BALINOS, LEIGN LYLAH JANE

BSBA 1.2B

Productivity and Quality Tools Handout 3

Introduction to Managing Quality

 Quality and Strategy: Managing quality is pivotal in building successful

strategies for differentiation, low cost, and rapid response to market demands.
Quality management helps in defining customer expectations, leading to the
successful differentiation of products and services.

The Dimensions of Quality

 Product Quality:
o Performance: Refers to a product's main operating characteristics.
o Aesthetics: Concerns the product’s appearance, feel, smell, or taste.

o Special features: Characteristics that enhance the product's appeal.

o Conformance: The degree to which a product corresponds to design

specifications.

o Reliability: The likelihood of a product not failing within a specific period.

o Durability: The length of a product's useful life.

o Perceived quality: The indirect evaluation of quality by consumers.

o Serviceability: The ease and speed with which a product can be repaired.

o Consistency: The product's ability to provide the same level of quality

throughout its usage.

 Service Quality:
o Convenience: The availability and accessibility of the service.
o Reliability: The ability to perform a service dependably and accurately.

o Responsiveness: The willingness to help customers and address their

needs.

o Time: The speed with which service is delivered.

o Assurance: The knowledge exhibited by personnel and their ability to

instill trust and confidence.
 o Courtesy: How customers are treated by employees.

o Tangibles: The physical appearance of facilities, equipment, personnel,

and communication materials.

o Consistency: The ability to provide the same level of good quality

repeatedly.

o Expectations: Meeting or exceeding customer expectations

Total Quality Management (TQM)

 Definition and emphasis of TQM: A comprehensive management approach that

works towards the continuous improvement of products and services to achieve
customer satisfaction.
 Continuous Improvement: A never-ending process of improvement covering all
components of an organization.

 Plan-Do-Check-Act (PDCA) Cycle: A method for implementing continuous

improvement through a cyclic process of planning, doing, checking, and acting.

 Six Sigma: A program designed to reduce defects, lower costs, save time, and
improve customer satisfaction through a disciplined, data-driven approach and
methodology for eliminating defects

Employee Empowerment

 The importance of involving employees in the production process:

Empowering employees involves including them in decision-making processes
and giving them responsibility for the production process.
 Techniques for building employee empowerment: Includes building
communication networks that include employees, developing open and
supportive supervisors, moving responsibility to production employees, building
high-morale organizations, and creating formal organization structures such as
teams and quality circles.

Benchmarking

 The process and importance of benchmarking: Benchmarking involves

comparing your performance against those of leaders in your industry or other
industries to identify areas of improvement.
  Best Practices for Resolving Customer Complaints: Includes making it easy for
clients to complain, responding quickly to complaints, resolving complaints on
the first contact, using computers to manage complaints, and recruiting the best
for customer service jobs.

Just-In-Time (JIT)

 Philosophy and requirements of JIT: JIT is a strategy focused on efficiency and

waste reduction by producing goods only as they are needed in the production
process, requiring effective supplier networks and quality management practices.

Tools of TQM

 Check Sheets: Forms designed for recording data, helping in identifying patterns
or facts for analysis.
 Scatter Diagram: A tool for determining the relationship between two variables
or characteristics.

 Cause-and-Effect Diagrams: Also known as Ishikawa or fishbone diagrams,

these help in identifying potential causes of a problem.

 Pareto Charts: Charts that organize errors, problems, or defects to identify the
most significant issues.

 Flowcharts: Graphical representations of a process, showing the steps in

sequential order.

 Histograms: Charts that show the range of measurement values and the
frequency of each value, offering insights into variations and distribution.

Reviewer for Handout 4

Introduction to Statistical Process Control (SPC)

 Definition: SPC applies techniques to ensure processes meet standards by

handling variability.
 Historical Context: Developed by Walter Shewhart in the 1920s at Bell
Laboratories.

 Variation Causes:
o Common (natural) causes: Inherent process variability.
o Special (assignable) causes: Variability due to specific factors.
Understanding Variations in Processes

 Natural Variations: Inevitable variability within a process; described by a

distribution pattern.
 Assignable Variations: Variations that can be traced to specific causes (e.g.,
equipment wear).

 Operations Manager Tasks:

o Control natural variation.
o Eliminate assignable variations.

Control Charts for Variables

 Variables: Measurable attributes with continuous proportions (e.g., weight,

length).
 Control Charts:

 Central Limit Theorem: Foundation for control charts; states that the
distribution of sample means approximates a normal distribution as sample size
increases.

 Formulas:

Control Charts for Attributes

 Attributes: Qualitative properties classified as defective or non-defective.

 p-charts: Monitor the proportion of defective items in a sample
Decision Making with Control Charts

 Variable vs. Attribute Charts: Choose based on the data type (continuous vs.
categorical).
 Managerial Decisions: Implement SPC at critical process points and select
appropriate chart types.

Process Capability

 Definition: The ability of a process to meet or exceed specified limits.

 Process Capability Ratio (Cp): Measures process tolerance width relative to the
spread of the process.

Reviewer Handout 5

1. Process Strategy

 Description: Details how organizations convert resources into goods and

services, focusing on creating processes that meet customer needs within
 budgetary and managerial limits. It affects production's efficiency, flexibility,
quality, and cost.
 Key Strategies:

 Process focus: Centers on a facility organized around functions to

facilitate low-volume, high-variety production, such as different
departments in a factory or services in a restaurant.

 Repetitive focus: Involves a product-oriented process using modules for a

mix of customization and efficiency, like fast-food services.

 Product focus: Describes a high-volume, low-variety, product-oriented

facility with continuous production runs, producing items like glass or
beer.

 Mass customization: Refers to rapid, low-cost production catering to

changing customer desires, allowing for a wide variety of products while
improving quality and reducing costs.

2. Process Analysis and Design

 Description: Tackles operational management issues such as throughput, cost,

and quality by examining processes for continuous improvement.
 Tools for Process Design and Redesign:

 Flowcharts: Diagrams showing the movement of materials, products, or

people, useful for understanding, analyzing, and communicating about a
process.

 Time-Function Mapping: Charts that represent activities and their flow

direction over time, aimed at identifying and removing waste.

 Process Charts: Use symbols, time, and distance to objectively analyze

and record process activities, emphasizing value-added activities.

 Value-Stream Mapping: A lean-management method for analyzing the

current state and designing a future state for the series of events that take
a product or service from its beginning through to the customer.

 Service Blueprinting: Focuses on customer interaction with the service

provider, mapping out each step of the service process.
3. Detailed Process Tools

 Flowchart: Defined as a schematic or drawing that depicts the movement, aiding

in process understanding, analysis, and communication.
 Time-Function Mapping: Described as a tool where nodes show activities,
arrows indicate flow direction, and time is marked on a horizontal axis to
eliminate waste.

 Process Charts: Presented as symbols, time, and distance representations to

analyze and record process activities, with a focus on value-added activities.

 Service Blueprinting: Centers on the interaction between the customer and

service provider, detailing each process step for clarity and understanding.

4. Example Applications

 Process Charts Example: Demonstrates using process charts to map out and
summarize activities within a process, emphasizing structured analysis.
 Service Blueprinting Example: Uses a detailed example to illustrate service
blueprinting, emphasizing customer-provider interaction.

Reviewer for Handout 6

Capacity Planning

Emphasizes the importance and the strategic role of capacity planning in operations
management, highlighting its impact on capital requirements, fixed costs, and demand
satisfaction.

Capacity Planning Overview

 Definition: Capacity refers to the throughput or the number of units a facility can
hold, receive, store, or produce at a time.
 Importance: Capacity decisions are crucial as they determine capital
requirements, influence fixed costs, and affect the ability to meet demand

Time Horizons in Capacity Planning

1. Long-range: Deals with adding facilities and equipment with long lead times,
generally more than three years.
 2. Intermediate: Involves adding equipment, personnel, shifts, subcontracting, and
inventory management, usually ranging from 3 to 36 months.

3. Short-run: Focuses on scheduling jobs and people, and allocating machinery,

typically up to 3 months.

Importance of Capacity Planning

 Impact on the Organization: Affects the organization's ability to meet future

demands, influences operating costs, initial costs, competitiveness, ease of
management, and necessitates early planning due to the complexity introduced
by globalization.
 Strategic Implications: Capacity decisions involve a long-term commitment of
resources and are difficult to modify without incurring major costs.

Design and Effective Capacity

 Definitions:
o Design Capacity: The maximum output under ideal conditions.
o Effective Capacity: The expected output under current operating
conditions.

 Performance Measures: Utilization and efficiency are crucial, with the following
formulas:
o Utilization = (Actual Output / Design Capacity) × 100
o Efficiency = (Actual Output / Effective Capacity) × 100

Case Study Examples

 Application and Formulas:

 Utilization and Efficiency Example: Illustrates calculation of a bakery's

design capacity, utilization, and efficiency when producing rolls.

o Design Capacity Formula: (Days × Shifts × Hours) × (Units per

Hour)

o Utilization Formula: (Actual Output / Design Capacity) × 100

o Efficiency Formula: (Actual Output / Effective Capacity) × 100

 Break-even Analysis: Demonstrates how to determine the break-even
point in both units and pesos for a single product and multiproduct cases,
highlighting the importance of considering fixed and variable costs.

o Break-even Point in Units (BEU): Fixed Costs / (Selling Price per

Unit - Variable Cost per Unit)

o Break-even Point in Pesos (BEP₱): Fixed Costs / (1 - Variable Cost

per Unit / Selling Price per Unit)

 Expected Monetary Value (EMV) for Capacity Decision: Applies EMV to

a capacity decision, showing the calculation of expected monetary value
for different plant sizes based on market favorability.

o EMV Formula: ∑(Payoff for State × Probability of State)

 Net Present Value (NPV) Technique: Describes the calculation of present

value of future cash receipts, emphasizing the time value of money.

o Present Value (PV) Formula: Future Value / (1 + Interest

Rate)^Number of Years