CHAPTER 7: WORK DESIGN & MEASUREMENT

7.1 INTRODUCTION Behavioral Approaches to Job Design

1. Job enlargement
Work design ˗ Giving a worker a larger portion of the total task. This
˗ Underscored by an organization’s dependence on constitutes horizontal loading—the additional work
human efforts (i.e., work) to accomplish its goals. is on the same level of skill and responsibility as the
original job.
7.2 JOB DESIGN ˗ Goal: Make the job more interesting by increasing the
variety of skills required and by providing the worker with a
Job Design more recognizable contribution to the overall output.
˗ The act of specifying the contents and methods of jobs.
˗ It focuses on WHAT, WHO, HOW & WHERE will be the job 2. Job rotation
done. ˗ Having workers periodically exchange jobs allowing
˗ The objectives of job design include productivity, safety, workers to broaden their learning experience and
and quality of work life. enables them to fill in for others in the event of
sickness or absenteeism.
2 Approaches to Job design:
1. Efficiency School/Approach 3. Job enrichment
Emphasizes a systematic, logical, approach to job ˗ An increase in the level of responsibility for planning
design and coordination tasks. It is sometimes referred to
2. Behavioral school/Approach as vertical loading.
Emphasizes satisfaction of wants and needs. ˗ Importance: The potential to increase the motivational
power of jobs by increasing worker satisfaction through
improvement in the quality of work life.
Specialization
˗ Describes jobs that have a very narrow scope. Work that
Motivation
concentrates on sure aspect of a product or service.
˗ A key factor in many aspects of work life. Not only can it
˗ Main rationale is the ability to concentrate one’s efforts
influence quality and productivity, but it also contributes
and thereby become proficient at that type of work.
to the work environment. People work for a variety of reasons
in addition to compensation. Other reasons include
FOR MANAGEMENT:
socialization, self-actualization, status, the physiological
Advantages: Disadvantages: aspects of work, and a sense of purpose and accomplishment.
1. Simplifies training 1. Difficult to motivate Quality ˗ Another factor that influences motivation, productivity, and
2. High productivity 2. Worker Dissatisfaction, possibly
employee–management relations is trust. In an ideal work
3. Low Wage Costs resulting in absenteeism, high
environment, there is a high level of trust between workers and
turnover, disruptive tactics, poor
managers.
attention to quality.

FOR EMPLOYEES: Team The efforts of business organizations to become

Advantages: Disadvantages: more productive, competitive, and customer oriented
1. Low education and skill 1. Monotonous work have caused them to rethink how work is accomplished.
requirements 2. Limited opportunities for
2. Minimum responsibilities advancement Forms of Teams
3. Little mental effort needed 3. Little control over work 1. Short-term team
4. Little opportunity for self- ˗ Formed to collaborate on a topic such as quality
fulfillment
improvement, product or service design, or solving a
problem.
2. Long Self-term Team
˗ Increasingly being used.
 Directed Teams, an example of long term-team, 7.3 QUALITY OF WORKLIFE
sometimes referred to as self-managed teams. Groups
empowered to make certain changes in their work Quality of work life
processes. ˗ Affects not only workers’ overall sense of well-being and
˗ Generally, the benefits of teams include higher quality, higher contentment, but also worker productivity. Quality of
productivity, and greater worker satisfaction. work life has several key aspects.
˗ Getting along well with coworkers and having good managers
Expert Robert Bacal has a list of requirements for successful can contribute greatly to the quality of work life.
team building: Leadership style is particularly important. Also important are working
1. Clearly stated and commonly held vision and goals. conditions and compensation.
2. Talent and skills required to meet goals.
3. Clear understanding of team members’ roles and functions. Working conditions
4. Efficient and shared understanding of procedures and norms. ˗ An important aspect of job design. Physical factors can
5. Effective and skilled interpersonal relations. have a significant impact on worker performance in
6. A system of reinforcement and celebration. terms of productivity, quality of output, and accidents.
7. Clear understanding of the team’s relationship to the greater
organization. Physical factors:
1. Temperature & Humidity. Work performance tends to be
Ergonomics (or human factors) adversely affected if temperatures or humidities are outside a
˗ The scientific discipline concerned with the very narrow comfort band which depends on how strenuous the
understanding of interactions among humans and other work is; the more strenuous, the lower the comfort range.
elements of a system, and the profession that applies 2. Ventilation. Unpleasant and noxious odors can be distracting
theory, principles, data, and methods to design to and dangerous to workers.
optimize human well-being and overall system 3. Illumination. The amount of illumination required depends
performance. largely on the type of work being performed; the more detailed,
the higher the level of illumination needed for adequate
performance.
The International Ergonomics Association organizes
4. Noise & Vibrations. Noise is unwanted sound. It can be
ergonomics into three domains: annoying or distracting, leading to errors and accidents. It also
1. Physical (e.g., repetitive movements, layout, health, can damage or impair hearing if it is loud enough.
and safety) Vibrations can be a factor in job design even without a noise
2. Cognitive (mental workload, decision making, component, so merely eliminating sound may not be sufficient
human–computer interaction, and work stress) in every case.
3. Organizational (e.g., communication, teamwork, 5. Work Time & Work Breaks. Reasonable (and sometimes
work design, and telework). flexible) work hours can provide a sense of freedom and
control over one’s work.
Frederick Winslow Taylor 6. Occupational HealthCare. Good worker health contributes
˗ Father of Scientific management. to productivity, minimizes health care costs, and enhances
˗ Found that the amount of coal that workers could shovel workers’ sense of well-being.
could be increased substantially by reducing the size and 7. Safety. Worker safety is one of the most basic issues in job
weight of the shovels. design. This area needs constant attention from management,
employees, and designers. Workers cannot be effectively
Frank & Lillian Gilbreth motivated if they feel they are in physical danger.
˗ Expanded Taylor’s work, developing a set of motion study
principles intended to improve worker efficiency and The enactment of the Occupational Safety and Health
reduce injury and fatigue. Act in 1970, and the creation of the Occupational Safety
and Health Administration (OSHA), emphasized the
• Poor posture can lead to fatigue, low productivity, importance of safety considerations in systems design.
and injuries to the back, neck, and arm. The law was intended to ensure that workers in all organizations
have healthy and safe working conditions. OSHA officials are
• Good posture can help avoid or minimize these
empowered to issue warnings, impose fines, and even to invoke
problems. court-ordered shutdowns for unsafe conditions.
 Ethical issues 7.4 METHODS ANALYSIS
˗ Affect operations through work methods, working
conditions and employee safety, accurate record Methods Analysis
keeping, unbiased performance appraisals, fair ˗ Focuses on how a job is done. It is done for both existing
compensation, and opportunities for advancement. jobs and new jobs.
˗ For a new job, it is needed to establish a method.
Compensation ˗ For an existing job, the procedure usually is to have the
˗ A significant issue for the design of work systems. Simply analyst observe the job as it is currently being performed
how workers are paid for their work. and then devise improvements.
˗ For a new job, the analyst must rely on a job description
Approaches For Compensation: and an ability to visualize the operation.
1. Time-based systems
˗ Known as hourly and measured daywork systems, The basic procedure in methods analysis is as follows:
compensate employees for the time the employee has 1. Selecting an Operation to Study.
worked during a pay period. ˗ Sometimes a foreman or supervisor will request that a
2. Output-based (incentive) system certain operation be studied.
˗ Compensate employees according to the amount of 2. Documenting the Current Method.
output they produce during a pay period, thereby tying ˗ Use charts, graphs, and verbal descriptions of the way
pay directly to performance. the job is now being performed.
• Individual Incentive Plans. 3. Analyzing the Job and Proposing New Methods.
˗ The simplest plan is straight piecework. Under this plan, a ˗ It is facilitated by the use of various charts such as flow
worker’s pay is a direct linear function of his or her output. process charts and worker-machine charts.
• Group Incentive Plans
a. Flow process charts
˗ Stresses to sharing of productivity gains with employees,
are in use. Some focus exclusively on output, while others
˗ Are used to review and critically examine the
reward employees for output and for reductions in material overall sequence of an operation by focusing
and other costs. on the movements of the operator or the flow of
3. Knowledge-based pay system materials.
˗ Used by organizations to reward workers who undergo ˗ These charts are helpful in identifying
training that increases their skills. nonproductive parts of the process.
a) Horizontal skills reflect the variety of tasks the worker b. Worker-machine chart
can perform ˗ a chart used to determine portions of a work
b) Vertical skills reflect managerial tasks the worker is cycle during which an operator and equipment
capable of. are busy or idle.
c) Depth skills reflect quality and productivity results.
6. Installing the Improved Method.
4. Management Compensation ˗ Successful implementation of proposed method
˗ Many organizations that traditionally rewarded managers changes requires convincing management of the
and senior executives based on output are now seriously desirability of the new method and obtaining the
reconsidering that approach. cooperation of workers.
˗ Reward systems are being restructured to reflect new 7. The Follow-Up.
dimensions of performance. ˗ The analyst should review the operation after a
5. Recent Trends reasonable period and consult again with the operator.
˗ Many organizations are moving toward compensation
systems that emphasize flexibility and performance
objectives, with variable pay based on performance.
7.5 MOTION STUDY 7.6 WORK MEASUREMENT

Motion Study Work measurement

˗ Systematic study of the human motions used to perform ˗ Concerned with determining the length of time it should
an operation to eliminate unnecessary motions and to take to complete the job.
identify the best sequence of motion for maximum
efficiency. Standard time
˗ The amount of time it should take a qualified worker to
Frank Gilbreth complete specified task, working at a sustainable rate,
˗ An early 20th-century pioneer in motion study. using given methods, tools and equipment, raw material
˗ Credited with originating techniques in the bricklaying inputs, and workplace arrangement.
trade that significantly improved productivity.
Development of a time standard involves computation of three
The most-used techniques by motion study analysts are the times:
following: a. Observed Time (OT) is simply the average of the recorded
times.
1. Motion Study Principles
b. Normal Time (NT) is the observed time adjusted for worker
˗ Developed from the work of Gilbreth, motion study performance.
principles are guidelines used to design motion-efficient c. Standard Time (ST) consider such factors as personal
work procedures. delays, unavoidable delays, and breaks.
The guidelines are divided into three categories:
a. principles for use of the body The most used methods of work measurement are the ff:
b. principles for arrangement of the workplace 1. Stopwatch Time Study
c. principles for the design of tools and equipment. ˗ First introduced over a hundred years ago by Frederick Winslow
2. Therbligs Taylor to set times for manufacturing and construction
˗ Basic elemental motions. This approach is to break jobs activities.
down into basic elements and base improvements on an ˗ It is used for the development of a time standard based on
observations of one worker taken over several cycles.
analysis of these basic elements by eliminating,
2. Standard Elemental Times
combining, or rearranging them. ˗ Derived from a firm’s own historical time study data.
Here is a list of some common ones that will 3. Predetermined Time Standards
illustrate the nature of these basic elemental ˗ Involve the use of published data on standard elemental times.
motions: • Methods-Time Measurement (MTM) is a commonly used
a. Search implies hunting for an item with the hands and/or system developed by the Methods Engineering Council,
the eyes. based on extensive research of basic elemental motions
b. Select means to choose from a group of objects. and times.
c. Grasp means to take hold of an object. 4. Work Sampling
d. Hold refers to retention of an object after it has been ˗ A technique for estimating the proportion of time that a worker
grasped. or machine spends on various activities and in idle time.
e. Transport load means movement of an object after hold. ˗ Unlike time study, this does not require timing or continuous
f. Release load means to deposit the object. observation.
3. Micromotion study ˗ The observer makes brief observations at random intervals and
˗ Use of motion pictures and slow motion to study motions simply notes the nature of the activity being performed by the
that otherwise would be too rapid to analyze. worker or machine.
Two primary uses are in (1) ratio-delay studies, which
4. Simo Chart
concern the percentage of a worker’s time that involves
˗ Used to study simultaneous motions of the hands. unavoidable delays or the proportion of time a machine is
idle, and (2) analysis of nonrepetitive jobs, which typically
involve a broader range of skills than repetitive jobs.

Random Number Table

˗ A table consisting of unordered sequences of numbers,
used to determine random observation schedules.
CHAPTER 8: LOCATION PLANNING AND ANALYSIS
8.1 THE NEED FOR LOCATION DECISION Supply Chain Considerations
˗ Location criteria can depend on where a business is in
Existing organizations may need to make location decisions the supply chain.
for a variety of reasons; ˗ The retail end of a chain, site selection tends to focus
✓ Part of marketing strategy more on accessibility, consumer demographics traffic
✓ Growth in demand patterns, and local customs.
- when they can’t accommodate all of their customers. ˗ Businesses at the beginning of a supply chain, if they are
✓ Depletion of basic inputs involved in supplying raw materials, are often located
- raw materials of mining and fishing industries are near the source of the raw materials.
limited. ˗ Businesses in the middle of the chain may locate near
✓ Market shift or high cost of doing business suppliers or near their markets, depending on a variety of
- increase of operations cost. Example; rental space. circumstances.
- shift in markets causes them to consider relocation, or
the costs of doing business at a particular location reach 2 kinds of business distribution
a point where other locations begin to look more 1. Centralized distribution
attractive. ˗ Generally, yields scale economies as well as tighter
control than decentralized distribution, but it
8.2 THE NATURE OF LOCATION DECISIONS sometimes incurs higher transportation costs.
2. Decentralized distribution
Strategic Importance of Location Decisions ˗ Tends to be more responsive to local needs.
˗ Location choices can impact capacity and flexibility. One ˗ Centralized distribution – Mas mura, better control
is that they entail a long-term commitment, which makes pero may higher delivery cost.
mistakes difficult to overcome. ˗ Decentralized – Mas mabilis sa local needs pero mas
˗ Another is that location decisions often have an impact mahal ang setup.
on investment requirements, operating costs and
revenues, and operations. A poor choice of location Location Options
might result in excessive transportation costs, a shortage 1. Expand an existing facility.
of qualified labor, loss of competitive advantage, This option can be attractive if there is adequate room for
inadequate supplies of raw materials, or some similar expansion, especially if the location has desirable
condition that is detrimental to operations. features that are not readily available elsewhere.
2. Add new locations while retaining existing ones.
Objectives of Location Decisions Opening a new store in a shopping mall may simply draw
˗ Profit-oriented organizations base their decisions on profit customers who already patronize an existing store in the
potential, whereas nonprofit organizations strive to same chain, rather than expand the market.
achieve a balance between cost and the level of 3. Shut down at one location and move to another.
customer service they provide An organization must weigh the costs of a move and the
˗ Some Internet-based retail businesses are much less resulting benefits against the costs and benefits of
dependent on location decisions such as Netflix; they remaining in an existing location.
can exist just about anywhere, while others that rely 4. Do nothing.
If a detailed analysis of potential locations fails to
heavily on shipping, such as Amazon.
uncover benefits that make one of the previous three
alternatives attractive, a firm may decide to maintain the
status quo, at least for the time being.
8.3 GLOBAL LOCATIONS 3. Unskilled labor
˗ Low labor skills may negatively impact quality and
Facilitating Factors productivity, and the work ethic may differ from that in
1. Trade Agreements the home country.
˗ Barriers to international trade such as tariffs and quotas 4. Import restrictions
can have a detrimental effect on trade, while trade ˗ Some countries place restrictions on the importation of
agreements that are fair to all sides can help trade to manufactured goods, thus having local suppliers avoids
flourish. those issues.
2. Technology 5. Criticisms
˗ Technological advances in communication and ˗ Critics may argue that cost savings are being generated
information sharing have been very helpful. These through unfair practices such as using sweatshops, in
include texting, e-mail, teleconferencing, and the which employees are paid low wages and made to work
internet. in poor conditions; using child labor; and operating in
countries that have less stringent environmental
Benefits requirements.
1. Markets 6. Productivity
˗ Companies often seek opportunities for expanding ˗ Low labor productivity may offset low labor costs or
markets for their goods and services, as well as better other advantages.
serving existing customers by being more attuned to
local needs and having a quicker response time when Risks
problems occur. 1. Protecting intellectual property rights
2. Cost savings ˗ Companies that outsource production to foreign
˗ Among the areas for potential cost savings are countries need to have assurance that intellectual
transportation costs, labor costs, raw material costs, property rights will be preserved.
and taxes. 2. Political
3. Legal and regulatory ˗ Political instability and political unrest can create risks
˗ There may be more favorable liability and labor laws, and for personnel safety and the safety of assets. Moreover, a
less restrictive environmental and other regulations. government might decide to nationalize facilities, taking
4. Financial them over.
˗ Companies can avoid the impact of currency changes 3. Terrorism
and tariffs that can occur when goods are produced in ˗ Terrorism continues to be a threat in many parts of the
one country and sold in other countries. For instance, world, putting personnel and assets at risk and
Toyota, who originated in Japan, created its own decreasing the willingness of domestic personnel to
manufacturing in the US to save money for tariffs. travel to or work in certain areas.
5. Other 4. Economic
˗ Globalization may provide new sources of ideas for ˗ Economic instability might create inflation or deflation,
products and services, new perspectives on operations, either of which can negatively impact profitability.
and solutions to problems. 5. Legal
˗ Laws and regulations may change, reducing or
Disadvantages eliminating what may have been key benefits.
1. Transportation costs 6. Ethical
˗ High transportation costs can occur due to poor ˗ Corruption and bribery, common in some countries, may
infrastructure or having to ship over great distances, and be illegal in a company’s home country.
the resulting costs can offset savings in labor and 7. Cultural
materials costs. ˗ Cultural differences may be more real than apparent.
2. Security costs 8. Quality
˗ Increased security risks and theft can increase costs. ˗ Lax quality controls can lead to recalls and liability
issues.
Managing Global Operations 8.5 IDENTIFYING COUNTRY, REGION, COMMUNITY, AND
Language and cultural differences SITE
˗ Increase the risk of miscommunication and may also
interfere with developing trust that is important in Identifying a Country
business relationships. ˗ In identifying a country, we look at factors like:
˗ Tactics that work well in one Country may not work in ✓ Political stability: Countries with stable governments
another. reduce the risk of disruptions.
✓ Economic factors: Low inflation, low taxes, because
Automation strong economic growth attract businesses.
˗ Having a major influence on the decision of where to ✓ Availability of resources: Access to energy, water, and
produce goods, particularly if the main markets are raw materials.
domestic. ✓ Workforce: Skill level, wage rates, labor laws.
✓ Cultural considerations: Language, religion, consumer
8.4 THE GENERAL PROCEDURE FOR MAKING LOCATION preferences.
DECISIONS USUALLY CONSISTS OF THE FOLLOWING
STEPS Identifying a Region
˗ We identify the region because regions vary in labor
availability, wages, infrastructure, proximity to suppliers or
1. Decide on the criteria to use for evaluating location
markets, and climate. We look for regions that reduce
alternatives, such as increased revenues, decreased cost,
transportation costs, have reliable infrastructure, and
or community service.
suitable environmental conditions.
˗ First, the company must determine what it values most. Is it
˗ Example: In the Philippines, a manufacturer may choose
minimizing costs (like rent or transportation)? Maximizing
CALABARZON because of its industrial parks and access to
revenue (being close to customers)? Serving a specific
Manila ports.
community need (like a rural clinic)? These goals influence
every subsequent decision.
˗ Choose what’s most important: cost savings, access to The primary regional factors involve
markets, or community service. • Location of Raw Materials
˗ Firms locate near or at the source of raw materials
2. Identify important factors such as location of markets or raw for three primary reasons: necessity, perishability,
materials. The factors will differ depending on the type of and transportation costs.
facility. ✓ Locating near sources of raw materials
˗ This involves pinpointing elements influencing the choice. significantly reduces transportation costs and
˗ These differ by industry. A retail business looks for customer lead times, improving efficiency and potentially
traffic; a factory may focus on energy costs. lowering production costs.
˗ For example, you are in food industry, of course, supplies are ✓ This is particularly important for industries with
the important factors for you. bulky or perishable raw materials.
3. Develop location alternatives, in which we are going to
• Location of Markets.
identify ˗ Profit-oriented firms frequently locate near the
˗ Identify a country or countries for location. Like choosing markets they intend to serve as part of their
between the Philippines or Vietnam competitive strategy.
˗ Identify the general region for a location. Luzon or Mindanao ˗ Examples: Amazon, Fast foods business
˗ Identify a small number of community alternatives. Marawi ˗ Nonprofit organizations choose locations relative to
City or Iligan city. the needs of the users of their services.
˗ Identify site alternatives among the community alternatives. ˗ Examples: Charity, Red Cross
Specific lots in those cities. ✓ Being close to target markets reduces
transportation costs and delivery times,
4. Evaluate the alternatives and select. allowing for quicker response to customer
˗ Use data, site visits, and scoring methods to decide. demand and potentially increasing sales.
˗ Use analysis and scoring to pick the best location.
 • Labor Factors ˗ How do we identify? Of course, we evaluate:
˗ A labor-intensive manufacturing plant might ✓ Land size, shape: If the site has flat land, it will cost
choose a region with lower labor costs but still us less to build a facility.
possessing a sufficient skilled workforce. ✓ Access to major roads or ports. This is for the
• Other Factors convenience of the customers and for them to see
˗ Climate and taxes sometimes play a role in location the located store.
decisions. ✓ Zoning laws: Is industrial use allowed? Like what
types of businesses or activities are allowed on site,
Identifying a community or does this site have a limitation when it comes to
˗ Communities affect the business's day-to-day expansions.
operations and image. A supportive local ˗ Example: A retailer might choose a site near a busy
highway intersection for better customer access.
government and community can help the business
grow. Multiple Plant Manufacturing Strategies
˗ Example: You wouldn’t locate your business in a ˗ The plant here refers to a manufacturing facility or a
community where there is a history of robbery or production site. This is a physical location where goods
accidents. are produced, assembled, or processed.
˗ As well as Factors that are needed to be considered ˗ These are a factory, like a factory where raw materials are
such as the quality of life that the people have transformed into finished goods.
there, local government attitude, tax incentives, of ˗ And these plants have its specific roles, depending on
course, the workforce availability. the manufacturing strategy.

• Product Plant Strategy

Just-In-Time manufacturing techniques (see ˗ Each plant makes only one product.
Chapter 14) ˗ Example: One factory makes fridges; another makes
˗ Just-in-time (JIT) manufacturing focuses on producing washing machines.
goods only when needed, minimizing inventory. ˗ Each plant specializes in producing a specific
˗ Example: NIKE brand. They are using JIT Manufacturing to product. A car manufacturer might have one plant
produces brands or apparels based on the demands of for
the customers. ˗ engines, another for bodies.
˗ In that case, JIT helps to reduce costs and wastes.
˗ Identifying a community relevant to JIT involves • Market Area Plant Strategy
considering proximity to suppliers and customers to ˗ Each plant serves a specific region.
reduce lead times and transportation costs. ˗ Example: Factories in Luzon, Visayas, and
˗ This approach minimizes inventory by having suppliers Mindanao.
deliver materials just as they are needed. This ˗ Plants are located to serve specific geographic
encourages companies to locate near their suppliers. markets. A beverage company might have plants in
different regions to reduce transportation costs.
Identifying a Site ˗ Example: a company like coca-cola has plants
˗ After identifying what country, we are going to locate our locates near major markets and they be addressed
business, after choosing what specific region and as:
community we are going to facilitate our business, in that ✓ Plant A: That serves the Luzon region (Laguna,
community, we are going to choose a site to build our the Canlubang Plant)
business. ✓ Plant B: Mindanao region (more on Davao
˗ The actual plot of land or building affects construction oriental plants)
cost, ease of expansion, and daily operations.
 • Process Plant Strategy ✓ Banks use a GIS to help decide where to locate
˗ Each plant handles one step in production. branch banks and to understand the composition
˗ Plants specialize in specific manufacturing and needs of different market segments.
processes. A chemical company might have one ✓ Insurance companies use a GIS to determine
plant for refining and another for packaging. premiums based on population distribution, crime
˗ Example: in a clothing production, One plant spins figures, and likelihood of natural disasters such as
the thread; another weaves the cloth; a third sews flooding in various locations, and to manage risk.
the clothes. ✓ Retailers can link information about sales,
˗ Each plant has their own station where its specific customers, and demographics to geographic
job is mainly for that job alone. Then, it will be locations in planning locations. They also use a GIS
passed on to the succeeding Plant for its specific to develop marketing strategies and for customer
job. mapping, site selection, sales projections,
promotions, and other store portfolio management
• General-Purpose Plant Strategy applications.
˗ Each plant makes a wide range of products to meet ✓ Utility companies use a GIS to balance supply and
varying demand. demand and identify problem areas.
˗ These plants are aiming to produce variety of goods ✓ Emergency services use a GIS to allocate resources
depending on the demands of the consumers. to locations to provide adequate coverage where
˗ Example: A factory that makes different models of they are needed.
TVs and speakers. • Logistics companies: Use GIS for them to see
˗ Another example: Plant A, they are producing food where to plan the best routes and schedules for
products, cosmetics and other goods. the deliveries of their products.
˗ Example: Nestle Philippines, they produce
• Publishers. to see kung saan nabe-benta yung
beverages (milo, nescafe), at the same time, they
magazines and newspapers and to attract more
produce infant nutrition (cerelac) and othe culinary
advertisers.
products (maggi seasonings).
• Retailers: Use GIS to decide where to open new
stores, yung target customers nila, and to plan
Geographic Information Systems
marketing strategies.
˗ GIS combines maps and data to help businesses analyze
and choose locations. • Real estate companies: Use GIS to create
˗ GIS is like a smart map that helps business owners to find property maps and para i-analyze yung mga
a best spot to locate business. This helps make good bagong market trends.
decisions where to put up a business, because you • Banks: Use GIS to decide where to open new
already analyze a specific area with the help of the data, branches.
you can already consider planning how to execute it. • Insurance companies. They use GIS to
˗ Many businesses use GIS: determine kung magkano yung insurances na i-
cha-charge nila or ibibigay nila sa mga tao
˗ Here are some of the ways businesses use geographic based on the risks in different areas. Like if
information system: there is flood, by the given, they can dicide on
✓ Logistics companies use GIS data to plan fleet how much to spend in assessing those people
activities such as routes and schedules based on who are a victim of floods by giving financial
the locations of their customers. support.
✓ Publishers of magazines and newspapers use a GIS • Utilities: Use GIS to manage resources and find
to analyze circulation and attract advertisers. problems in their systems.
✓ Real estate companies rely heavily on a GIS to make • Emergency services. Use GIS to send help to
maps available online to prospective home and the right places quickly and efficiently.
business buyers.
8.6 SERVICE AND RETAIL LOCATIONS 2. The Transportation Model
˗ This model is used when the problem involves the shipment of
Factors Considerations in Service and Retail Locations: goods from multiple sending point (facilities) to multiple
• Nearness to raw materials is not usually a consideration receiving point (warehouses), and a new location is to be added
• Customer access is a prime consideration for some: to the system.
restaurants, hotels, supermarkets, etc. but not a consideration ˗ Transportation model of linear programming - is a special-purpose
in others, such call center, online services, etc. algorithm used to determine the minimum transportation costs.
˗ This model is used to analyze each of the configurations
• Manufacturing tends to be cost-focused, concerned with:
considered, and it reveals the minimum costs each would
✓ Transportation models/costs provide.
✓ Energy availability/costs
✓ Labor cost/availability/skills 3. Factor Rating
✓ Building/leasing costs ˗ A general approach that is useful for evaluating a given
• Service and Retail businesses tend to be profit/revenue alternative and comparing alternatives.
focused, concerned with: ˗ Includes quantitative and qualitative inputs.
✓ Demographics: age, income, education ˗ The value of factor rating is that it provides a rational basis for
✓ Population/Drawing area evaluation and facilitates comparison among alternatives by
establishing a composite value for each alternative that
✓ Competition summarizes all related factors.
✓ Traffic Volume/Patterns
✓ Customer access/Parking The following procedure is used to develop a factor rating:
1. Determine which factor are relevant (e.g. location of
Clustering market, water supply, parking facilities, revenue potential).
˗ Similar types of businesses locate near one another. 2. Assign a weight to each factor that indicates its relative
˗ Retail and service businesses generally prefer locations importance compared with all other factors.
that are near other retailers because of higher traffic 3. Decide on a common scale for all factors (e.g. 1 to 100) and
set a minimum acceptable score if necessary.
volume and convenience to customers.
4. Score each location alternative.
5. Multiply the factor weight by the score for each factor and
8.7 EVALUATING LOCATION ALTERNATIVES sum the results for each location alternative.
6. Choose the alternative that has the highest composite
4 Common Techniques: score, unless it fails to meet the minimum acceptable
1. Locational Cost-Profit-Volume Analysis score.
˗ Technique for evaluating location choices in economic terms.
˗ The analysis can be done numerically/graphically. 4. The Center-of-Gravity Method
˗ Methods for locating a distribution center that minimizes
The procedure for locational cost-profit-volume analysis: distribution cost.
1. Determine the fixed and variable cost associated with ˗ The method includes the use of map that shows the locations of
each location alternative. destinations. The map must be accurate. A coordinate system
2. Plot the total-cost lines for all location alternatives on the is overlaid on the map to determine relative locations. The
same graph. location of the (0,0) point of the coordinate system, and its
3. Determine which location will have the lowest total cost scale, is unimportant. Once the coordinate system is in place,
for the expected level of output. Alternatively, determine you can determine the coordinates of each destination.
which location will have the highest profit. ˗ If the quantities to be shipped to every location are equal, you
can obtain the coordinates of the center of gravity by using the
These methods assume the following: simple average formula of x and y coordinates.
• Fixed costs are constant for the range of probable output. ˗ If the quantities to be shipped to every location are not equal or
• Variable costs are linear for the range of probable output. not the same for all destinations, a weighted average must be
• The required level of output can be closely estimated. used to determine the center of gravity.
• Only one product is involved
✓ Cost Analysis Formula: Total cost = FC + v × Q
✓ Profit Analysis Formula: Q(R – v) – FC
CHAPTER 9: MANAGEMENT OF QUALITY
9.1 Introduction ❖ During the 1960s, the concept of “zero defects” gained
favor – this approach focused on employee motivation
Quality and awareness, and the expectation of perfection from
˗ Refers to the ability of a product or service to consistently each employee.
meet or exceed customer requirements or expectations. ❖ It evolved from the success of the Martin Company in
˗ The ability of a product or service to consistently meet or producing a “perfect” missile for the U.S. Army.
exceed customer expectations. ❖ In the 1970s, quality assurance methods gained
increasing emphasis in services including government
9.2 The Evolution of Quality Management operations, health care, banking, and the travel industry.

Prior to the Industrial Revolution 9.3 The Foundations Of Modern Quality Management: The
˗ Skilled craftsmen performed all stages of production. Gurus
˗ Pride of workmanship and reputation often provided the
motivation to see that a job was done right. Walter Shewhart
˗ Lengthy guild apprenticeships caused this attitude to ˗ “Father of statistical quality control.”
carry over to new workers. ˗ Pioneer in the field of quality control
o A division of labor accompanied the Industrial ˗ Developed control charts.
Revolution – Pride of workmanship became ˗ Strong influence on the thinking of two other gurus, W.
less meaningful because workers could no Edwards Deming and Joseph Juran.
longer identify readily with the final product.
W. Edwards Deming
Frederick Winslow Taylor ˗ Statistics professor at New York University in the 1940s.
˗ “Father of Scientific Management” ˗ Went to Japan after WWII to assist the Japanese in
˗ Gave new emphasis to quality by including product improving quality and productivity; 30 years
inspection and gauging in his list of fundamental areas of ˗ In 1951, The Union of Japanese Scientists, after a series
manufacturing management. of lectures presented by Deming, established the
Deming Prize – awarded annually to firms that distinguish
G. S. Radford themselves with quality management programs and to
˗ Improved Taylor’s methods. individuals who lead such efforts.
˗ Cause of inefficiency and poor quality is the system, not
❖ In 1924, Bell Telephone Laboratories introduced statistical the employees - management’s responsibility to correct
control charts that could be used to monitor production. the system to achieve the desired results.
❖ Around 1930, H. F. Dodge and H. G. Romig, also of Bell
Labs, introduced tables for sampling. Joseph M. Juran
❖ Nevertheless, statistical quality control procedures were ˗ Viewed quality as fitness-for-use.
not widely used until World War II, when the U.S. ˗ Believed that roughly 80 percent of quality defects are
government began to require vendors to use them. management controllable
❖ During the 1950s, the quality movement evolved into ˗ Trilogy consisting of quality planning, quality control, and
quality assurance. quality improvement.
❖ In the mid-1950s, total quality control efforts enlarged ˗ A key element of his philosophy is the commitment of
the realm of quality efforts from its primary focus on management to continual improvement.
manufacturing to include product design and incoming
raw materials.
❖ One important feature of this work was greater
involvement of upper management in quality.
 Armand Feigenbaum 9.4 Defining Quality: The Dimensions Of Quality
˗ “Cost of nonconformance” approach as a reason for
management to commit to quality.
˗ Recognized that quality was not simply a collection of Quality
tools and techniques, but a “total field.” ˗ It is the degree to which performance of a product or
˗ Customer who defines quality. service meets or exceeds customer expectations.
Dimensions of Product Quality
Philip B. Crosby.
˗ Developed the concept of zero defects and popularized 1. Performance - main characteristics of the product
the phrase “Do it right the first time.” 2. Aesthetics - appearance, feel, smell, and taste
˗ He stressed prevention, and he argued against the idea 3. Special Features - extra characteristic
that “there will always be some level of defectives.” 4. Conformance - how well a product corresponds to
˗ Quality Without Tears: The Art of Hassle-Free design specifications
Management 5. Reliability - dependable performance
6. Durability - ability to perform over time
Kaoru Ishikawa 7. Perceived quality - indirect evaluation of quality
˗ Key contributions were the development of the cause- 8. Serviceability - handling of complaints or repairs
and-effect diagram (also known as a fishbone diagram) 9. Consistency - quality doesn’t vary
˗ The first quality expert to call attention to the internal Dimensions of Service Quality:
customer—the next person in the process, the next
operation, within the organization. 1. Convenience - the availability and accessibility of
the services.
Genichi Taguchi 2. Reliability - the ability to perform a service
˗ Best known for the Taguchi loss function involving a dependably, consistently, and accurately.
formula for determining the cost of poor quality. 3. Responsiveness - the willingness of service
˗ An important part of his philosophy is the cost to society
providers to help customers in unusual situations
of poor quality.
and to deal with problem.
Taiichi Ohno and Shigeo Shingo 4. Time - the speed with which service is delivered.
˗ Developed the philosophy and methods of kaizen – a 5. Assurance - knowledge exhibited by personnel and
Japanese term for continuous improvement (defined their ability to convey trust and confidence.
more fully later in this chapter), at Toyota. 6. Courtesy - the way customers are treated by
˗ Continuous improvement is one of the hallmarks of employees.
successful quality management. 7. Tangible - physical appearance of facilities,
equipment, personnel, and communication
materials.
8. Consistency -the ability to provide the same level
of good quality repeatedly.
9. Expectations - meet or exceed customer
expectations.

Assessing Service Quality

˗ SERVQUAL
˗ An instrument designed to obtain feedback on an
organization’s ability to provide quality service to
customers.
SERVQUAL SCORE = Perception Score - Expectation Score Benefits of Good quality
→ Enhanced reputation for quality → Greater customer loyalty
If the result: → Ability to command premium prices → Lower liability costs
POSITIVE → Expectations were exceeded → An increased market share → Fewer production or service problems

ZERO → Expectations were met Consequences of Poor quality

NEGATIVE → Expectations were not meet (Quality gaps Exist) → Loss of Business
→ Liability
→ Productivity
SERVQUAL GAP MODEL → Costs
˗ Actual customer expectations and management perceptions of
those expectations
Cost Of Quality
˗ Management perceptions of customer expectations and
service-quality specifications Appraisal costs relate to inspection, testing, and other
˗ Service quality and the service actually delivered activities intended to uncover defec tive products or services,
˗ The service actually delivered and what is communicated about or to assure that there are none.
the service to customers
˗ Customers’ expectations of the service provider and their Prevention costs relate to attempts to prevent defects from
perceptions of provider delivery occurring.
Failure costs are incurred by defective parts or products, or
4 Primary Determinants by faulty services.
1. Quality of Design → refers to the intention of designers to
include or exclude certain features in a product or • Internal failures are those discovered during the
service. production process
2. Quality of Conformance → refers to the degree to which • External failures are those discovered after delivery
goods and services conform to the intent of the to the customer.
designers.
3. Ease of use Return on quality (ROQ)
4. Service after Delivery ˗ Approach focuses on the economics of quality efforts. In
this approach, quality improvement projects are viewed
as investments
Key areas of responsibility
1. Top Management - ultimately responsible for quality.
2. Design - Quality products and services begin with design. 9.5 Quality And Performance Excellence Award
3. Procurement Department - responsible for obtaining The Baldrige Award
goods and services that will not detract from the quality. ˗ It is administered by the Baldrige Performance Excellence
4. Production/Operation - responsible for ensuring that Program at the National Institute of Standards and
processes yield products and services that conform to Technology.
design specifications. ˗ Purpose: to identify and recognize role-model
5. Quality assurance - responsible for gathering and organizations, establish criteria for evaluating
analyzing data on problems and working with operations improvement efforts, and disseminate and share best
to solve problems. practices.
6. Packaging and shipping - ensure that goods are not ˗ Applicants’ approaches are evaluated in seven main
damaged in transit, that packages are clearly labeled, areas: leadership; strategy; customers; measurement,
etc. analysis, and knowledge management; workforce;
7. Marketing and sales - responsible for determining operations; and results.
customers’ needs.
8. Customer service - is often the first department to learn
about problems.
 European Quality Award The standards for ISO 14000 certification bear upon 3 major
˗ is Europe’s most prestigious award for organizational areas:
excellence. 1. Management systems - systems development and
˗ sits at the top of regional and national quality awards, and integration of environmental responsibilities into
applicants have often won one or more of those awards business planning
prior to applying for the European Quality Award 2. Operations - consumption of natural resources and
energy
Deming Prize 3. Environmental systems - measuring, assessing,
˗ It was named in honor of the late W. Edwards Deming, is and managing emissions, effluents, and other waste
Japan’s highly coveted award recognizing successful streams
quality efforts.
˗ often given to Japanese companies and given to some ISO 24700
individuals who meet the standard of this award. ˗ A set of international standards that pertains to the
quality and performance of office equipment that
9.6 Quality Certification contains reused components.

International Organization for Standardization (ISO) 9.7 Quality And The Supply Chain
˗ Promotes worldwide standards for the improvement of The emphasis in supply chain quality management is on
quality, productivity, and operating efficiency through a reducing:
series of standards and guidelines. 1. Outsourcing risk – Risk comes from the use of
substandard materials or work methods, which can
ISO 9000 lead to inferior product quality and potential product
˗ A set of international standards on quality management liability. Tighter control of vendors and worker
and quality assurance, critical to international business. training can reduce these risks.
2. Product or service variation - Variation results from
ISO 14000 processes that are not in control; it can be reduced
˗ A set of international standards for assessing a through statistical quality control.
company’s environmental performance. 3. Overhead - can be reduced by assigning quality
assurance responsibility to vendors, while
Both ISO 9000 and ISO 14000 relate to an organization’s customers operate in a quality audit mode, with
processes rather than its products and services, and both some monitoring of vendor quality efforts.
stress continual improvement. The standards are meant
to be generic.

8 quality management principles form the basis of the

latest version of ISO 9000:
1. A customer focus
2. Leadership
3. Involvement of people
4. A process approach
5. A system approach to management
6. Continual improvement
7. Use of a factual approach to decision making
8. Mutually beneficial supplier relationships.
9.8 TOTAL QUALITY MANAGEMENT 5. Decisions based on facts rather than opinions -management
gathers and analyzes data as a basis for decision making.
Total quality management (TQM) 6. Knowledge of tools - employees and managers are trained in
˗ A philosophy that involves everyone in an organization in the use of quality tools.
a continual effort to improve quality and achieve 7. Supplier quality - suppliers must be included in quality
customer satisfaction. assurance and quality improvement efforts so their
processes are capable of delivering quality parts and
materials in a timely manner.
3 key philosophies in this approach:
8. Champion - a TQM champion’s job is to promote the value
1. Continuous improvement - a never-ending push to
and importance of TQM principles throughout the company.
improve 9. Quality at the source - the philosophy of making each worker
2. Involvement of everyone in the organization responsible for the quality of his or her work.
3. Goal of customer satisfaction - means meeting or 10. Suppliers - are partners in the process, and long-term
exceeding customer expectations. relationships are encouraged.

We can describe the TQM approach as follows: Obstacles to Implementing TQM

1. Find out what customers want. • Lack of a companywide definition of quality
• Internal customer - the next person in the process • Lack of a strategic plan for change
• External customer - the final customer • Lack of a customer focus
2. Design a product or service that will meet (or exceed) • Poor intraorganizational communication
what customers want. • Lack of employee empowerment
3. Design processes that facilitate doing the job right the • View of quality as a "quick fix"
first time. • Emphasis on short-term financial results
• Fail-safing – Incorporating design elements that • Inordinate presence of internal politics and "turf" issues
prevent incorrect procedures. The Japanese term for • Lack of strong motivation
this is pokayoke. Another term sometimes used is • Lack of time to devote to quality initiatives
mistake-proofing. Another term that is sometimes • Lack of leadership: Managers need to be leaders
used for this is foolproofing, but this term may be
taken to imply that employees (or customers) are Criticisms of TQM
fools. • Overzealous advocates may pursue TQM programs
4. Keep track of results, and use them to guide improvement blindly, focusing attention on quality even though other
in the system. priorities may be more important (e.g., responding
5. Extend these concepts throughout the supply chain. quickly to a competitor's advances),
6. Top management must be involved and committed. • Programs may not be linked to the strategies of the
organization in a meaningful way.
Other elements of TQM:
1. Continuous improvement - philosophy that seeks to make • Quality-related decisions may not be tied to market
never-ending improvements to the process of converting performance. For instance, customer satisfaction may be
inputs into outputs. The Japanese use the term kaizen to emphasized to the extent that its cost far exceeds any
refer to continuous improvement. direct or indirect benefit of doing so.
2. Competitive benchmarking - this involves identifying other • Failure to carefully plan a program before embarking on it
organizations that are the best at something and studying can lead to false starts, employee confusion, and
how they do it to learn how to improve your operation. meaningless results.
3. Employee empowerment - giving workers the responsibility • Organizations sometimes pursue continuous
for improvements and the authority to make changes to improvement (ie, incremental improvement) when
accomplish them provides strong motivation for employees. dramatic improvement is needed.
4. Team approach - the use of teams for problem solving and to • Quality efforts may not be tied to results.
achieve consensus takes advantage of group synergy, gets
people involved, and promotes a spirit of cooperation and
shared values among employees.
9.9.Problem Solving And Process Improvements 8 Common Tools
1. Flowchart - is like a map of a process. It shows the steps
PDSA Cycle from start to finish.
- Plan, Do, Study, Act 2. Check sheet - is a form used to collect and organize data.
- This is a step by step method to solve problems and improve It usually involves tally marks to count how often
processes continuously. something happens.
3. Histogram - is a bar graph that shows how data is spread
Steps in Problem Solving out or distributed.
1. Define the problem and goal. 4. Pareto Analysis (80/20 Rule) - this tool helps you focus on
2. Collect data the biggest problems first.
3. Analyze the problem 5. Cause-and-Effect Diagram - helps you organize possible
4. Generate solutions causes of a problem into categories like: people,
5. Choose the best solution machines, materials, methods, etc.
6. Implement the solution 6. Scatter Diagram - a graph that shows the relationship
7. Monitor the solution between two variables.
7. Control Chart - a line graph that monitors a process over
Process Improvement time to see if it's stable or if something unusual
˗ Means finding ways to make a process better. happened.
Here's how: 8. Run Charts - used to track the values of a variable over
1. Map the process time. This can aid in identifying trends or other patterns
2. Analyze the Process that may be occurring.
3. Redesign the Process
Methods for Generating Ideas
Six Sigma 1. Brainstorming
˗ Six Sigma is a quality program that focuses on reducing ˗ A group discussion where everyone freely shares ideas -
defects. It aims for only 3.4 defects per million no judging or criticizing.
opportunities. 2. Quality Circles
˗ A small group of workers (often from the same
2 parts of Six Sigma: department) who meet regularly to talk about how to
1. Management part - Leaders choose the right projects and improve quality.
train the right people. 3. Benchmarking
2. Technical part - Teams use data and statisties to find and ˗ Benchmarking means comparing how your company
fix problems. DMAIC Method Define, Measure, Analyze, performs against the best - either in your industry or any
Improve, and Control other industry.

People in Six Sigma are trained and given titles:

1. Champions - usually top managers or executives.
2. Black Belts - project leaders
3. Green Belts - Team members

Quality Tools
˗ Used to help businesses identify problems, analyze data,
and make smart decisions.
CHAPTER 10: QUALITY CONTROL SUMMARIZATION
10.1 Introduction Off-Site versus On-Site Inspection
- The advantages of Specialized Lab Tests (Off-Site) are worth the
Quality Control time and interruption needed to obtain the results.
- is a process that measures output relative to a standard and - Reasons favoring On-Site inspection include quicker decisions
takes corrective action when output does not meet standards. and avoidance of introduction of extraneous factors
- A process that evaluates output relative to a standard and takes
corrective action when output doesn’t meet standards. 10.3 Statistical Process Control
• Quality Assurance that relies primarily on inspection of lots
(batches) of previously produced items is referred to as • Quality control is concerned with the quality of conformance of
Acceptance Sampling. a process
• Quality control efforts that occur during production are
referred to as Statistical Process Control. • Statistical process control (SPC) is used to evaluate process
output to decide if a process is “in control” or if corrective action
10.2 Inspection is needed

Inspection Process Variability

- An appraisal activity that compares goods or services to a - All processes generate output that exhibits some degree of
standard. Inspection is a vital but often unappreciated aspect of variability.
quality control. ✓ Random variation. Natural variation in the output of a
- Although for well-designed processes little inspection is process, created by countless minor factors
necessary, inspection cannot be completely eliminated. ✓ Assignable variation. In process output, a variation whose
cause can be identified. A nonrandom variation
- Inspection can occur at three points: before production, during
production, and after production.
Sampling and Sampling Distributions
- Inspection before and after production often involves
- In statistical process control, periodic samples of process
acceptance sampling procedures; monitoring during the
output are taken, and sample statistics, such as sample means
production process is referred to as process control.
or the number of occurrences of a certain type of outcome, are
determined.
How Much to Inspect and How Often
- Low-cost, high-volume items such as paper clips, roofing nails,
- Sampling distribution. A theoretical distribution of sample
statistics.
and wooden pencils often require little inspection.
- High-cost, low-volume items that have large costs associated
- Central limit theorem. The distribution of sample aver ages tends
to be normal regardless of the shape of the process distribution.
with passing defective products often require more intensive
inspections. - The central limit theorem states that as the sample size increases,
the distribution of sample averages approaches a normal
- In high-volume systems, automated inspection is one option
distribution regardless of the shape of the sampled population.
that may be employed.
The Control Process
Where to Inspect in the Process - Sampling and corrective action are only a part of the control
process.
- Raw materials and purchased parts. Supplier certification
programs can reduce or eliminate the need for inspection. ✓ Define. The first step is to define in sufficient detail what is
to be controlled. It is not enough.
- Finished products. Well-designed processes, products and
✓ Measure. Only those characteristics that can be counted or
services, quality at the source, and process monitoring can
measured are candidates for control.
reduce or eliminate the need for inspection.
✓ Compare. There must be a standard of comparison that
- Before a costly operation. The point is to not waste costly labor can be used to evaluate the measurements.
or machine time on items that are already defective.
✓ Evaluate. Management must establish a definition of out of
- Before an irreversible process. In many cases, items can be control.
reworked up to a certain point; beyond that point they cannot. ✓ Correct. When a process is judged to be out of control,
- Before a covering process. corrective action must be taken.
 ✓ Monitor results. To ensure that corrective action is Step 3: Visual Plot Check
effective, the output of a process must be monitored for a If Steps 1-2 pass, visually scan for patterns
sufficient period of time to verify that the problem has been
eliminated. 10.4 Process Capability

Control Charts: The Voice of the Process Process capability analysis

- An important tool in statistical process control is the control - Assesses if a stable process meets design specifications.
chart, which was developed by Walter Shewhart.
- A control chart is a time-ordered plot of sample statistics. It is ✓ Specifications indicate a range of acceptable values established
used to monitor sample statics to determine if the variability by engineering design or customer requirements.
exhibited reflects random variation. It has upper and lower limits, ✓ Control limits are statistical limits that reflect the extent to which
called control limits, that define the range of acceptable sample statistics such as means and ranges can vary due to
variation for the sample statistic randomness alone.
- The essence of statistical process control is to assure that the ✓ Process variability reflects the natural or inherent (i.e., random)
output of a process is random so that future output will be variability in a process. It is measured in terms of the process
random. standard deviation.
- Control charts have two limits that separate random variation Managerial actions & improvements
and nonrandom variation. The larger value is the upper control Out-of-control response:
limit (UCL), and the smaller value is the lower control limit (LCL).
- Investigate assignable causes (e.g., machine wear, training
- Type I error. Concluding a process is not in control when it gaps).
actually is.
- False alarm? Resume process but monitor closely.
- Type II error. Concluding a process is in control when it is not.
- Good result (e.g., point below lcl)? Replicate improvement.
- There are four commonly used control charts. Two are used for
variables, and two are used for attributes. Incapable processes:
✓ Variables. Generate data that are measured.
- Solutions: 100% inspection, process redesign, automation,
✓ Attributes. Generate data that are counted. outsourcing.
Control Charts for Variables Improving capability:
- Mean control chart sometimes referred to as an ¯ x (“x-bar”) - Methods: simplify steps, standardize parts, mistake-proofing,
chart, is based on a normal distribution. A Control chart used to upgrade equipment.
monitor the central tendency of a process.
- Range control charts (R-charts) are used to monitor process Taguchi loss function:
dispersion; they are sensitive to changes in process dispersion. - "Any deviation from target causes loss, increasing with distance
It is used to monitor process dispersion. from target."
1. Control Charts for Attributes
- p-Chart (Proportion Defective): Purpose: Monitor binary A Critical Limitations & Risks
outcomes (good/bad, pass/fail) in samples. Capability Index Assumptions:
2. Chart (Defects per Unit): - Process must be stable and normally distributed.
- Purpose: Monitor non-occurrences (scratches, errors) - Misleading Cp if process mean is off-target (e.g., μ = 12,
where non-defects can't be counted. specs=10-11 Cp1.67 but 0% output meets specs).
3. Run Tests for Non-Random Patterns Run Test Caution
- Detects subtle trends/cycles even when data is within - Ties in data? Assign A/B or U/D to maximize z-value.
control limits.
4. Integrated Control Workflow Key Takeaways
Step 1: Control Limits 1. Control Charts detect extreme deviations; Run Tests uncover
Compute UCL/LCL for 7, R, P, or c -chart. hidden patterns.
Rule: Any point outside limits → Stop and investigate 2. Stable Capable: Always check Cp/Cpk after confirming
assignable cause. statistical control.
Step 2: Run Tests 3. Managerial Vigilance: React to signals with root-cause analysis
Apply both Median and Up/Down tests. and process upgrades.
Rule: Either |z| > 2 variation detected. ← Non-random
CHAPTER 11: Aggregate Planning And Master Scheduling
11.1 Introduction • Aggregation
- Gives a clearer overall picture and avoids unnecessary
Intermediate Planning in Perspective complexity.
• Long-term decisions - For example, in a department store, managers may
- Major, strategic choices like what products or services to allocate space (e.g., 20% to women’s sportswear)
offer, where to build facilities, how big they should be, what without breaking it down by brands or product types. The
equipment to use, and how to arrange everything. These aggregate measure could be square feet or number of
decisions set the limits or boundaries for the next two levels racks.
of planning.
- It is often measured in general units such as labor hours,
machine hours, or total output per period. This avoids
• Intermediate decisions
detailed tracking of specific products and allows flexible
- Medium-term plans that focus on how many workers are use of resources.
needed, how much to produce, and how much inventory to
keep. These decisions guide what can be done in the short
• Product groupings
term
- Make aggregation easier because grouped items often
• Short-term decisions share similar resource requirements or measurement
units.
- Daily or weekly plans to reach goals based on the limits set
by long-term and intermediate decisions. These include
Dealing with Variations
scheduling tasks, assigning workers, and organizing
equipment.
Forecasting to Manage Variations
- Most organizations use rolling 3-, 6-, 9-, and 12-month
The Concept of Aggregation forecasts
• Business plan - These forecasts are updated periodically, not just made
- Plan that includes both long-term and intermediate-term once a year
planning. It gives overall direction to the organization by - This helps planners adjust to changes in expected
using strategies, policies, demand forecasts, and current demand or expected supply
economic, competitive, and political situations. - Allows development of revised plans
• Aggregate plan
Strategies to Deal with Variations
- Result of all departments working together. It is a strategic 1. Maintain excess capacity
plan that becomes the base for operating decisions. It is a 2. Maintain flexibility
guide for making more detailed plans that will lead to the 3. Use design strategies
master schedule
4. Help respond more easily to different customer needs
- Helps in making bigger decisions, like whether to add 5. Postpone supply commitments
capacity, especially when temporary options like overtime or
subcontracting cost too much.
- Helps shorten the time horizon and reduce
uncertainty for the remaining items.
- Big-picture approach to planning that focuses on groups of
similar products or services, not individual items. This is
The goal of aggregate planners: is to achieve rough equality of
especially useful for companies with multiple product types
demand and capacity over the entire planning horizon.
or service options.
Cost consideration — planners aim to minimize the cost of
• Time-based competition
the aggregate plan, though cost is not the only factor they
- Means the organization needs to respond fast to changes, so
consider.
the aggregate plan must be flexible.
 Demand Options 5. Subcontracting
1. Pricing - Temporarily increase capacity by outsourcing work
- To shift demand from busy (peak) times to slower - May reduce control or raise costs
(off-peak) times - Can also subcontract in (do work for others) during
- Effectiveness: Depends on price elasticity — the excess capacity
more elastic the demand, the better pricing works
- Trade-off: Can involve opportunity cost — lost 11.2 Basic Strategies For Meeting Uneven Demand
profit when demand is purposely shifted away from
peak times Level Capacity Strategy – Maintain a Level Workforce
2. Promotion → Keep workforce size constant throughout the planning
- To influence when and how much customers will period
buy through advertising or marketing → Use inventories, overtime, part-time workers,
- Considerations: Requires good timing and subcontracting, and back orders to absorb demand
understanding of customer response patterns changes
✔ Advantages:
- Risk: Demand might increase at the wrong time,
– Stable workforce, fewer morale problems
adding stress to capacity instead of easing it
– Lower hiring and layoff costs
3. Back Orders – Stable use of equipment and facilities
- Let customers place orders now, but delay the – Union-friendly
delivery to a later period ✘ Disadvantages:
4. New Demand – High inventory and storage costs
- To make use of excess capacity during slow – Subcontracting may reduce control and increase cost
periods by creating new types of demand – Backlogging can lower customer service
– Not suitable for service organizations
Supply Options
1. Hire and Lay Off Workers Chase Demand Strategy – Match Demand Period by
- Adjust workforce levels to match demand Period
→ Adjust output or workforce to exactly match demand in
- Affected by labor intensity, union rules, and worker
each period
availability and Involves hiring and layoff costs
✔ Advantages:
2. Overtime / Slack Time
– Keeps inventories low
- Use existing workers more (overtime) or less (slack time) – Avoids storage costs
- Quick and flexible option ✘ Disadvantages:
- Good for seasonal changes – Unstable operations and low morale
- May affect productivity or quality if overused – Higher hiring, layoff, and training costs
3. Part-Time or Temporary Workers – Difficult if forecasts are inaccurate
- Used for seasonal or flexible staffing
Combination Strategy – Use a Combination of
- Lower cost than full-time workers
Decision Variables
- Includes contract or gig workers → Mix elements of level capacity and chase demand
4. Inventories strategies
- Buildup stock during low demand, use it during high → Allows more flexibility and customization
demand ✔ Advantages:
- Suitable for manufacturing, not for most services – Can balance cost, stability, and responsiveness
- Carries holding and storage costs ✘ Disadvantages:
– May lack clear focus
– Could confuse employees
– Risk of inconsistent execution
 Choosing a Strategy match capacities with demand requirements and
Key Factors in Strategy Selection: minimize costs.
→ Company policy – may limit options (e.g., no layoffs, no Simulation model
subcontracting) • Computerized models that can be tested under
→ Union agreements – may restrict use of part-time hours or different scenarios to identify acceptable solutions
flexible scheduling to problems
→ Flexibility – some companies (e.g., refineries, auto plants)
may not support chase demand strategy due to steady- 11.4 aggregate planning in services
output design
→ Alignment with company strategy – strategies should Examples are:
match company values (e.g., excellent customer service, ✓ Hospitals
employee care) ✓ Airlines
✓ Restaurant
11.3 techniques for aggregate planning ✓ Other services: e.g school, office, lawfirms

A general procedure for aggregate planning consists of the Service vs manufacturing

following steps: 1. Demand for service can be difficult to predict.
1. Determine demand for each period. 2. Capacity availability for service can be difficult to predict.
2. Determine capacities (regular time, overtime, 3. Labor flexibility can be advantage in service.
subcontracting) for each period. 4. Services occur when they are rendered.
3. Identify company or departmental policies that are
pertinent (e.g., maintain a safety stock of 5 percent Yield management - the application of pricing strategies to
of demand, maintain a reasonably stable workforce). allocate capacity among various categories of demand.
4. Determine unit costs for regular time, overtime,
subcontracting, holding inventories, back orders, 11.5 disaggregating the aggregate plan
layoffs, and other relevant costs.
5. Develop alternative plans and compute the cost for Disaggregating the aggregate plan
each. - This means breaking down the aggregate plan into specific
6. If satisfactory plans emerge, select the one that best product requirements to determine labor requirements
satisfies objectives. Otherwise, return to step (skills, size of workforce), materials, and inventory
requirements.
2 categories: - For example, an appliance manufacturer might produce
1. Informal trial & error technique
refrigerators, freezers, clothes washers, clothes dryers, and
- Consist of developing simple tables or graphs that enable dishwashers.
planners to visually compare projected demand - The aggregate plans would have to be broken down into
requirements with existing capacity. quantities or each of these products.
2. Mathematical technique
- The result of disaggregating the aggregate plan is a master
- They range from mathematical programming models to production schedule (mps).
heuristic and computer search models.
Master production schedule (mps) or simply master
Linear programming schedule. This schedule indicates the quantity and timing of
• Methods for obtaining optimal solutions to problems planned completed production.
involving the allocation of scarce resources in terms
of cost minimization or profit maximization It shows the planned output for individual products rather
• Constraints involve the capacities of the workforce, than an entire product group, along with the timing of
inventories, and subcontracting. production.
• Formulated as a transportation-type programming
model so as to obtain aggregate plans that would
11.6 master scheduling Rough-cut capacity planning (rccp)
- Approximate balancing of capacity and demand to test
Master schedule is the heart of production planning and the feasibility of a master schedule.
control. - This means checking capacities of production and
warehouse facilities, labor, and vendors to ensure no
It determines the quantities needed to meet demand from gross deficiencies exist that will render the master
all sources and governs key decisions and activities schedule unworkable.
throughout the organization.
˗ It may be updated monthly, even though it covers two or
Interfacing with the ff. three months
✓ Marketing – to make valid delivery commitments to A key component of effective scheduling is the use of
warehouses and final customers. time fences to facilitate order promising and the entry
✓ Capacity planning – to evaluate capacity requirements. of orders into the system.
✓ Production planning – to provide the necessary information
to negotiate when customer requests cannot be met by Time fences
normal capacity. Points in time that separate phases of a master
✓ Distribution planning –to determine whether the business schedule planning horizon.
plan and its strategic objectives will be achieved.
3 sections or phases:
The master scheduler ✓ Frozen is the near-term phase that is so soon that delivery of
The central person in the master scheduling process. a new order would be impossible.
Or only possible using very costly or extraordinary
Duties include: options such as delaying another order.
1. Evaluating the impact of new orders ✓ Slushy is the next phase, and its time fence is usually a few
2. Providing delivery dates for orders periods beyond the frozen phase.
3. Dealing with problems: Order entry in this phase necessitates trade-offs but is
a. Evaluating the impact of production delays or late less costly or disruptive than in the frozen phase.
deliveries of purchased goods ✓ Liquid is the farthest out on the time horizon.
b. Revising the master schedule, when necessary, because New orders or cancellations can be entered with ease.
of insufficient supplies or capacity
c. Bringing instances of insufficient capacity to the Inputs
attention of production and marketing personnel so ✓ Beginning inventory – actual quantity on hand from the
they can participate in resolving conflicts preceding period
✓ Forecasts – predicted for each period of the schedule
11.7 the master scheduling process
✓ Customer orders – quantities already committed to
customers.
˗ This indicates the quantity and timing (i.e., delivery times)
Other factors include any hiring or firing restrictions
for a product, or a group of products.
imposed by hr, skill levels, limits on inventory such as
˗ In some instances, it is more economical to produce large
available space, whether items are perishable, and
amounts rather than small amounts, with the excess
whether there is some market lifetime (e.g., seasonal or
temporarily placed in inventory until needed.
obsolescence) considerations.
˗ The master production schedule is one of the primary
Outputs
outputs of the master scheduling process.
✓ Projected inventory
Validation is referred to as rough-cut capacity planning
✓ Production requirements
(RCCP).
✓ Uncommitted inventory

Available-to-promise (atp) inventory

uncommitted inventory.