316 317
How operations and production work
Control
First in, first out (FIFO) Oldest inventory items
sold first (or recorded as sold for accounting
purposes rather than physically moving goods)
Last in, first out (LIFO) Most recently produced
items sold first (or recorded as sold)
Stock-keeping unit (SKU) A distinct item that
has its own stock code
RFID tag A chip that enables remote tracking
of an item by radio sensors
NEED TO KNOW
142,000
different items were
handled by Walmart
Supercenters in any
one store in 2005
Main warehouse
Company may have one main warehouse or a number
of warehouses as hubs for smaller storage facilities.
Delivery to customers
Efficient and timely delivery is part of
the overall customer experience,
especially as online shopping grows.
Stock is checked in by scanning bar
codes or RFID tags.
Customer returns
Returns are checked out by scanning
bar codes or RFID tags. Batch number
and other data can be monitored.
US_316-317_Inventory.indd 317 21/11/2014 16:29
Quality control
How it works
Businesses measure and manage the quality of their
output against national legal standards and/or internal
standards. For example, the manufacturing industry
sets its own standards. Checking takes place against
these and any national standards at various points
along the production process, such as when raw
materials arrive in the factory, during production, and
before shipment of finished goods to the customer.
Quality control relies on a predetermined percentage of
products for inspection, agreed corrective action, and
remedial efforts to minimize future defects. Industries
in which safety is paramount, including food, clothing,
pharmaceuticals, construction, and car, train, and
aircraft manufacture, are subject to extremely strict
standards of quality control. Some are there to
protect workers—for instance, if they are handling
chemicals—while others safeguard the consumer.
There is a series of processes to ensure that a business maintains a
prescribed level of quality in its products or services. Quality control
is particularly important in industries where safety is an issue.
Delivery to factory
Before assembly, weight, chemicals,
bacteria, taste, and interaction of
individual ingredients are tested.
Assembly line
During assembly, weight,
temperature, hygiene,
and visual appearance
are assessed.
The bread and butter
of quality control
Hygiene and safety are essential in the food industry, as in this example of
quality control in a factory making prepacked sandwiches. Samples are tested
all along the line. Any lapses in quality are not only a dangerous health hazard
but would also be extremely damaging to the company’s reputation.
US_318-319_Quality_Control.indd 318 21/11/2014 16:30
318 319
how operations and production work
Control
Packaging station
Samples are tested to check
that sealing is accurate, labels
are correctly applied, and
overall presentation is good.
$4.4
billion
the value of the
prepacked sandwich
market in the UK
Storage
The temperature is checked
for accuracy and safety, and
samples are tested for taste,
texture, and contamination
by foreign objects.
Transportation
The temperature in
the vehicles and their
delivery time are
checked to ensure
product freshness.
Standard safety procedures are mandatory in
developed countries, including site organization
with suitable work gear, limited access, materials
storage, and traffic flow; working at heights using
appropriate ladders and scaffolds; and avoidance
of slips and trips with awareness of obstacles,
trailing cables, and uneven or wet surfaces.
THE CONSTRUCTION
INDUSTRY
US_318-319_Quality_Control.indd 319 21/11/2014 16:30
318 319
how operations and production work
Control
Packaging station
Samples are tested to check
that sealing is accurate, labels
are correctly applied, and
overall presentation is good.
$4.4
billion
the value of the
prepacked sandwich
market in the UK
Storage
The temperature is checked
for accuracy and safety, and
samples are tested for taste,
texture, and contamination
by foreign objects.
Transportation
The temperature in
the vehicles and their
delivery time are
checked to ensure
product freshness.
Standard safety procedures are mandatory in
developed countries, including site organization
with suitable work gear, limited access, materials
storage, and traffic flow; working at heights using
appropriate ladders and scaffolds; and avoidance
of slips and trips with awareness of obstacles,
trailing cables, and uneven or wet surfaces.
THE CONSTRUCTION
INDUSTRY
US_318-319_Quality_Control.indd 319 21/11/2014 16:30
How it works
The idea is that measuring the
number of defects in any process
makes it possible to systematically
work out how to eliminate them
and get as close to zero defects as
possible. Individuals are trained to
become experts in the different
methods, creating a cadre of black
belts, green belts, and champions.
Every Six Sigma project is carefully
documented, follows a defined
sequence of steps, and has
quantified value targets, such as
increasing customer satisfaction
or reducing costs. To achieve Six
Sigma quality, a manufacturing
process must have 99.99966
percent of output free of defects
(3.4 defective parts per million).
Six Sigma
Improve
Implement
improvements
and so address
the root causes of
major problems.
Control
Perform before-and-
after analysis; monitor
systems; document
results; work out
recommendations
for next steps.
Used in organizations to strive for near-perfect products and
services, Six Sigma is a disciplined, data-driven approach for
eliminating defects in any process.
SIX SIGMA ROLES
Six Sigma professionals are experts at improving
processes. They drive the implementation of change.
Master black belt Trains and coaches
black belts and green belts; works at
highest level, developing key measures
and the strategic direction
Black belt Leads problem-solving
projects; coaches project teams,
assigning roles and responsibilities;
trains green belts
Green belt Leads green-belt projects;
helps with data collection and analysis
for black-belt projects
Champions Translate the company’s
vision, mission, and goals to create an
organizational deployment (OD) plan
and identify individual projects
Executives Provide overall alignment
by establishing strategic focus of the Six
Sigma program within the context of the
organization’s culture and its vision of
what the customer sees and feels
4
5
$320
million
the sum saved by
General Electric with
Six Sigma in 1997
US_320-321_Six_sigma.indd 320 21/11/2014 16:30
320 321
HOW OPERATIONS AND PRODUCTION WORK
Control
Define
Define the project’s purpose and
scope; identify processes that need
improvement; determine customer
needs and benefits.
Measure
Use data on current
processes as a
baseline; pinpoint
problem locations
and occurrences;
identify potential
areas for
improvement.
Analyze
Identify root causes of
problems and check them
against data; determine
precise improvements that
need to be made.
of Fortune 500
US organizations
were running Six
Sigma initiatives
by the late 1990s,
with the goal
of improving
quality and
reducing costs
CHAMPIONS
Mobile-phone maker
Motorola used Six Sigma
quality as a goal for its
manufacturing operations;
CEO and chairman Jack
Welch made it central to
his business strategy at
General Electric in the
1990s; tech company Dell
has used a form of Six
Sigma since 2000 and is
now the model for many
other businesses.
Striving for
perfection
The DMAIC methodology
(standing for Define, Measure,
Analyze, Improve, Control) is an
integral part of Six Sigma. It is
used for improving existing
business processes that are
falling below targets and where
step-by-step improvements
can be made.
²
³
2
3
1
US_320-321_Six_sigma.indd 321 21/11/2014 16:30
320 321
HOW OPERATIONS AND PRODUCTION WORK
Control
Define
Define the project’s purpose and
scope; identify processes that need
improvement; determine customer
needs and benefits.
Measure
Use data on current
processes as a
baseline; pinpoint
problem locations
and occurrences;
identify potential
areas for
improvement.
Analyze
Identify root causes of
problems and check them
against data; determine
precise improvements that
need to be made.
of Fortune 500
US organizations
were running Six
Sigma initiatives
by the late 1990s,
with the goal
of improving
quality and
reducing costs
CHAMPIONS
Mobile-phone maker
Motorola used Six Sigma
quality as a goal for its
manufacturing operations;
CEO and chairman Jack
Welch made it central to
his business strategy at
General Electric in the
1990s; tech company Dell
has used a form of Six
Sigma since 2000 and is
now the model for many
other businesses.
Striving for
perfection
The DMAIC methodology
(standing for Define, Measure,
Analyze, Improve, Control) is an
integral part of Six Sigma. It is
used for improving existing
business processes that are
falling below targets and where
step-by-step improvements
can be made.
²
³
2
3
1
US_320-321_Six_sigma.indd 321 21/11/2014 16:30
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