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Operations Management: Sustainability and Supply Chain Management

Thirteenth Edition

Week 3

Chapter 6

Managing Quality

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Outline

Global Company Profile: Arnold Palmer Hospital

Quality and Strategy

Defining Quality

Total Quality Management

Tools of T Q M

The Role of Inspection

T Q M in Services

Managing Quality Provides a Competitive Advantage

Arnold Palmer Hospital

Delivers over 14,000 babies annually

Virtually every type of quality tool is employed

Continuous improvement

Employee empowerment

Benchmarking

Just-in-time (J I T)

Quality tools

Learning Objectives

When you complete this chapter you should be able to:

6.1 Define quality and TQ M

6.2 Describe the I S O international quality standards

6.3 Explain Six Sigma

6.4 Explain how benchmarking is used in T Q M

6.5 Explain quality robust products and Taguchi concepts

6.6 Use the seven tools of T Q M

Quality and Strategy

Managing quality supports differentiation, low cost, and response strategies

Quality helps firms increase sales and reduce costs

Building a quality organization is a demanding task

Two Ways Quality Improves Profitability

The Flow of Activities

Defining Quality

An operations manager’s objective is to build a total quality management system that identifies and satisfies customer needs

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

Different Views

User based: better performance, more features

Manufacturing based: conformance to standards, making it right the first time

Product based: specific and measurable attributes of the product

Implications of Quality

Company reputation

Perception of new products

Employment practices

Supplier relations

Product liability

Reduce risk

Global implications

Improved ability to compete

Malcolm Baldrige National Quality Award

Established in 1988 by the U.S. government

Designed to promote T Q M practices

Recent winners include

Bristol Tennessee Essential Services, Stellar Solutions, Adventist Health Castle, MidwayUSA, Charter School of San Diego, Mid-America Transplant Services, Hill Country Memorial, Elevations Credit Union, MESA Products Inc.

Baldrige Criteria

Applicants are evaluated on:

CATEGORIES	POINTS
Leadership	120
Strategic Planning	85
Customer Focus	85
Measurement, Analysis, and Knowledge Management	90
Workforce Focus	85
Operations Focus	85
Results	450

I S O 9000 International Quality Standards (1 of 2)

International recognition

Encourages quality management procedures, detailed documentation, work instructions, and recordkeeping

2015 revision gives greater emphasis to risk-based thinking

Over 1.6 million certifications in 201 countries

Critical for global business

I S O 9000 International Quality Standards (2 of 2)

Management principles

Top management leadership

Customer satisfaction

Continual improvement

Involvement of people

Process analysis

Use of data-driven decision making

A systems approach to management

Mutually beneficial supplier relationships

Costs of Quality

Appraisal costs - evaluating products, parts, and services

Prevention costs - reducing the potential for defects

Internal failure costs - producing defective parts or service before delivery

External failure costs - defects discovered after delivery

Takumi

A Japanese character that symbolizes

a broader dimension than quality,

a deeper process than education,

a more perfect method than persistence

Leaders in Quality (1 of 2)

LEADER	PHILOSOPHY/CONTRIBUTION
W. Edwards Deming	Deming insisted management accept responsibility for building good systems. The employee cannot produce products that on average exceed the quality of what the process is capable of producing. His 14 points for implementing quality improvement are presented in this chapter.
Joseph M. Juran	A pioneer in teaching the Japanese how to improve quality. Juran believed strongly in top-management commitment, support, and involvement in the quality effort. He was also a believer in teams that continually seek to raise quality standards. Juran varies from Deming somewhat in focusing on the customer and defining quality as fitness for use, not necessarily the written specifications.

Leaders in Quality (2 of 2)

LEADER	PHILOSOPHY/CONTRIBUTION
Armand Feigenbaum	His 1961 book Total Quality Control laid out 40 steps to quality improvement processes. He viewed quality not as a set of tools but as a total field that integrated the processes of a company. His work in how people learn from each other’s successes led to the field of cross-functional teamwork.
Philip B. Crosby	Quality Is Free was Crosby’s attention-getting book published in 1979. Crosby believed that in the traditional trade-off between the cost of improving quality and the cost of poor quality, the cost of poor quality is understated. The cost of poor quality should include all of the things that are involved in not doing the job right the first time. Crosby coined the term zero defects and stated, “There is absolutely no reason for having errors or defects in any product or service.”

Ethics and Quality Management

Operations managers must deliver healthy, safe, quality products and services

Poor quality risks injuries, lawsuits, recalls, and regulation

Ethical conduct must dictate response to problems

All stakeholders must be considered

Total Quality Management

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

Deming's Fourteen Points (1 of 2)

1. Create consistency of purpose

2. Lead to promote change

3. Build quality into the product; stop depending on inspections to catch problems

4. Build long-term relationships based on performance instead of awarding business on price

5. Continuously improve product, quality, and service

6. Start training

7. Emphasize leadership

Deming's Fourteen Points (2 of 2)

8. Drive out fear

9. Break down barriers between departments

10. Stop haranguing workers

11. Support, help, and improve

12. Remove barriers to pride in work

13. Institute a vigorous program of education and self-improvement

14. Put everyone in the company to work on the transformation

Seven Concepts of T Q M

Continuous improvement

Six Sigma

Employee empowerment

Benchmarking

Just-in-time (J I T)

Taguchi concepts

Knowledge of T Q M tools

Continuous Improvement

Never-ending process of continuous improvement

Covers people, equipment, suppliers, materials, procedures

Every operation can be improved

Shewhart's P D C A Model

Kaizen describes the ongoing process of unending improvement

T Q M and zero defects also used to describe continuous improvement

（1891-1967) was an American physicist, engineer and statistician, sometimes known as the father of statistical quality control

Six Sigma

Two meanings

Statistical definition of a process that is 99.9997% capable, 3.4 defects per million opportunities (D P M O)

A program designed to reduce defects, lower costs, save time, and improve customer satisfaction

A comprehensive system for achieving and sustaining business success

What is Six Sigma? 1986, Bill Smith at Motorola

https://www.mathsisfun.com/data/standard-deviation.html

Two most recognized productivity improvement platforms…Lean and Six Sigma

Mean

Variance

Standard Deviation (SD)

SD, Sigma is used to measure the variability or spread of the data.

A low SD indicates the data points tend to be close to the mean.

about 68% of values to be within plus-or-minus 1 standard deviation.

Two most recognized productivity improvement platforms…Lean and Six Sigma

DPMO: defects per million opportunities

The average number of defects per unit observed during an average production run divided by

the number of opportunities to make a defect on the product under study during that run normalized to one million

Why Six Sigma?

99% Good

(2.8 Sigma)

No electricity for almost 7 hours each month

200,000 wrong drug prescriptions each year

20,000 lost articles of mail per hour

99.99966% Good

(6 Sigma)

1 hour without electricity every 34 years

Seven articles lost per hour

68 wrong prescriptions per year

Instructors Notes:

Do we need to be 99.99966% Doesn’t 99% sounds like a good measure of performance? Having 99% customer satisfaction sounds great! However, when we look at the difference between 99% and a Six Sigma process, there is much room for improvement. At 99%, we are looking at …..

Are you willing to take this risk?

6s view of quality is:

100% Inspection is inefficient

Focus on the process

Reduce variation

Continuous improvement is a philosophy of doing business.

Accomplished through the use of two 6s sub-methodologies: DMAIC and DMADV.

DMAIC process

define, measure, analyse, improve, control

is an improvement system for existing processes falling below specification and

looking for incremental improvement.

6s (Continued)

Defines the project’s purpose, scope, and outputs, then identifies the required process information keeping in mind the customer’s definition of quality

Measures the process and collects data

Analyzes the data, ensuring repeatability and reproducibility

Improves by modifying or redesigning existing processes and procedures

Controls the new process to make sure performance levels are maintained

D M A I C Approach

Implementing Six Sigma

Emphasize defects per million opportunities as a standard metric

Provide extensive training

Focus on top management leadership (Champion)

Create qualified process improvement experts (Black Belts, Green Belts, etc.)

Set stretch objectives

This cannot be accomplished without a major commitment from top level management

Employee Empowerment

Getting employees involved in product and process improvements

85% of quality problems are due to materials and process

Techniques

Build communication networks that include employees

Develop open, supportive supervisors

Move responsibility to employees

Build a high-morale organization

Create formal team structures

Quality Circles

Group of employees who meet regularly to solve problems

Trained in planning, problem solving, and statistical methods

Often led by a facilitator

Very effective when done properly

Benchmarking

Selecting best practices to use as a standard for performance

Determine what to benchmark

Form a benchmark team

Identify benchmarking partners

Collect and analyze benchmarking information

Take action to match or exceed the benchmark

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

Internal Benchmarking

When the organization is large enough

Data more accessible

Can and should be established in a variety of areas

Just-in-Time (J I T)

'Pull' system of production scheduling including supply management

Production only when signaled

Allows reduced inventory levels

Inventory costs money and hides process and material problems

Encourages improved process and product quality

Relationship to quality:

J I T cuts the cost of quality

J I T improves quality

Better quality means less inventory and better, easier-to-employ J I T system

Taguchi (January 1, 1924 – June 2, 2012) Concepts

Engineering and experimental design methods to improve product and process design

Identify key component and process variables affecting product variation

Taguchi Concepts

Quality robustness

Ability to produce products uniformly in adverse manufacturing and environmental conditions

Remove the effects of adverse conditions

Small variations in materials and process do not destroy product quality

Target-oriented quality

Quality loss function

Quality Loss Function (1 of 2)

Shows that costs increase as the product moves away from what the customer wants

Costs include

customer dissatisfaction

warranty and service,

internal scrap and repair, and

costs to society

Traditional conformance specifications are too simplistic

Target-oriented quality

Quality Loss Function (2 of 2)

Figure 6.5

T Q M Tools

Tools for Generating Ideas

Check Sheet

Scatter Diagram

Cause-and-Effect Diagram

Tools to Organize the Data

Pareto Chart

Flowchart (Process Diagram)

Tools for Identifying Problems

Histogram

Statistical Process Control Chart

Seven Tools of T Q M (1 of 7)

Figure 6.6

(a) Check Sheet: An organized method of recording data

Seven Tools of T Q M (2 of 7)

Figure 6.6

(b) Scatter Diagram: A graph of the value of one variable vs. another variable

Seven Tools of T Q M (3 of 7)

Figure 6.6

Seven Tools of T Q M (4 of 7)

Figure 6.6

(d) Pareto Chart: A graph to identify and plot problems or defects in descending order of frequency

Seven Tools of T Q M (5 of 7)

Figure 6.6

(e) Flowchart (Process Diagram): A chart that describes the steps in a process

Seven Tools of T Q M (6 of 7)

(f) Histogram: A distribution showing the frequency of occurrences of a variable

Seven Tools of T Q M (7 of 7)

Figure 6.6

(g) Statistical Process Control Chart: A chart with time on the horizontal axis to plot values of a statistic

Cause-and-Effect Diagrams

Figure 6.7

Pareto Charts

Flow Charts

MRI (Magnetic Resonance Imaging) Flowchart

Physician schedules MRI

Patient taken to MRI

Patient signs in

Patient is prepped

Technician carries out MRI

Technician inspects film

If unsatisfactory, repeat

Patient taken back to room

MRI read by radiologist

MRI report transferred to physician

Patient and physician discuss

Statistical Process Control (S P C)

Uses statistics and control charts to tell when to take corrective action

Drives process improvement

Four key steps

Measure the process

When a change is indicated, find the assignable cause

Eliminate or incorporate the cause

Restart the revised process

Control Charts

Figure 6.8

Inspection

Involves examining items to see if an item is good or defective

Detect a defective product

Does not correct deficiencies in process or product

It is expensive

Issues

When to inspect

Where in process to inspect

Many problems

Worker fatigue

Measurement error

Process variability

Cannot inspect quality into a product

Robust design, empowered employees, and sound processes are better solutions

When and Where to Inspect (1 of 2)

At the supplier’s plant while the supplier is producing

At your facility upon receipt of goods from your supplier

Before costly or irreversible processes

During the step-by-step production process

When production or service is complete

Before delivery to your customer

At the point of customer contact

When and Where to Inspect (2 of 2)

Table 6.4 How Samsung Tests Its Smartphones

Durability	Stress testing with nail punctures, extreme temperatures and overcharging
Visual inspection	Comparing the battery with standardized models
X-ray	Looking for internal abnormalities
Charge and discharge	Power up and down the completed phone
Organic pollution (T V O C)	Looking for battery leakage
Disassembling	Opening the battery cell to inspect tab welding and insulation tape conditions
Accelerated usage	Simulated 2 weeks of real-life use in 5 days
Volatility (O V C)	Checking for change in voltage throughout the manufacturing process

Inspection (2 of 2)

Source Inspection

Also known as source control

The next step in the process is your customer

Ensure perfect product to your customer

Poka-yoke is the concept of foolproof devices or techniques designed to pass only acceptable products

Checklists ensure consistency and completeness

Service Industry Inspection (1 of 2)

Table 6.5 Examples of Inspection in Services

ORGANIZATION	WHAT IS INSPECTED	STANDARD
Alaska Airlines	Last bag on carousel Airplane door opened	Less than 20 minutes after arrival at the gate Less than 2 minutes after arrival at the gate
Jones Law Office	Receptionist performance Billing Attorney	Phone answered by the second ring Accurate, timely, and correct format Promptness in returning calls
Hard Rock Hotel	Reception desk Doorman Room Minibar	Use customer’s name Greet guest in less than 30 seconds All lights working, spotless bathroom Restocked and charges accurately posted to bill

Service Industry Inspection (2 of 2)

Table 6.5 Examples of Inspection in Services

ORGANIZATION	WHAT IS INSPECTED	STANDARD
Arnold Palmer Hospital	Billing Pharmacy Lab Nurses Admissions	Accurate, timely, and correct format Prescription accuracy, inventory accuracy Audit for lab-test accuracy Charts immediately updated Data entered correctly and completely
Olive Garden Restaurant	Busboy Busboy Waiter	Serves water and bread within 1 minute Clears all entrée items and crumbs prior to dessert Knows and suggests specials, desserts

Attributes Versus Variables

Attributes

Items are either good or bad, acceptable or unacceptable

Does not address degree of failure

Variables

Measures dimensions such as weight, speed, height, or strength

Falls within an acceptable range

Use different statistical techniques

T Q M In Services

Service quality is more difficult to measure than the quality of goods

Service quality perceptions depend on

Intangible differences between products

Intangible expectations customers have of those products

Service Quality

The operations manager must recognize:

Selecting best practices to use as a standard for performance

The tangible component of services is important

The service process is important

The service is judged against the customer’s expectations

Exceptions will occur

Service Specifications

Determinants of Service Quality

Reliability involves consistency of performance and dependability

Responsiveness concerns the willingness or readiness of employees to provide service

Competence means possession of the required skills and knowledge to perform the service

Access involves approachability and ease of contact

Courtesy involves politeness, respect, consideration, and friendliness

Communication means keeping customers informed and listening to them

Credibility involves trustworthiness, believability, and honesty

Security is the freedom from danger, risk, or doubt

Understanding/knowing the customer involves making the effort to understand the customer's needs

Tangibles include the physical evidence of the service

Service Recovery Strategy

Managers should have a plan for when services fail

Marriott's LEARN routine

Listen

Empathize

Apologize

React

Notify

Evaluating Performance

The SERVQUAL technique

Direct comparisons between customer service expectations and actual service provided

Focuses on gaps in the 10 service quality determinants

Most common version collapses the determinants to

Reliability

Assurances

Tangibles

Empathy

Responsiveness

Exercise

Answer

Case study: Southwestern University

P. 270-271

Q1. Using at least two different quality tools, analyse the data and present your conclusion.

Q2. How could the survey have been more useful?

Q3. What is the next step?

Q1. Using at least two different quality tools, analyse the data and present your conclusion.

Begin by considering the tools of TQM and go from there.

We can weight these survey data (from Table 6.7) with 4 for good and 0 for poor in Table 1 below and then ranked them. This approach yields the data in descending order (Poor to Good) in Table 2. Then we take the open-ended questions and look at both the positive and negative responses (Table 3). Then we rank these in descending order (most negative to least negative).

Note how the survey results differ between the survey and open-ended comments. Parking, for instance, comes in second on the open-ended comments, but with the weighting scheme it is near the bottom (Table 2).

Bathrooms were not included on the survey questions, but show up on the open-ended comments.

Different methodologies often yield different results. Fishbone analysis appears in Figure 1.

Q2. How could the survey have been more useful?

The survey could have been segmented by faculty, alumni, guests, and students for an added perspective on quality.

Q3. What is next step?

The next step is to improve quality by beginning improvement with the high-frequency item on the left of the Pareto chart for the open-ended negative responses (see Figure 2).