Chapter 4

Aggregate Planning

Do not promise what you cannot deliver

 Aggregate Planning
• Determine the resource capacity needed to meet demand over
an intermediate time horizon in 6-12 months
• Usually not feasible to increase capacity by building new
facilities or purchasing new equipment ;
• It is feasible to hire or lay off workers, increase or decrease
workweek, add extra shift, subcontract out work, use over
time, buildup or reduce inventory level.
• Aggregate refers to product lines or families
• Aggregate planning matches supply and demand
• Objectives of aggregate planning:
• Establish a companywide game plan for allocating
resources (battle b/n mkg and operations)
• Develop an economic strategy for meeting demand

04/25/2023 2
Aggregate Planning Process

Inputs and Out puts of APP

04/25/2023 3
 Meeting Demand Strategies

• Demand can be met by adjusting capacity or managing demand.

i) Adjusting capacity
• Demand forecasts are converted in to resource requirements and
resources necessary to meet demand are acquired and
maintained over the time horizon of the plan
• Minor variations in demand are handled with overtime or under-
time
• Managing demand
• Proactive demand management
• Pure strategy- involves only one capacity factor
• Mixed strategies-when combination of two or more strategies are
used.

04/25/2023 4
Strategies for Adjusting Capacity

• Level production • Overtime and under-time

• Producing at a constant rate • Increasing or decreasing
and using inventory to working hours
absorb fluctuations in • Subcontracting
demand • Let outside companies
• Chase demand complete the work
• Hiring and firing workers to • Part-time workers
match demand • Hiring part time workers to
• Peak demand complete the work
• Maintaining resources for • Backordering
high-demand levels • Providing the service or
product at a later time
period
APP evaluates alternative capacity sources to find an economic
strategy for satisfying demand.
04/25/2023 5
 Costs

• Basic production costs- Costs associated with changes in the production

rate: costs involved in hiring, training, and laying off personnel, material.
• Inventory holding costs: A major component is the cost of capital tied up in
inventory. Other components are storing, insurance, taxes, spoilage, and
obsolescence.
• Backordering costs- loss of customer goodwill, and loss of sales revenues
resulting form backordering.
• Subcontracting
Pure strategies
i) Chase demand- matches production plan and the demand pattern and
absorbs variations in demand by hiring and firing workers.
 cost of this strategy is cost of hiring and firing workers.
 does not work in industries in which worker skill is scarce or competition
for labor force is intense
 is cost effective during the period of high un employment or for low
skilled workers.
04/25/2023 6
 Chase Demand Level production
Demand
Demand

Production
Production
Units

Units
Time Time
ii)Level production-involves producing at a constant rate and using
inventory to absorb variations in demand.
 Production is fixed usually to meet average demand)
 During periods of low demand, overproduction is stored as inventory, to
be depleted in periods of high demand.
 The cost of this strategy is cost of holding inventory including cost of
perishable or obsolete items.
04/25/2023 7
iii) Maintaining resources for high demand level –ensures high level of customer
service, but may be very costly in terms of investment in extra workers and
machines that remain idle during low demand periods.
• Is used when superior customer service is important or when customers are willing
to pay extra for availability of critical staff or equipment.
iv) Overtime and under time- used when demand fluctuations are not extreme.
 A competent staff is maintained, hiring and firing costs are avoided, demand is met
without investing on permanent resources.
 Disadvantage: premium paid for overtime, tired and potentially less efficient work
force, possibility that overtime alone may be inefficient to meet peak demand
period.
v) Subcontracting or Outsourcing
 Is feasible if a supplier can reliably can meet quality and time requirement.
 Common solution for component parts when demand exceeds expectations for the
final product.
 Requires maintaining strong ties with possible subcontractors and first-hand
knowledge of their work.
 Disadvantage: reduced profit, loss of control over production, long lead times,
potential
04/25/2023
for a subcontractor turn to be competitor. 8
vi) Part-timer workers- feasible for unskilled jobs or in areas with large
temporary labor pools.
Are less costly than full timers-no health care or retirement benefit- are
more flexible –their hours vary considerably.
Problems: high turnover, accelerated training requirement, less
commitment and difficulty in scheduling.
vii) Back ordering- is viable only if the customer is willing to wait for the
product or service.
• Eg. For some restaurants, fast foods, you will be willing to wait an hour
for a table; for others you may not.
Note: One AP strategy is not always preferable to another. The most
effective strategy depends on the demand distribution, competitive
position and cost structure of a firm or product line

04/25/2023 9
Quantitative Techniques For APP
• Pure Strategies
• Mixed Strategies
• Linear Programming
• Transportation Method
• Other Quantitative Techniques

APP using Pure and Mixed strategies

Steps:
1. Formulating several strategies for meeting demand
2. Constructing production plans from those strategies
3. Determining cost and feasibility of each plan
4. Selecting the lowest cost plan from among the feasible alternatives.

04/25/2023 10
Pure Strategies
Example: QUARTER SALES FORECAST (LB)
Spring 80,000
Summer 50,000
Fall 120,000
Winter 150,000
Hiring cost = $100 per worker
Firing cost = $500 per worker
Regular production cost per pound = $2.00
Inventory carrying cost = $0.50 pound per quarter
Production per employee = 1,000 pounds per quarter
Beginning work force = 100 workers
Level Production Strategy Level production
(50,000 + 120,000 + 150,000 + 80,000)
= 100,000 pounds
4
SALES PRODUCTION
QUARTER FORECAST PLAN INVENTORY
Spring 80,000 100,000 20,000
Summer 50,000 100,000 70,000
Fall 120,000 100,000 50,000
Winter 150,000 100,000 0
400,000 140,000
Cost of Level Production Strategy (400,000 X $2.00) + (140,00 X $.50) = $870,000
04/25/2023 11
Chase Demand Strategy
SALES PRODUCTION WORKERS WORKERS WORKERS
QUARTER FORECAST PLAN NEEDED HIRED FIRED
Spring 80,000 80,000 80 0 20
Summer 50,000 50,000 50 0 30

Fall 120,000 120,000 120 70 0

Winter 150,000 150,000 150 30 0
100 50
Cost of Chase Demand Strategy (400,000 X $2.00) + (100 x $100) + (50
x $500) = $835,000

04/25/2023 12
 Scheduling?
What is Scheduling?
• Last stage of planning before production occurs
• Specifies when labor, equipment, and facilities are needed to produce a
product or provide a service.
Scheduled Operations
• Process Industry
• Linear programming
• EOQ with non-instantaneous replenishment
• Mass Production
• Assembly line balancing
• Project
• Project -scheduling techniques (PERT, CPM)
• Batch Production
• Aggregate planning
• Master scheduling
• Material requirements planning (MRP)/Capacity requirements planning
(CRP)
04/25/2023 13
Objectives in Scheduling

• Meet customer due dates, Minimize (job lateness, response time,

completion time, time in the system, overtime, idle time & work-
in-process inventory), Maximize machine or labor utilization
Shop Floor Control (SFC)
• Schedule and monitor day-to-day job shop production
• Also called production control and production activity control
(PAC)
• Performed by production control department
• Loading - check availability of material, machines, and labor
• Sequencing - release work orders to shop and issue dispatch
lists for individual machines
• Monitoring - maintain progress reports on each job until it is
complete
04/25/2023 14
 Sequencing

• Prioritize jobs assigned to a resource

• If no order specified use first-come first-served (FCFS)
• Other Sequencing Rules FCFS - first-come, first-served
LCFS - last come, first served
DDATE - earliest due date
CUSTPR - highest customer priority
SETUP - similar required setups
SLACK - smallest slack
CR - smallest critical ratio
SPT - shortest processing time
LPT - longest processing time

Minimum Slack & Smallest Critical Ratio

SLACK considers both work and time remaining
SLACK = (due date – today’s date) – (processing time)
CR recalculates sequence as processing continues and arranges information in ratio form
CR = time remaining= due date - today’s date
work remaining remaining processing time
If CR > 1, job ahead of schedule
If CR < 1, job behind schedule
If CR = 1, job on schedule

04/25/2023 15
 Sequencing Jobs Through One Process
• Flow time (completion time)
• Time for a job to flow through system
• Makespan
• Time for a group of jobs to be completed
• Lateness
• Difference between a late job’s due date and its PROCESSING DUE DATE
JOB TIME (days) (date hence)
completion time
Simple Sequencing Rules A
B
5
10
10
15
C 2 5
Simple Sequencing Rules: FCFS D 8 12
E 6 8
FCFS START PROCESSING COMPLETION DUE
SEQUENCE TIME TIME TIME DATE LATENESS
A 0 5 5 10 0
B 5 10 15 15 0
C 15 2 17 5 12
D 17 8 25 12 13
E 25 6 31 8 23
Total flow time 93 48
Average flow time 93/5 = 18.60 Average lateness 48/5 = 9.6
04/25/2023 16
 Simple Sequencing Rules: DDATE
DDATE START PROCESSING COMPLETION DUE
SEQUENCE TIME TIME TIME DATE LATENESS
C 0 2 2 5 0
E 2 6 8 8 0
A 8 5 13 10 3
D 13 8 21 12 9
B 21 10 31 15 16
Total 75 28
Average75/5 = 15.00 28/5 = 5.6

Simple Sequencing Rules: SLACK

A(10-0) – 5 = 5
B(15-0) – 10 = 5
SLACK START PROCESSING COMPLETION DUE
C(5-0) – 2 = 3 SEQUENCE TIME TIME TIME DATE LATENESS
D(12-0) – 8 = 4 E 0 6 6 8 0
E(8-0) – 6 = 2 C 6 2 8 5 3
D 8 8 16 12 4
A 16 5 21 10 11
B 21 10 31 15 16
Total 82 34
Average82/5 = 16.40 34/5 = 6.8

04/25/2023 17
Simple Sequencing Rules: SPT
SPT START PROCESSING COMPLETION DUE
SEQUENCE TIME TIME TIME DATE LATENESS
C 0 2 2 5 0
A 2 5 7 10 0
E 7 6 13 8 5
D 13 8 21 12 9
B 21 10 31 15 16
TFT 74 30
AFT 74/5 = 14.80 AL 30/5 = 6

Simple Sequencing Rules: Summary

TOTAL AVERAGE AVERAGE NO. OF MAXIMUM
RULE COMPLETION TIME COMPLETION TIME LATENESS JOBS LATE LATENESS
FCFS 93 18.60 9.6 3 23
DDATE 75 15.00 5.6 3 16
SLACK 82 16.40 6.8 4 16 16
SPT 74 6.0 3 16
14.80

04/25/2023 18
 Monitoring

• Work package
• Shop paperwork that travels with a job
• Gantt Chart
• Shows both planned and completed activities against a time scale
• Input/Output Control
• Monitors the input and output from each work center
Gantt Chart

Job 32B
3 Behind schedule

Job 23C
Facility

2 Ahead of schedule

Job 11C Job 12A

1 On schedule

1 2 3 4 5 6 8 9 10 11 12 Days
Today’s Date
Key: Planned activity
Completed activity
04/25/2023 19
Input/Output Control
PERIOD 1 2 3 4 TOTAL
Planned input 65 65 70 70 270
Actual input 0
Deviation 0
Planned output 75 75 75 75 300
Actual output 0
Deviation 0
Backlog 30
20 10 5 0

PERIOD 1 2 3 4 TOTAL
Planned input 65 65 70 70 270
Actual input 60 60 65 65 250
Deviation 5 5 5 5 20
Planned output 75 75 75 75 300
Actual output 75 75 65 65 280
Deviation 0 0 -10 -10 -20
Backlog 30 15 0 0 0 17-20

04/25/2023
 Quiz 3
JOB EPROCESSING TIME (days) DUE DATE (date hence)
A 2 4
B 4 8
C 3 6
D 5 10
E 6 12
F 7 11
G 9 13
H 10 15

Sequence the above listed tasks using the following “sequencing rules” and compare
them one another. N.B. also calculate TCT, ACT, TLT and ALT so that it will help you
to compare the rules.
1. FCFS - first-come, first-served
2. LCFS - last come, first served
3. DDATE - earliest due date
4. SLACK - smallest slack
5. CR - smallest critical ratio assuming today is the 1 day at work
6. SPT - shortest processing time
04/25/2023 21
 Chapter Five

Quality Management
04/25/2023 22
 Meaning of Quality
• “ Quality is in the eye of the beholder”
• Webster’s Dictionary- degree of excellence of a thing
• American Society for Quality- The totality of features and characteristics of a product or
service that bears on its ability to satisfy stated or implied needs
• Consumer’s and Producer’s Perspective
Meaning of Quality: Consumer’s Perspective
• Fitness for intended use- how well product or service does what it is
supposed to.
• Quality of design- designing quality characteristics into a product or
service to meet d/t needs of consumers for what he is willing to pay.
Meaning of Quality: Producer’s Perspective
Quality of Conformance
• Making sure a product or service is produced according to design
(conformance to standards, making it right the first time)
• Product or service design results in design specifications that should
achieve the desired quality.
04/25/2023 23
• E.g.. A Mercedes and a Ford are equally “fit for use,” but with different
design dimensions.
• Therefore, it is about better performance, more features

3-24
 • Producer perceives quality to be how effectively the production process
is able to conform to the specifications required by the design.
if new tires do not conform to specifications, they wobble.
if a hotel room is not clean when a guest checks in, the hotel is not
functioning according to specifications of its design.
Achieving quality of conformance depends on a number of
factors:
Design of the production process ( distinct from product design)
Performance level of machinery, equipment and technology, materials
used, training and supervision of employees, and the degree to which SQC
techniques is used.
Product based view
• Product based, which views quality as a precise and measurable variable.
• In this view, for example, really good ice cream has high butterfat levels;
Good edible oil is colorless, odorless.
04/25/2023 25
 Meaning of Quality: A Final Perspective
• Consumer’s and producer’s perspectives depend on each other :
• Consumer’s perspective: PRICE
• Producer’s perspective: COST
• Consumer’s view must dominate, b/s it is consumer who makes the final judgment
regarding quality.

Meaning of Quality

Producer’s Perspective Consumer’s Perspective

Quality of Conformance Quality of Design

• Conformance to • Quality
Production specifications Marketing
characteristics
• Cost • Price

Fitness for
Consumer Use
04/25/2023 26
Note: The three perspectives are not independent
• The characteristics that connote quality must first be identified through
research (a user-based approach to quality).
• These characteristics are then translated into specific product attributes (a
product-based approach to quality).
• Then, the manufacturing process is organized to ensure that products are
made precisely to specifications (a manufacturing-based approach to
quality).
• A process that ignores anyone of these steps will not result in a quality
product.
Implications of Quality
1. Company reputation –affects :
 Perception of new products
 Employment practices
 Supplier relations
• Self-promotion is not substitute for quality products.
04/25/2023 27
2. Product liability- Quality reduce risk
• Impure foods that cause illness, nightgowns that burn, tires
that fall apart, or auto fuel tanks that explode on all lead to
huge legal expenses, large settlements or losses, and
terrible publicity.
3. Global implications - Improved ability to compete
• Quality is an international, as well as OM, concern
• For both a company and a country to compete effectively in
the global economy, products must meet global quality,
design, and price expectations.
• Inferior products harm a firm's profitability and a nation's
balance of payments. Remember the case of Ethiopian
coffee export case before four/five years
04/25/2023 28
 Dimensions of Quality: Manufactured Products
Dimensions of quality primarily for manufactured products a consumer looks for
in a product include:
1. Performance: basic operating characteristics of a product; how well a car is
handled or its gas mileage
2. Features: “extra” items added to basic features, such as a stereo CD or a
leather interior in a car
3. Reliability: probability that a product will operate properly within an
expected time frame; that is, a TV will work without repair for about seven
years.
4. Conformance: degree to which a product meets pre–established standards.
5. Durability: how long product lasts before replacement.
6. Serviceability: ease of getting repairs, speed of repairs, courtesy and
competence of repair person.
7. Aesthetics: how a product looks, feels, sounds, smells, or tastes.
8. Safety: assurance that customer will not suffer injury or harm from a
product; an especially important consideration for automobiles
9. Perceptions: subjective perceptions based on brand name, advertising, and
the like
 These cxs are weighed by customers relative to price of product.
04/25/2023 29
 Dimensions of Quality: Service
Service quality is more directly related to time and the interaction b/n employees
and customers. Dimensions by Evans and Lindsay:
1. Time and Timeliness: How long must a customer wait for service, and is it
completed on time? Does an overnight package delivered overnight?
2. Completeness: Is everything customer asked for provided? Is a mail order
from a catalogue company complete when delivered?
3. Courtesy: How are customers treated by employees? Are catalogue phone
operators nice and are their voices pleasant?
4. Consistency: Is the same level of service provided to each customer each
time? Is your newspaper delivered on time every morning?
5. Accessibility and convenience: How easy is it to obtain service? Does a
service representative answer your calls quickly?
6. Accuracy: Is the service performed right every time? Is your bank or credit
card statement correct every month?
7. Responsiveness: How well does the company react to unusual situations?
How well is a telephone operator able to respond to a customer’s questions?
04/25/2023 30
 Total Quality Management (TQM)
• A philosophy that involves everyone in an organization in a
continual effort to improve quality and achieve customer
satisfaction.
• Encompasses on entire organization, from supplier to customer
to improve quality.
• Stresses a commitment by management to have a continuing,
company-wide drive toward excellence in all aspects of products
and services that are important to the customer
 Quality is the focal point of all organizational function
 Emphasizes quality is strategic issue.
 The org must decide what customers wants in terms of quality
and then use strategic planning encompassing all functional
areas to achieve goals of quality.
 For this perspective, quality is the most important company
issue.
04/25/2023 31
 Shift… from TQM into Continuous Improvement
• Nowadays the term continuous process improvement has been used to
identify from TQM.
• It embodies the same principles as TQM except reflects a trend of
focusing management attention on business process than functions.
• Considers all the tasks and activities in the business are part of a process
or a group of interacting processes that are done over and over; a business
is not just a group of separate function.
Principles of TQM
 Involves a set of mgt principles that focus on quality improvements as a
driving force in all functional areas and all levels in a company.
 Customer-oriented – customer defines quality and customer satisfaction
is top priority.
 Leadership – top mgt must provide leadership for quality.
 Strategic planning- quality is strategic issue and requires strategic plan.
 Employee responsibility- quality is the responsibility of all employees at all
levels.
04/25/2023 32
Continuous improvement- all functions must focus on continuous
improvement to achieve strategic goal.
Cooperation – quality problems are solved by cooperation b/n mgt and
employees.
Statistical methods- problem solving and continuous quality improvement
use SQC methods.
Training and education – T&E is basis for continuous quality improvement.
The TQM Approach of continuous improvement
1. Find out what the customer wants
2. Design a product or service that meets or exceeds customer wants
3. Design processes that facilitates doing the job right the first time (Poka
yoke) - error proofing or safe system.
4. Keep track of results and always go for kaizen- continuous improvement,
i.e. no end for improvement; Shwart’s /Deming model is applicable.
5. Ensure the commitment of management
6. Build teams of employees who are motivated, trained and willing.
7. Extend these concepts to suppliers
04/25/2023 33
The three approaches to wards continuous improvement
I. Deming Wheel: PDCA Cycle Deming is also credited for development of Deming
Wheel ( plan- Do- check -act)
1. Plan- a process or situation is studied, identifying problems and planning
how to solve them.
-Customer expectations is determined and goals to measure quality
improvement are established.
2. Do. Plan is implemented in a test basis, improvement is measured and
results documented.
3. Study –originally called check. It is called as study to reflect a more thorough
analysis of the plan than a simple check.
-Plan is assessed to see if it is achieving goals established in earlier stages and
see if any new problem is developed.
4. Act. Plan is implemented and quality improvement (QI) is made part of the
normal operation.
The process then returns to stage 1 to start the cycle over again to identify new
quality problems and develop plans to solve them- the continuous
improvement of a committed quality mgmt. program.
04/25/2023 34
 Deming Wheel: PDCA Cycle

4. Act 1. Plan
Institutionalize Study process.
improvement; identify problem,
continue the cycle set goals and
with new develop the plan
problems at stage for improvement.
1.

3. Study/Check 2. Do
Assess plan; is it Implement the
working? Goals plan on a test
achieved? basis, measure
improvement

04/25/2023 35
 II. Quality Circle
A)Quality circle- a small voluntary group of workers and supervisors from
the same area who address production problems.
Trained in planning, problem solving, and statistical methods.
 Brainstorming is used to generate ideas and evaluated later.
B) Process/Quality improvement team- includes members from the
interrelated functions or departments that make up a process.
 Focuses on cross- functional or business process than separate company
functions.
• Essential conditions for success of quality at circle:
Well educated workforce( competent, motivated)
Employees are willing to exchange views
Employees see themselves as working for the good of the organization
Management who are willing to share information about operations
Senior management who implement the suggested improvements.
QC is very effective when done properly
04/25/2023 36
 Quality Circle
Organization
8-10 members
Same area
Supervisor/moderator

Training
Presentation Group processes
Implementation Data collection
Monitoring Problem analysis

Problem
Solution Identification
Problem results List alternatives
Consensus
Problem Analysis Brainstorming
Cause and effect
Data collection and
analysis

04/25/2023 37
 III. Benchmarking
• Selecting best practices to use as a standard for performance
 Determine what to benchmark r n al
inte king
 Form a benchmark team Use chmar g
b en ’re bi
 Identify benchmarking partners u
if yo ugh
 Collect and analyze benchmarking information eno
 Take action to match or exceed the benchmark

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 the first contact. • It reduces cost
• Use computers to manage complaints. • Discover trends, share them, and align
• Recruit the best for customer service your services.
jobs. • It should be part of formal training
04/25/2023
and career advancement 38
 TQM Tools- Seven Quality Control Tools
 used to identify quality problems and causes.
• Are also called: Magnificent seven, Seven QC tools Seven process
improvement tools.
• Pareto Analysis, Flow Chart, Check Sheet, Histogram, Scatter Diagram,
SPC Chart & Cause-and-Effect Diagram
1. Check Sheet COMPONENTS REPLACED BY LAB
TIME PERIOD: 22 Feb to 27 Feb 2002
A list of causes of quality problems REPAIR TECHNICIAN: Bob
with the number of defects resulting
from each cause; used to develop TV SET MODEL 1013
histograms and Pareto diagrams up
Integrated Circuits | |
on completion of tallying. Capacitors || || || || || |
Frequently used in conjunction with Resistors |
histograms and Pareto diagrams. Transformers ||
Fact finding tool. Commands
CRT |
04/25/2023 39
 2. Pareto Analysis
• Most quality problems & cost result from a fewer causes.
• Applied by tallying the no of defects for each possible cause of poor
quality and developing frequency disn from the data.
• The frequency distribution is called Pareto diagram
NUMBER OF
CAUSE DEFECTS PERCENTAGE
Poor design 80 64 %
Wrong part dimensions 16 13

Defective parts 12 10
Incorrect machine calibration 7 6
Operator errors 4 3
Defective material 3 2
Surface abrasions 3 2
125 100 %

04/25/2023 40
Pareto Chart 3. Histogram
70
(64)
A diagram showing the frequency
of data related to a quality problem
60
Percent from each cause

50
20
40

30 15

20
(13)
(10)
10 (6) 10
(3) (2) (2)
0
rr n s

ls
gn

pa s

s
r ts

s
r e io
iv o n

or

ab ria
on
si

5
to at
ct si

ce ate

si
De

r a ib r
fe en

ra
e

m
pe l
or

O ca
De dim

Su ive
Po

ne
ng

ct
hi

rfa
fe
ro

ac

De

0
W

Causes of poor quality 1 2 6 13 10 16 19 17 12 16 2017 13 5 6 2 1

04/25/2023 41
 4. Flow Chart
• Is a diagram of the steps in a job, operation or process.
• Help to identify quality problems by helping the problem solver better
understand the process.
• Helps focus on where in a process a quality problem might exist.

Start/
Finish Operation Operation Decision Operation

Operation Operation

Decision Start/
Finish

04/25/2023 42
 5. Scatter Diagram
• A graph showing how process variables relate to each other. Identifies a
pattern that may cause quality problems.

04/25/2023 43
 6. Statistical Process Control(SPC) Chart
• A chart with statistical upper and lower limits; if the process stays within these
limits over time, it is in control and problem does not exist.
 Uses statistics and control charts to tell when to take
corrective action
 Drives process improvement
 Four key steps
 Measure the process
 When a change is indicated, find the assignable cause
 Eliminate or incorporate the cause
 Restart the revised process

04/25/2023 44
 An SPC Chart

Plots the percent of absenteeism

20% Upper control limit

10%
Coach’s target value

0%
| | | | | | | | |
Lower control limit
1 2 3 4 5 6 7 8 9

Classes attended

04/25/2023 45
 7. Cause- and- Effect Diagram
• Also called fishbone diagram; a graph of the cause of quality problem
divided in to categories.
• Is developed as part of participative problem solving, which is common in
quality circles.
Measurement Human Machines
Faulty
testing equipment Poor supervision Out of adjustment

Incorrect specifications Lack of concentration Tooling problems

Improper methods Inadequate training Old / worn

Quality
Inaccurate Problem
temperature
control Defective from vendor Poor process design
Ineffective quality
Not to specifications management
Dust and Dirt Material- Deficiencies
handling problems in product design

Environment Materials Process

04/25/2023 46
 TQM in service companies
• Svs sector is increasing in its volume and employment.
• Customers directly interact with production process consuming while the
service is being produced.
• Svs tend to be customized provided at the convenience of the customer
• Are labor intensive, thus human contacts and its ramifications are an
important part of the process of producing svs.
Manufactured products Services
• Are physical items-observed, held, • Svs can’t be held, felt, stored and
felt, stored and used again. used again.
• If defect exists, it can be felt or • Dimension- timeliness, courtesy,
seen and counted or measured. consistency, accuracy, convenience,
• Dimensions- performance, responsiveness and completeness-
features, reliability, conformance all hard to measure beyond a
and durability w/c can be subjective assessment by customer.
quantitatively measured.

04/25/2023 47
 Regardless of these differences, principles of TQM apply equally well to service and
mfg.
 Quality service -how well the svs does what the customer thinks it is supposed to do-
same as fitness for use in mfg.
 Quality mgt in svs must focus on employee performance related to intangible, difficult-
to-measure quality dimensions; i.e. how quickly, correctly and pleasantly employees are
able to provide services.
In Service Quality The Operations Manager must recognize:
1. The tangible component of services is important
2. The service process is important
3. The service is judged against the customer’s expectations
4. Exceptions will occur
Service Recovery Strategy:
Managers should have a plan for when services fail
 Marriott’s LEARN routine
 Listen
 Empathize
 Apologize
 React
 Notify
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Cont’d… Service Specifications at UPS

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 Quality Certification
• ISO 9000: Set of international standards on quality management and quality
assurance, critical to international business
• ISO 14000: A set of international standards for assessing a company’s
environmental performance
ISO 9000: A set of procedures and policies for international quality
certification of suppliers
• Standards: ISO 9000:2000
• Quality Management Systems—Fundamentals and Vocabulary
• defines fundamental terms and definitions used in ISO 9000 family
• ISO 9001:2000
• Quality Management Systems—Requirements
• standard to assess ability to achieve customer satisfaction
• ISO 9004:2000
• Quality Management Systems—Guidelines for Performance Improvements
• guidance to a company for continual improvement of its quality-
management system

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 Implications of ISO 9000 for Companies
• Many overseas companies will not do business with a supplier unless it has ISO
9000 certification
• ISO 9000 accreditation or ISO registrars
• A total commitment to quality is required throughout an organization
ISO 14000 Environmental Standard
ISO 14000 - A set of international standards for assessing a company’s
environmental performance
• Standards in three major areas: Management systems, Operations,
Environmental systems
• Management systems
• Systems development and integration of environmental responsibilities
into business planning
• Operations
• Consumption of natural resources and energy
• Environmental systems
• Measuring, assessing and managing emissions, effluents, and other waste
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