1. Managing Quality

2. Chapter4, Slide 2 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Managing Quality Quality defined Total cost of quality Strategic Quality –Total quality management (TQM) –Continuous improvement tools Quality assurance –Statistical quality control

3. Chapter4, Slide 3 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Definitions of Quality ASQ: –The characteristics of a product or service that bear on its ability to satisfy stated or implied needs –A product or service free from defects Joseph Juran –Fitness for use How would you evaluate the quality of the following? –Software package –Hand-held vacuum cleaner –No-frills air flight

4. Chapter4, Slide 4 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Defensive Quality Quality analyzed in economic terms  Total Cost of Quality: $ Failure Costs $ Appraisal Costs $ Prevention Costs

5. Chapter4, Slide 5 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Total Cost of Quality — One View

6. Chapter4, Slide 6 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Another View The need for appraisal and prevention costs fall as defect levels decrease

7. Chapter4, Slide 7 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Growth of the Quality Movement Strategic Quality Quality as a Competitive Advantage

8. Chapter4, Slide 8 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Dimensions of Quality Performance Features Reliability Durability Conformance Aesthetics Serviceability Perceived Quality Idea: Firms can actually compete by excelling on selected dimensions.

9. Chapter4, Slide 9 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Dimensions of Quality Performance Features Reliability Durability Conformance Aesthetics Serviceability Perceived Quality Which dimensions do you think are directly affected by Operations and Supply Chain activities?

10. Chapter4, Slide 10 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Total Quality Management (TQM) Managing the entire organization so that it excels in all dimensions important to the customer.  Product development  Marketing  Operations  Support services

11. Chapter4, Slide 11 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield TQM Principles Customer focus Leadership involvement Continuous improvement Employee empowerment Quality assurance (including SQC or SPC) Strategic partnerships Strategic quality plan

12. Chapter4, Slide 12 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Continuous Improvement (CI) versus “Leaps” Forward Performance Time

13. Chapter4, Slide 13 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Common Improvement Tools Process mapping Cause and effect diagrams (aka “Fishbone” or Ishikawa diagrams) Check sheets Pareto analysis Run charts and scatter plots Bar graphs Histograms

14. Chapter4, Slide 14 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Run Charts and Scatter Plots Time Measure Variable Y Variable X Run Scatter

15. Chapter4, Slide 15 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Histograms Frequency Measurements

16. Chapter4, Slide 16 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield A Services Example Flight delays at Midway Cause and Effect Diagrams Check Sheets Pareto Analysis

17. Chapter4, Slide 17 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Problem: Delayed Flights No one is sure why, but plenty of opinions “Management by Fact” CI Tools we will use: –Fishbone diagram –Check sheets –Pareto analysis

18. Chapter4, Slide 18 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Cause and Effect Diagram ASKS: What are the possible causes? Root cause analysis — open and narrow phases

19. Chapter4, Slide 19 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Generic C&E Diagram

20. Chapter4, Slide 20 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Midway C-E diagram

21. Chapter4, Slide 21 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Check Sheets (root cause analysis -- closed phase) Event:Day 1Day 2Day 3 Late arrivalII I Gate occupied Too few agentsII Accepting late passengers IIIIIII

22. Chapter4, Slide 22 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Pareto Analysis (sorted histogram) Late passengers Late arrivals Late baggage to aircraft Weather Other (160) 100 85 70 65

23. Chapter4, Slide 23 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Percent of each out of 480 total incidents... Late passengers 21% Late arrivals 18% Late baggage to aircraft 15% Weather 14% Other 33%

24. Chapter4, Slide 24 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield The PDCA Cycle Plan Do Check Act

25. Chapter4, Slide 25 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Switching Focus... TQM to Quality Assurance “Did we do it right?”

26. Chapter4, Slide 26 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield In the Book We Noted That Organizations Must... Understand which quality dimensions are important Develop products and services that will meet users’ quality needs Put in place business processes capable of meeting these needs Verify that business processes are meeting the specifications

27. Chapter4, Slide 27 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Inspect every item Expensive to do Testing can be destructive, should be simply unnecessary Statistical techniques Statistical process control (SPC) Acceptance Sampling Discovering “problems”

28. Chapter4, Slide 28 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Statistical Process Control “Representative” samples –good, but not perfect, picture Sampling by Variable Sampling by Attribute (good, bad, %?)

29. Chapter4, Slide 29 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Example: Fabric Dyeing Rolls of fabric go through dyeing process Target temperature of 140 degrees Too low... ? Too high... ? Temperature must be “monitored” and action taken when something is “unusual” Is temperature a “variable” or an “attribute”?

30. Chapter4, Slide 30 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Step 1: Sampling the Process Things should be working OK when we do this... Sample12345 1136137144141138 2143138140 139 3140141144137135 4139140141139141 5137138143140138 6142141140139138 7143141143140 8139 141140136 9140138143141136 10139141142140136 Observation

31. Chapter4, Slide 31 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Step 2: Calculate the Mean and Range for Each Sample SampleXR 1139.28 21405 3139.49 41402 5139.26 61404 7141.43 81395 9139.67 10139.66 X = 139.74° R = 5.5°

32. Chapter4, Slide 32 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Step 3: Use These Values to Set Up X and R charts Upper control limit for X chart: UCL X = X+ A2 × R = 142.93 Lower control limit for X chart: LCL X = X – A2 × R = 136.55

33. Chapter4, Slide 33 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Step 3: Use These Values to Set Up X and R charts (cont’d) Upper control limit for R chart: UCL R = D4 × R = 11.605 Lower control limit for R chart: LCL R = D3 × R = 0

34. Chapter4, Slide 34 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Use the Charts to Plot the Following Data... SampleXR 11141.28 121429 1314412 141405 15139.64 16140.85 Out of Contro l Sampl e

35. Chapter4, Slide 35 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Sampling by Attribute Gonzo Pizza is interested in tracking the proportion (%) of late deliveries Like before, you take several samples of say, 50 observations each when things are “typical” For each sample, you calculate the proportion of late deliveries and call this value p. For example: p = (8 late)/(50 deliveries) = 0.16

36. Chapter4, Slide 36 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield For all samples, calculate the average p: 0.16 0.20 0.00 0.14 0.10 Gonzo Pizza (cont’d) p = 0.10

37. Chapter4, Slide 37 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Gonzo Pizza (cont’d) Calculate standard deviation for the p-chart as follows: Where n = size of each sample = 50

38. Chapter4, Slide 38 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Gonzo Pizza (cont’d) And the control limits are: UCL p = p + z × S p = 0.226 LCL p = p – z × S p = – 0.026, or zero Here z is 3, but can be chosen as other values to increase the sensitivity of the chart to changes in the process.

39. Chapter4, Slide 39 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Gonzo Pizza Probably too early to develop control charts since the process is not yet in control (i.e., late deliveries are too high a percentage at present) First, fix the more obvious problem(s), take new samples, then put in place control charts

40. Chapter4, Slide 40 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Process Capability Answers the Question: Can the process provide acceptable quality consistently?

41. Chapter4, Slide 41 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Process Capability Ratio (C p ) Upper Tolerance Limit – Lower Tolerance Limit 6σ6σ Where σ is the estimated standard deviation for the individual observations

42. Chapter4, Slide 42 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Shown Graphically: Process Capability ratio of 1 (99.7% coverage)

43. Chapter4, Slide 43 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield What is the process capability ratio for our dyeing example? What conclusions can you draw?

44. Chapter4, Slide 44 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield “Six Sigma Quality” When a process operates with  6σ variation inside the tolerance limits, only 2 parts out of a million will be unacceptable.

45. Chapter4, Slide 45 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield What would  need to be for us to have “  ” quality ? σ = 20/12 = 1.67 12σ = UTL – LTL = 150 – 130

46. Chapter4, Slide 46 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Process Capability Index (C pk ) Used when the process is not precisely centered Recall, X = 139.8 for the fabric dyeing example

47. Chapter4, Slide 47 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield The Big Picture So how do TQM, continuous improvement, and all these statistical techniques “fit” together?

48. Chapter4, Slide 48 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield 3 Lines of Defense 1)PREVENT defects from occurring  TQM and continuous improvement 2)DISCOVER problems early  Process control charts 3)CATCH DEFECTS before used or shipped  inspection / acceptance sampling

49. Chapter4, Slide 49 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Traditional View of the Cost of Variability Low Spec High Spec Target Spec Cost of Bad Quality $

50. Chapter4, Slide 50 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Big Bob’s Axles... Axles have slightly larger or smaller diameter than target value Wheels have slightly larger or smaller holes than target value ( What are the possible outcomes?

51. Chapter4, Slide 51 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Taguchi’s Quality Loss Function An alternative perspective on the cost of quality

52. Chapter4, Slide 52 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Taguchi’s view of the cost of variability What are the managerial implications? (HINT: think continuous improvement) Low Spec High Spec Target Spec Cost of Bad Quality $