1 / 14

Managing Quality and Time to Create Value

Managing Quality and Time to Create Value. Chapter 7. How much quality is enough?. Total quality management (TQM) Continuous improvement toward perfection Assumes customers seek high quality and will pay for it Return on quality (ROQ) Tradeoff between costs and benefits of quality

rigg
Download Presentation

Managing Quality and Time to Create Value

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Managing Quality and Time to Create Value Chapter 7

  2. How much quality is enough? • Total quality management (TQM) • Continuous improvement toward perfection • Assumes customers seek high quality and will pay for it • Return on quality (ROQ) • Tradeoff between costs and benefits of quality • Maximize profit instead of quality

  3. Costs of quality • Prevention costs • Cost incurred to prevent a problem • Design, process improvement, training, etc. • Appraisal costs • Cost incurred to identify problems • Inspection, testing, evaluations, etc.

  4. Costs of quality • Internal failure costs • Costs incurred to correct problems while still in the company’s control • Rework, scrap, retesting, delays, etc. • External failure costs • Costs incurred to correct problems after the problem leaves the company’s control • Warranty repairs, replacement, recalls, lawsuits, damage to reputation, lost sales, etc.

  5. Costs of quality • In theory: • Spending on prevention reduces appraisal and failure costs • Spending on appraisal reduces external failure costs • ROQ is maximized where combined cost is minimized

  6. Tracking quality • Indicators • Frequency distributions • Run chart • Control chart • Diagnostics • Scatter diagrams • Cause and effect diagrams/flowcharts • Pareto charts

  7. Time matters • Time is the one resource you cannot buy • Speed is a competitive advantage • Product/service development time • Customer response time • Receipt of order to delivery • Production cycle time • Start to completion of production process

  8. Time/efficiency measures • Productivity • Outputs / inputs • Cycle time • Total processing time / good output produced • Throughput efficiency • Value-added time / Total processing time

  9. Measuring capacity Theoretical (rated) capacity -- Planned downtime = Practical capacity -- Capacity used to meet demand = Excess capacity

  10. Time-based ABC • Simpler version of traditional ABC • Time used as driver base • Calculation of driver rate Cost of capacity to provide service Time available to complete service • Cost = time required * driver rate

  11. Just-in-time systems • Traditional “push” system • Results in mismatch between supply and demand • Excess inventory or lost sales

  12. Just-in-time systems • JIT “pull” system • Better match between supply and demand • Less inventory • Possibly slower response

  13. Just-in-time systems • Requirements of JIT • Flexible capacity and workforce • Smooth production flow • Short cycle times and processing times • Reliable suppliers • Commitment to quality

More Related