Operation Analysis

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1. Bottle Neck Process 2. Economics of Quality Management
3. Total Quality Management(TQC) 4. MRP
5. JIT 6. Inventory Control
7. BPR

1. Bottle Neck Process

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When we design processes, we must consider capacities of processes

2. Economics of Quality Management

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Joseph Juran's Quality Cost Categories

Internal Failure Costs

External Failure Costs

Appraisal Costs

Prevention Cost

3. Total Quality Control(TQC)

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Edward Deming's 14 points

  1. Create consistency of purpose for product and service improvement
  2. Adopt new philosophy
  3. Cease dependence on mass inspection
  4. End awarding business on price tag alone
  5. Improve continuously and forever
  6. Institute modern methods of job training(Statistical methods)
  7. Institute modern methods of supervising(Empowerment)
  8. Drive of fear( Do not afraid to ask questions, report problems, and express ideas)
  9. Breakdown barriers between departments
  10. Eliminate numerical goal(Eliminate 20 % up, 50 % down kinds of slogan, a goal is to improve continuously)
  11. Eliminate work standards(Work standards prevent improvement)
  12. Remove barriers that hinders workers' pride
  13. Institute a vigorous education program
  14. Create structure in top management that will push the above 13 points everyday.

Joseph Juran's Breakthrough Sequence

  1. Breakthrough in management attitude
  2. Identify the vital few projects
  3. Organize for breakthrough teams
  4. Conduct the analysis
  5. Determine how to overcome resistance to change
  6. Institute the cooperation
  7. Institute control(monitor and feedback continuously)

Crosby's Quality Control programs

  1. Establish commitment in management
  2. Institute quality improvement teams
  3. Establish quality measurement
  4. Evaluate the cost of quality improvement
  5. Make aware of quality
  6. Generate corrective actions
  7. Plan a Zero Defect
  8. Train supervisors
  9. Set Zero defect day
  10. Set goals to individuals
  11. Remove error cause
  12. Evaluate attainment of goal
  13. Institute regular quality council
  14. To be continuous

4. MRP

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MRP I: Arrange material


Bill of Material

Time Phasing

5. JIT

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Pull System: Kanban

Jidouka: Make processes processes human

Andon: Stop the line when a defect occurs, and do not start again the cause of defect.

Minimum inventory: In order to clarify defects

Heijunka: Ideal target is one by one flow.

6. Inventory Control

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Economic Order Quantity

Yearly carrying cost = Average units of inventory x Value per unit x Inventory carrying cost rate

=Q/2 x V x C

*Average units Inventory is equal to ½ of each order size

Yearly set up cost =(Demand/Order size) x Set up cost per unit

= Q/2 x V x C

When yearly carrying cost = yearly set up cost, total cost becomes minimum.

Q/2 x V x C= Q/2 x V x C


Inventory System

(s,Q) System

(s, S) System

Reorder Point/Reorder Quantity System(Fixed Order Quantity model)

S = Fixed Upper inventory level -Current inventory level

(Depending on the last ordered size, current inventory level becomes less than safety inventory level)

Reorder point

ROP =Average daily demand x Lead-time

+ Sigma for specified service level x Sigma for usage during lead-time

Sigma for specified service level = EOQ(1-P)/Sigma for review period + lead- time

P: Non-stock out probability

Sigma for review period + lead- time = Sqrt(Sum of variances)

(Sigma for review period + lead time must be decided by past experience)

Sigma for usage during lead-time = Sqrt(Sum of variances)

(Sigma for lead time must be decided by past experience)

Safety Stock

SS = ROP - Average Demand during the lead time

Periodic Review System(Fixed Time Period Model)

Reorder point

ROP = Mean demand during lead time + Z score x Sigma

Stock out probability 2.5 % Z=1.96
Stock out probability 5.0 % Z=1.64
Stock out probability 10.0 % Z=1.28
Stock out probability 15.0 % Z=1.03

No Safety Stock level

ABC analysis

7. BPR

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Continuous Implementation VS BPR
Continuous Impl.
Level of Change
Starting Point
Current Process
Primer Enabler
Info. Technology
Financial Requirement