Chapter 9 Management of Quality. Chapter 9: Learning Objectives You should be able to: Define the term quality as it relates to products and as it.

Chapter 9

Management of Quality

Chapter 9: Learning Objectives You should be able to:

Define the term quality as it relates to products and as it relates to services

Explain why quality is important and the consequences of poor quality

Identify the determinants of quality Distinguish the costs associated with quality Compare the quality awards Discuss the philosophies of quality gurus Describe TQM Give an overview of problem solving Give an overview of process improvement Describe and use various quality tools

9-2

Quality Management

Quality The ability of a product or service to consistently meet or

exceed customer expectationso For a decade or so, quality was an important focal point in

business. After a while, this emphasis began to fade as other concerns took precedence

o There has been a recent resurgence in attention to quality given recent experiences with the costs and adverse attention associated with highly visible quality failures:• Auto recalls• Toys• Produce• Dog food• Pharmaceuticals

9-3

Dimensions of Product QualityPerformance main characteristics of the productAesthetics appearance, feel, smell, tasteSpecial features extra characteristicsConformance how well the product conforms to design

specifications

Reliability consistency of performanceDurability the useful life of the productPerceived quality indirect evaluation of qualityServiceability handling of complaints or repairs

Dimensions of Service QualityReliability ability to perform a service dependably,

consistently, and accuratelyResponsiveness willingness to help customers in unusual

situations and to deal with problemsTime the speed with which the service is deliveredAssurance knowledge exhibited by personnel and their

ability to convey trust and confidenceCourtesy the way customers are treated by employeesTangibles the physical appearance of facilities,

equipment, personnel, and communication materials

Consistency the ability to provide the same level of good quality repeatedly

Assessing Service Quality

Audit service to identify strengths and weaknesses

In particular, look for discrepancies between: Customer expectations and management perception

of those expectations Management perceptions customer expectations

and service-quality specifications Service quality and service actually delivered Customers’ expectations of the service provider and

their perceptions of provider delivery9-6

Determinants of Quality Quality of design

Intention of designers to include or exclude features in a product or service

Quality of conformance The degree to which goods or services conform to the intent of

the designers Ease-of-Use and user instructions

Increase the likelihood that a product will be used for its intended purpose and in such a way that it will continue to function properly and safely

After-the-sale service Taking care of issues and problems that arise after the sale

9-7

Responsibility for Quality

Top management Design Procurement Production/operations Quality assurance Packaging and shipping Marketing and sales Customer service

Everyone in the organization has some responsibility for quality, but certain areas of the organization are involved in activities that make them key areas of responsibility.

9-8

Benefits of Good Quality

Enhanced reputation for quality Ability to command premium prices Increased market share Greater customer loyalty Lower liability costs Fewer production or service problems Lower production costs Higher profits

9-9

The Consequences of Poor Quality

Loss of business Liability Productivity Costs

9-10

Costs of Quality

Appraisal Costs Costs of activities designed to ensure quality or

uncover defects Prevention Costs

All TQ training, TQ planning, customer assessment, process control, and quality improvement costs to prevent defects from occurring

9-11

Costs of Quality

Failure Costs - costs incurred by defective parts/products or faulty services. Internal Failure Costs

o Costs incurred to fix problems that are detected before the product/service is delivered to the customer.

External Failure Costso All costs incurred to fix problems that are detected

after the product/service is delivered to the customer

9-12

Ethics and Quality

Substandard work Defective products Substandard service Poor designs Shoddy workmanship Substandard parts and materials

Having knowledge of this and failing to correctand report it in a timely manner is unethical.

9-13

Quality ContributorsContributor Key Contributions

Shewart Control charts; variance reduction

Deming 14 points; special vs. common causes of variation

Juran Quality is fitness-for-use; quality trilogy

Feigenbaum Quality is a total field; the customer defines quality

Crosby Quality is free; zero defects

Ishikawa Cause-and-effect diagrams; quality circles

Taguchi Taguchi loss function

Ohno and Shingo Continuous improvement

9-14

Deming’s 14 PointsDeming’s 14 Points

1. Create constancy of purpose toward improvement of product and service with a plan to become competitive and stay in business.

2. Adopt the new philosophy. We are in a new economic age. We can no longer live with commonly accepted levels of delays, mistakes, defective materials, and defective workmanship

3. Cease dependence on mass inspection. 4. End the practice of awarding on the basis of price tag.5. Find problems. It is management’s job to work continually on the system.6. Institute modern methods of training on the job7. The responsibility of foremen must be changed from sheer numbers to quality.8. Drive out fear, so that everyone may work effectively for the company.9. Break down barriers between departments.10. Eliminate numerical goals, posters, and slogans for the workforce asking for new levels of

productivity without providing methods.11. Eliminate work standards that prescribe numerical quotas.12. Remove barriers that stand between the hourly worker and his right to pride of workmanship.13. Institute a vigorous program of education and retraining.14. Create a structure in top management that will push every day on the above 13 points.

9-15

Quality Awards and Certification

Quality Awards Deming Prize Malcolm Baldrige National Quality Award European Quality Award

Quality Certifications ISO 9000 ISO 14000 ISO 24700

9-16

The Baldrige Competition

Benefits of the Baldrige Competition Winners achieve financial success Winners share their knowledge The process motivates employees The process requires obtaining data The process provides feedback

9-17

The Baldrige Competition

Award Categories Education Healthcare Manufacturing Nonprofit/Government Service Small Business

9-18

Baldrige Criteria

9-19

Quality Certification

International Organization for Standardization ISO 9000

Set of international standards on quality management and quality assurance, critical to international business

ISO 14000 A set of international standards for assessing a

company’s environmental performance ISO 24700

Pertains to the quality and performance of office equipment that contains reused components

9-20

Quality Certification

ISO 9000: 2005 Quality Principles:

o Principle 1 Customer focus o Principle 2 Leadership o Principle 3 Involvement of people o Principle 4 Process approach o Principle 5 System approach to management o Principle 6 Continual improvement o Principle 7 Factual approach to decision making o Principle 8 Mutually beneficial supplier relationships

9-21

Quality and the Supply Chain

Business leaders are increasingly recognizing the importance of their supply chains in achieving their quality goals Requires:

o Measuring customer perceptions of qualityo Identifying problem areaso Correcting these problems

Supply chain quality management can benefit from a collaborative relationship with supplierso Helping suppliers with quality assurance effortso Information sharing on quality-related matters

9-22

Total Quality Management

A philosophy that involves everyone in an organization in a continual effort to improve quality and achieve customer satisfaction.

T Q M

9-23

TQM Approach

Find out what the customer wants Design a product or service that meets or

exceeds customer wants Design processes that facilitate doing the job

right the first time Keep track of results Extend these concepts throughout the supply

chain

9-24

TQM Elements

Continuous improvement Competitive benchmarking Employee empowerment Team approach Decision based on fact, not opinion Knowledge of tools Supplier quality Champion Quality at the source Suppliers are partners in the process

9-25

Continuous Improvement

Continuous Improvement Philosophy that seeks to make never-ending

improvements to the process of converting inputs into outputs

Kaizeno Japanese word for continuous improvement.

9-26

Quality at the Source

The philosophy of making each worker responsible for the quality of his or her work “Do it right” and “If it isn’t right, fix it”

9-27

Six Sigma

Six Sigma A business process for improving quality, reducing

costs, and increasing customer satisfaction Statistically

o Having no more than 3.4 defects per million Conceptually

o Program designed to reduce defectso Requires the use of certain tools and techniques

9-28

Lean Six Sigma

Lean Six Sigma A balanced approach to process improvement

that integrates principles from lean operation and statistical tools for variation reduction from six sigma to achieve speed and quality

An approach that is equally applicable to products and serviceso Early application in service support functions of

General electric and Caterpillar Finance

9-29

Obstacles to Implementing TQM Obstacles include:

Lack of company-wide definition of quality Lack of strategic plan for change Lack of customer focus Poor inter-organizational communication Lack of employee empowerment View of quality as a “quick fix” Emphasis on short-term financial results Inordinate presence of internal politics and “turf” issues Lack of strong motivation Lack of time to devote to quality initiatives Lack of leadership

9-30

Quality Tools

9-31

Flowcharts Check sheet Histogram Pareto analysis Scatter diagrams Control charts Cause-and-Effect diagrams

Flowcharts

A flowchart is a visual representation of a process.

Diamond = Decision pointsRectangle = ProceduresArrows = The direction of “flow”

Figure 9.5, page 401Flowchart for catalog telephone orders -- potential failurepoints are highlighted.

Check sheet

A tool for organizing and collecting data; a tally of problems or other events by category

Frequently used for problem identification

Histogram

A chart that shows an empirical frequency distribution

Pareto Analysis Technique for classifying problem areas

according to degree of importance and focusing on resolving the most important. 80 percent of defects from 20 percent of the causes of

defects.

Scatter Diagram

A graph that shows the degree and direction of relationship between two variables

Control charts

Time ordered plot of statistics calculated from samples taken from the process

Used to detect the presence of correctable causes of process variation

Cause-and-effect diagram

A diagram used to organize and search for the causes of a problem (aka Fishbone diagram)

Six Ms:Man training, qualifications, experience, certification

Machine maintenance, testing, software or hardware updates

Material raw material, consumables, and information

Method process, testing, control

Measurement calibration

Mother Nature environmental conditions like noise, humidity, and temperature

Cause-and-effect diagram

A diagram used to organize and search for the causes of a problem (aka Fishbone diagram)

Cause-and-effect diagram - Example

Methods for Generating Ideas

Brainstorming Affinity Diagram Quality circles Interviewing Benchmarking 5W2H

9-41

Quality Circles

Quality Circle Groups of workers who meet to discuss ways of

improving products or processeso Less structured and more informal than teams

involved in continuous improvemento Quality circle teams have historically had relatively

little authority to make any but the most minor changes

9-42

Benchmarking Process

Identify a critical process that needs improvement

Identify an organization that excels in this process

Contact that organization Analyze the data Improve the critical process

9-43

Operations Strategy

Quality is a strategic imperative for organizations Customers are very concerned with the quality of

goods and services they receive Quality is a never-ending journey

It is important that most organizational members understand and buy into this idea

Customer satisfaction ≠ customer loyalty Quality needs to be incorporated throughout the

entire supply chain, not just the organization itself

9-44