B370 Operations Management

1. B370 Operations Management Group 2 Tutorial 3 C.S. Lai May 2012 B370 Operations Management

2. Agenda Q & A 15 mins. What is Quality 30 mins. Why Quality is important 30 mins. How to make Quality happens 30 mins. Q & A 15 mins. B370 Operations Management

3. WHAT IS QUALITY? B370 Operations Management

4. Discussion • Identify a quality product/service • Discuss WHY you think its quality is better than competitions B370 Operations Management

5. Performance Top speed Features Fuel economy Durability Life span Reliability MTBF Serviceability Ease/cost to repair Conformance Safety Compliance Aesthetics subjective!! Perceived quality Brand The Eight Dimensions of Quality Garvin 1987 B370 Operations Management

6. Quality, what the gurus said: “Conformance to requirements” Crosby “Fitness for use” Juran “Pride of workmanship”, “a predictable degree of uniformity and dependability at low cost and suited to the market” Deming “A subjective term for which each person has his or her own definition.” “In technical usage, quality can have two meanings: 1. the characteristics of a product or service that bear on its ability to satisfy stated or implied needs. 2. a product or service free of deficiencies. ASQ B370 Operations Management

7. Total Quality Management (TQM)Defined • Total quality management is defined as managing the entire organization so that it excels on all dimensions of products and services that are important to the customer. B370 Operations Management

8. Discussion • Who is responsible for quality? • What is the Quality Manager’s role in implementing TQM? B370 Operations Management

9. 2011 HKMA Quality Award –the Hong Kong equivalent to the Malcolm Baldrige Award • 1.0 Leadership (120 points) • 2.0 Strategic Planning (85 points) • 3.0 Customer Focus (85 points) • 4.0 Measurement, Analysis, and Knowledge Management (90 points) • 5.0 Workforce Focus (85 Points) • 6.0 Process Management (85 points) • 7.0 Results (450 points) Source: www.hkma.org.hk/qa B370 Operations Management

10. 2011 HKMA Quality Award –the Hong Kong equivalent to the Malcolm Baldrige Award Source: www.hkma.org.hk B370 Operations Management

11. MTR Ricoh Office Solutions COSCO, Hsin Chong Real Estate Management Ltd, KMB PARNnSHOP Glorious Sun Enterprises Ltd, The Hong Kong and China Gas Co Ltd McDonald's Restaurants (Hong Kong) Ltd, MTR Corporation Island Shangri-La, Hong Kong KCRC Integrated Solutions Limited Mandarin Oriental Hotel Group Fuji Xerox (Hong Kong) Ltd Eurasia CLP Power Manfield Coatings Co. Ltd. Source: www.hkma.org.hk Past Award Winners B370 Operations Management

12. Characteristics of the Award Winners • The companies formulated a vision of what they thought quality was and how they would achieve it. • Senior management was actively involved. • Companies carefully planned and organized their quality effort to be sure it would be effectively initiated. • They vigorously controlled the overall process. B370 Operations Management

13. ISO 9000 • Series of standards agreed upon by the International Organization for Standardization (ISO) • Adopted in 1987 • More than 100 countries • A prerequisite for global competition? • ISO 9000 directs you to "document what you do and then do as you documented." B370 Operations Management

14. ISO 9000 in Brief • ISO 9000 has become an international reference for quality management requirements in business-to-business dealings. • The ISO 9000 family is primarily concerned with "quality management". This means what the organization does to fulfil: - the customer's quality requirements, and - applicable regulatory requirements, while aiming to - enhance customer satisfaction, and - achieve continual improvement of its performance in pursuit of these objectives. B370 Operations Management

15. ISO 9000 in Brief "generic management system standards“: • "Generic" means that the same standards can be applied: - to any organization, large or small, whatever its product - including whether its "product" is actually a service, - in any sector of activity, and - whether it is a business enterprise, a public administration, or a government department. B370 Operations Management

16. ISO 9000 in Brief • "Generic" also signifies that no matter what the organization's scope of activity, if it wants to establish a quality management system, then such a system has a number of essential features for which the relevant standards of the ISO 9000 families provide the requirements. • "Management system" refers to the organization's structure for managing its processes - or activities - that transform inputs of resources into a product or service which meet the organization's objectives, such as satisfying the customer's quality requirements, complying to regulations, or meeting environmental objectives. Source: http://www.iso.org B370 Operations Management

17. Three Forms of ISO Certification First party: A firm audits itself against ISO 9000 standards. Second party: A customer audits its supplier. Third party: A "qualified" national or international standards or certifying agency serves as auditor. B370 Operations Management

18. ISO 9000 versus the Baldrige Award • Which should we pursue first? • What are the differences between the two? • Do you have to be ISO 9000 certified before going for the Baldrige Award? B370 Operations Management

19. WHY QUALITYIS IMPORTANT? B370 Operations Management

20. Quality vs. Productivity vs. Price vs. Profitability • Is there a tradeoff? • What is quality and what is productivity? • How can you increase productivity? • How can you increase quality? • Can you think of any examples? B370 Operations Management

21. Appraisal Costs Costs of Quality External Failure Costs Prevention Costs Internal FailureCosts Costs of Quality (Crosby) B370 Operations Management

22. HOW TO MAKEQUALITYHAPPENS? B370 Operations Management

23. 4 Eras of Quality Management • 1800s -1900s – Inspection • 1920s - 1950s – SPC • 1950s - 1960s – Quality Assurance, TQC, Zero Defects, COQ. • 1960s - 1990s – Strategic Quality Management B370 Operations Management

24. Continuous Improvement (CI) • Management's view of performance standards of the organization • performance level of the firm as something to be "continuously challenged and incrementally upgraded." • The way management views the contribution and role of its workforce • believe employee involvement and team efforts are the key to improvement B370 Operations Management

25. 1. Plan a change aimed at improvement. 4. Institutionalize the change or abandon or do it again. 4. Act 1. Plan 3. Check 2. Do 3. Study the results; did it work? 2. Execute the change. CI Methodology: PDCA Cycle (Deming Wheel) B370 Operations Management

26. Quality Improvement Activity – the use of other QC tools • Process Flowchart • Pareto Analysis • Run Chart • Histogram • Scatter Diagram • Check Sheet • Fishbone Diagram • Control Charts B370 Operations Management

27. Benchmarking 1. Identify those processes needing improvement. 2. Identify a firm that is the world leader in performing the process. 3. Contact the managers of that company and make a personal visit to interview managers and workers. 4. Analyze data. B370 Operations Management

28. The Shingo System – Poka-Yoke • Shingo’s argument: • SQC methods do not prevent defects • Defects arise when people make errors • Defects can be prevented by providing workers with feedback on errors • Poka-Yoke includes: • Checklists • Special tooling that prevents workers from making errors B370 Operations Management

29. Poka-yoke exercises • Problem 1: Wrong staff ID entered into computer. • Problem 2: Packaging worker forgot/miss to insert the spoon into the seasoning powder. • Problem 3: OUHK student forgot to answer part of a TMA question. B370 Operations Management

30. Statistical Process Control(SPC) B370 Operations Management

31. Process Capability and Statistical Quality Control • Process Variation • Process Capability • Process Control Procedures • Variable data • Attribute data • Acceptance Sampling • Operating Characteristic Curve B370 Operations Management

32. Basic Forms of Variation • Assignable variation is caused by factors that can be clearly identified and possibly managed. • Common variation is inherent in the production process. B370 Operations Management

33. High High Incremental Cost of Variability Incremental Cost of Variability Zero Zero Lower Spec Target Spec Upper Spec Lower Spec Target Spec Upper Spec Traditional View Taguchi’s View Taguchi’s View of Variation B370 Operations Management

34. Process Capability • Process limits • Tolerance limits • How do the limits relate to one another? B370 Operations Management

35. Process Capability Index, Cpk Capability Index shows how well parts being produced fit into design limit specifications. As a production process produces items small shifts in equipment or systems can cause differences in production performance from differing samples. Shifts in Process Mean B370 Operations Management

36. Types of Statistical Sampling • Attribute (Go or no-go information) • Defectives refers to the acceptability of product across a range of characteristics. • Defects refers to the number of defects per unit which may be higher than the number of defectives. • p-chart application • Variable (Continuous) • Usually measured by the mean and the standard deviation. • X-bar and R chart applications B370 Operations Management

37. UCL Statistical Process Control (SPC) Charts Normal Behavior LCL 1 2 3 4 5 6 Samples over time UCL Possible problem, investigate LCL 1 2 3 4 5 6 Samples over time UCL Possible problem, investigate LCL 1 2 3 4 5 6 Samples over time B370 Operations Management

38. Control Limits are based on the Normal Curve x m z -3 -2 -1 0 1 2 3 Standard deviation units or “z” units. B370 Operations Management

39. x LCL UCL Control Limits We establish the Upper Control Limits (UCL) and the Lower Control Limits (LCL) with plus or minus 3 standard deviations. Based on this we can expect 99.7% of our sample observations to fall within these limits. 99.7% B370 Operations Management

40. Example of x-Bar and R Charts: Required Data B370 Operations Management

41. Example of x-bar and R charts: Step 1. Calculate sample means, sample ranges, mean of means, and mean of ranges. B370 Operations Management

42. Example of x-bar and R charts: Step 2. Determine Control Limit Formulas and Necessary Tabled Values From Exhibit TN7.7 B370 Operations Management

43. UCL LCL Example of x-bar and R charts: Steps 3&4. Calculate x-bar Chart and Plot Values B370 Operations Management

44. Example of x-bar and R charts: Steps 5&6. Calculate R-chart and Plot Values UCL LCL B370 Operations Management

45. Basic Forms of Statistical Sampling for Quality Control • Acceptance Sampling is sampling to accept or reject the immediate lot of product at hand • Statistical Process Control is sampling to determine if the process is within acceptable limits

46. Acceptance Sampling • Purposes • Determine quality level • Ensure quality is within predetermined level • Advantages • Economy • Less handling damage • Fewer inspectors • Upgrading of the inspection job • Applicability to destructive testing • Entire lot rejection (motivation for improvement)

47. Acceptance Sampling (Continued) • Disadvantages • Risks of accepting “bad” lots and rejecting “good” lots • Added planning and documentation • Sample provides less information than 100-percent inspection

48. Acceptance Sampling: Single Sampling Plan A simple goal Determine (1) how many units, n, to sample from a lot, and (2) the maximum number of defective items, c, that can be found in the sample before the lot is rejected

49. Risk • Acceptable Quality Level (AQL) • Max. acceptable percentage of defectives defined by producer • Thea (Producer’s risk) • The probability of rejecting a good lot • Lot Tolerance Percent Defective (LTPD) • Percentage of defectives that defines consumer’s rejection point • The  (Consumer’s risk) • The probability of accepting a bad lot

50. 1 0.9 a = .05 (producer’s risk) 0.8 0.7 n = 99 c = 4 0.6 0.5 Probability of acceptance 0.4 =.10 (consumer’s risk) 0.3 0.2 0.1 0 1 2 3 4 5 6 7 8 9 10 11 12 AQL LTPD Percent defective Operating Characteristic Curve The OCC brings the concepts of producer’s risk, consumer’s risk, sample size, and maximum defects allowed together The shape or slope of the curve is dependent on a particular combination of the four parameters