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Heizer, Render, Griffin
Operations Management
Canadian Edition

Chapter 6: Managing Quality

Slides adapted for Canada by Mats Gerschman

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Outline

Global Company Profile: Arnold Palmer Hospital
Quality and Strategy
Defining Quality
Total Quality Management
Tools of Total Quality Management
International Quality Standards
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 Six Sigma
Explain how benchmarking is used
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 16,000 babies annually
Virtually every type of quality tool is employed
Continuous improvement
Employee empowerment
Benchmarking
Just-in-time
Quality tools

Arnold Palmer hospital does so much more than just “going through the motions” with these quality tools. The hospital really ingrains a culture of quality in all of its employees. Patient satisfaction is truly the number one priority. The results clearly reflect this culture: (1) the hospital typically scores in the top 10% nationally in benchmark patient satisfaction surveys, and (2) it boasts one of the highest neonatal intensive care survival rates in the U.S.

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Quality and Strategy

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

Right away the instructor can emphasize that “high quality” is not an exclusive strategy unto itself. On the contrary, the pursuit of high quality can actually support other strategies discussed in Chapter 2 by satisfying customer needs or making things run more smoothly or cheaply.

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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

It is possible to have high quality and low cost at the same time! For the third bullet—this is something that all of the quality gurus recognize. A successful quality management system must have top management support, and it involves so much more than implementing a tool or memorizing a list of concepts or Deming’s 14 points.

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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

Quality means different things to different people for different products and services under different circumstances. It all begins with a good understanding of what the customers expect. Slide 8 is particularly important to emphasize. High quality does so much more than just reduce rework costs. The reputation implications can have a huge impact on profitability, and it is so difficult to recover from bad publicity about quality. Furthermore, several firms over the past few years have gone bankrupt due to liability stemming from product defects.

LO1 : Define quality and TQM.

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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

Studies have shown that high quality products are positively correlated with profitability, so the impacts illustrated in this slide are really happening.

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The Flow of Activities to Achieve TQM

Figure 6.2

This flow of activities will go nowhere without top management support and an organization that emphasizes a true culture of 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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Key Dimensions of Quality

Performance

Features

Reliability

Conformance

Durability

Serviceability

Aesthetics

Perceived quality

Value

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National Quality Awards

National Quality Institute in Canada issues various awards (www.nqi.ca)
Malcolm Baldrige National Quality Award (USA)
Deming Prize (Japan)

Instructors can spend several minutes on the various awards that are given out. Of specific status is the Baldrige Award. Video clips of awards presentations can be shown, which usually include a U.S. President or Vice President. Also, the website contains a lot more information about the award, and it can be interesting to look at all the past winners—some are well known while many others are not. It can be useful to emphasize that some firms apply for the award with no intention of winning it—they want the quality audit to show them needed areas of improvement.

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Costs of Quality

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

Here’s where the concept of making it “right the first time” can be emphasized. Spending more on prevention usually leads to bigger savings in failure costs and potentially even appraisal costs. In particular, external failure costs may exceed the price of the final product itself and can be devastating in terms of company reputation. The old carpenter’s quote applies here, “Measure twice and cut once.”

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Costs of Quality

External Failure

Internal Failure

Prevention

Appraisal

Total Cost

Quality Improvement

Total Cost

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Leaders in Quality

Table 6.1

Leader Philosophy/Contribution

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

This slide shows some of the pioneers of quality management. Deming was probably the most influential. In fact, the Japanese honour Deming by naming their top national quality prize after him (an American). An interesting film about Deming was produced that shows him in action later in life. Both he and Juran were not particularly charismatic. Crosby, on the other hand, displayed his charisma like an infomercial professional (in a generally positive way). Crosby definitely focused less on the quantitative aspects of TQM than the other pioneers. One important way that Juran differed was with the idea of choosing a defect level (which could be less than 1%) that minimized the “cost of quality” (finding the balance between prevention and failure costs). Deming and Crosby, on the other hand, preached about striving for and attaining zero defects.

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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
Organizations are judged by how they respond to problems
All stakeholders must be considered

The point about responding to problems is particularly important. Mistakes happen, but how does an ethical company respond and make it right?

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International Quality Standards

ISO 9000 series (Europe/EC)
Common quality standards for products sold in Europe (even if made in U.S.)
2008 update places greater emphasis on leadership and customer requirements and satisfaction
ISO 14000 series (Europe/EC)

ISO 9000 continues to be an important standard around the world, and increasingly in the U.S. and Canada. Many overseas companies will not purchase from suppliers who are not ISO 9000 certified. It used to be easier to make jokes about ISO 9000, because the original standards focused on documentation and consistency, with little stated about quality itself. However, recent updates to the standards have emphasized more features similar to the Baldrige criteria. An important advantage of a certification like ISO 9000 is that firms can rely on such a certification as an outside validation of quality—this frees firms from having to audit each potential supplier for themselves.

LO 2: Define the ISO international quality standards.

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ISO 14000
Environmental Standard

Core Elements:

Environmental management
Auditing
Performance evaluation
Labelling
Life cycle assessment

LO 2: Define the ISO international quality standards.

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ISO 14000
Environmental Standard

Advantages:

Positive public image and reduced exposure to liability
Systematic approach to pollution prevention
Compliance with regulatory requirements and opportunities for competitive advantage
Reduction in multiple audits

LO 2: Define the ISO international quality standards.

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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

It can be re-emphasized here that TQM programs are difficult to implement and represent a cultural change that must be supported in words and actions by top management.

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Deming’s 14 Points

Table 6.2

Create consistency of purpose
Lead to promote change
Build quality into the product; stop depending on inspections
Build long-term relationships based on performance instead of awarding business on price
Continuously improve product, quality, and service

Deming’s points represent one framework to think about implementing a TQM program.

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Deming’s 14 Points

Table 6.2

Start training
Emphasize leadership
Drive out fear
Break down barriers between departments
Stop haranguing workers
Support, help, and improve

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Deming’s 14 Points

Table 6.2

Remove barriers to pride in work
Institute education and self-improvement
Put everyone 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

Represents continual improvement of all processes
Involves all operations and work centres including suppliers and customers
People, Equipment, Materials, Procedures

Continuous improvement is like a race with no finish line. The runner can celebrate and take a break now and then, but then she needs to get back on that road and keep going further. The most important feature of the PDCA cycle (Slide 26) is the arrow on top—showing that the cycle does not end with implementation but starts again with a new set of improvements.

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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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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, and improve customer satisfaction

In some ways, Six Sigma is a modern re-wording of old TQM concepts. The Six Sigma certification program (black belts and green belts) has become highly valued for those that attain the certification. In some ways, it is quality management’s equivalent to the CPA in accounting or the CFA in finance. A nice feature of the certifications is that they involve not only passing exams, but also real-world experience in management quality improvement projects.

LO 3: Explain what Six Sigma is.

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Six Sigma

Figure 6.4

Mean

Lower limits

Upper limits

±6

3.4 defects/million

2,700 defects/million

±3

LO 3: Explain what Six Sigma is.

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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

6

LO 3: Explain what Six Sigma is.

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Six Sigma

DMAIC Approach

Define critical outputs
and identify gaps for improvement
Measure the work and
collect process data
Analyze the data
Improve the process
Control the new process to make sure new performance is maintained

LO 3: Explain what Six Sigma is.

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Six Sigma Implementation

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

LO 3: Explain what Six Sigma is.

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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

Arguably, employee empowerment represents the most powerful means to improve quality in an organization. Often the people closest to the actual work know best how to improve it. A key feature for success is to properly reward employees for helping to improve quality.

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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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Use internal benchmarking if you’re big enough

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

Note that benchmarking does not have to examine only other firms in the industry. World-class organizations from other industries lead to some great ideas—and those companies might be more willing to share information.

LO 4: Explain how benchmarking is used in TQM.

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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

JIT receives much fuller treatment in Chapter 16. The issues here are that JIT in the form of “procrastination” has two main benefits: less inventory and identification of errors early before they are applied to many products. The boat slides represent a key description of the Japanese philosophy. Inventory (the water) acts as a band-aid, potentially helping for “smooth sailing” in the short run but actually hiding root problems in the long run. The Japanese suggest that the better approach is to throw the band-aids away and force yourself to bleed (hit the rocks). Only then will you truly identify the root problems, which then can be eliminated. Once the root problems are gone, the need for the band-aids (the inventory) disappears.

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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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Just-In-Time (JIT) Example

Scrap

Unreliable Vendors

Capacity Imbalances

Work in process inventory level
(hides problems)

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Just-In-Time (JIT) Example

Reducing inventory reveals
problems so they can be solved

Scrap

Unreliable Vendors

Capacity Imbalances

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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

LO 5: Explain quality robust products and Taguchi concepts.

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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

LO 5: Explain quality robust products and Taguchi concepts.

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Tools of TQM

Tools for Generating Ideas
Check sheets
Scatter diagrams
Cause-and-effect diagrams
Tools to Organize the Data
Pareto charts
Flowcharts

These are nice graphics that illustrate the seven tools. The full set can be covered relatively quickly. The first six, at least, are among the easier quantitative methods that operations managers employ; nevertheless, they can provide powerful insight.

LO 6: Use the seven tools of TQM.

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Tools of TQM

Tools for Identifying Problems
Histogram
Statistical process control chart

LO 6: Use the seven tools of TQM.

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/ / /// /

// ///

// ////

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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

A check sheet can have a variety of appearances. In many cases, patterns are easily seen while the data are being taken.

LO 6: Use the seven tools of TQM.

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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

With a scatter diagram, if the two items are closely related, the data points will from a tight band. If a random pattern results, the items are unrelated.

LO 6: Use the seven tools of TQM.

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Seven Tools of TQM

(c) Cause-and-Effect Diagram (also called Fish-bone diagram): A tool that identifies process elements (causes) that might effect an outcome

Figure 6.6

Cause

Materials

Methods

Manpower

Machinery

Effect

The cause-and-effect diagram is also called a fishbone or Ishikawa diagram. The four Ms can be a good starting point for main causes. The lecture could break at this point with an example having students fill in the diagram with ideas of causes of some outcome.

LO 6: Use the seven tools of TQM.

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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

LO 6: Use the seven tools of TQM.

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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

A Pareto chart exhibits the natural phenomenon that, in general, 80% of problems are a result of only 20% of causes. The lecture could break here by asking the students about their experience managing things. Did the Pareto rule apply?

LO 6: Use the seven tools of TQM.

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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 percentage of the total

Cumulative percent

Data for October

LO 6: Use the seven tools of TQM.

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Seven Tools of TQM

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

Figure 6.6

A picture can truly be worth 1000 words when attempting to analyze a process. A flow chart provides such a picture.

LO 6: Use the seven tools of TQM.

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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 to room
MRI read by radiologist
MRI report transferred to physician
Patient and physician discuss

20%

80%

See Example 2, page 204.

LO 6: Use the seven tools of TQM.

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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

A histogram can help determine the potential actual underlying distribution of a variable. If it looks like a bell curve, the distribution might be Normal; if it looks like a rectangle, the distribution might be uniform, etc. More generally, a histogram provides a quick visual estimate of the mean, mode, skewness, etc.

LO 6: Use the seven tools of TQM.

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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

SPC charts are the most “scientific” of the quality tools. They are covered in detail in Supplement 6. They are used to monitor a process over time. When output falls outside the control limits, the process should be investigated to search for an unnatural (assignable) cause.

LO 6: Use the seven tools of TQM.

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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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An SPC Chart

Figure 6.8

Upper control limit

Coach’s target value

Lower control limit

Game number

| | | | | | | | |

1 2 3 4 5 6 7 8 9

20%

10%

Plots 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

In the old days, the only form of quality management implemented by companies was the process of inspection. Inspection itself may not catch all errors, and it may be costly. Ideally, suppliers are delivering perfect materials and products are made right the first time, which would minimize the need for a lot of inspection. “Source inspection” is the concept of controlling or monitoring at the point of production or purchase. This is consistent with the idea of employee empowerment, where individual employees self-check their own work. If done correctly, source inspection would eliminate the need for extra inspections anywhere else. If inspections are needed, Slide 56 provides the common places. Point 3 is probably the most important because sending a defective product through the bottleneck process reduces the throughput for the entire operation.

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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 the 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

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

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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 and services
Intangible expectations customers have of those products and services

These slides focus on the special challenges and differences that attempting to implement TQM in services has. The UPS example in on page 209 is common in many service businesses, where employee appearance matters because there is customer contact. Disney World has similar standards for its student workers. You won’t find your ride operator sporting facial piercings or visible tattoos at Disney World.

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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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Determinants of Service Quality

Table 6.5

Reliability	Consistency of performance and dependability
Responsiveness	Willingness or readiness of employees
Competence	Required skills and knowledge
Access	Approachability and ease of contact
Courtesy	Politeness, respect, consideration, friendliness
Communication	Keeping customers informed
Credibility	Trustworthiness, believability, honesty
Security	Freedom from danger, risk, or doubt
Understanding/ knowing the customer	Understand the customer’s needs
Tangibles	Physical evidence of the service

This slide illustrates some of the different points of emphasis with respect to quality that service firms must adhere to.

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Service Recovery Strategy

Managers should have a plan for when services fail

Marriott Hotel’s LEARN routine

Listen

Empathize

Apologize

React

Notify

This slide shows that Marriot’s LEARN routine is a nice way to think about service recovery. Each component is important, but the last one in particular notifies the system about the problem in the hopes that similar problems will not occur in the future.

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Summary

Quality has many different meanings

Quality has to be built into systems rather than inspected in

Total Quality Management (TQM) concepts:

Six Sigma

Continuous Improvement (CI)

Just-In-Time (JIT)

Taguchi

Bench-marking

Employee Empowerment

TQM tools help to manage quality