6 Managing Quality Power Point presentation to accompany

6 Managing Quality Power. Point presentation to accompany Heizer and Render Operations Management, 10 e Principles of Operations Management, 8 e Power. Point slides by Jeff Heyl © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 -1

Learning Objectives When you complete this chapter you should be able to: 1. Define quality and TQM-Total Quality Management 2. Describe the (ISO-International Standards Organization) international quality standards 3. Explain Six Sigma 4. Explain how benchmarking is used 5. Explain quality robust products and Taguchi concepts 6. Use the seven tools of TQM © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 -2

Managing Quality Provides a Competitive Advantage Arnold Palmer Hospital https: //www. youtube. com/watch? v=U_Gn. Yw. Re. Tzc u Deliver over 16, 000 babies annually u Virtually every type of quality tool is employed u Continuous improvement u Employee empowerment u Benchmarking u Just-in-time u Quality tools © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 -3

Quality and Strategy An operations manager’s objective is to build a TQM - Total Quality Management system that identifies and satisfies customer needs e. g. Arnold Palmer Hospital meets all the components of service quality © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 -4

Quality and Strategy u Managing quality - Helps in building strategies of differentiation, low cost, and response strategies u Quality helps firms increase sales and reduce costs u Building a quality organization is a demanding task © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 -5

Two Ways Quality Improves Profitability Sales Gains via u Improved response (Toyota) u Flexible pricing (Real Estate, Car dealers) Improved Quality u Improved reputation Reduced Costs via u Increased productivity Increased Profits u Lower rework and scrap costs u Lower warranty costs Figure 6. 1 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 -6

The Flow of Activities Organizational Practices Leadership, Mission statement, Effective operating procedures, Staff support, Training Yields: What is important and what is to be accomplished Quality Principles Customer focus, Continuous improvement, Benchmarking, Just-in-time, Tools of TQM Yields: How to do and what is important and to be accomplished Employee Fulfillment Empowerment, Organizational commitment Yields: Employee attitudes that can accomplish what is important Figure 6. 2 Customer Satisfaction Winning orders, Repeat customers Yields: An effective organization with a competitive advantage © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 -7

Defining Quality The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs American Society for Quality © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 -8

Different Views u User-based: User-based better performance, more features (Marketing people and customers) u Manufacturing-based: Manufacturing-based conformance to standards, making it right the first time (Production Manager) u Product-based: Product-based specific and measurable attributes of the product © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 -9

Implications of Quality 1. Company’s reputation is at !! HIGH RISK !! u Perception of new products u Employment practices u Supplier relations 2. Product liability u Reduce risk 3. Global implications u Improved ability to compete © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 10

Key Dimensions of Quality u Performance u Durability u Features u Serviceability u Reliability u Aesthetics u Conformance u Perceived quality u Value © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 11

Baldrige Criteria Applicants are evaluated on: Categories Leadership Strategic Planning Customer & Market Focus Measurement, Analysis, and Knowledge Management Workforce Focus Process Management Results © 2011 Pearson Education, Inc. publishing as Prentice Hall Points 120 85 85 90 85 85 450 6 - 12

Takumi A Japanese character that symbolizes a broader dimension than quality, a deeper process than education, and a more perfect method than persistence © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 13

Costs of Quality Four major categories of costs associated with Quality: u Prevention costs - reducing the potential for defects u Appraisal costs - evaluating products, parts, and services e. g. Testing labs, inspectors u Internal failure - producing defective parts or services before delivery e. g. Rework, scrap u External costs - defects discovered after delivery e. g. Defective spare parts or services (Trainings/Quality improvement programs) e. g. reworked returned goods/ Loss of goodwill © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 14

Costs of Quality…Contd High Total Cost External Failure Loss of goodwill, External returned good Internal Failure Rework, Scrap Prevention Low Appraisal Training, Quality improvement programe Testing, lab, Inspectors Quality Improvement © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 15

Ethics and Quality Management u Operations managers must deliver healthy, safe, quality products and services u Poor quality risks injuries, lawsuits, recalls, and regulation u Organizations are judged by how they respond to problems u All stakeholders must be considered © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 16

International Quality Standards u ISO 9000 series (Europe/EC) u Common quality standards for products sold in Europe (even if made in U. S. ) u 2008 update places greater emphasis on leadership and customer requirements and satisfaction u ISO 14000 series (Europe/EC) © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 17

ISO 14000 Environmental Standard Core Elements: u Environmental management u Auditing u Performance evaluation u Labeling u Life cycle assessment © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 18

ISO 14000 Environmental Standard Advantages: u Positive public image and reduced exposure to liability u Systematic approach to pollution prevention u Compliance with regulatory requirements and opportunities for competitive advantage u Reduction in multiple audits © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 19

TQM-Total Quality Management Includes entire organization, from supplier to customer Stresses a commitment by management to have a continuing, companywide drive toward excellence in all aspects of products and services that are important to the customer © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 20

Deming’s Fourteen Points 1. Create consistency of purpose 2. Lead to promote change 3. Build quality into the product; stop depending on inspections 4. Build long-term relationships based on performance instead of awarding business on price 5. Continuously improve product, quality, and service Table 6. 2 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 21

Deming’s Fourteen Points 6. Start training 7. Emphasize leadership 8. Drive out fear 9. Break down barriers between departments 10. Stop haranguing workers 11. Support, help, and improve Table 6. 2 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 22

Deming’s Fourteen Points 12. Remove barriers to pride in work 13. Institute education and selfimprovement 14. Put everyone to work on the transformation Table 6. 2 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 23

Seven Concepts of TQM 1. 2. 3. 4. 5. 6. 7. Continuous improvement Six Sigma Employee empowerment Benchmarking Just-in-time (JIT) Taguchi concepts Knowledge of TQM tools © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 24

Continuous Improvement u Represents continuous improvement of all processes u Involves all operations and work centers including suppliers and customers u People, Equipment, Materials, Procedures © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 25

Shewhart’s PDCA Model 4. Act Implement the plan document 3. Check Is the plan working? 1. Plan Identify the problem/ pattern and make a plan 2. Do Test the plan Figure 6. 3 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 26

Six Sigma u Two meanings u Statistical definition of a process that is 99. 9997% capable, 3. 4 Defects Per Million Opportunities (DPMO) u A program designed to reduce defects, lower costs, and improve customer satisfaction © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 27

Six Sigma Program u Originally developed by Motorola, adopted and enhanced by Honeywell and GE u Highly structured approach to process improvement u A strategy u A discipline - DMAIC © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 6 - 28

Six Sigma 1. Define critical outputs and identify gaps for improvement DMAIC Approach 2. Measure the work and collect process data 3. Analyze the data 4. Improve the process 5. Control the new process to make sure new performance is maintained © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 29

Six Sigma Implementation u Emphasize defects per million opportunities as a standard metric u Provide extensive training u Focus on corporate sponsor support (Champions) u Create qualified process improvement experts (Black Belts, Green Belts, etc. ) u Set stretch objectives This cannot be accomplished without a major commitment from top level management © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 30

Employee Empowerment u Getting employees involved in product and process improvements u 85% of quality problems are due to process and material u Techniques u Build communication networks that include employees u Develop open, supportive supervisors u Move responsibility to employees u Build a high-morale organization u Create formal team structures © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 31

Employee Empowerment Quality Circles u Group of employees who meet regularly to solve problems u Trained in planning, problem solving, and statistical methods u Often led by a facilitator u Very effective when done properly © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 32

Benchmarking Selecting best practices to use as a standard for performance al n r te ing n i k 1. Determine what to Use hmar ig c ’re b n benchmark e b you h g f i u 2. Form a benchmark team eno 3. Identify benchmarking partners 4. Collect and analyze benchmarking information 5. Take action to match or exceed the benchmark © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 33

Best Practices for Resolving Customer Complaints Best Practice Justification Make it easy for clients to complain It is free market research Respond quickly to complaints It adds customers and loyalty Resolve complaints on first contact It reduces cost Use computers to manage complaints Discover trends, share them, and align your services Recruit the best for customer service jobs It should be part of formal training and career advancement Table 6. 3 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 34

Just-in-Time (JIT) JIT systems are designed to produce or deliver goods just when they are required/ needed Relationship to quality: u JIT cuts the cost of quality u JIT improves quality u Better quality means less inventory and better, easier-to-employ JIT system u E. g. Dell Laptops, Arnold Palmer Hospitals © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 35

Just-in-Time (JIT) u ‘Pull’ system of production scheduling including supply management u Production only when signaled u Allows reduced inventory levels u Inventory costs money and hides process and material problems u Encourages improved process and product quality © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 36

Just-In-Time (JIT) Example Inventory Work in process inventory level (hides problems) Unreliable Vendors Scrap © 2011 Pearson Education, Inc. publishing as Prentice Hall Capacity Imbalances 6 - 37

Just-In-Time (JIT) Example Reducing inventory reveals problems so they can be solved Inventory Unreliable Vendors Scrap © 2011 Pearson Education, Inc. publishing as Prentice Hall Capacity Imbalances 6 - 38

Taguchi Concepts u Engineering and experimental design methods to improve product and process design u Identify key component and process variables affecting product variation u Taguchi Concepts for improving both product and process quality u Quality robustness u Quality loss function u Target-oriented quality © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 39

Quality Robustness u Ability to produce products uniformly in adverse manufacturing and environmental conditions u Remove the effects of adverse conditions u Small variations in materials and process do not destroy product quality © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 40

Tools of TQM u Tools for Generating Ideas u Check sheets u Scatter diagrams u Cause-and-effect diagrams u Tools to Organize the Data (e. g. Arnold Palmer Hospital) u Pareto charts u Flowcharts © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 41

Tools of TQM u Tools for Identifying Problems u Histogram u Statistical process control chart © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 42

Seven Tools of TQM (a) Check Sheet: An organized method of recording data Defect A B C 1 /// // / 2 / / // 3 / Hour 4 5 / / / 6 / 7 /// // // 8 / //// Figure 6. 6 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 43

Seven Tools of TQM Productivity (b) Scatter Diagram: A graph of the value of one variable vs. another variable Absenteeism Figure 6. 6 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 44

Seven Tools of TQM (c) Cause-and-Effect Diagram: A tool that identifies process elements (causes) that might effect an outcome Cause Materials Methods Effect Manpower Machinery Figure 6. 6 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 45

Seven Tools of TQM Percent Frequency (d) Pareto Chart: A graph to identify and plot problems or defects in descending order of frequency A B C D E Figure 6. 6 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 46

Seven Tools of TQM (e) Flowchart (Process Diagram): A chart that describes the steps in a process (step by step process Figure 6. 6 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 47

Seven Tools of TQM (f) Histogram: A distribution showing the frequency of occurrences of a variable Frequency Distribution Repair time (minutes) Figure 6. 6 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 48

Seven Tools of TQM (g) Statistical Process Control Chart: A chart with time on the horizontal axis to plot values of a statistic Upper control limit Target value Lower control limit Time Figure 6. 6 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 49

Cause-and-Effect Diagrams Method (shooting process) Material (ball) Grain/Feel (grip) Size of ball Aiming point Bend knees Air pressure Hand position Lopsidedness Follow-through Training Conditioning Consistency Balance Missed free-throws Rim size Motivation Rim alignment Concentration Manpower (shooter) © 2011 Pearson Education, Inc. publishing as Prentice Hall Machine (hoop & backboard) Rim height Backboard stability Figure 6. 7 6 - 50

Pareto Charts Data for October Frequency (number) 70 – 60 – 54 – 72 50 – 40 – Number of occurrences 30 – 20 – 12 10 – 4 0 – Room svc 72% Check-in Pool hours 16% 5% 3 2 Minibar 4% Misc. 3% Cumulative percent – 100 – 93 – 88 Causes and percent of the total © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 51

Flow Charts MRI Flowchart 1. 2. 3. 4. 5. 6. 1 Physician schedules MRI Patient taken to MRI Patient signs in Patient is prepped Technician carries out MRI Technician inspects film 2 3 4 5 7. 8. 9. 10. If unsatisfactory, repeat Patient taken back to room MRI read by radiologist MRI report transferred to physician 11. Patient and physician discuss 6 7 80% 8 11 9 10 20% © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 52

Statistical Process Control (SPC) u Uses statistics and control charts to tell when to take corrective action u Drives process improvement u Four key steps u Measure the process u When a change is indicated, find the assignable cause u Eliminate or incorporate the cause u Restart the revised process © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 53

An SPC Chart…Contd. Plots the percent of free throws missed 20% Upper control limit 10% Coach’s target value 0% | | | | | 1 2 3 4 5 6 7 8 9 Lower control limit Game number Figure 6. 8 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 54

Inspection u Involves examining items to see if an item is good or defective u Detect a defective product u Does not correct deficiencies in process or product u It is expensive u Issues u When to inspect (next slide - When and Where to Inspect) u Where in process to inspect (next slide - When and Where to Inspect) © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 55

When and Where to Inspect 1. At the supplier’s plant while the supplier is producing 2. At your facility upon receipt of goods from the supplier 3. Before costly or irreversible processes 4. During the step-by-step production process 5. When production or service is complete 6. Before delivery to your customer 7. At the point of customer contact © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 56

Inspection u Many problems u Worker fatigue u Measurement error u Process variability u Cannot inspect quality into a product u Robust design, empowered employees, and sound processes are better solutions © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 57

Source Inspection u Also known as source control u The next step in the process is your customer u Ensure perfect product to your customer Poka-yoke is the concept of foolproof devices or techniques designed to pass only acceptable product © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 58

Service Industry Inspection Organization What is Inspected Jones Law Office Receptionist performance Standard Is phone answered by the second ring Billing Accurate, timely, and correct format Attorney Promptness in returning calls Table 6. 4 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 59

Service Industry Inspection Organization Arnold Palmer Hospital What is Inspected Standard Billing Accurate, timely, and correct format Pharmacy Prescription accuracy, inventory accuracy Lab Audit for lab-test accuracy Nurses Charts immediately updated Admissions Data entered correctly and completely Table 6. 4 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 60

Service Industry Inspection Organization Nordstrom Department Store What is Inspected Standard Display areas Attractive, well-organized, stocked, good lighting Stockrooms Rotation of goods, organized, clean Salesclerks Neat, courteous, very knowledgeable Table 6. 4 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 61

TQM In Services u Service quality is more difficult to measure than the quality of goods u Service quality perceptions depend on u Intangible differences between products u Intangible expectations customers have of those products © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 62

Service Quality The Operations Manager must recognize: 1. The tangible component of services is important 2. The service process is important 3. The service is judged against the customer’s expectations 4. Exceptions will occur © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 63

Service Specifications at UPS © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 64

Determinants of Service Quality Reliability Consistency of performance and dependability Responsiveness Willingness or readiness of employees Competence Required skills and knowledge Access Approachability and ease of contact Courtesy Politeness, respect, consideration, friendliness Communication Keeping customers informed Credibility Trustworthiness, believability, honesty Security Freedom from danger, risk, or doubt Understanding/ knowing the customer Understand the customer’s needs Tangibles Physical evidence of the service Table 6. 5 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 65

Service Recovery Strategy u Managers should have a plan for when services fail u Marriott’s LEARN routine u Listen u Empathize u Apologize u React u Notify © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 66

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 67