6 Managing Quality Power Point presentation to accompany

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6 Managing Quality Power. Point presentation to accompany Heizer and Render Operations Management, 10 e Principles of Operations Management, 8 e Power. Point slides by Jeff Heyl © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 -1

Outline u Global Company Profile: Arnold Palmer Hospital u Quality and Strategy u Defining Quality u Implications of Quality u Malcolm Baldrige National Quality Award u Cost of Quality (COQ) u Ethics and Quality Management © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 -2

Outline – Continued u Total Quality Management u Continuous Improvement u Six Sigma u Employee Empowerment u Benchmarking u Just-in-Time (JIT) u Taguchi Concepts u Knowledge of TQM Tools © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 -4

Outline – Continued u Tools of TQM u Check Sheets u Scatter Diagrams u Cause-and-Effect Diagrams u Pareto Charts u Flowcharts u Histograms u Statistical Process Control (SPC) © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 -5

Outline – Continued u The Role of Inspection u When and Where to Inspect u Source Inspection u Service Industry Inspection u Inspection of Attributes versus Variables u TQM in Services © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 -6

Learning Objectives When you complete this chapter you should be able to: 1. Define quality and TQM 2. Describe the ISO international quality standards 3. Explain Six Sigma 4. Explain how benchmarking is used 5. Explain quality robust products and Taguchi concepts 6. Use the seven tools of TQM © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 -7

Managing Quality Provides a Competitive Advantage Arnold Palmer Hospital u Deliver over 16, 000 babies annually u Virtually every type of quality tool is employed u Continuous improvement u Employee empowerment u Benchmarking u Just-in-time u Quality tools © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 -8

Quality and Strategy An operations manager’s objective is to build a total quality management system that identifies and satisfies customer needs © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 -9

Quality and Strategy u Managing quality supports differentiation, low cost, and response strategies u Quality helps firms increase sales and reduce costs u Building a quality organization is a demanding task © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 10

Two Ways Quality Improves Profitability Sales Gains via u Improved response u Flexible pricing Improved Quality u Improved reputation Reduced Costs via u Increased productivity Increased Profits u Lower rework and scrap costs u Lower warranty costs Figure 6. 1 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 11

The Flow of Activities Organizational Practices Leadership, Mission statement, Effective operating procedures, Staff support, Training Yields: What is important and what is to be accomplished Quality Principles Customer focus, Continuous improvement, Benchmarking, Just-in-time, Tools of TQM Yields: How to do what is important and to be accomplished Employee Fulfillment Empowerment, Organizational commitment Yields: Employee attitudes that can accomplish what is important Figure 6. 2 © 2005 Prentice Hall, Inc Customer Satisfaction Winning orders, Repeat customers Yields: An effective organization with a competitive advantage 6 - 12

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 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 13

Different Views u User-based: better performance, User-based more features u Manufacturing-based: Manufacturing-based conformance to standards, making it right the first time u Product-based: specific and Product-based measurable attributes of the product © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 14

Implications of Quality 1. Company reputation u Perception of new products u Employment practices u Supplier relations 2. Product liability u Reduce risk 3. Global implications u Improved ability to compete © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 15

Key Dimensions of Quality u Performance u Durability u Features u Serviceability u Reliability u Aesthetics u Conformance u Perceived quality u Value © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 16

Malcolm Baldrige National Quality Award u Established in 1988 by the U. S. government u Designed to promote TQM practices u Recent winners include u Honeywell Federal, Midway USA, Atlanti. Care, Heartland Health, Cargill Corn Milling, PRO-TEC Coating Co. , City of Coral Springs, Premier Inc. , Sunny Fresh Foods, Park Place Lexus, Richland College © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 17

Baldrige Criteria Applicants are evaluated on: Categories Leadership Strategic Planning Customer & Market Focus Measurement, Analysis, and Knowledge Management Workforce Focus Process Management Results © 2011 Pearson Education, Inc. publishing as Prentice Hall Points 120 85 85 90 85 85 450 6 - 18

Takumi A Japanese character that symbolizes a broader dimension than quality, a deeper process than education, and a more perfect method than persistence © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 19

Costs of Quality u Prevention costs - reducing the potential for defects u Appraisal costs - evaluating products, parts, and services u Internal failure - producing defective parts or service before delivery u External costs - defects discovered after delivery © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 20

Leaders in Quality 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 © 2011 Pearson Education, Inc. publishing as Prentice Hall Table 6. 1 6 - 22

Ethics and Quality Management u Operations managers must deliver healthy, safe, quality products and services u Poor quality risks injuries, lawsuits, recalls, and regulation u Organizations are judged by how they respond to problems u All stakeholders much be considered © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 23

International Quality Standards u ISO 9000 series (Europe/EC) u Common quality standards for products sold in Europe (even if made in U. S. ) u 2008 update places greater emphasis on leadership and customer requirements and satisfaction u ISO 14000 series (Europe/EC) © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 24

ISO 14000 Environmental Standard Core Elements: u Environmental management u Auditing u Performance evaluation u Labeling u Life cycle assessment © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 25

ISO 14000 Environmental Standard Advantages: u Positive public image and reduced exposure to liability u Systematic approach to pollution prevention u Compliance with regulatory requirements and opportunities for competitive advantage u Reduction in multiple audits © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 26

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 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 27

Deming’s Fourteen Points 1. Create consistency of purpose 2. Lead to promote change 3. Build quality into the product; stop depending on inspections 4. Build long-term relationships based on performance instead of awarding business on price 5. Continuously improve product, quality, and service Table 6. 2 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 28

Deming’s Fourteen Points 6. Start training 7. Emphasize leadership 8. Drive out fear 9. Break down barriers between departments 10. Stop haranguing workers 11. Support, help, and improve Table 6. 2 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 29

Deming’s Fourteen Points 12. Remove barriers to pride in work 13. Institute education and selfimprovement 14. Put everyone to work on the transformation Table 6. 2 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 30

Seven Concepts of TQM 1. 2. 3. 4. 5. 6. 7. Continuous improvement Six Sigma Employee empowerment Benchmarking Just-in-time (JIT) Taguchi concepts Knowledge of TQM tools © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 31

Continuous Improvement u Represents continual improvement of all processes u Involves all operations and work centers including suppliers and customers u People, Equipment, Materials, Procedures © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 32

Shewhart’s PDCA Model 4. Act 1. Plan Implement 2. Identify the plan pattern and document make a plan 3. Check Is the plan working? 2. Do Test the plan Figure 6. 3 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 33

Six Sigma u Two meanings u Statistical definition of a process that is 99. 9997% capable, 3. 4 defects per million opportunities (DPMO) u A program designed to reduce defects, lower costs, and improve customer satisfaction © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 34

Six Sigma Lower limits Upper limits u Two meanings 2, 700 defects/million u Statistical definition of a process that 3. 4 defects/million is 99. 9997% capable, 3. 4 defects per million opportunities (DPMO) u A program designed to reduce defects, lower costs, Mean improve and customer satisfaction ± 3 ± 6 Figure 6. 4 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 35

Six Sigma Program u Originally developed by Motorola, adopted and enhanced by Honeywell and GE u Highly structured approach to process improvement u A strategy u A discipline - DMAIC © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 6 - 36

Six Sigma 1. Define critical outputs and identify gaps for improvement DMAIC Approach 2. Measure the work and collect process data 3. Analyze the data 4. Improve the process 5. Control the new process to make sure new performance is maintained © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 37

Six Sigma Implementation u Emphasize defects per million opportunities as a standard metric u Provide extensive training u Focus on corporate sponsor support (Champions) u Create qualified process improvement experts (Black Belts, Green Belts, etc. ) u Set stretch objectives This cannot be accomplished without a major commitment from top level management © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 38

Employee Empowerment u Getting employees involved in product and process improvements u 85% of quality problems are due to process and material u Techniques u Build communication networks that include employees u Develop open, supportive supervisors u Move responsibility to employees u Build a high-morale organization u Create formal team structures © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 39

Quality Circles u Group of employees who meet regularly to solve problems u Trained in planning, problem solving, and statistical methods u Often led by a facilitator u Very effective when done properly © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 40

Benchmarking Selecting best practices to use as a l standard for performance rna 1. Determine what to benchmark 2. Form a benchmark team inte rking Use hma ig enc u’re b b yo if nough e 3. Identify benchmarking partners 4. Collect and analyze benchmarking information 5. Take action to match or exceed the benchmark © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 41

Best Practices for Resolving Customer Complaints Best Practice Justification Make it easy for clients to complain It is free market research Respond quickly to complaints It adds customers and loyalty Resolve complaints on first contact It reduces cost Use computers to manage complaints Discover trends, share them, and align your services Recruit the best for customer service jobs It should be part of formal training and career advancement Table 6. 3 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 42

Just-in-Time (JIT) Relationship to quality: u JIT cuts the cost of quality u JIT improves quality u Better quality means less inventory and better, easier-toemploy JIT system © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 43

Just-in-Time (JIT) u ‘Pull’ system of production scheduling including supply management u Production only when signaled u Allows reduced inventory levels u Inventory costs money and hides process and material problems u Encourages improved process and product quality © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 44

Taguchi Concepts u Engineering and experimental design methods to improve product and process design u Identify key component and process variables affecting product variation u Taguchi Concepts u Quality robustness u Quality loss function u Target-oriented quality © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 47

Quality Robustness u Ability to produce products uniformly in adverse manufacturing and environmental conditions u Remove the effects of adverse conditions u Small variations in materials and process do not destroy product quality © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 48

Quality Loss Function u Shows that costs increase as the product moves away from what the customer wants Targetriented o quality u Costs include customer dissatisfaction, warranty and service, internal scrap and repair, and costs to society u Traditional conformance specifications are too simplistic © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 49

Quality Loss Function L = D 2 C High loss Unacceptable Loss (to producing organization, customer, and society) Poor Fair Good Best Low loss where L = loss to society D = distance from target value C = cost of deviation Target-oriented quality yields more product in the “best” category Target-oriented quality brings product toward the target value Frequency Conformance-oriented quality keeps products within 3 standard deviations Lower Target Upper Specification © 2011 Pearson Education, Inc. publishing as Prentice Hall Figure 6. 5 6 - 50

Tools of TQM u Tools for Generating Ideas u Check sheets u Scatter diagrams u Cause-and-effect diagrams u Tools to Organize the Data u Pareto charts u Flowcharts © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 51

Seven Tools of TQM (a) Check Sheet: An organized method of recording data Defect A B C 1 /// // / 2 / / // 3 / Hour 4 5 / / / 6 / 7 /// // // 8 / //// Figure 6. 6 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 53

Seven Tools of TQM (c) Cause-and-Effect Diagram: A tool that identifies process elements (causes) that might effect an outcome Cause Materials Methods Effect Manpower Machinery Figure 6. 6 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 55

Seven Tools of TQM Percent Frequency (d) Pareto Chart: A graph to identify and plot problems or defects in descending order of frequency A B C D E Figure 6. 6 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 56

Seven Tools of TQM (f) Histogram: A distribution showing the frequency of occurrences of a variable Frequency Distribution Repair time (minutes) Figure 6. 6 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 58

Seven Tools of 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 Figure 6. 6 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 59

Cause-and-Effect Diagrams Method (shooting process) Material (ball) Grain/Feel (grip) Size of ball Aiming point Bend knees Air pressure Hand position Lopsidedness Follow-through Training Conditioning Consistency Balance Missed free-throws Rim size Motivation Rim alignment Concentration Manpower (shooter) © 2011 Pearson Education, Inc. publishing as Prentice Hall Machine (hoop & backboard) Rim height Backboard stability Figure 6. 7 6 - 60

Pareto Charts Data for October Frequency (number) 70 – 60 – 54 – 72 50 – 40 – Number of occurrences 30 – 20 – 12 10 – 4 0 – Room svc 72% Check-in Pool hours 16% 5% 3 2 Minibar 4% Cumulative percent – 100 – 93 – 88 Misc. 3% Causes and percent of the total © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 61

Flow Charts MRI Flowchart 1. 2. 3. 4. 5. 6. 1 Physician schedules MRI Patient taken to MRI Patient signs in Patient is prepped Technician carries out MRI Technician inspects film 2 3 4 5 7. 8. 9. 10. If unsatisfactory, repeat Patient taken back to room MRI read by radiologist MRI report transferred to physician 11. Patient and physician discuss 6 7 80% 8 11 9 10 20% © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 62

Statistical Process Control (SPC) u Uses statistics and control charts to tell when to take corrective action u Drives process improvement u Four key steps u Measure the process u When a change is indicated, find the assignable cause u Eliminate or incorporate the cause u Restart the revised process © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 63

An SPC Chart Plots the percent of free throws missed 20% Upper control limit 10% Coach’s target value 0% | | | | | 1 2 3 4 5 6 7 8 9 Lower control limit Game number Figure 6. 8 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 64

Inspection u Involves examining items to see if an item is good or defective u Detect a defective product u Does not correct deficiencies in process or product u It is expensive u Issues u When to inspect u Where in process to inspect © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 65

When and Where to Inspect 1. At the supplier’s plant while the supplier is producing 2. At your facility upon receipt of goods from the supplier 3. Before costly or irreversible processes 4. During the step-by-step production process 5. When production or service is complete 6. Before delivery to your customer 7. At the point of customer contact © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 66

Inspection u Many problems u Worker fatigue u Measurement error u Process variability u Cannot inspect quality into a product u Robust design, empowered employees, and sound processes are better solutions © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 67

Source Inspection u Also known as source control u The next step in the process is your customer u Ensure perfect product to your customer Poka-yoke is the concept of foolproof devices or techniques designed to pass only acceptable product © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 68

Service Industry Inspection Organization What is Inspected Jones Law Office Receptionist performance Standard Is phone answered by the second ring Billing Accurate, timely, and correct format Attorney Promptness in returning calls Table 6. 4 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 69

Service Industry Inspection Organization Hard Rock Hotel What is Inspected Standard Reception desk Use customer’s name Doorman Greet guest in less than 30 seconds Room All lights working, spotless bathroom Minibar Restocked and charges accurately posted to bill Table 6. 4 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 70

Service Industry Inspection Organization Arnold Palmer Hospital What is Inspected Standard Billing Accurate, timely, and correct format Pharmacy Prescription accuracy, inventory accuracy Lab Audit for lab-test accuracy Nurses Charts immediately updated Admissions Data entered correctly and completely Table 6. 4 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 71

Service Industry Inspection Organization Olive Garden Restaurant What is Inspected Standard Busboy Serves water and bread within 1 minute Busboy Clears all entrée items and crumbs prior to dessert Waiter Knows and suggest specials, desserts Table 6. 4 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 72

Service Industry Inspection Organization Nordstrom Department Store What is Inspected Standard Display areas Attractive, well-organized, stocked, good lighting Stockrooms Rotation of goods, organized, clean Salesclerks Neat, courteous, very knowledgeable Table 6. 4 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 73

Attributes Versus Variables u Attributes u Items are either good or bad, acceptable or unacceptable u Does not address degree of failure u Variables u Measures dimensions such as weight, speed, height, or strength u Falls within an acceptable range u Use different statistical techniques © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 74

TQM In Services u Service quality is more difficult to measure than the quality of goods u Service quality perceptions depend on u Intangible differences between products u Intangible expectations customers have of those products © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 75

Service Quality The Operations Manager must recognize: 1. The tangible component of services is important 2. The service process is important 3. The service is judged against the customer’s expectations 4. Exceptions will occur © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 76

Determinants of Service Quality 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 Table 6. 5 © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 78

Service Recovery Strategy u Managers should have a plan for when services fail u Marriott’s LEARN routine u Listen u Empathize u Apologize u React u Notify © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 79

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. © 2011 Pearson Education, Inc. publishing as Prentice Hall 6 - 80