Management Chapter 5 Homework The case describes a real service guarantee initiative and the student must decide if it was successful or not

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47. A mortgage loan approval process consists of three steps in series performed by clerks A,

B, and C. Errors are often made, and a study found that clerks A and B had an average

reliability of only 0.85, which results in the paperwork having errors, missing information,

and so on. Clerk C who performs the final review catches nearly all mistakes and has a

reliability of 0.99, but the work involved is causing a considerable backlog. After studying

the process, the loan manager decided to add an additional clerk D with more experience

to each of the first two steps to check the work, having a reliability of 0.95 as shown in the

diagram below.

a. How much does adding this redundancy improve the reliability of the original process?

b. If, in addition to adding clerks D, the reliability of clerks A and B can be improved to 0.95

through better training, how much can the reliability be improved?

(a) Original process:

(b) Using Equation 5.3:

RAD or RBD = 1 – (1 – 0.95)(1 – 0.95) = 0.9975

RADRBDRC = (0.9975)(0.9975)(0.99) = 0.9851

48. A simple electronic assembly consists of two components in a series configuration with

reliabilities as shown in the figure below.

Engineers would like to increase the reliability by adding additional components in one of

the two proposed designs shown below:

a. Find the reliability of the original design.

Reliability = (0.9)(0.95) = 0.855

b. Explain how the configurations of the proposed designs differ.

c. Which proposed design has the best reliability?

Option B

EXCEL-BASED PROBLEMS

For these problems, you may use Excel or the spreadsheet templates in MindTap to assist in

your analysis.

49. Assume the specifications for a part (in inches) are 5.00 ± 0.37, and the Taguchi loss

Loss Calculation for a Specific x

Target specification, T 5

50. Assume the specifications for a television remote control part (in inches) are 5.00 ± 0.10,

and the Taguchi loss function is estimated to be L(x) = 5,500 (x – T)2. Determine the

estimated loss per part if the quality characteristic (i.e., actual process performance) under

study takes on a value of 4.91 inches. Use the Excel template Taguchi to find the total

51. A quality characteristic has a design specification (in cm.) of 0.200  0.02. If the actual

process value of the quality characteristic is at the boundary of the tolerance on either side,

the product will require a repair of $30. Use the Excel template Taguchi to find the value of

k and state the Taguchi loss function. What is the loss associated with x = 0.205?

The Taguchi Loss Function is:

L(x) = k(x – T)2

30 = k(0.02)2 or k = 75,000

52. For the situation in Problem 51, what are the economic design specifications if the cost of

inspection and adjustment is $7.50?

Using the logic in the Solved Problem in the chapter, the economic specification limits

should be approximately between 0.190 and 0.210. The Excel template Taguchi can be used

to confirm this; use the third portion of the template “Economic Design Specifications” as

shown below.

53. Suppose that the design specifications for hydraulic cylinder are 10.00  0.10 centimeters,

and that the Taguchi loss function is estimated to be L(x) = 1,400 (x – T)2. Use the Excel

template Taguchi to answer the following questions:

a. Determine the estimated loss for a production order if the quality characteristic under

study takes on a value of 10.04 and 100 parts are produced.

b. Assume the production process is recalibrated weekly and a new sample of cylinders

after recalibration reveals an x-bar of 9.789. What action, if any, is need in this

situation? Explain.

If 100 parts are produced at an average x-bar of 9.789 centimeters the loss per unit is

Thus, the total Taguchi economic loss for 100 parts is $6,233. In (a) the economic loss was

low and actual process performance was very close to the target design specification but in

54. An electronic missile guidance system at Mguide, Inc. consists of: Components A, B, C, and

D which have reliabilities of 0.98, 0.97, 0.91, and 0.95, respectively (see the following

diagram).

a. Use the Excel template Systems Reliability to compute the reliability of the entire

system.

Note that the reliability of the parallel subsystem C is copied into component 3 in the

Series System calculations.

b. Suppose the customer requires a reliability of at least 0.98. Try to find a configuration

that meets this requirement using the minimum number of components. Use the Excel

template Systems Reliability to assist in your analysis.

A configuration that meets the 0.98 reliability requirement is difficult, but can be attained

55. Magnaplex, Inc. has a complex manufacturing process, with three operations that are

performed in series. Because of the nature of the process, machines frequently fall out of

Use the Excel template Systems Reliability to answer the following questions:

a. Analyze the system reliability, assuming only one machine at each stage (all the backup

machines are out of operation).

b. How much is the reliability improved by having two machines at each stage?

Using the Excel template, compute the series equivalent for each parallel subsystem and

copy the result into the series system section. The capture below shows the parallel

subsystem for component C.

The improvement in reliability is significant, increasing from 0.704 to 0.962

56. MegaMart, a large department store, has a very successful and profitable package

wrapping department. The department uses two very complex bow-making machines that

work inline to make the bows for the packages. Bow-making Machine #1 has a reliability of

a. What is the current reliability of the system, including the operator?

b. Management is considering either scrapping Machine #2 and replacing it with a new

machine which has a reliability of 0.98 at a cost of $5,000 or training another operator

Alternatives:

1) Replace machine (component 3 is the operator)

2) Train new operator (having a reliability of 1 for the parallel subsystem):

Expected net profit = (0.8245 x $7,000) – $5,100 = $671.50

It would be more profitable to replace the machine.

Teaching Note: Gulf Coast Bank: Service Guarantees

Overview

The case describes a real service guarantee initiative and the student must decide if it was

successful or not. After much discussion the student and instructor should decide this program

is marketing driven without any attempt to involve operations, actually improve process

Case Questions for Discussion:

1. What are the objectives of the service guarantee program?

The Hart Harvard Business Review article previously cited contains these objectives. They

include establish customer service expectations, establish employee service, expectations,

2. Is a total payout of $860 over 10 months for 300 branches good or bad?

One can argue it is good or bad. The $860 total payout could be considered good if other

customer and process focused performance measures were improving. However, the bank

does not have a good measurement system. The $860 could be viewed as bad since the

3. Are the bank’s services and processes services truly redesigned to meet the service

guarantee promises?

No. There is no evidence in the case or in the actual case situation of even one permanent

4. Is GCB’s service guarantee program well-designed and executed? Is it successful?

Evidence of success includes: (1) commitment by middle management, (2) 2-day training

5. What are your final recommendations?

Ideally, a really good performance measurement system should be established and

procedures developed based on employee suggestions to improve process performance.

Once these internal operating systems, training, and process capabilities are well

Other possible in class discussion questions

1. Ask your students, “What if we raised the payout amount from $5 to $20 or $50 or $100

per service upset? What do they think would happen then?

2. How would we know if it is successful?

The simple answer is if the service guarantee differentiated the bank from competitors it

3. How should we measure the performance of our service guarantee program?

Many performance measures could be used focused on the customer and processes.

4. Is Gulf Coast Bank’s service guarantee program a marketing-driven program only? Explain.

Has job and process capability been improved? What role did operations play? (i.e.,

questions of last resort) yes to marketing-driven; barely for job and process capability by

building employee awareness and some minor training; operations played no role.

This case is based on a real bank service guarantee situation that was not successful. Of course,

the bank never admitted this – they just quietly let the program die! Bank employees knew

almost immediately it was another corporate fad initiative with little real impact. Almost all

Teaching Note: Tom’s Auto Service

Overview

Tom’s Auto Service (TAS) is a quick service vehicle oil and lubricant change service much like

Jiffy Lube and Tuffy Tire & Auto Service. The case allows the students to evaluate store

managers, standards of performance, employees, facilities and the overall customer experience

based on case information and analysis of survey results. The chapter supports the analysis of

the case by defining

Service delivery system design

The principal dimensions are:

• facility location and layout;