Manufacturing

Planning and Control

BITS Pilani Faculty Name
Pilani Campus Dr. Pavan Potdar
 BITS Pilani
Pilani Campus

Session 4
Statistical Process Control
Session 3 - Process Strategy
Selection – Homework
Process focus Repetitive focus Product focus
Annual demand 200,000 200,000 200,000
Annual fixed cost $100,000 $200,000 $500,000
Variable cost / unit $15.00 $14.00 $13.00

1. Chart out the cost curves for these different process

strategies

2. Figure out the “crossover” points that move the optimal

choices from one to the other

3. Summarize observations from the exercise

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Crossover Charts

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Process Strategy Selection –
Homework solution
Process focus Repetitive focus Product focus
Annual demand 200,000 200,000 200,000
Annual fixed cost $100,000 $200,000 $500,000
Variable cost / unit $15.00 $14.00 $13.00

V1*15 + 100,000 = V1*14 + 200,000

Solving for V1 = 100,000 up to this demand adopt ‘Process Focus’

V2*13 + 500,000 = V2*14 + 200,000

Solving for V2 = 300,000 above this demand adopt ‘Product Focus’

Between 100,000 and 300,000 adopt ‘Repetitive Focus’

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 Process Strategy Selection –
Homework solution
Crossover chart - Different Process Strategies
60,00,000

50,00,000

40,00,000
Total cost in USD

30,00,000

20,00,000

10,00,000

-
50,000 1,00,000 1,50,000 2,00,000 2,50,000 3,00,000 3,50,000
Total annual vol (units)

Process Repetitive Product

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Session 4 Outline

➢Statistical Process Control

➢ Control Charts for Variables
➢ Central Limit Theorem
➢ Setting Mean Chart Limits (Xbar – Chart)
➢ Setting Range Chart Limits (R-Chart)
➢ Using Mean and Range Charts
➢ Control Charts for Attributes

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Outline

➢Statistical Process Control

➢ Control Charts for Variables
➢ Central Limit Theorem
➢ Setting Mean Chart Limits (Xbar – Chart)
➢ Setting Range Chart Limits (R-Chart)
➢ Using Mean and Range Charts
➢ Control Charts for Attributes

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➢Process Capability
➢ Process Capability Ratio (Cp )
➢ Process Capability Index (Cpk)
➢Acceptance Sampling
➢ Operating Characteristic Curve
➢ Average Outgoing Quality

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Why Statistical Process
Control

SPC is a method that uses statistics to monitor and improve

the quality and efficiency of a production process.

Helps identify & reduce Defects

variation in the process that Waste
can lead to: Customer dissatisfaction

Helps optimize the process performance and capability by

detecting and eliminating the causes of variation.

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Statistical Process Control

• SPC is a statistical technique used to ensure that the

processes meet the standards.

• Variability is inherent in every process

• Natural or Common causes
• Special or assignable causes

• Provides a statistical signal when assignable causes are

present
• Detect and eliminate assignable causes of variation

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SPC Tools

Tools help to:

• Collect data
• Analyze data
Control charts • Display process behaviour
• Identify sources of variation

Data-driven decisions to control and improve

Histograms processes

Benefits:
Pareto charts • Reduce scrap/ rework
• Increase productivity
• Improve overall quality
Scatter diagrams • Matching process capability to product
requirement
• Data to support decision making
• Streamlining processes
Cause-and-effect diagrams • Increasing product reliability
• Creates opportunities for company-wide
improvements

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7 QC tools

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Control charts

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Natural Variations

➢ Also called common causes

➢ Affect virtually all production processes

➢ Expected amount of variation

➢ Output measures follow a probability distribution. For any

distribution there is a measure of central tendency and
dispersion

➢ If the distribution of outputs falls within acceptable limits,

the process is said to be “in control”

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Assignable Variations

➢ Also called Special causes of variation (Generally this is

some change in process).

➢ Variations that can be traced to specific reason

➢ The objective is to discover when assignable causes are

present.
➢ Eliminate the bad causes

➢ Incorporate the good causes

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Sampling and analysis of
process

1. Samples of products,
say 5 boxes of cereal Each of these
represents one
taken off the filling sample of five
machine line, vary boxes of cereal
from each other in # #

weight.
Frequency
# # #

# # # #

# # # # # # #

# # # # # # # # # #

Weight

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2. After enough samples
The solid line
are taken from a represents the
distribution
stable process, they
form a pattern called
a distribution.
Frequency

Weight

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3. There are many types of distributions, including
the normal distribution, but distributions differ in
terms of central tendency (mean), standard
deviation or variance, and shape.
Frequency

Central tendency Variation Shape

Weight Weight Weight

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4. If only natural
causes of
variation are
present, the
output forms a
Frequency
Prediction
distribution that
is stable over
time and is
Weight
predictable.

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5. If assignable
causes are
?
?? ??
present, the ?
? ?
?
? ?
process output ???
? ?
??
?
is not stable Frequency Prediction
over time and is
not predictable.
Weight

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Process Control

(a) In statistical
control and capable
of producing within
Frequency control limits

Lower control limit Upper control limit

(b) In statistical control
but not capable of
producing within
control limits

(c) Out of control

Size
(weight, length, speed, etc.)

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Control Charts for Variables

➢ For variables that have continuous dimensions (weight,

speed, length, strength etc)

➢ Xbar charts are to control the central tendency of the

process

➢ R-charts are to control the dispersion of the process

➢ Normally, these two charts must be used together to get

better control over the process.

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Setting Chart Limits

For Xbar Chart, when we know the standard deviation σ

Upper control limit (UCL) = x + zsx

Lower control limit (LCL) = x - zsx
where x = mean of the sample means or a target
value set for the process
z = number of normal standard deviations
sx = standard deviation of the sample means
= s/ n
s = population standard deviation
n = sample size
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 Hour 1 Hour Mean Hour Mean
Sample Weight of 1 16.1 7 15.2
Number Oat Flakes 2 16.8 8 16.4
1 17 3 15.5 9 16.3
2 13 4 16.5 10 14.8
3 16 5 16.5 11 14.2
4 18 6 16.4 12 17.3
5 17
6 16 For 99.73% control limits, z = 3
7 15
8 17 UCLx = x + zsx = 16 + 3(1/3) = 17 ozs
9 16
Mean 16.1 LCLx = x - zsx = 16 - 3(1/3) = 15 ozs
s= 1

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 Control Chart
for sample of 9 Variation due
Out of to assignable
boxes control causes

17 = UCL

Variation due to
16 = Mean natural causes

15 = LCL

Variation due
| | | | | | | | | | | |
to assignable
1 2 3 4 5 6 7 8 9 10 11 12 Out of causes
Sample number control

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For Xbar Charts when we don’t know standard deviation σ

Upper control limit (UCL) = x + A2R

Lower control limit (LCL) = x - A2R

where R = average range of the samples

A2 = control chart factor found in Stats tables
x = mean of the sample means

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Control Chart Factors

Sample Size Mean Factor Upper Range Lower Range

n A2 D4 D3
2 1.880 3.268 0
3 1.023 2.574 0
4 .729 2.282 0
5 .577 2.115 0
6 .483 2.004 0
7 .419 1.924 0.076
8 .373 1.864 0.136
9 .337 1.816 0.184
10 .308 1.777 0.223
12 .266 1.716 0.284

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R - Chart

➢ Type of Variables Control Chart

➢ Shows sample ranges over time (shows difference

between the smallest and largest values in samples)

➢ Monitors process variability

➢ Independent from process mean.

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Setting Chart Limits

Upper control limit (UCLR) = D4R

Lower control limit (LCLR) = D3R

where
R = average range of the samples
D3 and D4 = control chart factors from Statistical tables

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Mean and Range Charts

(a)
These (Sampling mean is
sampling shifting upward but
distributions range is consistent)
result in the
charts below

UCL
(x-chart detects
x-chart shift in central
tendency)
LCL
UCL
(R-chart does not
R-chart detect change in
mean)
LCL

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(b)
These
sampling (Sampling mean
distributions is constant but
result in the dispersion is
charts below increasing)

UCL
(x-chart does not
x-chart detect the increase
in dispersion)
LCL
UCL
(R-chart detects
R-chart increase in
dispersion)
LCL

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Control Charts for Attributes

➢ For variables that are categorical Ex. Good / bad,

yes/no, acceptable / unacceptable etc.

➢ Measurement is typically counting defectives

➢ Charts may measure

➢ Percentage defective (p-chart)

➢ Number of defects (c-chart)

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Control Limits for p-Charts

UCLp = p + zsp^
p(1 - p)
sp^ = n
LCLp = p - zsp^

where p = mean fraction defective in the sample

z = number of standard deviations
sp^ = standard deviation of the sampling distribution
n = sample size

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P-Chart for Data Entry Sample size = 100
Sample Number Fraction Sample Number Fraction
Number of Errors Defective Number of Errors Defective

1 6 .06 11 6 .06
2 5 .05 12 1 .01
3 0 .00 13 8 .08
4 1 .01 14 7 .07
5 4 .04 15 5 .05
6 2 .02 16 4 .04
7 5 .05 17 11 .11
8 3 .03 18 3 .03
9 3 .03 19 0 .00
10 2 .02 20 4 .04
Total = 80
80 (.04)(1 - .04)
p= = .04
(100)(20) sp^ = = .02
100
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p- Chart for Data Entry

UCLp = p + zsp^ = .04 + 3(.02) = .10

LCLp = p - zsp^ = .04 - 3(.02) = 0
.11 –
.10 – UCLp = 0.10
.09 –
Fraction defective

.08 –
.07 –
.06 –
.05 –
.04 – p = 0.04
.03 –
.02 –
.01 – LCLp = 0.00
| | | | | | | | | |
.00 –
2 4 6 8 10 12 14 16 18 20
Sample number
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Control Limits for c-Chart

UCLc = c + 3 c LCLc = c - 3 c

where c = mean number defective in the sample

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c-Chart for cab company

c = 54 complaints/9 days = 6 complaints/day

UCLc = c + 3 c 14 – UCLc = 13.35

=6+3 6

Number defective
12 –
= 13.35 10 –
8 –
6 – c= 6
LCLc = c - 3 c 4 –
=6-3 6 2 – LCLc = 0
=0 0 – | | | | | | | | |
1 2 3 4 5 6 7 8 9
Day

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Managerial Issues and Control
Charts
Three major management decisions

➢ Select points in the processes that need SPC

➢ Determine the appropriate charting technique

➢ Set clear policies and procedures.

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Patterns in Control Charts

Upper control limit

Target

Lower control limit

Normal behavior. Process is “in

control.”

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Patterns in Control Charts

Upper control limit

Target

Lower control limit

One plot out above (or below).
Investigate for cause. Process is
“out of control.”

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Patterns in Control Charts

Upper control limit

Target

Lower control limit

Trends in either direction, 5 plots.
Investigate for cause of
progressive change.

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Patterns in Control Charts

Upper control limit

Target

Lower control limit

Two plots very near lower (or
upper) control. Investigate for
cause.

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Patterns in Control Charts

Upper control limit

Target

Lower control limit

Run of 5 above (or below) central
line. Investigate for cause.

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Patterns in Control Charts

Upper control limit

Target

Lower control limit

Erratic behavior. Investigate.

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Process Capability

➢ The natural variation of a process should be small

enough to produce products that meet the standards
required.

➢ Process in SPC does not necessarily meet the design

specifications

➢ Process capability is a measure of the relationship

between the natural variation of the process and the
design specifications.

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Process Capability Ratio

Upper Specification - Lower Specification

Cp =
6s
➢ A capable process must have Cp of at least 1.0
➢ Does not look at how well the process is centred in the
specification range
➢ Often target value of Cp=1.33 is used to allow for off-
centre processes.
➢ Six sigma quality requires a Cp = 2.0

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Process Capability Index

Upper Lower
Cpk = minimum of Specification - x ,
x - Specification
Limit Limit
3s 3s

➢ A capable process must have a Cpk of at least 1.0

➢ A capable process is not necessarily in the centre of

specification, but it falls within the specification limits at
both extremes.

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Acceptance Sampling

➢ Form of quality testing used for incoming materials or

finished goods
➢ Take samples at random from a lot of items (shipments)

➢ Inspect each of the items in the sample

➢ Decide whether to reject the whole lot based on inspection

results.

➢ Only screens lots; does not drive quality

improvement efforts.

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Operating Characteristic
Curves (OC Curves)
➢ Shows how well a sampling plan discriminates between
good and bad lots (shipments)

➢ Shows the relationship between the probability of

accepting a lot and its quality level.

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Ideal or Perfect OC Curve

Keep whole
shipment
P(Accept Whole Shipment)

100 –

75 –
Return whole
shipment
50 –

Cut-Off
25 –

0 |– | | | | | | | | | |

0 10 20 30 40 50 60 70 80 90 100

% Defective in Lot

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An OC Curve Acceptable Quality Level (AQL)
Lot Tolerance Percentage Defective (LTPD)

100 –
95 –
 = 0.05 producer’s risk for AQL

75 –

Probability of
Acceptance 50 –

25 –

10 –
 = 0.10 Percent
0 |– | | | | | | | |
0 1 2 3 4 5 6 7 8 defective
AQL LTPD
Consumer’s
risk for LTPD Good Indifference
Bad lots
lots zone

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AQL and LTPD

Acceptable Quality Level (AQL)

- The poorest level of quality we are willing to

accept.

Lot Tolerance Percentage Defective (LTPD)

- Quality level we consider bad

- Consumer (buyer) does not want to accept lots

with more defects than LTPD.

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Producer’s and Consumer’s
Risk
Producer’s Risk (α)
- Probability of rejecting a good lot
- Probability of rejecting a lot when
the fraction defective is at or above
the AQL

Consumer’s Risk (β)

- Probability of accepting a bad lot
- Probability of accepting a lot when
the fraction defective is below LTPD

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Average Outgoing Quality
(AOQ)

(Pd)(Pa)(N - n)
AOQ =
N

where
Pd = true percent defective of the lot
Pa = probability of accepting the lot
N = number of items in the lot
n = number of items in the sample

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Average Outgoing Quality

➢ If a sampling plan replaces all defectives

➢ If we know the incoming percent defective for the lot

We can compute the average outgoing quality in percent

defective

The maximum AOQ is the highest percent defective or the

lowest average quality and is called Average Outgoing
Quality Level (AOQL).

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Homework – Case Study
ABC Electronics
➢ ABC Electronics is a manufacturer of high-tech electronic gadgets. The company has recently
implemented Statistical Process Control (SPC) to enhance the quality and efficiency of its production
processes. SPC involves using statistical methods to monitor and control a process to ensure it
operates efficiently and consistently.
➢ Questions: please write any formulae down in the answers before showing the calculation.
➢ a) Explain the key principles of Statistical Process Control (SPC) and how it can contribute to
effective operations management in a manufacturing environment.
➢ b) ABC Electronics produces microchips with a target diameter of 2.5 cm. The production process is
monitored using control charts. During a random sample, measurements of the microchip diameters
were taken, and the data is as follows: 2.48, 2.51, 2.49, 2.52, 2.50. Calculate the mean and standard
deviation of the sample. Is the process in control?
➢ c) Discuss the significance of control limits in SPC. How are control limits determined, and what
actions should be taken if data points fall outside these limits? Provide examples relevant to ABC
Electronics.
➢ d) ABC Electronics has identified a potential improvement in the production process that could
reduce the variation in microchip diameters. If the company decides to implement the improvement,
how might this impact the mean and standard deviation of the process?

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Homework – Case Study
ABC Electronics - Solution
• SPC involves using statistical tools to monitor and control processes
• Key areas of focus are:
• Understsnding variation
• Using control charts
• Setting control limits
• Taking corrective actions based on statistical analysis
• Calculation of Mean and Standard deviation:
• Mean = (2.48+2.51+2.49+2.52+2.50)/5 = 2.50 cm
• Standard deviation = sqrt(0.02^2 + 0.01^2 + 0.01^2 + 0.02^2 + 0^2)/(5-1)) = ~0.01cm
• The process is in control if the data points are within the control limits
• Significance of control limits
• Control limits are set based on historical data and process capabilities
• If data points fall outside these limits, it may indicate a special cause variation requiring investigation
• For ABC electronics, if a diameter measurement falls outside the control limits, it suggests a potential
issue in the production process that needs attention.
• Impact of Process Improvement
• Implementing a process improvement that reduces variation is likely to decrease the standard deviation
• If the improvement is effective, the mean may also shift toward the target value
• This demonstrates how process changes can be monitored using SPC to ensure sustained
improvements

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Session 4 Post-reads

Appendix slides on this ppt

Chapter 6 – Managing Quality (Textbook T1 Ray Heizer)
Supplement 6 – Statistical Process Control (Textbook T1
Ray Heizer)
Videos and other white papers/ articles
Appendix (Word file) with examples of SPC control charts
usage

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Session 5 Pre-reads

T2: The Goal – FULL BOOK

Line Balancing

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Thank you

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Quality Loss Function
L=D2C
L=Loss to society
D=Distance from Target value
C=Cost of deviation

Target-oriented quality yields

more product in the BEST
category
Target-oriented quality brings
product towards the target value

Conformance-oriented quality
keeps products within 3 standard
deviations

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Inspection

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