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Managing Quality

PowerPoint presentation to accompany

Heizer and Render

Operations Management, Eleventh Edition

Principles of Operations Management, Ninth Edition

PowerPoint slides by Jeff Heyl

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Outline

Global Company Profile:
Arnold Palmer Hospital

Quality and Strategy
Defining Quality
Total Quality Management
Tools of TQM
The Role of Inspection
TQM in Services

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Learning Objectives

When you complete this chapter you should be able to:

Define quality and TQM
Describe the ISO international quality standards
Explain what Six Sigma is
Explain how benchmarking is used in TQM
Explain quality robust products and
Taguchi concepts
Use the seven tools of TQM

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Managing Quality Provides a Competitive Advantage

Arnold Palmer Hospital

Deliver over 12,000 babies annually
Virtually every type of quality tool is employed
Continuous improvement
Employee empowerment
Benchmarking
Just-in-time
Quality tools

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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

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Two Ways Quality
Improves Profitability

Figure 6.1

Improved Quality

Increased Profits

Increased productivity
Lower rework and scrap costs
Lower warranty costs

Reduced Costs via

Improved response
Flexible pricing
Improved reputation

Sales Gains via

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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

Figure 6.2

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

Customer Satisfaction

Winning orders, Repeat customers

Yields: An effective organization with
a competitive advantage

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Defining Quality

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

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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

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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

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Implications of Quality

Company reputation
Perception of new products
Employment practices
Supplier relations
Product liability
Reduce risk
Global implications
Improved ability to compete

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Malcolm Baldrige National Quality Award

Established in 1988 by the U.S. government
Designed to promote TQM practices
Recent winners include

Lockheed Martin Missiles and Fire Control, MESA Products Inc., North Mississippi Health Services, City of Irving, Concordia Publishing House, Henry Ford Health System, MEDRAD, Nestlé Purina PetCare Co., Montgomery County Public Schools

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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

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ISO 9000 International Quality Standards

International recognition
Encourages quality management procedures, detailed documentation, work instructions, and recordkeeping
2009 revision emphasized sustained success
Over one million certifications in 178 countries
Critical for global business

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ISO 9000 International Quality Standards

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

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Costs of Quality

Prevention costs - reducing the potential for defects
Appraisal costs - evaluating products, parts, and services
Internal failure costs - producing defective parts or service before delivery
External failure costs - defects discovered after delivery

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Costs of Quality

External Failure

Internal Failure

Total Cost

Quality Improvement

Total Cost

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Takumi

A Japanese character that symbolizes a broader dimension than quality, a deeper process than education, and a more perfect method than persistence

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Leaders in Quality

TABLE 6.1	Leaders in the Field of Quality Management
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.

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Leaders in Quality

TABLE 6.1	Leaders in the Field of Quality Management
LEADER	PHILOSOPHY/CONTRIBUTION
Amarnd 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.”

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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 much be considered

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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

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Deming’s Fourteen Points

TABLE 6.2	Deming’s 14 Points for Implementing Quality Improvement
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

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Deming’s Fourteen Points

TABLE 6.2	Deming’s 14 Points for Implementing Quality Improvement
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

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Seven Concepts of TQM

Continuous improvement

Six Sigma

Employee empowerment

Benchmarking

Just-in-time (JIT)

Taguchi concepts

Knowledge of TQM tools

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Continuous Improvement

Never-ending process of continual improvement
Covers people, equipment, materials, procedures
Every operation can be improved

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Shewhart’s PDCA Model

Figure 6.3

4. Act

Implement the plan, document

2. Do

Test the plan

3. Check

Is the plan working?

Plan

Identify the pattern and make a plan

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Continuous Improvement

Kaizen describes the ongoing process of unending improvement
TQM and zero defects also used to describe continuous improvement

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Six Sigma

Two meanings
Statistical definition of a process that is 99.9997% capable, 3.4 defects per million opportunities (DPMO)
A program designed to reduce defects, lower costs, save time, and improve customer satisfaction
A comprehensive system for achieving and sustaining business success

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Six Sigma

Two meanings
Statistical definition of a process that is 99.9997% capable, 3.4 defects per million opportunities (DPMO)
A program designed to reduce defects, lower costs, save time, and improve customer satisfaction
A comprehensive system for achieving and sustaining business success

Figure 6.4

Mean

Lower limits

Upper limits

±6

3.4 defects/million

2,700 defects/million

±3

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Six Sigma Program

Originally developed by Motorola, adopted and enhanced by Honeywell and GE
Highly structured approach to process improvement
A strategy
A discipline – DMAIC
A set of 7 tools

6

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Six Sigma

Defines the project’s purpose, scope, and outputs, 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

DMAIC Approach

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Implementing Six Sigma

Emphasize defects per million opportunities as a standard metric
Provide extensive training
Focus on corporate sponsor support (Champions)
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

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Employee Empowerment

Getting employees involved in product and process improvements
85% of quality problems are due
to process and material
Techniques
Build communication networks
that include employees
Develop open, supportive supervisors
Move responsibility to employees
Build a high-morale organization
Create formal team structures

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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

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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

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Best Practices for Resolving Customer Complaints

Table 6.3
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

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Internal Benchmarking

When the organization is large enough
Data more accessible
Can and should be established in a variety of areas

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Just-in-Time (JIT)

Relationship to quality:

JIT cuts the cost of quality
JIT improves quality
Better quality means less inventory and better, easier-to-employ JIT system

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Just-in-Time (JIT)

‘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

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Taguchi 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
Quality loss function
Target-oriented quality

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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

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Quality Loss Function

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

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Quality Loss Function

Figure 6.5

Unacceptable

Poor

Good

Best

Fair

High loss

Loss (to producing organization, customer, and society)

Low loss

L = D2C

where

L = loss to society

D2 = square of the distance from target value

C = cost of deviation

Lower

Target

Upper

Specification

Frequency

Target-oriented quality yields more product in the “best” category

Target-oriented quality brings product toward the target value

Conformance-oriented quality keeps products within 3 standard deviations

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TQM Tools

Tools for Generating Ideas
Check Sheet
Scatter Diagram
Cause-and-Effect Diagram
Tools to Organize the Data
Pareto Chart
Flowchart (Process Diagram)

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TQM Tools

Tools for Identifying Problems
Histogram
Statistical Process Control Chart

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Hour

Defect 1 2 3 4 5 6 7 8

Seven Tools of TQM

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

Figure 6.6

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Seven Tools of TQM

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

Figure 6.6

Absenteeism

Productivity

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Seven Tools of TQM

Figure 6.6

Cause

Materials

Methods

Manpower

Machinery

Effect

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Seven Tools of TQM

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

Figure 6.6

Frequency

Percent

A B C D E

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Seven Tools of TQM

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

Figure 6.6

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Seven Tools of TQM

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

Figure 6.6

Distribution

Repair time (minutes)

Frequency

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Seven Tools of TQM

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

Figure 6.6

Upper control limit

Target value

Lower control limit

Time

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Cause-and-Effect Diagrams

Figure 6.7

Material

(ball)

Method

(shooting process)

Machine

(hoop &

backboard)

Manpower

(shooter)

Missed
free-throws

Rim alignment

Rim size

Backboard stability

Rim height

Follow-through

Hand position

Aiming point

Bend knees

Balance

Size of ball

Lopsidedness

Grain/Feel (grip)

Air pressure

Training

Conditioning

Motivation

Concentration

Consistency

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Pareto Charts

Number of occurrences

Room svc Check-in Pool hours Minibar Misc.

72% 16% 5% 4% 3%

– 100

– 93

– 88

– 72

70 –

60 –

50 –

40 –

30 –

20 –

10 –

0 –

Frequency (number)

Causes and percent of the total

Cumulative percent

Data for October

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Flow Charts

MRI 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

20%

80%

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Statistical Process Control (SPC)

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

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Control Charts

Figure 6.8

Upper control limit

Coach’s target value

Lower control limit

Game number

| | | | | | | | |

1 2 3 4 5 6 7 8 9

40%

20%

Plot the percent of free throws missed

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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

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When and Where to Inspect

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

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Inspection

Many problems
Worker fatigue
Measurement error
Process variability
Cannot inspect quality into a product
Robust design, empowered employees, and sound processes are better solutions

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Source Inspection

Also known as source control
The next step in the process is your customer
Ensure perfect
product to your
customer

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Source Inspection

Poka-yoke is the concept of foolproof devices or techniques designed to pass only acceptable product
Checklists ensure
consistency and
completeness

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Service Industry Inspection

TABLE 6.4	Examples of Inspection in Services
ORGANIZATION	WHAT IS INSPECTED	STANDARD
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

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Service Industry Inspection

TABLE 6.4	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 suggest specials, desserts

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Service Industry Inspection

TABLE 6.4	Examples of Inspection in Services
ORGANIZATION	WHAT IS INSPECTED	STANDARD
Nordstrom Department Store	Display areas Stockrooms Salesclerks	Attractive, well-organized, stocked, good lighting Rotation of goods, organized, clean Neat, courteous, very knowledgeable

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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

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TQM 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

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Service Quality

The Operations Manager must recognize:

The tangible component of services is important
The service process is important
The service is judged against the customer’s expectations
Exceptions will occur

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Service Specifications

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Determinants of Service Quality

Table 6.5

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

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Service Recovery Strategy

Managers should have a plan for when services fail

Marriott’s LEARN routine

Listen

Empathize

Apologize

React

Notify

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C H A P T E R 6 | M A N AG I N G Q UA L I T Y 225

range. If a piece of electrical wire is supposed to be 0.01 inch in diameter, a micrometer can be used to see if the product is close enough to pass inspection.

Knowing whether attributes or variables are being inspected helps us decide which statisti- cal quality control approach to take, as we will see in the supplement to this chapter.

TQM in Services The personal component of services is more difficult to measure than the quality of the tangible component. Generally, the user of a service, like the user of a good, has features in mind that form a basis for comparison among alternatives. Lack of any one feature may eliminate the ser-vice from further consideration. Quality also may be perceived as a bundle of attributes in which many lesser characteristics are superior to those of competitors. This approach to product com-parison differs little between goods and services. However, what is very different about the selection of services is the poor definition of the (1) intangible differences between products and (2) the intangible expectations customers have of those products. Indeed, the intangible attributes may not be defined at all. They are often unspoken images in the purchaser’s mind. This is why all of those marketing issues such as advertising, image, and promotion can make a difference.

The operations manager plays a signi!cant role in addressing several major aspects of service quality. First, the tangible component of many services is important. How well the ser- vice is designed and produced does make a difference. This might be how accurate, clear, and complete your checkout bill at the hotel is, how warm the food is at Taco Bell, or how well your car runs after you pick it up at the repair shop.

Second, another aspect of service and service quality is the process. Notice in Table 6.5 that 9 out of 10 of the determinants of service quality are related to the service process. Such things as reliability and courtesy are part of the process. An operations manager can design processes (service products) that have these attributes and can ensure their quality through the TQM techniques discussed in this chapter.

Third, the operations manager should realize that the customer’s expectations are the stan- dard against which the service is judged. Customers’ perceptions of service quality result from a comparison of their “before-service expectations” with their “actual-service experience.” In

VIDEO 6.2 TQM at Ritz-Carlton Hotels

Aircraft 97% boarded 10 min. before departure time

1st bag to conveyor belt 15 min. after arrival

First passenger boarded 40 min. before departure

Flight attendants on- board 45 min. before departure

Cargo door opened 1 min. afer arrival

All doors closed 2 min before departure

On board count- check-in count 5 min. before departure

Final load closeout 2 min. before departure

Like many service organizations, Alaska Airlines, sets quality standards in areas such as courtesy, appearance, and time. Shown here are some of Alaska Airlines’s 50 quality checkpoints, based on a timeline for-each departure.

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