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6 - 1© 2014 Pearson Education, Inc. Managing Quality PowerPoint presentation to accompany Heizer and Render Operations Management, Eleventh Edition Principles.

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Presentation on theme: "6 - 1© 2014 Pearson Education, Inc. Managing Quality PowerPoint presentation to accompany Heizer and Render Operations Management, Eleventh Edition Principles."— Presentation transcript:

1 6 - 1© 2014 Pearson Education, Inc. Managing Quality PowerPoint presentation to accompany Heizer and Render Operations Management, Eleventh Edition Principles of Operations Management, Ninth Edition PowerPoint slides by Jeff Heyl 6 © 2014 Pearson Education, Inc.

2 6 - 2© 2014 Pearson Education, Inc. Outline ► Defining Quality ► Total Quality Management ► Tools of TQM

3 6 - 3© 2014 Pearson Education, Inc. DEFINING QUALITY Malcolm Baldrige National Quality Award ISO 9000 Cost of Quality

4 6 - 4© 2014 Pearson Education, Inc. Defining Quality An operations manager’s objective is to build a total quality management system that identifies and satisfies customer needs

5 6 - 5© 2014 Pearson Education, Inc. Different Views ► User-based: better performance, more features ► Manufacturing-based: conformance to standards, making it right the first time ► Product-based: specific and measurable attributes of the product

6 6 - 6© 2014 Pearson Education, Inc. ► President Ronald Regan signed legislation mandating a nationwide study of productivity in 1982. ► The final recommendation was that “a national quality award be presented annually to those firms that successfully challenge and meet the award requirements”. ► Established in 1987 by Department of Commerce ► Goal is to help companies review and structure their quality programs Malcolm Baldrige National Quality Award

7 6 - 7© 2014 Pearson Education, Inc. ► Four Key Characteristics ► Focuses on business results ► Nonprescriptive and adaptable ► Supports company-wide alignment of goals and processes ► Permits goal-based diagnosis Malcolm Baldrige National Quality Award

8 6 - 8© 2014 Pearson Education, Inc. Baldrige Criteria Applicants are evaluated on: CATEGORIESPOINTS Leadership120 Strategic Planning85 Customer Focus85 Measurement, Analysis, and Knowledge Management 90 Workforce Focus85 Operations Focus85 Results450

9 6 - 9© 2014 Pearson Education, Inc. ► International recognition ► A prerequisite for global competition ► Series of standards by the International Organization for Standardization (ISO) ▶ Adopted in 1987 ▶ Over one million certifications in 178 countries ▶ First-time registration fee ranges from $0.25~$1 million ▶ Process takes from 3~24 months ISO 9000 International Quality Standards

10 6 - 10© 2014 Pearson Education, Inc. ▶ ISO 9000 directs you to "document what you do and then do as you documented” ▶ Encourages quality management procedures, detailed documentation, work instructions, and recordkeeping ▶ Example: Du Pont ▶ Increase on-time delivery from 70% to 90% ▶ Decrease cycle time from 15 days to 1.5 days ▶ Increase first-pass yields from 72% to 92% ISO 9000 International Quality Standards

11 6 - 11© 2014 Pearson Education, Inc. ► Focus is for companies to document their quality systems in a series of manuals to facilitate trade through supplier conformance ► Standards are very broad and nonspecific, so they can be adapted to many different industries and cultures ► Recognized international quality standard that businesses can follow ISO 9000:2008 International Quality Standards

12 6 - 12© 2014 Pearson Education, Inc. ISO 9000 International Quality Standards ► Management principles ► Top management leadership ► Customer satisfaction ► Continual improvement ► Involvement of people ► Process analysis ► Use of data-driven decision making ► A systems approach to management ► Mutually beneficial supplier relationships

13 6 - 13© 2014 Pearson Education, Inc. Costs of Quality Costs resulting from inspection used to assess quality levels (e.g. material inspection, inspection staff salaries, development of test procedure.) Costs from defects found before delivery to the customer (e.g., rework, scrapped material, etc.) Costs associated with defects found after delivery to customer (e.g., warranty, recall, etc.) Costs associated with preventing defects and limiting failure and appraisal costs (e.g., training, improvement projects, data gathering, analysis) Appraisal Costs Internal Failure Costs External Failure Costs Prevention Costs

14 6 - 14© 2014 Pearson Education, Inc. 1. Sanford Corp. bought new technological systems to inspect the quality of products as they come off the production line. The expense of operating these systems would be an example of which of the following types of quality-related costs? A. Internal failure cost B. Appraisal cost C. External failure cost D. Prevention cost Decision Question 1

15 6 - 15© 2014 Pearson Education, Inc. 2. Xanadu Inc. decided to increase the training received by new employees. The expense of this training is an example of which of the following costs of quality: A. Appraisal costs B. External failure costs C. Internal failure costs D. Prevention costs E. Quality control costs Discussion Question 2

16 6 - 16© 2014 Pearson Education, Inc. 3. All of the following represent external failure cost except the cost of: A. Scrapping defective raw material B. Repairing items covered by warranty C. Replacing defective items found by customers D. Loss of goodwill and reputation Discussion Question 3

17 6 - 17© 2014 Pearson Education, Inc. TOTAL QUALITY MANAGEMENT Plan-Do-Check-Act Six Sigma Employee Empowerment Benchmarking

18 6 - 18© 2014 Pearson Education, Inc. ▶ An integrated business management strategy aimed at embedding awareness of quality in all organizational processes ▶ Developed by Edwards Deming, Joseph Juran and Armand Feigenbaum in the 1950s ▶ Become popular in the 1980s ▶ Encompasses entire organization from supplier to customer. ▶ Quality is customer-driven. Total Quality Management (TQM)

19 6 - 19© 2014 Pearson Education, Inc. Continuous Improvement ► Never-ending process of continual improvement ► Covers people, equipment, materials, procedures ► Every operation can be improved

20 ▶ Originally called Shewhart cycle ▶ Renamed by Japanese in 1950 ▶ Plan-do-check-act cycle (Deming wheel or cycle): sequence to solve problems and improve over time ▶ Plan: identify problem and actions for improvement ▶ Do: implement formulated plan ▶ Check: monitor results ▶ Act: take corrective action Act CheckDo Plan Plan-Do-Check-Act

21 6 - 21© 2014 Pearson Education, Inc. ▶ Introduction Video Six Sigma at Caterpillar Six Sigma

22 6 - 22© 2014 Pearson Education, Inc. ▶ Key players ▶ Master black belt: ▶ Highest level ▶ Ensuring consistent application of Six Sigma across various functions and departments ▶ Black belt ▶ Operate under Master Black Belts to specific projects ▶ Green belt ▶ Lowest level ▶ Part-time job on Six Sigma; devote the rest of time on regular duties Six Sigma

23 6 - 23© 2014 Pearson Education, Inc. ▶ Quality improvement through elimination of defects and variation ▶ Developed by Bill Smith, a reliability engineer in Motorola, Inc., in 1987 ▶ Applied by General Electric, Ford Motor Company, Citibank, Xerox, Bank of America, Caterpillar, Raytheon ▶ Standard deviation: statistical measure of variation 6 – 23 Sigma LevelDefects per Million 2σ2σ308,537 3σ3σ66,807 4σ4σ6,210 5σ5σ233 6σ6σ3.4 Six Sigma

24 6 - 24© 2014 Pearson Education, 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, save time, and improve customer satisfaction ► A comprehensive system for achieving and sustaining business success

25 Six Sigma: DMAIC Approach 1.Defines the project’s purpose, scope, and outputs, identifies the required process information keeping in mind the customer’s definition of quality 2.Measures the process and collects data 3.Analyzes the data ensuring repeatability and reproducibility 4.Improves by modifying or redesigning existing processes and procedures 5.Controls the new process to make sure performance levels are maintained Five-step Process Improvement Model

26 6 - 26© 2014 Pearson Education, Inc. Employee Empowerment ► Add responsibility and authority to the lowest level employees ► 85% of quality problems are due to process and material ► Techniques 1)Build communication networks that include employees 2)Develop open, supportive supervisors 3)Move responsibility to employees 4)Build a high-morale organization 5)Create formal team structures

27 6 - 27© 2014 Pearson Education, Inc. A Benchmark is an organization recognized for its exemplary operational performance. Why?  The worst thing for a business is a weak competitor.  Openness provides an impetus to continual improvement  Openness can create psychological barriers to competition. Benchmarking

28 6 - 28© 2014 Pearson Education, Inc. Benchmarking is defined as  Measuring your performance against that of best- in-class companies  Determining how the best-in-class achieve those performance levels  Using the information as a basis for you own company’s targets, strategies and implementation. OR  The search of industry best practices that lead to superior performance Benchmarking

29 6 - 29© 2014 Pearson Education, Inc. ▶ Do not benchmark only within your industry! ► Xerox uses many benchmarks:  Employee involvement: Procter & Gamble  Quality process: Florida Power and light, Toyota  High-volume production: Kodak, Canon  Billing collection: American Express  Research and development: AT&T, Hewlett-Packard  Distribution: L.L. Bean, Hershey Foods  Daily scheduling: Cummins Engine Benchmarking

30 6 - 30© 2014 Pearson Education, Inc. Best Practices for Resolving Customer Complaints Table 6.3 BEST PRACTICEJUSTIFICATION Make it easy for clients to complainIt is free market research Respond quickly to complaintsIt adds customers and loyalty Resolve complaints on first contactIt reduces cost Use computers to manage complaintsDiscover trends, share them, and align your services Recruit the best for customer service jobs It should be part of formal training and career advancement

31 6 - 31© 2014 Pearson Education, Inc. 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

32 © 2014 Pearson Education, Inc.6 - 32 Purposes of Benchmarking  Learning from success  Borrowing ideas  Best-in-firm  Beating industry standards  Best-in-class  National leadership  Best-in-world Benchmarking

33 © 2014 Pearson Education, Inc.6 - 33 Benchmarking Purpose and Quality Maturity Benchmarking

34 6 - 34© 2014 Pearson Education, Inc. Although benchmarking is a popular management technique, many firms are not engaged in the benchmarking process. Why do you think that some firms avoid benchmarking? Are any of the reasons valid? Why or why not? Discussion Question 4

35 6 - 35© 2014 Pearson Education, Inc. Video: Culture of Quality at Arnold Palmer Hospital 1.Why is it important for hospital to get a patient’s assessment of health care quality? 2.Does the patient have the expertise to judge the health care she receives? 3.How could you build a culture of quality in an organization, such as Arnold Palmer Hospital? 4.What techniques does APH practice in its drive for quality and continuous improvement?

36 6 - 36© 2014 Pearson Education, Inc. TOOLS OF TQM ► Check Sheets ► Scatter Diagrams ► Cause-and-effect Diagrams ► Pareto charts ► Flowcharts ► Histograms ► Statistical process control (SPC)

37 6 - 37© 2014 Pearson Education, Inc. TQM Tools ► Tools for Generating Ideas ► Check Sheet ► Scatter Diagram ► Cause-and-Effect Diagram ► Tools to Organize the Data ► Pareto Chart ► Flowchart (Process Diagram) ► Tools for Identifying Problems ► Histogram ► Statistical Process Control Chart

38 6 - 38© 2014 Pearson Education, Inc. Hour Defect12345678 A B C Seven Tools of TQM (a)Check Sheet: Tool for collecting, organizing and displaying data to uncover patterns Figure 6.6 / // / // /// / / / //// // // /// /// ////

39 Seven Tools of TQM (b)Scatter Diagram: Used to examine the relationship between variables Scatter plot of the relationship between conformance data and prevention and appraisal quality related costs

40 6 - 40© 2014 Pearson Education, Inc. Seven Tools of TQM (c)Cause-and-Effect Diagram: A tool that identifies process elements (causes) that might effect an outcome Figure 6.6 Cause MaterialsMethods ManpowerMachinery Effect

41 6 - 41© 2014 Pearson Education, Inc.

42 6 - 42© 2014 Pearson Education, Inc. Discussion Question 5 ▶ Prepare a fish-bone chart explaining how a pizza delivery can arrive late on a Friday or Saturday

43 6 - 43© 2014 Pearson Education, Inc. Seven Tools of TQM (d) Pareto Analysis: Separates the critical few form the trivial many 1.Indentify categories about which to collect data 2.Gather data and calculate frequency of observations 3.Sort into descending order by percentage 4. Graph and identify the few areas that account for most of the variation Frequency Percent ABCDEABCDE

44 6 - 44© 2014 Pearson Education, Inc. Seven Tools of TQM

45 6 - 45© 2014 Pearson Education, Inc. Seven Tools of TQM (e)Flowchart (Process Diagram): A chart that describes the steps in a process Figure 6.6

46 6 - 46© 2014 Pearson Education, Inc.

47 6 - 47© 2014 Pearson Education, Inc. Seven Tools of TQM (f)Histogram: A distribution showing the frequency of occurrences of a variable ► A representation of data in a bar chart format ► Also used to observe the shape of data. ► “How are the data distributed?”

48 6 - 48© 2014 Pearson Education, Inc. Example: The Big City Cafeteria wants to determine the distribution of its sales during lunch time. On a given day the manager randomly selects 40 sales from the sales register receipt. The following table shows the sales (in dollars). Develop a histogram of the sales. 4.510.794.192.29 5.963.492.253.45 3.966.794.663.56 8.222.565.253.33 5.552.248.952.49

49 6 - 49© 2014 Pearson Education, 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

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