Operation Management

*Operations Management Chapter 5 QUALITY MANAGEMENT

*OutlineQUALITY AND STRATEGYDEFINING QUALITYImplications of QualityMalcolm Baldrige National Quality AwardCost of Quality (COQ)INTERNATIONAL QUALITY STANDARDSTOTAL QUALITY MANAGEMENTContinuous ImprovementEmployee EmpowermentBenchmarkingJust-in-Time (JIT)Taguchi ConceptsKnowledge of TQM Tools

*Outline - ContinuedTOOLS OF TQMCheck sheetsScatter Diagrams Cause-and-Effect DiagramPareto ChartsFlow ChartsHistogramsStatistical Process Control (SPC)TQM IN SERVICES

*Learning ObjectivesWhen you complete this chapter, you should be able to:Identify or Define:QualityMalcolm Baldrige National Quality AwardISO International Quality StandardsDemings, Juran, and CrosbyTaguchi Concepts

*Learning Objectives - continuedWhen you complete this chapter, you should be able to :Explain:Why quality is importantTotal Quality Management (TQM)Pareto chartsProcess chartsQuality robust products

*Ways in Which Quality Can Improve ProductivitySales GainsImproved responseHigher PricesImproved reputationReduced CostsIncreased productivityLower rework and scrap costsLower warranty costsIncreased ProfitsImproved Quality

*Flow of Activities Necessary to Achieve Total Quality ManagementOrganizational PracticesQuality PrinciplesEmployee FulfillmentCustomer Satisfaction

*1.Organizational PracticesLeadershipMission statementEffective operating procedureStaff supportTrainingYields: What is important and what is to be accomplished

*2.Quality PrinciplesCustomer focusContinuous improvementEmployee empowermentBenchmarkingJust-in-timeTools of TQMYields: How to do what is important and to be accomplished

*3.Employment FulfillmentEmpowermentOrganizational commitmentYields: Employees attitudes that they can accomplish what is important and to be accomplished

*4.Customer SatisfactionWinning ordersRepeat customersYields: An effective organization with a competitive advantage

*Definitions of QualityASQ: Product characteristics & features that affect customer satisfactionUser-Based: What consumer says it isManufacturing-Based: Degree to which a product conforms to design specificationProduct-Based: Level of measurable product characteristic

*OperationReliability & durabilityConformanceServiceabilityAppearancePerceived qualityQualityDimensions of Quality for Goods

*Under- standingService Quality Attributes

*Importance of QualityCosts & market shareCompanys reputationProduct liabilityInternational implications

*Established in 1988 by the U.S. governmentDesigned to promote TQM practicesSome criteriaSenior executive leadership; Strategic planning; Customer & Market focus; Information analysis; Human Resource focus; Process management; Business results; customer satisfactionRecent winnersMotorola, Xerox, Federal Express, Texas Instruments.Malcom Baldrige National Quality Award

*Costs of QualityPrevention costs - reducing the potential for defectsAppraisal costs - evaluating productsInternal failure - of producing defective parts or serviceExternal costs - occur after delivery

*International Quality StandardsIndustrial Standard Z8101-1981 (Japan)Specification for TQMISO 9000 series (Europe/EC)Common quality standards for products sold in Europe (even if made in U.S.)ISO 14000 series (Europe/EC)Standards for recycling, labeling etc.ASQC Q90 series; MILSTD (U.S.)

*EC Environmental StandardISO 14000Core Elements:Environmental managementAuditingPerformance evaluationLabelingLife-cycle assessmentAdvantages:Positive public image & reduced exposure to liabilityGood systematic approach to pollution preventionCompliance with regulatory requirementsReduction in need of multiple audits

*Traditional Quality Process (Manufacturing)SpecifiesNeedCustomerInterpretsNeedMarketingDesignsProductDefinesQualityEngineeringProducesProductPlansQualityMonitorsQualityOperationsQuality is customer driven!

*TQMEncompasses entire organization, from supplier to customerStresses a commitment by management to have a continuing, company-wide, drive toward excellence in all aspects of products and services that are important to the customer.

*Organizational PracticesQuality PrinciplesEmployee FulfillmentAttitudes (e.g., Commitment)How to DoWhat to DoEffective BusinessCustomer SatisfactionAchieving Total Quality Management

*Demings Fourteen PointsCreate consistency of purposeLead to promote changeBuild quality into the productsBuild long term relationshipsContinuously improve product, quality, and serviceStart trainingEmphasize leadership

*Demings Points - continuedDrive out fearBreak down barriers between departmentsStop haranguing workersSupport, help, improveRemove barriers to pride in workInstitute a vigorous program of education and self-improvementPut everybody in the company to work on the transformation

*Concepts of TQMContinuous improvementEmployee empowermentBenchmarkingJust-in-time (JIT)Taguchi conceptsKnowledge of TQM tools

*1.Continuous ImprovementRepresents continual improvement of process & customer satisfactionInvolves all operations & work unitsOther namesKaizen (Japanese)Zero-defectsSix sigma 1984-1994 T/Maker Co.

*Shewharts PDCA Model4.Act1.Plan3.Check2.DoIdentify the improvement and make a planTest the planIs the plan workingImplement the plan

*2.Employee EmpowermentGetting employees involved in product & process improvements85% of quality problems are due to process & material TechniquesSupport workersLet workers make decisionsBuild teams & quality circles 1995 Corel Corp.

*Quality CirclesGroup of 6-12 employees from same work areaMeet regularly to solve work-related problems4 hours/monthFacilitator trains & helps with meetings 1995 Corel Corp.

*3.BenchmarkingSelecting best practices to use as a standard for performanceDetermine what to benchmarkForm a benchmark teamIdentify benchmarking partnersCollect and analyze benchmarking informationTake action to match or exceed the benchmark

*Resolving Customer ComplaintsBest PracticesMake it easy for clients to complainRespond quickly to complaintsResolve complaints on the first contactUse computers to manage complaintsRecruit the best for customer service jobs

*4.Just-in-Time (JIT)Relationship to quality:JIT cuts cost of qualityJIT improves qualityBetter quality means less inventory and better, easier-to-employ JIT systemPull system of production/purchasingCustomer starts production with an orderInvolves vendor partnership programs to improve quality of purchased itemsReduces all inventory levelsInventory hides process & material problemsImproves process & product quality

*5.Taguchi TechniquesExperimental design methods to improve product & process designIdentify key component & process variables affecting product variationTaguchi ConceptsQuality robustnessQuality loss functionTarget specifications

*Ability to produce products uniformly regardless of manufacturing conditionsPut robustness in House of Quality (QFD) matrices besides functionalitya)Quality Robustness

*Quality Function Deployment(QFD)Determines what will satisfy the customerTranslates those customer desires into the target design

*Shows social cost ($) of deviation from target valueAssumptionsMost measurable quality characteristics (e.g., length, weight) have a target valueDeviations from target value are undesirableEquation: L = D2CL = Loss ($); D = Deviation; C = Costb)Quality Loss Function

*Quality Loss Function; Distribution of Products ProducedLow lossHigh lossFrequencyLowerTargetUpperSpecificationLoss (to producing organization, customer, and society)Quality Loss Function (a)UnacceptablePoorFairGoodBestTarget-oriented quality yields more product in the best categoryTarget-oriented quality brings products toward the target valueConformance-oriented quality keeps product within three standard deviationsDistribution of specifications for product produced (b)

*A study found U.S. consumers preferred Sony TVs made in Japan to those made in the U.S. Both factories used the same designs & specifications. The difference in quality goals made the difference in consumer preferences.Japanese factory (Target-oriented)U.S. factory (Conformance-oriented)c)Target Specification Example

*6.Tools of TQMTools for generating ideasCheck sheetScatter diagramCause and effect diagramTools to organize dataPareto chartsProcess charts (Flow diagrams)Tools for identifying problemsHistogramsStatistical process control chart

*Seven Tools for TQM

*Shows sequence of events in processDepicts activity relationshipsHas many usesIdentify data collection pointsFind problem sourcesIdentify places for improvementIdentify where travel distances can be reducedProcess Chart

*Process Chart Example

*Used to find problem sources/solutionsOther namesFish-bone diagram, Ishikawa diagramStepsIdentify problem to correctDraw main causes for problem as bonesAsk What could have caused problems in these areas? Repeat for each sub-area.Cause and Effect Diagram

*MethodManpowerMaterialMachineryCause and Effect Diagram Example

*Uses statistics & control charts to tell when to adjust processDeveloped by Shewhart in 1920sInvolvesCreating standards (upper & lower limits)Measuring sample output (e.g. mean wgt.)Taking corrective action (if necessary)Done while product is being producedStatistical Process Control (SPC)

*Produce GoodProvide ServiceStop ProcessYesNoAssign.Causes?Take SampleInspect SampleFind Out WhyCreateControl ChartStartStatistical Process Control Steps

*Process Control Chart

*Patterns to Look for in Control Charts

*Service quality is more difficult to measure than for goodsService quality perceptions depend on Expectations versus realityProcess and outcomeTypes of service qualityNormal: Routine service deliveryExceptional: How problems are handledTQM In Services

*Under- standingService Quality Attributes

*Determinants of Service QualityReliability consistency and dependabilityResponsiveness willingness/readiness of employees to provide service; timelinessCompetence possession of skills and knowledge required to perform serviceAccess approachability and ease of contactCourtesy politeness, respect, consideration, friendliness of contact personnel

*Determinants of Service QualityCommunication keeping customers informed in languages they understandCredibility trustworthiness, believability, honestySecurity freedom from danger, risk or doubtUnderstanding/knowing the customer making the effort to understands the customers needsTangibles the physical evidence of the service

******This slide not only looks at the impact of quality on productivity - it also enables you to begin a discussion as to the meaning of quality (or perhaps the differing meanings among different people). To many people, the notion of high quality carries with it the assumption of high price. This slide provides an initial point to challenge that assumption.*This slide simply introduces the four activities. Subsequent slides expand on each.*One might begin discussion of this slide by introducing the difference between leadership and management.

The point should also be made, again, about the need for involvement and commitment throughout the organization.*Some students may find the notion of continuous improvement (Why cant we do it right the first time?) and employee empowerment (Doesnt this reduce or abrogate the role of the manager?) the most difficult to accept. If you have not done so already, this might be a good time to discuss each in some depth.

The following slide may be used in a discussion of empowerment.*This slide can be used to form the basis for a discussion of empowerment. If you wish to discuss empowerment - begin by asking students to define the term. You may find students are already comfortable with the term, in which case the discussion can be rather short; or, you may find they have unrealistic expectations (or desires?) - in which case you may wish to pursue the discussion at greater length. It may be helpful to ask students to identify the benefits and pitfalls to both management and worker. (For example, empowerment requires workers to assume greater responsibility.)*The main point that one might make with this slide is that the customer is, ultimately, the most important person in your business.*Once you have introduced these definitions of quality, ask students to provide example of products that use them.*It may be most helpful to provide, or ask you students to provide, examples of products for which the notion of quality is based upon one or more of the dimensions listed.*Although the text considers service quality at the end of the chapter, you may wish, at this point, to contrast the notion of quality for goods with that for services. If not, skip this slide - it is repeated at the point at which the issues are raised in the text.*This slide simply illustrates the relationships between quality and other elements of the firm.*You might make the point that companies actually do consider this a prestigious award.

For further information, visit the web site:

http://www.quality.nist.gov*One of the most important points to be made from this slide is that quality standards are now international. Students might be asked to explain the benefits of international as opposed to national standards. They might also be asked to consider the limitations we would face if there were no such standards. The problems to be encountered in developing international standards also make for good discussion.

Note to your students that Crosby has great reservations about the standard and the procedures building an effective quality program.**Students might be asked what problems they would foresee in implementing this process.*A point to be made here is that TQM is not a program but a philosophy.*Again, a point to be made here is the universality required to achieve TQM.*One point to make here is that this list represents a recent expression of Demings 14 points - the list is still evolving.

Students may notice that many of these fourteen points seem to be simply common sense. If they raise this issue - ask them to consider jobs they have held. Were these points emphasized or implemented by their employers? If not, why not? This part of the discussion can be used to raise again the issue that proper approaches to quality are not programs, with limited involvement and finite duration, but rather philosophies which must become ingrained throughout the organization.

**This slide simply introduces concepts of TQM. These concepts are expanded upon in subsequent slides.*Students may have a number of questions with respect to the notion of continuous improvement. - Why do we need continuous improvement? Why cant we do it right the first time? - Doesnt implementation of continuous improvement introduce a certain instability? - Are we never done? - Etc.**If you have not done so already, you might at this point discuss: - why employee empowerment works - the role of information technology in enabling employee empowerment - the role of information technology in making employee empowerment a requirement*You might discuss: - the benefits and the limitations of quality circles - the impact of quality circles on workers - requirements for quality circles to be successful - implementation of quality circles in the U.S.*Ask student to identify firms which they believe could serve as benchmarks. If students are unable to identify any firms - ask them to identify a college or university whose registration system or housing selection system could serve as a benchmark. Most students have enough knowledge of, or friends at,other colleges and universities so as to be able to respond to this question.*One might ask students Given that these suggestions seem to make intuitive sense, why would a company not wish to implement them?*This slide introduces a discussion about JIT.

Subsequent slides elaborate.****One question to pose to your students: Of what value is the notion of a social cost? How might a manager use this in decision making?*This slide may help clarify the differences between conformance and target-based quality control.*This slide probably deserves some discussion. Some students will probably question whether consumers could tell the difference between the two. You should stress that they can tell the difference and that this will have an impact on their buying decisions.***This slide can be used to introduce Process Charts.*You can use this slide as an example of a process chart; use it to guide students in developing their own charts for some common activity.*This slide introduces the Cause and Effect Diagram. The next several slide show the development of a simple example.

If time is available, it would be helpful to ask students to develop their own examples.**This slide introduces the process of Statistical Process Control. Slides illustrating the mechanics will be found in the presentation for supplement 6S.

At some point, you may wish to illustrate or discuss the connection between Statistical Process Control and the Target and Conformance-based quality control discussed earlier.***This chart enables you to discuss some of the information which can be obtained from the Process Control Charts.*At this point, you might consider going back to the slides illustrating the differences between goods and services. Those slides are provided next. If you do not wish to use them, simply skip to the final slide in the sequence.*This slide is a repeat of the earlier one on Service Quality Attributes as that topic appears at this point in the text.