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OPERATIONS MANAGEMENTOPERATIONS MANAGEMENTfor MBAs for MBAs Fourth Edition Fourth Edition
Chapter 3: Controlling Processes 1
Meredith and Shafer
John Wiley and Sons, Inc.
Prepared by: Al AnsariSeattle University
Chapter 3Chapter 3
Controlling Processes
Chapter 3: Controlling Processes 2
IntroductionIntroduction
Chapter 3: Controlling Processes 3
Texas InstrumentsTexas Instruments
Wanted to design new Accounts Receivable using new technologies
To monitor and control their costThey identified variety of measures
to track including actual versus projected spending
Problem – the planned budget exceeded the contract funs available
Chapter 3: Controlling Processes 4
Automotive Systems GroupAutomotive Systems Group of Johnson Controls of Johnson Controls
Having trouble controlling their product development process
Each manager used a different processWorkers did not know who was
responsible for the workDevelopments were failing because of
rapid company growthNew employees were having trouble
fitting into the culture.
Chapter 3: Controlling Processes 5
Monitoring and ControlMonitoring and Control
Monitor processes, output, and environment to make sure that strategy is appropriate to achieve goals. ◦First, identify the key factors to be
controlled.◦Second, identify the relevant
information to be collected.
Chapter 3: Controlling Processes 6
Stages of Operational Stages of Operational EffectivenessEffectiveness
Internally Neutral Minimize manufacturing’s negative potential
Externally Neutral Industry practice is followed
Internally Supportive Manufacturing investment support the business strategy
Externally Supportive Manufacturing is involved up front in strategic decision
Chapter 3: Controlling Processes 7
Benefits of Balanced Benefits of Balanced ScorecardScorecard
An effective way to clarify and gain consensus of the strategy
A mechanism for communicating the strategy throughout the entire organization
A mechanism for aligning departmental and personal goals to the strategy
A way to ensure that strategic objectives are linked to annual budgets
Timely feedback related to improving the strategy
Chapter 3: Controlling Processes 8
ISO 9000ISO 9000
ISO 9000 was developed by International Organization for Standardization.
ISO 9000 was developed as a guideline for designing , manufacturing, selling, and servicing products.
It is a “checklist” of good business practices.
Chapter 3: Controlling Processes 9
ISO 9000ISO 9000
Guidelines for designing, manufacturing, selling, and servicing products.
Selecting an ISO 9000 certified supplier provides some assurance that supplier follows accepted business practices in areas covered by the standard
Chapter 3: Controlling Processes 10
Elements of ISO 9000Elements of ISO 9000
Management Responsibility Quality System Contract Review Design Control Document and Data Control Purchasing Control of Customer Supplied
Product Product Identification and
Traceability Process Control Inspection and Testing
Control of Inspection, Measuring, and Test Equipment
Inspection and Test Status Control of Nonconforming
Product Corrective and Preventive
Action Handling, Storage,
Packaging, Preservation, and Delivery
Internal Quality Audits Training Servicing Statistical Techniques
Chapter 3: Controlling Processes 11
ISO 14000ISO 14000
Series of standards covering environmental management systems, environmental auditing, evaluation of environmental performance, environmental labeling, and life-cycle assessment.
Intent is to help organizations improve their environmental performance through documentation control, operational control, control of records, training, statistical techniques, and corrective and preventive actions.
Chapter 3: Controlling Processes 12
Process ControlProcess Control
Chapter 3: Controlling Processes 13
Process ControlProcess Control
Process control is the act of reducing difference between plan and reality for each process.
Control is one of the manager’s most difficult tasks involving mechanistic and human elements.
Chapter 3: Controlling Processes 14
Process ControlProcess Control
Characteristic of a good control system:
Should be flexibleShould be cost effectiveShould be simpleMust operate in a timely mannerShould be preciseShould be fully documented
Chapter 3: Controlling Processes 15
Control Based on Attributes Control Based on Attributes and Variablesand Variables
Inspection for Variables: measuring a variable that can be scaled such as weight, length, temperature, and diameter.
Inspection of Attributes: determining the existence of a characteristic such as acceptable-defective, timely-late, and right-wrong.
Chapter 3: Controlling Processes 16
Chance Versus Assignable Chance Versus Assignable VariationVariation
Chance variation is variability built into the system.
Assignable variation occurs because some element of the system or some operating condition is out of control.
Quality control seeks to identify when assignable variation is present so that corrective action can be taken.
Chapter 3: Controlling Processes 17
Control ChartsControl Charts
Chapter 3: Controlling Processes 18
Control ChartsControl Charts
Developed in 1920s to distinguish between chance variation in a system and variation caused by the system’s being out of control - assignable variation.
Chapter 3: Controlling Processes 19
Control Charts Control Charts continuecontinue
Repetitive operation will not produce exactly the same outputs.
Pattern of variability often described by normal distribution.
Random samples that fully represent the population being checked are taken.
Sample data plotted on control charts to determine if the process is still under control.
Chapter 3: Controlling Processes 20
Chapter 3: Controlling Processes 21
Control Chart with Limits Control Chart with Limits Set at Three Standard Set at Three Standard DeviationsDeviations
Control Charts for VariablesControl Charts for Variables
Chapter 3: Controlling Processes 22
Two Control ChartsTwo Control Charts
Sample Means Chart
Range Chart
Chapter 3: Controlling Processes 23
Sample Data of Weights of Tacos Sample Data of Weights of Tacos (Ounces)(Ounces)
Sample Scenario 1 Scenario 2
1 4, 5, 6 4, 5, 6
2 6, 7, 8 3, 5, 7
3 7, 8, 9 2, 5, 8
Chapter 3: Controlling Processes 24
Analysis of Scenario 1Analysis of Scenario 1
Sample Mean Range
1 5 2
2 7 2
3 8 2
Chapter 3: Controlling Processes 25
Sample means show problem having increased from 5 ounces to 8 ounces. Sample ranges have not changed from sample to sample.
Analysis of Scenario 2Analysis of Scenario 2
Sample Mean Range
1 5 2
2 5 4
3 5 6
Chapter 3: Controlling Processes 26
Sample ranges show problem having increased from 2 ounces to 6 ounces. Sample means have not changed from sample to sample.
Chapter 3: Controlling Processes 27
Patterns of Change in Patterns of Change in Process DistributionsProcess Distributions
Control LimitsControl Limits
Chapter 3: Controlling Processes 28
Sample Means Chart:
RAXLCL
RAXUCL
2X
2X
Range Chart:
RDLCL
RDUCL
3R
4R
Constructing Control Constructing Control ChartsCharts
Chapter 3: Controlling Processes 29
N
RR
N
XX
Chapter 3: Controlling Processes 30
Mean Age of Ice Mean Age of Ice CreamCream
Chapter 3: Controlling Processes 31
Range in Ice Cream Range in Ice Cream AgeAge
Control Charts for Control Charts for AttributesAttributes
Chapter 3: Controlling Processes 32
Fraction-Defective (Fraction-Defective (pp) ) ChartsCharts
Chapter 3: Controlling Processes 33
pp
pp
p
zp
zp
n
pp
p
LCL
UCL
)1(
sampled units ofnumber total
defects ofnumber total
Number-of-Defects (Number-of-Defects (cc) ) ChartsCharts
Chapter 3: Controlling Processes 34
cc
cc
c
zc
zc
c
c
LCL
UCL
sampled units ofnumber
observed incidents ofnumber
Service DefectionsService Defections
Organizations should monitor customer defections◦feedback from defecting customers
can be used to identify problem areas
◦can determine what is needed to win them back
◦changes in defection rate can be used as early warning signal
Chapter 3: Controlling Processes 35
Chapter 3: Controlling Processes 36
CopyrightCopyright
Copyright John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that named in Section 117 of the United States Copyright Act without the express written consent of the copyright owner is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. Adopters of the textbook are granted permission to make back-up copies for their own use only, to make copies for distribution to students of the course the textbook is used in, and to modify this material to best suit their instructional needs. Under no circumstances can copies be made for resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.
Chapter 3: Controlling Processes 37
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