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Chapter 4Managing Quality

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Quality and Strategy

Managing quality supports differentiation, low cost, and response strategiesQuality helps firms increase sales and reduce costsBuilding a quality organization is a demanding task

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Ways Quality Improves Productivity

Improved Quality

Increased Profits

Increased productivityLower rework and scrap costsLower warranty costs

Reduced Costs

Improved responseHigher PricesImproved reputation

Sales Gains

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The Flow of ActivitiesOrganizational Practices

Leadership, Mission statement, Effective operating procedures, Staff support, TrainingYields: What is important and what is to be accomplished

Quality PrinciplesCustomer focus, Continuous improvement, Benchmarking, Just-in-time, Tools of TQMYields: How to do what is important and to be accomplished

Employee FulfillmentEmpowerment, Organizational commitmentYields: Employee attitudes that can accomplish what is important

Customer SatisfactionWinning orders, Repeat customersYields: An effective organization with a competitive advantage

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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 featuresManufacturing-based –conformance to standards, making it right the first timeProduct-based – specific and measurable attributes of the product

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Implications of Quality

1. Company reputationPerception of new productsEmployment practicesSupplier relations

2. Product liabilityReduce risk

3. Global implicationsImproved ability to compete

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Key Dimensions of QualityKey Dimensions of Quality

PerformanceFeaturesReliabilityConformance

DurabilityServiceabilityAestheticsPerceived qualityValue

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Costs of Quality

Prevention costs - reducing the potential for defectsAppraisal costs - evaluating products, parts, and servicesInternal failure - producing defective parts or service before deliveryExternal costs - defects discovered after delivery

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International Quality Standards

Industrial Standard Z8101-1981 (Japan)Specification for TQM

ISO 9000 series (Europe/EC)Common quality standards for products sold in Europe (even if made in U.S.)2000 update places greater emphasis on leadership and customer satisfaction

ISO 14000 series (Europe/EC)

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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

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Seven Concepts of TQM

Continuous improvementSix SigmaEmployee empowermentBenchmarkingJust-in-time (JIT)Taguchi conceptsKnowledge of TQM tools

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Continuous Improvement

Represents continual improvement of all processes Involves all operations and work centers including suppliers and customers

People, Equipment, Materials, Procedures

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2. DoTest the

plan

3. CheckIs the plan working?

4. ActImplement

the plan

1.PlanIdentify the

improvement and make

a plan

Shewhart’s PDCA Model

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Six Sigma

Originally developed by Motorola, Six Sigma refers to an extremely high measure of process capabilityA Six Sigma capable process will return no more than 3.4 defects per million operations (DPMO)Highly structured approach to process improvement

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Six Sigma

1. Define critical outputs and identify gaps for improvement

2. Measure the work and collect process data

3. Analyze the data4. Improve the process5. Control the new process to

make sure new performance is maintained

DMAIC Approach

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Six Sigma Implementation

Emphasize DPMO as a standard metricProvide extensive trainingFocus 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 EmpowermentGetting employees involved in product and process improvements

85% of quality problems are due to process and material

TechniquesBuild communication networks that include employeesDevelop open, supportive supervisorsMove responsibility to employeesBuild a high-morale organizationCreate formal team structures

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Quality Circles

Group of employees who meet regularly to solve problemsTrained in planning, problem solving, and statistical methodsOften led by a facilitatorVery effective when done properly

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Use internal

benchmarking

if you’re big

enough

BenchmarkingSelecting best practices to use as a standard for performance

Determine what to benchmarkForm a benchmark teamIdentify benchmarking partnersCollect and analyze benchmarking informationTake action to match or exceed the benchmark

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Best Practices for Resolving Customer Complaints

Make it easy for clients to complainRespond quickly to complaintsResolve complaints on first contactUse computers to manage complaintsRecruit the best for customer service jobs

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Just-in-Time (JIT)

Relationship to quality:

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

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Taguchi Concepts

Experimental design methods to improve product and process design

Identify key component and process variables affecting product variation

Taguchi ConceptsQuality robustnessQuality loss functionTarget-oriented quality

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Quality Robustness

Ability to produce products uniformly in adverse manufacturing and environmental conditions

Remove the effects of adverse conditionsSmall 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 wantsCosts include customer dissatisfaction, warranty and service, internal scrap and repair, and costs to societyTraditional conformance specifications are too simplistic

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Unacceptable

Poor

Good

Best

Quality Loss FunctionHigh loss

Loss (to producing organization, customer, and society)

Low loss

Frequency

Lower Target UpperSpecification

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

Target-oriented quality brings product toward the target valueConformance-oriented quality keeps products within 3 standard deviations

L = D2Cwhere

L = loss to societyD = distance from

target valueC = cost of deviation

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Tools of TQMTools for Generating Ideas

Check sheetsScatter diagramsCause and effect diagrams

Tools to Organize the DataPareto chartsFlow charts

Tools for Identifying ProblemsHistogramStatistical process control chart

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//

/ / /// /// ///// ////

//////

HourDefect 1 2 3 4 5 6 7 8

ABC

////

/

Seven Tools for TQM(a) Check Sheet: An organized method of

recording data

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Seven Tools for TQM(b) Scatter Diagram: A graph of the value of

one variable vs. another variable

Absenteeism

Pro

duct

ivity

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Seven Tools for TQM(c) Cause and Effect Diagram: A tool that

identifies process elements (causes) that might effect an outcome

CauseMaterials Methods

Manpower Machinery

Effect

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Seven Tools for TQM(d) Pareto Charts: A graph to identify and plot

problems or defects in descending order of frequency

Freq

uenc

y

Per

cent

A B C D E

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Seven Tools for TQM(e) Flow Charts (Process Diagrams): A chart that

describes the steps in a process

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Seven Tools for TQM(f) Histogram: A distribution showing the frequency

of occurrence of a variable

Distribution

Repair time (minutes)

Freq

uenc

y

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Seven Tools for 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

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Cause-and-Effect Diagrams

Material Machinery

Methods Manpower

Inadequatesupply of

magazines

Inadequate special meals on-board

Insu

ffici

ent

clea

n pi

llow

s&

bla

nket

s on

-boa

rd

Broken luggage carousel

Mechanical delay on plane

Dei

cing

eq

uipm

ent n

ot

avai

labl

e

Overbooking policies

Bumping policies

Mis

tagg

ed

bags

Poo

r che

ck-in

po

licie

s

Understaffed ticket counters

Understaffed crew

Poo

rly tr

aine

d at

tend

ants

Dissatisfied Airline Customer

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Pareto Charts

Number of occurrences

Room svc Check-in Pool hours Minibar Misc.72% 16% 5% 4% 3%

124 3 2

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– 100– 93– 88

– 72

70 –

60 –

50 –

40 –

30 –

20 –

10 –

0 –

Freq

uenc

y (n

umbe

r)

Causes and percent

Cum

ulat

ive

perc

ent

Data for October

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Shipping dock

Storage(4 to 6 hrs)

Quick freeze storage

(60 Mins)

Sealing Weighing Labeling

Flow Charts

Packing and shipping process

Packing station

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Statistical Process Control (SPC)

Uses statistics and control charts to tell when to take corrective actionDrives process improvementFour key steps

Measure the processWhen a change is indicated, find the assignable causeEliminate or incorporate the causeRestart the revised process

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An SPC Chart

Upper control limit

Coach’s target value

Lower control limit

Game number

| | | | | | | | |1 2 3 4 5 6 7 8 9

20%

10%

0%

Plots the percent of free throws missed

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InspectionInvolves examining items to see if an item is good or defectiveDetect a defective product

Does not correct deficiencies in process or productIt is expensive

IssuesWhen to inspectWhere in process to inspect

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When and Where to Inspect1. At the supplier’s plant while the supplier is

producing2. At your facility upon receipt of goods from the

supplier3. Before costly or irreversible processes4. During the step-by-step production processes5. When production or service is complete6. Before delivery from your facility7. At the point of customer contact

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InspectionMany problems

Worker fatigueMeasurement errorProcess variability

Cannot inspect quality into a productRobust design, empowered employees, and sound processes are better solutions

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Source Inspection

Also known as source controlAlso known as source controlThe next step in the process is The next step in the process is your customeryour customerEnsure perfect product to your Ensure perfect product to your customercustomer

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

product

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Service Industry Inspection

Use customer’s name

Greet guest in less than 30 secondsAll lights working, spotless bathroomRestocked and charges accurately posted to bill

Reception deskDoorman

Room

Minibar

Hard Rock Hotel

StandardWhat is InspectedOrganization

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Service Industry Inspection

Serves water and bread within 1 minuteClears all entrée items and crumbs prior to dessertKnows and suggest specials and desserts

Busboy

Busboy

Waiter

Hard Rock Cafe

StandardWhat is InspectedOrganization

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Service Industry Inspection

Accurate, timely, and correct formatPrescription accuracy, inventory accuracyAudit for lab-test accuracyCharts immediately updatedData entered correctly and completely

Billing

Pharmacy

LabNurses

Admissions

Arnold Palmer Hospital

StandardWhat is InspectedOrganization

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TQM In Services

Service quality is more difficult to measure than the quality of goodsService quality perceptions depend on

Intangible differences between productsIntangible expectations customers have of those products

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Service Quality

The Operations Manager must recognize:

1. The tangible component of services is important

2. The service process is important3. The service is judged against the

customer’s expectations4. Exceptions will occur

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Determinants of Service Quality

ReliabilityResponsivenessCompetenceAccessCourtesyCommunication

CredibilitySecurityUnderstanding/ knowing the customerTangibles