LSM733-PRODUCTION OPERATIONS MANAGEMENT By: OSMAN BIN SAIF LECTURE 8 1

 Issues for Product Design  Robust Design  Modular Design  Computer-Aided Design (CAD)  Computer-Aided Manufacturing (CAM)  Virtual Reality Technology  Value Analysis  Ethics and Environmentally Friendly Design Summary of last Session 2

 Time-Based Competition  Purchasing Technology by Acquiring a Firm  Joint Ventures  Alliances  Defining a Product  Make-or-Buy Decisions  Group Technology Summary of last Session(Contd.) 3

 Documents For Production  Product Life-Cycle Management (PLM)  Service Design  Documents for Services  Application of Decision Trees to Product Design  Transition to Production Summary of last Session(Contd.) 4

 Global Company Profile: Arnold Palmer Hospital  Quality and Strategy  Defining Quality  Implications of Quality  Malcolm Baldrige National Quality Award  Cost of Quality (COQ)  Ethics and Quality Management Agenda for this session 5

 International Quality Standards  ISO 9000  ISO14000 Agenda for this session (Contd.) 6

 Total Quality Management  Continuous Improvement  Six Sigma  Employee Empowerment  Benchmarking  Just-in-Time (JIT)  Taguchi Concepts  Knowledge of TQM Tools Agenda for this session (Contd.) 7

Managing Quality Provides a Competitive Advantage Arnold Palmer Hospital  Deliver over 13,000 babies annually  Virtually every type of quality tool is employed  Continuous improvement  Employee empowerment  Benchmarking  Just-in-time  Quality tools 8

Quality and Strategy  Managing quality supports differentiation, low cost, and response strategies  Quality helps firms increase sales and reduce costs  Building a quality organization is a demanding task 9

Two Ways Quality Improves Profitability Improved Quality Increased Profits  Increased productivity  Lower rework and scrap costs  Lower warranty costs Reduced Costs via  Improved response  Flexible pricing  Improved reputation Sales Gains via Figure

The Flow of Activities Organizational Practices Leadership, Mission statement, Effective operating procedures, Staff support, Training Yields:What is important and what is to be accomplished Quality Principles Customer focus, Continuous improvement, Benchmarking, Just-in- time, Tools of TQM Yields:How to do what is important and to be accomplished Employee Fulfillment Empowerment, Organizational commitment Yields:Employee attitudes that can accomplish what is important Customer Satisfaction Winning orders, Repeat customers Yields:An effective organization with a competitive advantage Figure

Defining Quality The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs American Society for Quality 12

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 13

Implications of Quality 1.Company reputation  Perception of new products  Employment practices  Supplier relations 2.Product liability  Reduce risk 3.Global implications  Improved ability to compete 14

Key Dimensions of Quality  Performance  Features  Reliability  Conformance  Durability  Serviceability  Aesthetics  Perceived quality  Value 15

Malcom Baldrige National Quality Award  Established in 1988 by the U.S. government  Designed to promote TQM practices  Few winners  Premier Inc., MESA Products, Sunny Fresh Foods, Park Place Lexus, North Mississippi Medical Center, The Bama Companies, Richland College, Texas Nameplate Company, Inc. 16

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 17

Costs of Quality  Prevention costs - reducing the potential for defects  Appraisal costs - evaluating products, parts, and services  Internal failure - producing defective parts or service before delivery  External costs - defects discovered after delivery 18

External Failure Internal Failure Prevention Costs of Quality Appraisal Total Cost Quality Improvement Total Cost 19

Leaders in Quality W. Edwards Deming14 Points for Management Joseph M. JuranTop management commitment, fitness for use Armand FeigenbaumTotal Quality Control Philip B. CrosbyQuality is Free, zero defects 20

Ethics and Quality Management  Operations managers must deliver healthy, safe, quality products and services  Poor quality risks injuries, lawsuits, recalls, and regulation  Organizations are judged by how they respond to problems  All stakeholders much be considered 21

International Quality Standards  ISO 9000 series (Europe/EC)  Common quality standards for products sold in Europe (even if made in U.S.)  2000 update places greater emphasis on leadership and customer satisfaction  ISO series (Europe/EC) 22

ISO Environmental Standard Core Elements:  Environmental management  Auditing  Performance evaluation  Labeling  Life cycle assessment 23

TQM Encompasses entire organization, from supplier to customer Stresses a commitment by management to have a continuing, companywide drive toward excellence in all aspects of products and services that are important to the customer 24

Deming’s Fourteen Points 1.Create consistency of purpose 2.Lead to promote change 3.Build quality into the product; stop depending on inspection 4.Build long-term relationships based on performance, not price 5.Continuously improve product, quality, and service 6.Start training 7.Emphasize leadership Table

Deming’s Fourteen Points 8.Drive out fear 9.Break down barriers between departments 10.Stop haranguing workers 11.Support, help, improve 12.Remove barriers to pride in work 13.Institute a vigorous program of education and self-improvement 14.Put everybody in the company to work on the transformation Table

Seven Concepts of TQM  Continuous improvement  Six Sigma  Employee empowerment  Benchmarking  Just-in-time (JIT)  Taguchi concepts  Knowledge of TQM tools 27

Continuous Improvement  Represents continual improvement of all processes  Involves all operations and work centers including suppliers and customers  People, Equipment, Materials, Procedures 28

2. Do Test the plan 3. Check Is the plan working? 4. Act Implement the plan 1.Plan Identify the improvement and make a plan Shewhart’s PDCA Model Figure

Six Sigma  Two meanings  Statistical definition of a process that is % capable, 3.4 defects per million opportunities (DPMO)  A program designed to reduce defects, lower costs, and improve customer satisfaction 30

 Two meanings  Statistical definition of a process that is % capable, 3.4 defects per million opportunities (DPMO)  A program designed to reduce defects, lower costs, and improve customer satisfaction Six Sigma Mean Lower limitsUpper limits 3.4 defects/million ±6  2,700 defects/million ±3  Figure

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 32

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 33

Six Sigma Implementation  Emphasize defects per million opportunities as a standard metric  Provide extensive training  Focus on corporate sponsor support (Champions)  Create qualified process improvement experts (Black Belts, Green Belts, etc.)  Set stretch objectives This cannot be accomplished without a major commitment from top level management 34

Employee Empowerment  Getting employees involved in product and process improvements  85% of quality problems are due to process and material  Techniques  Build communication networks that include employees  Develop open, supportive supervisors  Move responsibility to employees  Build a high-morale organization  Create formal team structures 35

Quality Circles  Group of employees who meet regularly to solve problems  Trained in planning, problem solving, and statistical methods  Often led by a facilitator  Very effective when done properly 36

Use internal benchmarking if you’re big enough Benchmarking Selecting best practices 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 37

Benchmarking Factors for Web Sites Use of meta tags Yes: 70%, No: 30% Meaningful homepage title Yes: 97%, No: 3% Unique domain name Yes: 91%, No: 9% Search engine registration Above 96% Average loading speed 28K: 19.31, 56K: 10.88, T1: 2.59 Average number of spelling errors 0.16 Visibility of contact information Yes: 74%, No: 26% Presence of search engine Yes: 59%, No: 41% Translation to multiple languages Yes: 11%, No: 89% Table

Best Practices for Resolving Customer Complaints  Make it easy for clients to complain  Respond quickly to complaints  Resolve complaints on first contact  Use computers to manage complaints  Recruit the best for customer service jobs 39

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 40

Just-in-Time (JIT)  ‘Pull’ system of production scheduling including supply management  Production only when signaled  Allows reduced inventory levels  Inventory costs money and hides process and material problems  Encourages improved process and product quality 41

Just-In-Time (JIT) Example Scrap Unreliable Vendors Capacity Imbalances Work in process inventory level (hides problems) 42

Just-In-Time (JIT) Example Reducing inventory reveals problems so they can be solved Scrap Unreliable Vendors Capacity Imbalances 43

Takumi A Japanese character that symbolizes a broader dimension than quality, a deeper process than education, and a more perfect method than persistence 44

Taguchi Concepts  Engineering and experimental design methods to improve product and process design  Identify key component and process variables affecting product variation  Taguchi Concepts  Quality robustness  Quality loss function  Target-oriented quality 45

Quality Robustness  Ability to produce products uniformly in adverse manufacturing and environmental conditions  Remove the effects of adverse conditions  Small variations in materials and process do not destroy product quality

Quality Loss Function  Shows that costs increase as the product moves away from what the customer wants  Costs include customer dissatisfaction, warranty and service, internal scrap and repair, and costs to society  Traditional conformance specifications are too simplistic Target- oriented quality 47

Unacceptable Poor Good Best Fair Quality Loss Function High loss Loss (to producing organization, customer, and society) Low loss Frequency LowerTargetUpper Specification Target-oriented quality yields more product in the “best” category Target-oriented quality brings product toward the target value Conformance-oriented quality keeps products within 3 standard deviations Figure 6.5 L = D 2 C where L =loss to society D =distance from target value C =cost of deviation 48

 Global Company Profile: Arnold Palmer Hospital  Quality and Strategy  Defining Quality  Implications of Quality  Malcolm Baldrige National Quality Award  Cost of Quality (COQ)  Ethics and Quality Management Summary of this session 49

 International Quality Standards  ISO 9000  ISO14000 Summary of this session (Contd.) 50

 Total Quality Management  Continuous Improvement  Six Sigma  Employee Empowerment  Benchmarking  Just-in-Time (JIT)  Taguchi Concepts  Knowledge of TQM Tools Summary of this session (Contd.) 51

THANK YOU 52