OPERATIONS MANAGEMENT for MBAs Fourth Edition Chapter 3: Controlling Processes1 Meredith and Shafer John Wiley and Sons, Inc. Prepared by: Al Ansari Seattle

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


IntroductionIntroduction


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


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.


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.


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


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


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.


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


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


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.


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.



Characteristic of a good control system:

Should be flexibleShould be cost effectiveShould be simpleMust operate in a timely mannerShould be preciseShould be fully documented


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.


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.


Control ChartsControl Charts


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.


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.



Control Chart with Limits Control Chart with Limits Set at Three Standard Set at Three Standard DeviationsDeviations

Control Charts for VariablesControl Charts for Variables


Two Control ChartsTwo Control Charts

Sample Means Chart

Range Chart


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


Analysis of Scenario 1Analysis of Scenario 1

Sample Mean Range

1 5 2

2 7 2

3 8 2


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


Sample ranges show problem having increased from 2 ounces to 6 ounces. Sample means have not changed from sample to sample.


Patterns of Change in Patterns of Change in Process DistributionsProcess Distributions

Control LimitsControl Limits


Sample Means Chart:

RAXLCL

RAXUCL

2X

2X

Range Chart:

RDLCL

RDUCL

3R

4R

Constructing Control Constructing Control ChartsCharts


N

RR

N

XX


Mean Age of Ice Mean Age of Ice CreamCream


Range in Ice Cream Range in Ice Cream AgeAge

Control Charts for Control Charts for AttributesAttributes


Fraction-Defective (Fraction-Defective (pp) ) ChartsCharts


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


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



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OPERATIONS MANAGEMENT for MBAs Fourth Edition Chapter 3: Controlling Processes1 Meredith and Shafer John Wiley and Sons, Inc. Prepared by: Al Ansari Seattle