Quality Management 11111

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Outline

Operations Management

 Global Company Profile: Arnold Palmer Hospital  Quality and Strategy

Managing Quality

 Defining Quality  Implications of Quality  Malcolm Baldrige National Quality Award  Cost of Quality (COQ)  Ethics and Quality Management 6–1

Outline – Continued

6–2

Outline – Continued

 International Quality Standards

 Total Quality Management

 ISO 9000

 Continuous Improvement

 ISO14000

 Six Sigma  Employee Empowerment  Benchmarking  Just-in-Time (JIT)  Taguchi Concepts  Knowledge of TQM Tools 6–3

6–4

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Outline – Continued

Outline – Continued

 Tools of TQM

 The Role of Inspection

 Check Sheets

 When and Where to Inspect

 Scatter Diagrams

 Source Inspection

 Cause-and-Effect Diagrams

 Service Industry Inspection

 Pareto Charts

 Inspection of Attributes versus Variables

 Flowcharts

 TQM in Services

 Histograms  Statistical Process Control (SPC) 6–5

6–6

Managing Quality Provides a Competitive Advantage

Learning Objectives When you complete this chapter you should be able to:

Arnold Palmer Hospital

 Define quality and TQM

 Deliver over 13,000 babies annually

 Describe the ISO international quality standards

 Virtually every type of quality tool is employed

 Explain Six Sigma

 Continuous improvement

 Explain how benchmarking is used

 Employee empowerment

 Explain quality robust products and Taguchi concepts

 Benchmarking  Just-in-time

 Quality tools

 Use the seven tools of TQM 6–7

6–8

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Two Ways Quality Improves Profitability

Quality and Strategy  Managing quality supports differentiation, low cost, and response strategies

Sales Gains via  Improved response  Flexible pricing

 Quality helps firms increase sales and reduce costs

Improved Quality

 Building a quality organization is a demanding task

 Improved reputation Reduced Costs via  Increased productivity

Increased Profits

 Lower rework and scrap costs  Lower warranty costs Figure 6.1 6–9

Defining Quality

6 – 10

Different Views

The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs

 User-based – better performance, more features

American Society for Quality

 Manufacturing-based – conformance to standards, making it right the first time  Product-based – specific and measurable attributes of the product

6 – 12

6 – 13

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Meaning of Quality

Implications of Quality 1. Company reputation

Meaning of Quality

 Perception of new products Producer’s Perspective

Consumer’s Perspective

Quality of Conformance

Quality of Design

 Employment practices  Supplier relations

Production

• Conformance to specifications • Cost

• Quality characteristics • Price

2. Product liability

Marketing

 Reduce risk

3. Global implications

Fitness for Consumer Use

 Improved ability to compete 6 – 14

6 – 15

Professional football player Drew Brees and wife Brittany check in as the first guests of the Ritz-Carlton in New Orleans when it reopened after Hurricane Katrina. The Ritz-Carlton is the only two-time winner of the Malcolm Baldrige National Quality Award in the service category and its goal is a totally defect-free experience for its guests. 6 – 17

6 – 18

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Baldrige Criteria

Malcom Baldrige National Quality Award

Applicants are evaluated on:

 Established in 1988 by the U.S. government

Categories Leadership Strategic Planning Customer & Market Focus Measurement, Analysis, and Knowledge Management Workforce Focus Process Management Results

 Designed to promote TQM practices  Recent winners  Motorola, Xerox,Federal Express, IBM, Ritz Carlton,

Points 120 85 85

6 – 19

90 85 85 450 6 – 20

PQA Criteria

Philippine Quality Award

Awardees are evaluated on: Leadership Strategic Planning Customer & Market Focus Information and Analysis Human Resource Focus Process Management Business / Organizational Results

 The PQA sets a standard of excellence to help Filipino organizations achieve world-class performance and serves as a ―template‖ for competitiveness based on the principles of Total Quality Management (TQM).  The highest national recognition for exemplary organizational performance of private and public organizations in the country  It is a national quality award comparable with the Malcolm Baldrige National Quality Award (MBNQA) of the US and those in Europe and Asia.

6 – 21

6 – 22

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PQA Recipients

Costs of Quality Total Cost

Total Cost External Failure

Internal Failure

Prevention Appraisal

Quality Improvement 6 – 23

6 – 25

Leaders in Quality

Costs of Quality

• Walter Shewhart

 Prevention costs - reducing the potential for defects

– In 1920s, developed control charts – Introduced term ―quality assurance‖

• W. Edwards Deming

 Appraisal costs - evaluating products, parts, and services

– Developed courses during World War II to teach statistical quality-control techniques to engineers and executives of companies that were military suppliers – After war, began teaching statistical quality control to Japanese companies – 14 Points for Management

 Internal failure - producing defective parts or service before delivery  External costs - defects discovered after delivery

• Joseph M. Juran – Followed Deming to Japan in 1954 – Focused on strategic quality planning 6 – 26

6 – 28

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Leaders in Quality

Ethics and Quality Management

 Armand V. Feigenbaum  In 1951, introduced concepts of total quality control and continuous quality improvement

 Operations managers must deliver healthy, safe, quality products and services

 Philip Crosby  In 1979, emphasized that costs of poor quality far outweigh cost of preventing poor quality  In 1984, defined absolutes of quality management—conformance to requirements, prevention, and ―zero defects‖ --- Quality Is Free

 Poor quality risks injuries, lawsuits, recalls, and regulation  Organizations are judged by how they respond to problems

 Kaoru Ishikawa  Promoted use of quality circles  Developed ―fishbone‖ diagram  Emphasized importance of internal customer

 All stakeholders must be considered 6 – 29

6 – 30

ISO 9000 Series International Quality Standards

 ISO 9000 series  Common quality standards for products sold  1994 update  2000 update places greater emphasis on leadership and customer satisfaction  2008 update 6 – 31

6 – 32

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ISO 14000 Environmental Standard

TQM • Refers to a quality emphasis that encompasses the entire organization, from supplier to customer

Core Elements:  Environmental management

• 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

 Auditing  Performance evaluation  Labeling  Life cycle assessment 6 – 33

Deming’s Fourteen Points

6 – 34

Deming’s Fourteen Points 6. Institute worker training

1. 2. 3. 4.

Create constancy of purpose Adopt philosophy of prevention Cease mass inspection Select a few suppliers based on quality 5. Constantly improve system and workers

7. Instill leadership among supervisors 8. Eliminate fear among employees 9. Eliminate barriers between departments

10. Eliminate slogans 6 – 35

6 – 36

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Deming’s Fourteen Points

Seven Concepts of TQM

11. Remove numerical quotas

 Continuous improvement

12. Enhance worker pride

 Six Sigma

13. Institute vigorous training and education programs

 Employee empowerment

14. Develop a commitment from top management to implement above 13 points

 Just-in-time (JIT)

 Benchmarking  Taguchi concepts  Knowledge of TQM tools 6 – 37

6 – 38

Shewhart’s PDCA Model

Continuous Improvement  Represents continual improvement of all processes

1.Plan 4. Act Identify the Implement improvement and make the plan a plan

 Involves all operations and work centers including suppliers and customers

3. Check Is the plan working?

People, Equipment, Materials, Procedures

2. Do Test the plan Figure 6.3

6 – 39

6 – 40

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Six Sigma  Two meanings  Statistical definition of a process that is 99.9997% capable, 3.4 defects per million opportunities (DPMO)  A program designed to reduce defects, lower costs, and improve customer satisfaction

41

6 – 41

Six Sigma  Two meanings Lower limits

6 – 42

Six Sigma Program  Originally developed by Motorola, adopted and enhanced by Honeywell and GE

Upper limits

2,700 defects/million  Statistical definition of a process that is 99.9997% capable, 3.4 defects per 3.4 defects/million million opportunities (DPMO)

 Highly structured approach to process improvement

 A program designed to reduce defects, lower costs, and improve customer satisfactionMean

 A strategy

 A discipline - DMAIC

±3 ±6 Figure 6.4 6 – 43

6 6 – 44

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Six Sigma 1. Define critical outputs and identify gaps for improvement

Six Sigma Implementation  Emphasize defects per million opportunities as a standard metric

DMAIC Approach

 Provide extensive training  Focus on corporate sponsor support

2. Measure the work and collect process data

(Champions)

3. Analyze the data

 Create qualified process improvement

4. Improve the process

 Set stretch objectives

experts (Black Belts, Green Belts, etc.)

5. Control the new process to make sure new performance is maintained

This cannot be accomplished without a major commitment from top level management 6 – 45

Employee Empowerment

6 – 46

Quality Circles

 Getting employees involved in product and process improvements

 Group of employees who meet regularly to solve problems

 85% of quality problems are due to process and material

 Trained in planning, problem solving, and statistical methods

 Techniques  Build communication networks that include employees  Develop open, supportive supervisors  Move responsibility to employees  Build a high-morale organization  Create formal team structures

 Often led by a facilitator  Very effective when done properly

6 – 47

6 – 48

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Benchmarking Factors for Web Sites

Benchmarking Selecting best practices to use as a standard for performance  Determine what to benchmark  Form a benchmark team  Identify benchmarking partners  Collect and analyze benchmarking information  Take action to match or exceed the benchmark

Use of meta tags

Yes: 70%, No: 30%

Meaningful homepage title

Yes: 97%, No: 3%

Unique domain name

Yes: 91%, No: 9%

Search engine registration

Above 96%

Average loading speed Average number of spelling errors

28K: 19.31, 56K: 10.88, T1: 2.59 0.16

Visibility of contact information

Yes: 74%, No: 26%

Presence of search engine

Yes: 59%, No: 41%

Translation to multiple languages

Yes: 11%, No: 89% Table 6.3

6 – 49

Best Practices for Resolving Customer Complaints

6 – 50

Just-in-Time (JIT)

 Make it easy for clients to complain

• An inventory strategy implemented to improve the return on investment of a business by reducing in-process inventory and cycle time.

 Respond quickly to complaints

•

 Resolve complaints on first contact

 Use computers to manage complaints

JIT is an all-encompassing manufacturing and service management philosophy that is founded on the concept of elimination of waste.

 The term just-in-time stems from a primary form of waste elimination: reducing inventories (in manufacturing) and waiting times (in services).

 Recruit the best for customer service jobs 6 – 51

6 – 52

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Waste in Operations

Waste in Operations (cont.)

6 – 53

6 – 54

Just-in-Time (JIT)

Waste in Operations (cont.)

Relationship to quality:  JIT cuts the cost of quality  JIT improves quality  Better quality means less inventory and better, easier-toemploy JIT system

6 – 55

6 – 56

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Just-In-Time (JIT) Example

Just-In-Time (JIT) Example

Reducing inventory reveals problems so they can be solved Work in process inventory level (hides problems)

Unreliable Vendors

Scrap

Unreliable Vendors

Capacity Imbalances

Scrap

Capacity Imbalances

6 – 57

6 – 58

Tools of TQM

Taguchi Concepts

 Tools for Generating Ideas

 Engineering and experimental design methods to improve product and process design

Check sheets Scatter diagrams Cause-and-effect diagrams

 Identify key component and process variables affecting product variation

 Tools to Organize the Data Pareto charts Flowcharts

 Taguchi Concepts  Quality robustness

 Tools for Identifying Problems

 Quality loss function

Histogram Statistical process control chart

 Target-oriented quality 6 – 59

6 – 63

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Seven Tools of TQM

Seven Tools of TQM

(a) Check Sheet: An organized method of recording data

1 /// // /

2 / / //

3 /

Hour 4 5 / / /

6 /

7 /// // //

8 / /// ////

Productivity

Defect A B C

(b) Scatter Diagram: A graph of the value of one variable vs. another variable

Absenteeism Figure 6.6

Figure 6.6 6 – 64

Seven Tools of TQM

6 – 65

Cause-and-Effect Diagrams

(c) Cause-and-Effect Diagram: A tool that identifies process elements (causes) that might effect an outcome

Method (shooting process)

Material (ball) Grain/Feel (grip)

Aiming point

Size of ball

Bend knees

Air pressure

Cause Materials

Hand position Lopsidedness

Methods

Effect

Training Conditioning Consistency

Balance

Follow-through

Missed free-throws

Rim size Motivation Rim alignment

Rim height Backboard stability

Concentration

Manpower

Machinery

Manpower (shooter)

Figure 6.6 6 – 66

Machine (hoop & backboard)

Figure 6.7 6 – 67

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Seven Tools of TQM (d) Pareto Chart: A graph to identify and plot problems or defects in descending order of frequency

Percent

Frequency

DRAW A FISHBONE DIAGRAM SHOWING REASONS WHY YOU MIGHT ARRIVE LATE FOR CLASS IN THE MORNING

A

B

C

D

E Figure 6.6

6 – 68

6 – 69

Seven Tools of TQM

70

NUMBER OF DEFECTS

Poor design Wrong part dimensions Defective parts Incorrect machine calibration Operator errors Defective material Surface abrasions

Percent from each cause

Pareto Analysis CAUSE

Pareto Chart

(64)

60

PERCENTAGE

80 16 12 7 4 3 3

64 % 13 10 6 3 2 2

125

100 %

50 40 30 20 (13) 10

(10) (6)

(3)

(2)

(2)

0

Causes of poor quality 6 – 70

6 – 71

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Seven Tools of TQM

Pareto Charts Data for October – 100 – 93 – 88

Frequency (number)

70 – 60 –

54

– 72

50 – 40 –

Number of occurrences

30 – 20 –

12

10 –

4

0 –

Analyze the complaints using a Pareto Chart

Room svc 72%

Check-in Pool hours 16% 5%

3

2

Minibar 4%

Misc. 3%

Cumulative percent

The hard Rock Hotel in Bali has just collected the data from 75 complaint calls to the general manager during the month of October. The manager wants to prepare an analysis of the complaints. The data provided are room service, 54 ; Check-in delays,12; hours the pool is open, 4; minibar prices,3; and miscellaneous, 2;

Causes and percent of the total

Figure 6.6 6 – 72

6 – 73

Seven Tools of TQM

Flow Charts

(e) Flowchart (Process Diagram): A chart that describes the steps in a process: A chart that graphically represents a process or system using annotated boxes and interconnected lines.

MRI Flowchart 1. 2. 3. 4. 5. 6.

Physician schedules MRI Patient taken to MRI Patient signs in Patient is prepped Technician carries out MRI Technician inspects film

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

8 1

2

3

4

5

6

7

80%

11 9

10

20%

Figure 6.6 6 – 74

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Seven Tools of TQM

Seven Tools of TQM

(f) Histogram: A distribution showing the frequency of occurrences of a variable

(g) Statistical Process Control Chart: A chart with time on the horizontal axis to plot values of a statistic

Frequency

Distribution

Upper control limit Target value Lower control limit

Time

Repair time (minutes) Figure 6.6

Figure 6.6 6 – 76

6 – 77

Statistical Process Control (SPC)

An SPC Chart Plots the percent of free throws missed

 Uses statistics and control charts to tell when to take corrective action

20%

Upper control limit

10%

Coach’s target value

 Drives process improvement  Four key steps  Measure the process  When a change is indicated, find the assignable cause

0%

 Eliminate or incorporate the cause

| 1

| 2

| 3

| 4

| 5

| 6

| 7

| 8

| 9

Lower control limit

Game number

 Restart the revised process

Figure 6.8 6 – 78

6 – 79

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Inspection

When and Where to Inspect

 Involves examining items to see if an item is good or defective  Detect a defective product

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

 Does not correct deficiencies in process or product  It is expensive

 Issues  When to inspect  Where in process to inspect 6 – 80

Inspection

6 – 81

Source Inspection

 Many problems

 Also known as source control

 Worker fatigue

 The next step in the process is your customer

 Measurement error  Process variability

 Ensure perfect product to your customer

 Cannot inspect quality into a product

 Robust design, empowered employees, and sound processes are better solutions

Poka-yoke is the concept of foolproof devices or techniques designed to pass only acceptable product 6 – 82

6 – 83

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Service Industry Inspection Organization

What is Inspected

Jones Law Office Receptionist performance

Service Industry Inspection

Standard

Organization

Is phone answered by the second ring

Hard Rock Hotel

What is Inspected

Standard

Reception desk

Use customer’s name

Billing

Accurate, timely, and correct format

Doorman

Greet guest in less than 30 seconds

Attorney

Promptness in returning calls

Room

All lights working, spotless bathroom

Minibar

Restocked and charges accurately posted to bill

Table 6.5

Table 6.5 6 – 84

Service Industry Inspection Organization Arnold Palmer Hospital

What is Inspected

6 – 85

Service Industry Inspection

Standard

Organization

Billing

Accurate, timely, and correct format

Pharmacy

Olive Garden Restaurant

What is Inspected

Standard

Busboy

Serves water and bread within 1 minute

Prescription accuracy, inventory accuracy

Busboy

Clears all entrée items and crumbs prior to dessert

Lab

Audit for lab-test accuracy

Waiter

Nurses

Charts immediately updated

Knows and suggest specials, desserts

Admissions

Data entered correctly and completely Table 6.5

Table 6.5 6 – 86

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Service Industry Inspection Organization Nordstrom Department Store

What is Inspected

Attributes Versus Variables  Attributes

Standard

 Items are either good or bad, acceptable or unacceptable  Does not address degree of failure

Display areas Attractive, well-organized, stocked, good lighting Stockrooms

Rotation of goods, organized, clean

Salesclerks

Neat, courteous, very knowledgeable

 Variables  Measures dimensions such as weight, speed, height, or strength  Falls within an acceptable range

 Use different statistical techniques Table 6.5 6 – 88

TQM In Services

6 – 89

Service Quality The Operations Manager must recognize:

 Service quality is more difficult to measure than the quality of goods  Service quality perceptions depend on

1. The tangible component of services is important

 Intangible differences between products

2. The service process is important

3. The service is judged against the customer’s expectations

 Intangible expectations customers have of those products

4. Exceptions will occur 6 – 90

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Determinants of Service Quality

Service Specifications at UPS

 Reliability

 Credibility

 Responsiveness

 Security

 Competence

 Understanding/ knowing the customer

 Access  Courtesy  Communication

6 – 92

 Tangibles

6 – 93

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