Class 16

1
Operations Management Performance Modeling

• Operations Strategy
• Process Analysis
• Lean Operations
• Supply Chain Management
• Capacity Management in Services
• Quality Management
• Class 7b Quality the Voice of the Customer
• Class 8a Control Charts Voice of the Process
• Class 8b Paradigms for Continuous Improvement
• Process Capability
• Analog Devices Continuous Improvement
• Introduce National Printing Company

2
Class 8a Key Learning Objectives

• The role of variability in evaluating performance
• A process
• in control has only inherent (from common cause)
  variation
• out of control has variation from an assignable
  cause
• Pareto analysis to identify key causes of error
• SPC framework for process control and improvement

3
Statistical Process Control Attribute
Measurements (p-Charts)
4
Control Chart of errors in Receiving Process
5
Errors by Type Module (Pareto Analysis)
6
Control Chart Module 1 Errors
7
Module 1 of Receiving Process

• 1. Calculate average proportion of errors per
  sample
• 2. Calculate the standard deviation of proportion
  defects per sample of 400
• 3. Calculate control limits
• 4. Plot control chart with control limits
  400(UCL, LCL) (20.52, 1.08)

Module 1 is out of control
8
Module 1 Errors by Type
Number of Errors by type in Module 1
180
160
140
120
100
80
60
40
20
0
Slotter
Other
Letdown
Putaway
Keying
ITR ADJ
Error Types
9
Process Capability

• Voice of the Customer Voice of the Process
• Process Capability
• How well is process capable of meeting customer
  specifications?
• For the Receiving process, customer
  specifications require no more than 2 errors on
  any given day.
• Proportion of days where errors are beyond
  customer specifications

10
Process Capability Sigma or z Capability

• Sigma capability is the number of standard
  deviations from the mean to the closest
  specification limit.
• Sigma capability of Receiving process
• What if Receiving is to become a 3-Sigma process?
• Target mean
• Target standard deviation

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Improving Process Capability
99.9
99.9
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Magnitude of Difference Between Sigma Levels
13
99.9 Suppliers

• At least 20,000 wrong prescriptions per year
• More than 15,000 newborns dropped by doctors or
  nurses
• No electricity, water or heat for 8.6 hours each
  year
• No telephone service or TV transmission for
  nearly 10 minutes each week
• Two short (or long) landings at OHare each week

14
Why 6-Sigma?

• Impact of of parts/stages in a process
• Impact of mean shift

15
Relationship Between Sigma Capability, Proportion
Defects, and Cpk
16
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ADI Stock Price Performance
18
Key learning objectives Analog Devices

• Methods to drive improvement
• visibility expose the rocks (mgt. by sight)
• exploratory stress crisis (mgt. by stress)
• set standards half live (mgt. by stretch)
• Short term performance evaluation of complex
  organizations requires a balanced scorecard
• Operational improvement needs to be converted
  into financial improvement

19
Class 8b Key Learning Objectives SPC

• Specification limits Voice of the customer
• Control limits used to verify if process is in
  control (internal), i.e., is maintaining
  capability Voice of the process
• Process capability is a measure of the quality
  delivered (external) links VoP with VoC
• Improving capability may require variability
  reduction and/or mean shift
• Reducing number of stages/parts improves
  capability

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Continuous ImprovementPDCA Cycle (Deming
Wheel)
Institutionalize the change or abandon or do it
again.
Plan a change aimed at improvement.
1. Plan
4. Act
2. Do
3. Check
Execute the change.
Study the results did it work?
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Process Improvements at Analog
Average Yields
Manufacturing Cycle Time
51
15 weeks 7 weeks
20
July 1, 1987 July 1, 1990
July 1, 1987 July 1, 1990
Defects
500 ppm 50 ppm
18.75 6.25
July 1, 1987 July 1, 1990
July 1, 1987 July 1, 1990
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Target Half-Lives
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Continuous Improvement Benchmarking

• 1. Identify those processes needing improvement.
• 2. Identify a firm that is the world leader in
  performing the process.
• 3. Contact the managers of that company and make
  a personal visit to interview managers and
  workers.
• 4. Analyze data