Ch.1- Intro. To Operations Management 9/27/2011 11:52:00 AM
Operations management- is the management of processes and the systems
that create goods and or services.
A system is a set of interrelated parts that must work together. A
process is a series of linked actions, changes, and functions
bringing about a result.
3 types of processes: core, support, and managerial.
o Core/operational—directly create the good
o Support—supports core
o Managerial—govern the system
EXAMPLE- airline company
core processes include reservations, boarding and flying the planes,
handling the luggage, and performing maintenance.
Support processes include forecasting, scheduling, managing
inventory, and buying materials.
Managerial processes include capacity planning, locating facilities
and employee motivation.
Many companies use operations management strategies, tactics, and actions
in order to improve their efficiency and effectiveness.
Functions within an organization
A typical organization has 3 basic functions: operations, finance, and
marketing—all work together. Ie. For instance, unless operations and
marketing work together, marketing may promote goods or services that
operations cannot profitably deliver.
(FIGURE 1-1 p.5)
-all activities directly related to producing goods or services. Exists in
fabrication and assembly. -inputs are used to obtain finished good or services using one or more
transformation/ conversion process9 storing, transporting…) At various
stages feedback is compared as control.
Ie. inputs= raw vegetables, water, metal..
Process=cleaning, making cans
-good and services often occur jointly. Ie. House painting is a service, but
the paint is a good.
-essence of the operations function is to add value during the cost of inputs
and the value of the output.
Non-profit organizations, value of output= their value to society
For-profit, value of outputs is meatued by the prices that customers
are willing to pay.
-one way businesses can be more productive- examine if operations add
value- value added approach. Those that do not ad value are wasteful-
eliminating these adds value. Ie. Producing something too soon means
storage costs= wasteful.
-performs activities related to securing resources at favorable prices and
allocating those resources throughout the organization.
-cooperated with operations management by exchanging information in:
provision of funds
economic analysis of investment proposals (evaluation of
alternative investments in plant and equipment requires inputs from
both operations and finance people)
-responsible for assessing customer wants and needs, and communicating
those needs and feedback to operations people and product design people. - one important piece of information marketing needs from operations is the
manufacturing or service lead time in order to give customers realistic
estimates of how long it will take to fill their orders.
Lead time= time between ordering a good or service and receiving
-Accounting-supplies info to mgmt—costs of labor, materials and overhead.
-Management information systems(MIS)-provides management with info it
needs to effectively manage.
-Purchasing- needs close contact with operations to ensure correct quantities
and timing of purchase.
-HR-motivating and hiring employees.
-manufacturing engineering- responsible for design or purchase of
-Maintenance- of equ and bldg.
-Logistics- transportation of raw materials to plant, storage and transport to
warehouse, and customers.
THE SCOPE OF OPERATIONS MANAGEMENT
-design decisions are strategic usually long term: 1-5 years ahead
-planning decisions are tactical and medium term: 1-12 months ahead
-scheduling execution and control decisions are short term: 1-12 weeks
-system design- involves decisions that relate to product and service design,
system capacity and placement of equipment…
-operational activities- management of personnel, scheduling, project
PRODUCTS vs. SERVICES
Productions of goods ex. Manufacturing, construction, agriculture,
forestry, fishing, mining. Biggest is manufacturing –includes food,
clothes, furniture… Services—ie. Government, wholesales. Retail, finance and
- are similar in terms of what is done but differ in terms of how it is done.
-both make decisions on location, scheduling and control of operations and
allocating scarce resources.
1. customer contact-
o services involve a higher degree of customer contact. The
performance of a service often occurs at point of
2. Uniformity of input-service is subject to greater variability of
inputs—each auto repair presents a specific problem that must be
diagnosed before it can be remedied.
3. labor content in jobs
o services=higher labor content. Goods= more capital intensive
4. measurement of productivity
5. uniformity of output
o ie. One doctor has a large # of routine cases, while other do
not so their productivity appears to differ.
6. quality assurance
o easier in goods production, errors can be corrected before the
customer receives the output.. not true in service firm.
-most real systems are a blend of both producing goods and providing
services. Ie. Movie theatre selling popcorn.
-service sector is growing and accounts for 75% of jobs in Canada.
THE OPERATIONS MANAGER‘S JOB
-has ultimate responsibility for the creation of goods or services
-must coordinate the use of resources through the management activities of
planning, organizing, directing, and controlling.
From diagram 1-6 can see that operations managers don‘t like their long
hours, working conditions but like the compensation, and work variety… OPERATIONS MANAGERS AND DECISION MAKING
-models-simplified version of reality
-qualitative approaches- attempt to obtain optimum solutions to the
mathematical models o managerial problems. Often done with equations.
- analysis of trade-offs- ie. In scheduling overtime to increase output,
manager weighs increased output to higher costs.
-systems approach- a set of interrelated parts that must work together.
Emphasizes interrelationships between theses parts. Therefore, from a
systems viewpoint, the output and objectives of the organization as a whole
takes precedence over those of any one part. Essential when something is
being designed. Ie. When deciding whether to put in anti-lock brakes
designer must think about how customers will like it, instruction book, cost,
chances of misuse..
Establishing Priorities- Pareto phenomenon-a few factors account for a
high percentage of results achieved. Known as the 80/20 rule- meaning 20%
of factors will impact 80% of results. Managers should examine each
situation, searching for the few factors that will have the greatest impact,
and give them the highest priority.
Ethics- worker safety, product safety, environment, and closing facilities.
The Historical evolution of operations management
-In early days goods were produced using craft production- system
in which highly skilled workers use simple, flexible tools to produce
small quantities of customized goods. No economies of scale.
-The industrial revolution- division of labor and interchangeable
parts-did not need to be custom fitted.
-Scientific management- emphasized the technical aspects of work
mass production- system in which lower-skilled workers use
specialized machinery to produce high volumes of standardized
The Human relations movement- emphasized the importance of the
human element in job design—ie .motivation
The influence of Japanese manufacturers- introduced total quality
management- emphasized quality and continual improvement,
worker teams and empowerment, and achieving customer satisfaction. Lean production- system that uses minimal amounts of
resources to produce a high-volume of high-quality goods with
some variety. The skilled workers in this system are more involved
in maintaining and improving the system than in mass production.
They are taught to stop production if they see defects, therefore it
will not occur again. They must be able to function in teams.
Responsibility is greater.
Look at table 1-5 p. 19 for summary of craft production, mass production and lean production.
READ SUMMARY Pg. 21 & do review ch. questions Ch.2- Competitiveness, strategic planning, and
productivity 9/27/2011 11:52:00 AM
-Using teamwork and rewards, an organization can develop its
-an organization‘s performance in the marketplace depends on the
expectation of its customers for purchase of goods or services, mainly
PRICE, VARIETY, and TIMELINESS- these are key purchasing criteria. Other
criteria include customer service and convenient location.
-In complex purchases, customers may use two categories of purchasing
criteria: order qualifiers and order winners.
Order qualifiers- are those purchasing criteria that customers perceive as
minimum standards of acceptability for purchases. However, these may not
be sufficient to get a customer to purchase from the organization.
Order winners- are those purchasing criteria that cause the organization to
be perceived as better than the competition.
Purchasing criteria such as price, on-time delivery, quality.. etc can
be order q or order winners. Quality consistency and on-time
delivery are order qualifiers for most customers.
Competitive priorities from a organizations p.o.v are- cost, quality,
flexibility(bin able to produce a variety of goods and services), and
delivery(meeting promised dates)
-if an organization wants to be more competitive it can improve many or all
of its competitive priorities simultaneously. However, as it becomes more
competitive, it reaches a point where one priority can be achieved only by
reducing the emphasis of another priority.
-is a long-term plan that sets new direction for an organization. Some
companies only implement new plans when they are facing crisis‘s but most
do it annually.
-It stats with top management evaluating current performance and doing a
market study of the industry to see where it will be in the next 1-5 years. Then they change the organizations vision/mission.
It does analysis- SWOT
MISSION, VISION, AND VALUES
-mission- where the organization is going now
-vision- where the organization desires to be in the future
-values- shared beliefs of the organization‘s stakeholders(customers,
companies have long-term functional strategies ie. Financial , marketing and
Tactics- are medium-term plans sometimes used as components of a
strategy. The are more specific in nature than a strategy, and they may
provide guidance and direction for determining policies and carry out action
plans- a medium or short-term project to accomplish a specific objective,
with a deadline and the resources needed.
LOOK AT figure 2-1 pg. 33 for hierarchy ---mission, goals, organizational
- Deals with guiding the operations function of the organization, but should
answer organizational goals.
-comprises a set of well-coordinated policies, objectives, and action plans,
directly affecting the operations function.
-operations functions has to cooperate with all other functions of the
business and monitor external markets. Ie. Mkt should be aware of
competitors new products.
-usually operations policies, objectives and action plans are classified as
follows: (READ ABOUT THEM ON P.36)
3. vertical integration
4. vendor relations
5. product ix and new products 5. process types and technology
8. Operations infrastructure ad systems.
READ TOP OF Pg.37
Generic Operations Strategies
-are theme-based operation improvement programs ie. J-I-T delivery and
total quality management/ continuous improvement.
-generic bc they have are frequently used irrespective to market condition.
Some popular generic operations strategies: (used in Japan in the past)
Low labor cost strategy
Scale-based strategy—capital-intensive methods to achieve higher
labor productivity and lower unit costs.
Flexible factories strategy—reduced the time needed to add new
product and process designs. Used flexible equipment tht allowed
volume and design changes.
Continuous improvement strategy—improved products and
-recent popular generic operations strategies:
Time based competition—focuses on reducing the time required to
accomplish various activities(ie. Develop new products and market
them, respond to changes in customer demand). Gives competitive
advantage. Costs are less, and productivity and quality are higher.
Outsourcing—reduces costs and gain flexibility and take advantage
of suppliers expertise.
A measure of productive use of resources, usually expressed as the ratio of
output to input. (output=goods. Services, input=machine, labor, materials,
(Current period productivity-Previous prev.p)/pervious period productivity MEASURING PRODUCTIVITY
-productivity measures can be based on a single input-partial productivity
more than one input- multifactor productivity
on all inputs- total productivity
ie. of partial
labor productivity—ie. Units of output per labor hr, units of output
Material productivity-units of output per unit material input
-don‘t confuse productivity and efficiency
efficiency is getting the most out of a fixed set of resources
productivity is getting better use of overall resources.
o Total productivity and profit are directly related. Productivity
is rev/cost, profit=rev-costs
-productivity measurements serve as scorecards of the efficient use of
resources. Competitiveness- if 2 companies both have same output, but one
needs less input bc of higher productivity, that one will be able to charge a
lower price and therefore increase market share.
-productivity of services—is harder to determine bc output is partially
intangible. Ie . legal advice…
factors affecting productivity
-machinery, workers, management, technological improvements.
READ CH.REVIEW and do all questions 9/27/2011 11:52:00 AM Chapter 4: Product Design 9/27/2011 11:52:00 AM
product design- determines form and function
in most cases, products are redesigned to invigorate their demand
and to take advantage of new technology.
Has 4 elements:
1. product approval committee
consists of top management. Responsible for authorizing new
products and allocate resources.
2. core teams
cross-functional teams that plan from idea to commercialization.
Resolve conflicts, make trade-off decisions, and directing other
support to staff. Every function in the design/development team
should be represented in the core team. Should not be large- ie. 8
3. phase reviews- are milestones during a new product.
Process of he core team is reviewed by the product approval
committee. The decision will be to approve, cancel, or redirect the
Phase reviews recognize problems earlier- saving costs… ie.
Changing a sketch is easier than changing a prototype, and
changing a prototype is easier than changing the first unit of
production—called the escalator effect.
4. structural development process-the use of project management
techniques. It involves breaking each phase/stage into steps and each into
activities, determining their relationships, scheduling, and execution.
steps are planned and managed by the core team.
The usual phases are:
o Idea generation and preliminary assessment.
o Building a business case- what do customers want. Assess the
products feasibility, establish its goals and objectives. o Develop the product and process- translate the voice of the
customer into an actual product.
Usually consists of product manager, product designers, manufacturing
representatives. The team expends during each phase of deign with mkt
reps, accountants, engineers, quality control, and purchasing and supplier
This team-based approach of simultaneously designing the product and
process is called concurrent engineering. The new product design/
development process is a stage gate model.
Scoping- preliminary market, financial , and technical assessment
Building business case- determining customer requirements, competitive
Development-future developing the product concepts, making prototypes
Testing and validating-testing and customer trials
SOURCES OF IDEAS FOR PRODUCTS
-ideas come from front-line employees, suppliers customers, R&D team and
- one of the strongest motivators is competitors‘ products. Reverse
engineering- buying a competitors product and dismantle it to see how its
-Research and development- costly. KEY ISSUES IN PRODUCT DESIGN
incubation-when an item is introduced, it may be treated as a curiosity.
Demand is low. Production is low.
Growth-design improvements create a more reliable and less costly product.
Demand grows bc of increase of awareness.higher production=lower cost.
Maturity- few deisgn changes and demand levels off.
Saturation- leads to a decline in demand
Decline- in this stage the compny tries to prolong useful life with product
improements or introducing a substitute product.
---some products do not use life cycles-ie. Pencils.
---services also use life cycles- ie bank tellers- ABM- internet banking.
-life cycles vary between products- ie. Computers=1year, washing
STANDARDATION- the extnt to which there is absebce if variety in a at or
product. By reducing variety, they save time and money while increasing
quality an dreliability in their products. It also reduces time and cost to train
DESIGN FOR MASS CUSTOMIZATION - producing basically sandardizd goods or services but incorporting some
degree of customiztion. Several tactivs make this possible- delayed
differentiation, and modular design.
Delayed differentiation- producing, but not quite completing, a product until
customer preferences are known.
Moduar design- parts are grouped into modules that are easily
replaced or interchanged. The product is composed of a number of
modules or components instead of a collection if individual parts.
o This is the reason that Dell computers can assemble and have
custom-ordered computers delivered to its internet customers
in a matter of days. It avoids the long customer wait that
would occur if individual parts had to be assembled.
Is a measure of the ability of a product to perform its intended
function. Could be a failure.
- design that can function over a broad range of conditions. Rubber boots vs.
ballerina flats- rubber boots are more robust bc they can handle more
weather conditions. The more robust, the less likely it is to fail.
LEGAL AND ETHICAL ISSUES
-ie. Food and drug acts, hadzards products act, automobile pollution
standards, airbags.. etc.
-should not infringe on patents, trademarks, and copyrights.
-Product liability- means that a manufacturer is liable for any injuries or
damages caused by a faulty product bc of poor design. –strong incentive for
DESIGN FO RENVIRONMENT
-design for energy efficiency
-design for hazardous material minimization
-design for re-use
-design for disassembly—so that used products can be easily taken apart.
-design for remanufacturing refers to refurbishing used products by replacing worn-out
components and re-selling the products—printers, cars…
Aka simultaneous development
-means bringing engineering design, manufacturing engineers, and staff
from marketing together early in the design phase to simultaneously develop
the product and the processes from creating the product.
Traditionally, designers developed a new product without any input
from manufacturing, and then turned over the design to
manufacturing… this contributes to an ―us vs. then‖ mentality.
COMPUTER AIDED DESIGN (CAD)
-use computer graphics for product design. The designer can modify an
existing design or create a new one on the screen and see it in 3D. no need
for timely drawings.
DESIGN FOR MANUFACTURING AND ASSEMBLY (DFM)
-take into account the organizations manufacturing capabilities when
designing a product.
Companies can benefit when a component can be sued in multiple products.
Bc of standard training ad increased savings from buying bulk, and save on
repair costs. Tool manufacturers use a design that allows tool users to attach
different power tools to a common power source.
DIFFERNCE IN DESIGNING SERVICES
-services are normally made and delivered at the same time- less latitude in
finding and correcting errors before the customer has a chance to discover
them. Consequently, training, process design and customer relations are
important. Quality is measured in customer satisfaction. -most services have some degree of customization, therefore there will be
variability in length of the service.
-services have lower barriers to exit and exit. Disadvantage- hard to
measure the cost of introducing the service because of the shared resources.
Location is important.
Quality Function of deployment
-structural approach that integrates ‗voice of the customer‖ into product
design. Ie. Customers say that the blades on lawnmower should be easily
Read about house of quality metrics on pg. 131-132. Chapter 6- Process Design and Facility Layout 9/27/2011 11:52:00 AM
Process design determines the form and function of how production of goods
and services is to occur. It has major implications for layout.
First step in process design is to determine whether to make or buy
some or all product parts.
Every production process is different, even in the same industry. However,
there are similarities therefore we group the processes into four categories:
1. job shop
process type used when a low quantity of high-variety customized
goods or services is needed.
High flexibility of equipment and skilled workers are important.
work shift from one small job to the next, each with somewhat
Service example is an emergency ward of a hospital that is able to
process a variety of injuries and diseases.
used when a moderate volume and variety of goods/services is
desired. The equipment doesn‘t need to be as flexible as job shop,
but process is still intermittent. The skill level of workers doesn‘t
need to be as high as in a job shop bc there is less variety in the
Ie. Small bakeries that make bread, cake or cookies in batches.
Movie theatres that show movies to groups-batches.
Other examples- beer, paint, ice cream clothes, magazines, and
The managerial challenge is scheduling batches in oder to meet
planned production demand while utilizing the resources a a high
3. repetitive (assembly line)
higher quantities or standard goods are needed
only light flexibility is needed-equ
skill of workers is low
ie. Production and assembly lines o production line-sequence of machines that perform operations
o assembly line- production line where parts are added to a
ie. Cars computers
service ie. Carwash, cafeteria lines.
Challenges- capacity balance, technology management, quality and
when a high volume of highly standardized output is desired, a
continuous process is used.
No variety in output therefore no need for equ flexibility.
Workers are low skilled
Ie. Steel, paper, flour, and salt.
Utilities and the internet
LOOK AT FIGURE 6-1 p.172
-the idea is to have production process capabilities, such as equipment
flexibility, match product requirements, such as product variety and
-failure to match product requirements and production process
characteristics results in inefficiency.- higher costs
ie. Using batch when there is only one product Is inefficient bc the
process does not use enough automation.
-products often go through a life cycle that begins with low quality, which
increases as the product becomes better known. Manager must shift from if
job shop to batch.
-processes do not always exist in ‗pure‘ format. They could be a hybrid of 2
process types. -focused factory- processes that produce high quantity of products specialize
in these products. However, some companies have managed to handle high
variety on the same processes. Ie ―made for you‖ by McDonals, and Dell‘s
computers mass customization.
-key question in process design- ―should we automate?‖ and by how much?
-enable a machine to operate automatically.
low variability- whereas it is difficult for a human to perform a task
in exactly the same way, rapidly.
Do not get bored, distracted, or injured.
Costly, needs high volume of product to offset the high initial costs.
Less flexible than human labor
Workers fear automation bc they will lose their jobs
-3 types of automation:
1. Fixed- not flexible
o uses high-cost, specialized equipment for a fixed sequence of
operations. Low unit costs and high volume are its primary
advantages. Minimal variety and high cost of making major
2. Programmable automation
o high-cost, general-purpose equipment controlled bu a
computer program. Changing the process is easy as changing
the computer program.
o Has the capability of producing a wide variety of low=volume
products in small batches.
o Ie. Numerically controlled machines (machines that perform
operations by following mathematical processing
instructions.) or robots
3. Flexible automation
o uses equipment that is more flexible than programmable
automation. A machine centre- is a machine capable of performing a variety of
operations on part.
A flexible manufacturing system (FMS) is a group of machining centres,
controlled by a computer.
-Determines the form and function of how production of goods it to occur.
-identifies the activities and their sequence, resources, and controls.
-also plan- order taking, planning, purchasing staffing..
Methodology for production process design
1. define the production process
determine how complete the input materials should be- make-or
set production objectives- capacity, costs
2. production process development
conceptualize the design
make an embodiment of the design
o choose one process concept
o determine the resources needed-machines, equ.
o Estimate costs, and quality
Create a detailed design
o Design plant layout
3. buy the machines and equipment, recruit workers and start trial runs.
Draw a process flow diagram- shows the operations and movement
of material through the operations. Involves following flow of
materials though the transformation process, and identifying the
activities and resources required and their sequence.
Service Process Fail-safeing
Similar to manufacturing, except follow customers instead of
Services are vulnerable to quality and delivery problems-bc
normally performed on the spot therefore no time to correct
problem. Companies should identify potential failure points and try to
strategically minimize them.
Ie. Customer calls and long wait times- solution= call-waiting
Customer Perception in Service process design
Since services are intangible you have to leave good impression.
End service positively-customers remember end more
If the service is pleasurable- divide it
If the service is painful- combine it.
Let customers control parts- ATM
Types of Layout
2 types: Product layout, and process layout
1. Product (line) layout
arranges production resources linearly according to the progressive
steps by which a product is made.
Standard products and standard production
Could have a Production or assembly line
Less common in services because service requirements usually
have to much variability.
When lines are used, compromises are made. Ie. A very dirty car
might not get cleaned as well in a car wash bc amt of soap is
Work-in-progress is low bc items move quickly from operation to
operation. Since operation are so closely tied, the entire system can
shut down bc of mechanical failure pr absenteeism.
Process (Functional) Layout
-arranges production resources together according to similarity of function.
It processes items that have a variety of production requirements.
-the use of general-purpose equipment provides the flexibility necessary to
handle a wide range of production requirements, therefore workers are
skilled. -common is services. Ie. Emergency department- has a waiting room, x-ray
rooms, surgery rooms.
-less vulnerable to shut down bc equ is arranged by type rather than by
-disadvantage; scheduling must be done on a continual basis .
-a layout in which different machines are arranged in a cell that can process
items that have similar processing requirements, called part families.
-a cell is U shaped, permitting increased communication among workers on
-items required cold storage are grouped, items that are ordered frequently
are placed near the door, correlation between items are grouped- item a is
ordered with item b.
-important to account the presence of customers and how to influence them.
-less important bc of e-mail… but trend is to make open space- less walls. Ch.7 – Design of Work Systems 9/27/2011 11:52:00 AM
Work Design- Involves;
-job design (content and method. Objective it is to increase long-term
-determination of working conditions
-work measurement (establishment of standard times)
JOB DESIGN has 2 schools of thought- efficiency school and behavioral
1. efficiency school- systematic, logical approach to labor cost reduction.
Includes specialization(doing one thing to become proficient in it-
ie. Assembly line worker), method analysis, and time
-the serious problems with assembly-line specialization caused job designers
to seek the behavioral approach.
2. behavioral school-
satisfaction of wants and needs of workers as a motivation for increased
In order to make jobs interesting, job designers consider
giving a worker a larger portion of the total task. Goal is to make
the job more interesting by increasing the variety of skills required
workers periodically exchange jobs. Can fill in for absenteeism,
prevent repetitive strain injuries. Can rotate every hr
increases level of responsibility for planning and coordination
groups who perform the same function and are empowered to make
certain decisions and changes in their work. Workers who are close
to their work and have the best knowledge of it, are better suited
than management to make decisions.
Methods Analysis -breaks down the job into a sequence of tasks and elements and improves
1. identify job and facts about all equ used
2. discuss job with operator and supervisor
3. analyze present method
4. question present method and propose a new method.
Systematic study of the human motions used to perform a task.
Purpose is to eliminate unnecessary motions for max efficiency.
-government standards apply
physical factors ie. Temperature, illumination, work breaks, safety,
ergonomics.. have an impact on the productivity of a worker.
Work breaks- frequency, length and timing of breaks can have
significant impact on productivity and quality of output.
Safety-accidents are exp- employer p.o.v. workers cannot be
motivated if they feel they are in physical danger. #1reason for
The enactment of Occupational and Safety regulations emphasizes
the importance of safety considerations in work system design. It
provides specific safety regulations with inspectors to see that they
are adhered to.
Fitting the job to the worker‘s capabilities.
Relates to the design of equ work methods and work space to
remove awkward reaching and bending heavy lifting and endless
repetition of motions.
WORKER MEASUREMENT/time study
-determining how long it should take to do a job.
Time standard- the amount of time it should take a worker to complete a
task. Stopwatch time study- used to develop a standard time for a job
based on observations of one worker taken over a number of
cycles. Then its applied to all other workers who perform same job.
Standard time- normal time is the length of time a worker should
take to perform a job if there are no delays or rest breaks.
Standard time= normal time* allowance time for rest and
Limitations of stopwatch time study
- only jobs that can be observed can be studied. This eliminates most
managerial and creative jobs. The cost of the study rules out its use for
irregular operations and infrequent occurring jobs. It also disrupts normal
work routine, and workers resent it.
Predetermined element times
-published data based on extensive research on element times.
- to use this method must divide jo into its basic elements and then refer to
the appropriate table of data to get the time for that element. Then all times
are added up to get a total.
-high level of skill is required to generate a predetermined element time.
-tables include: eye travel, leg and foot motions…
Is a technique for estimating the proportion of time that a worker spends on
each activity or is idle.
-does not require timing an activity. Insteadm an observer makes brief
observations of a worker at random intervals and notes than nature of the
activity. Ie. Secretary types and files. The resulting data are counts of the
number of times each activity or idle time was observed.
-used for non-repetitive jobs
-establishes % of time worker does specific activity.
2 basic approaches for compensating employees- time-based pay and
Time-based pay-aka hourly pay -why do so many jobs use this instead of output based pay? Not piece rate.
May be impossible to measure output. Quality is not quantity ie healthcare.
Output-based pay- compensates employees on the amount of output they
-lots of pressure
-minimum wage makes it somewhat impractical to use output-based pay.
Group bonus plans
Stress sharing productivity gains with employees
Gainsharing-reward employees for output and for reductions in costs Ch.9- Management of Quality 9/27/2011 11:52:00 AM
Quality control- monitoring, testing and correcting quality problems after
Quality Assurance- providing confidence that a product‘s quality will be good
by preventing defects before they occur.
Continuous improvement- never-ending improvements to key processes as
part of total quality management.
Quality of goods
The dimensions of quality good includes:
Performance, aesthetics, special features, safety, reliability,
durability, perceived quality, service after sale, and latent.
Tangible-the physical appearance of facility, equipment, personnel,
and communication materials.
Convenience, responsiveness, time, assurance, courtesy.
Determinants of quality
A products quality is determined during: design, process design, &
o quality is what the customer requires. Quality function
deployment should be used to translate the customer
requirements into technical attributes f the product and their
o During production, conformance to design specifications
refers to the degree to which the produced goods or services
conform to specifications of designers. Factors affecting this is
ie. Skills and training of operators, taking corrective actions.
Cost of Quality
1. internal failure costs- discovered during production
incorrect machinery settings, defective material, faulty equipment.
Cost of internal failures include lost production time, possible equ
damage, and possible worker injury.
2. external failure costs- discovered after delivery to customer defective products that are sold.
Costs include warranty work, handling of complaints, replacements,
liability payments to customers or discounts, loss of customer
3. appraisal costs
relate to inspection, testing, and other activities intended to
uncover defective products. They include the cost of inspectors,
testing, test equipment and labs.
4. prevention costs- to prevent defects form occurring
costs- planning and administration, working with vendors, standard
operating procedures, and training.
-Internal and external failure costs represent costs related to poor quality,
whereas appraisal and prevention costs represent investments fir achieving
good quality. Ie spending $1 on prevention might save $5 on fixing failures.
Quality of the source- every employee Is responsible for inspecting their own
Zero defects- philosophy that any level of defects is too high. Management
must install programs that help the organization more toward 0 defects.
(according to P. Crosby)
IOS 9001-the international standard for quality management system,
critical to international business.
Purpose- to promote worldwide standards that will improve
operating efficiency and productivity and reduce costs.
This standards is critical for countries doing business
internationally, esp in Europe.
A company wanting to be certified must document its processes and
procedures, and have an assessment.
Over 1 million companies are registered.
Hazard analysis critical control point
HACCP is a quality management system similar to ISO 9001 designed for
food processors. -originated when pilsbury company needed to design and manufacture food
for the NASA space mission.
-meet exporters to other countries need to have HACCP certification.
- Deals with food safety.
-first HACCP team inspects various construction and sanitary aspects in the
plant, equ and personnel. Ie. Land should have good drainage, no garbage
or odor, building should have easy to clean walls, floors.. etc
READ pg. 297
Canada Awards for Excellence (CAE) and Total Quality Management
CAE recognizes outstanding quality achievement by Canadian
They developed a set of criteria for business excellence. The main
o 1. Leadership and governance
o 2. Planning and environmental sustainability
o 3. Customer/ citizen / client focus
o 4. People focus and healthy workplace
o 5. Process management
o supplier/ partner focus
to make the implementation of the quality management system
easier for organizations NQI (national quality institute) has divided
the implementation into 4 stages:
o 1. Foundation
developing mission statement, defining customers,
planning training in management principles and
practices, and performing an assessment of the above
o 2. Transformation
strategic planning.; identifying customer needs; HR
planning, identifying, documenting, and improving key
o 3. Role model
at level 3 CAE, certification, the organization
demonstrates shared commitment; performs periodic planning, sets priorities, and communicates
performance measures customer satisfaction and
receives feedback; involves employees in health and
safety… Also, all activities are continuously improved.
These activities start after an
o 4. World class
requirements build on the other levels, and the
organization demonstrates that it has achieved good to
excellent overall results and at least three years of
positive trends from the improvement efforts.
Total Quality Management (TQM)
An approach to quality management that involves everyone in an