Summary Lecture

Productivity and Quality Management

Lecture No. 1

• Productivity and Quality Introductory Lecture• Topics Introduced

– Productivity– Factors Affecting Productively– Productivity at National Level– Quality– Total Quality Management (TQM)– Product and Service Quality– Total Productive Maintenance (TPM)

Lecture No. 2

• The Role of Productivity• Misconceptions about Productivity• Benefits of Productivity• Model of Low Productivity Trap

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• Single-factor measures– Output / (Single Input)

• All-factors measure– Output / (Total Inputs)

Productivity = Outputs

Inputs

Productivity

Lecture No. 2

• Misconceptions– First, productivity is not only labour efficiency or

``labour productivity– The second misconception is that it is possible to

judge performance simply by output. – The third problem is confusion between

productivity and profitability. – Fourth there is one more misunderstanding –

confusing productivity with efficiency.

Model of the Low Productivity Trap

Low productivity growth (compared with input prices)

Rising Prices (domestic and export goods)

Rising unit (labor and energy) cost

Sluggish sales (in domestic and

foreign markets)

Lower utilization of domestic plant

capacity

Lagging capital formation

(insufficient capital ratio)

3rd Lecture

• History of Background of Productivity • Productivity Models• Productivity Measurement Models• Productivity Improvement

Ways of Calculating Productivity

Ways to Improve Productivity

Ways to Improve Productivity

Lecture No. 4

• Role of Productivity in Operations Management

• Efficiency Versus Effectiveness• Production and Productivity• Productivity Calculations• Example of Productivity

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Productivity Calculations

Productivity =Units produced

Labor-hours used

= = 4 units/labor-hour1,000250

Labor Productivity

One resource input single-factor productivity

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Multi-Factor Productivity

OutputLabor + Material + Energy +

Capital + Miscellaneous

Productivity =

Also known as total factor productivity Output and inputs are often expressed in

dollars

Multiple resource inputs multi-factor productivity

Lecture No. 5

• Improving Productivity– Historical Background– Productivity Growth

• Productivity Improvement Factors (1st Theory)– Internal Factors– External Factors

• Productivity Improvement Factors– Technical Factors

Productivity improvement factors

External Factors• Factors which are external and not

controllable for one institution are often internal to another.

• Factors external to an enterprise are of interest to that enterprise because an understanding of them can motivate certain actions which might change an enterprise behavior and its productivity in the long run.

Productivity improvement factors

Internal Factors• Since some internal factors are more easily

changed than others it is useful to classify them into two groups:– Hard (not easily changed)– Soft (not easily changed)

Lecture No. 6

• Productivity Improvement Factors• Organizational Factors• Management Factors• Production Factors• Government Factors• Finance Factors• Government Factors

Factors that affect Productivity

The eight main factors that affect productivity are:

Lecture No. 7

• Productivity and Global Economic Growth and Development– Background– Economic Growth – Causes of Economic Growth– Economic Development– Issues and Applications

9-21

How Do We DefineEconomic Growth (cont’d)?

• There are two ways to define economic growth, depending upon the final goal.– An increase in real GDP over time– An increase in real per capita GDP over time

• The second definition is superior if the objective of the analysis is a comparison of living standards.

Economic Growth

• The key determinants of economic growth – Increases in the labor force, the growth of capital, and the growth

of productivity

• New growth theory – Emphasizes how rewards to innovation contribute to higher growth

rates

• Fundamental factors that contribute to a nation’s economic development

– Nations that encourage education, have a strong system of property rights, allow creative destruction, and avoid protectionism have higher levels of productivity and economic development

Lecture No. 8

• Productivity indices help us to evaluate economic performance and the quality of social and economic policies.

• Productivity Analysis helps identify factors affecting income and investment distribution within different economic sectors, and helps to determine priorities in decision making.

• In enterprise, productivity is measured to help analyze effectiveness and efficiency.

• Its measurement can stimulate operational improvement

Labor Time Method

• Total Productivity is the average of labor and capital productivity weighted and adjusted to price fluctuation.

• It can be calculated by labor time method.• All materials, depreciation, services and final

products can be converted into manpower equivalents by dividing the output by input in financial terms, this being divided again by the national or sectoral average annual income per employee:

Labor Time Method

This gives

The indices used above are complex and not very precisely defined.

National Labor Productivity

• At the national level labor productivity is computed by taking the entire economically active population as the input and the total value of goods and services produced as the output

National productivity =

A more useful way of measuring national labor productivity is to divide output by “hours potentially workable” in order to take account of labor wasted by unemployment.

Lecture No. 9

• Performance and Productivity in Non-profit organizations– Performance and Productivity– Public and Private Organizations– Some reasons for Performance– Major Performance Challenges

• Stakeholders• Organizations• Projects• People

Performance Problems of Stakeholders

• Problem 1: Needs of target groups are not sufficiently met.– Variations: Programs are absent or too small to meet target group needs,

programs or policies perform poorly, client groups feel disenfranchised or excluded from decision-making processes, target groups have unrealistic expectations.

• Problem 2: Individuals who interact with the agency are dissatisfied.– Variations: Unresponsiveness by agency staff, poor mix of interaction

mechanisms, inadequate frontline service.• Problem 3: Citizens, clients, or community leaders are apathetic

about the program.– Variations: Inadequate enthusiasm for new programs, inadequate support

of agency goals and staff.• Problem 4: Individuals or groups are making politics at the expense

of the organization.

Performance Problems of Organizations

• Many performance problems are caused by failure to adhere to basic principles of organizational design.

• This can produce symptoms such as infighting, lack of direction, micromanagement, spending too much time on coordination, plans that gather dust, and the inefficient use of or acquisition of resources.

• Employee de-motivation may occur as a secondary result.

• These problems affect programs as well as agencies as a whole.

Performance Problems of Projects

• When projects are managed poorly, they fall behind schedule, lack relevance, exceed costs, and fail to meet standards, yielding stakeholder dissatisfaction or apathy.

• They fail to contribute to the agency’s mission. • Project management is about avoiding these outcomes.• The hallmark of properly managed programs is that they

achieve their objectives – (1) on time, – (2) within budget, and – (3) at or above quality and performance specifications.

Performance Problems of People

• People are key to making organizations work. • When they fail, so too do many organizations and

their programs. • People are a critical resource. • Typical symptoms of people problems are people

shunning their work, their manager or their coworkers, staff de-motivation, formal or informal complaints against a person, projects falling behind, and lack of new programs, successful programs, or program leadership

Lecture No. 10

• Quick Productivity Appraisal approach (QPA)– Integrated audit approach– Includes diagnosis and monitoring of a

productivity improvement program covering a whole organization.

• Components– Company Performance Appraisal (CPA)– Qualitative assessment– Industry Performance Appraisal

How to conduct CPA?

Steps in Company Performance Appraisal (CPA)

Lecture No. 11

• Total Productive Maintenance– Philosophy of Total Productive Maintenance (TPM)– History of TPM– Types of Maintenance– TPM Policies and Objectives– Similarities and Differences between TPM and

TQM

The TPM Philosophy

Lecture No. 11

• TPM Models and Theories• 5S Theory• Pillars of TPM• TPM Implementation• Benefits of Applying Total Productive

Maintenance

Components of TPM

Lecture No. 12

• TPM Models and Theories• 5S Theory• Pillars of TPM• TPM Implementation• Benefits of Applying Total Productive

Maintenance

Based on five Japanese words that begin with ‘S’, the 5S Philosophy focuses on effective work place organization and standardized work procedures.

5 S’s 1. Sort :(Seiri)2. Set In Order:(Seiton)3. Shine: (Seiso)4. Standardize: (Seiketsu) 5. Sustain: (Shitsuke)

5S Philosophy

Eight Pillars of TPM Activity• TPM has 8 pillars of activity, [2] each being set to achieve a “zero”

target. These 8 pillars are the following: – Focused improvement (Kobetsu Kaizen); – Autonomous maintenance (Jishu Hozen); – Planned maintenance – training and education – early-phase management – quality maintenance (Hinshitsu Hozen); – Office TPM – Safety, Health & Environment

• Some organizations also add additional pillars according to their work place like: – Tools Management – Information Technology

Lecture No. 13

• Factors that improve productivity in Oil and Gas:1). Integrating Automation2). Introducing Smart business processes3). Improving safety4). Risk Mitigation5). Innovations6). The Human element

Key areas to be looked into in Oil and Gas

Lecture No. 14

• History of Motion and Time Study• Defining Work Systems and Productivity• Methods Design • Motion Study• Work Methods Design

Motion and Time Study

• Motion and time study helps management determine how much is produced by workers in a specific period of time, therefore making it easier to predict work schedules and output.

• Motion and Time Study is a scientific method designed by two different people for the same purpose, to increase productivity and reduce unit cost.

• The two methods evaluate work and try to find ways to improve processes.

HISTORY OF MOTION AND TIME STUDY

Frank B. Gilbreth, Lillian M Gilbreth-1885, he begun to develop motion study. Gilbreth invented motion study designed to determine the best way to complete a job

Frederick W. Taylor-1881, he started to develop time studyTaylor designed Time Study; it measures how long it takes a worker to complete a task.

WorkMeas.mnt

MethodsDesign

MethodologyOutline of MTS • Develop System

– Design work methods (sequence of operations and procedures) that make up the preferred solution

– Find better methods for work• Standardize

– Form written standards for operations

• Time Standards– Determine a standard time for

each operation• Training

– Train the operators

Develop System

Standardize

Time Standards

Training

Lecture No. 15

• Work measurement – evaluation of a task in terms of the time that should be allowed by an average worker to perform the task

• Time study – all the ways in which time is analyzed in work situations

• Standard time – amount of time that should be allowed for an average worker to process one work unit using the standard method and working at normal pace

Task Hierarchy & Work Measurement

Time Study and Work Measurement

Prerequisites for Valid Time Standards: Factors that must be standardized before a time standard can be set

Time Study and Work Measurement

Lecture No. 16

• What is Quality?• Century of Quality• History of Quality Methodology• Deming’s Principles• Taguchi’s Contributions And Philosophy

What is Quality?• Conformance to specifications (British Defense Industries

Quality Assurance Panel)• Conformance to requirements (Philip Crosby)• Fitness for purpose or use (Juran)• A predictable degree of uniformity and dependability, at low

cost and suited to the market (Edward Deming)• Synonymous with customer needs and expectations (R J

Mortiboys)• Meeting the (stated) requirements of the customer- now and

in the future (Mike Robinson)• The total composite product and service characteristics of

marketing, engineering, manufacturing and maintenance through which the product and service in use will meet the expectations by the customer (Armand Feigenbaum)

Taguchi Philosophy

• 3 stages in a product’s (or process’s) development:1) System design: uses scientific and

engineering principles to determine the basic configuration.

2) Parameter design: specific values for the system parameters are determined.

3) Tolerance design: determine the best tolerances for the parameters.

Lecture No. 17

• Total Quality Management• Quality Improvement Tools• Costs related to quality• Benefits/Drawbacks

Evolution of Quality Management

Mass Inspection

Quality Control (Acceptance Sampling)

Quality Assurance

Quality Management System

Company wide Quality Control

Total Quality Management

The Acceptance Inspection Model

Reject, Scrap, Rework, Repair

Pass the Inspection?NO

YES

Process

Inspection

Acceptance

Next Process

Lecture No. 18

• The Quality Management Paradigms– Inspection Era– Statistical Quality Control Era– Quality Assurance Era– Strategic Management Era– Total Quality Management

The Four Major Quality Eras

The Four Major Quality Eras

The Four Major Quality Eras

Lecture No. 19

• The Quality Management Philosophies• Deming’s System of Profound Knowledge• Perspectives on Profound Knowledge

Theory of Profound Knowledge- knowledge for leadership of transformation

1. Appreciation for a system– A network of interdependent components that work together to try

to accomplish the aim of the system. Without aim there is no system.

2. Knowledge of variation– Understanding where the processes are stable

3. Theory of knowledge– Predicting and anticipating what will happen if certain actions are

taken

4. Psychology of individuals, society and change.– Appreciate people’s natural inclination toward learning and being

innovative.

Slide 3.2

Lectures 20 and 21

• Leaders in the Quality Revolution– W. Edwards Deming– Joseph M. Juran– Philip B. Crosby– Shingo – Ishikawa– Genichi Taguchi– Peter Drucker– Tom Peters

Deming’s Philosophy

• Quality is about people, not products• Suggested quality concept for designing product• Management need to understand nature of

variation and how to interpret statistical data• Promoted importance of leadership• 85% of production faults responsibility of

management, not workers• Enumerated a 14-point management philosophy

Slide 3.17

Juran’s Quality Trilogy

• Quality planning– Preparing to meet quality goals

• Quality control– Meeting quality goals during operations

• Quality improvement– Reaching unprecedented levels of performance

Q.P

Q.C. Q.I.

Philip B. Crosby’s Philosophy

Absolutes of Quality Management:• quality means conformance to requirements

– Requirements must be clearly stated so they can’t be misunderstood

• problems are functional in nature– Problems must be identified by those individuals

that cause them

Lecture No. 22

1. To emphasize the importance of planning in the quality management system.

2. To compare and contrast formal and informal planning.

3. To provide a systematic approach to planning

PDCA Example

Lecture No. 23-Project Planning• A project plan is made up of significant events or milestones that

must occur in some time sequence in order for a project to be completed.

• A project plan is a schedule of tasks over the duration of the project• Project plans are an effective means of depicting a project schedule

and reporting progress as it occurs. • The type of plan most often used is a Gantt-type chart • When viewing this plan, you should remember that the responsible

manager should have a list of all the projects under his or her control along with their associated status.

• In turn, each project on the list is then delegated to a project manager.

Lecture No. 24 and 25Controlling for Quality

1. Define the control process, and discuss the elements of reporting.

2. Develop an appreciation for business, process, and product performance reporting.

3. Introduce and describe the various reporting structures.

Journalizing Procedure

• To illustrate the recording of activities in the activity report or log, assume that on May 1, 20xx, John Doe of the Red Bead Company Sales Department took 500 orders from customers.

• Upon review of these orders, three nonconformities were found.

• This activity is recorded on the first page of the activity report or log as follows:

Journalizing Procedure

Posting

• The process by which the outputs and nonconformance are summarized and transferred to activities on the performance log is called posting.

• It consists of transferring totals for the outputs (total) column and the nonconformance (nc) column on the individual activity reports or logs to the performance log.

Lecture No. 26Staffing for Quality

Define the employee-forecasting process, and discuss the elements of resource planning.

2. Develop a scheme for the development of job descriptions and requirements.

3. Describe the various education and training methodologies.

Lecture No. 27Leadership

• The motivation process begins with proper leadership. • Leadership should lead to an appropriate motivating

environment which provides consistency in purpose and sincerity, and where goals are realistic and there are no hidden agendas.

• Management needs to be aware that each individual has different needs depending on her stage in life and should be treated accordingly.

• Operator dissatisfaction will be reflected in her work when these needs are not recognized.

Lecture No. 27Motivation

• The motivation process begins with proper leadership. • Leadership should lead to an appropriate motivating environment

which provides consistency in purpose and sincerity, and where goals are realistic and there are no hidden agendas.

• Management needs to be aware that each individual has different needs depending on her stage in life and should be treated accordingly.

• Operator dissatisfaction will be reflected in her work when these needs are not recognized.

• When management communicates in only one direction to employees, mostly through threats and very few rewards, employees will form informal objectives that are diametrically opposed to those of the organization, resulting in ever-decreasing levels of output value.

Lecture No. 28- TQM

• Definition and Explanation of TQM• History of TQM• Five Approaches of Quality• Characteristics of TQM

– Quality chains– Company policy and accountability– Control – Monitoring the process – Teamwork – Consumer views – Zero defects

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Lecture No. 29- Introduction to Six Sigma

Six Sigma is methodology used for:• Aligning key business processes to achieve those

requirements.• Utilizing rigorous data analysis to minimize data

variation in those processes.• Driving rapid and sustainable improvement to

business processes.

Lecture No. 30Six Sigma Methodologies

• BPMSBusiness Process Management System

• DMAICSix Sigma Improvement Methodology

• DMADVCreating new process which will perform at Six

Sigma

Lecture No. 31ISO Quality management system• ISO 9000 establishes the requirements for quality management systems

(QMS) that must be employed by all organizations registered to the standard.

• The eight quality management principles are defined and detailed in ISO 9004:2000, Quality management systems Guidelines for performance improvements.

• Principle 1 Customer focus• Principle 2 Leadership• Principle 3 Involvement of people• Principle 4 Process approach• Principle 5 System approach to management• Principle 6 Continual improvement• Principle 7 Factual approach to decision making• Principle 8 Mutually beneficial supplier relationships

Improving Productivity