Quality Management Ted Lee Industrial & Systems Engineering Florida International University leet@eng.fiu.edu

Quality Management Total Customer Satisfaction at Motorola The Meaning of Quality Total Quality Management Strategic Implications of TQM TQM in Service Companies The Cost of Quality The Effect of Quality Management on Productivity Quality Improvement and the Role of Employees Identifying Quality Problems and Causes Quality Awards and the Competitive Spirit ISO 9000

Russell/Taylor Oper Mgt 3/e What Is Quality? “The degree of excellence of a thing” (Webster’s Dictionary) “The totality of features and characteristics that satisfy needs” ( ASQC) Fitness for use © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 2

Dimensions Of Product Quality (Garvin) 1. Performance basic operating characteristics 2. Features “extra” items added to basic features 3. Reliability probability product will operate over time © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 3

Russell/Taylor Oper Mgt 3/e 4. Conformance meeting pre-established standards 5. Durability life span before replacement 6. Serviceability ease of getting repairs, speed & competence of repairs © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 4

Russell/Taylor Oper Mgt 3/e 7. Aesthetics look, feel, sound, smell or taste 8. Safety freedom from injury or harm 9. Other perceptions subjective perceptions based on brand name, advertising, etc © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 5

Russell/Taylor Oper Mgt 3/e Service Quality 1. Time & Timeliness customer waiting time, completed on time 2. Completeness customer gets all they asked for 3. Courtesy treatment by employees © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 6

Russell/Taylor Oper Mgt 3/e 4. Consistency same level of service for all customers 5. Accessibility & Convenience ease of obtaining service 6. Accuracy performed right every time 7. Responsiveness reactions to unusual situations © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 7

Quality Of Conformance Ensuring product or service produced according to design Depends on design of production process performance of machinery materials training © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 8

The Meaning of Quality

Total Quality Management Evolution of Total Quality Management W. Edwards Deming Joseph M. Juran, Philip Crosby, and Armand V. Feigenbaum TQM and Continuous Process Improvement Principles of Total Quality Management TQM Throughout the Organization

Deming's 14 points Create a constancy of purpose toward product improvement to achieve long-term organizational goals. Adopt a philosophy of preventing poor-quality products instead of acceptable levels of poor quality as necessary to compete internationally. Eliminate the need for inspection to achieve quality by relying instead on statistical quality control to improve product and process design. Select a few suppliers or vendors based on quality commitment rather than competitive prices.

Deming's 14 points Constantly improve the production process by focusing on the two primary sources of quality problems, the system and workers, thus increasing productivity and reducing costs. Institute worker training that focuses on the prevention of quality problems and the use of statistical quality control techniques. Instill leadership among supervisors to help workers perform better. Encourage employee involvement by eliminating the fear of reprisal for asking questions or identifying quality problems.

Deming's 14 points Eliminate barriers between departments, and promote cooperation and a team approach for working together. Eliminate slogans and numerical targets that urge workers to achieve higher performance levels without first showing them how to do it. Eliminate numerical quotas that employees attempt to meet at any cost without regard for quality.

Deming's 14 points Enhance worker pride, artisanry and self-esteem by improving supervision and the production process so that workers can perform to their capabilities. Institute vigorous education and training programs in methods of quality improvement throughout the organization, from top management down, so that continuous improvement can occur. Develop a commitment from top management to implement the previous thirteen points.

Deming Wheel (PDCA Cycle)

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 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 14

TQM Throughout The Organization Marketing, sales, R&D Engineering Purchasing Personnel Management Packing, storing, shipping Customer service Marketing, sales, R&D define what customer wants Engineering specifications, parts requirements, job design Purchasing acquire high quality parts & material Personnel hire qualified employees Management maintain smooth flow through processes Packing, storing, shipping prevent product damage Customer service install & provide instructions © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 15 15

Strategic Implications Of TQM Quality is key to effective strategy Clear strategic goal, vision, mission High quality goals Operational plans & policies Feedback mechanism Strong leadership © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 16

TQM In Service Companies Inputs similar to manufacturing Processes & outputs are different Services tend to be labor intensive Quality measurement is harder Timeliness is important measure TQM principles apply to services © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 17

Russell/Taylor Oper Mgt 3/e Cost Of Quality Cost of achieving good quality Prevention Appraisal Cost of poor quality Internal failure costs External failure costs Cost of achieving good quality Prevention quality planning, product design process, training information Appraisal inspection & testing test equipment operator Cost of poor quality Internal failure costs scrap, rework process failure & downtime downgrading products External failure costs customer complaints returns, warranty product liability, lost sales © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 18 18

The Cost of Quality The Cost of Achieving Good Quality Prevention costs Quality planning costs: Product design costs Process costs Training costs Information costs Appraisal costs Inspection and testing Test equipment costs Operator costs

The Cost of Quality The Cost of Poor Quality Internal failure costs Scrap costs Rework costs Process failure costs (Diagnostic) Process downtime costs Price-downgrading costs External failure costs Customer complaint costs Product return costs Warranty claims costs Product liability costs Lost sales costs

Russell/Taylor Oper Mgt 3/e Quality Indexes Labor index quality cost / labor hours Cost index quality cost / manufacturing cost Sales index quality cost / sales Production index quality cost / units produced © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 19

Russell/Taylor Oper Mgt 3/e Quality Index Example 1994 1995 1996 1997 Quality Costs Prevention $ 27,000 41,500 74,600 112,300 Appraisal 155,000 122,500 113,400 107,000 Internal failure 386,400 469,200 347,800 219,100 External failure 242,000 196,000 103,500 106,000 Total $ 810,400 829,200 639,300 544,400 Accounting measures Sales $ 4,360,000 4,450,000 5,050,000 5,190,000 Mfg costs 1,760,000 1,810,000 1,880,000 1,890,000 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 20

Russell/Taylor Oper Mgt 3/e Quality Index Total quality costs * 100 / base $810,400 * 100 / 4,360,000 = 18.58 Year Sales Cost 1994 18.58 46.04 1995 18.63 45.18 1996 12.66 34.00 1997 10.49 28.80 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 21

Russell/Taylor Oper Mgt 3/e Quality Is... An important determinant of business profitability Positively & significantly related to higher return on investment © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 22

Quality And Productivity Productivity = output / input Fewer defects increase output Quality improvement reduces inputs © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 23

The Effect of Quality Management on Productivity Measuring Product Yield and Productivity where: Y = yield I = total input %G = % good units produced %R = % of defective units suc. reworked

Russell/Taylor Oper Mgt 3/e Product Yield Example Start 100 motors per day 80% are good 50% of poor quality units can be reworked Y = (I)(%G) + (I)(1-%G)(%R) Y = 100 (0.80) + 100 (1- 0.80) (0.50) = 90 motors © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 25

The Effect of Quality Management on Productivity Production Cost where: Kd = direct manuf. cost per unit I = input Kr = rework cost per unit R = reworked units Y = yield

Russell/Taylor Oper Mgt 3/e Product Cost Example Direct mfg cost = $30, Rework cost = $12 100 motors started, 20% defective 50% of defective motors can be reworked © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 27

Multistage Product Yield Y = (I) (%g1)(%g2)...(%gn) where I = input batch size %gi = percent good at stage I © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 28

Multistage Process Yield Motors produced in four-stage process Start with 100 motors Stage % Good quality 1 0.93 2 0.95 3 0.97 4 0.92 Y = (I) (%g1)(%g2)...(%gn) = (100)(0.93)(0.95)(0.97)(0/92) Y = 78.8 motors © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 29

Input Required For Output Of 100 Good Motors © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 30

Quality Productivity Ratio (QPR) Includes productivity & quality costs Increases if processing or rework costs decrease if process yield increases © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 31

Russell/Taylor Oper Mgt 3/e QPR Example Direct cost = $30/unit Rework cost = $12/unit Start with 100 motors per day 80% are good, 50% of defective units are 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 & 3 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 32

Russell/Taylor Oper Mgt 3/e QPR Example Base case QPR= 3.09 Case 1 - Increasing I has no effect © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 33

Russell/Taylor Oper Mgt 3/e Case 2 - Cost decrease increases QPR Case 3 - Increased yield increases QPR Case 4 - Cut costs & raise yield is best © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 34

Employees & Quality Improvement Quality circles Employee suggestions Process improvement teams Self-managed work teams © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 35

Quality Improvement and the Role of Employees Quality Circle

Identifying Quality Problems and Causes (The 7 QC Tools) Pareto Analysis Flow Chart Check Sheet Histogram Scatter Diagram Statistical Process Control Chart Cause-and-Effect Diagram

A Pareto Chart 10 20 30 40 50 60 70 (64) Percent from each cause (13) 10 20 30 40 50 60 70 (64) Percent from each cause (13) (10) (6) (3) (2) (2) Poor Design Defective parts Machine calibrations Operator errors Wrong dimensions Defective materials Surface abrasions Causes of poor quality © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 38

Russell/Taylor Oper Mgt 3/e A Flowchart © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 39

Russell/Taylor Oper Mgt 3/e Check Sheet COMPONENTS REPLACED BY LAB TIME PERIOD: 22 Feb to 27 Feb 1998 REPAIR TECHNICIAN: Bob TV SET MODEL 1013 Integrated Circuits |||| Capacitors |||| |||| |||| |||| |||| || Resistors || Transformers |||| Commands CRT | © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 40

Russell/Taylor Oper Mgt 3/e Histogram 5 10 15 20 25 30 35 40 1 2 6 13 10 16 19 17 12 16 20 17 13 5 6 2 1 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 41

Russell/Taylor Oper Mgt 3/e Scatter Diagram . © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 42

Russell/Taylor Oper Mgt 3/e Control Chart 18 12 6 3 9 15 21 24 27 2 4 8 10 14 16 Sample number Number of defects UCL = 23.35 LCL = 1.99 c = 12.67 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 43

Fishbone Diagram Measurement Human Machines Quality Problem Faulty testing equipment Poor supervision Out of adjustment Incorrect specifications Lack of concentration Tooling problems Improper methods Inadequate training Old/worn Quality Problem Inaccurate temperature control Defective from vendor Poor process design Ineffective quality management Not to specifications Dust and Dirt Material- handling problems Deficiencies in product design Environment Materials Process © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 44

Quality Awards And Certifications The Malcolm Baldrige Award The Deming Prize Industry, regional, and company awards Institute of Industrial Engineers NASA European Quality Award © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 45

Russell/Taylor Oper Mgt 3/e ISO 9000 Categories ISO 9001 ~ Suppliers and Designers ISO 9002 ~ Production ISO 9003 ~ Inspection and Test ISO 9004 ~ Quality Management © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 46

Russell/Taylor Oper Mgt 3/e 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 © 2000by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 47

Russell/Taylor Oper Mgt 3/e ISO Accreditation European registration 3rd party registrar assesses quality program European Conformity (CE) mark authorized United States 3rd party registrars American National Standards Institute (ANSI) American Society for Quality Control (ASQC) Registrar Accreditation Board (RAB) © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Ch 3 - 48