conceptually
Program designed to reduce defects
Requires the use of certain tools and techniques

Six sigma: A business process for improving
quality, reducing costs, and increasing
customer satisfaction.
9-184
Six Sigma Programs
Six Sigma programs
Improve quality
Save time
Cut costs
Employed in
Design
Production
Service
Inventory management
Delivery
9-185
Six Sigma Management
Providing strong leadership
Defining performance metrics
Selecting projects likely to succeed
Selecting and training appropriate people
9-186
Six Sigma Technical
Improving process performance
Reducing variation
Utilizing statistical models
Designing a structured improvement strategy
9-187
Six Sigma Team
Top management
Program champions
Master black belts
Black belts
Green belts
9-188
Six Sigma Process
Define
Measure
Analyze
Improve
Control

DMAIC
9-189
Lack of:
Company-wide definition of quality
Strategic plan for change
Customer focus
Real employee empowerment
Strong motivation
Time to devote to quality initiatives
Leadership

Obstacles to Implementing TQM
9-190
Poor inter-organizational communication
View of quality as a quick fix
Emphasis on short-term financial results
Internal political and turf wars
Obstacles to Implementing TQM
9-191
Criticisms of TQM
1. Blind pursuit of TQM programs
2. Programs may not be linked to strategies
3. Quality-related decisions may not be tied to market
performance
4. Failure to carefully plan a program
9-192
Basic Steps in Problem Solving
1.Define the problem and establish an
improvement goal
2.Define measures and collect data
3.Analyze the problem
4.Generate potential solutions
5.Choose a solution
6.Implement the solution
7.Monitor the solution to see if it
accomplishes the goal
9-193
The PDSA Cycle
Plan
Do
Study
Act
Figure 9.2
9-194
The Process Improvement Cycle
Implement the
Improved process
Select a
process
Study/document
Seek ways to
Improve it
Design an
Improved process
Evaluate
Document
Figure. 9.3
9-195
Process Improvement: A systematic approach to
improving a process
Process mapping
Analyze the process
Redesign the process
Process Improvement
9-196
Process Improvement and Tools
Process improvement - a systematic approach to
improving a process
Process mapping
Analyze the process
Redesign the process
Tools
There are a number of tools that can be used for
problem solving and process improvement
Tools aid in data collection and interpretation, and
provide the basis for decision making
9-197
Basic Quality Tools
Flowcharts
Check sheets
Histograms
Pareto Charts
Scatter diagrams
Control charts
Cause-and-effect diagrams
Run charts
9-198
Check Sheet
Billing Errors

Wrong Account

Wrong Amount

A/R Errors

Wrong Account

Wrong Amount



Monday
9-199
Pareto Analysis
80% of the
problems
may be
attributed to
20% of the
causes.
Smeared
print
N
u
m
b
e
r

o
f

d
e
f
e
c
t
s

Off
center
Missing
label
Loose Other
9-200
Control Chart
970
980
990
1000
1010
1020
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
UCL
LCL
Figure 9.11
9-201
Cause-and-Effect Diagram
Figure 9.12
Effect
Materials Methods
Equipment People
Environment
Cause
Cause
Cause
Cause
Cause
Cause
Cause
Cause
Cause
Cause
Cause
Cause
9-202
Run Chart
Time (Hours)
D
i
a
m
e
t
e
r

9-203
Tracking Improvements
UCL
LCL
LCL
LCL
UCL
UCL
Process not centered
and not stable
Process centered
and stable
Additional improvements
made to the process
Figure 9-18
9-204
Methods for Generating Ideas
Brainstorming
Quality circles
Interviewing
Benchmarking
5W2H
9-205
Team approach
List reduction
Balance sheet
Paired comparisons
Quality Circles
9-206
Identify a critical process that needs improving
Identify an organization that excels in this
process
Contact that organization
Analyze the data
Improve the critical process

Benchmarking Process
Quality Control
10-208
Learning Objectives
List and briefly explain the elements of the control
process.
Explain how control charts are used to monitor a
process, and the concepts that underlie their use.
Use and interpret control charts.
Use run tests to check for nonrandomness in
process output.
Assess process capability.
10-209
Phases of Quality Assurance
Acceptance
sampling
Process
control
Continuous
improvement
Inspection of lots
before/after
production
Inspection and
corrective
action during
production
Quality built
into the
process
The least
progressive
The most
progressive
Figure 10.1
10-210
Inspection
How Much/How Often
Where/When
Centralized vs. On-site
Inputs Transformation Outputs
Acceptance
sampling
Process
control
Acceptance
sampling
Figure 10.2
10-211
C
o
s
t

Optimal
Amount of Inspection
Inspection Costs
Cost of
inspection
Cost of
passing
defectives
Total Cost
Figure 10.3
10-212
Where to Inspect in the Process
Raw materials and purchased parts
Finished products
Before a costly operation
Before an irreversible process
Before a covering process
10-213
Examples of Inspection Points
Type of
business
Inspection
points
Characteristics
Fast Food Cashier
Counter area
Eating area
Building
Kitchen
Accuracy
Appearance, productivity
Cleanliness
Appearance
Health regulations
Hotel/motel Parking lot
Accounting
Building
Main desk
Safe, well lighted
Accuracy, timeliness
Appearance, safety
Waiting times
Supermarket Cashiers
Deliveries
Accuracy, courtesy
Quality, quantity
Table 10.1
10-214
Statistical Process Control:
Statistical evaluation of the output of a
process during production
Quality of Conformance:
A product or service conforms to specifications
Statistical Control
10-215
Control Chart
Control Chart
Purpose: to monitor process output to see if it is
random
A time ordered plot representative sample
statistics obtained from an on going process (e.g.
sample means)
Upper and lower control limits define the range of
acceptable variation

10-216
Control Chart
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
UCL
LCL
Sample number
Mean
Out of
control
Normal variation
due to chance
Abnormal variation
due to assignable sources
Abnormal variation
due to assignable sources
Figure 10.4
10-217
Statistical Process Control
The essence of statistical process control is to
assure that the output of a process is random so
that future output will be random.
10-218
Statistical Process Control
The Control Process
Define
Measure
Compare
Evaluate
Correct
Monitor results
10-219
Statistical Process Control
Variations and Control
Random variation: Natural variations in the output
of a process, created by countless minor factors
Assignable variation: A variation whose source can
be identified
10-220
Sampling Distribution
Sampling
distribution
Process
distribution
Mean
Figure 10.5
10-221
Normal Distribution
Mean
3o 2o +2o +3o
95.44%
99.74%
o = Standard deviation
Figure 10.6
10-222
Control Limits
Sampling
distribution
Process
distribution
Mean
Lower
control
limit
Upper
control
limit
Figure 10.7
10-223
SPC Errors
Type I error
Concluding a process is not in control when it
actually is.
Type II error
Concluding a process is in control when it is not.
10-224
Type I and Type II Errors
In control Out of control
In control No Error Type I error
(producers risk)
Out of
control
Type II Error
(consumers risk)
No error
Table 10.2
10-225
Type I Error
Mean
LCL UCL
o/2 o/2
o = Probability
of Type I error
Figure 10.8
10-226
Observations from Sample Distribution
Sample number
UCL
LCL
1 2 3 4
Figure 10.9
10-227
Control Charts for Variables
Mean control charts
Used to monitor the central tendency of a process.
X bar charts
Range control charts
Used to monitor the process dispersion
R charts
Variables generate data that are measured.
10-228
Mean and Range Charts
UCL
LCL
UCL
LCL
R-chart
x-Chart
Detects shift
Does not
detect shift
Figure 10.10A
(process mean is
shifting upward)
Sampling
Distribution
10-229
x-Chart
UCL
Does not
reveal increase
Mean and Range Charts
UCL
LCL
LCL
R-chart
Reveals increase
Figure 10.10B
(process variability is increasing)
Sampling
Distribution
10-230
Control Chart for Attributes
p-Chart - Control chart used to monitor the
proportion of defectives in a process
c-Chart - Control chart used to monitor the
number of defects per unit
Attributes generate data that are counted.
10-231
Use of p-Charts
When observations can be placed into two
categories.
Good or bad
Pass or fail
Operate or dont operate
When the data consists of multiple samples of
several observations each
Table 10.4
10-232
Use of c-Charts
Use only when the number of occurrences per unit
of measure can be counted; non-occurrences
cannot be counted.
Scratches, chips, dents, or errors per item
Cracks or faults per unit of distance
Breaks or Tears per unit of area
Bacteria or pollutants per unit of volume
Calls, complaints, failures per unit of time
Table 10.4
10-233
Use of Control Charts
At what point in the process to use control charts
What size samples to take
What type of control chart to use
Variables
Attributes

10-234
Run Tests
Run test a test for randomness
Any sort of pattern in the data would suggest a
non-random process
All points are within the control limits - the process
may not be random
10-235
Nonrandom Patterns in Control charts
Trend
Cycles
Bias
Mean shift
Too much dispersion
10-236
Counting Above/Below Median Runs (7 runs)
Counting Up/Down Runs (8 runs)
U U D U D U D U U D
B A A B A B B B A A B
Figure 10.12
Figure 10.13
Counting Runs
10-237
NonRandom Variation
Managers should have response plans to investigate
cause
May be false alarm (Type I error)
May be assignable variation

10-238
Tolerances or specifications
Range of acceptable values established by
engineering design or customer requirements
Process variability
Natural variability in a process
Process capability
Process variability relative to specification

Process Capability
10-239
Process Capability
Lower
Specification
Upper
Specification
A. Process variability
matches specifications
Lower
Specification
Upper
Specification
B. Process variability
well within specifications
Lower
Specification
Upper
Specification
C. Process variability
exceeds specifications
Figure 10.15
10-240
Process Capability Ratio
Process capability ratio, Cp =
specification width
process width
Upper specification lower specification
6o
Cp =
|
|
.
|

\
|

o o 3
X - UTL
or
3
LTL X
min = C
pk
If the process is centered use Cp
If the process is not centered use Cpk
10-241
Limitations of Capability Indexes
1. Process may not be stable
2. Process output may not be normally distributed
3. Process not centered but C
p
is used
10-242
Example 8

Machine
Standard
Deviation
Machine
Capability

C
p
A 0.13 0.78 0.80/0.78 = 1.03
B 0.08 0.48 0.80/0.48 = 1.67
C 0.16 0.96 0.80/0.96 = 0.83
Cp > 1.33 is desirable
Cp = 1.00 process is barely capable
Cp < 1.00 process is not capable
10-243
Process
mean
Lower
specification
Upper
specification
1350 ppm
1350 ppm
1.7 ppm 1.7 ppm
+/- 3 Sigma
+/- 6 Sigma
3 Sigma and 6 Sigma Quality
10-244
Improving Process Capability
Simplify
Standardize
Mistake-proof
Upgrade equipment
Automate

Acceptance
Sampling
10s-246
Learning Objectives
Explain the purpose of acceptance sampling
Contrast acceptance sampling and process control
Compare and contrast single- and multiple-sampling
plans
Determine the average outgoing quality of inspected
lots
10s-247
Sampling Plans
Acceptance sampling: Form of inspection
applied to lots or batches of items
before or after a process, to judge
conformance with predetermined
standards
Sampling plans: Plans that specify lot
size, sample size, number of samples,
and acceptance/rejection criteria
Single-sampling
Double-sampling
Multiple-sampling
10s-248
Acceptance Sampling
Acceptance Sampling most useful when
A large number of items must be processed in a short
time
The cost consequences of passing defects are low
Destructive testing is required
Fatigue or boredom leads to inspection errors
10s-249
Operating Characteristic Curve
Operating Characteristic (OC) Curve: Probability
curve that shows the probabilities of accepting
lots with various fractions defective.
10s-250
Typical OC Curve
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
0 .05 .10 .15 .20 .25
P
r
o
b
a
b
i
l
i
t
y

o
f

a
c
c
e
p
t
i
n
g

l
o
t

Lot quality (fraction defective)
3%
Figure 10S.1
10s-251
Decision Criteria
0
1.00
P
r
o
b
a
b
i
l
i
t
y

o
f

a
c
c
e
p
t
i
n
g

l
o
t

Lot quality (fraction defective)
Good Bad
Ideal
Not very
discriminating
Figure 10S.2
10s-252
Sampling Terms
Acceptance quality level (AQL): the percentage
of defects at which consumers are willing to
accept lots as good
Lot tolerance percent defective (LTPD): the upper
limit on the percentage of defects that a
consumer is willing to accept
Consumers risk: the probability that a lot
contained defectives exceeding the LTPD will
be accepted
Producers risk: the probability that a lot
containing the acceptable quality level will be
rejected
10s-253
Consumers and Producers Risk
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
0 .05 .10 .15 .20 .25
P
r
o
b
a
b
i
l
i
t
y

o
f

a
c
c
e
p
t
i
n
g

l
o
t

Lot quality (fraction defective)
o = .10
| = .10
Good
AQL
Bad Indifferent
LTPD
Figure 10S.3
10s-254
QC Curve for n = 10, c = 1
Figure 10S.4
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
0
.10 .20 .30 .40 .50
P
r
o
b
a
b
i
l
i
t
y

o
f

a
c
c
e
p
t
a
n
c
e

Fraction defective in lot
.9139
.7361
.5443
.3758
.2440
.1493
.0860
10s-255
Average Quality
Average outgoing quality (AOQ): Average of
inspected lots (100%) and uninspected lots
AOQ Pac p
N n
N
=

|
\

|
.
|
Pac = Probability of accepting lot
p = Fraction defective
N = Lot size
n = Sample size
10s-256
Example S-2: AOQ
0 0
0.05 0.046
0.1 0.074
0.15 0.082
0.2 0.075
0.25 0.061
0.3 0.045
0.35 0.03
0.4 0.019
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4
Approximate AOQL = .082
A
O
Q

(
F
r
a
c
t
i
o
n

d
e
f
e
c
t
i
v
e

o
u
t
)

Incoming fraction defective