Operations Management Managing Quality Chapter 6

1. Operations ManagementManaging QualityChapter 6

2. Outline • Quality and Strategy. • Defining Quality. • International Quality Standards. • Total Quality Management. • Tools of TQM. • Inspection. • TQM in Services.

3. Quality Improves Profitability Sales Gains • Higher sales. • Higher prices. • Improved reputation. Increased Profits Improved Quality Reduced Costs • Increased productivity. • Lower rework and scrap costs. • Lower warranty costs.

4. Definitions of Quality • Product characteristics & features that affect customersatisfaction. (American Society for Quality) • User-Based: What consumersays it is. • Manufacturing-Based: Degree to which a product conforms to design specification.

5. Dimensions of Quality for Goods • Operation or Performance. • Reliability. • Durability. • Conformance. • Serviceability. • Appearance to senses. • Perceived quality. Quality

6. Implications of Quality • Company reputation. • Real or perceived. • Product liability. • Large $ can be awarded. • Global implications. • Company quality affects national image.

7. International Quality Standards • ISO 9000 series (Europe/EC) • Common quality standards for products sold in Europe (even if made in U.S.). • ISO 14000 series (Europe/EC) • Standards for recycling, labeling etc.

8. Costs of Quality • Prevention costs (5-10%) - To prevent failures. • Appraisal costs (15-40%) - To evaluate products. • Failure costs (50-80%): • Internal failure costs - Defective parts or services discovered in-house. • External failure costs - Defective parts or services discovered by customer. • Most organizations do not know the cost of poor quality.

9. Costs of Quality • Internal failure costs. • Scrap and rework. • Downtime. • Safety stock inventory. • Overtime. • External failure costs. • Complaint handling and replacement. • Warranties. • Liability. • Loss of goodwill.

10. Traditional Quality Process (Manufacturing) Customer Marketing Engineering Operations Specifies Interprets Designs Produces Need Need Product Product Defines Plans Quality Quality Quality is customer driven! Monitors Quality

11. TQM - Total Quality Management • Encompasses entire organization from supplier to customer. • Commitment by management to a continuing company-wide drive toward excellence in all aspects of products and services that are important to the customer.

12. Three Key Figures • W. Edwards Deming • Management & all employees have responsibility for quality. • 14 points. • Deming Prize in Japan. • Joseph Juran • Focus on customer. • Continuous improvement and teams. • Philip Crosby • Quality is free! • Cost of poor quality is underestimated.

13. Deming’s Points • Create consistency of purpose across the organization. • Leadership must play a key role. • Build quality into the products. • Build long term relationships. • Continuously improve product, quality, and service. • Training & education are crucial. • Empower employees.

14. Malcom Baldrige National Quality Award • Established in 1988 by the U.S. government. • Designed to promote TQM practices. • Criteria include: • Senior executive leadership. • Strategic planning. • Management of process quality. • Quality results. • Customer satisfaction.

15. Malcom Baldrige National Quality Award - Guidelines • The leadership of the U.S. in product and process quality has been challenged strongly by foreign competition. • Quality improvement programs are essential to the well-being of our economy and our ability to compete globally.

16. Malcom Baldrige National Quality Award - Guidelines • It is crucial to have improved: • management understanding of the factory floor, • worker involvement in quality, and • greater emphasis on statistical process control. • “Quality improvement programs must be management-led and customer-oriented, and this may require fundamental changes in the way companies and agencies do business.”

17. Concepts of TQM • Top management has primary responsibility. • Focus on customer. • Continuous improvement. • Employee empowerment. • Benchmarking. • Knowledge of tools for TQM.

18. Continuous Improvement • Continuously improve process & customer satisfaction. • Involve all operations & work units. • Other names: • Kaizen (Japanese). • Zero-defects. • Six sigma.

19. Employee Empowerment • Involve employees in product & process improvements. • 85% of quality problems are due to process & material. • Techniques: • Support workers; workers solve quality problems. • Let workers make decisions. • Train workers; provide tools for improved quality. • Build teams & quality circles.

20. Benchmarking Selecting best practices to use as a standard for performance. • Determine what to benchmark. • Form a benchmark team. • Collect and analyze benchmarking information. • Take action to match or exceed the benchmark.

21. Tools for TQM • Quality Function Deployment (QFD). • Taguchi techniques. • Cause-and-effect diagrams. • Pareto charts. • Statistical process control.

22. Quality Function Deployment(QFD) • Determines what will satisfy the customer. • Translates customer desires into target design. • Helps determine product and process to ensure quality.

23. Taguchi Techniques • Experimental design methods to improve product & process design. • Identify key component & process variables affecting product variation. • Taguchi Concepts: • Quality robustness. • Quality loss function.

24. Quality Robustness • Design and make products so that variations in production do not cause failure. • Identify important variations. • Eliminate the effect of variations rather than the cause. • Allow variation, but limit its ability to reduce quality.

25. Quality Loss Function • Poor quality can be viewed as deviation from a desired level. • Most quality characteristics (e.g., length, weight) have a target value. • Large deviations are much more expensive than small deviations. • Quality loss function shows cost of deviation and is not linear. • A deviation twice as large may be 10 times as expensive.

26. Cause and Effect Diagram • Used to find problem sources/solutions. • Other names: • Fish-bone diagram, Ishikawa diagram. • Steps: • Identify problem to correct. • Draw main causes for problem as ‘bones’. • Ask ‘What could have caused problems in these areas?’ Repeat for each sub-area.

27. Problem Too many defects Cause and Effect Diagram Example

28. Cause and Effect Diagram Example Method Manpower Main Cause Too many defects Material Machinery Main Cause

29. Cause and Effect Diagram Example Method Manpower Drill Over Time Too many defects Wood Steel Lathe Material Machinery Sub-Cause

30. Tired Drill Over Slow Time Too many defects Old Wood Steel Lathe Cause and Effect Diagram Example Method Manpower Material Machinery

31. 70 60 54 50 Number 40 30 20 12 5 10 4 2 0 Scratches Porosity Nicks Contamination Misc. 70% 16% 6% 5% 3% Causes of Glass Defects, by % of total defects Pareto Charts • The majority of quality problems (defects) have only a few causes. • Pareto chart shows relative importance of causes.

32. Statistical Process Control (SPC) • Uses statistics & control charts to identify when to adjust process. • Involves: • Creating standards (upper & lower limits). • Measuring sample output (e.g. mean weight). • Taking corrective action (if necessary). • Done while product is being produced.

33. Inspection • Examine items to see if they are good or defective. • Detects defective products. • Does not correct deficiencies in process or product. • Issues: • What to inspect? • When & where to inspect?

34. When and Where to Inspect Products • At the supplier’s plant while the supplier is producing. • At your facility upon receipt of goods from the supplier. • Before costly or irreversible processes. • During the step-by-step production processes. • When production or service is complete. • Before delivery from your facility. • At the point of customer contact.

35. Some Points of Inspection Organization Issues to Consider Restaurant Kitchen Cashier station Dining areas Food Clean, proper storage, unadulterated food, health regulations observed, well-organized. Speed, accuracy, appearance. Clean, comfortable, regular monitoring by personnel. Presentation, taste, quantity. Inspection Points in Services

36. TQM In Services • Customer contact is important! • Service quality is more difficult to measure than for goods. • Courtesy, competence, communication, etc. • Service quality perceptions depend on: • Expectations versus reality. • Process and outcome. • Type of service (normal vs. exception).