Forecasting Models

Forecasting Models
Everyday a shop owner thinks how many items he would be able to sell.
The florist at the roadside keeps flower thinking in mind how much he would be able to sell by the end of the evening.
Here they are applying forecasting- albeit on a miniscule scale.
So we all forecast something each and every day.
What is Forecasting?
Planning is an important function of any management which based of forecasting. Hence, Forecasting is the art and science of predicting future events. Forecasts are required throughout an organization and at all levels of decision making in order to plan for the future and make effective decisions. The principal use of forecasts in operations management is in predicting the demand for manufactured products and services for time horizons ranging from several years down to 1 day. Depending on the planning horizon, forecasting can be classified in three ways:
Short – range forecasting (up to 1 year)
Medium – range forecasting ( up to 3 years)
Long – range forecasting (more than 3 years)
Types of forecasts
In general, a contemporary business organization employs three distinct types of forecasts.
These are given under:
1. Economic forecasts
2. Technological forecasts
3. Demand forecasts
Economic forecasts address the business cycle by predicting inflation rates, money supplies, housing starts, and other planning indicators.
Technological forecasts are concerned with rates of technological progress, which can result in the birth of exciting new products, requiring new plants and equipment.
Demand forecasts are projections of demand for a company’s products or services. These forecasts, also called sales forecasts, drive a company’s production, capacity, and scheduling systems and serve as inputs to financial, marketing, and personnel planning.
What is the strategic importance of forecasting?
Forecasting plays a very important role in the following areas:
Human resource management
Hiring, training and laying-off workers all depend on anticipated demand.
Capacity planning

Quantitative Methods
The chief Quantitative methods are:
1. Moving averages
2. Exponential smoothing Time series models
3. Trend projection
4. Linear regression  Causal model
The time series models of forecasting predict on the basis of the assumption that the future is a function of the past. In other words, they look at what has happened over a period of time and use a series of past data to make a forecast. If we are predicting weekly sales of washing machine, we use the past weekly sales for washing machine in making the forecast.
A causal model incorporates into the model the variables or relationships that might influence the quantity being forecast. A causal model for washing machine sales might include relationships such as new housing, advertising budget, and competitors’ prices.
Moving over to a structured approach to forecasting, let me introduce the basic steps involved in this process:-
Steps in Forecasting
There are eight steps to a forecasting system.
These are:
1. Determine the use of the forecast –
(What objectives are we trying to achieve?)
2. Select the items that are to be forecasted
3. Determine the time horizon of the forecast –
(Is it short, medium, or long – range?
4. Select the forecasting model
5. Gather the data needed to make the forecast
6. Validate the forecasting model
7. Make the forecast
8. Implement the results
We now focus our attention to one of the most widely used and effective method of forecasting.
Time Series Forecasting
A time series is based on a sequence of evenly spaced (weekly, monthly, quarterly, and so on) data points. Forecasting time series data implies that future values are predicted only from past values and that other variables, no matter how potentially valuable, are ignored.
Decomposition of a Time Series
There are four main ways of decomposing the time series:
􀂃 Trend
􀂃 Seasonality
􀂃 Cycles
􀂃 Random variations

QualitativeMethods:

Market Survey

Build-up forecast

Life cycle analog method

Panel consensus forecasting

Delphi method

Capacity management

Capacity management
What is Capacity?
Capacity is the maximum rate of output for a process. The operations manager must provide the capacity to meet current and future demand; otherwise, the organization will miss opportunities for growth and profits.
Capacity plans are made at two distinct levels:
Long term capacity plan –
( it covers at least two years in future.g. investment in new facilities and equipments)
Short term capacity –
(it covers week-to-week operation e.g. it focuses on workforce size, overtime budgets, inventories, etc)
The relevant questions in this regard are:
􀂃 How much of cushion is needed to handle variable, uncertain demand?
􀂃 Should we expand capacity before the demand is there or wait until demand is more certain?
Measures of capacity –
There are two main methods of measuring capacity. These are expressed as:
􀂃 Output measures (choice for high volume process)
􀂃 Input measures (choice for low volume flexible processes)
Output measures
Output measures are best utilized when the firm provides a relatively small number of standardized products and services, or when applied to individual process within the overall firm. Nissan Motor Company states capacity at its Tennessee plant as 4,50,000 vehicles per year. That plant produces only one type of vehicle, making capacity easy to measure. However, many organizations produce more than one product or service. For example, a restaurant may be able to handle 50 sit-down or 100 take-out customers per hour. It might also handle 25 sit-down and 50 take-out customers or many other combinations of the two types of customers. As the amount of customization and variety in the product mix becomes excessive, output-based capacity measures become less useful.
Input measures
Input measures are useful for low-volume, flexible processes. For example in a photocopy shop, capacity can be measured in machine hours or number of machines. Just as product mix can complicate output capacity measures, so as demand can complicate input measures. Demand, which is expressed as an output rate, must be converted to an input measure. Only after making the conversion can a manager compare demand requirements and capacity on an equivalent basis. For example, the manager of a copy center must convert its annual demand for copies from different clients to the number of machines required.
When we talk about capacity planning it requires knowledge of the current capacity of a process and its utilization.
My next question to you would be:-
What is capacity utilization?
Capacity utilization is the degree to which equipment, space, or labour is currently being used. It is expressed as a percent.
Mathematically, it can be expressed as under:
Utilization = %100capacity Maximumrateoutput Average×
The unit of measurement for both Numerator and Denominator should be same.
Utilization indicates the need for adding extra capacity or eliminating unneeded capacity.
Two definitions of maximum capacity, i.e.:
Peak capacity and
Eeffective capacity
are quite useful.
Let us focus on these aspects.
Peak capacity
The maximum output that a process or facility can achieve under ideal conditions is called peak capacity. It can be sustained only for a short time, few hours a day or few days in a month. A process reaches it by using marginal methods of production, such as excessive overtime, extra shifts, temporarily reduced maintenance activities, overshifts, and subcontracting.
Effective capacity
The maximum output that a process or firm can economically sustain under normal conditions is its effective capacity. In some organizations, effective capacity implies a one-shift operation; in others, it implies a three-shift operation. For this reason, Census Bureau surveys define capacity as the greatest level of output the firm can reasonably sustain by using realistic employee work schedules and the equipment currently in place.
When operating close to peak capacity, a firm can make minimal profits or even lose money despite high sales levels.
Let us now see how to calculate these measures of utilization through an example.
Example
If operated around the clock under ideal conditions, the fabrication department of an engine manufacturer can make 100 engines per day. Management believes that a maximum output rate of only 45 engines per day can be sustained economical over a long period of time. Currently, the department is producing an average of 50 engines per day. What is the utilization of the department relative to peak capacity? Effective capacity?
Solution.
The two utilization measures are
Utilizatio = peakncapacityPeakrateoutputAverage = 10050×100% = 50%
effectivenUtilizatio = capacityEffectiverateoutputAverage = 4550×100% = 111%
Note- Even though the fabrication department falls well short of the peak capacity, it is well beyond the output rate judged to be the most economical. Capacity expansion options could be evaluated.
To increase the maximum capacity the process need to be focused more. Most processes involve multiple operations, and often their effective capacities are not identical. A bottleneck is an operation that has the lowest effective capacity of any operation in the process and thus limits the system’s output. Figure 5.1 shows a process where operation 2 is a bottleneck, whereas Figure 5.2 shows the process when the capacities are perfectly balanced, making every operation a bottleneck.
A project or job process does not enjoy the simple line flows. Its operations may process many different items, and the demand on any one operation could vary considerably from one day to the next. Bottlenecks can still be identified by computing the average
Inputs
utilization of each operation. In this situation, management prefers lower utilization rate, which allow greater slack to absorb unexpected rise in demand. The long-term capacity of bottleneck operation can be expanded in various ways. Investments can be made in new equipments, The bottleneck’s capacity also can be expanded by operating it more hour per week, such as going from a one-shift operation to multiple shifts, or going from five workdays week to six or seven workdays per week. Managers also might relieve the bottleneck by redesigning the process, either through process reengineering or process improvement.
Theory of constraints (TOC) refers to an approach that focuses on bottlenecks of a firm’s financial performance.
Long-term capacity expansions are not the only way to ease bottlenecks. Overtime, temporary or part-time employees, or temporarily outsourcing during peak periods are short – term options. Managers should also explore ways to increase the effective capacity utilization at bottlenecks, without experiencing the higher costs and poor customer service usually associated with maintaining output rates at peak capacity.
The key is to carefully monitor short-term schedules, keeping bottleneck resources as busy as practical. They should also minimize the time spent unproductively for setups. When a changeover is made at a bottleneck operation, the number of units or customers processed before the next changeover should be large, compared to the number processed at less critical operations. Maximum the number processed per setup means that there will be fewer setups per year and thus less total time lost to set ups.
The TOC is an approach to management that focuses on whatever hinders progress toward the goal of maximizing the flow of total value – added funds or sales less sales discounts and variable costs. The impediments or bottlenecks might be overloaded processes such as order entry, new product development, or a manufacturing operation. The fundamental idea is to focus on the bottlenecks to increase their throughput, thereby increasing the flow of total value – added funds. .
Application of TOC involves the following steps
It’s basically a five step process.
1. Identify the system bottleneck
2. Exploit the bottleneck
3. Subordinate all other decision to step 2
4. Elevate the bottleneck
5. Do not let inertia set in
Factors that determine capacity
Ultimately, the output from a production facility or system is not determined simply by the physical size of the facility, the sizes or types of machines, or the number of employees working. Production capacity, especially effective capacity, is affected by the design of the products and processes, the training of employees, the management of quality, and many other factors. The most important factors affecting production capacity are:
1. Process design. In multistage production processes the maximum rate of output that can be achieved is governed by the slowest) lowest capacity stage.
2. Product design. With exactly the same personnel and equipment, the capacity for making a product that is well designed for production will be greater than for a poorly designed one.
3. Product variety. The fewer types of products made by a production unit and the more similar they are, the more specialized equipment and jobs can be, and the less time lost on product changeovers and machine set-ups.
4. Product quality. The way products are made, tested, and inspected will affect the rate at which products of acceptable quality can be produced.
5. Production scheduling. Scheduling that keeps product flows well balanced and synchronized and unproductive time minimized will utilize machines and personnel better and result in greater effective capacity.
6. Materials management. Shortages of materials can cause work stoppages, while excess inventories can cause congestion and wasted time searching for materials.
7. Maintenance. Equipment breakdowns and defects due to machine wear are two majors sources of lost production.
8. Job design and personnel management. The amount of output a production system actually produces is greatly determined by the personnel operating the system. Inadequate training, poor job design, overwork, and absenteeism all lead to lost production.

Design of product layouts

Design of product layouts
In product layout, equipment or departments are dedicated to a particular product line, duplicate equipment is employed to avoid backtracking, and a straight-line flow of material movement is achievable. Adopting a product layout makes sense when the batch size of a given product or part is large relative to the number of different products or parts produced
Assembly lines are a special case of product layout. In a general sense, the term assembly line refers to progressive assembly linked by some material handling device. The usual assumption is that some form of pacing is present and the allowable processing time is equivalent for all workstations. Within this broad definition, there are important differences among line types. A few of these are material handling devices (belt or roller conveyor, overhead crane); line configuration (U-shape, straight, branching); pacing (mechanical, human); product mix (one product or multiple products); workstation characteristics (workers may sit, stand, walk with the line, or ride the line); and length of the line (few or many workers). The range of products partially or completely assembled on lines includes toys, appliances, autos, clothing and a wide variety of electronic components. In fact, virtually any product that has multiple parts and is produced in large volume uses assembly lines to some degree.
Assembly-line systems work well when there is a low variance in the times required to perform the individual subassemblies. If the tasks are somewhat complex, thus resulting in a higher assembly-time variance, operators down the line may not be able to keep up with the flow of parts from the preceding work station or may experience excessive idle time. An alternative to a conveyor-paced assembly line is a sequence of workstations linked by gravity conveyors, which act as buffers between successive operations
Line balancing
Assembly-line balancing often has implications for layout. This would occur when, for balance purposes, workstation size or the number used would have to be physically modified.
The most common assembly line is a moving conveyor that passes a series of workstations in a uniform time interval called the workstation cycle time (which is also the time between successive units coming off the end of the line). At each workstation, work is performed on a product either by adding parts or by completing assembly operations. The work performed at each station is made up of many bits of work, termed tasks, elements, and work units. Such tasks are described by motion-time analysis. Generally, they are grouping that cannot be subdivided on the assembly line without paying a penalty in extra motions.
The total work to be performed at a workstation is equal to the sum of the tasks assigned to that workstation. The line balancing problem is one of assigning all tasks to a series of workstations so that each workstation has no more than can be done in the workstation cycle time, and so that the unassigned (idle) time across all workstations is minimized. The problem is complicated by the relationships among tasks imposed by product design and process technologies. This is called the precedence relationship, which specifies the order in which tasks must be performed in the assembly process.
The steps in balancing an assembly line are:
1. Specify the sequential relationships among tasks using a precedence diagram.
2. Determine the required workstation cycle time
3. Determine the theoretical minimum number of workstations Nt =
4. Select a primary rule by which tasks are to be assigned to workstations, and a secondary rule to break ties.
5. Assign tasks, one at a time, to the first workstation until the sum of the task times is equal to the workstation cycle time, or no other tasks are feasible because of time or sequence restrictions. Repeat the process for Workstation 2, Workstation 3, and so on until all tasks are assigned.
6. Evaluate the efficiency of the balance derived
7. If efficiency is unsatisfactory, rebalance using a different decision rule.
Process layout design
The analysis involved in the design of production lines and assembly lines relates primarily to timing, coordination, and balance among individual stages in the process. For process layouts, the relative arrangement of departments and machines is the critical factor because of the large amount of transportation and handling involved.
Procedure for designing process layouts
Process layout design determines the best relative locations of functional work centers. Work centers that interact frequently, with movement of material or people, should be located close together, whereas those that have little interaction can be spatially separated. One approach of designing an efficient functional layout is described below.
1. List and describe each functional work center
2. Obtain a drawing and description of the facility being designed
3. Identify and estimate the amount of material and personnel flow among work centers
4. Use structured analytical methods to obtain a good general layout
5. Evaluate and modify the layout, incorporating details such as machine orientation, storage area location, and equipment access.
The first step in the layout process is to identify and describe each work center. The description should include the primary function of the work center )drilling, new accounts, or cashier_; its major components, including equipment and number of personnel; and the space required. The description should also include any special access needs (such as access to running water or an elevator) or restrictions (it must be in a clean area or away from heat).
For a new facility, the spatial configuration of the work centers and the size and shape of the facility are determined simultaneously. Determining the locations of special structures and fixtures such as elevators, loading docks, and bathrooms becomes part
of the layout process. However, in many cases the facility and its characteristics are a given. In these situations, it is necessary to obtain a drawing of the facility being designed, including shape and dimensions, locations of fixed structures, and restrictions on activities, such as weight limits on certain parts of a floor or foundation.
To minimize transport times and material-handling costs, we would like to place close together those work centers that have the greatest flow of materials and people between them. To estimate the flows between work centers, it is helpful to begin by drawing relationship.

Service Process

Service Process
In planning manufactured products, a great deal of attention must be paid to technical specifications such as size, weight, and engineering specifications. For physical characteristics, standard may be determined and the conformance to these standards can be monitored for quality assurance. The quality of services, on the other hand, depends on the skill and training of personnel who produce the services. It is more difficult to set standards on performance, and consistent quality is more difficult to ensure.
For example, all meals on an airline may be of the same quality, but service may vary considerably with different flight crews.
Another important difference between manufactured products and services is that manufactured products can be stored for future use, whereas services must be made available to the customer on demand. This difference is another important consideration for quality assurance. That is, major quality considerations must be planned and designed into the service just as it should be with manufactured products; however, finished goods may be inspected prior to being released from the factory. For services, this cannot be done.
Additional considerations should be given when designing service products are as follows:
1. To what extent will the customer be involved in the process? For example, will a retail operation be primarily self-service (Big Bazaar)? Will a financial institution allow customers to execute their own transactions using automatic teller machines or telephones (Citibank)? Normally, greater customer involvement is incorporated into the product either to reduce costs or to provide grater convenience to the customer by, for instance, eliminating the need to wait for a salesperson.
2. How quickly will service be provided? Human queuing systems are an important aspect of product quality for services. The intended speed of service will affect staffing, job design, scheduling, and facility layout.
3. How standardized or customized will the service be? For example, freight rail service is usually highly standardized: trains are scheduled
to run between specific locations, and if customers want to ship or receive materials, they must be ready at those times.
4. What variety of services will be offered? If a fast-food restaurant will provide only carry-out service, there is no need for seating space in the facility or extra service personnel to clean the tables.
5. What geographical area will be served? American Express Corporation, which sells its products based on quick worldwide replacement of lost or stolen traveler’s checks and credit cards. This product characteristic requires a large international network of American Express offices and agents with a telecommunications system linking them.

Approaches to Improving Product and Service Designs

Approaches to Improving Product and Service Designs

Quality Function Deployment- “method to transform user demands into design quality, to deploy the functions forming quality, and to deploy methods for achieving the design quality into subsystems and component parts, and ultimately to specific elements of the manufacturing process.”

Computer-aided design- Computer-Aided Design (CAD) is the use of computer technology to aid in the design and particularly the drafting (technical drawing and engineering drawing)

Computer-added manufacturing-The process of using specialized computers to control, monitor, and adjust tools and machinery in manufacturing

Design for Manufacturability-It is the general engineering art of designing products in such a way that they are easy to manufacture. The basic idea exists in almost all engineering disciplines, but of course the details differ widely depending on the manufacturing technology.

Design for Maintainability-Design for Maintainability When human factors engineering is applied to minimize the time and effort required to perform preventive and unscheduled

Design for the Environment- It is a general concept that refers to a variety of design approaches that attempt to reduce the overall environmental impact of a product, process or service, where environmental impacts are considered across its life cycle

Target costing- Method used in the analysis of product design that involves estimating a target cost, via a desired profit and sales price, and then designing the product/service to meet that cost.

Product Design and Development Process

Product Design and Development Process
Process decisions must be made when:-
A new or substantially modified product or service is being offered
Quality must be improved
Competitive priorities have changed
Demand for a product or service is changing
Current performance is inadequate
The cost or availability of inputs has changed
Competitors are gaining by using a new process; or
New technologies are available

Process decisions directly affect the process itself, and indirectly the products and services that it provides. Let’s focus on the relevant common process decisions. In general, Operations managers must consider five common process decisions.
These are:
1. Process choice - Whether resources are organized around products or processes. It depends on volume and degree of customization to be provided
2. Vertical integration -Backward integration, and forward integration
3. Resource flexibility -ease with which employees and equipment can handle a wide variety of products, output levels, duties, and functions
4. Customer involvement
5. Capital intensity- mix of equipment and human skills in a process
A common classification of production process structures
We often classify processes based on their physical configuration, material and product flow, flexibility, and volume expectation.
There are five different process types, which a manager can choose, keeping in mind the relative importance of the following attributes:-
Quality,
Time,
Flexibility, and
Cost.
These are:
1. Project process
Selecting location for new plant
2. Job process
Machining precision metal tubes
3. Batch process
Producing a batchof textbooks
4. Line process
Auto assembly
5.Continuous process
Oil-refining process

Statistical Quality Control

Statistical Quality Control

It helps in verify that the business processes are indeed meeting the specifications. Under this we are using statistical methods and mathematical formulas to control over quality.

Tools of Statistical Quality Control
Process Capability
Upper Tolerance Limit
Lower Tolerance Limit
Six –sigma Quality
Control Chart
Acceptance Sampling
Taguchi’s Quality Loss Function
With the help of above tools we can compare the standards with actual results and take decisions to improve quality and increase profitability.

Continuous Improvement tools

Lecture-8

Continuous Improvement tools
In today's turbulent business environments everyone is looking for continuous improvements in the products and services which they offer and the ways in which they produce them. Whether these come through the occasional 'big bang' breakthrough innovation, or through the more typical incremental improvements and adjustments, constant change is essential, not just to remain competitive but often for the survival of the business itself.
Faced with this challenge we need to rethink our views on innovation and how it is carried out. In particular, we need to think again about who can be involved in the process. Whilst innovation used to be the responsibility of a few specialists in R&D or production engineering, there is no reason why most people in the organisation should not be able to participate in thinking of — and implementing — small changes on a regular basis. After all, most of the innovation task is about incremental problem-solving, getting the 'bugs' out of the system or product. And everyone in the firm comes fully equipped for the task — 'with every pair of hands you get a free brain'!

Why and when is it used?
… because continuous improvement (CI) represents a huge missed opportunity. By tapping in to the creativity of all the staff in the organisation — not just a handful of specialists — it's possible to become much more innovative. After all, with every pair of hands you also get a free brain — it's an awful waste not to use it! The experience of those who have gone down this road might help persuade you — they've managed to trigger hundreds and thousands of small ideas. Whilst these may never win a Nobel prize, they add up to impressive bottom line savings — in reduced waste, reduced time, greater flexibility, higher quality and better service …
CI can be used to deliver performance improvement along any dimension of the business (eg costs, quality, time reduction, etc.) through high involvement of the workforce.

How does it work?
Although obvious, this potentially huge source of innovation was largely neglected in UK manufacturing until comparatively recently. It was only when the messages from Japan became hard to ignore that we began to realise that their success across a range of sectors was due in no small measure to a different approach to innovation. In addition to the traditional use of specialists, Japanese firms built on high involvement of the workforce in regular incremental innovation — a process called kaizen but which is more familiar to us as 'continuous improvement' (CI).
Continuous improvement (CI) is a generic name given to a range of activities designed to engage a high degree of involvement amongst the workforce in innovation. It is really an umbrella term for an organisational approach (high involvement) supported by a range of specific tools.
CI is about an approach to change which is high in involvement but which stresses incremental innovation as its key feature — a 'little and often' rather than a 'big bang' view. Since it is a philosophy it is often linked with more specific change programmes — for example, in business process re-engineering, total quality management or versions of the 'lean' concept. In each case the contribution of CI is to maintaining and extending progress through a regular stream of small improvements.

Specific techniques

CI involves an extended journey, gradually building up skills and capabilities within the organisation to find and solve problems. Not surprisingly there are many different techniques which can help enable the process, and for a full account of them you should look at the further information sources. What follows here are some brief explanations of basic tools.
Specifically we will look at:
problem solving cycle
brainstorming
cause and effect diagrams
checksheets
flow diagrams
and an outline of policy deployment.

Explaination:-

Problem-solving cycle

In the first stage — identify — the organisation recognises that there is a problem to solve. This may be an emergency or it may be a minor difficulty which has been nagging away for some time; it may not even be a 'problem' but an experiment, an attempt to find out a new way of doing something.
Whatever the initial stimulus, finding a problem then triggers the next stage which is to define it more clearly. Here the issue is often to separate out the apparent problem (which may only be a symptom) from the underlying problem to be solved. Defining it also puts some boundaries around the problem; it may be necessary to break a big problem down into smaller sub-problems which can be tackled — 'eating the elephant a spoonful at a time'. It can also clarify who 'owns' the problem — and thus who ought to be involved in its solution, if the solution is to stick for the longer-term.
Having analysed the nature of the problem, the next stage is to explore ways of solving it. There may be a single correct answer, as in crossword puzzles or simple arithmetic — but it is much more likely to be an open-ended problem for which there may be a number of possible solutions. The challenge at this stage is to explore as widely as possible — perhaps through the use of brainstorming or other group tools — to generate as many potential solutions as possible.
Next comes the selection of the most promising solutions to try out — essentially the reverse of the previous stage since this involves trying to close down and focus from a wide range of options. The selected option is then put into practice — and the results, successful or otherwise, reviewed. On the basis of this evaluation, the problem may be solved, or it may need another trip around the loop. It may even be the case that solving one problem brings another to light.
In terms of learning, this is essentially a model for experimenting and evaluating. We gain knowledge at various steps in the process — for example, about the boundaries of the problem in defining it, or about potential solutions, in exploring it or about what works and what doesn't work in implementing it. The point is that if we capture this learning it puts us in a much better position to meet the next problem; if it is a repeat, we already know how to solve it. If it is similar, we have a set of possible solutions which would be worth trying. And if it is completely new, we still have the experience of a structured approach to problem-solving.

Brainstorming
Brainstorming is the rapid pooling of all and any ideas that a group of people can come up with before any discussion or judgement takes place. Every idea is recorded no matter how bizarre or irrational.
How to Brainstorm
Keep a relaxed atmosphere. Meetings should be disciplined but informal. If possible, choose an informal venue.
Get the right size of team. The technique seems to work best with groups of 5 to 7 people.
Choose a leader. The leader checks that everyone understands what is going on and why.
Define the problem clearly.
Generate as many ideas as possible.
Do not allow any evaluation and discussion.
Give everyone equal opportunity to contribute.
Write down EVERY idea — clearly and where everyone can see them.
When all the ideas are listed, review them for clarification, making sure everyone understands each item. At this point you can eliminate duplications and remove ideas the group feels are no longer appropriate.
Allow ideas to incubate. Brainstorm in sessions with perhaps a few days in between. This gives time for the team to let the ideas turn over in their mind, which often results in new ideas at a later session.
Approaches to Brainstorming
One-at-a-time
A member of the group offers one idea and the session continues this way until everyone has had a chance to add to the list.
Open Door or Freewheeling
Anyone who has a contribution speaks whenever he or she wants.
Write-it down
Ideas are written down rather than stated out loud, but everyone must be able to see each idea listed.

Cause and effect diagram
Also called the 'Fishbone Diagram', this participatory exercise explores the links between the effects and the possible causes of an issue. This tool encourages a group setting for problem —solving and demonstrates that problems can have a number of causes.
What is it?
Cause and effect analysis is a technique for identifying the possible causes of a problem or effect. The technique uses a Cause and Effect Diagram to record the possible causes as they are suggested.
When should you use it?
Use this tool when you want to establish the cause of an effect. The effect may be either a problem or a desirable effect — when something desirable has happened it is useful to find out what caused it so you can make it happen again.
Constructing a Cause and Effect Diagram
Establish what the problem, or effect, is. It must be stated in clear and concise terms, agreed by everyone.
Write the effect (problem) in a box on the right and draw a long line pointing to the box.
Decide the major categories of causes. This may be done in several ways:
Brainstorming
Using standard categories such as the 4Ms (Machines, Materials, Methods, Manpower) or PEMPEM (Plant, Equipment, Materials, People, Environment, Methods).
When the effect results from a recognisable process or set of activities, the major steps in the process can be used.
Write the major categories in boxes parallel to, and some distance from, the main line. Connect them to the main line with slanting arrows.
Brainstorm for possible causes.
Add the causes to the diagram clustered around the major causes they influence. Divide and sub-divide the causes to show how they interact, and draw links between causes that are related. If the diagram becomes too crowded, move one or more categories to a new sheet of paper.
Evaluate and analyse the possible causes.
Decide and act.
This will probably involve using other tools. For example, in order to verify some of the possible causes identified you may need to collect data (using checksheets) and analyse it (Pareto Analysis, graphs, etc.).

Checksheets
What is it?
A Checksheet is a tool for recording and organising data.
There are three kinds of Checksheets:
Recording Checksheet
Counts how many times something happens in pre-specified categories.
Checklist Checksheet
A list of items to be addressed in some predetermined manner eg an inspection sequence that prevents steps or procedures from being left out.
Location Checksheet
Records the relative or specific locations of defects, injuries, accidents etc … Usually it is a picture or map of the item/area under consideration on which the location of the defect etc. is marked with a dot or a cross.
Why use it ?
Checksheets will help you to gather and classify data. Checksheets ensures that everyone collects comparable data in the same form, and in a format that allows easy analysis.

Constructing a Checksheet
Decide what data you need to collect.
Decide how often the events will be observed (the frequency) and over what total period (the duration).
Design a draft Checksheet. Put the items to be monitored on the left and the time periods across the top. Allow space for totals on the right for each item being observed and along the bottom for the observation periods. Label the Checksheets clearly.
Test the draft Checksheet by getting someone who did not help design it to use it.
Make any revisions that are necessary as a result of step 4.
Distribute the Checksheets to the people collecting the data and explain how to use them.
Act on the data collected.

Flow charting
What is it?
A flowchart is a diagram illustrating the activities in a process.
Why use it?
A flowchart can tell you a lot about a process and the activities involved eg Are all the activities really necessary? What controls are in place?
Flowcharts are a useful tool to use when improving a process, especially when you are planning to collect data or to implement a solution. They can also be used to document a new process or to compare an existing process with an 'ideal' process.
Flowcharts are a good communication tool — by using standard symbols everyone will have the same understanding of the process.

Constructing a flowchart
Decide what level of detail the flowchart is to represent.
This will depend on the purpose for constructing the flowchart. On a higher level flowchart several tasks which make up an activity will be shown as one activity whereas on a lower level flowchart each task will be shown separately.
List the activities in the process.
Draw the flowchart (sometimes this is done using standard symbols — for example:
stretched circle- start or end of process
rectangle-step or activity in the process
diamond-decision point
arrow-direction of flow

Policy deployment
As the name suggests the basic concept in policy deployment is the development of mechanisms for breaking overall strategic objectives of the business down into small units, each of which can provide the target for groups or individuals in their CI activities over a sustained period. For example, in Nissan Cars the overall strategic target is cascaded down through the organisation via the appraisal process, where everyone has the chance to discuss and agree to certain objectives over the coming year, including a range of targets for their own CI activities. This process — which is essentially 'management by objectives' — is a two-way one but the outcome is agreed targets and a commitment on the part of the employee to achieving them, a recognition that this is what will be used to assess performance over the coming year, and an understanding that achievement will be related to rewards.
Its value in CI is to provide a focus and targeting process which moves on from simply improving things on a project by project basis. In policy deployment targets are linked to strategic objectives and local activities mesh together to contribute to meeting these. For example, if the overall target includes an objective to become competitive by reducing customer lead-time by 25%, then policy deployment would ask, for each area, how they could cut 25% of time out of their overall operations. In turn this would cascade down to the individual units within the area, and down to the individual teams, with the same question. Each individual team will then use CI tools to explore the sources of wasted time, and the kinds of thing which might cut it down — and on a project by project basis they would chip away at the time taken within their area. In aggregate form this would result in major savings.
Two key features are important here — the use of 'stretch' targets which give impetus, and the use of monitoring and measurement against these targets as a way of guiding the process and maintaining momentum. In addition there is a strong component of 'know why' as well as know-how — in other words, there is an attempt to explain the rationale behind the strategy and how improvements in a particular area contribute to it. For example, in a chemical plant working towards the target of 'zero breakdowns' each machine has detailed operating and maintaining instructions attached. These have been developed through CI activity and include not only the new operating procedures but also a section on why these steps are important. There is thus an element of organisational learning, of turning tacit into formal knowledge. Similar functions are performed by the storyboards which characterise progress along the road to meeting strategic targets.
Policy deployment is concerned with strategic objectives so the timescales for typical 'campaigns' are long. For example, in Japan the 'mid-term plan is the key driver in firms, and this represents a clear statement of objectives and targets over the next 3 years.

Benefits
'Total quality', 'lean manufacturing' and a host of other prescriptions to explain the productivity and performance gap between Japanese firms and the rest of the world repeatedly stressed the high level of involvement of most employees in the day-to-day problem-solving. The scale of this is impressive — firms like Toyota receive annually around two million suggestions, whilst Kawasaki Engineering report a staggering 7 million — and they implement the vast majority of these. (To put that in perspective, it was estimated in 1989 that workers in the Japanese car industry made an average of 1 suggestion per worker per week; the European equivalent figures were 0.5 suggestions, per worker, per year!)
That picture is changing fast — recent survey data suggests that 65% of companies consider CI to be of strategic importance, and around 50% have instituted some form of systematic programme to apply these concepts. A further 19% claim to have a widespread and sustained process of CI in operation, and of those firms using CI 89% claim it has had an impact on productivity, quality, delivery performance or some combination of these.

TQM & Cost

Lecture 7

Total Quality Management & Cost

Total quality management is an effective system for integrating the quality development, quality-maintenance, and quality-improvement efforts of the various groups in an organization so as to enable marketing, engineering, production, and service at the most economical levels which allow for full customer satisfaction.

The content and its essentiality to the achievement of business results make total quality control a new and important area of management. As a focus of managerial and technical leadership, total quality control has produced outstanding improvements in product quality and reliability for many organizations throughout the world Moreover, total quality control has achieved progressive and substantial reductions in quality costs.
Through total quality control, company managements have been able to deal from strength and confidence in the quality of their products and services, permitting them to move forward in market volume and product mix expansion with a high degree of customer acceptance and profit stability and growth.
Total quality control provides the fundamental basis of positive quality motivation for all company employees and representatives, from top management through assembly workers, office personnel, dealers, and service people. And a powerful total-quality-control capability is one of the principal company strengths for achieving vastly improved total productivity.

Core Idea behind TQM

Customer focus

Leadership involvement

Continuous improvement

Employee empowerment

Quality assurance

Supplier partnership

Strategic quality plan

TQM Cost

Various kind of cost incurred in TQM are as follows:

Internal Failure CostExternal Failure Cost

Appraisal Cost

Prevention Cost