Technology and Operations Management Puspita Ramadhania

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Chapter 3
Project Management
PERT, CPM, and other scheduling techniques have proven to be valuable tools in controlling
large and complex projects. Managers use such techniques to segment projects into discrete
activities (work breakdown structures), identifying specific resources and time requirements
for each.
With PERT and CPM, managers can understand the status of each activity, including its earliest
start, latest start, earliest finish, and latest finish (ES, LS, EF, and LF) times. By controlling the
trade-off between ES and LS, managers can identify the activities that have slack and can
address resource allocation, perhaps by smoothing resources.
Effective project management also allows managers to focus on the activities that are critical
to timely project completion. By understanding the project’s critical path, they know where
crashing makes the most economic sense. Good project management also allows firms to
efficiently create products and services for global markets and to respond effectively to global
competition.
Microsoft Project, illustrated in this chapter, is one of a wide variety of software packages
available to help managers handle network modelling problems. The models described in this
chapter require good management practices, detailed work breakdown structures, clear
Technology and Operations Management Puspita Ramadhania
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responsibilities assigned to activities, and straightforward and timely reporting systems. All are
critical parts of project management.
An operations manager’s objective is to build a total quality management system that identifies
and satisfies customer needs.
• Quality —The ability of a product or service to meet customer needs. The American
Society for Quality (ASQ) defines quality as “the totality of features and characteristics
of a product or service that bears on its ability to satisfy stated or implied needs.” The
two most well-known quality awards are:
▪ US: Malcolm Baldrige National Quality Award, named after a former secretary
of commerce.
▪ Japan: Deming Prize, named after an American, Dr. W. Edwards Deming.
• ISO 9000 —A set of quality standards developed by the International Organization for
Standardization (ISO). ISO 9000 is the only quality standard with international
recognition. To do business globally, being listed in the ISO directory is critical.
• Cost of quality (COQ) —The cost of doing things wrong; that is, the price of
nonconformance. The four major categories of costs associated with quality are
prevention costs, appraisal costs, internal failure costs, and external failure costs. Four
leaders in the field of quality management are W. Edwards Deming, Joseph M. Juran,
Armand Feigenbaum, and Philip B. Crosby.

Managing quality helps build successful strategies of differentiation, low cost, and response.
Two ways that quality improves profitability are:
• Sales gains via improved response, price flexibility, increased market share, and/or
improved reputation.
• Reduced costs via increased productivity, lower rework and scrap costs, and/or lower
warranty costs.
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Total quality management (TQM) is management of an entire organization so that it excels

in all aspects of products and services that are important to the customer. Seven concepts for
an effective TQM program are continuous improvement, Six Sigma, employee empowerment,
benchmarking, just-in-time (JIT), Taguchi concepts, and knowledge of TQM tools.

1. PDCA: A continuous improvement model that involves four stages: plan, do, check,
and act. The Japanese use the word kaizen to describe the ongoing process of unending
improvement, the setting and achieving of ever-higher goals.
2. Six Sigma: A program to save time, improve quality, and lower costs. In a statistical
sense, Six Sigma describes a process, product, or service with an extremely high
capability, 99.9997% accuracy, or 3.4 defects per million.
3. Employee empowerment: Enlarging employee jobs so that the added responsibility
and authority are moved to the lowest level possible in the organization. Business
literature suggests that some 85% of quality problems have to do with materials and
processes, not with employee performance.
4. Quality circle: A group of employees meeting regularly with a facilitator to solve
work-related problems in their work area.
5. Benchmarking: Selecting a demonstrated standard of performance that represents the
very best performance for a process or an activity. The philosophy behind just-in-time
(JIT) involves continuing improvement and enforced problem solving. JIT systems are
designed to produce or deliver goods just as they are needed.
6. Quality robust: Products that are consistently built to meet customer needs, despite
adverse conditions in the production process.
7. Target-oriented quality: A philosophy of continuous improvement to bring the
product exactly on target.
8. Quality loss function (QLF): A mathematical function that identifies all cost
connected with poor quality and shows how these costs increase as output moves away
from the target value.
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Chapter 6
Process Capability
Process capability means the ability to meet design specifications. Quality is a term that means
different things to different people. We define quality as “the totality of features and
characteristics of a product or service that bears on its ability to satisfy stated or implied needs.”
Defining quality expectations is critical to effective and efficient operations. Quality requires
building a total quality management (TQM) environment because quality cannot be inspected
into a product. The chapter also addresses seven TQM concepts: continuous improvement, Six
Sigma, employee empowerment, benchmarking, just-in-time, Taguchi concepts, and
knowledge of TQM tools. The seven TQM tools introduced in this chapter are check sheets,
scatter diagrams, cause-and-effect diagrams, Pareto charts, flowcharts, histograms, and
statistical process control (SPC).

Cp is a ratio for determining whether a process meets design specifications. Formula as below:
(𝑈𝑝𝑝𝑒𝑟 𝑠𝑝𝑒𝑐𝑖𝑓𝑖𝑐𝑎𝑡𝑖𝑜𝑛 − 𝐿𝑜𝑤𝑒𝑟 𝑠𝑝𝑒𝑐𝑖𝑓𝑖𝑐𝑎𝑡𝑖𝑜𝑛)
𝐶𝑝 =
6𝜎
Cpk is a proportion of variation (3σ) between the center of the process and the nearest
specification limit:
𝑈𝑝𝑝𝑒𝑟 𝑠𝑝𝑒𝑐 𝑙𝑖𝑚𝑖𝑡 − 𝑋 𝑋 − 𝐿𝑜𝑤𝑒𝑟 𝑠𝑝𝑒𝑐 𝑙𝑖𝑚𝑖𝑡
𝐶𝑝𝑘 = 𝑀𝑖𝑛𝑖𝑚𝑢𝑚 𝑜𝑓 [ , ]
3𝜎 3𝜎
Acceptance sampling— A method of measuring random samples of lots or batches of products
against predetermined standards.
Operating characteristic (OC) curve— A graph that describes how well an acceptance plan
discriminates between good and bad lots.
Producer’s risk— The mistake of having a producer’s good lot rejected through sampling.
Consumer’s risk— The mistake of a customer’s acceptance of a bad lot overlooked through
sampling.
Acceptable quality level (AQL)— The quality level of a lot considered good.
Lot tolerance percent defective (LTPD)— The quality level of a lot considered bad.
 Type I error— Statistically, the probability of rejecting a good lot.
 Type II error— Statistically, the probability of accepting a bad lot.
Average outgoing quality (AOQ)— The percent defective in an average lot of goods
inspected through acceptance sampling:
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(𝑃𝑑)(𝑃𝑎)(𝑁 − 𝑛)
𝐴𝑂𝑄 =
𝑁
Tools of TQM that generate ideas include the check sheet (organized method of recording data),
scatter diagram (graph of the value of one variable vs. another variable), and cause-and-effect
diagram. Tools for organizing the data are the Pareto chart and flowchart. Tools for identifying
problems are the histogram (distribution showing the frequency of occurrences of a variable)
and statistical process control chart.
 Cause-and-effect diagram - A schematic technique used to discover possible locations
of quality problems. (Also called an Ishikawa diagram or a fish-bone chart.)
 Pareto chart - A graphic that identifies the few critical items as opposed to many less
important ones.
 Flowchart - A block diagram that graphically describes a process or system.
 SPC - A process used to monitor standards, make measurements, and take corrective
action as a product or service is being produced.
 Control chart - A graphic presentation of process data over time, with predetermined
control limits.

The role of inspection means of ensuring that an operation is producing at the quality level
expected.
 Inspection —A means of ensuring that an operation is producing at the quality level
expected.
 Source inspection —Controlling or monitoring at the point of production or purchase:
at the source.
 Poka-yoke —Literally translated, “mistake proofing”; it has come to mean a device or
technique that ensures the production of a good unit every time.
 Checklist —A type of poka-yoke that lists the steps needed to ensure consistency and
completeness in a task.
 Attribute inspection —An inspection that classifies items as being either good or
defective.
 Variable inspection —Classifications of inspected items as falling on a continuum
scale, such as dimension, size, or strength.
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TQM in service determinants of service quality: reliability, responsiveness, competence,

access, courtesy, communication, credibility, security, understanding/knowing the customer,
and tangibles.
 Service recovery —Training and empowering frontline workers to solve a problem
immediately.
 jSERVQUAL—A popular measurement scale for service quality that compares service
expectations with service performance.