2. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Chapter 14 Quality Management To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.

3. “The degree of excellence of a thing” (Webster’s Dictionary) “The degree of excellence of a thing” (Webster’s Dictionary) “The totality of features and characteristics that satisfy needs” (ASQ) “The totality of features and characteristics that satisfy needs” (ASQ) Fitness for use Fitness for use Quality of design Quality of design What Is Quality?

4. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Dimensions of Quality (Garvin) 1.Performance Basic operating characteristics Basic operating characteristics 2.Features “Extra” items added to basic features “Extra” items added to basic features 3.Reliability Probability product will operate over time Probability product will operate over time

5. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Dimensions of Quality (Garvin) 4.Conformance Meeting pre-established standards Meeting pre-established standards 5.Durability Life span before replacement Life span before replacement 6.Serviceability Ease of getting repairs, speed & competence of repairs Ease of getting repairs, speed & competence of repairs

6. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Dimensions of Quality (Garvin) 7.Aesthetics Look, feel, sound, smell or taste Look, feel, sound, smell or taste 8.Safety Freedom from injury or harm Freedom from injury or harm 9.Other perceptions Subjective perceptions based on brand name, advertising, etc Subjective perceptions based on brand name, advertising, etc

7. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 1.Time & Timeliness Customer waiting time, completed on time Customer waiting time, completed on time 2.Completeness Customer gets all they asked for Customer gets all they asked for 3.Courtesy Treatment by employees Treatment by employees Service Quality

8. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 4.Consistency Same level of service for all customers Same level of service for all customers 5.Accessibility & Convenience Ease of obtaining service Ease of obtaining service 6.Accuracy Performed right every time Performed right every time 7.Responsiveness Reactions to unusual situations Reactions to unusual situations Service Quality

9. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Quality of Conformance Ensuring product or service produced according to design Ensuring product or service produced according to design Depends on Depends on Design of production process Design of production process Performance of machinery Performance of machinery Materials Materials Training Training

10. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Fitness for Consumer Use Fitness for Consumer Use Producer’s Perspective Consumer’s Perspective Quality of Conformance Conformance to specifications Cost Quality of Design Quality characteristics Price Marketing Production The Meaning of Quality Figure 14.1 The Meaning of Quality

11. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Quality Philosophers Walter Shewhart Walter Shewhart W. Edwards Deming W. Edwards Deming Joseph Juran Joseph Juran Philip Crosby Philip Crosby Armand Feigenbaum Armand Feigenbaum

12. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Deming’s 14 Points 1.Create constancy of purpose 2.Adopt philosophy of prevention 3.Cease mass inspection 4.Select a few suppliers based on quality 5.Constantly improve system and workers 6.Institute worker training

13. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Deming’s 14 Points 7.Instill leadership among supervisors 8.Eliminate fear among employees 9.Eliminate barriers between departments 10.Eliminate slogans 11.Remove numerical quotas

14. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Deming’s 14 Points 12.Enhance worker pride 13.Institute vigorous training and education programs 14.Develop a commitment from top management to implement these 13 points

15. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. The Deming Wheel (or PDCA Cycle) 1. Plan Identify the problem and develop the plan for improvement. 2. Do Implement the plan on a test basis. 3. Study/Check Assess the plan; is it working? 4. Act Institutionalize improvement; continue the cycle. Figure 14.2

16. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Total Quality Management 1.Customer defined quality 2.Top management leadership 3.Quality as a strategic issue 4.All employees responsible for quality 5.Continuous improvement 6.Shared problem solving 7.Statistical quality control 8.Training & education for all employees

17. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. TQM Throughout the Organization Marketing, sales, research Marketing, sales, research Engineering Engineering Purchasing Purchasing Human resources Human resources Management Management Packing, storing, shipping Packing, storing, shipping After-sale support After-sale support

18. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. TQM and External Suppliers Support of suppliers required to satisfy customer expectations Support of suppliers required to satisfy customer expectations Single-sourcing Single-sourcing Partnering Partnering Suppliers may be required to adopt quality programs or meet specific standards Suppliers may be required to adopt quality programs or meet specific standards

19. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. TQM and Customer Satisfaction Requires some form of measurement system Requires some form of measurement system Customer surveys widely used Customer surveys widely used Total customer satisfaction is often an organization’s overriding objective Total customer satisfaction is often an organization’s overriding objective

20. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. TQM and Information Technology Critical to monitoring and controlling quality in an organization Critical to monitoring and controlling quality in an organization IT systems must be structured to satisfy the requirements of TQM systems IT systems must be structured to satisfy the requirements of TQM systems IT systems tie together all the organization's functions and processes IT systems tie together all the organization's functions and processes IT systems must be able to apply appropriate tools to drive improvement IT systems must be able to apply appropriate tools to drive improvement It systems must be able to store and access relevant data for analysis It systems must be able to store and access relevant data for analysis

21. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Strategic Implications of TQM Quality is key to effective strategy Quality is key to effective strategy Clear strategic goal, vision, mission Clear strategic goal, vision, mission High quality goals High quality goals Operational plans & policies Operational plans & policies Feedback mechanism Feedback mechanism Strong leadership Strong leadership

22. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. TQM in Service Companies Inputs similar to manufacturing Inputs similar to manufacturing Processes & outputs are different Processes & outputs are different Services tend to be labor intensive Services tend to be labor intensive Quality measurement is harder Quality measurement is harder Timeliness is important measure Timeliness is important measure TQM principles apply to services TQM principles apply to services

23. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Quality on the Web Internet creates new rules doing business Internet creates new rules doing business Key factors in differentiating firms Key factors in differentiating firms B2B largest part of Internet business B2B largest part of Internet business Direct sales more visible Direct sales more visible Internet removes the human dimension Internet removes the human dimension

24. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Dimensions of Web Quality 1.Ease of use 2.Clarity of information and instructions 3.Server reliability 4.Speed of page loading 5.Transaction time 6.Aesthetics 7.Privacy and security 8.Domain name 9.Human backup 10.Transaction reliability

25. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Cost of Quality Cost of achieving good quality Cost of achieving good quality Prevention Prevention Planning, Product design, Process, Training, Information Planning, Product design, Process, Training, Information Appraisal Appraisal Inspection and testing, Test equipment, Operator Inspection and testing, Test equipment, Operator

26. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Cost of Quality Cost of poor quality Cost of poor quality Internal failure costs Internal failure costs Scrap, Rework, Process failure, Process downtime, Price- downgrading Scrap, Rework, Process failure, Process downtime, Price- downgrading External failure costs External failure costs Customer complaints, Product return, Warranty, Product liability, Lost sales Customer complaints, Product return, Warranty, Product liability, Lost sales

27. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Measuring and Reporting Quality Labor index Labor index Quality cost / labor hours Quality cost / labor hours Cost index Cost index Quality cost / manufacturing cost Quality cost / manufacturing cost Sales index Sales index Quality cost / sales Quality cost / sales Production index Production index Quality cost / units produced Quality cost / units produced

28. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Quality Costs and Index YEAR 1999200020012002 Quality Costs Prevention$ 27,00041,50074,600112,300 Appraisal155,000122,500113,400107,000 Internal failure386,400469,200347,800219,100 External failure242,000196,000103,500106,000 Total$ 810,400829,200639,300544,400 Accounting Measures Sales$ 4,360,0004,450,0005,050,0005,190,000 Mfg costs1,760,0001,810,0001,880,0001,890,000

29. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Quality Costs and Index Quality index = (100) total quality costs base Quality cost per sale = = 18.58 $810,400(100) 4,360,000 QUALITYQUALITY MANUFACTURING YEARSALES INDEXCOST INDEX 199918.5846.04 200018.6345.18 200112.6634.00 200210.4928.80

30. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Quality–Cost Relationship Increased prevention costs lead to decreased failure costs Increased prevention costs lead to decreased failure costs Improved quality leads to increased sales and market share Improved quality leads to increased sales and market share Quality improvement at the design stage Quality improvement at the design stage Higher quality products can command higher prices Higher quality products can command higher prices

31. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Profitability Deming Prize winners showed higher than average results on financial performance indicators Deming Prize winners showed higher than average results on financial performance indicators Baldrige Award winners consistently exceed industry averages on financial performance Baldrige Award winners consistently exceed industry averages on financial performance Quality leads to improved profitability and ROI Quality leads to improved profitability and ROI “Quality is... a profit--maker” “Quality is... a profit--maker” In the long run, quality and profitability are closely related In the long run, quality and profitability are closely related

32. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Quality and Productivity Quality improvement reduces inputs Quality improvement reduces inputs Fewer defects increase output Fewer defects increase output Productivity = Productivity =outputinput

33. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Measuring Yield and Productivity where Y= yield I= number units started in production % G= percentage good units % R= percentage of defective units reworked Yield =(total input) (% good units) + (total input)(1 - % good units)(% reworked) Y = (I)(%G) + (I)(1 - %G)(%R)

34. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Product Yield Start 100 motors per day 80% are good 50% of poor quality units can be reworked Yield= (I)(%G) + (I)(1 - %G)(%R) Y= 100(0.80) + 100(1 - 0.80)(0.50) = 90 motors Y= 100(0.90) + 100(1 - 0.90)(0.50) = 95 motors If product quality is increased to 90% good, Example 14.2

35. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Product Cost Product cost = (K d )(I) + (K r )(R) Y Product cost = (direct manufacturing cost per unit)(input) + (rework cost per unit)(reworked units) yieldwhere K d = direct manufacturing cost per unit I= input K r = rework cost per unit R= reworked units Y= yield

36. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Product Cost Direct mfg cost = $30, Rework cost = $12 100 motors started, 20% defective 50% of defective motors can be reworked Product cost = (K d )(I) + (K r )(R) Y Product cost = = $34.67 per motor ($30)(100) + ($12)(10) 90 motors The manufacturing cost after quality improvement is Product cost = = $32.21 per motor ($30)(100) + ($12)(5) 95 motors Example 14.3

37. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Multistage Product Yield Y = (I) (%g 1 )(%g 2 )...(%g n ) where I= input batch size %g i = percent good at stage i

38. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Multistage Process Yield Start with 100 motors AVERAGE PERCENTAGE STAGE GOOD QUALITY 10.93 20.95 30.97 40.92 Y= (I) (%g 1 )(%g 2 )...(%g n ) = (100)(0.93)(0.95)(0.97)(0.92) Y= 78.8 motors Solve for I I = = = 126.8 motors Y (%g 1 )(%g 2 )...(%g n ) 100(0.93)(0.95)(0.97)(0.92) Example 14.4

39. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Quality Productivity Ratio (QPR) Includes productivity and quality costs Includes productivity and quality costs Increases Increases if processing or rework costs decrease if processing or rework costs decrease if process yield increases if process yield increases QPR = (100) Good-quality units (input)(processing cost) + (defective units)(rework cost)

40. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. QPR Example Direct cost = $30/unit Rework cost = $12/unit Start with 100 motors per day 80% are good, 50% of defective units can be reworked Company studies 4 changes 1.Increase production to 200 units/day 2.Cut processing cost to $26 & rework cost to $10 3.Increase yield to 95% 4.Combine 2 and 3

41. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. QPR Example Direct cost = $30/unit Rework cost = $12/unit Start with 100 motors per day 80% are good, 50% of defective units can be reworked Base case: QPR = (100) = 2.89 80 + 10 (100)($30) + (10)($12) Case 1: Increase input to capacity of 200 units QPR = (100) = 2.89 160 + 10 (200)($30) + (20)($12)

42. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. QPR Example Case 3: Increase initial good-quality to 95% QPR = (100) = 3.22 95 + 10 (100)($30) + (2.5)($12) Case 4: Decrease costs and increase initial good-quality QPR = (100) = 3.71 95 + 2.5 (100)($26) + (2.5)($10) Case 2: Reduce processing cost to $26 and rework to $10 QPR = (100) = 3.33 80 + 10 (100)($26) + (10)($10)

43. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Employees and Quality Improvement Employee involvement Employee involvement Quality circles Quality circles Process improvement teams Process improvement teams Employee suggestions Employee suggestions

44. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. The Quality Circle Process Presentation Implementation Monitoring Solution Problem results Problem Analysis Cause and effect Data collection and analysis Problem Identification List alternatives Consensus Brainstorming Training Group processes Data collection Problem analysis Organization 8-10 members Same area Supervisor/moderator Figure 14.3

45. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Pareto Analysis Pareto Analysis Flow Chart Flow Chart Check Sheet Check Sheet Histogram Histogram Scatter Diagram Scatter Diagram SPC Chart SPC Chart Cause-and-Effect Diagram Cause-and-Effect Diagram Seven Quality Control Tools 1234 Dirt Old Temp Fault x x x x x x x x x x x x x x x x UCL LCL 1 2 3 4 5 Process

46. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Pareto Chart NUMBER OF CAUSEDEFECTSPERCENTAGE Poor design8064% Wrong part dimensions1613 Defective parts1210 Incorrect machine calibration76 Operator errors43 Defective material32 Surface abrasions32 125100%

47. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Pareto Chart Percent from each cause Causes of poor quality Machine calibrations Defective parts Wrong dimensions Poor Design Operator errors Defective materials Surface abrasions 0 10 20 30 40 50 6070(64) (13) (10) (6) (3) (2)(2)

48. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Flow Chart Operation Decision Start/ Finish Operation Decision

49. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Check Sheet COMPONENTS REPLACED BY LAB TIME PERIOD: 22 Feb to 27 Feb 2002 REPAIR TECHNICIAN: Bob TV SET MODEL 1013 Integrated Circuits |||| Capacitors |||| |||| |||| |||| |||| || Resistors || Transformers |||| Commands CRT |

50. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Histogram 0 5 10 15 20 25 1 2 6 13 10 16 19 17 12 16 20 17 13 5 6 2 1

51. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Scatter Diagram Y X

52. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Control Chart 18 12 6 3 9 15 21 2427246810121416 Sample number Number of defects UCL = 23.35 LCL = 1.99 c = 12.67

53. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Cause-and-Effect Diagram Quality Problem Quality Problem Out of adjustment Tooling problems Old / worn Machines Faulty testing equipment testing equipment Incorrect specifications Improper methods Measurement Poor supervision Lack of concentration Inadequate training Human Deficiencies in product design Ineffective quality management Poor process design Process Inaccuratetemperaturecontrol Dust and Dirt Environment Defective from vendor Not to specifications Material- handling problems Materials Figure 14.6

54. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. The Malcolm Baldrige Award The Malcolm Baldrige Award The Deming Prize The Deming Prize RIT/USA Today Quality Cup RIT/USA Today Quality Cup European Quality Award European Quality Award President’s Quality Award President’s Quality Award Excellence in Productivity Improvement Excellence in Productivity Improvement NASA NASA Quality Awards and Certifications

55. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. ISO 9000 Categories ISO 9001 ~ Suppliers and Designers ISO 9001 ~ Suppliers and Designers ISO 9002 ~ Production ISO 9002 ~ Production ISO 9003 ~ Inspection and Test ISO 9003 ~ Inspection and Test ISO 9004 ~ Quality Management ISO 9004 ~ Quality Management

56. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Implications Of ISO 9000 Truly international in scope Truly international in scope Certification required by many foreign firms Certification required by many foreign firms U.S. firms export more than $150 billion annually to Europe U.S. firms export more than $150 billion annually to Europe Adopted by U.S. Navy, DuPont, 3M, AT&T, and others Adopted by U.S. Navy, DuPont, 3M, AT&T, and others

57. To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. ISO Accreditation European registration European registration 3rd party registrar assesses quality program 3rd party registrar assesses quality program European Conformity (CE) mark authorized European Conformity (CE) mark authorized United States 3rd party registrars United States 3rd party registrars American National Standards Institute (ANSI) American National Standards Institute (ANSI) American Society for Quality (ASQ) American Society for Quality (ASQ) Registrar Accreditation Board (RAB) Registrar Accreditation Board (RAB)