Session 4

Business Operations and Logistics:

Process Analysis
Quality management
Chapter 2, 3 (Krajewski, et al., 2019)
Chapter 6 (Heizer, et. al, 2017)

Associate Professor Sakda Siriphattrasophon, Ph.D.

What is Process Analysis?

• Process Analysis
– The documentation and detailed
understanding of how work is performed
and how is can be redesigned

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Six Sigma Process Improvement Model
Figure 2.6 Six Sigma Process Improvement Model

• Define - The scope and boundaries of the

process to be analyzed are first established

• Measure - The metrics to evaluate how to

improve the process are determined

• Analyze - A process analysis is done, using the

data on measures, to determine where
improvements are necessary

• Improve - The team uses analytical and critical

thinking to generate a long list of ideas for
improvement

• Control - The process is monitored to make sure

that high performance levels are maintained

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Defining, Measuring, and Analyzing the
Process

I. Flowcharts
II. Work Measurement Techniques
III. Process Charts
IV.Data Analysis Tools

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Defining, Measuring, and Analyzing the Process –
I. Flowcharts

Flowchart
• A diagram that traces the flow of information,
customers, equipment, or materials through the various
steps of a process
• Swim Lane Flowchart – A visual representation that
groups functional areas responsible for different
subprocesses into lanes.
Service Blueprint

• A special flowchart of a service process that shows which

steps have high customer contact
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Flowchart:
• A diagram that traces the flow of information, customers, equipment, or materials
through the various steps of a process

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Swim Lane Flowchart in Manufacturing
Service Blueprint:
A special flowchart of a service process that shows which steps have high
customer contact

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Defining, Measuring and Analyzing the Process:
II. Work Measurement Techniques

• Work Measurement Techniques

– Time Study
– Elemental Standard Data Method
– Predetermined Data Method
– Work Sampling Method
– Learning Curve Analysis

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Example 1: Time Study of Watch Assembly
Process

• A process at a watch assembly plant has been changed.

• The process is divided into three work elements.
• A time study has been performed with the following
results.
• The time standard for the process previously was 14.5
minutes.
• Based on the new time study, should the time standard
be revised?

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Example 1

The new time study had an initial sample of four

observations, with the results shown in the following table.
The performance rating factor (RF) is shown for each
element, and the allowance for the whole process is 18
percent of the total normal time.

Blank Obs 1
er vation Obs 2
er vation Obs 3
er vation Obs 4er vation Average (min) RF Normal Time
Element 1 2.60 2.34 3.12 2.86 2.730 1.0 2.730
Element 2 4.94 4.78 5.10 4.68 4.875 1.1 5.363
Element 3 2.18 1.98 2.13 2.25 2.135 0.9 1.922

Total Normal Time = 10.015

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Example 1 (3 of 3)

The normal time for an element in the table is its average

time, multiplied by the RF.
The total normal time for the whole process is the sum of
the normal times for the three elements, or 10.015 minutes.
To get the standard time (ST) for the process, just add in
the allowance, or
ST= 10.015(1 + 0.18)= 11.82 minutes watch
The time to assemble a watch appears to have decreased
considerably. However, based on the precision that
management wants, the analyst decided to increase the
sample size before setting a new standard.
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Work Measurement Techniques

Work Sampling
Figure 2.8 Work Sampling Study of Admission Clerk at Health Clinic using OM
Explorer’s Time Study Solver

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Work Measurement Techniques (2 of 2)
Learning Curves
Figure 2.9 Learning Curve with 80% Learning Rate Using OM
Explorer’s Learning Curves Solver

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Defining, Measuring and Analyzing the Process:
III. Process Charts

• Process Charts - An organized way of documenting all

the activities performed by a person or group of people,
at a workstation, with a customer, or working with certain
materials
• Activities are typically organized into five categories:
– Operation
– Transportation
– Inspection
– Delay
– Storage

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Process Charts (2 of 6)
Figure 2.10 Process Chart for Emergency Room Admission

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Process Charts (4 of 6)
Figure 2.10 [continued]

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Process Charts
• The annual cost of an entire process can be estimated as:

Annual  Time to perform   Variable costs   Number of times process 

=   
labor cost  the process in hours   per hour   performed each year 

• For example:
– Average time to serve a customer is 4 hours
– The variable cost is $25 per hour
– 40 customers are served per year
• The total labor cost is:
4 hrs customer × $25 hr × 40 customers yr = $4, 000

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Defining, Measuring and Analyzing the Process:
IV. Data Analysis Tools

• Checklists
• Histograms and Bar Charts
• Pareto Charts
• Scatter Diagrams
• Cause-and-Effect Diagrams (Fishbone)
• Graphs

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Application of the Tools for Improving Quality
Example 2: Chart for a Restautant
The manager of a neighborhood restaurant is concerned about the
smaller numbers of customers patronizing his eatery. Complaints have
been rising, and he would like to find out what issues to address and
present the findings in a way his employees can understand.
The manager surveyed his customers over several weeks and
collected the following data:

Complaint Frequency
Discourteous server 12
Slow service 42
Cold dinner 5
Cramped table 20
Atmosphere 10

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Example 2 (2 of 3)
Figure 2.11 Bar Chart

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Example 2 (3 of 3)
Figure 2.12 Pareto Chart

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Example 3: Cause-and-Effect Diagrams
(Fishbone) (1 of 3)

A process improvement team is working to improve the

production output at the Johnson Manufacturing plant’s
header cell that manufactures a key component, headers,
used in commercial air conditioners.
Currently the header production cell is scheduled
separately from the main work in the plant.

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Example 3 (2 of 3)

• The team conducted extensive on-site observations

across the six processing steps within the cell and they
are as follows:
1. Cut copper pipes to the appropriate length
2. Punch vent and sub holes into the copper log
3. Weld a steel supply valve onto the top of the copper log
4. Braze end caps and vent plugs to the copper log
5. Braze stub tubes into each stub hole in the copper log
6. Add plastic end caps to protect the newly created header

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Example 3 (3 of 3)
• To analyze all the possible causes of that problem, the team constructed a
cause-and-effect diagram.

• Several suspected causes were identified for each major category.

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Example 4 (1 of 3)
The Wellington Fiber Board Company produces headliners, the fiberglass
components that form the inner roof of passenger cars. Management wanted to
identify which process failures were most prevalent and to find the cause.

•Step 1: A checklist of different types of process failures is constructed from

last month’s production records.

•Step 2: A Pareto chart prepared from the checklist data indicated that broken
fiber board accounted for 72 percent of the process failures.

• Step 3: A cause-and-effect diagram for broken fiber board identified several

potential causes for the problem. The one strongly suspected by the manager
was employee training.

•Step 4: The manager reorganizes the production reports into a bar chart
according to shift because the personnel on the three shifts had varied
amounts of experience.

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Example 4 (2 of 3)
Figure 2.14 Application of the Tools for Improving Quality

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Example 4 (3 of 3)
Figure 2.14 [continued]

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Redesigning and Managing Process
Improvements (1 of 4)

• Questioning and Brainstorming

• Benchmarking
• Implementing

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Redesigning and Managing Process
Improvements (2 of 4)
• Questioning and Brainstorming
• Ideas can be uncovered by asking six questions:
1. What is being done?
2. When is it being done?
3. Who is doing it?
4. Where is it being done?
5. How is it being done?
6. How well does it do on the various metrics of importance?

Brainstorming – Letting a group of people, knowledgeable

about the process, propose ideas for change by saying whatever
comes to mind
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Redesigning and Managing Process
Improvements (3 of 4)

• Benchmarking
– A systematic procedure
that measures a firm’s
processes, services,
and products against
those of industry
leaders

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Redesigning and Managing Process
Improvements (4 of 4)
• Implementing
– Avoid the following seven mistakes:
1. Not connecting with strategic issues
2. Not involving the right people in the right way
3. Not giving the Design Teams and Process Analysts a
clear charter, and then holding them accountable
4. Not being satisfied unless fundamental “reengineering”
changes are made
5. Not considering the impact on people
6. Not giving attention to implementation
7. Not creating an infrastructure for continuous process
improvement

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 Case study
▶José’s Authentic Mexican Restaurant

p.120
Operations Management: Processes and
Supply Chains
Twelfth Edition, Global Edition

Chapter 3
Quality and Performance

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Quality and Performance
Two Ways Quality Improves Profitability
Figure 6.1

Sales Gains via

• Improved response
• Flexible pricing
• Improved reputation

Improved Increased
Quality Profits
Reduced Costs via
• Increased productivity
• Lower rework and scrap costs
• Lower warranty costs
 Defining Quality
The totality of features and
characteristics of a product or service
that bears on its ability to satisfy stated or
implied needs American Society for Quality
Costs of Quality

 Prevention costs - reducing the potential for

defects (train, quality improvement
program)
 Appraisal costs - evaluating products
(testing, labs, inspections)
 Internal failure - producing defective parts
before delivery (rework , scrap)
 External costs - defects discovered after
delivery (rework, returned, liabilities)
Costs of Quality

Total Total Cost

Cost
External Failure

Internal Failure

Prevention

Appraisal
Quality Improvement
International Quality Standards (ISO)

• International Organization for Standardization

(ISO) is a worldwide federation of national
standards bodies. (Europe, EU)

• ISO 9000 -- The common name given to quality

management and assurance standards.

• ISO 14000 -- A collection of the best practices for

managing an organization’s impact on the environment.

• ISO 26000 - Social responsibility

• ISO 37001 - Anti-bribery management systems

Malcolm Baldrige National Quality Award

 US established for quality

achievement
 Motorola, Milliken, Xerox, FedEx, Ritz-
Carlton, AT&T, Cadillac, Texas instrument
 Details; http://www.nist.gov/baldrige
 Japanese have Deming Prize
 Baldrige Criteria
Applicants are evaluated on:
CATEGORIES POINTS
Leadership 120
Strategic Planning 85
Customer Focus 85
Measurement, Analysis, and Knowledge 90
Management
Workforce Focus 85
Operations Focus 85
Results 450
Total Quality Management (TQM)
• A philosophy that stresses three principles for
achieving high levels of process performance and quality
(1) customer satisfaction, (2) employee involvement and
(3) continuous improvement in performance.
Continuous Improvement

► Never-ending process of continual

improvement
► Covers people, equipment, materials,
procedures
► Every operation can be improved
 Shewhart's PDCA Model
Figure 6.3

4. Act 1. Plan
Implement Identify the
the plan, pattern and
document make a plan

3. Check 2. Do
Is the plan Test the
working? plan

วงจรชูฮาร์ต (Shewhart Cycle)

Six Sigma

 Popularized by Motorola , Honey well , GE

 Six Sigma refers to an extremely high
measure of process capability of 99.9997%
accuracy ( return no more than 3.4 defects
per million operations (DPMO)
 To reduce defects to help lower costs, save
time and improve customer satisfaction
 It is both STRATEGY and DISCIPLINE
 Six Sigma
►
Lower limits Upper limits
Two meanings
2,700 defects/million
► Statistical definition of a process that is
99.9997% capable, 3.4 defects per
3.4 defects/million
million opportunities (DPMO)
► A program designed to reduce defects,
lower costs, save time, and improve
customer satisfaction Mean
±3σ
► A comprehensive system for achieving
σ
and sustaining business±6success
Figure 3.3 Six Sigma Approach Focuses on Reducing Spread and
Centering the Process
Acceptance Sampling (1 of 2)

• Acceptance Sampling
– The application of statistical techniques to determine
if a quantity of material from a supplier should be
accepted or rejected based on the inspection or test
of one or more samples.
• Acceptable Quality Level (AQL)
– The quality level desired by the consumer.

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Acceptance Sampling (2 of 2)

Figure 3.4 Interface of Acceptance Sampling and Process Performance

Approaches in a Supply Chain
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Statistical Process Control (SPC)

• SPC
– The application of statistical techniques to determine
whether a process is delivering what the customer
wants.

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Statistical Process Control Chart (SPC):
(a) Normal – No action (b) Run – Take action

(d) Exceeds control limits –

(c) Sudden change – Monitor Take action
Type of Control Charts

• Control Charts for Variables

– R-Chart– Measures the variability of the process
– x -Chart – Measures whether the process is
generating output, on average, consistent with a
target value
• Control Charts for Attributes
– p-Chart – Measures the proportion of defective
services or products generated by the process
– c-Chart – Measures the number of defects when
more than one defect can be present in a service or
product
Control Charts for Variables

R-Chart
UCLR = D4R and LCLR = D3R
Where

R = average of several past R values and the central

line of the control chart
D3, D4 = constants that provide three standard deviation
(three-sigma) limits for the given sample size

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Control Charts for Variables

X -Chart
UCL x = x + A2 R and LCL x = x − A2 R

Where

x = central line of the chart, which can be either the

average of past sample means or a target value set
for the process
A2 = constant to provide three-sigma limits for the
sample mean

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Control Charts for Variables
Table 3.1 Factors for Calculating Three Sigma Limits for the x -Chart
and R-Chart
Size of Factor for UCL and LCL Factor for LCL for Factor for UCL for
Sample (n) for x-Chart (A2)
x-bar R-Chart (D3) R-Chart (D4)
2 1.880 0 3.267
3 1.023 0 2.575
4 0.729 0 2.282
5 0.577 0 2.115
6 0.483 0 2.004
7 0.419 0.076 1.924
8 0.373 0.136 1.864
9 0.337 0.184 1.816
10 0.308 0.223 1.777

Source: Reprinted with permission from ASTM Manual on Quality Control of Materials, copyright ©
ASTM International, 100 Barr Harbor Drive, West Conshohocken, PA 19428.
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Control Charts for Variables
Steps to Compute Control Charts:
1. Collect data.
2. Compute the range.
3. Use Table 3.1 to determine R-Chart control limits.
4. Plot the sample ranges. If all are in control, proceed to step
5. Otherwise, find the assignable causes, correct them, and
return to step 1.
5. Calculate
x for each sample and determine the central line of
the chart, x

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Control Charts for Variables

6. Use Table 3.1 (see slide 34) to determine the

parameters for UCL and LCL for x - Chart
7. Plot the sample means. If all are in control, the process
is in statistical control. Continue to take samples and
monitor the process. If any are out of control, find the
assignable causes, address them, and return to step 1.
If no assignable causes are found after a diligent
search, assume the out-of-control points represent
common causes of variation and continue to monitor the
process.

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Example 3.1 (135)

The management of West Allis Industries is concerned about the

production of a special metal screw used by several of the company’s
largest customers. The diameter of the screw is critical to the
customers. Data from five samples appear in the accompanying table.
The sample size is 4. Is the process in statistical control?

Sample Observation Observation Observation Observation

Number 1 2 3 4 R x
x-bar

1 0.5014 0.5022 0.5009 0.5027 0.0018 0.5018

2 0.5021 0.5041 0.5024 0.5020 0.0021 0.5027

3 0.5018 0.5026 0.5035 0.5023 0.0017 0.5026

4 0.5008 0.5034 0.5024 0.5015 0.0026 0.5020

5 0.5041 0.5056 0.5034 0.5047 0.0022 0.5045

Blank Blank Blank Blank Average 0.0021 0.5027

Figure 3.10 The x - Chart from the OM Explorer x and R-Chart Solver
for the Metal Screw, Showing that Sample 5 Is Out of Control

Process average is NOT in statistical control.

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TQM in Services
 Service quality is more difficult to
measure than the quality of goods
 Service quality perceptions depend on
 Intangible differences between products
 Intangible expectations customers have
of those products
 Determinants of Service Quality

Table 6.6
Reliability involves consistency of performance and dependability
Responsiveness concerns the willingness or readiness of employees to provide service
Competence means possession of the required skills and knowledge to perform the
service
Access involves approachability and ease of contact
Courtesy involves politeness, respect, consideration, and friendliness
Communication means keeping customers informed and listening to them
Credibility involves trustworthiness, believability, and honesty
Security is the freedom from danger, risk, or doubt
Understanding/knowing the customer involves making the effort to understand the
customer's needs
Tangibles include the physical evidence of the service

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SERVQUAL EXAMPLE

ความสามารถในการเข้าใจความรูส้ กึ ของผู้อน่ื
 Best Practices for Resolving
Customer Complaints
Table 6.3
BEST PRACTICE JUSTIFICATION
Make it easy for clients to complain It is free market research
Respond quickly to complaints It adds customers and loyalty
Resolve complaints on first contact It reduces cost
Use computers to manage complaints Discover trends, share them, and align
your services
Recruit the best for customer service It should be part of formal training and
jobs career advancement
 Inspection
► Involves examining items to see if
an item is good or defective
► Detect a defective product
► Does not correct deficiencies in
process or product
► It is expensive
► Issues:
► When to inspect
► Where in process to inspect
 When and Where to Inspect
1. At the supplier’s plant while the supplier is
producing
2. At your facility upon receipt of goods from your
supplier
3. Before costly or irreversible processes
4. During the step-by-step production process
5. When production or service is complete
6. Before delivery to your customer
7. At the point of customer contact
 Service Industry Inspection
TABLE 6.4 Examples of Inspection in Services
ORGANIZATION WHAT IS INSPECTED STANDARD
Alaska Airlines Last bag on carousel Less than 20 minutes after
arrival at the gate
Airplane door opened Less than 2 minutes after
arrival at the gate
Jones Law Office Receptionist performance Phone answered by the
second ring
Billing Accurate, timely, and correct
format
Attorney Promptness in returning calls
Hard Rock Hotel Reception desk Use customer’s name
Doorman Greet guest in less than 30
seconds
Room All lights working, spotless
bathroom
Minibar Restocked and charges
accurately posted to bill
 Case study
▶Quality at Axon

pp.158-159