1 SIX SIGMA QUALITY Process Management and The Tools of Quality FGCU The scope of total quality management in a firm. Understand the Six Sigma approach to improving quality and productivity. Illustrate globally recognized quality benchmarks.

What Quality Means to you? From Class: Reliability Perfectionism Durability Value 2

What Is Quality? “ The degree of excellence of a thing” (Webster’s Dictionary) “The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs” ( ASQ) Fitness for use Takumi, perfect method than persistence, a deeper process than education. 3

© 2011 Pearson Education, Inc. publishing as Prentice Hall 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

Customer Perspective 5 Value = Quality ↑ x Service ↑ x Innovation ↑ Cost ↓ x Time ↓ Customer perception of value constantly changes

Ford Focus – Base Charge Automatic Transmission Power Steering, Windows and Locks MP3 Player Sun Roof Antilock Braking System Total $11,000 1, $14,375 Value from Customer Perspective

Price is the same…Do you feel the same? Ford Focus – Base Cost $ 9,000 Inspection: Cost of sorting good from bad $ 800 Rework: Things we had to fix $ 1,300 Scrap: Stuff thrown away we couldn’t rework $ 800 Inventory: Cost of storing stuff we didn’t need at the time $ 700 Material Handling: Moving material around because it’s in the wrong place or not yet required $ 825 Order Entry: Cost of taking your order $ 250 Set-up: Charges due to equipment producing parts for another customer $ 700 Total $ 14,375

Key Dimensions of Quality  Performance  Features  Reliability  Conformance  Durability  Serviceability  Aesthetics  Perceived quality  Value

Dimensions Of Product Quality (Garvin) 1. Performance basic operating characteristics 2. Features “extra” items added to basic features 3. Reliability The probability product will operate properly over an expected time 9

Dimensions Of Product Quality (Garvin) 4. Conformance meeting pre-established standards 5. Durability life span before replacement 6. Serviceability ease of getting repairs, speed & competence of repairs and the repair person 10

Dimensions Of Product Quality (Garvin) 7. Aesthetics look, feel, sound, smell or taste 8. Safety freedom from injury or harm 9. Perceived quality subjective perceptions based on brand name, advertising, etc 11

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

Service Specifications at UPS

14 The Deming Wheel (or P-D-C-A Cycle) Identify problem, gather data, analyze Develop plan for improvement Implement plan on test (trial) basis Is the plan working Make adjustments to the plan Institutionalize improvement Continue cycle 1. Plan 2. Do 3. Study / Check 4. Act

The Quality Gurus 12-15

Total Quality Management (TQM) Total quality management: managing the entire organization so that it excels on all dimensions of products and services that are important to the customer 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

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

Six Sigma A process for developing and delivering virtually perfect products and services Measure of how much a process deviates from perfection 3.4 defects per million opportunities Six Sigma Process four basic steps of Six Sigma—align, mobilize, accelerate, and govern Champion an executive responsible for project success

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

DMAIC Cycle Define - identify customers and their priorities Measure - determine how to measure the process and how it is performing Analyze - determine the most likely causes of defects Improve - identify means to remove the causes of defects Control - determine how to maintain the improvements 12-20

DPMO 67,000 DPMO cost = 25% of sales 67,000 DPMO cost = 25% of sales DEFINE CONTROL IMPROVE ANALYZE MEASURE Six Sigma: Breakthrough Strategy— DMAIC

2-22 Six Sigma: Black Belts and Green Belts Black Belt project leader Master Black Belt a teacher and mentor for Black Belts Green Belts project team members

Six Sigma Analytical Tools Flowchart - a diagram of the sequence of operations Run chart - depict trends in data over time Pareto chart - help to break down a problem into components Checksheet - basic form to standardize data collection Cause-and-effect diagram - show relationships between causes and problems Opportunity flow diagram - used to separate value-added from non-value-added Process control chart - used to assure that processes are in statistical control 12-23

Flowchart 12-24

Run Chart 12-25

Checksheet 12-26

Cause-and-Effect Diagram (Fishbone Diagram) 12-27

Opportunity Flow Diagram 12-28

Process Control Chart 12-29

30 Pareto Charts Frequency (number of times) %

31 PARETO CHART Category of Defect Overall Effect in Percentage per Category % 25% 20% 10% 7.5% 2.5%

32 Histogram of the Number of Maintenance Occurrences and Service Hours for Four Production Lines Frequency HISTOGRAM

Additional Six Sigma Tools Failure mode and effect analysis (FMEA): is a structured approach to identify, estimate, prioritize, and evaluate risk of possible failures at each stage in the process Design of experiments (DOE): a statistical methodology to determine cause-and-effect relationships between process variables and output Permits experimentation with many variables simultaneously 12-33

DPMO (Defects per million opportunities) 34

COST OF QUALITY “Defects are not free. Somebody makes them, and gets paid for making them”. W. Edwards Deming “Quality is free. It is not a gift, but it is free. What costs money are the unquality things- all the actions that involve not doing jobs right the first time.” Philip Crosby

Costs of Quality Appraisal costs – costs of the inspection and testing to ensure that the product or process is acceptable Prevention costs – sum of all the costs to prevent defects Internal failure costs – costs for defects incurred within the system External failure costs – costs for defects that pass through the system Quality Costs 12-36

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

External Failure Internal Failure Prevention Costs of Quality Appraisal Total Cost Quality Improvement Total Cost

Cost of Quality Problem Problem 7. Costs are given: Annual Inspection costs: $155,000 Annual Cost of scrap materials: $286,000 Annual rework cost: $34,679 Annual cost of quality training: $456,000 Annual warranty cost: $1,546,000 Annual testing cost: $543,000 APPRAISAL Cost: Annual inspection cost + Annual testing cost: $155,000 + $543,000 = $698,000 39

Malcolm Baldrige National Quality Award  Established in 1988 by the U.S. government  Designed to promote TQM practices  Recent winners include  Honeywell Federal, Midway USA, AtlantiCare, Heartland Health, Cargill Corn Milling, PRO-TEC Coating Co., City of Coral Springs, Premier Inc., Sunny Fresh Foods, Park Place Lexus, Richland College

Malcolm Baldrige National Quality Award  An award established by the U.S. Department of Commerce given annually to companies that excel in quality.  The Baldrige Quality Award is given to organizations that have demonstrated outstanding quality in their products and processes.  The award program is administered by the National Institute of Standards and Technology, an agency of the U.S. Department of Commerce.  A total of up to 18 awards may be given annually in these categories: manufacturing, service, small business, education and health care, and not-for-profit

Baldrige Criteria Applicants are evaluated on: CategoriesPoints Leadership120 Strategic Planning 85 Customer & Market Focus85 Measurement, Analysis, and Knowledge Management 90 Workforce Focus85 Process Management 85 Results450

43 Additional Info: Quality Awards And Certifications The Malcolm Baldrige Award The Deming Prize Industry, regional, and company awards Institute of Industrial Engineers NASA European Quality Award

2-44 ISO 9000 Certification, Implications, and Registrars ISO 9001:2000—only standard that carries third-party certification Many overseas companies will not do business with a supplier unless it has ISO 9000 certification ISO 9000 accreditation ISO registrars

45 ISO 9000:2000 Categories and ISO ISO 9000:2000 ~ Quality management systems: fundamentals ISO 9001:2000 ~ Quality management systems: Requirements ISO 9004:2000 ~ Quality management: Guidelines for Performance ISO ~ Environmental management systems

46 Implications Of ISO 9000 Truly international in scope Certification required by many foreign firms U.S. firms export > $100 billion/yr to Europe Adopted by U.S. Navy, DuPont, 3M, AT&T, & others

ISO 9000 and ISO Series of standards agreed upon by the International Organization for Standardization (ISO) Adopted in 1987 Used in more than 160 countries A prerequisite for global competition? ISO 9000 an international reference for quality; ISO primarily concerned with environmental management 12-47

Three Forms of ISO Certification 1.First party: a firm audits itself against ISO 9000 standards 2.Second party: a customer audits its supplier 3.Third party: a "qualified" national or international standards or certifying agency serves as auditor 12-48

External Benchmarking Steps 1.Identify those processes needing improvement. 2.Identify a firm that is the world leader in performing the process. 3.Contact the managers of that company and make a personal visit to interview managers and workers. 4.Analyze data

Baldrige – Scoring Applications are scored on total points out of 1,000. Those >650 get selected for site visits, which decide the final winner. Other benefits: Feedback from the Baldrige examiners “An audit report of the firm’s practices.” Many states use Baldrige Criteria as the basis for their own awards

What It Takes to Apply for Baldrige  Candidates for the award must submit an application of up to 50 pages that details the approach, deployment, and results of their quality activities under seven major categories: 1.Leadership 2.Strategic Planning 3.Customer and Market Focus 4.Information and Analysis 5.Human Resource Focus 6.Process Management 7.Business Results 12-51