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Complete five problems in which you analyze common approaches to determining product or service quantities based on financials, contribution to profit based on a specific price and volume, product reliability, and quality control.

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Introduction

This assessment explores the quality tools companies use to monitor, control, and analyze their products or services. Most businesses in today’s economy must invest in quality to survive. Experts on quality have consistently shown that investing in programs and processes to ensure high quality does pay off.

Today’s customers want high quality products at the lowest possible price. Businesses establish quality expectations and conform to those expectations based on the customer or market segment they are serving. Today’s consumers also demand organizations to be concerned with sustainable resources; this is evident with the passage of recent regulations and laws.

What Is Quality?

It is important to understand that quality is not just an issue for companies that provide products. Services are measured by quality expectations as well, and they are monitored to ensure high levels of quality. Organizations that provide services are extremely vulnerable to high quality expectations because they are usually face-to-face with the customer on a regular basis. Service is not as easy to quantitatively measure, but it is still important to measure the service quality through the use of surveys, questionnaires, and other tools.

In services, the idea is to make sure that the customer’s expectations have been exceeded, thus establishing the client as a return customer. Businesses have started to recognize the important role their employees play in this process, and they have invested heavily in education, training, and team development. The best practice of investing in employees helps a company survive in today’s competitive economy.

A company determines its level of quality based, in part, on the specific expectations an individual is willing to pay. Once this and other factors are considered, a company sets its quality standards. The transformation of inputs to outputs creates many variablesfrom materials used to shipping and handling of the final productthat can affect quality. More importantly, industry metrics need to be considered to better manage effective resource use and determine organizational performance for sustainability.

Total Quality Management

Total quality management (TQM) is a process by which companies strive for zero defects while delivering high quality products. By understanding the process, a company can identify the causes of defects and work toward eliminating them. Companies monitor and improve the development of a product or service with the use of statistical process control (SPC), control charts, process capabilities, Six Sigma, and other tools. Six Sigma is a tool that involves the whole company, especially top management, with the intent of reducing defective workmanship to 3.4 parts per million transactions. This is not a quick-fix program but a long-term, corporate culture mindset that strives to eliminate defects completely so they do not return.

Scenario

Suppose that you were recently hired as the operations manager for ABC Manufacturing, a small manufacturing company founded two years ago. The company has been reasonably successful since it was founded, but it has recently experienced several production issues. You were hired to recommend and implement improvements to get the company back on track.

Problems

Complete the following problems based on the ABC Manufacturing scenario above. For each question, briefly describe the operations management issue and describe how you would approach an analysis, then provide answers to the algebraic equations.

Question 1

ABC Manufacturing is unsure of the ideal price to quote for one of their products, a pump. ABC’s president has asked you to do a break-even analysis for the pump and to recommend the optimal price. The fixed costs (FC) associated with manufacturing this particular product are $100,000, and the variable costs (VC) are $50 per unit. ABC’s president is considering a selling price (P) for this product of $100. The president wants to know how many units have to be sold in order to break even (BEU).

• Analyze this operations management issue.
• Provide the algebraic equation (using BEU, FC, P, and VC as variables) for the break-even analysis.
• Calculate and provide the numeric break-even value.

Question 2

ABC’s president believes there is substantial competition for this type of pump, and that price is a significant factor in potential customer’s purchase decision. He estimates that the company will sell 3,600 pumps (unit volume or UV) if they are priced at $100, and he will sell 2,900 pumps if they are priced at $110. He wants to know what contribution to profit (CP) would result from each of those two selling prices, and thus which is the better price.

• Analyze this operations management issue.
• Provide the algebraic equation (using CP, UV, P, and VC as variables) for this analysis.
• Calculate and provide the numeric contribution to profit (in dollars) for each of the two price points.

Question 3

Another issue ABC is facing is reliability of their products, in part because they are manufacturing increasingly complex products. One such product is designed and manufactured with five different subassemblies combined in series. It was determined through testing that those subassemblies have reliabilities, which are R1, R2, R3, R4, and R5; of .997, .998, .995, .999, and .990, respectively. (Refer to the Question 3 Flowchart below). ABC’s president has asked you what the reliability of the overall product (RP) is, given those subassembly reliabilities utilized in series.

• Analyze this operations management issue.
• Provide the algebraic equation (using RP, R1, R2, R3, R4, and R5 as variables) for this analysis.
• Calculate and provide the overall product reliability, given those subassemblies utilized in series.

Question 4

ABC’s president has also asked you what the overall reliability of a different product (RP) is. That product has four subcomponents (SC1, SC2, SC3, and SC4). The components are organized as SC1, followed by SC2 in parallel with SC3, which are then both followed by SC4. (Refer to the Question 4 Diagram below). Their respective reliabilities are SC1R=.97, SC2R=.98, SC3R=.95, and SC4R=.93.

• Analyze this operations management issue.
• Provide the algebraic equation (using RP, SC1R, SC2R, SC3R, and SC4R as variables) for this analysis.
• Calculate and provide the overall product reliability given those subassemblies.

Question 5

ABC Manufacturing is also concerned about the quality of its manufacturing processes. One of the products the company sells is a bottle of liquid lubricant associated with the pump product line. ABC’s president is familiar with the operations management concept of control limits (determining an upper and lower numerical threshold such that a process is considered in control as long as it stays within those limits).

The president has asked you to take samples of the amount of liquid in those bottles and determine the upper control limit (UCL) and lower control limit (LCL) of three standard deviations. He told you that, based on previous testing, the standard deviation (SD) for this process is 0.035. You took sample measurements of the volume of liquid in the bottles, done at different times of the day (in case that somehow impacted the volume), and this produced the data in the Sample Measurements Table below:

Sample Measurements Table

Time	Volume of Liquid in Bottles of Lubricant (in Ounces)
8:00 am	30.03
9:00 am	30.04
10:00 am	29.98
11:00 am	30.01
12:00 pm	30.00
1:00 pm	29.97
2:00 pm	30.08
3:00 pm	29.98
4:00 pm	29.99
5:00 pm	29.98
Mean (M)	30.006

• Analyze this operations management issue.
• Provide the algebraic equation for the UCL and for the LCL (using UCL, LCL, M, and SD as variables).
• Calculate and provide the numerical ULC and LCL values.

Additional Requirements

• Written communication: Written communication should be free of errors that detract from the overall message.
• APA formatting: Any references and citations should be formatted according to current APA style and formatting guidelines.
• Font and font size: Times New Roman, 12 point.

Competencies Measured

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and scoring guide criteria:

• Competency 2: Apply the tools and technology used in operations management.
  • Apply operations management tools associated with determining a break-even analysis.
  • Apply operations management tools associated with determining contribution to profit.
  • Apply operations management tools associated with determining reliability based on a product with subcomponents used in series.
  • Apply operations management tools associated with determining reliability based on a product with subcomponents used in parallel and in series.
  • Apply operations management tools associated with determining control limits.