operations management
Class 16 Managing Quality
Instructor: Mani Lakshmanan
P300 Introduction to Operations Management
Outline
Two types of quality
Impact of quality
Cost of Quality (COQ) Analysis
Quality management: Six Sigma
Product Quality
Product quality is a product’s fitness for consumption in terms of meeting customers’ needs and desires
Two types of quality:
Design quality
How well a product’s designed features match up to the requirements of a given customer group
Conformance quality
Whether or not a delivered product meets its design specifications
Design Quality
Conformance quality
Bottle fill level
Output Variability
Desired Value
Value of Output
Output Variability
Variability is one major source of conformance quality problems
Desired Value
Range of outputs allowed by the product’s design specification
Value of Output
Defects that do not meet conformance quality
Outline
Two types of quality
Impact of quality
Cost of Quality (COQ) Analysis
Quality management: Six Sigma
Impact of Quality
Product sales
Brand image and company reputation
Inspection, rework, and warranty costs
Identify cost impacts of poor conformance quality
Cost of Quality (COQ) Analysis
Prevention costs
Appraisal costs
Internal failure costs
External failure costs
Identify cost impacts of poor conformance quality
Cost of Quality (COQ) Analysis
Prevention costs: cost of activities aimed at eliminating the potential causes of product defects or failures
Preventive repair / maintenance
Training
Appraisal costs: cost of activities aimed at ensuring that defective products are identified and not delivered to customers
Inspection before/during/after production
Identify cost impacts of poor conformance quality
Cost of Quality (COQ) Analysis
Internal failure costs: results from defects that are found in products prior to their shipment to customers
Scrap
Rework
External failure costs: result from defects that are found only after products reach customers
Returned material
Repair
Lost of future sales
Identify cost impacts of poor conformance quality
Operation 1
Final
Inspection
End User’s
Hand
Operation 2
Operation 3
Operation 4
Operation 5
Operation 6
…
Identify cost impacts of poor conformance quality
Operation 1
Final
Inspection
End User’s
Hand
Operation 2
Operation 3
Operation 4
Operation 5
Operation 6
…
Cost of solving a quality problem
at operation 2
at Final inspection
in the hands of a customer
<
<
A defect found in later stages is much more costly than a defect found in earlier stages
Identify cost impacts of poor conformance quality
Cost of Quality (COQ) Analysis
Prevention costs
Appraisal costs
Internal failure costs
External failure costs
| Percentage of Revenues: Hotel Restaurant | Percentage of Revenues: Manufacturing Plant | |
| Total cost of quality | 12%-16% | 7.24%-7.98% |
| Prevention costs | 2%-4% | 2% |
| Appraisal costs | 2%-4% | 1.7%-2% |
| Internal failure costs | 2.5%-4.5% | 3.3%-3.57% |
| External failure costs | 3.5%-5.5% | 0.37%-0.46% |
Give managers a stronger basis for financially justifying investments in quality improvement initiatives
What’s the purpose of COQ?
Outline
Two types of quality
Impact of quality
Cost of Quality (COQ) Analysis
Quality management: Six Sigma
Quality Management
Variability reduces control over processes and outputs
An important task in quality management is to continually find and eliminate sources of unwanted and uncontrolled variability
A systematic approach to quality management: Six Sigma
Six Sigma
Sigma (): represents the standard deviation of values for the output of a process
The values of output tend to be very close to the same value, typically the mean
The values of output are spread out over a large range of values
Low standard deviation
High standard deviation
Six Sigma
We can find standard deviation () of output values by using some statistic tools
The goal of the six sigma approach is to reduce variability so that range allowed
Range of outputs allowed by the product’s design specification
Value of Output
Desired Value
Six Sigma Quality
Exercise 1
Kristen loves to bake cookies, but she has an old oven that has trouble maintaining a constant temperature.
If the acceptable temperature range for making the cookies is 350 plus or minus 5 degrees, what is the allowable standard deviation in the temperature of her oven in order to achieve a Six Sigma level of quality?
350
345
355
Answer: The stand deviation of the temperature should satisfy: , i.e., the standard deviation should be at most.
Six Sigma
We can find standard deviation () of output values by using some statistic tools
The goal of the six sigma approach is to reduce variability so that range allowed
| Sigma Level | Defects per Million |
| 2σ | 308,537 |
| 3σ | 66,807 |
| 4σ | 6,210 |
| 5σ | 233 |
| 6σ | 3.4 |
Six Sigma
Sigma level of quality
Lower
Tolerance Limit
Design Quality
Upper
Tolerance Limit
Four sigma
Six sigma
Two sigma
1σ
1σ
1σ
σ: Standard Deviation
22
Exercise 2
What would the standard deviation in the temperature of her oven need to be if she settled for a “Three Sigma” level of quality?
If her oven exactly meets this quality level, what percentage of the time would her oven be operating at a temperature outside the acceptable range?
| Sigma Level | Defects per Million |
| 3σ | 66,807 |
| 4σ | 6,210 |
| 5σ | 233 |
| 6σ | 3.4 |
Six Sigma quality (3.4 defects per million units produced) is probably a bit much to ask of Kristen’s old oven.
Answer:
Answer:
DMAIC: the six sigma process
Define: identify critical to quality characteristics(CTQs) that have the most impact on quality
Measure: identify the key internal processes that influence CTQs and measure the defects currently generated
Analyze: identify key variables that are most likely to create process variation, statistical tools are used
Improve: identify acceptable ranges of the key variables and modify the process to stay within the range
Control: tools(equipment/statistic tests) are put in place to ensure the key variables stay in specified range over time
Takeaway
Two types of quality:
Design quality
How well a product’s designed features match up to the requirements of a given customer group
Conformance quality
Whether or not a delivered product meets its design specifications
Higher the Sigma better the quality process which result in lower defects
(6 sigma means just 3.2 defects per million parts produced whereas 2 sigma means 30.8% defects)