Operations Management Managing Quality Chapter 6 © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Ways Quality Can Improve Profitability Sales Gains Improved response Higher Prices Improved reputation Improved Quality Increased Profits Reduced Costs Increased productivity Lower rework / scrap costs Lower warranty costs This slide not only looks at the impact of quality on productivity - it also enables you to begin a discussion as to the meaning of quality (or perhaps the differing meanings among different people). To many people, the notion of “high quality” carries with it the assumption of “high price.” This slide provides an initial point to challenge that assumption. © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Flow of Activities Necessary to Achieve Total Quality Management Organizational Practices Quality Principles Employee Fulfillment This slide simply introduces the four activities. Subsequent slides expand on each. Customer Satisfaction © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

TQM – Organizational Practices Leadership Mission statement Effective operating procedure Staff support Training What is important and what is to be accomplished Organizational Practices Quality Principles Employee Fulfillment Customer Satisfaction One might begin discussion of this slide by introducing the difference between “leadership” and “management.” The point should also be made, again, about the need for involvement and commitment throughout the organization. © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

TQM – Quality Principles Customer focus Continuous improvement Employee empowerment Benchmarking Just-in-time Tools of TQM How to do what is important and to be accomplished Organizational Practices Quality Principles Employee Fulfillment Customer Satisfaction Some students may find the notion of “continuous improvement” (Why can’t we do it right the first time?) and “employee empowerment” (Doesn’t this reduce or abrogate the role of the manager?) the most difficult to accept. If you have not done so already, this might be a good time to discuss each in some depth. The following slide may be used in a discussion of empowerment. © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

TQM – Employee Fulfillment Empowerment Organizational commitment Employees’ attitudes that they can accomplish what is important and to be accomplished Organizational Practices Quality Principles Employee Fulfillment Customer Satisfaction This slide can be used to form the basis for a discussion of empowerment. If you wish to discuss empowerment - begin by asking students to define the term. You may find students are already comfortable with the term, in which case the discussion can be rather short; or, you may find they have unrealistic expectations (or desires?) - in which case you may wish to pursue the discussion at greater length. It may be helpful to ask students to identify the benefits and pitfalls to both management and worker. (For example, empowerment requires workers to assume greater responsibility.) © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

TQM – Customer Satisfaction Winning orders Repeat customers An effective organization with a competitive advantage Organizational Practices Quality Principles Employee Fulfillment Customer Satisfaction The main point that one might make with this slide is that the customer is, ultimately, the most important person in your business. © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Definitions of Quality ASQ: The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs User-Based: What consumer says it is Product-Based: Level of measurable product characteristic Manufacturing-Based: Degree to which a product conforms to design specification CATAGORIES Once you have introduced these definitions of quality, ask students to provide example of products that use them. CONFORMANCE IS THE JOB OF OPERATIONS © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Dimensions of Quality for Goods Operation Reliability & durability Serviceability Appearance Perceived quality Conformance It may be most helpful to provide, or ask you students to provide, examples of products for which the notion of quality is based upon one or more of the dimensions listed. © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Service Quality Attributes Tangibles Reliability Communication Credibility Security Responsiveness Competence Courtesy Access © 1995 Corel Corp. Under- standing Although the text considers service quality at the end of the chapter, you may wish, at this point, to contrast the notion of quality for goods with that for services. If not, skip this slide - it is repeated at the point at which the issues are raised in the text. How do we build quality into our service offerings? © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Costs of Quality Prevention costs Appraisal costs Internal failure costs External failure costs Costs of poor quality are huge but the amounts are not known with precision. In most companies, the accounting system provides only a minority of the information needed to quantify this cost of poor quality Juran on “Quality by Design” The Free Press (1992) © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Prevention Costs Costs associated with preventing defects before they happen Redesigning the process to remove causes of defects Redesigning the product or service Training employees in continuous improvement Working with suppliers to improve quality © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Appraisal Costs Costs to assess / appraise quality Test / inspection to identify quality problems Used to screen out defective product … this is NOT best practice As preventive measures improve quality, appraisal costs decrease © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Internal Failure Costs Costs resulting from defects discovered during production of the product or service Yield / scrap Rework / correcting mistakes (note may also affect delivery) © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

External Failure Costs Costs resulting from defects discovered after delivery of the product or service to the customer Warranty service expense Customer returns Dissatisfied customers / repeat business Poor publicity Lawsuits © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Cost of Detecting Defects Process Final testing Customer Where defect is detected Cost of detection and correction Prevention, not inspection or correction © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Traditional Quality Process (Manufacturing) Customer Marketing Engineering Operations Specifies Interprets Designs Produces Need Need Product Product Defines Plans Students might be asked what problems they would foresee in implementing this process. Quality Quality Quality is customer driven! Monitors Quality © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

TQM Encompasses entire organization, from supplier to customer Stresses a commitment by management to have a continuing, company-wide, drive toward excellence in all aspects of products and services that are important to the customer. A point to be made here is that TQM is not a program but a philosophy. © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Concepts of TQM Continuous improvement Employee empowerment Benchmarking Just-in-time (JIT) Taguchi concepts Knowledge of TQM tools This slide simply introduces concepts of TQM. These concepts are expanded upon in subsequent slides. © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Continuous Improvement TQM CONCEPTS Continuous Improvement Continual improvement of people, equipment, suppliers, materials, process & customer satisfaction Based on philosophy that every aspect of an operation can be improved Involves all operations and work units Other names Kaizen Zero-defects Six sigma Plan Do Check Act Students may have a number of questions with respect to the notion of continuous improvement. - Why do we need continuous improvement? Why can’t we do it right the first time? - Doesn’t implementation of continuous improvement introduce a certain instability? - Are we never “done”? - Etc. © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

TQM CONCEPTS Employee Empowerment Involving employees in product & process improvement 85% of quality problems are due to processes & materials The people most closely associated with an operation are in the best position to identify the changes that should be made Techniques Support workers Let workers make decisions Build teams & quality circles Training If you have not done so already, you might at this point discuss: - why employee empowerment works - the role of information technology in enabling employee empowerment - the role of information technology in making employee empowerment a requirement © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

TQM CONCEPTS Benchmarking Selecting best practices in products, services, processes, or costs to use as a standard for performance Determine what to benchmark Form a benchmark team Identify benchmarking partners Collect and analyze benchmarking information Take action to match or exceed the benchmark Ask student to identify firms which they believe could serve as benchmarks. If students are unable to identify any firms - ask them to identify a college or university whose registration system or housing selection system could serve as a benchmark. Most students have enough knowledge of, or friends at,other colleges and universities so as to be able to respond to this question. © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Best Practices Example – Resolving Customer Complaints TQM CONCEPTS Best Practices Example – Resolving Customer Complaints Make it easy for clients to complain Respond quickly to complaints Resolve complaints on the first contact Use computers to manage complaints Recruit the best for customer service jobs One might ask students “Given that these suggestions seem to make intuitive sense, why would a company not wish to implement them?” © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Just-in-Time (JIT) Relationship to quality: TQM CONCEPTS 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 JIT QUALITY This slide introduces a discussion about JIT. Subsequent slides elaborate. © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

TQM CONCEPTS Taguchi Concepts Experimental design methods to improve product and process design Quality Robustness – Ability to produce products uniformly regardless of manufacturing conditions – Removing the effects is often cheaper than removing the causes Quality loss function Target specifications © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Taguchi Concepts TQM CONCEPTS Experimental design methods to improve product and process design Quality Robustness Quality loss function – Identifies all costs (loss to society) connected with poor quality – Costs increase as the product moves away from the target Target specifications Low Loss High Loss Quality Loss Function Unacceptable Poor Fair Good Best Upper Lower Target Specification © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Taguchi Concepts TQM CONCEPTS Experimental design methods to improve product and process design Quality Robustness Quality loss function Target-oriented quality – Philosophy of continuous improvement to bring the product exactly on target – Traditional conformance- oriented specs produce more units farther from the target (greater loss) Quality Loss Function (a) Target-oriented quality yields more product in the “best” category and brings products toward the target level High loss Unacceptable Poor Fair Low loss Good Best Conformance-oriented quality keeps product within three standard deviations Frequency Lower Target Upper Distribution of specs for product produced (b) Specification © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Seven Tools of TQM TQM CONCEPTS © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Process Chart Shows sequence of events in process TQM CONCEPTS Process Chart Shows sequence of events in process Depicts activity relationships Has many uses Identify data collection points Find problem sources Identify areas for improvement Identify where travel distances can be reduced This slide can be used to introduce Process Charts. © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Process Chart example TQM CONCEPTS © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Cause and Effect Diagram TQM CONCEPTS Cause and Effect Diagram Main Cause Main Cause Specific cause Specific cause Effect (problem) Specific cause Specific cause Specific cause Main Cause Main Cause © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Cause and Effect Diagram Example TQM CONCEPTS Cause and Effect Diagram Example Method Manpower Drilling too slow Overtime/ fatigue Too many defects Wood Steel Lathe not calibrated Material Machinery © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Inspection Examining items to see if they are good or defective TQM CONCEPTS Inspection Examining items to see if they are good or defective Does not correct deficiencies in process or product Does not add value to the product / service Why inspect – to ensure that we are producing at the expected quality level Issues When to inspect Where in process to inspect This slide introduces the concept of inspection. At this point, one should probably stress the role of inspection in the overall quality control process. Some students seem to have the notion that inspection is quality control. © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

When and Where to Inspect TQM CONCEPTS When and Where to Inspect At the supplier’s plant while the supplier is producing At your facility upon receipt of goods from the supplier Before costly or irreversible processes During the step-by-step production process When production or service is complete Before delivery from your facility At the point of customer contact This slide can be used to frame a discussion about when to inspect. If your students have documented an actual production process from a local business, one of these documented processes can serve as an example. The best inspection can be thought of as no inspection at all: Source inspection – controlling or monitoring at the point of production or purchase © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

SPC (Control Charting) TQM CONCEPTS 100% Inspection vs. SPC Ship Process Rework Scrap 100% Inspection Process Ship Sample Feedback SPC (Control Charting) Normal variance or cause for concern ? © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

TQM In Services It is more difficult to measure quality for services than for goods Intangible differences between products (services) Intangible expectations of customers Tangibles Reliability Communication Credibility Security Responsiveness Competence Courtesy Access © 1995 Corel Corp. Under- standing At this point, you might consider going back to the slides illustrating the differences between goods and services. Those slides are provided next. If you do not wish to use them, simply skip to the final slide in the sequence. © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Operations Role in Service Quality The tangible component of many services is important Operations can design processes (service products) that have quality attributes Customers’ perceptions are the quality standard – Operations can influence both the quality of the service and the expectation Preparation for exceptions – contingency plans for sub-optimal operating conditions At this point, you might consider going back to the slides illustrating the differences between goods and services. Those slides are provided next. If you do not wish to use them, simply skip to the final slide in the sequence. © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458

Summary TQM is a supply chain-wide philosophy to continuously improve processes to make products that will satisfy our customers. TQM and Just-in-Time support each other In the process of getting better, most companies also reduce costs and lead time through elimination of waste. So TQM is a way to get faster, better and cheaper simultaneously. At this point, you might consider going back to the slides illustrating the differences between goods and services. Those slides are provided next. If you do not wish to use them, simply skip to the final slide in the sequence. © 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458