Module 2
Materials Management

Significance of Materials ( 1/5M’s)
• Amount spent on materials increasing
• Scope for reducing cost and improving profit
• Influence ROI (M is a form of current asset)
• Add value to the product
• Affect the quality of the end product
• One of the centers of accountability for performance
• Conservation of M is a CSR
• For environmental safety
• Very essential for production
• Materials are the life-blood of man’s development
Aswathappa Page 472

Objectives of Materials Management
• Low prices
• High inventory turnover
• Low cost acquisition and
possession
• Continuity of supply
• Consistency of quality
• Low payroll costs
• Favourable supplier
relations
• Development of personnel
• Good Records
• Reciprocal relations
• New materials and products
• Economic make or buy
• Standardisation
• Product improvement
• Interdepartmental harmony
• Forecasts
• Acqisition
Aswathappa Page 476

Importance of MM
• Lower prices for materials and equipments
• Faster inventory turnover
• Continuity of supply
• Reduced lead time
• Reduced transportation costs
• Less duplication of efforts
• Elimination of buck-passing
• Reduced materials obsolescence
• Improved supplier relationship and better records and
information
• Better interdepartmental cooperation and
• Personnel development

Production planning in manufacturing
Overview of
Planning Levels
Short-range plans
(Detailed plans)
Machine
loading
Job
assignments
Intermediate
plans (General
levels)
Employment
Output
Long-range plans
Long term
capacity
Location /
layout

Materials planning and control
• It is the scientific way of determining the
requirements of raw materials, components
spares and other items that go into meeting
the production needs within economic
investment policies.
• Materials budgeting is an estimate of
expenses to be incurred in the procurement of
materials and it helps effective execution and
control of materials plans
Aswathappa page 480

Significance of materials planning
• Lack of proper MP leads to
– Over ordering or under ordering of materials
– Unwarranted emergency or rush orders
– Poor motivation to people
– Poor materials management

Factors influence materials planning
• Macro factors
– Price trends
– Business cycle
– Import policy of the government
– Credit policy
• Micro factors
– Corporate objectives
– Working capital
– Seasonality delegation of powers
– Communication systems
Aswathappa page 481

Approaches to Materials Planning
• Bill of Materials Explosion
Sales Forecasting
Techniques
Product requirements
Product- mix
Product structure
Sales Forecasts
Bill of Materials
Explosion Chart
Requirements of
Materials
Delivery Schedules of
materials
Requirements of various materials are worked out by
exploding the master production schedule for the
Planning period through the planning horizon. This technique is
referred to as Bill of Materials Explosion

Approaches to Materials Planning
1. Demand or sales forecasts - Annual production or
operating plan - Aggregate production plan -
Master production Schedule - Materials
Requirement Planning
2. Another approach is based on Past consumption
analysis. Used for items that are consumed on a
continuous basis ( i.e., independent demand items)
The past consumption data is analyzed and a
projection for the future is made, taking into
account the past and further production programs
for end products.

Guidelines for each item
• Average or mean consumption
• SD of the mean assuming that the
consumption follows a normal distribution
• The stock of levels to be held as a minimum
stock levels, maximum stock levels, re-order
levels and order quantities. ( these are
computed using statistical formulae).

Refer - Aswathappa
• Problems in Materials planning - Refer Page
482 – 483
• Guidelines to be used for effective and reliable
materials planning Page 483
• Purpose of materials budgets – Page 484
• Benefits of Materials budgets – page 485
• Importance of materials control – page 485-
486

Material Budgeting
• Process
•
Requirements of
materials
Purchase budget or
materials budget
Inventory of materials
on hand
Amount of materials to
be purchased
Variance report for
control
Inventory
Norms/ targets Forecast of prices and
rates
Actual Purchases
Page 484 Aswathappa

Note
• Note:- Material budget is prepared taking into
account inventory on order, and inventory in
transit ( known as pipe-line inventory).

Material control
• Function of maintaining constantly availability of
all kinds of materials required for the
manufacture of products
• Functional responsibilities
– Requisitioning of materials for purchase in economic
quantities at the proper time
– Their receipts
– Storage and production
– The issuing of materials to production upon
authorised request
– Maintenance and verification of inventory records

Materials control cycle
• Determining material needs
• Preparing requisitions for purchased items and requests for work
orders for parts made in the shops
• Receiving purchased materials and finished parts into the plant
• Inspecting purchased material and parts and inspection of finished
shop made parts.
• Delivering all parts and materials to the stores for storage
• Entering receipts in stores records apportioning material in the
records to current orders, authorising requisitions of materials from
stores for production of shop parts and requisitions of parts from
stores for assembly into finished products
• Issuing of parts and materials to the shop for production and
assembly
• Recording the issue in store records
• Entry of receiving and issuing transactions to cost and accounting
records
• Determination of necessity for replacement of stores which leads to
step number one and the cycle repeats

Other activities of materials control
section
• Determining the proper quantity to requisition
for each item of material for each purchased
and manufactured part
• Physical stock checking in stores to check
quantity on hand of each part and material in
order to verify the balances shown in stock on
store records
• Standardizing materials and parts for lowest
cost manufacturing or purchasing

Resource Requirement Planning
• Determination of the amount and timing of
production resources needed to produce
finished products as per master production
schedule

RRPS(Resource Requirement Planning
system
Functional Inputs
• Marketing – short range
demand forecasting
• Finance – Cash
availability , inventory
norms
• Production – Capacity
constraints, Development
of MPS, CRP, and MRP
• Engineering – Change in
product design and
product structure
• Personnel- Employee
availability
• Purchasing – Material
supply availability
• MIS data base system
inventory status file
• Bill of material file
Resource Requirement
Planning
• MPS (Master
production
schedule)
• MRP(Material
Requirement
Planning)
• CRP(Capacity
Requirement
Planning)
Outputs
• Marketing – end item
production schedule
• Finance – accounting –
inventory level schedule
• Production – MPS, load
profile capacity
utilisation data etc.
• Engineering – New
design incorporation data
• Personnel – Employee
requirement schedule
• Purchasing – Planned
orders and order releases
• MIS data =base system –
updated inventory status
file
Page 261 Aswathappa

Materials Requirement Planning
(MRP or MRP I)
• It is a technique to plan the requirements of
materials for production.
• It helps an operations manager find the net
requirement of a component after taking into
consideration inventory on hand, scheduled,
receipts and scheduled order releases

MRP Inputs MRP Processing MRP Outputs
Master
schedule
Bill of
materials
Inventory
records
MRP computer
programs
Changes
Order releases
Planned-order
schedules
Exception reports
Planning reports
Performance-
control
reports
Inventory
transaction
Primary
reports
Secondary
reports
Figure 13.2

PowerPoint presentation to
accompany Operations
Management, 6E (Heizer &
© 2001 by Prentice Hall, Inc. Upper Saddle
River, N.J. 07458
14-22
Forecast &
Firm Orders
Material
Requirements
Planning
Aggregate
Production
Planning
Resource
Availability
Master
Production
Scheduling
Shop
Floor
Schedules
Capacity
Requirements
Planning
Realistic?
No, modify CRP, MRP, or MPS
Yes
MRP and The Production Planning
Process

Order Changes
Order
Planning
Report
Elements of MRP
MRP
System
Planned Order
Schedule
Inventory
Transaction Data
Bill of
Materials File
Master
Production
Schedule
Inventory
Status File
Service-Parts
Orders and
Forecasts
Performance
Exception
Reports
Inputs Outputs
Norman and Gaither

24
When to use MRP
 ___________________________________
 ___________________________________
 ___________________________________
 ___________________________________
Dependent / Independent Demand?

25
Demand Characteristics
1 2 3 4 5
Week
400 –
300 –
200 –
100 –
No.
of
tables
Continuous demand
M T W Th F M T W Th F
400 –
300 –
200 –
100 –
No.
of
tables
Discrete demand
Independent demand
100 tables
Dependent demand
100 x 1 =
100 tabletops
100 x 4 = 400 table legs
Demand Characteristics for Finished Products and Their Components

Objectives of MRP
• Improved customer service
• Reduced Investment in inventory
• Improved operating efficiency
• Faster response to market changes

Components of an MRP system
• Aggregate production Plan
• Master production schedule
• Materials planning

Objectives of MRP
• Improve customer service by meeting delivery
schedules
• To reduce inventor costs
• To improve plant operating efficiency

Purpose of MRP
• Inventory – control inventory levels
• Priorities – order with the right due date and
keep the due date valid
• Capacity – plan for complete load, plan an
accurate load and plan for an adequate time
to view future load.
• “ Getting the right materials to the right plan
at the right time in the right quantities”.

Advantages and disadvantages
• Refer page 263 – aswathappa
Issues in MRP – Lot- sizing, Safety stock, Scrap
allowances, Pegging, cycle counting, updating
and time fence – refer page 274 Aswathappa.

Manufacturing Resource Planning
(MRP II)
• The broad based resource co-ordination
system involving other areas of a firm in the
planning process such as marketing, finance
and the human resource is called as MRP II

DRP
• In retail MRP is called as distribution
Requirements Planning. IT is a time – phased
stock replenishment plan for all levels of a
distribution network using the MPR planning
logic.

ERP
• A software package developed for optimum
use of resources of an enterprise in a planned
manner. It integrates the entire enterprise
starting form the supplier to the customer,
covering, logistics financial and human
resources.

Inventory
• Originates from the French word ‘Inventaire’
and Latin word ‘Inventariom’ which implies a
list of things found.

Inventory Definitions
• Inventory refers to a stock of goods, commodities, or
other economic resources that are held by firms at a
particular time for their future production requirements
and for meeting future demands. ( ICFAI BOOK)
• It includes materials – raw, in process, finished packaging,
spares and other stocked in order to meet an unexpected
demand or distribution in the future. ( Aswathappa book)
• “can be used to refer to the stock on hand at a particular
time of raw materials, goods in process of manufacture,
finished products, merchandise purchased for resale, and
the like, tangible assets which can be seen, measured and
counted…in connection with financial statements and
accounting records, the reference may be to the amount
assigned to the stock of goods owned by an enterprise at a
particular time”.( Aswathappa BOOK)

Types of Inventory
• Raw materials or Production Inventories
• Semi-finished Goods or In-process Inventories
• Finished Goods
• MRO Inventories :- Maintenance, Repair and
Operating supplies, ( consumed in the
production process but not become part of
the product) Eg- lubricating oil, soap, machine
repair parts etc.
ICFAI Book and Aswathappa

Purpose of Inventory
• Smooth Production
• Better Service to customers
• Protection against business uncertainties
• Take advantage of quantity discounts
• Refer Page 532 for objectives of inventory management
in Aswathappa
Icfai book page 160

Inventory Costs
• Ordering Costs
– Cost of placing an order
– Ordering from the plant
• Carrying Costs
– Costs connected directly with materials
– Financial costs like taxes and insurances
• Out-of Stock Costs
– Back ordering
– Lost sales
• Capacity Costs
– Overtime payments
– Lay-Offs and idle time
Aswathappa page - 532

Inventory Management and Control
• Inventory management involves
administration, policies and procedures to
reduce inventory cost.
Aswathappa page 535

Factors influencing inventory
management and control
• Type of product
• Type of manufacture
• Volume of production
• Other factors
Aswathappa Page 536

Process of inventory management and
control
• Determination of optimum inventory levels
and procedures of their review and
adjustment
• Determination of the degree of control that is
required for the best results.
• Planning and design of the inventory control
system.
• Planning of the inventory control organisation.

Approaches to inventory systems
• The fixed order quantity system ( Q system)
• The fixed order periodic system (periodic
system, the periodic review system, and the
fixed order interval system) (P system)
• Difference between Q and P systems – refer
page 540 Aswathappa
538-539 Aswathappa

Inventory control Techniques
( Classification of Inventory Control)
• Always Better Control (ABC Analysis)
• High, Medium and Low (HML) Analysis
• Vital Essential and desirable (VED) analysis
• Scarce, Difficulty and Easy ( SDE)
• Fast Moving, Slow Moving and Non-Moving (FSN)
• Seasonal and Off Seasonal Items ( SOS)
• XYZ Value of inventory actually in stores.
• Government, Open market, Local or Foreign Source of
supply (GOLF)
• Economic order quantity (EOQ)
• Two Bin System
Aswathappa Page 543 to 552

Inventory Control Techniques
• Reducing Number of items
– Preferred number series
– Value analysis/value engineering
– Standardisation
– Codification
– Bar Coding
• Reducing the quantities of the items
– Ad hoc approach to inventory management
– Inventory control through stock levels
• Reducing the lead time of procurement

Stock levels
• Minimum stock level
• Re-order level
• Danger warning level
• Safety/buffer stock level
• Stock-out level

JIT
• A philosophy of manufacturing based on
planned elimination of all waste and
continuous improvement of producitivity”

17-47
Elements of JIT
• Small lot sizes (lot size one)
• Use of Kanban system
• Quick changeover (set-ups)
• Multifunction workers
• Efficient layout (linear flow)
• Close relationships with suppliers
• Frequent deliveries from vendors
• Elimination of Waste

17-48
The Seven Wastes
Overproduction: Producing more than the demand for customers resulting in unnecessary
inventory, handling, paperwork, and warehouse space.
Waiting Time: Operators and machines waiting for parts or work to arrive from suppliers
or other operations.
Transportation: Double or triple movement of materials due to poor layouts, lack of
coordination and workplace organization.
Processing: Poor design or inadequate maintenance or processes requiring additional labor
or machine time.
Inventory: Excess inventory due to large lot sizes, obsolete items, poor forecasts or
improper production planning.
Motion: Wasted movements of people or extra walking to get materials.
Defects: Use of materials, labor and capacity for production of defects, sorting our bad
parts or warranty costs with customers.

17-49
Inventory as Waste
• “If all our suppliers are guessing, you end
up with inventory, which is the physical
embodiment of bad information.”
–Paul Bell, Dell, Inc. Europe.
• Dell’s inventories fell from 31 days of parts
in 1996 to 6 days in 2000.
Source: Economist, 1 April 2000, p. 57.

17-50
Elements of JIT as a Philosophy
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17-51
• A “pull” production system
• A physical (normally visual) control system
• Normally composed of cards and containers
(production card and withdrawal card), but
can be any type of signal
• Number of containers
Kanban System
C
DT
n

The Kanban System
• The Kanban system uses simple cards or signals to
strictly control production
• The basic idea is that no station is permitted to
produce more than is immediately required by the
succeeding station
• This simple idea prevents the buildup of inventory
• No computer is required!
17-52

The Real Origin Of Kanban
Q - R
In the 1950s, Ohno visited Detroit to learn
about auto making from the U.S. manufacturers.
He was not impressed.
He visited a supermarket, which they did not
have in Japan, and observed the way they
restocked the shelves.
He used that method as the basis for Kanban.
17-53

17-54
Kanban System

17-55
Kanban Cards

17-56
Reducing Setup Times and Lot Sizes
• Reducing setup times:
– increases available capacity
– increases flexibility
– reduces inventory
• Reduce setup times and run times simultaneously
to reduce lot sizes and throughput times
• Single-digit Setup Times (Shigeo Shingo [d. 1990]
or SMED System)
• Small lots require short setups!

17-57
Traditional Layout
Stockrooms
Supplier A Supplier B
Final
Assembly
Work Centers

17-58
Effect of JIT on Workers
• Multifunction workers
• Cross-training
• New pay system to reflect skills variety
• Teamwork
• Suggestion system

17-59
Suppliers
• Very close relationship with suppliers
• Frequent deliveries demanded from suppliers
• Sole-sourcing
• Integrated supplier programs
• Deliveries to production line
• No inspection—high quality

17-60
Features of Integrated Supplier Programs
• Early supplier selection, preferably in the
design phase
• Family of part sourcing to allow supplier to
take advantage of GT
• Long-term relationships with small number of
suppliers
• Paperwork reduction in receiving and
inspection to reduce costs

17-61
Implementation of JIT
• Obtain commitment from top management
• Gain the cooperation of workforce
• Start with final assembly line
• Reduce setup times and lot sizes working backward from
the final assembly line
• Balance fabrication rates with final assembly production
rates
• Extend JIT to the suppliers

Benefits Of JIT
1. Reduced inventory
2. Improved quality
3. Lower costs
4. Reduced space
requirements
5. Shorter lead times
6. Increased productivity
7. Greater flexibility
8. Better relations with
suppliers
9. Simplified scheduling
and control activities
10. Increased capacity
11. Better use of human
resources
12. More product variety
17-62

17-63
Comparison of MRP and JIT
• Pull versus Push production systems
• Situations for comparing MRP and JIT:
– Pure repetitive manufacturing situation; JIT works
best
– A batch process; JIT works well with cellular
manufacturing
– A job shop; MRPII with some elements of JIT
• MRP assumes the present system is correct and seeks
to make the best of that system.
• JIT seeks to change the system to make it better.

The Traditional Push System
• In traditional manufacturing, an item is released
for production at a specified time, with an
associated due date generated by MRP.
• The item moves through a sequence of
operations
• When one operation is finished, the item is
“pushed” to the next operation
• Finally, the product is pushed to inventory, to
meet the demand forecast
17-64

The Pull System
• The pull system focuses on the output of the
system rather than the input.
• Finished products are “pulled” from the final
operation in response to firm customer
orders.
• This leads to a chain reaction, with each
station pulling material from its preceding
station.
• JIT uses the “Kanban” system to control the
flow of material with very little work-in-
process inventory.
17-65

17-66
Uses of MRP and JIT
JIT
Repetitive (mass)
SYNCRO MRP
Semirepetitive
MRP
Nonrepetitive
(batch or job
shop)
JIT
SYNCRO MRP
MRP
Low High
Stability of Master Schedule
Stability of Bill of Material

17-67
Lean Thinking
• Term coined by Womack, Jones and Roos in
1990.
• Extends JIT beyond the factory
• Also applies to services
• http://www.lean.org

17-68
Five Elements of Lean Thinking
• Specify value from the customer’s point of view
• Create a value stream map and remove waste
• Flow the product or service through the system
• Pull the product or service from the customer
• Strive for perfection

Purchase Management
• Purchasing refers merely to the act of buying
an item at a price – very narrow definition

Objectives of Purchasing
• Buying raw materials of the right qualities, in
the right quantities in the right time at the
right price, and from the right source

Objectives
• Buy at low price
• Keep Low inventories
• Develop satisfactory sources of supply
• Prompt delivery and acceptable quality
• Locate new materials and products as required
• Develop Good purchasing procedure, policy and
controls
• Implement value analysis, cost analysis and make
or buy.
Aswathappa

Functions of purchasing department
• Receive purchase requisitions
• Review and evaluate requisitions
• Supplier selection
• Scrutiny of offers
• Order placement
• Follow-up order and expediting delivery
• Market research and information
• Payment authorisation
• Cost reduction
• Record – keeping
• Miscellaneous activities
CU book

Purchasing Cycle
• Recognition of need
• Description of need
• A suitable source is selected for the purchase
• Price and availability are determined
• Purchase order is prepared and sent out to the
supplier
• Acceptance of the purchase order is obtained
from the supplier
• Follow up is done by the purchasing department
to ensure timely delivery of the material.
• Checking the invoice and approving it for making
payment to the supplier.
Aswathappa page 495 496

Purchasing Policies
• Ancillary Development
– Ancillarisation results in spread of entrepreneurial
base.

Make – Or - Buy
• Decision is deciding whether a part should be
purchased or manufactured.

Speculative Buying
• It is done with the hope of making profit out
of price changes.
• Forward buying is the practice of buying
materials in a quantity exceeding current
requirement but not beyond foreseeable
requirement.

Vendor rating
• It is the process of rating a supplier based on
some rating technique.
• Rating Techniques
– Price, discounts received, maintenance of
specialisation, compliance with other
specifications, promptness of delivery, freight and
delivery charges, installation costs, service, market
information, co-operation, management
competence, credit terms, disposition of rejects,
employee training, adjustment policies, cost
reduction suggestions, inventory plans, Financial
position

Value analysis
• It is also known as value engineering.
• Value analysis is applicable to all aspects of
manufacturing processes.

Methods of Purchasing
• Market purchasing ( forward purchasing or seasonal
purchasing)
• Speculative purchasing(purchase huge quantities at
low prices and sell it when the price is high)
• Group purchasing ( make the items in to group and
purchasing)
– Blanket order purchasing
• Tender purchasing
• Hand – to mouth purchasing (JIT)
• Scheduled purchasing
• Subcontract purchasing
University book

Types of tenders
• Single tender
• Limited or closed
• Open tender
• Global tender
University book

Stores management
• Store:- building where goods are kept
• Stores:- supplies of goods
• Storage:- act of storing the goods
• It is the function of receiving, storing and
issuing materials.

Importance
• Ready accessibility of major materials
permitting efficient service to users
• Efficient space utilisation and flexibility of
arrangement
• Reduced need for material handling
equipment
• A minimisation of materials deterioration and
pilferage
• Ease of physical counting

Functions
• Receive raw materials and account for them
• To provide adequate and proper storage and preservation
the various items
• To meet the demands of the consuming departments by
proper issues and account for the consumption
• To minimise obsolescence, surplus and scrap through
proper codification, preservation and handling
• To highlight stock accumulation, discrepancies and
abnormal consumption and effect control measures
• To ensure good housekeeping so that materials handling,
materials preservation, stocking, receipt and issue can be
done adequately
• To assist in verification and provide supporting
information for effective purchase action

Stores
• Stores layout
• Storage system – location – fixed, random,
zoned locations
• Types of store layout – comb type, tree type
• Store manual
• Measurement of stores efficiency
• Stock verification – fixed or periodic,
perpetual of continuous and low point
inventory
Aswathappa page 510-514

Classification and codification
• Enables reduction in sizes and varieties
• Consistency coverage of items, mutually
exclusive code and easily understandable are
the principles of classification and codification
• Methods:- raw materials, consumable stores,
tools, work-in-process, hardware, etc.

Elements of good codification system
• Flexibility
• Precision
• Brevity
• Comprehensiveness

Methods of Codification
• Numerical code
• Mnemonic code ( using alphabets)
• Consonant code:- TPT is transport etc.
• Alpha-numeric code

Material Handling
• Moving, packaging, and storing of substances
in any form
• Create time and place utility
• Efficient material handling helps
manufacturing operations
• Reduction in manufacturing cycle, improved
working conditions, higher productivity etc.

Principles of material handling
• Eliminate handling
• Keep moving
• Use simple patterns of material flow
• Carry pay loads both ways
• carry full loads
• Use gravity

Material handling equipments
• Pallet, forklift, trailers etc,
– Safety measures – need to be taken care of

Quality
Quality is the ability of a product or service to meet a customer's expectations for that
product or service.
Quality is fitness for use. (Juran, 1974)
Quality means conformance to requirements. (Crosby, 1979)
[Quality is] a system of means to economically produce goods or services which satisfy
customers' requirements. (Japanese Industrial Standards Committee, 1981)
Quality refers to the amounts of the unpriced attributes contained in each unit of the
priced attribute. (Leffler, 1982)
Quality means best for certain conditions...(a) the actual use and (b) the selling
price. (Feigenbaum, 1983)

There are two forms of quality, and therefore two definitions and
two forms of measurement.
1. OBJECTIVE quality is the degree of compliance of a
process or its outcome with a predetermined set of criteria,
which are presumed essential to the ultimate value it
provides. Example: proper formulation of a medication.
2. SUBJECTIVE quality is the level of perceived value
reported by the person who benefits from a process or its
outcome. It may subsume various intermediate quality
measures, both objective and subjective. Example: pain
relief provided by a medication.

Quality systems
• A quality management system (QMS) can be
expressed as the organizational structure,
procedures, processes and resources needed
to implement quality management

Elements of a Quality Management
System
Organizational
Structure
Responsibilities Methods
Data
Management
Processes Resources
Customer
Satisfaction
Continuous
Improvement
Product Quality

Significance of quality management
Product quality
Customer satisfaction
Increased revenues
Reduce wastage
Teamwork
Consistency
Continuous improvement
More demand
More productivity

Dimensions of Quality
Performance - main characteristics of the product/service
Aesthetics - appearance, feel, smell, taste
Special features - extra characteristics
Conformance - how well product/service conforms to customer’s expectations
Safety - Risk of injury
Reliability - consistency of performance
Durability - useful life of the product/service
Perceived Quality - indirect evaluation of quality (e.g. reputation)
Service after sale - handling of customer complaints or checking on customer satisfaction

Examples of Quality Dimensions
Dimension
1. Performance
2. Aesthetics
3. Special features
Convenience
High tech
4. Safety
(Product)
Automobile
Everything works, fit &
finish
Ride, handling, grade of
materials used
Interior design, soft touch
Gauge/control placement
Cellular phone, CD
player
Antilock brakes, airbags
(Service)
Auto Repair
All work done, at agreed
price
Friendliness, courtesy,
Competency, quickness
Clean work/waiting area
Location, call when ready
Computer diagnostics
Separate waiting area
Table 9-1

Examples of Quality Dimensions (Cont’d)
Dimension
5. Reliability
6. Durability
7. Perceived
quality
8. Service after
sale
(Product)
Automobile
Infrequency of breakdowns
Useful life in miles, resistance
to rust & corrosion
Top-rated car
Handling of complaints and/or
requests for information
(Service)
Auto Repair
Work done correctly,
ready when promised
Work holds up over
time
Award-winning service
department
Handling of complaints
Table 9-1

Quality Certification
• ISO 9000
• Set of international standards on quality management
and Quality assurance, critical to international
Business
• ISO 9000 series standards, briefly, require firms to
document their quality-control systems at every step
(incoming raw materials, product design, in-process
monitoring and so forth) so that they’ll be able to
identify those areas that are causing quality problems
and correct them.

The ISO 9000 Series Standards
• ISO 9000 requires companies to document
everything they do that affects the quality
of goods and services.
– Hierarchical approach to documentation of the
Quality Management System

• ISO 14000 - A set of international standards
for assessing a company’s environmental
performance
• Standards in three major areas
– Management systems
– Operations
– Environmental systems
ISO 14000

Statistical concepts in quality control
Statistical Quality Control (SQC) is the
application of statistical techniques to
accept of reject products already produced,
or to control the process and, therefore,
product quality while the part is being
made. While the latter is called process
control, the former is named acceptance
sampling.
Aswathappa Page - 394

Control chart
• A graphic comparison of process performance
and data with control limits drawn as limit line
on a chart.
• It helps to determine whether the ongoing
process is under statistical control or not.

Bell shaped curve
• No of cases in y axis and size in inches in x axis
Aswathappa page 395

Control chart for process control
• ..
v
Upper control unit
Average quality
Lower control limit
Time
Quality
Variations Central Line
v
v
Aswathappa page 395

Control chart for process control
• A typical control chart consists of a CENTRAL LINE
corresponding to the Upper and Lower control
limits, also called the tolerance limits. The
vertical scale indicates the quality variations and
the horizontal scale has time. Samples of product
are taken at specified time intervals, quality
checked, measured, averaged and plotted on the
chart. If the values plotted are within the control
limits the processing is said to be under control.
If the values move away from control limits, the
process must be improved.
Aswathappa page 395

Types of control charts
• Control charts for variables
• Control charts for attributes
• Variables are quality characteristics that can be
measured on continuous scale for eg:- the
diameter before taking a decision regarding the
quality; i.e., whether the diameter is within the
permissible limits of variation
• Attributes are quality characteristics which can be
classified into one of the two categories namely
good or bad, defective or non-defective. Eg:- a
painted surface is good or bad depending on the
quality of the workmanship of the painter and
the quality of the paint used. Page 397-398 Aswathappa

Control charts and variables
• X R chart (Mean Range chart)

Control charts and attributes
• ‘np’ chart (Number of defectives charts, con
for constant sample
• ‘p’ chart ( Fraction defective chart for varying
sample size
• ‘c’ Chart ( number of defects chart for
constant sample size)
• ‘u’ chart ( Number of defects per unit chart for
varying sample size)

Acceptance Sampling
• When 100% inspection is not practical i.e., either too
costly and time consuming or when the inspection is of
destructive in nature sampling inspection is the best
way of estimating the quality of incoming or outgoing
lots.
• Random sampling provides each element with an equal
chance of being selected and permit logical inferences
to be made about the lot.
• It is based on the premise that a sample represents the
whole lot from which the former is drawn. It is a
technique used to take a decision regarding acceptance
or rejection of lot without having to examine the entire
lot.
• Accepting sample inspection can be either sampling by
attributes or sampling by variables

Total Quality Management
A philosophy that involves everyone in
an organization in a continual effort to
improve quality and achieve customer
satisfaction.

Find out what the customer
wants
Design a product or service that
meets or exceeds customer
wants
Design processes that facilitates
doing the job right the first time
Keep track of results
Extend these concepts to
suppliers
The TQM Approach

Elements of TQM
Continual
improvement
Competitive
benchmarking
Employee
empowerment
Team approach
Decisions based
on facts
Knowledge of
tools
Supplier quality
Champion

Line Balancing
• Is a technique used in production scheduling and
control to determine, at a review date, not only
how many of an item should have been
completed by that date, but also how many
should have passed through the previous
operation stages by that time so as to ensure the
completion of the required delivery schedule.
• It is also called as assembly line balancing.
• There is a smooth and regulated flow of material
through a sequence of operations at a uniform
rate.
Aswathappa Page 323-324

PDCA cycle
PDCA (plan–do–check–act) is an iterative four-step
problem-solving process typically used in business
process improvement. It is also known as the
Deming circle/cycle/wheel, Shewhart cycle,
control circle/cycle, or plan–do–study–act (PDSA).
popular by Dr. W. Edwards Deming, who is
considered by many to be the father of modern
quality control

PDCA cycle by Deming

PDCA
PDCA is a successive cycle which starts off small to test potential effects on processes, but
then gradually leads to larger and more targeted change.
PLAN Establish the objectives and processes necessary to deliver results in accordance
with the expected output. By making the expected output the focus, it differs from other
techniques in that the completeness and accuracy of the specification is also part of the
improvement. DO Implement the new processes. Often on a small scale if possible, to
test possible effects. CHECK Measure the new processes and compare the results
against the expected results to ascertain any differences. ACT Analyze the differences to
determine their cause. Each will be part of either one or more of the P-D-C-A steps.
Determine where to apply changes that will include improvement. When a pass through
these four steps does not result in the need to improve, refine the scope to which PDCA
is applied until there is a plan that involves improvement

7 QC Tools
Seven QC tools are fundamental instruments to improve the quality
of the product. They are used to analyze the production process,
identify the major problems, control fluctuations of product quality,
and provide solutions to avoid future defects. Statistical literacy is
necessary to effectively use the seven QC tools. These tools use
statistical techniques and knowledge to accumulate data and analyze
them.
Seven QC tools are utilized to organize the collected data in a way
that is easy to understand and analyze. Moreover, from using the
seven QC tools, any specific problems in a process are identified.

7QC tools
Check Sheet is used to easily
collect data. Decision-making
and actions are taken from the
data.
Pareto Chart is used to define
problems, to set their priority,
to illustrate the problems
detected, and determine their
frequency in the process.
Cause-and-Effect Diagram
(Fishbone Diagram) is used to
figure out any possible causes
of a problem. After the major
causes are known, we can
solve the problem accurately.
Histogram shows a bar chart of
accumulated data and provides
the easiest way to evaluate the
distribution of data.
Scatter Diagram is a graphical
tool that plots many data points
and shows a pattern of
correlation between two
variables.
Flow Chart shows the process
step by step and can
sometimes identify an
unnecessary procedure.
Control Chart provides control
limits which are generally
three standard deviations
above and below average,
whether or not our process is
in control.

Fishbone Diagram
• This fishbone diagram was drawn by a
manufacturing team to try to understand the
source of periodic iron contamination. The
team used the six generic headings to prompt
ideas. Layers of branches show thorough
thinking about the causes of the problem.

Histogram
• A frequency distribution shows how often
each different value in a set of data occurs. A
histogram is the most commonly used graph
to show frequency distributions. It looks very
much like a bar chart, but there are important
differences between them.

When to Use a Histogram
• When the data are numerical.
• When you want to see the shape of the data’s distribution,
especially when determining whether the output of a process is
distributed approximately normally.
• When analyzing whether a process can meet the customer’s
requirements.
• When analyzing what the output from a supplier’s process looks
like.
• When seeing whether a process change has occurred from one
time period to another.
• When determining whether the outputs of two or more processes
are different.
• When you wish to communicate the distribution of data quickly and
easily to others.

Pareto Chart
• Also called: Pareto diagram, Pareto analysis
• Variations: weighted Pareto chart,
comparative Pareto charts
• A Pareto chart is a bar graph. The lengths of
the bars represent frequency or cost (time or
money), and are arranged with longest bars
on the left and the shortest to the right. In this
way the chart visually depicts which situations
are more significant.

When to Use a Pareto Chart
• When analyzing data about the frequency of
problems or causes in a process.
• When there are many problems or causes and
you want to focus on the most significant.
• When analyzing broad causes by looking at
their specific components.
• When communicating with others about your
data.

Pareto Chart Procedure
• Decide what categories you will use to group items.
• Decide what measurement is appropriate. Common measurements are frequency, quantity, cost and
time.
• Decide what period of time the Pareto chart will cover: One work cycle? One full day? A week?
• Collect the data, recording the category each time. (Or assemble data that already exist.)
• Subtotal the measurements for each category.
• Determine the appropriate scale for the measurements you have collected. The maximum value will
be the largest subtotal from step 5. (If you will do optional steps 8 and 9 below, the maximum value
will be the sum of all subtotals from step 5.) Mark the scale on the left side of the chart.
• Construct and label bars for each category. Place the tallest at the far left, then the next tallest to its
right and so on. If there are many categories with small measurements, they can be grouped as
“other.”
• Steps 8 and 9 are optional but are useful for analysis and communication.
• Calculate the percentage for each category: the subtotal for that category divided by the total for all
categories. Draw a right vertical axis and label it with percentages. Be sure the two scales match: For
example, the left measurement that corresponds to one-half should be exactly opposite 50% on the
right scale.
• Calculate and draw cumulative sums: Add the subtotals for the first and second categories, and place
a dot above the second bar indicating that sum. To that sum add the subtotal for the third category,
and place a dot above the third bar for that new sum. Continue the process for all the bars. Connect
the dots, starting at the top of the first bar. The last dot should reach 100 percent on the right scale.

Pareto Chart Examples
• Example #1 shows how many customer complaints
were received in each of five categories.
• Example #2 takes the largest category, “documents,”
from Example #1, breaks it down into six categories of
document-related complaints, and shows cumulative
values.
• If all complaints cause equal distress to the customer,
working on eliminating document-related complaints
would have the most impact, and of those, working on
quality certificates should be most

Scatter Diagram
• Also called: scatter plot, X–Y graph
• The scatter diagram graphs pairs of numerical
data, with one variable on each axis, to look
for a relationship between them. If the
variables are correlated, the points will fall
along a line or curve. The better the
correlation, the tighter the points will hug the
line.

When to Use a Scatter Diagram
• When you have paired numerical data.
• When your dependent variable may have multiple values
for each value of your independent variable.
• When trying to determine whether the two variables are
related, such as…
– When trying to identify potential root causes of problems.
– After brainstorming causes and effects using a fishbone
diagram, to determine objectively whether a particular cause
and effect are related.
– When determining whether two effects that appear to be
related both occur with the same cause.
– When testing for autocorrelation before constructing a control
chart.

Control Chart
• Also called: statistical process control
• The control chart is a graph used to study how a process changes
over time. Data are plotted in time order. A control chart always has
a central line for the average, an upper line for the upper control
limit and a lower line for the lower control limit. These lines are
determined from historical data. By comparing current data to
these lines, you can draw conclusions about whether the process
variation is consistent (in control) or is unpredictable (out of
control, affected by special causes of variation).
• Control charts for variable data are used in pairs. The top chart
monitors the average, or the centering of the distribution of data
from the process. The bottom chart monitors the range, or the
width of the distribution. If your data were shots in target practice,
the average is where the shots are clustering, and the range is how
tightly they are clustered. Control charts for attribute data are used
singly.

• Different types of control charts can be used, depending
upon the type of data. The two broadest groupings are for
variable data and attribute data.
• Variable data are measured on a continuous scale. For
example: time, weight, distance or temperature can be
measured in fractions or decimals. The possibility of
measuring to greater precision defines variable data.
• Attribute data are counted and cannot have fractions or
decimals. Attribute data arise when you are determining
only the presence or absence of something: success or
failure, accept or reject, correct or not correct. For
example, a report can have four errors or five errors, but it
cannot have four and a half errors.

• Variables charts
–
•
•
• x
• and R chart (also called averages and range chart)
–
–
•
•
• x
• and s chart
– chart of individuals (also called X chart, X-R chart, IX-MR chart, Xm R chart, moving range chart)
– moving average–moving range chart (also called MA–MR chart)
– target charts (also called difference charts, deviation charts and nominal charts)
– CUSUM (also called cumulative sum chart)
– EWMA (also called exponentially weighted moving average chart)
– multivariate chart (also called Hotelling T2)
• Attributes charts
– p chart (also called proportion chart)
– np chart
– c chart (also called count chart)
– u chart
• Charts for either kind of data
– short run charts (also called stabilized charts or Z charts)
– group charts (also called multiple characteristic charts)

When to Use a Control Chart
• When controlling ongoing processes by finding and
correcting problems as they occur.
• When predicting the expected range of outcomes from
a process.
• When determining whether a process is stable (in
statistical control).
• When analyzing patterns of process variation from
special causes (non-routine events) or common causes
(built into the process).
• When determining whether your quality improvement
project should aim to prevent specific problems or to
make fundamental changes to the process.

Check Sheet
• Also called: defect concentration diagram
• A check sheet is a structured, prepared form
for collecting and analyzing data. This is a
generic tool that can be adapted for a wide
variety of purposes.

When to Use a Check Sheet
• When data can be observed and collected
repeatedly by the same person or at the same
location.
• When collecting data on the frequency or
patterns of events, problems, defects, defect
location, defect causes, etc.
• When collecting data from a production
process

Check Sheet Example
• The figure below shows a check sheet used to
collect data on telephone interruptions. The
tick marks were added as data was collected
over several weeks.

Flowchart
• A flowchart is a type of diagram that represents an
algorithm or process, showing the steps as boxes of
various kinds, and their order by connecting these with
arrows. This diagrammatic representation can give a
step-by-step solution to a given problem. Process
operations are represented in these boxes, and arrows
connecting them represent flow of control. Data flows
are not typically represented in a flowchart, in contrast
with data flow diagrams; rather, they are implied by
the sequencing of operations. Flowcharts are used in
analyzing, designing, documenting or managing a
process or program in various fields

Poka-Yoke
• Term coined in 1961 by statistical process control
expert Shigeo Shingo from the Japanese words
for "inadvertent mistake" ("poka") and
"prevention" ("yoke"); generally translated as
"mistake-proofing" or "error-proofing." In the
manufacturing context, "poka-yoke" is the initial
step in "error-proofing" design or production
processes by means of a signaling device that
indicates whether the process is in its operable
state. Its puropse is to make errors either readily
identifiable and easily corrected, or prevented
entirely.

Quality function deployment
• Quality function deployment (QFD) is a “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.”, as described by Dr. Yoji Akao, who
originally developed QFD in Japan in 1966, when
the author combined his work in quality assurance
and quality control points with function
deployment used in value engineering.

• QFD helps transform customer needs (the
voice of the customer [VOC]) into engineering
characteristics (and appropriate test methods)
for a product or service, prioritizing each
product or service characteristic while
simultaneously setting development targets
for product or service.
Also Refer the PPTs QFD and QFD 1 in student refer folder

Areas of application
• QFD is applied in the early stages of the design phase so that the customer
wants are incorporated into the final product. Furthermore it can be used
as a planning tool as it identifies the most important areas in which the
effort should focus in relation to our technical capabilities.
• QFD is applied in a wide variety of services, consumer products, military
needs (such as the F-35 Joint Strike Fighter[2]), and emerging technology
products. The technique is also used to identify and document
competitive marketing strategies and tactics (see example QFD House of
Quality for Enterprise Product Development, at right). QFD is considered a
key practice of Design for Six Sigma (DFSS - as seen in the referenced
roadmap). It is also implicated in the new ISO 9000:2000 standard which
focuses on customer satisfaction.
• Results of QFD have been applied in Japan and elsewhere into deploying
the high-impact controllable factors in Strategic planning and Strategic
management (also known as Hoshin Kanri, Hoshin Planning, or Policy
Deployment).

Lean Manufacturing
• Streamlining production by eliminating steps in the production process
that do not add benefits that customers are willing to pay for.
• Lean manufacturing or lean production, often simply, "Lean," is a
production practice that considers the expenditure of resources for any
goal other than the creation of value for the end customer to be wasteful,
and thus a target for elimination. Working from the perspective of the
customer who consumes a product or service, "value" is defined as any
action or process that a customer would be willing to pay for. Basically,
lean is centered on preserving value with less work. Lean manufacturing is
a management philosophy derived mostly from the Toyota Production
System (TPS) (hence the term Toyotism is also prevalent) and identified as
"Lean" only in the 1990s. It is renowned for its focus on reduction of the
original Toyota seven wastes to improve overall customer value, but there
are varying perspectives on how this is best achieved. The steady growth
of Toyota, from a small company to the world's largest automaker, has
focused attention on how it has achieved this

• Steps to achieve lean systems
• The following steps should be implemented to create the ideal lean
manufacturing system: :
• Design a simple manufacturing system
• Recognize that there is always room for improvement
• Continuously improve the lean manufacturing system design
Design a simple manufacturing system
• A fundamental principle of lean manufacturing is demand-based flow
manufacturing. In this type of production setting, inventory is only pulled
through each production center when it is needed to meet a customer’s
order. The benefits of this goal include:
• decreased cycle time
• less inventory
• increased productivity
• increased capital equipment utilization

What is 5 “S”
5 “S” Japanese English
1 S Seiri Sort out unnecessary items in the workplace
and discard them.
2 S Seiton Arrange necessary items in good order.
3 S Seiso Clean your workplace thoroughly so that
there is no dust on floors, machines and
equipment.
4 S Seiketsu Maintain high standards of housekeeping at
workplace at all times.
5 S Shitsuke Train people to follow good housekeeping
disciplines.

5S
1. Sort - All unneeded tools, parts and supplies are
removed from the area
2. Set in Order - A place for everything and everything is in its
place
3. Shine - The area is cleaned as the work is performed
4. Standardize - Cleaning and identification methods are
consistently applied
5. Sustain - 5S is a habit and is continually improved
Also - Work areas are safe and free of hazardous or dangerous
conditions

5 S
Management’s
commitment
Management’s
involvement
Participation by all
Supported
By all
Self sustaining

SEIRI
• SORT OUT THE ITEMS AND DISCARD THE
UNWANTED
– Make a list of all the items in the department.
– The list should include raw material, wip, finished
product, tools, tackles, dust bin, facilities like chair,
table, bins etc. nothing should be left unlisted.
– Appropriate authority should decide which items can
be disposed off and which items need to be kept in the
department.
– Items marked for disposal should be disposed off in a
safe manner.

SEITON
• PLACE FOR EVERY THING
– After disposing unwanted material, provide
appropriate place for every item that has to be kept in
the department.
– While providing the place the ergonomic factors and
safety aspects have also to be considered.
– Place for movement of men and material should also
be provided.
– Place should be distinctly identified and marked.
– Place for display of instructions, posters etc. should lso
be identified.

SEISO
• CLEAN THE PLACE THOROUGHLY AND KEEP EVERY
THING IN IT’S PLACE.
– Clean every thing including material, floor, containers,
walls, windows etc.
– If necessary painting also should be done.
– While painting follow colour codes wherever
applicable.
– Insist on regular cleaning at the end of the work

SEIKETSU
• Maintain high standards of housekeeping at
workplace at all times.
– Ensure that people keep the items at
designated place after it’s use.
– If possible, design the system such that if some
thing is missing from the place, it is easily
highlighted

SHITSUKE
• Train people to follow good housekeeping
discipline.
– Train people in 5 S, housekeeping etc.
– Lead by example.
– Maintain discipline in every aspect

Role of top management in 5 “S”
implementation
• Play the role of mentor
• Initiate the 5S programme
• Provide resources
• Appreciate the efforts

Role of middle and line management in
5 “S” implantation
• Play the role of facilitator
• Take initiative in his area of work
• Train the people in 5S
• Give the feedback

Role of employees in 5 “S”
implementation
• Participate actively.
• Give suggestions.
• Respect the opinion of
others.
• Be a good team player, and
• Maintain discipline

Refer Awathappa Page 417-420
• Quality gurus and their philosophies
• Deming’s 14 principles
• Deming wheel
• Deming’s triangle
• Joseph Juran’s 10 steps for quality improvement
• Crosby’s 14 steps for quality management
• Crosby’s quality vaccine or crosby Triangle