1. 6 Managing Quality PowerPoint presentation to accompany
Heizer and Render
Operations Management, Eleventh Edition
Principles of Operations Management, Ninth Edition
PowerPoint slides by Jeff Heyl
© 2014 Pearson Education, Inc.

2. Outline
Defining Quality
Total Quality Management
Tools of TQM

3. Defining quality Malcolm Baldrige National Quality Award ISO 9000
Cost of Quality

4. Defining Quality
An operations manager’s objective is to build a total quality management system that identifies and satisfies customer needs

5. 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

6. Malcolm Baldrige National Quality Award
President Ronald Regan signed legislation mandating a nationwide study of productivity in 1982.
The final recommendation was that “a national quality award be presented annually to those firms that successfully challenge and meet the award requirements”.
Established in 1987 by Department of Commerce
Goal is to help companies review and structure their quality programs 6

7. Malcolm Baldrige National Quality Award
Four Key Characteristics
Focuses on business results
Nonprescriptive and adaptable
Supports company-wide alignment of goals and processes
Permits goal-based diagnosis

8. Baldrige Criteria Applicants are evaluated on: CATEGORIES POINTS
Leadership
120
Strategic Planning 85
Customer Focus
Measurement, Analysis, and Knowledge Management 90
Workforce Focus
Operations Focus
Results
450

9. ISO 9000 International Quality Standards
International recognition
A prerequisite for global competition
Series of standards by the International Organization for Standardization (ISO)
Adopted in 1987
Over one million certifications in 178 countries
First-time registration fee ranges from $0.25~$1 million
Process takes from 3~24 months

10. ISO 9000 International Quality Standards
ISO 9000 directs you to "document what you do and then do as you documented”
Encourages quality management procedures, detailed documentation, work instructions, and recordkeeping
Example: Du Pont
Increase on-time delivery from 70% to 90%
Decrease cycle time from 15 days to 1.5 days
Increase first-pass yields from 72% to 92%

11. ISO 9000:2008 International Quality Standards
Focus is for companies to document their quality systems in a series of manuals to facilitate trade through supplier conformance
Standards are very broad and nonspecific, so they can be adapted to many different industries and cultures
Recognized international quality standard that businesses can follow

12. ISO 9000 International Quality Standards
Management principles
Top management leadership
Customer satisfaction
Continual improvement
Involvement of people
Process analysis
Use of data-driven decision making
A systems approach to management
Mutually beneficial supplier relationships

13. Costs of Quality Prevention Costs Appraisal Costs
Costs associated with preventing defects and limiting failure and appraisal costs (e.g., training, improvement projects, data gathering, analysis)
Prevention Costs
Appraisal Costs
Costs resulting from inspection used to assess quality levels (e.g. material inspection, inspection staff salaries, development of test procedure.)
Internal Failure Costs
Costs from defects found before delivery to the customer (e.g., rework, scrapped material, etc.)
External Failure Costs
Costs associated with defects found after delivery to customer (e.g., warranty, recall, etc.)

14. Decision Question 1
1. Sanford Corp. bought new technological systems to inspect the quality of products as they come off the production line. The expense of operating these systems would be an example of which of the following types of quality-related costs? 
A. Internal failure cost B. Appraisal cost C. External failure cost D. Prevention cost

15. Discussion Question 2
2. Xanadu Inc. decided to increase the training received by new employees. The expense of this training is an example of which of the following costs of quality:
  A. Appraisal costs B. External failure costs C. Internal failure costs D. Prevention costs E. Quality control costs

16. Discussion Question 3
3. All of the following represent external failure cost except the cost of: 
A. Scrapping defective raw material B. Repairing items covered by warranty C. Replacing defective items found by customers D. Loss of goodwill and reputation

17. Total quality management
Plan-Do-Check-Act
Six Sigma
Employee Empowerment
Benchmarking

18. Total Quality Management (TQM)
An integrated business management strategy aimed at embedding awareness of quality in all organizational processes
Developed by Edwards Deming, Joseph Juran and Armand Feigenbaum in the 1950s
Become popular in the 1980s
Encompasses entire organization from supplier to customer.
Quality is customer-driven.

19. Continuous Improvement
Never-ending process of continual improvement
Covers people, equipment, materials, procedures
Every operation can be improved

20. Plan-Do-Check-Act Originally called Shewhart cycle
Renamed by Japanese in 1950
Plan-do-check-act cycle (Deming wheel or cycle):
sequence to solve problems and improve over time
Plan: identify problem and actions for improvement
Do: implement formulated plan
Check: monitor results
Act: take corrective action
Act
Plan
Check Do

21. Six Sigma
Introduction Video
Six Sigma at Caterpillar

22. Six Sigma Key players Master black belt: Black belt Green belt
Highest level
Ensuring consistent application of Six Sigma across various functions and departments
Black belt
Operate under Master Black Belts to specific projects
Green belt
Lowest level
Part-time job on Six Sigma; devote the rest of time on regular duties

23. Six Sigma
Quality improvement through elimination of defects and variation
Developed by Bill Smith, a reliability engineer in Motorola, Inc., in 1987
Applied by General Electric, Ford Motor Company, Citibank, Xerox, Bank of America, Caterpillar, Raytheon
Standard deviation: statistical measure of variation
Sigma Level
Defects per Million 2σ
308,537 3σ
66,807 4σ
6,210 5σ
233 6σ
3.4

24. 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, save time, and improve customer satisfaction
A comprehensive system for achieving and sustaining business success

25. Six Sigma: DMAIC Approach
Five-step Process Improvement Model
Defines the project’s purpose, scope, and outputs, identifies the required process information keeping in mind the customer’s definition of quality
Measures the process and collects data
Analyzes the data ensuring repeatability and reproducibility
Improves by modifying or redesigning existing processes and procedures
Controls the new process to make sure performance levels are maintained

26. Employee Empowerment
Add responsibility and authority to the lowest level employees
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

27. Benchmarking
A Benchmark is an organization recognized for its exemplary operational performance.
Why?
The worst thing for a business is a weak competitor.
Openness provides an impetus to continual improvement
Openness can create psychological barriers to competition.

28. Benchmarking Benchmarking is defined as OR
Measuring your performance against that of best-in-class companies
Determining how the best-in-class achieve those performance levels
Using the information as a basis for you own company’s targets, strategies and implementation. OR
The search of industry best practices that lead to superior performance

29. Benchmarking Do not benchmark only within your industry!
Xerox uses many benchmarks:
Employee involvement: Procter & Gamble
Quality process: Florida Power and light, Toyota
High-volume production: Kodak, Canon
Billing collection: American Express
Research and development: AT&T, Hewlett-Packard
Distribution: L.L. Bean, Hershey Foods
Daily scheduling: Cummins Engine

30. Best Practices for Resolving Customer Complaints
Table 6.3
BEST PRACTICE
JUSTIFICATION
Make it easy for clients to complain
It is free market research
Respond quickly to complaints
It adds customers and loyalty
Resolve complaints on first contact
It reduces cost
Use computers to manage complaints
Discover trends, share them, and align your services
Recruit the best for customer service jobs
It should be part of formal training and career advancement

31. 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

32. Benchmarking Purposes of Benchmarking Learning from success
Borrowing ideas
Best-in-firm
Beating industry standards
Best-in-class
National leadership
Best-in-world

33. Benchmarking
Benchmarking Purpose and Quality Maturity

34. Discussion Question 4
Although benchmarking is a popular management technique, many firms are not engaged in the benchmarking process.
Why do you think that some firms avoid benchmarking? Are any of the reasons valid? Why or why not?

35. Video: Culture of Quality at Arnold Palmer Hospital
Why is it important for hospital to get a patient’s assessment of health care quality?
Does the patient have the expertise to judge the health care she receives?
How could you build a culture of quality in an organization, such as Arnold Palmer Hospital?
What techniques does APH practice in its drive for quality and continuous improvement?

36. Tools of tqm Check Sheets Scatter Diagrams Cause-and-effect Diagrams
Pareto charts
Flowcharts
Histograms
Statistical process control (SPC)

37. TQM Tools Tools for Generating Ideas Tools to Organize the Data
Check Sheet
Scatter Diagram
Cause-and-Effect Diagram
Tools to Organize the Data
Pareto Chart
Flowchart (Process Diagram)
Tools for Identifying Problems
Histogram
Statistical Process Control Chart

38. Seven Tools of TQM
(a) Check Sheet: Tool for collecting, organizing and displaying data to uncover patterns
Hour
Defect A B C / / / /
Figure 6.6

39. Seven Tools of TQM
(b) Scatter Diagram: Used to examine the relationship between variables
Scatter plot of the relationship between conformance data and prevention and appraisal quality related costs

40. Seven Tools of TQM
(c) Cause-and-Effect Diagram: A tool that identifies process elements (causes) that might effect an outcome
Cause
Materials
Methods
Manpower
Machinery
Effect
Figure 6.6

42. Discussion Question 5
Prepare a fish-bone chart explaining how a pizza delivery can arrive late on a Friday or Saturday

43. Seven Tools of TQM
(d) Pareto Analysis: Separates the critical few form the trivial many
Indentify categories about which to collect data
Gather data and calculate frequency of observations
Sort into descending order
by percentage
4. Graph and identify the
few areas that account
for most of the variation
Frequency
Percent
A B C D E

44. Seven Tools of TQM

45. Seven Tools of TQM
(e) Flowchart (Process Diagram): A chart that describes the steps in a process
Figure 6.6

47. Seven Tools of TQM
(f) Histogram: A distribution showing the frequency of occurrences of a variable
A representation of data in a bar chart format
Also used to observe the shape of data.
“How are the data distributed?”

48. Example: The Big City Cafeteria wants to determine the distribution of its sales during lunch time. On a given day the manager randomly selects 40 sales from the sales register receipt. The following table shows the sales (in dollars). Develop a histogram of the sales.
4.51
0.79
4.19
2.29
5.96
3.49
2.25
3.45
2.24
5.25
5.36
1.15
7.28
4.29
3.96
6.79
4.66
3.56
8.22
2.56
3.33
5.55
8.95
2.49
2.26
4.11
6.11
4.56
2.21

49. Seven Tools of TQM
(g) Statistical Process Control Chart: A chart with time on the horizontal axis to plot values of a statistic
Upper control limit
Target value
Lower control limit
Time
Figure 6.6