QCD – Quality, Cost and Delivery

The QCD approach was originally developed to help companies within the British automobile sector. Using QCD can clarify the priorities for improving the production processes in a company. The tools in the QCD approach can be used to assess the results of changes in production processes. They can be used as an instrument for rapid feedback which provides the actual facts and figures for the management to make meaningful decisions. With the gathered data it is furthermore possible to set goals for the future and fulfill continuous reports.

To analyse the business processes of a company with the target of increasing the profitability there are seven steps which have to be considered. These seven key measurements offer a clear structure for continuous improvement, raising levels of customer satisfaction and improve the management of the whole production processes. They can be applied to improve production performance throughout manufacturing industry from the auto-industry to electronics, aerospace, telecommunications, textiles, building products, food and chemicals processing.

· Step 1: Not Right First Time (NRFT)
NRFT studies the quality of products. How often achieves the company the
customer’s specifications. NRFT can be put into numbers, by measuring the
number of “defective parts per million”. The number of the defect products
has to be divided by the total quantity of finished products. This figure has to
be multiplied by 10^6 to get the number of parts per million.

Measuring Not Right First Time
There are two possibilities to measure NRFT: before (internally) or after
reaching the customer (externally). If a company produces four defective
parts on every thousand, this transforms into 4.000 parts per million.

· Step 2: Delivery Schedule Achievement
Delivery Schedule Achievement analyses how well a supplier delivers what
the customers need and when they need it. The goal is 100% on-time
delivery of correct products. This goal has to be achieved as cost efficient as
possible and therefore expensive special deliveries or payments for overtime
should be avoided.
Measuring Delivery Schedule Achievement
A company makes 100 deliveries per week, of those eight are late and five
are of incorrect quantities. The ratio of correct and incorrect deliveries has to
be worked out for measuring how well the company delivers what the
customers need.

Incorrect deliveries include late and as well early deliveries and also
deliveries of the wrong quantity (too many, too few).

· Step 3: People Productivity
People Productivity (PP) is measured by looking at how long it takes (in staff
hours) to produce a good in a satisfying quality. To fulfill the PP
measurement it is necessary to take the number of good units and divide it
by the total number of direct operator hours. Direct operators are the staff
who is fundamental to the production process. The measure of PP helps to
focus on a major product cost, the staff salaries.

To reach a high value for PP it is absolutely necessary that most of the
employee’s work is adding value to the product. The non-value adding
activities should be minimised.
· Step 4: Stock Turns
Stock Turns (ST) is defined as the ratio of current stocks to finished goods.
The more quickly a company converts raw materials into finished products
and sells them, the more quickly they receive valuable sales revenues. The
ST ratio reveals how effectively the company is using funds.

The higher the number the better for the company. A low stock turn means
that the money is tied up in stock, and therefore the company has fewer
funds to invest in other parts of its business.

· Step 5: Overall Equipment Effectiveness
Overall Equipment Effectiveness (OEE) says how well the company is using
its equipment and staff. The three inputs for the calculation are the
availability, performance efficiency and quality rate.

Measuring Overall Equipment Effectiveness
There are three key points to look at: availability, performance and quality.
1. To work out availability for a machine, it is necessary to have the
amount of unplanned downtime. If it is planned that a machine should
run 100 hours a week, but actually runs only 50 hours, the availability
is 50%.
2. Performance compares the actual output with the ideal output. If a
process is assumed to take 10 minutes, but instead takes 20 minutes
then the performance is running by 50%.
3. To display the quality of goods, it is required to compare the number
of good parts produced with the total. If a company produces 50 parts
in an hour and only 25 of them are with saleable standard, this means
quality is running at 50%.

· Step 6: Value Added Per Person
Value Added Per Person (VAPP) shows how efficient people are deployed
to transform raw materials into finished products. The inputs for the VAPP
calculation are the price of the finished product and the costs of the needed
raw materials. Furthermore it is essential to know the number of direct
employees, those who are vital to the production process.
Measuring Value Added Per Person
In this working example a company produces MP3-Players and sells a unit
of them for 60 €, the components cost 10 € per unit and 20 employees are
required to assemble one MP3-Player.

A high VAPP highlights many value added to the product by a single
worker.
· Step 7: Floor Space Utilisation
Floor Space Utilisation (FSU) measures the sales revenue generated per
square metre of factory or office floor. The office and the factory floor space
represent expensive fixed costs. FSU can be used to look for the respective
revenue of an individual area or for the whole factory/office floor space. In
order to increase the revenue per square metre it is common to reduce the
amount of floor space used. Layout changes are necessary, for example
eliminating inventory to reduce storage areas. If the company succeeds in
reducing the amount of used space they would be able to expand without
the expense of acquiring or leasing new buildings.
Measuring Floor Space Utilisation
In the working example, given below, a company owns 2000m2 factory
space. The sales turnover is 10.000 € per month. To calculate the FSU it is
necessary to divide the turnover by the amount of space which is used.

Used Reference:

http://www.industryforum.co.uk/pdf/qualitycost.pdf

Value Stream Map

Another important method used during our project is Value Stream Mapping (VSM). It is a tool which was implemented in the Japanese automotive industry and is commonly used in lean continous improvement programs. It helps to understand and improve the material and information flows within firms. The main aims of creating and discussing VSM’s is to eliminate waste along the value chain and improve the understanding of the different production steps by visualising.

Waste is defined by the 7 kinds of waste according to Taiichi Ohno:

VSM is an important tool for companies in order to become lean and it presents the whole production process of a product from ramp to ramp. It could imply attributes associated with the steps of the process like the size of batches, the amount of queue time and wait time, the processing rate, the scrap or yield rate and the cumulative processing time.

By creating the current state map in the company operations along the value chain have to be divided into 3 different types:

o Value-adding activities
o Non-value-adding activities (but necessary)
o Waiting(no activity) / Non-value-adding (not necessary)

A Value Stream Map consists of facile, various symbols which are advancing the impression of the concerning production process. Some relevant symbols for constructing a VSM are given below:

It’s usually created with the Microsoft application MSVisio 2007.

A video explaining VSM:

Used Literature:

Chase, Aquilano, Robert Jacobs (2005), Operations Management for Competitive Advantage,p.473.

Novak (2006), The small manufacturer’s toolkit, p.135.

Lunau, Roenpage, Staudter, Meran, John, Beernaert (2006), Six Sigma + Lean Toolset,p.147.

Spaghetti diagram / Layout diagram

As said in the post ABC-Analysis, i am going to provide you with useful methods in the as-analysis phase of layout improvements.

Spaghetti diagrams are used to improve the performance of processes by identifying and minimising non-value-adding activities. Value is defined as aspects of a product the customer is willing to pay for.

To create a Spaghetti diagram the performance of a number of workers, products and lifts is recorded and measured. Every actual movement and every step of their work will be displayed in the general map of the production area.

The highest priority by accomplishing a Spaghetti diagram is that the actual process flow gets visualised instead of how it should be. Furthermore it is a snapshot in time so it does not include every possible scenario.

Approach to Spaghetti diagrams:

1. Locate or design a diagram of the workspace
2. Mark the location where the first step of the process takes places and draw an arrow from there to where the second step happens. Continue until you have mapped all process steps
3. Discuss the final diagram with a goal towards improving the workflow

• A complicated diagram with many lines indicates opportunities to simplify the process
• If the lines cross each other, explore the possibility of restructuring the workspace to create a smarter flow
• If lines repeatedly come back to one location, see if the work performed there can be combined and performed at the same time

A example for creating a Spaghetti diagram on the easily understandable example of the kitchen:

Used Literature:

Lunau, Roenpage, Staudter, Meran, John, Beernaert (2006), Six Sigma + Lean Toolset, p.138.

ABC-Analysis

To enrich the qualitiy of my post i decided to present you some useful methods which i learned about during my product project.

The ABC-Analysis is an instrument which allows the classification of different products regarding their contribution to the corporate turnover. It is based on the Pareto Analysis which is also known as the 80/20 rule founded by Villefredo Pareto in the nineteenth century. It points out that 20 percent of the effort is repsonsible for 80 percent of the results. According to this rule 20 percent of the products are generating 80 percent of the turnover.

But the ABC-Analysis differs to the original Pareto Analysis regarding the fact that the products are subdivided in three different segments.

Diagram of an ABC-Analysis (Wannenwetsch (2006), Integrierte Materialwirtschaft und Logistik, p. 77.)

The range of A, B, C products differ between:

With the evaluation of an ABC-Analysis the most important products can be filtered out. Due to the fact that A products contribute most to the corporate turnover, improving them has the biggest effect on the performance of the company.(They should be considered most in change situations)

Used literature:

Chase, Aquilano, Robert Jacobs (2005), Operations Management for Competitive Advantage,p. 610.

Prokopenko (1987), Productivity management, p. 130.

Wannenwetsch (2006), Integrierte Materialwirtschaft und Logistik, p. 77.