OPERATIONS MANAGEMENT for MBAs Second Edition Meredith and Shafer Prepared by Scott M. Shafer Wake Forest University John Wiley and Sons, Inc. 1
Chapter 3 Quality Management Chapter 3: Quality Management 2
Chapter 3: Quality Management 3
Examples Chapter 3: Quality Management 4
West Babylon School District 4 Began applying continuous improvement and quality to its administrative and education processes. 4 TQE 4 Applied Deming’s 14 Points for Management to administrative process. 4 Numerous improvements made. Chapter 3: Quality Management 5
National Semiconductor 4 Early proponent of total quality – Quality circles 1981 – Preventive maintenance 1982 – Statistical process control 1983 – Design of experiment techniques 1984 – Design for manufacturing techniques 1986 Chapter 3: Quality Management 6
National Semiconductor continued 4 Second stage of quality initiatives (1990 s) – – – – Focused on customer-supplier relationships Customer satisfaction Customer score cards Process analysis Employee empowerment Team strategies Problem solving techniques – Visioning Chapter 3: Quality Management 7
National Semiconductor continued 4 Third stage – Personal mastery – Shared vision – Systems thinking – Team learning Chapter 3: Quality Management 8
NCR 4 Produces business information processing systems 4 Recognized need to continuously improve its products 4 Major component of its continuous improvement program is use of statistical techniques Chapter 3: Quality Management 9
NCR continued 4 Began using statistical process control techniques in 1985 to monitor its autoinsertion operation on its printed circuit board assembly line. – Line was producing an unacceptable number of defects. – Reasons included misinserted or broken parts, using the wrong parts and so on. Chapter 3: Quality Management 10
NCR continued 4 Quality engineering department established process averages, control limits and guidelines for action for “out-of-control” conditions. – Production was stopped when out-of-control condition detected until cause identified. – Random samples of 1000 insertions were collected each hour and the results plotted on a c chart. – Out-of-control situations were investigated to identify the assignable cause. Chapter 3: Quality Management 11
NCR concluded 4 Learned a great deal about the autoinsertion operation using the control charts. – Problem of broken parts was traced to a specific supplier. 4 Because of the success of this experiment, statistical process control was implemented across the entire assembly line. 4 NCR has since changed its approach from “inspect and repair” to “prevent and design for quality. ” Chapter 3: Quality Management 12
Timber Companies 4 Because of environmental restrictions and limited quantities of large-diameter trees, many timber companies are using statistical quality control techniques to maximize the quality and quantity of finished lumber produced Chapter 3: Quality Management 13
Converting Logs into Finished Lumber 4 Log debarked 4 Debarked log split down 4 4 4 the middle Split log resawed to create boards Ends of boards trimmed Boards are stacked Boards dried in kiln for 2 to 30 days Boards are planed Chapter 3: Quality Management 14
Applying Statistical Quality Control to the Stacking Operation 4 Important operation because this operation determines straightness of finished lumber. 4 Lumber stacked in layers. 4 Separators placed between layers to form air channels and transfer weight of wood. 4 Automated equipment used to stack lumber making it necessary to monitor the alignment of the separators. Chapter 3: Quality Management 15
Stacking Operation continued 4 Estimated cost of misplaced separator is $31. 50 owing to board warping. 4 Average sawmill handles upwards of 30, 000 separators each day. 4 Measuring board placed in front of each column of separators to monitor separator alignment. 4 Stack of lumber contains approximately 15 columns of separators and 360 separators. 16 Chapter 3: Quality Management
Stacking Operation concluded 4 Total number of misplaced separators is divided by the total number of separators in the stack of lumber and result plotted on p chart. 4 Using p chart, workers monitor the stacking equipment and identify problems before an out-of-control situation arises. Chapter 3: Quality Management 17
Quality Management Perspectives Chapter 3: Quality Management 18
Quality Costs 4 Two primary sets of costs involved in quality – Control costs – Failure costs 4 These costs are often as high as 15 to 35% of sales 4 Costs often broken down into four categories Chapter 3: Quality Management 19
Category 1: Prevention Costs 4 Costs associated with trying to prevent defects and errors – Training for quality – Educating suppliers – Designing product for quality – Designing production system for quality – Preventive maintenance Chapter 3: Quality Management 20
Category 2: Appraisal Costs 4 Costs of determining current quality – Measuring and testing parts – Running special test laboratories – Acquiring special testing equipment – Conducting statistical process control – Inspecting incoming materials Chapter 3: Quality Management 21
Category 3: Internal Costs of Defects 4 Costs incurred when defects are found before shipment/delivery to customer. – Labor and materials going into scrap – Reworking and retesting to correct defects – Downtime of equipment and labor while waiting for repairs – Yield losses Chapter 3: Quality Management 22
Category 4: External Costs of Defects 4 Costs of trying to correct defects after receipt by customer. – Lost of customer goodwill – Recalls to correct problem – Warranty, insurance, and legal suit settlements Chapter 3: Quality Management 23
Quality Management Philosophies Chapter 3: Quality Management 24
W. Edwards Deming 4 Major source of poor quality is variation 4 Quality improvement the responsibility of top management 4 All employees should be trained in use of problem solving tools and especially statistical techniques Chapter 3: Quality Management 25
Deming’s 14 Points 4 Create constancy of purpose 4 Adopt the new philosophy 4 Cease dependence on mass inspection 4 End practice of awarding business on basis of price tags 4 Improve constantly and forever 4 Institute modern methods of training Chapter 3: Quality Management 26
Deming’s 14 Points continued 4 Institute modern method of supervision 4 Drive out fear 4 Breakdown organizational barriers 4 Eliminate arbitrary numerical goals 4 Eliminate work standards and quotas 4 Remove barriers that reduce pride of workmanship Chapter 3: Quality Management 27
Deming’s 14 Points continued 4 Institute a vigorous program of education and training 4 Push the 13 points everyday Chapter 3: Quality Management 28
Joseph Juran 4 Quality Control Handbook (1951) 4 Employees speak in different languages 4 Quality Trilogy – Quality Planning – Quality Control – Quality Improvement 4 Need to place more emphasis on planning and improvement Chapter 3: Quality Management 29
Joseph Juran continued 4 Organizations progress through four phases – Minimize prevention and appraisal costs – Appraisal costs increased – Process control introduced increasing appraisal costs but lowering internal and external failure costs – Prevention costs increased in effort to lower total quality costs Chapter 3: Quality Management 30
Philip B. Crosby 4 Quality is conformance to requirements, not elegance 4 Quality problems do not exist, rather organizations have functional problems 4 Best to perform an activity right the first time 4 Zero defects only meaningful performance measure Chapter 3: Quality Management 31
Total Quality Management (TQM) 4 Better to produce item right the first time than to try to inspect quality in 4 Quality at the source - responsibility shifted from quality control department to workers Chapter 3: Quality Management 32
History of TQM 4 Dr. Shewart began using statistical control at the Bell Institute in 1930 s 4 Military standards developed in 1950 s 4 After World War II, Japanese Union of Scientist and Engineers began consulting with Deming 4 Deming Prize introduced in Japan in 1951 Chapter 3: Quality Management 33
History of TQM continued 4 Quality assurance concept proposed in 1952 4 Juran makes first trip to Japan in 1954 4 Quality becomes Japan’s national slogan in 1956 4 First quality circles created in 1957 4 10, 000 quality circles by 1966 4 100, 000 quality circles by 1977 4 First U. S. quality circle 1974 Chapter 3: Quality Management 34
Five Steps in TQM 4 Determine what customers want 4 Develop products and services 4 Develop production system 4 Monitor the system 4 Include customers and suppliers Chapter 3: Quality Management 35
New Responsibilities of Quality Control Department 4 Training employees how to control quality 4 Conducting random quality audits 4 Consulting on quality problems 4 Determining cost of quality 4 Helping implement quality control ideas 4 Overseeing final test of finished goods Chapter 3: Quality Management 36
Quality Circles 4 Focus on all problems facing workers 4 Composed of natural work groups 4 Not limited to shop employees 4 Usually spend couple hours per week on company time analyzing problems Chapter 3: Quality Management 37
Quality Tools 4 Process analysis 4 Scatter diagram 4 Runs chart 4 Fishbone chart 4 Control chart 4 Presentation skills 4 Pareto chart 4 Analysis skills 4 Histogram 4 Brainstorming Chapter 3: Quality Management 38
Tools for Quality Control Chapter 3: Quality Management 39
Tools for Quality Control continued Chapter 3: Quality Management 40
Insufficient Time Spent Covering Curriculum Chapter 3: Quality Management 41
Taguchi Methods 4 Design for Manufacturability (DFM) 4 Procedure for statistical testing to determine best combination of product and transformation system design that will make output relatively independent of normal fluctuations in the production system Chapter 3: Quality Management 42
Quality Function Deployment (QFD) 4 Tools for helping translate customer desires directly into product service attributes. Chapter 3: Quality Management 43
Benchmarking Comparing an organization’s performance to performance of other organizations. Chapter 3: Quality Management 44
Purposes for Benchmarking 4 Comparing an organization’s performance to the best organization’s performance 4 Comparing an organization’s business processes with similar processes 4 Comparing products and services 4 Identifying best practices to implement 4 Projecting trends Chapter 3: Quality Management 45
Steps in Benchmarking 4 Preparing for the study – obtaining top management support 4 Collecting data – published data – original research 4 Using what was learned to improve organizational performance Chapter 3: Quality Management 46
Benchmarking Goals 4 Learning from experiences of others 4 Determining how organization is performing relative to the best 4 Helping to prioritize improvement efforts – developing stretch goals – overcoming complacency within organization Chapter 3: Quality Management 47
Quality in Services 4 Measuring is difficult 4 Training in standard procedures often used to improve quality 4 One way to measure quality of services is to use customer satisfaction surveys 4 J. D. Power and Associates uses surveys to rate domestic airlines, hotel chains, and rental car companies. Chapter 3: Quality Management 48
Rating the Performance of Domestic Airlines 4 On-time performance (25%) 4 Airport check-in (11%) 4 Courtesy of flight attendants (11%) 4 Seating comfort (11%) Chapter 3: Quality Management 49
Service Defections 4 Organizations should monitor customer defections – feedback from defecting customers can be used to identify problem areas – can determine what is needed to win them back – changes in defection rate can be used as early warning signal Chapter 3: Quality Management 50
Quality Awards/Certifications Chapter 3: Quality Management 51
Deming Prize Criteria 4 Policies and objectives 4 Standardization 4 Operation of the 4 Control organization 4 Education 4 Information Management 4 Analysis 4 Quality assurance 4 Results 4 Future plans Chapter 3: Quality Management 52
2001 Malcolm Baldrige Award Criteria 4 Leadership (120 points) – organizational leadership – public responsibility and citizenship 4 Strategic Planning (85 points) – strategy development process – strategy deployment Chapter 3: Quality Management 53
2001 Malcolm Baldrige Award Criteria continued 4 Customer and Market Focus (85 points) – customer and market knowledge – customer relationship and satisfaction 4 Information and Analysis (90 points) – measurement and analysis of organizational performance – information management Chapter 3: Quality Management 54
2001 Malcolm Baldrige Award Criteria continued 4 Human Resource Focus (85 points) – work systems – employee education, training, and development – employee well-being and satisfaction Chapter 3: Quality Management 55
2001 Malcolm Baldrige Award Criteria continued 4 Process Management (85) – product and service processes – business processes – support processes Chapter 3: Quality Management 56
2001 Malcolm Baldrige Award Criteria continued 4 Business Results (450 points) – Customer-focused results – financial and market results – human resource results – organizational effectiveness results Chapter 3: Quality Management 57
ISO 9000 4 Guidelines for designing, manufacturing, selling, and servicing products. 4 Selecting an ISO 9000 certified supplier provides some assurance that supplier follows accepted business practices in areas covered by the standard Chapter 3: Quality Management 58
Elements of ISO 9000 4 Management Responsibility 4 Control of Inspection, Measuring, 4 Quality System 4 Contract Review 4 4 Design Control 4 4 Document and Data Control 4 4 Purchasing 4 4 Control of Customer Supplied Product 4 Product Identification and Traceability 4 Process Control 4 Inspection and Testing 4 4 and Test Equipment Inspection and Test Status Control of Nonconforming Product Corrective and Preventive Action Handling, Storage, Packaging, Preservation, and Delivery Internal Quality Audits Training Servicing Statistical Techniques Chapter 3: Quality Management 59
ISO 14000 4 Series of standards covering environmental management systems, environmental auditing, evaluation of environmental performance, environmental labeling, and life-cycle assessment. 4 Intent is to help organizations improve their environmental performance through documentation control, operational control, control of records, training, statistical techniques, and corrective and preventive actions. Chapter 3: Quality Management 60
Process Capability Chapter 3: Quality Management 61
Process Capability 4 TQM’s emphasis on “making it right the first time” has resulted in organizations emphasizing the ability of a production system to meet design specifications rather than evaluating the quality of outputs after the fact with acceptance sampling. 4 Process Capability measures the extent to which an organization’s production system can meet design specifications. Chapter 3: Quality Management 62
Engineering Tolerance Versus Process Capability Chapter 3: Quality Management 63
Process Capability Depends On: 4 Location of the process mean. 4 Natural variability inherent in the process. 4 Stability of the process. 4 Product’s design requirements. Chapter 3: Quality Management 64
Natural Variation Versus Product Design Specifications Chapter 3: Quality Management 65
Process Capability Index Cp < 1: process not capable of meeting design specs Cp > 1: process capable of meeting design specs As rule of thumb, many organizations desire a Cp index of at least 1. 5. Six sigma quality (fewer than 3. 4 defective parts per million) corresponds to a Cp index of 2. Chapter 3: Quality Management 66
Effect of Production System Variability on Cp 67
Statistical Quality Control Chapter 3: Quality Management 68
Chance Versus Assignable Variation 4 Chance variation is variability built into the system. 4 Assignable variation occurs because some element of the system or some operating condition is out of control. 4 Quality control seeks to identify when assignable variation is present so that corrective action can be taken. Chapter 3: Quality Management 69
Control Based on Attributes and Variables 4 Inspection for Variables: measuring a variable that can be scaled such as weight, length, temperature, and diameter. 4 Inspection of Attributes: determining the existence of a characteristic such as acceptable-defective, timely-late, and rightwrong. Chapter 3: Quality Management 70
Control Charts Chapter 3: Quality Management 71
Control Charts 4 Developed in 1920 s to distinguish between chance variation in a system and variation caused by the system’s being out of control - assignable variation. Chapter 3: Quality Management 72
Control Charts continued 4 Repetitive operation will not produce exactly the same outputs. 4 Pattern of variability often described by normal distribution. 4 Random samples that fully represent the population being checked are taken. 4 Sample data plotted on control charts to determine if the process is still under control. Chapter 3: Quality Management 73
Control Chart with Limits Set at Three Standard Deviations Chapter 3: Quality Management 74
Control Charts for Variables Chapter 3: Quality Management 75
Two Control Charts 4 Sample Means Chart 4 Range Chart Chapter 3: Quality Management 76
Sample Data of Weights of Tacos (Ounces) Chapter 3: Quality Management 77
Analysis of Scenario 1 Sample means show problem having increased from 5 ounces to 8 ounces. Sample ranges have not changed from sample to sample. Chapter 3: Quality Management 78
Analysis of Scenario 2 Sample ranges show problem having increased from 2 ounces to 6 ounces. Sample means have not changed from sample to sample. Chapter 3: Quality Management 79
Patterns of Change in Process Distributions Chapter 3: Quality Management 80
Control Limits Sample Means Chart: Range Chart: Chapter 3: Quality Management 81
Calculating the Grand Mean and the Average Range Chapter 3: Quality Management 82
Mean Age of Ice Cream Chapter 3: Quality Management 83
Range in Ice Cream Age Chapter 3: Quality Management 84
Control Charts for Attributes Chapter 3: Quality Management 85
Fraction-Defective (p) Charts Chapter 3: Quality Management 86
Number-of-Defects (c) Charts Chapter 3: Quality Management 87
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