1. 6 - 1 Copyright © 2014 Pearson Canada Inc. Heizer, Render, Griffin Operations Management Canadian Edition Chapter 6: Managing Quality Slides adapted for Canada by Mats Gerschman

2. 6 - 2 Copyright © 2014 Pearson Canada Inc. Outline  Global Company Profile: Arnold Palmer Hospital  Quality and Strategy  Defining Quality  Total Quality Management  Tools of Total Quality Management  International Quality Standards  The Role of Inspection  TQM in Services

3. 6 - 3 Copyright © 2014 Pearson Canada Inc. 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

4. 6 - 4 Copyright © 2014 Pearson Canada Inc. Managing Quality Provides a Competitive Advantage Arnold Palmer Hospital  Deliver over 16,000 babies annually  Virtually every type of quality tool is employed  Continuous improvement  Employee empowerment  Benchmarking  Just-in-time  Quality tools

5. 6 - 5 Copyright © 2014 Pearson Canada Inc. Quality and Strategy An operations manager’s objective is to build a total quality management system that identifies and satisfies customer needs

6. 6 - 6 Copyright © 2014 Pearson Canada Inc. Quality and Strategy  Managing quality supports differentiation, low cost, and response strategies  Quality helps firms increase sales and reduce costs  Building a quality organization is a demanding task

7. 6 - 7 Copyright © 2014 Pearson Canada Inc. 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

8. 6 - 8 Copyright © 2014 Pearson Canada Inc. Two Ways Quality Improves Profitability Improved Quality Increased Profits  Increased productivity  Lower rework and scrap costs  Lower warranty costs Reduced Costs via  Improved response  Flexible pricing  Improved reputation Sales Gains via Figure 6.1

9. 6 - 9 Copyright © 2014 Pearson Canada Inc. The Flow of Activities to Achieve TQM Figure 6.2

10. 6 - 10 Copyright © 2014 Pearson Canada Inc. Different Views  User-based  User-based: better performance, more features  Manufacturing-based  Manufacturing-based: conformance to standards, making it right the first time  Product-based  Product-based: specific and measurable attributes of the product

11. 6 - 11 Copyright © 2014 Pearson Canada Inc. Key Dimensions of Quality  Performance  Features  Reliability  Conformance  Durability  Serviceability  Aesthetics  Perceived quality  Value

12. 6 - 12 Copyright © 2014 Pearson Canada Inc. National Quality Awards  National Quality Institute in Canada issues various awards (www.nqi.ca)  Malcolm Baldrige National Quality Award (USA)  Deming Prize (Japan)

13. 6 - 13 Copyright © 2014 Pearson Canada Inc. Costs of Quality  Prevention costs  Prevention costs – reducing the potential for defects  Appraisal costs  Appraisal costs – evaluating products, parts, and services  Internal failure  Internal failure – producing defective parts or service before delivery  External costs  External costs – defects discovered after delivery

14. 6 - 14 Copyright © 2014 Pearson Canada Inc. External Failure Internal Failure Prevention Costs of Quality Appraisal Total Cost Quality Improvement Total Cost

15. 6 - 15 Copyright © 2014 Pearson Canada Inc. Leaders in Quality Table 6.1 LeaderPhilosophy/Contribution W. Edwards Deming14 Points for Management Joseph M. JuranTop management commitment, fitness for use Armand FeigenbaumTotal Quality Control Philip B. CrosbyQuality is Free, zero defects

16. 6 - 16 Copyright © 2014 Pearson Canada Inc. Ethics and Quality Management  Operations managers must deliver healthy, safe quality products and services  Poor quality risks injuries, lawsuits, recalls, and regulation  Organizations are judged by how they respond to problems  All stakeholders must be considered

17. 6 - 17 Copyright © 2014 Pearson Canada Inc. International Quality Standards  ISO 9000 series (Europe/EC)  Common quality standards for products sold in Europe (even if made in U.S.)  2008 update places greater emphasis on leadership and customer requirements and satisfaction  ISO 14000 series (Europe/EC)

18. 6 - 18 Copyright © 2014 Pearson Canada Inc. ISO 14000 Environmental Standard Core Elements:  Environmental management  Auditing  Performance evaluation  Labelling  Life cycle assessment

19. 6 - 19 Copyright © 2014 Pearson Canada Inc. ISO 14000 Environmental Standard Advantages:  Positive public image and reduced exposure to liability  Systematic approach to pollution prevention  Compliance with regulatory requirements and opportunities for competitive advantage  Reduction in multiple audits

20. 6 - 20 Copyright © 2014 Pearson Canada Inc. 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

21. 6 - 21 Copyright © 2014 Pearson Canada Inc. Deming’s 14 Points Table 6.2 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

22. 6 - 22 Copyright © 2014 Pearson Canada Inc. Deming’s 14 Points Table 6.2 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

23. 6 - 23 Copyright © 2014 Pearson Canada Inc. Deming’s 14 Points Table 6.2 12.Remove barriers to pride in work 13.Institute education and self- improvement 14.Put everyone to work on the transformation

24. 6 - 24 Copyright © 2014 Pearson Canada Inc. Seven Concepts of TQM 1.Continuous improvement 2.Six Sigma 3.Employee empowerment 4.Benchmarking 5.Just-in-time (JIT) 6.Taguchi concepts 7.Knowledge of TQM tools

25. 6 - 25 Copyright © 2014 Pearson Canada Inc. Continuous Improvement  Represents continual improvement of all processes  Involves all operations and work centres including suppliers and customers  People, Equipment, Materials, Procedures

26. 6 - 26 Copyright © 2014 Pearson Canada Inc. 4. Act Implement the plan document 2. Do Test the plan 3. Check Is the plan working? 1.Plan Identify the pattern and make a plan Shewhart’s PDCA Model Figure 6.3

27. 6 - 27 Copyright © 2014 Pearson Canada Inc. 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

28. 6 - 28 Copyright © 2014 Pearson Canada Inc. Six Sigma Mean Lower limitsUpper limits 3.4 defects/million ±6  2,700 defects/million ±3  Figure 6.4

29. 6 - 29 Copyright © 2014 Pearson Canada Inc. Six Sigma Program  Originally developed by Motorola, adopted and enhanced by Honeywell and GE  Highly structured approach to process improvement  A strategy  A discipline – DMAIC 66 66

30. 6 - 30 Copyright © 2014 Pearson Canada Inc. Six Sigma 1.Define critical outputs and identify gaps for improvement 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 DMAIC Approach

31. 6 - 31 Copyright © 2014 Pearson Canada Inc. Six Sigma Implementation  Emphasize defects per million opportunities as a standard metric  Provide extensive training  Focus on corporate sponsor support (Champions)  Create qualified process improvement experts (Black Belts, Green Belts, etc.)  Set stretch objectives This cannot be accomplished without a major commitment from top level management

32. 6 - 32 Copyright © 2014 Pearson Canada Inc. Employee Empowerment  Getting employees involved in product and process improvements  85% of quality problems are due to process and material  Techniques  Build communication networks that include employees  Develop open, supportive supervisors  Move responsibility to employees  Build a high-morale organization  Create formal team structures

33. 6 - 33 Copyright © 2014 Pearson Canada Inc. Quality Circles  Group of employees who meet regularly to solve problems  Trained in planning, problem solving, and statistical methods  Often led by a facilitator  Very effective when done properly

34. 6 - 34 Copyright © 2014 Pearson Canada Inc. Use internal benchmarking if you’re big enough Benchmarking Selecting best practices to use as a standard for performance 1.Determine what to benchmark 2.Form a benchmark team 3.Identify benchmarking partners 4.Collect and analyze benchmarking information 5.Take action to match or exceed the benchmark

35. 6 - 35 Copyright © 2014 Pearson Canada Inc. Just-In-Time (JIT) Relationship to quality:  JIT cuts the cost of quality  JIT improves quality  Better quality means less inventory and better, easier-to- employ JIT system

36. 6 - 36 Copyright © 2014 Pearson Canada Inc. Just-In-Time (JIT)  ‘Pull’ system of production scheduling including supply management  Production only when signaled  Allows reduced inventory levels  Inventory costs money and hides process and material problems  Encourages improved process and product quality

37. 6 - 37 Copyright © 2014 Pearson Canada Inc. Just-In-Time (JIT) Example Scrap Unreliable Vendors Capacity Imbalances Work in process inventory level (hides problems)

38. 6 - 38 Copyright © 2014 Pearson Canada Inc. Just-In-Time (JIT) Example Reducing inventory reveals problems so they can be solved Scrap Unreliable Vendors Capacity Imbalances

39. 6 - 39 Copyright © 2014 Pearson Canada Inc. Taguchi Concepts  Engineering and experimental design methods to improve product and process design  Identify key component and process variables affecting product variation  Taguchi concepts  Quality robustness  Quality loss function  Target-oriented quality

40. 6 - 40 Copyright © 2014 Pearson Canada Inc. Quality Robustness  Ability to produce products uniformly in adverse manufacturing and environmental conditions  Remove the effects of adverse conditions  Small variations in materials and process do not destroy product quality

41. 6 - 41 Copyright © 2014 Pearson Canada Inc. Tools of TQM  Tools for Generating Ideas  Check sheets  Scatter diagrams  Cause-and-effect diagrams  Tools to Organize the Data  Pareto charts  Flowcharts

42. 6 - 42 Copyright © 2014 Pearson Canada Inc. Tools of TQM  Tools for Identifying Problems  Histogram  Statistical process control chart

43. 6 - 43 Copyright © 2014 Pearson Canada Inc. //// ////// ///// ////// /// // / Hour Defect12345678 A B C / // / Seven Tools of TQM (a)Check Sheet: An organized method of recording data Figure 6.6

44. 6 - 44 Copyright © 2014 Pearson Canada Inc. Seven Tools of TQM (b)Scatter Diagram: A graph of the value of one variable vs. another variable Absenteeism Productivity Figure 6.6

45. 6 - 45 Copyright © 2014 Pearson Canada Inc. Seven Tools of TQM (c)Cause-and-Effect Diagram (also called Fish-bone diagram): A tool that identifies process elements (causes) that might effect an outcome Figure 6.6 Cause MaterialsMethods ManpowerMachinery Effect

46. 6 - 46 Copyright © 2014 Pearson Canada Inc. Cause-and-Effect Diagrams Material (ball) Method (shooting process) Machine (hoop & backboard) Manpower (shooter) Missed free-throws Figure 6.7 Rim alignment Rim size Backboard stability Rim height Follow-through Hand position Aiming point Bend knees Balance Size of ball Lopsidedness Grain/Feel (grip) Air pressure Training Conditioning Motivation Concentration Consistency

47. 6 - 47 Copyright © 2014 Pearson Canada Inc. Seven Tools of TQM (d)Pareto Chart: A graph to identify and plot problems or defects in descending order of frequency Figure 6.6 Frequency Percent ABCDEABCDE

48. 6 - 48 Copyright © 2014 Pearson Canada Inc. Pareto Charts Number of occurrences Room svcCheck-inPool hoursMinibarMisc. 72%16%5%4%3% 12 4 3 2 54 – 100 – 93 – 88 – 72 70 – 60 – 50 – 40 – 30 – 20 – 10 – 0 – Frequency (number) Causes and percentage of the total Cumulative percent Data for October

49. 6 - 49 Copyright © 2014 Pearson Canada Inc. Seven Tools of TQM (e)Flowchart (Process Diagram): A chart that describes the steps in a process Figure 6.6

50. 6 - 50 Copyright © 2014 Pearson Canada Inc. Flow Charts MRI Flowchart 1.Physician schedules MRI 2.Patient taken to MRI 3.Patient signs in 4.Patient is prepped 5.Technician carries out MRI 6.Technician inspects film 7.If unsatisfactory, repeat 8.Patient taken to room 9.MRI read by radiologist 10.MRI report transferred to physician 11.Patient and physician discuss 11 10 20% 9 8 80% 1234567

51. 6 - 51 Copyright © 2014 Pearson Canada Inc. Seven Tools of TQM (f)Histogram: A distribution showing the frequency of occurrences of a variable Figure 6.6 Distribution Repair time (minutes) Frequency

52. 6 - 52 Copyright © 2014 Pearson Canada Inc. Seven Tools of TQM (g)Statistical Process Control Chart: A chart with time on the horizontal axis to plot values of a statistic Figure 6.6 Upper control limit Target value Lower control limit Time

53. 6 - 53 Copyright © 2014 Pearson Canada Inc. Statistical Process Control (SPC)  Uses statistics and control charts to tell when to take corrective action  Drives process improvement  Four key steps  Measure the process  When a change is indicated, find the assignable cause  Eliminate or incorporate the cause  Restart the revised process

54. 6 - 54 Copyright © 2014 Pearson Canada Inc. An SPC Chart Upper control limit Coach’s target value Lower control limit Game number |||||||||123456789|||||||||123456789 20% 10% 0% Plots the percent of free throws missed Figure 6.8

55. 6 - 55 Copyright © 2014 Pearson Canada Inc. Inspection  Involves examining items to see if an item is good or defective  Detect a defective product  Does not correct deficiencies in process or product  It is expensive  Issues  When to inspect  Where in process to inspect

56. 6 - 56 Copyright © 2014 Pearson Canada Inc. 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

57. 6 - 57 Copyright © 2014 Pearson Canada Inc. Inspection  Many problems  Worker fatigue  Measurement error  Process variability  Cannot inspect quality into a product  Robust design, empowered employees, and sound processes are better solutions

58. 6 - 58 Copyright © 2014 Pearson Canada Inc. Source Inspection  Also known as source control  The next step in the process is your customer  Ensure perfect product to your customer Poka-yoke is the concept of foolproof devices or techniques designed to pass only acceptable product

59. 6 - 59 Copyright © 2014 Pearson Canada Inc. TQM In Services  Service quality is more difficult to measure than the quality of goods  Service quality perceptions depend on  Intangible differences between products and services  Intangible expectations customers have of those products and services

60. 6 - 60 Copyright © 2014 Pearson Canada Inc. 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

61. 6 - 61 Copyright © 2014 Pearson Canada Inc. Determinants of Service Quality ReliabilityConsistency of performance and dependability ResponsivenessWillingness or readiness of employees CompetenceRequired skills and knowledge AccessApproachability and ease of contact CourtesyPoliteness, respect, consideration, friendliness CommunicationKeeping customers informed CredibilityTrustworthiness, believability, honesty SecurityFreedom from danger, risk, or doubt Understanding/ knowing the customer Understand the customer’s needs TangiblesPhysical evidence of the service Table 6.5

62. 6 - 62 Copyright © 2014 Pearson Canada Inc. Service Recovery Strategy  Managers should have a plan for when services fail  Marriott Hotel’s LEARN routine  Listen  Empathize  Apologize  React  Notify

63. 6 - 63 Copyright © 2014 Pearson Canada Inc.Summary  Quality has many different meanings  Quality has to be built into systems rather than inspected in  Total Quality Management (TQM) concepts:  Six Sigma  Continuous Improvement (CI)  Just-In-Time (JIT)  Taguchi  Bench-marking  Employee Empowerment  TQM tools help to manage quality