Chapter 5 Total Quality Management 1 Operations Management

Chapter 5 - Total Quality Management 1 Operations Management 6 th Edition R. Dan Reid & Nada R. Sanders Copyright © 2016 John Wiley & Sons, Inc.

Learning Objectives 2 Explain the meaning of total quality management (TQM). Identify costs of quality. Describe the evolution of TQM. Identify features of the TQM philosophy. Describe quality awards and quality certifications. Understand why and how TQM efforts fail. Copyright © 2016 John Wiley & Sons, Inc.

Defining Quality 3 Definition of quality is dependent on the people defining it There is no single, universal definition of quality “performance to standards”, “meeting customer’s needs”, “satisfying the customer” 5 common definitions (See next slide) Copyright © 2016 John Wiley & Sons, Inc.

Defining Quality – 5 Ways 4 Conformance to specifications 1. § How well a product/service meet targets and tolerances defined by its designers. Fitness for use 2. § Evaluates performance for intended use Value for price paid 3. § Evaluation of usefulness vs. price paid Support services 4. § Quality of support after sale Psychological 5. § Ambiance, prestige, friendly staff Copyright © 2016 John Wiley & Sons, Inc.

Manufacturing Quality vs. Service Quality 5 Manufacturing focuses on Service produce intangible product features (can products that must be be seen, touched, directly managed) experienced (cannot be seen or touched) Conformance Performance Reliability Features Durability Serviceability Intangible factors Consistency Responsiveness Courtesy, friendliness Promptness, timeliness Atmosphere Copyright © 2016 John Wiley & Sons, Inc.

Cost of Quality 6 Quality affects all aspects of the organization Quality has dramatic cost implications of: Quality control costs (to achieve high quality) Prevention costs Appraisal costs Quality failure costs (consequences of poor quality) Internal failure costs External failure costs Copyright © 2016 John Wiley & Sons, Inc.

Cost of Quality – 4 Categories 7

Evolution of TQM – New Focus 8 Copyright © 2016 John Wiley & Sons, Inc.

Quality Gurus 9 Copyright © 2016 John Wiley & Sons, Inc.

TQM Philosophy 10 n n TQM focuses on identifying quality problem root causes Encompasses the entire organization Involves the technical as well as people Relies on seven basic concepts of 1. Customer focus 2. Continuous improvement 3. Employee empowerment 4. Use of quality tools 5. Product design (discussed later in Chapter) 6. Process management (discussed later in Chapter) 7. Managing supplier quality (discussed later in Chapter) Copyright © 2016 John Wiley & Sons, Inc.

TQM Philosophy 11 Copyright © 2016 John Wiley & Sons, Inc.

TQM Philosophy Concepts 12 Focus on Customer Identify and meet customer needs Stay tuned to changing needs, e. g. fashion styles Continuous Improvement Continuous learning and problem solving, e. g. Kaizen, 6 sigma Plan-Do-Study-Act (PDSA) Benchmarking Copyright © 2016 John Wiley & Sons, Inc.

PDSA Details 13 Plan Evaluate current process Collect procedures, data, identify problems Develop an improvement plan, performance objectives Do Implement the plan – trial basis Study Collect data and evaluate against objectives Act Communicate the results from trial If successful, implement new process Copyright © 2016 John Wiley & Sons, Inc.

PDSA Details - cont'd 14 Cycle is repeated After act phase, start planning and repeat process

TQM Philosophy Concepts - cont'd 15 Employee Empowerment Empower all employees; external and internal customers Team Approach Teams formed around processes; 8 -10 people Meet weekly to analyze and solve problems Use of Quality Tools Ongoing training on analysis, assessment, and correction, & implementation tools Studying practices at “best in class” companies Copyright © 2016 John Wiley & Sons, Inc.

Ways of Improving Quality 16 Plan-Do-Study-Act Cycle (PDSA) Also called the Deming Wheel after originator Circular, never ending problem solving process or continuous improvement process Seven Tools of Quality Control Tools typically taught to problem solving teams Quality Function Deployment (QFD) Used to translate customer preferences to design Copyright © 2016 John Wiley & Sons, Inc.

Seven Tools of Quality Control 17 1. 2. 3. 4. 5. 6. 7. Cause-and-Effect Diagrams Flowcharts Checklists Control Charts Scatter Diagrams Pareto Analysis Histograms Copyright © 2016 John Wiley & Sons, Inc.

TQM Philosophy Concepts - cont'd 18 Copyright © 2016 John Wiley & Sons, Inc.

1. Cause-and-Effect Diagrams 19 Called Fishbone Diagram Focused on solving identified quality problem Used by quality control teams; brainstorming

2. Flowcharts 20 Schematic diagram Used to document the detailed steps in a process Often the first step in Process Re-Engineering

3. Checklist 21 Simple data check-off sheet Designed to identify type of quality problems at each work station; per shift, per machine, per operator

4. Control Charts 22 The UCL and LCL are calculated limits used to show when a process is in or out of control i. e. ; weight, width, or volume Key tool used in Statistical Process Control - Chap. 6

5. Scatter Diagrams 23 A graph showing how two variables are related to one another The greater the degree of correlation, the more linear are the observations

6. Pareto Analysis 24 Technique that displays the degree of importance for each element Named after the 19 th century Italian economist; often called the 80 -20 Rule Principle is that quality problems are the result of only a few problems i. e. ; 80% of problems are caused by 20% of causes

7. Histograms 25 A chart that shows the frequency distribution of observed values of a variable (i. e. ; service time at a bank drive-up window) Displays whether the distribution is symmetrical (normal) or skewed

Product Design - Quality Function Deployment (QFD) 26 Critical to ensure product design meets customer expectations (and enhance communications internally) QFD is a useful tool for translating customer specifications into technical requirements QFD encompasses Customer requirements Competitive evaluation Product characteristics Relationship matrix Trade-off matrix Setting Targets Copyright © 2016 John Wiley & Sons, Inc.

Quality Function Deployment (QFD) Details 27

QFD - House of Quality 28

Reliability – Critical to Quality 29 Reliability is the probability that the product, service or part will function as expected No product is 100% certain to function properly Reliability is a probability function dependent on subparts or components Copyright © 2016 John Wiley & Sons, Inc.

Reliability; Critical to Quality - cont’d 30 Reliability of a system is the product of component reliabilities RS = (R 1) (R 2) (R 3). . . (Rn) RS = reliability of the product or system R 1 = reliability of the components 1 thru n Copyright © 2016 John Wiley & Sons, Inc.

Reliability; Critical to Quality - cont’d 31 Increase reliability by placing components in parallel Parallel components allow system to operate if one or the other fails RS = R 1 + (R 2* Probability of needing 2 nd component) Copyright © 2016 John Wiley & Sons, Inc.

Process Management & Managing Supplier Quality 32 Quality products come from quality sources Quality must be built into the process Quality at the source is the belief that it is better to uncover source of quality problems and correct it TQM extends to quality of product from company’s suppliers Copyright © 2016 John Wiley & Sons, Inc.

Quality Awards and Standards 33 Malcolm Baldrige National Quality Award (MBNQA) The Deming Prize ISO 9000 Certification ISO 14000 Standards Copyright © 2016 John Wiley & Sons, Inc.

MBNQA- What Is It? 34 Award named after the former Secretary of Commerce – Regan Administration Intended to reward and stimulate quality initiatives Given to no more that two companies in each of three categories; manufacturing, service, and small business Past winners; Motorola Corp. , Xerox, Fed. Ex, 3 M, IBM, Ritz-Carlton Copyright © 2016 John Wiley & Sons, Inc.

MBNQA- Criteria 35 # Categories Points 1 Leadership 120 2 Strategic Planning 85 3 Customer and Market Focus 85 4 Information and Analysis 90 5 Human Resource Focus 85 6 Process Management 85 7 Business Results 450 TOTAL POINTS 1000 Criteria represents Quality belongs to everyone! And criteria promotes “continuous improvement”. Copyright © 2016 John Wiley & Sons, Inc.

The Deming Prize 36 Given by the Union of Japanese Scientists and Engineers since 1951 Named after W. Edwards Deming who worked to improve Japanese quality after WWII Not open to foreign companies until 1984 1989 - Florida P & L was first US company winner Copyright © 2016 John Wiley & Sons, Inc.

ISO Standards 37 ISO 9000 Standards: (1987) Certification developed by International Organization for Standardization Set of internationally recognized quality standards Companies are periodically audited & certified ISO 9000: 2000 QMS – Fundamentals and Standards ISO 9001: 2000 QMS – Requirements ISO 9004: 2000 QMS - Guidelines for Performance More than 40, 000 companies have been certified ISO 14000: (1987) Focuses on a company’s environmental responsibility Copyright © 2016 John Wiley & Sons, Inc.

Why TQM Efforts Fail 38 Lack of a genuine quality culture Lack of top management support and commitment Over- and under-reliance on SPC methods Copyright © 2016 John Wiley & Sons, Inc.

TQM Within OM 39 TQM is broad sweeping organizational change TQM impacts Marketing – providing key inputs of customer information Finance – evaluating and monitoring financial impact Accounting – provides exact costing Engineering – translate customer requirements into specific engineering terms Purchasing – acquiring materials to support product development Human Resources – hire employees with necessary skills Information systems – increased need for accessible information Copyright © 2016 John Wiley & Sons, Inc.

Chapter 5 Highlights 40 TQM is different from the old concept of quality Focus is on serving customers, identifying the causes of quality problems, and building quality into the production process Four categories of quality costs: Prevention, Appraisal, Internal and External Seven TQM notable individuals include: Walter A. Shewhart, W. Edwards Demings, Joseph M. Juran, Armand V. Feigenbaum, Philip B. Crosby, Kaoru Ishikawa, & Genichi Taguchi Copyright © 2016 John Wiley & Sons, Inc.

Chapter 5 Highlights – cont'd 41 Seven features of TQM combine to create TQM philosophy: Customer focus, continuous improvement, employee empowerment, use of quality tools, product design, process management, and managing supplier quality QFD a tool used to translate customer needs into specific engineering requirements Reliability the probability that the product will functions as expected The Malcolm Baldrige Award given to companies to recognize excellence in quality management. Copyright © 2016 John Wiley & Sons, Inc.