Global Economics and Business Operations: ECA Assignment Solution

This document provides a comprehensive solution to an ECA assignment on Global Economics and Business Operations. The assignment explores key aspects of quality management, including the Deming (PDCA) cycle, Statistical Process Control (SPC), and Six Sigma methodologies. It delves into the application of these processes within business organizations to improve product and service quality, meet customer requirements, and enhance overall financial performance. The solution also addresses inventory management, identifying critical issues related to planned order releases and scheduled receipts. The report analyzes the components of a product (Product X and Component Y) with lead times and gross requirements to determine optimal ordering strategies. The document concludes with a detailed analysis and recommendations for improving business operations through effective quality and inventory management practices.

Running head: GLOBAL ECONOMICS AND BUSINESS OPERATIONS
GLOBAL ECONOMICS AND BUSINESS OPERATIONS
Name of the Student
Name of the University
Author’s Note

1GLOBAL ECONOMICS AND BUSINESS OPERATIONS
Table of contents
Introduction......................................................................................................................................2
Answer for ECA Assignment 1.......................................................................................................3
Three areas of quality management processes.............................................................................3
The Deming (PDCA) cycle.........................................................................................................3
Statistical Process Control...........................................................................................................5
Six- sigma....................................................................................................................................7
Conclusion.......................................................................................................................................8
Answer for ECA Assignment 2.......................................................................................................9
References......................................................................................................................................11

2GLOBAL ECONOMICS AND BUSINESS OPERATIONS
1. Introduction
This report provides an overview about the areas of quality management utilized by the
business organization for producing better quality goods and services for meeting the
requirements of customers. These areas of quality management process include- The Deming
(PDCA) cycle, Statistical process control and Six –sigma. Quality management procedure refers
to the method at which the deliverables quality as well as processes is ensured and controlled
during a specific project. This procedure also involves completion of different review techniques
and implementation of the corrective actions in order to address deficiencies and increase the
levels of quality within this project.1 The process mainly involves- Listing the targets, identifying
different kinds of quality measurement techniques that is to be undertaken, estimating
deliverable as well as process quality, actions for enhancing the deliverable level as well as
process quality and reporting the quality level that is achieved to management of project.2 The
trend of adopting quality management procedure has gained huge popularity in every business
organizations as it helps them in achieving the target, satisfying their customers by knowing how
they defines quality, increasing productivity and improving their financial performance. .
Globalization acted as a vital tool for promoting technology as well as development within the
organization. Further, adoption of these technologies also helped the organization to improve
their quality management process.
1 H Gitlow, Quality Management, in , Tata McGraw Hill Education Private Limited, 2008.
2 D Peljhan & M Marc, "Total quality management and performance management systems: team players or lonely
riders?", in Total Quality Management & Business Excellence, , 2016, 1-21.

3GLOBAL ECONOMICS AND BUSINESS OPERATIONS
Answer for ECA Assignment 1
2. Three areas of quality management processes
2.0 The Deming (PDCA) cycle
3The Deming cycle refers to the four stage quality management model that is used by
organization for continuous improvement in business and solving incremental problem. This
model benefits the organization by providing systematic approach for achieving improvement. In
the field of improvement in business quality, it is also termed as PDCA cycle. It is usually
depicted graphically as circle as it involves repetition of similar stages for improving processes
as well as output. The circle is mainly represented in four sections that is plan- do- check- act.
This is mainly used by the companies to develop new product, solving problem and improving
quality in business operation. This cycle also provides feedback system for continuous
improvement in quality. It also involves assuring consistency across different activities of
business. The stages of this cycle are illustrated below:
Plan- The stage for quality management involves-
 Describing problem that needs redressing
 Defining desired state
 Collection of data for determining issue in account of deviance
 Asserting main cause of issue
 Assessing different possible outcome for solving the issue
 Selecting best intervention
 Scheduling and mapping corrective procedure through control charts
3 Rita, S, & K Lakshmi, "Mechanics of How to Apply Deming's PDCA Cycle to Management
Education.". in SSRN Electronic Journal, , 2012

4GLOBAL ECONOMICS AND BUSINESS OPERATIONS
Do- This PDCA phase mainly concerns adoption of selected solution for reducing deviation or
solving issue. However, integration of this solution helps the organization to check its impact.
This stage also covers employees training for the quality intervention.
Check- According to traditional schemes of quality management, the check became important
for quality inspection. 4It entails describing standards namely upper specification limit (USL) as
well as lower specification limit (LSL) and after that it compares specification of good against
such standards. This stage however weeds out inappropriate goods.
Act- 5In this stage in PDCA cycle for quality management involves- standardization of
successful solution and adoption of process improvement including other stakeholders or with
their customers.
Once all the phases are completed, the quality improvement is standardized. However, with
changing economic condition and promotion of new techniques, standardized procedure is again
subjected fir improvement thereby repetition of PDCA cycle occurs. Although PDCA basic
framework remains constant, this cycle for improving quality takes different approaches. ()
opines that adoption of this PDCA process towards management of quality increases consumer
expectations.
4 Wang, H, Y Chang, & W Che, "Application of PDCA-Cycle on the Management of Critical Values Reporting.".
in Advanced Materials Research, 712-715, 2013, 3203-3206.
5 V Bubevski, "A novel approach to software quality risk management", in Software Testing, Verification and
Reliability, vol. 24, 2013, 124-154.

5GLOBAL ECONOMICS AND BUSINESS OPERATIONS
Figure 1: PDCA cycle
Source: (Rita & Lakshmi 2012 )
3. Statistical Process Control
Statistical process control (SPC) refers to the quality control method that involves statistical
methods for monitoring as well as controlling the production process. 6Quality information in
terms of product is mainly obtained during production in real time. However, this data again is
plotted on the graph with determined control limitation. 7This process also facilitates the
organization to ensure that the procedure operates efficiently and thus manufacturing more goods
with less waste. The vital tools that are applied in SPC involves- run chats, design of different
experiments, control charts and focus on improvement. SPC is usually practiced into two stages,
which includes-
6 A Poth & A Sunyaev, "Effective Quality Management: Value- and Risk-Based Software Quality Management",
in IEEE Software, vol. 31, 2014, 79-85.
7 P Keller, Statistical process control demystified, in , New York, McGraw-Hill, 2012.

6GLOBAL ECONOMICS AND BUSINESS OPERATIONS
 In the first stage, the data are collected and recorded on different kinds of control charts.
 The second stage is the regular manufacturing utilization of this process in which the
data is analyzed. Moreover, in this phase, decision is examined based upon variation in
5M&E conditions that includes- man, machine, method, material, movement band
environment)
The main goals of SPC is to –
 Attain consistency by declining variation in procedure by adopting corrective action
 Simplify methods
 Measure performance level for long term after implementation
 Obtain best performance from adoption of equipment
 Provide proper data for better estimation of cost.
One benefit of SPC namely ‘inspection’ is that it gives stress on prevention of issues rather
than correcting the issues. Additionally to declining waste, this process leads to decrease in time
that is required for producing the good. 8These organizations use several SPC software in the
production process that are usually promoted during globalization for measuring the consistency
of the product being produced based on its design requirement. Therefore, the product
manufactured through implementation of this technology also improved their quality
management process. Moreover, this helps the organizations to satisfy their customers and attain
their trust.
Cp and CPK are the two index of the statistical measurements by which the capability as well
as performance is reported. CPk refers to the capability of the process of performing in future by
8 "Significant Benefits of Statistical Process Control (SPC) Software | IntraStage", in Intrastage.com, , 2018,
<https://intrastage.com/significant-benefits-of-statistical-process-control-spc-software/> [accessed 19 January 2018].

7GLOBAL ECONOMICS AND BUSINESS OPERATIONS
assuming that it stays in statistical control. Both CP and Cpk are also considered as the short term
capability measurement for the process. On the other hand CP index illustrates the process
capability in which the number of times the procedure fits into tolerance width. Therefore, higher
the Cp value, better is the procedure.
Figure 2: Statistical process control
Source: (Keller 2012)
Now a days, the manufacturing organization faces huge competition from the other rivalries.
At this time, the cost of raw material also continues to rise. These are the main factors that the
organizations face difficulty in controlling. However, they focus on internal business processes
in order to face these challenges. The organizations then strive for improvement in quality as
well as efficiency and reduction of production cost. For this they implements several quality
management processes including this SPC process in order to make it prevention based control in

8GLOBAL ECONOMICS AND BUSINESS OPERATIONS
quality. Thus, it also facilitates these companies to monitor their performance of this process in
real time and hence changes it before it comes out to be non-conforming good.
4. The process of Six- sigma
Six - sigma is actually set of tools that is used as management strategy for improving the
business processes quality by reducing error as well as variation. 9It seeks in improving the
quality of total output by recognizing and eliminating the reasons of defects as well as reducing
variability in business processes. The corporations that practices this six- sigma process creates
levels for their employees within the workplace. These levels are often termed as “Green Belts”,
“Black belts” etc. Implementation of this six sigma in businesses requires proper allocation of
the budgets as well as resources. The two methods of six sigma include- DMAIC and DMADV.
The first method mainly focuses on the improvement of the existing practices of businesses. On
the other hand, the second procedure concentrates on creation of new practices and strategies.
The DAMAIC method has basically five stages, including-
 Define- The objective of this stage is to define the issue by taking feedbacks from their
customers and summarize the plan of the project. In this stage, the project plan and the
target map is developed. The Pareto chart as well as SPIOC is the important tools that
are used in this phase.
 Measure- The purpose of this stage is to gather data relevant with this scope of the
project. It also focuses on recognizing the parameters that is required to be quantified and
measure them by applying various techniques. Important tools that are used in this syage
are process sigma, run charts, process flowcharts etc.
9 A Chakraborty & T Kay Chuan, "An empirical analysis on Six Sigma implementation in service organisations",
in International Journal of Lean Six Sigma, vol. 4, 2013, 141-170.

9GLOBAL ECONOMICS AND BUSINESS OPERATIONS
 Analyze- In this stage, the main cause of efficiency in business are carried out. The gap
between the target performance and its opportunities for improvement is also identified
an analyzed in this stage.
 Improve- This stage improves the procedure by determining the possible solutions as well
as test and implement them for improving the project. The plan has also been designed in
a way such that it can mitigate the risk in business. The tools used in this procedure are –
Brainstorming, simulation software etc.
 Control- The objective of this stage is to produce detailed solution by monitoring the plan
as well as ensure the performance has been maintained. It also defines as well as
authenticates the monitoring system, develops procedures and hence communicates with
the business. The tools applied in this procedure are control charts, control plan, sigma
calculation etc.
Therefore, this DMAIC methodology in six sigma has been accepted as well as adopted in all
size firms.
Similarly, the DMADV methods includes-
 Designing strategies as well as procedure that ensures satisfaction of the customers
 Measuring and recognizing the constraint that are vital for quality
 Analyzing as well as developing high extent of alternatives for assuring high quality
 Designing and structuring details of process
 Verifying different procedure and finally adopting the same
Therefore, through proper adoption of SPC software, the organization can-
 Decrease rework as well as warrenty claims

10GLOBAL ECONOMICS AND BUSINESS OPERATIONS
 Increase total productivity in business
 Improve utilization of resources
 Enhances efficiency in business operations
 Improves satisfaction of clients
 Decreasing total cost
 10Assists the business organization to improve on their weaknesses and build their
strength.
Moreover, the organization also uses lean six sigma in order to face increasing cost as well as
rising competition in the present market. Lean Six sigma refers to the methodology that is based
on collaborative effort of team for improving the performance by removing the waste as well as
reducing fluctuation. It combines lean production and six sigma in order to remove eight types of
waste that includes- defects, overproduction, inventory, transportation, extra processing etc.
PART II- Inventory Management
Answer for ECA Assignment 1
The two significant issues have been identified with the planned order releases. The first
aspect for this being the determination of lead production period or how far in advance the actual
orders needs to be released. The planned order release refers to planning of the orders within a
specific time frame which will ensure that the item is received when needed. 11There is no
consideration for planning of the orders to be released in the given case. It needs to be also noted
that this particular “planned” lead time may not be matching with the actual lead time if the gross
10 C Jun & B Kwon, "Process capability control procedure for electrical machines by using a six-sigma process for
achieving six-sigma quality level", in IET Electric Power Applications, vol. 11, 2017, 1466-1474.
11 Gitlow, H, Quality Management. in , Tata McGraw Hill Education Private Limited, 2008.

11GLOBAL ECONOMICS AND BUSINESS OPERATIONS
requirements are very high. The second important issue is identified with the fact that there is no
specific provision present for scheduled receipt. This would have led to a better estimation of
meeting delivery schedule thereby minimizing any scope of delays in materials procurement and
production decision making.
Product X [Lead Time = 1 Period]
Period 1 2 3 4 5
Gross
Requirement 400 500
Stock on Hand
(200) 200 200 200 0 0
Net
Requirement 200 500
Place Order 200 500
Component Y [Lead Time = 2 Period]
Period 1 2 3 4 5
Gross
Requirement 400 500
Stock on Hand 300 300 300 0 0
Net
Requirement 100 500
Place Order 100 500
Component Z [Lead Time = 1 Period]
Period 1 2 3 4 5
Gross
Requirement 800 1000
Stock on Hand 160 160 160 0 0
Net
Requirement 640 1000
Place Order 640 1000

12GLOBAL ECONOMICS AND BUSINESS OPERATIONS
Conclusion
From the above report, it can be concluded that consumer satisfaction is one of the pillars
of quality management as it directly entails purchase of goods as well as services that goes into
production process. For this reason, the organizations strives to provide best quality commodities
and work hard for maintaining that level as well as make necessary changes. However,
implementation of technologies in business promoted during globalization also helps them in
improving their quality management process. However, this increased the productivity of the
corporations, which in turn improved their financial performance. Thus, globalization has been
one of the powerful forces for the expansion of business and also helped in reducing the
technological gap between the developed and less developed nations.
References
"Significant Benefits of Statistical Process Control (SPC) Software | IntraStage". in , , 2018,
<https://intrastage.com/significant-benefits-of-statistical-process-control-spc-software/>
[accessed 19 January 2018].

13GLOBAL ECONOMICS AND BUSINESS OPERATIONS
"Similarities and Differences in Implementation of Quality Frameworks in Manufacturing and
Service Sector". in , , 2018, <http://www.managementstudyguide.com/implementation-of-
quality-frameworks-in-manufacturing-and-service-sector.htm> [accessed 19 January 2018].
Azis, Y, & H Osada, "Innovation in management system by Six Sigma: an empirical study of
world‐class companies.". in International Journal of Lean Six Sigma, 1, 2012, 172-190.
Barros, A, A Gal, & E Kindler, Business process management. in , Berlin, Springer, 2012.
Bubevski, V, "A novel approach to software quality risk management.". in Software Testing,
Verification and Reliability, 24, 2013, 124-154.
Chakraborty, A, & T Kay Chuan, "An empirical analysis on Six Sigma implementation in
service organisations.". in International Journal of Lean Six Sigma, 4, 2013, 141-170.
Gitlow, H, Quality Management. in , Tata McGraw Hill Education Private Limited, 2012.
Jun, C, & B Kwon, "Process capability control procedure for electrical machines by using a six-
sigma process for achieving six-sigma quality level.". in IET Electric Power Applications, 11,
2017, 1466-1474.
Keller, P, Statistical process control demystified. in , New York, McGraw-Hill, 2012.
Kuei, C, & M Lu, "Integrating quality management principles into sustainability management.".
in Total Quality Management & Business Excellence, 24, 2013, 62-78.
Oakland, J, Total quality management. in , [Place of publication not identified], Routledge, 2016.
Peljhan, D, & M Marc, "Total quality management and performance management systems: team
players or lonely riders?.". in Total Quality Management & Business Excellence, , 2016, 1-21.

14GLOBAL ECONOMICS AND BUSINESS OPERATIONS
Poth, A, & A Sunyaev, "Effective Quality Management: Value- and Risk-Based Software
Quality Management.". in IEEE Software, 31, 2014, 79-85.
Rita, S, & K Lakshmi, "Mechanics of How to Apply Deming's PDCA Cycle to Management
Education.". in SSRN Electronic Journal, , 2012.
Tuominen, K, K Laamanen, & L Malmberg, Process management excellence criteria. in .
Wang, H, Y Chang, & W Che, "Application of PDCA-Cycle on the Management of Critical
Values Reporting.". in Advanced Materials Research, 712-715, 2013, 3203-3206.