Operations Management Managing Quality Power Point presentation to

Operations Management Managing Quality Power. Point presentation to accompany Heizer/Render Principles of Operations Management, 7 e Operations Management, 9 e © 2008 Prentice Hall, Inc. 6– 1

Outline þ Quality and Strategy þ Defining Quality þ Implications of Quality þ Malcolm Baldrige National Quality Award þ Cost of Quality (COQ) þ Ethics and Quality Management © 2008 Prentice Hall, Inc. 6– 2

Outline – Continued þ International Quality Standards þ ISO 9000 þ ISO 14000 © 2008 Prentice Hall, Inc. 6– 3

Outline – Continued þ Total Quality Management þ Continuous Improvement þ Six Sigma þ Employee Empowerment þ Benchmarking þ Just-in-Time (JIT) þ Taguchi Concepts þ Knowledge of TQM Tools © 2008 Prentice Hall, Inc. 6– 4

Outline – Continued þ Tools of TQM þ Check Sheets þ Scatter Diagrams þ Cause-and-Effect Diagrams þ Pareto Charts þ Flowcharts þ Histograms þ Statistical Process Control (SPC) © 2008 Prentice Hall, Inc. 6– 5

Outline – Continued þ The Role of Inspection þ When and Where to Inspect þ Source Inspection þ Service Industry Inspection þ Inspection of Attributes versus Variables þ TQM in Services © 2008 Prentice Hall, Inc. 6– 6

Learning Objectives When you complete this chapter you should be able to: þ Define quality and TQM þ Describe the ISO international quality standards þ Explain Six Sigma þ Explain how benchmarking is used þ Explain quality robust products and Taguchi concepts þ Use the seven tools of TQM © 2008 Prentice Hall, Inc. 6– 7

Quality and Strategy þ Managing quality supports differentiation, low cost, and response strategies þ Quality helps firms increase sales and reduce costs þ Building a quality organization is a demanding task © 2008 Prentice Hall, Inc. 6– 8

Two Ways Quality Improves Profitability Sales Gains via þ Improved response þ Flexible pricing Improved Quality þ Improved reputation Reduced Costs via þ Increased productivity Increased Profits þ Lower rework and scrap costs þ Lower warranty costs Figure 6. 1 © 2008 Prentice Hall, Inc. 6– 9

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 what is important and to be accomplished Employee Fulfillment Empowerment, Organizational commitment Yields: Employee attitudes that can accomplish what is important Figure 6. 2 © 2008 Prentice Hall, Inc. Customer Satisfaction Winning orders, Repeat customers Yields: An effective organization with a competitive advantage 6 – 10

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 © 2008 Prentice Hall, Inc. 6 – 11

Different Views þ User-based – better performance, more features þ Manufacturing-based – conformance to standards, making it right the first time þ Product-based – specific and measurable attributes of the product © 2008 Prentice Hall, Inc. 6 – 12

Implications of Quality 1. Company reputation þ þ Perception of new products Employment practices þ Supplier relations 2. Product liability þ Reduce risk 3. Global implications þ Improved ability to compete © 2008 Prentice Hall, Inc. 6 – 13

Key Dimensions of Quality þ Performance þ Features þ Durability þ Serviceability þ Reliability þ Conformance þ Aesthetics þ Perceived quality þ Value © 2008 Prentice Hall, Inc. 6 – 14

Malcom Baldrige National Quality Award þ Established in 1988 by the U. S. government þ Designed to promote TQM practices þ Recent winners þ Premier Inc. , MESA Products, Sunny Fresh Foods, Park Place Lexus, North Mississippi Medical Center, The Bama Companies, Richland College, Texas Nameplate Company, Inc. © 2008 Prentice Hall, Inc. 6 – 15

Baldrige Criteria Applicants are evaluated on: Categories Leadership Strategic Planning Customer & Market Focus Measurement, Analysis, and Knowledge Management Workforce Focus Process Management Results © 2008 Prentice Hall, Inc. Points 120 85 85 90 85 85 450 6 – 16

Takumi A Japanese character that symbolizes a broader dimension than quality, a deeper process than education, and a more perfect method than persistence © 2008 Prentice Hall, Inc. 6 – 17

Costs of Quality þ Prevention costs - reducing the potential for defects þ Appraisal costs - evaluating products, parts, and services þ Internal failure - producing defective parts or service before delivery þ External costs - defects discovered after delivery © 2008 Prentice Hall, Inc. 6 – 18

Costs of Quality Total Cost External Failure Internal Failure Prevention Appraisal Quality Improvement © 2008 Prentice Hall, Inc. 6 – 19

Leaders in Quality W. Edwards Deming 14 Points for Management Joseph M. Juran Top management commitment, fitness for use Armand Feigenbaum Total Quality Control Philip B. Crosby Quality is Free, zero defects © 2008 Prentice Hall, Inc. 6 – 20

Ethics and Quality Management þ Operations managers must deliver healthy, safe, quality products and services þ Poor quality risks injuries, lawsuits, recalls, and regulation þ Organizations are judged by how they respond to problems þ All stakeholders must be considered © 2008 Prentice Hall, Inc. 6 – 21

International Quality Standards þ ISO 9000 series (Europe/EC) þ Common quality standards for products sold in Europe (even if made in U. S. ) þ 2000 update places greater emphasis on leadership and customer satisfaction þ ISO 14000 series (Europe/EC) © 2008 Prentice Hall, Inc. 6 – 22

ISO 14000 Environmental Standard Core Elements: þ þ Environmental management þ þ Performance evaluation Auditing Labeling þ Life cycle assessment © 2008 Prentice Hall, Inc. 6 – 23

TQM Encompasses 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 © 2008 Prentice Hall, Inc. 6 – 24

Deming’s Fourteen Points 1. Create consistency of purpose 2. Lead to promote change 3. Build quality into the product; stop depending on inspection 4. Build long-term relationships based on performance, not price 5. Continuously improve product, quality, and service 6. Start training 7. Emphasize leadership Table 6. 1 © 2008 Prentice Hall, Inc. 6 – 25

Deming’s Fourteen Points 8. Drive out fear 9. Break down barriers between departments 10. Stop haranguing workers 11. Support, help, improve 12. Remove barriers to pride in work 13. Institute a vigorous program of education and self-improvement 14. Put everybody in the company to work on the transformation Table 6. 1 © 2008 Prentice Hall, Inc. 6 – 26

Seven Concepts of TQM þ Continuous improvement þ Six Sigma þ Employee empowerment þ Benchmarking þ Just-in-time (JIT) þ Taguchi concepts þ Knowledge of TQM tools © 2008 Prentice Hall, Inc. 6 – 27

Continuous Improvement þ Represents continual improvement of all processes þ Involves all operations and work centers including suppliers and customers þ People, Equipment, Materials, Procedures © 2008 Prentice Hall, Inc. 6 – 28

Shewhart’s PDCA Model 1. Plan 4. Act Identify the Implement improvement and make the plan a plan 3. Check Is the plan working? 2. Do Test the plan Figure 6. 3 © 2008 Prentice Hall, Inc. 6 – 29

Six Sigma þ Two meanings þ Statistical definition of a process that is 99. 9997% capable, 3. 4 defects per million opportunities (DPMO) þ A program designed to reduce defects, lower costs, and improve customer satisfaction © 2008 Prentice Hall, Inc. 6 – 30

Six Sigma þ Two meanings Lower limits Upper limits 2, 700 defects/million þ Statistical definition of a process that is 99. 9997% capable, 3. 4 defects per 3. 4 defects/million opportunities (DPMO) þ A program designed to reduce defects, lower costs, and improve customer satisfaction. Mean ± 3 ± 6 Figure 6. 4 © 2008 Prentice Hall, Inc. 6 – 31

Six Sigma Program þ Originally developed by Motorola, adopted and enhanced by Honeywell and GE þ Highly structured approach to process improvement þ A strategy þ A discipline - DMAIC © 2008 Prentice Hall, Inc. 6 6 – 32

Six Sigma 1. Define critical outputs and identify gaps for improvement 2. Measure the work and collect process data 3. Analyze the data DMAIC Approach 4. Improve the process 5. Control the new process to make sure new performance is maintained © 2008 Prentice Hall, Inc. 6 – 33

Six Sigma Implementation þ Emphasize defects per million opportunities as a standard metric þ Provide extensive training þ Focus on corporate sponsor support (Champions) þ Create qualified process improvement experts (Black Belts, Green Belts, etc. ) þ Set stretch objectives This cannot be accomplished without a major commitment from top level management © 2008 Prentice Hall, Inc. 6 – 34

Employee Empowerment þ Getting employees involved in product and process improvements þ 85% of quality problems are due to process and material þ Techniques þ Build communication networks that include employees þ Develop open, supportive supervisors þ Move responsibility to employees þ Build a high-morale organization þ Create formal team structures © 2008 Prentice Hall, Inc. 6 – 35

Quality Circles þ Group of employees who meet regularly to solve problems þ Trained in planning, problem solving, and statistical methods þ Often led by a facilitator þ Very effective when done properly © 2008 Prentice Hall, Inc. 6 – 36

Benchmarking Selecting best practices to use as a l standard for performance a n er nt rking i e Us hma ig c ’re b n e b you if nough e þ Determine what to benchmark þ Form a benchmark team þ Identify benchmarking partners þ Collect and analyze benchmarking information þ Take action to match or exceed the benchmark © 2008 Prentice Hall, Inc. 6 – 37

Best Practices for Resolving Customer Complaints þ Make it easy for clients to complain þ Respond quickly to complaints þ Resolve complaints on first contact þ Use computers to manage complaints þ Recruit the best for customer service jobs © 2008 Prentice Hall, Inc. 6 – 38

Just-in-Time (JIT) Relationship to quality: þ JIT cuts the cost of quality þ JIT improves quality þ Better quality means less inventory and better, easier-toemploy JIT system © 2008 Prentice Hall, Inc. 6 – 39

Just-in-Time (JIT) þ ‘Pull’ system of production scheduling including supply management þ Production only when signaled þ Allows reduced inventory levels þ Inventory costs money and hides process and material problems þ Encourages improved process and product quality © 2008 Prentice Hall, Inc. 6 – 40

Just-In-Time (JIT) Example Work in process inventory level (hides problems) Unreliable Vendors © 2008 Prentice Hall, Inc. Scrap Capacity Imbalances 6 – 41

Just-In-Time (JIT) Example Reducing inventory reveals problems so they can be solved Unreliable Vendors © 2008 Prentice Hall, Inc. Scrap Capacity Imbalances 6 – 42

Taguchi Concepts þ Engineering and experimental design methods to improve product and process design þ Identify key component and process variables affecting product variation þ Taguchi Concepts þ Quality robustness þ Quality loss function þ Target-oriented quality © 2008 Prentice Hall, Inc. 6 – 43

Quality Robustness þ Ability to produce products uniformly in adverse manufacturing and environmental conditions þ Remove the effects of adverse conditions þ Small variations in materials and process do not destroy product quality © 2008 Prentice Hall, Inc. 6 – 44

Tools of TQM þ Tools for Generating Ideas þCheck sheets þScatter diagrams þCause-and-effect diagrams þ Tools to Organize the Data þPareto charts þFlowcharts þ Tools for Identifying Problems þHistogram þStatistical process control chart © 2008 Prentice Hall, Inc. 6 – 45

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 © 2008 Prentice Hall, Inc. 6 – 46

Seven Tools of TQM Productivity (b) Scatter Diagram: A graph of the value of one variable vs. another variable Absenteeism Figure 6. 6 © 2008 Prentice Hall, Inc. 6 – 47

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 © 2008 Prentice Hall, Inc. 6 – 48

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 © 2008 Prentice Hall, Inc. 6 – 49

Seven Tools of TQM (e) Flowchart (Process Diagram): A chart that describes the steps in a process Figure 6. 6 © 2008 Prentice Hall, Inc. 6 – 50

Seven Tools of TQM (f) Histogram: A distribution showing the frequency of occurrences of a variable Frequency Distribution Repair time (minutes) Figure 6. 6 © 2008 Prentice Hall, Inc. 6 – 51

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 © 2008 Prentice Hall, Inc. 6 – 52

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 © 2008 Prentice Hall, Inc. Missed free-throws Rim size Motivation Rim alignment Concentration Manpower (shooter) Balance Machine (hoop & backboard) Rim height Backboard stability Figure 6. 7 6 – 53

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 © 2008 Prentice Hall, Inc. 6 – 54

Flow Charts MRI Flowchart 1. 2. 3. 4. 5. 6. Physician schedules MRI Patient taken to MRI Patient signs in Patient is prepped Technician carries out MRI Technician inspects film 1 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% © 2008 Prentice Hall, Inc. 6 – 55

Statistical Process Control (SPC) þ Uses statistics and control charts to tell when to take corrective action þ Drives process improvement þ Four key steps þ Measure the process þ When a change is indicated, find the assignable cause þ Eliminate or incorporate the cause þ Restart the revised process © 2008 Prentice Hall, Inc. 6 – 56

An SPC Chart 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 © 2008 Prentice Hall, Inc. 6 – 57

Inspection þ Involves examining items to see if an item is good or defective þ Detect a defective product þ Does not correct deficiencies in process or product þ It is expensive þ Issues þ When to inspect þ Where in process to inspect © 2008 Prentice Hall, Inc. 6 – 58

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 © 2008 Prentice Hall, Inc. 6 – 59

Inspection þ Many problems þ Worker fatigue þ Measurement error þ Process variability þ Cannot inspect quality into a product þ Robust design, empowered employees, and sound processes are better solutions © 2008 Prentice Hall, Inc. 6 – 60

Source Inspection þ Also known as source control þ The next step in the process is your customer þ Ensure perfect product to your customer Poka-yoke is the concept of foolproof devices or techniques designed to pass only acceptable product © 2008 Prentice Hall, Inc. 6 – 61

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. 5 © 2008 Prentice Hall, Inc. 6 – 62

Service Industry Inspection Organization Hard Rock Hotel What is Inspected Standard Reception desk Use customer’s name Doorman Greet guest in less than 30 seconds Room All lights working, spotless bathroom Minibar Restocked and charges accurately posted to bill Table 6. 5 © 2008 Prentice Hall, Inc. 6 – 63

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. 5 © 2008 Prentice Hall, Inc. 6 – 64

Service Industry Inspection Organization Olive Garden Restaurant What is Inspected Standard Busboy Serves water and bread within 1 minute Busboy Clears all entrée items and crumbs prior to dessert Waiter Knows and suggest specials, desserts Table 6. 5 © 2008 Prentice Hall, Inc. 6 – 65

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. 5 © 2008 Prentice Hall, Inc. 6 – 66

Attributes Versus Variables þ Attributes þ Items are either good or bad, acceptable or unacceptable þ Does not address degree of failure þ Variables þ Measures dimensions such as weight, speed, height, or strength þ Falls within an acceptable range þ Use different statistical techniques © 2008 Prentice Hall, Inc. 6 – 67

TQM In Services þ Service quality is more difficult to measure than the quality of goods þ Service quality perceptions depend on þ Intangible differences between products þ Intangible expectations customers have of those products © 2008 Prentice Hall, Inc. 6 – 68

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 © 2008 Prentice Hall, Inc. 6 – 69

Service Specifications at UPS © 2008 Prentice Hall, Inc. 6 – 70

Determinants of Service Quality þ Reliability þ Responsiveness þ Competence þ Access þ Courtesy þ Communication © 2008 Prentice Hall, Inc. þ Credibility þ Security þ Understanding/ knowing the customer þ Tangibles 6 – 71

Service Recovery Strategy þ Managers should have a plan for when services fail þ Marriott’s LEARN routine þ Listen þ Empathize þ Apologize þ React þ Notify © 2008 Prentice Hall, Inc. 6 – 72