Process Improvement and Quality Management

MD707 Operations Management

Professor Joy Field

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Incremental Improvement and Reengineering

Non-value added activities or steps can be characterized as waste (i.e., no potential to add value) or slack (i.e., resources in excess of what are required to get the job done, including buffers). The concept of “value added” can be thought of in the context of whether a customer would be willing to pay for that activity or step to be performed and/or whether a product or service’s value can be increased through that activity.

Incremental process improvement involves eliminating non-value added activities or steps while leaving the current process essentially intact.

Reengineering involves a fundamental rethinking and radical redesign of processes to improve performance dramatically in terms of cost, quality, service, and speed.

Elimination of non-value added activities or steps increases productivity, by definition.

The purpose of incremental process improvement and reengineering is to move operations toward the performance frontier by: 1) eliminating non-value added activities and steps in the process and/or, 2) moving to a new performance frontier.

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Sources of Non-Value Added Activities

Why do non-value added activities or steps occur in processes? Poor process and/or organizational design (dysfunctional

uncertainty) Historical artifact Barriers to learning

Individual Within group Across groups From outside the organization

Finding and correcting errors elsewhere in the process Unclear understanding of “value” and “risks”

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Process Improvement Approach

Discover where non-value added activities are in the process and prioritize improvement efforts: Flow charts (value stream mapping) Brainstorming Data collection

Take action based on the source of the non-value added activity: Process reviews Remove barriers to learning Continuous improvement

Reducing dysfunctional uncertainty Implementing a systematic approach to process improvement Increasing process knowledge

Reengineering projects often take more of a “clean-slate” approach than incremental process improvement and are typically higher risk and higher return.

Quality as a Competitive Advantage

The costs of poor quality are estimated to be 20% - 30% of product or service costs.

Companies can improve their bottom line through better quality in several ways: Lower costs Higher prices Greater market share

Consistent quality is an order qualifier in many markets

Total Quality Management (TQM) is an approach to quality improvement with the goal of customer satisfaction through continuous improvement and employee involvement.

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Quality at the Source

Why? It costs less.

Inspection and sorting often do not improve process quality.

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Errors or defects should be caught and corrected at the source, not passed along to an internal or external customer. In other words, “Do It Right the First Time”!

Employee Involvement

This suggest that: Quality perceptions can be negatively affected at one point in the

process, even if the rest of the process is fine. All employees can participate in improving quality.

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Employee involvement an important component of TQM because perceived and actual quality is assessed throughout the process, involving all employees.

Work Teams

Work teams are small groups of people who have a common purpose, performance goals, and accountability.

Types of teams Problem-solving teams Special-purpose teams Self-managing teams

How can work teams help improve quality? Products and services are becoming more complex and

interrelated. Quality can not be ensured by individual efforts alone.

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Plan-Do-Check-Act Cycle

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Tools for Organizing Data Analysis

Flowchart Checklist Bar chart/Histogram Pareto chart Scatter diagram Cause-and-effect diagram Control charts

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Application of Data Analysis Tools

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Six Sigma Principles

Six Sigma Emphasizes the need to recognize high-impact, financially

quantifiable opportunities and eliminate defects as defined by customers

Recognizes that variation hinders the ability to reliably deliver high-quality products and services

Requires data-driven decisions using a comprehensive set of quality tools

Provides a highly prescriptive cultural infrastructure for aiding implementation

When implemented correctly, promises and delivers $500,000 of improved operating profit per Black Belt per year

The Define-Measure-Analyze-Improve-Control (DMAIC) improvement process used in Six Sigma is analogous to the PDCA cycle

Six Sigma Organization Roles and Responsibilities

Champion Green Belts

Project MemberExecutive

All employees

Black BeltsMaster BlackBelts

•Full-time•Train and coach Black and Green Belts•Statistical problem solving experts

•Devote 50%-100% of time to Black Belt activities•Facilitate and practice problem solving•Train and coach Green Belts and project teams

•Project owner•Implement solutions•Black Belt managers

•Understand vision•Apply concepts

•Part-time•Help Black Belts

•Own vision, direction, integration, results•Lead change

•Part-time•Project-specific

Lean Principles

The lean approach to process improvement includes: A focus on customers (both internal and external)

Maximizing process velocity (i.e., flow) Tools focused on analyzing process flow and delay times at

each activity in a process

Eliminating waste Separating “value-add” from “non-value-add” and addressing

the root causes of non-value-add activities Reducing unnecessary complexity and its costs

Lean Six Sigma

Lean Six Sigma combines the emphasis on maximizing flows and reducing waste from Lean with variation reduction and an organizational infrastructure and specific improvement process from Six Sigma.

Lean Six Sigma focuses on improving products and services by addressing poor flow and excess waste and variation in the process.

Lean Six Sigma DMAIC Tools(Lean tools in bold)

Define Improve ControlAnalyzeMeasure

•Project selection tools•PIP management process•Value stream map•Financial analysis•Project charter•Multi-generational plan•Stakeholder analysis•Communication plan•SIPOC map•High-level process map•Non-value-added analysis•VOC and Kano analysis•QFD•RACI and quad charts

•Operational definitions•Data collection plan•Pareto chart•Histogram•Box plot•Statistical sampling•Measurement system analysis•Control charts•Process cycle efficiency•Process sizing•Process capability

•Pareto charts•C&E matrix•Fishbone diagrams•Brainstorming•Detailed “As-Is” process maps•Basic statistical tools•Constraint identification•Time trap analysis•Non-value-added analysis•Hypothesis testing•Confidence intervals•FMEA•Simple & multiple regression•ANOVA•Queuing theory•Analytical batch sizing

•Brainstorming•Benchmarking•TPM•5S•Line balancing•Process flow improvement•Replenishment pull•Sales & operations planning•Setup reduction•Generic pull•Kaizen•Poka-yoke•FMEA•Hypothesis testing•Solution selection matrix•“To-Be” process maps•Piloting and simulation

•Control charts•Standard operating procedures (SOPs)•Training plan•Communication plan•Implementation plan•Visual process control•Mistake-proofing•Process control plans•Project commissioning•Project replication•Plan-Do-Check-Act cycle

Throughput Time and Process Speed

Throughput time is the amount of time a “unit” (e.g. customer) takes to complete the process

Work-in-process is the number of units in progress Average completion time is the number of units completed per

unit time If two of the three quantities are known, the other two can be

calculated Increasing process speed requires either reducing the WIP or

increasing the completion rate

Little’s Law: rate completion Average

progress-in- workofAmount timeThroughput

Cost of Quality

Quality assurance costs Nonconformance costs

Prevention Internal failure

Appraisal External failure

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Cost categories:

There is a tradeoff between quality assurance and nonconformance costs.

As the product or service moves farther along in the process, the cost to address a quality problem rises steeply.

Hidden Costs of Poor QualityBank Transaction Processing Example

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Quality Awards and Standards

Awards Malcolm Baldrige National Quality Award European Quality Award Deming Prize State quality awards Vendor/supplier quality awards

Standards ISO 9000/14000

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