Quality Management and Capacity Planning in Operations
Quality Management
Total Quality Management (TQM)
Managing the entire organization to excel in all dimensions of products and services important to the customer, including design and consistent production.
Malcolm Baldrige National Quality Award
Helps companies review and structure their quality programs.
Types of Quality
- Design Quality: The inherent value of the product in the marketplace, a strategic decision for the firm.
- Conformance Quality: The degree to which the product or service meets design specifications.
- Quality at the Source: Achieving conformance quality.
Cost of Quality
Expenditures related to achieving product or service quality, based on three assumptions:
- Failures are caused.
- Prevention is cheaper than correction.
- Performance can be measured.
Four types of quality costs:
- Appraisal
- Prevention
- Internal failure
- External failure
Six Sigma
A quality goal of no more than 3.4 defects per million opportunities (DPMO). It uses the DMAIC cycle:
- Define: Identify the problem and goals.
- Measure: Measure the process and defects.
- Analyze: Determine the cause of defects.
- Improve: Remove the cause of defects.
- Control: Maintain improvements.
Common Six Sigma tools include flowcharts, run charts, Pareto charts, checksheets, cause-and-effect diagrams, and process control charts.
Other Quality Management Techniques
- Failure Mode and Effect Analysis (FMEA): Identifies, estimates, prioritizes, and evaluates the risk of possible failures.
- Design of Experiments (DOE): Uses multivariate testing to determine cause-and-effect relationships between process variables and outputs.
- Statistical Quality Control (SQC): Techniques to evaluate quality from a conformance perspective, including:
- Assignable Variation: Identifiable and manageable deviations in process output.
- Common Variation: Random and inherent deviations in process output.
- Upper and Lower Specification Limits: Allowable range of values for a process measure.
- Capability Index (Cpk): Ratio of the range of values produced by a process to the range allowed by design specifications.
- Statistical Process Control (SPC): Techniques for testing random samples of output to determine if the process is within a prescribed range.
Capacity Planning
Capacity Definitions
- Capacity: The amount of output a system can achieve over a specific period.
- Strategic Capacity Planning: Determining the overall capacity level of capital-intensive resources to support the firm’s long-term strategy.
- Best Operating Level: The capacity level at which average unit cost is minimized.
- Capacity Utilization Rate: How close the firm’s current output rate is to its best operating level.
Capacity Strategies
- Economies of Scale: Average cost per unit decreases as plant size and volume increase.
- Focused Factory: Facility designed for a limited set of production objectives.
- Plant Within a Plant (PWP): An area within a larger facility dedicated to a specific production objective.
- Capacity Flexibility: The ability to rapidly change production levels or shift capacity between products or services.
- Economies of Scope: Producing multiple products together at a lower cost than producing them separately.
Capacity Planning Considerations
- Maintaining System Balance
- Frequency of Capacity Additions
- External Sources of Capacity (outsourcing, sharing)
Capacity Cushion
Capacity in excess of expected demand.
Service Capacity Planning
Unique challenges due to:
- Perishability of services
- Location constraints
- Demand volatility
Service Rate
The average number of customers processed per time period at maximum capacity.
Learning Curve
The relationship between cumulative units produced and the time or cost to produce each unit.
Service Blueprinting
A flowchart emphasizing what is visible and invisible to the customer in a service process, including poka-yokes (procedures to prevent service defects).
Queuing Theory
The study of waiting lines, considering factors such as:
- Arrival rate
- Service rate
- Queue length
- Number of servers
- Queue discipline (e.g., first-come, first-served)
Product and Service Design
Key Dimensions of Product and Service Design
- Performance
- Features
- Reliability
- Conformance
- Durability
- Serviceability
- Aesthetics
- Perceived Quality