Beni Asllani University of Tennessee at Chattanooga
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1 Beni Asllani University of Tennessee at Chattanooga Chapter 3Quality ManagementOperations Management - 5th EditionRoberta Russell & Bernard W. Taylor, IIIBeni Asllani University of Tennessee at ChattanoogaCopyright 2006 John Wiley & Sons, Inc.
2 Lecture Outline Quality Imperative Meaning of Quality How to Build Quality into your Product—TQM PrinciplesSix SigmaQuality Awards and StandardsCopyright 2006 John Wiley & Sons, Inc.
3 Quality and Productivity I. Market GainsImproved:PerformanceReliabilityFeaturesetc.Improved reputation for qualityIncreased Market shareExperience-based scale economiesIncreased ProfitsHigher PricesCopyright 2006 John Wiley & Sons, Inc.
4 Quality and Productivity II. Cost SavingsIncreasedproductivityLower manufacturing costsImproved reliability or conformanceLower rework and scrap costsIncreased ProfitsLower service costsLower warranty and product liability costsCopyright 2006 John Wiley & Sons, Inc.
5 Cost of Quality Prevention costs Appraisal costs costs incurred during product designAppraisal costscosts of measuring, testing, and analyzingInternal failure costsinclude scrap, rework, process failure, downtime, and price reductionsExternal failure costsinclude complaints, returns, warranty claims, liability, and lost salesCopyright 2006 John Wiley & Sons, Inc.
6 Prevention Costs Quality planning costs Product-design costs costs of developing and implementing quality management programProduct-design costscosts of designing products with quality characteristicsProcess costscosts expended to make sure productive process conforms to quality specificationsTraining costscosts of developing and putting on quality training programs for employees and managementInformation costscosts of acquiring and maintaining data related to quality, and development of reports on quality performanceCopyright 2006 John Wiley & Sons, Inc.
7 Appraisal Costs Inspection and testing Test equipment costs costs of testing and inspecting materials, parts, and product at various stages and at the end of a processTest equipment costscosts of maintaining equipment used in testing quality characteristics of productsOperator costscosts of time spent by operators to gar data for testing product quality, to make equipment adjustments to maintain quality, and to stop work to assess qualityCopyright 2006 John Wiley & Sons, Inc.
8 Internal Failure Costs Scrap costscosts of poor-quality products that must be discarded, including labor, material, and indirect costsRework costscosts of fixing defective products to conform to quality specificationsProcess failure costscosts of determining why production process is producing poor-quality productsProcess downtime costscosts of shutting down productive process to fix problemPrice-downgrading costscosts of discounting poor-quality products—that is, selling products as “seconds”Yield lossDecrease in the number of good units producedCopyright 2006 John Wiley & Sons, Inc.
9 External Failure Costs Customer complaint costscosts of investigating and satisfactorily responding to a customer complaint resulting from a poor-quality productProduct return costscosts of handling and replacing poor-quality products returned by customerWarranty claims costscosts of complying with product warrantiesProduct liability costslitigation costs resulting from product liability and customer injuryLost sales costscosts incurred because customers are dissatisfied with poor quality products and do not make additional purchasesCopyright 2006 John Wiley & Sons, Inc.
10 Process Final testing Customer Where defect is detected Costs of Detecting DefectsCost of detection and correctionProcess Final testing CustomerWhere defect is detectedFigure 6.3Copyright 2006 John Wiley & Sons, Inc.15
11 Percentage Cost Distribution by Category: Watches Appraisal16%Internal failure29%Prevention3%External failure52%Copyright 2006 John Wiley & Sons, Inc.
12 Hidden costs of poor Quality Copyright 2006 John Wiley & Sons, Inc.
13 Measuring and Reporting Quality Costs Index numbersratios that measure quality costs against a base valuelabor indexratio of quality cost to labor hourscost indexratio of quality cost to manufacturing costsales indexratio of quality cost to salesproduction indexratio of quality cost to units of final productCopyright 2006 John Wiley & Sons, Inc.
14 Meaning of Quality Webster’s Dictionary American Society for Quality degree of excellence of a thingAmerican Society for Qualitytotality of features and characteristics that satisfy needsConsumer’s and Producer’s PerspectiveCopyright 2006 John Wiley & Sons, Inc.
15 The Meaning of Quality QUALITY QUALITY OF PERFORMANCE QUALITY OF DESIGNQUALITY OF CONFORMANCECopyright 2006 John Wiley & Sons, Inc.
16 Meaning of Quality: Consumer’s Perspective Fitness for usehow well product or service does what it is supposed toQuality of designdesigning quality characteristics into a product or serviceA Mercedes and a Ford are equally “fit for use,” but with different design dimensionsCopyright 2006 John Wiley & Sons, Inc.
17 Dimensions of Quality: Manufactured Products PerformanceFeaturesReliabilityConformanceDurabilityServiceabilityAestheticsSafetyPerceptionsCopyright 2006 John Wiley & Sons, Inc.
18 Dimensions of Quality: Service Time and TimelinessCompletenessCourtesyConsistencyAccessibility and convenienceAccuracyResponsivenessCopyright 2006 John Wiley & Sons, Inc.
19 Meaning of Quality: Producer’s Perspective Quality of ConformanceMaking sure a product or service is produced according to designIt is defect-freeMeeting specifications consistentlyCopyright 2006 John Wiley & Sons, Inc.
20 Producer’s Perspective Consumer’s Perspective Meaning of QualityFitness forConsumer UseProducer’s PerspectiveConsumer’s PerspectiveQuality of ConformanceConformance to specificationsCostQuality of DesignQuality characteristicsPriceMarketingProductionMeaning of QualityCopyright 2006 John Wiley & Sons, Inc.
21 TQM Wheel Customer satisfaction Figure 6.1 This slide presents the TQM Wheel from page This can be left on the screen while you discuss whatever aspects of the wheel you choose. The Employee Involvement section is presented in more detail on a subsequent slide.Figure 6.1Copyright 2006 John Wiley & Sons, Inc.2
22 Total Quality Management Commitment to quality throughout organizationPrinciples of TQMCustomer-orientedLeadershipStrategic planningEmployee responsibilityContinuous improvementCooperationStatistical methodsTraining and educationCopyright 2006 John Wiley & Sons, Inc.
23 Deming Wheel: PDCA Cycle 1. PlanIdentify problem and develop plan for improvement.2. DoImplement plan on a test basis.3. Study/CheckAssess plan; is it working?4. ActInstitutionalize improvement; continue cycle.Copyright 2006 John Wiley & Sons, Inc.
24 Quality Improvement and Role of Employees Participative problem solvingKaizan, involving employees in continuous improvementQuality circlesProcess improvement teamsCopyright 2006 John Wiley & Sons, Inc.
25 Quality Circle Organization Training Presentation ImplementationMonitoringSolutionProblem resultsProblem AnalysisCause and effectData collection and analysisProblem IdentificationList alternativesConsensusBrainstormingTrainingGroup processesData collectionProblem analysisOrganization8-10 membersSame areaSupervisor/moderatorCopyright 2006 John Wiley & Sons, Inc.
26 Seven Quality Control Tools Pareto AnalysisFlow ChartCheck SheetHistogramScatter DiagramSPC ChartCause-and-Effect DiagramCopyright 2006 John Wiley & Sons, Inc.
27 Pareto Analysis NUMBER OF CAUSE DEFECTS PERCENTAGE Poor design 80 64 % Wrong part dimensions 16 13Defective parts 12 10Incorrect machine calibration 7 6Operator errors 4 3Defective material 3 2Surface abrasions 3 2%Copyright 2006 John Wiley & Sons, Inc.
28 Percent from each cause Causes of poor qualityMachine calibrationsDefective partsWrong dimensionsPoor DesignOperator errorsDefective materialsSurface abrasions10203040506070(64)(13)(10)(6)(3)(2)Pareto ChartCopyright 2006 John Wiley & Sons, Inc.
29 Cause-and-Effect Diagram QualityProblemOut of adjustmentTooling problemsOld / wornMachinesFaultytesting equipmentIncorrect specificationsImproper methodsMeasurementPoor supervisionLack of concentrationInadequate trainingHumanDeficienciesin product designIneffective qualitymanagementPoor process designProcessInaccuratetemperaturecontrolDust and DirtEnvironmentDefective from vendorNot to specificationsMaterial-handling problemsMaterialsCopyright 2006 John Wiley & Sons, Inc.
30 Six SigmaA process for developing and delivering near perfect products and servicesMeasure of how much a process deviates from perfection3.4 defects per million opportunitiesChampionan executive responsible for project successCopyright 2006 John Wiley & Sons, Inc.
31 Black Belts and Green Belts project leaderMaster Black Belta teacher and mentor for Black BeltsGreen Beltsproject team membersCopyright 2006 John Wiley & Sons, Inc.
32 Six Sigma: DMAIC DEFINE MEASURE ANALYZE IMPROVE CONTROL 67,000 DPMO cost = 25% of sales3.4 DPMOCopyright 2006 John Wiley & Sons, Inc.
33 Baldrige AwardCreated in 1987 to stimulate growth of quality management in the United StatesCategoriesLeadershipInformation and analysisStrategic planningHuman resourceFocusProcess managementBusiness resultsCustomer and market focusCopyright 2006 John Wiley & Sons, Inc.
34 ISO 9000A set of procedures and policies for international quality certification of suppliersStandardsISO 9000:2000Quality Management Systems—Fundamentals and Vocabularydefines fundamental terms and definitions used in ISO 9000 familyISO 9001:2000Quality Management Systems—Requirementsstandard to assess ability to achieve customer satisfactionISO 9004:2000Quality Management Systems—Guidelines for Performance Improvementsguidance to a company for continual improvement of its quality-management systemCopyright 2006 John Wiley & Sons, Inc.
35 Implications of ISO 9000 for U.S. Companies Many overseas companies will not do business with a supplier unless it has ISO 9000 certificationISO 9000 accreditationISO registrarsA total commitment to quality is required throughout an organizationCopyright 2006 John Wiley & Sons, Inc.