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Cost Control management

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Given your main focus on helping managers implement cost control programs, the CFO asked you to put together a memorandum of likely opportunities to reduce costs through the manufacturing facility itself.
He asked you to write short summaries of what each of the following specific opportunities to reduce costs is all about: Describe 1 of the following a total quality programs: Crosby, six sigma, or Juran.
Describe the implementation of any one statistical process control program (e.g., Deming).
Discuss moving toward reduction in non-value-added activities. Include examples.
Explain the adoption of lean manufacturing techniques

The CFO remembers, from your initial interview, the point you made about the need for firms to consider the total cost of a decision or proposal, which might be different than traditional procedures might consider (when just the costs and benefits of the immediate change, new equipment, or new process might be considered). He asks you to write a short paragraph about that, including an example.
Finally, the CFO asked you to show him how to construct a control chart because he thinks he might use it in his own office processes to monitor performance in terms of timeliness of getting his reports done. Because you are not familiar with office processes, you instead show him an example of setting up and monitoring a control chart in a manufacturing process, given the following data: Part X specifications for cutting a piece of steel are a nominal dimension of 1" +/- 0.05".
Once the process was deemed to be in control by the engineers, the next 10 consecutive samples drawn from the actual production showed a standard deviation of 0.016.
Actual sampling of production the next day showed consecutive part actual dimensions of the following: 1.03, 1.03, 1.035, 1.039, and 1.046.
Using this resource to assist you, set up a statistical process control (SPC) chart by plotting the following: 1.The upper and lower specification limits
2.The part's nominal dimension
3.The upper and lower control limits
4.The actual dimensions of the 5 samples
Is there any cause for concern? Explain your reasoning.

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Solution Preview

Six sigma is a statistical method to control and limit variance in a process. One of the tools is defining a process with parameters and create statistical process control (SPC) charts to measure the variation in the process. By measuring variance, one can then start identifying causes of the variation using root cause analysis tools like ishikawa diagrams (or fish bone diagrams) and the like. Once causes are determined, one can then go about correcting the problem causing the variation.

An SPC chart is constructed as follows: One first takes a parameter's ideal result or outcome (the desired dimension on a part, the nominal, or a measurable outcome of a service like typos on a a purchase order or mistakes in doing end of month accounting reports, etc.) and that becomes the center line on the chart. Then, using the tolerances allowed in the outcome, these become the upper and lower limit lines on the chart. For example. the dimensions for a part could be 1" +/- 0.05". The upper limit line would be 1.05" and the lower limit would be 0.95". Then, one plots the actual dimension or outcome data points on the chart. Ideally, the points would all be on the center line, but that is nearly impossible over time. The next ideal result would be the data points would be above or below the center line as close as possible and evenly distributed above and below the center line.

Such a result would indicate that the process is in control. However, there are other ...

Solution Summary

This solution uses a real world example to improve a manufacturing process using the tools of lean and 6 sigma. In addition the principles and tools of lean and 6 sigma (SPC charts) is explained with examples.