Operations and supply

chain dynamics

Presented by
Team Teaching
IPB university
Week Topics

1 Introduction: Scope of Operations and Supply Chain Dynamics

2 Quality Management: Total Quality and Management (TQM) Concepts and TQM Tools
3 Role of Inspection in Quality Management
4 Operations Strategy: Process Analysis and Design
5 Operations Strategy: Production Technology and Service Technology
6 Location Strategy
7 Layout Strategy
8 Supply chain management
9 Inventory management
10 Aggregate planning
11 Material Requirement Planning (MRP)
12 ERP
13 Project Management in Supply Chain 1
14 Project Management in Supply Chain 2
Week 2
Quality Management:
Total Quality and Management (TQM) Concepts and
TQM Tools
 Quality and Strategy

► Managing quality supports differentiation,

low cost, and response strategies
► Quality helps firms increase sales and
reduce costs
► Building a quality organization is a
demanding task
 Two Ways Quality
Improves Profitability

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
• Lower recalls and aftersales troubles
© 2014 Pearson Education, Inc. 6-6
 The Flow of Activities
Organizational Practices
Leadership, Mission statement, Effective operating
procedures, Staff support, Training
Yields: What is important and what is to be
accomplished
Quality Principles
Customer focus, Continuous improvement, Benchmarking,
Just-in-time, Tools of TQM
Yields: How to do what is important and to be
accomplished

Employee Fulfillment
Empowerment, Organizational commitment
Yields: Employee attitudes that can accomplish
what is important

Customer Satisfaction
Winning orders, Repeat customers
Yields: An effective organization with
a competitive advantage
 Defining Quality

"The primary goal of an operations manager is to

establish a comprehensive quality management
system that aimed at recognizing and fulfilling
customer requirements effectively."
 Defining Quality

The entirety of attributes and qualities

inherent in a product or service, which
directly impact its capacity to fulfill
expressed or inferred customer
requirements.
American Society for Quality
 Different Views

• User-based: better performance, more

features
• Manufacturing-based: conformance to
standards, making it right the first time
• Product-based: specific and measurable
attributes of the product
 Implications of Quality

1. Company reputation
• Perception of new products
• Employment practices
• Supplier relations
2. Product liability
• Reduce risk
3. Global implications
• Improved ability to compete
 ISO 9000 International Quality
Standards
• International recognition
• Encourages quality management procedures,
detailed documentation, work instructions, and
recordkeeping
• 2009 revision emphasized sustained success
• Over one million certifications in 178 countries
• Critical for global business
 ISO 9000 International Quality
Standards
► Management principles
• Top management leadership
• Customer satisfaction
• Continual improvement
• Involvement of people
• Process analysis
• Use of data-driven decision making
• A systems approach to management
• Mutually beneficial supplier relationships
 Costs of Quality

• Prevention costs - reducing the potential for defects

• Appraisal costs - evaluating products, parts, and services
• Internal failure costs - producing defective parts or service
before delivery
• External failure costs - defects discovered after delivery
 Costs of Quality

Total Total Cost

Cost
External Failure

Internal Failure

Prevention

Appraisal
Quality Improvement
 Takumi

A Japanese character that

symbolizes a broader
dimension than quality, a
deeper process than
education, and a more
perfect method than
persistence
© 2014 Pearson Education, Inc. 6 - 17
 Ethics and Quality Management

• Operations managers must deliver healthy, safe,

quality products and services
• Poor quality risks injuries, lawsuits, recalls, and
regulation
• Ethical conduct must dictate response to
problems
• All stakeholders much be considered
 Total Quality Management (TQM)

▪ Encompasses entire organization from supplier to

customer
▪ Stresses a commitment by management to have a
continuing companywide drive toward excellence
in all aspects of products and services that are
important to the customer
▪ Fosters a culture of continuous improvement and
learning at all levels of the organization
 Deming’s Fourteen Points

TABLE 6.2 Deming’s 14 Points for Implementing Quality Improvement

1. Create consistency of purpose
2. Lead to promote change
3. Build quality into the product; stop depending on inspections to catch problems
4. Build long-term relationships based on performance instead of awarding
business on price
5. Continuously improve product, quality, and service
6. Start training
7. Emphasize leadership

© 2014 Pearson Education, Inc. 6 - 21

 Deming’s Fourteen Points

TABLE 6.2 Deming’s 14 Points for Implementing Quality Improvement

8. Drive out fear
9. Break down barriers between departments
10. Stop haranguing workers
11. Support, help, and improve
12. Remove barriers to pride in work
13. Institute a vigorous program of education and self-improvement
14. Put everyone in the company to work on the transformation
 Seven Concepts of TQM

1. Continuous improvement
2. Six Sigma
3. Employee empowerment
4. Benchmarking
5. Just-in-time (JIT)
6. Taguchi concepts
7. Knowledge of TQM tools
 1. Continuous Improvement

▪ Never-ending process of continual

improvement
▪ Covers all aspects from people, equipment,
materials, procedures
▪ Every operation can be improved
Shewhart’s PDCA Model

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

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

► Kaizen characterizes the perpetual journey

of never-ending enhancement.
► TQM and zero defects are also employed to
denote the persistent pursuit of continuous
improvement.
© 2014 Pearson Education, Inc. 6 - 27
 2. Six Sigma

▪ Two meanings
▪ Statistical definition of a process that is 99.9997%
capable, resulting in only 3.4 defects per million
opportunities (DPMO).
▪ A program designed to reduce defects, lower costs,
save time, and improve customer satisfaction
▪ A comprehensive system for achieving and sustaining
business success
 Six Sigma

Lower limits Upper limits

2,700 defects/million

3.4 defects/million

Mean

±3

Normal Distribution ±6

 Six Sigma
1. Defines the project’s purpose, scope, and outputs,
identifies the required process information keeping in
mind the customer’s definition of quality
2. Measures the process and collects data
3. Analyzes the data ensuring DMAIC Approach
repeatability and reproducibility
4. Improves by modifying or
redesigning existing
processes and procedures
5. Controls the new process
to make sure performance
levels are maintained
 Seven Concepts of TQM

1. Continuous improvement
2. Six Sigma
3. Employee empowerment
4. Benchmarking
5. Just-in-time (JIT)
6. Taguchi concepts
7. Knowledge of TQM tools

© 2014 Pearson Education, Inc. 6 - 31

 3. Employee Empowerment
▪ Getting employees involved in product and process
improvements
▪ 85% of quality problems are due
to process and material
▪ Techniques
1. Build communication networks
that include employees
2. Develop open, supportive supervisors
3. Move responsibility to employees
4. Build a high-morale organization
5. Create formal team structures
 3. Employee Empowerment

Quality Circles
▪ Group of employees who meet regularly to
solve problems
▪ Trained in planning, problem solving, and
statistical methods
▪ Often led by a facilitator
▪ Very effective when done properly
 4. Benchmarking
Selecting best practices to use as a
standard for performance
1. Determine what to benchmark
2. Form a benchmark team
3. Identify benchmarking partners
4. Collect and analyze benchmarking information
5. Take action to match or exceed the benchmark
 Reverse Engineering

Reverse Engineering using 3D Scanning

© 2014 Pearson Education, Inc. 6 - 35

Best Practices for Resolving Customer
Complaints
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
 Internal Benchmarking

▪ When the organization is large enough

▪ Data more accessible
▪ Can and should be established in a variety of
areas
 Seven Concepts of TQM

1. Continuous improvement
2. Six Sigma
3. Employee empowerment
4. Benchmarking
5. Just-in-time (JIT)
6. Taguchi concepts
7. Knowledge of TQM tools

© 2014 Pearson Education, Inc. 6 - 38

 Just-in-Time (JIT)

Relationship to quality:
► JIT cuts the cost of quality
► JIT improves quality
► Better quality means less inventory and better,
easier-to-employ JIT system
 Just-in-Time (JIT)

1. ‘Pull’ system of production scheduling including supply

management
• Production only when signaled
2. Allows reduced inventory levels
• Inventory costs money and hides process and material
problems
3. Encourages improved process and product quality
 Just-in-Time (JIT)

© 2014 Pearson Education, Inc. 6 - 41

 Seven Concepts of TQM

1. Continuous improvement
2. Six Sigma
3. Employee empowerment
4. Benchmarking
5. Just-in-time (JIT)
6. Taguchi concepts
7. Knowledge of TQM tools

© 2014 Pearson Education, Inc. 6 - 42

 Taguchi Concepts
► Engineering and experimental design methods to
improve product and process design
► Identify key component and process variables
affecting product variation
► Taguchi Concepts
► Quality robustness
► Quality loss function
► Target-oriented quality
 Quality Robustness

► Ability to produce products uniformly in

adverse manufacturing and
environmental conditions
► Remove the effects of adverse
conditions
► Small variations in materials and
process do not destroy product quality
Response Wrap-Up:
Project and Group
● Please choose any company as the project for
the entire topics of this lecture.
● Based on the company that you choose, identify
and develop one of the seven concepts of TQM
and provide a deep analysis in a one-page
paper.
Thank You