Chapter 9 Quality Improvement

1. KVANLI PAVUR KEELING Chapter 9Quality Improvement

2. Chapter Objectives • At the completion of this chapter, you should be able to: ∙ Explain the basic concepts of total quality management and Six Sigma ∙ Explain the history, intent, and criteria associated with the Malcolm Baldrige National Quality Award ∙ Understand the reason for, and the construction of, flowcharts and cause-and-effect diagrams

3. Chapter Objectives - Continued • At the completion of this chapter, you should be able to: ∙ Construct and R charts ∙ Detect nonrandom patterns in charts ∙ Construct p charts and c charts ∙ Determine capability ratios Cp, Cpk, and Cpm

4. A First Look at Quality Improvement • What if you could be 99% mistake-free in your job? • How about 99.9%? • In many job areas, that is just good enough to get you a place in the unemployment line • If 99.9% was good enough, then . . .

5. A First Look at Quality Improvement • 22,000 checks per hour would be deducted from the wrong bank accounts • Two million documents would be lost by the IRS this year • 12 babies born today would be given to the wrong parents • 18,322 pieces of mail would be mishandled in the next hour • 20,000 drug prescriptions would be written incorrectly this year

6. Quality Improvement: The Past • In the past, the “Doing business as usual” and “If it ain’t broke, don’t fix it” philosophies prevailed for too long • New ideas require change • Change means more work, and we all seem to have enough work • It has become clear to an increasing number of both manufacturing and service organizations that what worked in the past may not be the ideal path for the twenty-first century

7. Quality Improvement: The Past • Quality improvement hit center stage in the 1970s, when U.S. industry was faced with increased competition from the Japanese on the basis of product quality, price, and overall product reliability • In the 1980s, defect prevention (largely spearheaded by the U.S. automotive industry) rapidly evolved and expanded • The early results were favorable, spurring additional expansion of the quality movement

8. Quality Improvement: The Present • A large number of organizations have been quiet on the subject of quality improvement simply because quality control and statistical process control (SPC) are already integrated into the business strategy • Quality concepts, tools, and methods have been intertwined with the work of the organization, and use of this methodology has become part of the job

9. Quality Improvement: The Future • Even as we continue to use command-and-control techniques in our organizations, the emphasis in the twenty-first century is shifting toward allowing greater freedom • Layer after layer of bureaucracy and hierarchy is being stripped away, allowing for ever-increasing creativity and productivity • It has taken organizations a long time to realize that the level of external customer satisfaction is related to the level of employee satisfaction • As a result, discussion of quality improvement can no longer set aside the social, psychological, and emotional needs of employees

10. Total Quality Management (TQM) • Total Quality Management (TQM) got a lot of press in the 1990’s • It is a very customer-focused strategy • It stresses employee empowerment (employees are trying to do the best job they can so leave them alone and let them concentrate on finding improvements)

11. What’s Not to Like About TQM? • Many firms have soured on TQM due to ∙ Unrealistic expectations ∙ Lack of understanding ∙ Quick-fix mentality ∙ Competition from other tools • It was expected to turn lead into gold and reverse poor performance • Often TQM efforts were measured against short-term financial performance and when short-term improvements did not materialize, many firms became disillusioned

12. New Kid on the Block • TQM evolved into Six Sigma • Six Sigma goes beyond TQM and focuses on a company’s bottom line • It does this by requiring a clearly visible return on investment • It requires companies to make improvements in reducing waste and reducing system failure rates

13. Six Sigma • Six Sigma is a very structured approach to solving problems • It uses sound statistical methods and hard facts • Six Sigma originated at Motorola in the mid 1980’s • The primary goal of Six Sigma is to improve customer satisfaction and as a result, profitability

14. Implementing Six Sigma • Implementation of Six Sigma involves a five-phase improvement cycle, referred to as DMAIC (pronounced “duh-MAY-ick”) • DMAIC is an acronym for the following five activities: • Define the problem and requirements • Measure key internal processes and determine the capability of each process • Analyze the data collected and search out opportunities for improvement • Improve the target process • Control the process and correct problems

15. Summary of Six Sigma • Six Sigma provides companies with a methodology and philosophy for minimizing mistakes and maximizing value • The quality improvement philosophy is that all business organizations and individuals have room to improve • When used properly, the Six Sigma approach can dramatically reduce costs, improve efficiency, and maximize customer satisfaction in all operations within the company

16. Some Key Definitions • What is “quality”? • Everyone has their own definition here, including ∙ meets or exceeds the needs and expectations of the customer ∙ general excellence ∙ is fit for its intended use, such as a machined part that must be the correct size

17. Some Key Definitions • Process: Any combination of people, machinery, materials, and methods that is intended to produce a product or service • The goal of Quality Improvement is to continually improve the process • Quality Characteristic: What you measure to determine if, in fact, you have improved quality Examples: durability, taste, no. of complaints

18. Some Key Definitions • Variation: This is a key component of product quality and consists of two types: ∙ chance variation (the process is stable) ∙ variation due to an assignable cause (the process has become unstable) • If the process becomes unstable, something is wrong and you need to find out what the problem is

19. Some Key Definitions • Control Chart: A statistical tool that is used to monitor a process to determine if the process is in control (stable) or out of control (unstable) • Statistical Process Control(SPC): Measuring and analyzing process variation • The key tool used in SPC is a variety of control charts • We will discuss four of these charts

20. Malcolm Baldrige Award • The Malcolm Baldrige National Quality Award (MBNQA) is the U.S. annual quality award and was established by Congress in 1987 • The award was named after the former Secretary of Commerce, who was killed in a rodeo accident earlier the same year • In 1998, Baldrige Awards were expanded to include nonprofit education and health care sectors • Not-for-profit organizations (including government agencies) were added in 2007

21. Malcolm Baldrige Award • There can be at most two winners each year within each of three business categories: ∙ manufacturing companies ∙ small businesses ∙ service companies • Recent winners of the MBNQA are shown on the next slide

22. Malcolm Baldrige Award Manufacturing Companies Small Business Service Companies 2003 Medrad, Inc. Stoner, Inc. Boeing Aereospace Support Caterpillar Financial Services Corp., U.S. 2004 The Bama Companies, Inc. Texas Nameplate Company, Inc. 2005 Sunny Fresh Foods, Inc. Park Place Lexus DynMcDermottPetroleun Operations 2006 MESA Products, Inc. Premier, Inc. 2007 PRO-TEC Coating Co.

23. Seven Categories in the Malcolm Baldrige Award • Leadership (120 points) • Strategic planning (85 points) • Customer and market focus (85 points) • Measurement, analysis, knowledge management (90 points) • Workforce focus (85 points) • Process management (85 points) • Results (450 points) Nearly half of the 1000 points!

24. ISO 9000 • The next thing to come along was ISO 9000 registration • As the emerging global economy invites new and expanded international trade and business, corporations are finding that continued success requires doing business beyond the borders of their host country

25. ISO 9000 • Revised in 2000, the ISO 9000 standards now represent the worldwide benchmark standards for process quality systems • ISO 9000 does not specify how business and industry processes must be performed but instead defines required actions that must be carried out within those processes to ensure quality products

26. ISO 9000/ISO 9001 • The intent of ISO 9000 (more recently, ISO 9001) is to shift an organization’s focus from functional management thinking to process management thinking • It is structured to facilitate the idea that all processes are linked within the company • Registration to ISO 9001 standards is increasingly becoming a prerequisite for doing business worldwide

27. Quality Improvement Tools • The main statistical tools used in quality improvement are ∙ Histograms (discussed in Chapter 2) ∙ Control charts (discussed in this chapter) ∙ Pareto charts (fancy bar charts) ∙ Flow charts ∙ Cause-and-effect (fishbone) diagrams

28. Pareto Charts • Pareto charts were actually introduced in the Chapter 2 exercises (exercises 2.33 and 2.34) • We skipped these exercises in Chapter 2 but will discuss them here • As we will see, a Pareto chart allows management to observe how most of their problems can be eliminated by taking care of the few most common causes

29. The Pareto Principle • The word “Pareto” is pronounced “pah-ree’-toe” and the Pareto principle states that, for many events, 80% of the effects come from 20% of the causes • The principle is named after an Italian economist, Vilfredo Pareto, who observed that 80% of the income in Italy went to 20% of the population

30. A Pareto Chart • A sample of 200 customer complaints at a utility company: ComplaintFrequency A: Check was lost 10 B: Bill was mailed late 80 C: Serviceman was rude 20 D: Meter was read incorrectly 60 E: Service was accidently disconnected 5 F: Other 25 200

31. A Pareto Chart • Construct a bar chart in the usual manner, except: ∙ The vertical axis should always go from 0 to n ∙ The order of the categories on the horizontal axis is: largest first, then next largest, etc. ∙ The “Other” category is always last • The height of each bar is the corresponding frequency and there is no space between the bars

32. A Pareto Chart

33. Flow Charts • A flow chart provides a systematic view of the entire process • The flow chart consists of connected ∙ boxes and ∙ diamonds • It is a good first step when examining a process Each step of the process A decision point (yes/no)

34. Flow Charts • A flow chart provides an excellent way to discuss a process • It can often spot potential “bottlenecks” • A bottleneck is a place where the process is likely to get bogged down and cause problems • By eliminating the bottlenecks up front, you will get a smoother, more efficient, process • The example on the next slide is a flowchart of a package delivery at Metro Delivery Service

35. Customer arrives with package Customer waits in line Order is recorded Directions to final destination prepared No Place in queue for next available driver Driver available? Yes Select driver from pool Relay package and delivery instructions/directions Driver loads package into vehicle Package is delivered Flowchart

36. Cause-and-Effect Diagrams • Cause-and-effect diagrams are generally called fishbone diagrams • They resemble a fish that has been out under the hot sun for a few weeks (not a pleasant thought) • This diagram examines a potential problem and its possible causes

37. Main cause Main cause Main cause Main cause Secondary cause Problem to be resolved Cause-and-Effect Diagram

38. A Fishbone Diagram for Metro Delivery Service • In a fishbone diagram you have ∙ main causes (represented by boxes) ∙ secondary causes (represented by arrows) • This will be illustrated for Metro Delivery Service where the potential problem is that a package arrives late

39. Taking the order Delivery vehicles Flat tire Insufficient number of orders taken Scheduling too many deliveries per run Package stolen from car Engine trouble Recording poor directions Recording wrong address Illegible handwriting Vehicle too small for large package–had to change vehicle Had to fill gas tank Language/accent difficulties Making sure package recipient will be present at delivery Package arrived late Got lost Wait for funeral procession None available when needed Wait for train Speeding ticket Long distance to go Impaired due to alcohol/drugs Couldn’t find parking spot Couldn’t follow directions Encountering an accident Loaded the wrong package Poor driving caused an accident Hazardous roads due to bad weather Driver Traffic conditions Metro Delivery Service

40. Process Variation and Control Charts • Variation always exists because, from day to day, you don’t have the same ∙ people ∙ materials ∙ machines ∙ weather conditions, etc. • There are two types of variation

41. Two Types of Process Variation • Process is: “in control” vs. “out of control” Variation is due to chance (random causes) Variation is due to an “assignable cause” such as ∙ machine is defective ∙ machine is out of adjustment ∙ operator error ∙ bad raw material, … Moral: If the process is in control, then don’t tamper with it in an attempt to improve it.

42. Ed Deming • One of the early quality pioneers was a U.S. statistician, named W. Edwards (Ed) Deming • He was primarily responsible for Japan’s rapid ascent in the world of quality improvement • To this day, Japan gives an annual award called the Deming Award to organizations that best demonstrate dramatic quality improvement • To illustrate the point made on the previous slide, Deming used his famous funnel experiment

43. Marble Funnel Apparatus Target paper with bull’s eye Deming Funnel Experiment

44. Deming Funnel Experiment: Strategies • Strategy 1: Do not react to this random variation and do not move the funnel • Strategy 2: Measure the distance from the marble’s resting place to the bull’s-eyeMove the funnel an equal distance, but in the opposite direction

45. Deming Funnel Experiment: Strategies • Strategy 3: Measure the distance from the marble’s resting place to the bull’s-eyeMove the funnel this distance, in the opposite direction, starting at the bull’s-eye

46. CONTROL STRATEGY 1 4.0 – 0.0 – -4.0 – Y | | | | | -5.0 -2.5 0.0 2.5 5.0 X Deming Funnel Experiment

47. CONTROL STRATEGY 2 4.0 – 0.0 – -4.0 – Y | | | | | -5.0 -2.5 0.0 2.5 5.0 X Deming Funnel Experiment

48. CONTROL STRATEGY 3 4.0 – 0.0 – -4.0 – Y | | | | | -30 -15 0 15 30 X Deming Funnel Experiment

49. Deming Funnel Experiment • What’s the point of the funnel experiment? • Don’t react to random variation • Such attempts only make matters worse since they will increase the process variation • However (and this is important), you can and should improve the process itself by ∙ moving the funnel closer to the target ∙ changing the target and/or table surface

50. Control Charts • To monitor whether variation is due to random causes or the process has become unstable, we use control charts • We will look at four of these • In this situation, you don’t get one sample but rather you get many small samples (say, 20 – 25) • The design of a control chart is shown on the next slide