Chapter 6

1. Chapter 6 Managing Quality

2. Outline • Quality And Strategy • Defining Quality • Why Quality is important? • Seven tools of TQM

3. Quality and Strategy • Managing quality supports differentiation, low cost, and response strategies • Quality helps firms increase sales and reduce costs • Building a quality organization is a demanding task

4. How Quality improves Profitability?

5. Sales Gains • Improved response • Higher Prices • Improved reputation Improved Quality Increased Profits Reduced Costs • Increased productivity • Lower rework and scrap costs • Lower warranty costs Ways Quality Improves Productivity Figure 6.1

6. How do you define Quality?

7. Defining Quality The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs American Society for Quality

8. Different Views • User-based – better performance, more features • Manufacturing-based – conformance to standards, making it right the first time • Product-based – specific and measurable attributes of the product

9. Implications of Quality • Company reputation • Perception of new products • Employment practices • Supplier relations • Product liability • Reduce risk • Global implications • Improved ability to compete

10. Malcom Baldrige National Quality Award • Established in 1988 by the U.S. government • Designed to promote TQM practices • Recent winners • The Bama Companies, Kenneth W. Monfort College of Business, Caterpillar Financial Services, Baptist Hospital, Clarke American Checks, Los Alamos National Bank

11. What are the costs of quality?

12. Costs of Quality • Prevention costs - reducing the potential for defects • Appraisal costs - evaluating products, parts, and services • Internal failure - producing defective parts or service before delivery • External costs - defects discovered after delivery

13. Total Cost Total Cost External Failure Internal Failure Prevention Appraisal Quality Improvement Costs of Quality

14. TQM (Total Quality Management) Refers to a quality emphasis that: Encompasses entire organization, from supplier to customer. And Stresses a commitment by management to have a continuing, companywide drive toward excellence in all aspects of products and services that are important to the customer

15. Deming’s Fourteen Points (How he implemented TQM!?) • Create consistency of purpose • Lead to promote change • Build quality into the product; stop depending on inspection • Build long term relationships based on performance, not price • Continuously improve product, quality, and service • Start training • Emphasize leadership Table 6.1

16. Deming’s Fourteen Points • Drive out fear • Break down barriers between departments • Stop haranguing workers • Support, help, improve • Remove barriers to pride in work • Institute a vigorous program of education and self-improvement • Put everybody in the company to work on the transformation Table 6.1

17. We develop those into Seven Concepts of TQM • Continuous improvement • Six Sigma • Employee empowerment • Benchmarking • Just-in-time (JIT) • Taguchi concepts • Knowledge of TQM tools

18. 1- Continuous Improvement • Represents continual improvement of all processes • Involves all operations and work centers including suppliers and customers • People, Equipment, Materials, Procedures

19. Plan Identify the improvement and make a plan 4. Act Implement the plan 3. Check Is the plan working? 2. Do Test the plan Shewhart’s PDCA Model for Continuous Improvement Figure 6.3

20. Seven Concepts of TQM • Continuous improvement • Six Sigma • Employee empowerment • Benchmarking • Just-in-time (JIT) • Taguchi concepts • Knowledge of TQM tools

21. 2-Six Sigma • Originally developed by Motorola, Six Sigma refers to an extremely high measure of process capability • A Six Sigma capable process will return no more than 3.4 defects per million operations (DPMO) • Highly structured approach to process improvement

22. Define critical outputs and identify gaps for improvement Measure the work and collect process data Analyze the data Improve the process Control the new process to make sure new performance is maintained Six Sigma Improvement Model DMAIC Approach

23. Seven Concepts of TQM • Continuous improvement • Six Sigma • Employee empowerment • Benchmarking • Just-in-time (JIT) • Taguchi concepts • Knowledge of TQM tools

24. 3- Employee Empowerment • Getting employees involved in product and process improvements • 85% of quality problems are due to process and material • Techniques • Build communication networks that include employees • Develop open, supportive supervisors • Move responsibility to employees • Build a high-morale organization • Create formal team structures

25. Quality Circles • Group of employees who meet regularly to solve problems • Trained in planning, problem solving, and statistical methods • Often led by a facilitator • Very effective when done properly

26. Seven Concepts of TQM • Continuous improvement • Six Sigma • Employee empowerment • Benchmarking • Just-in-time (JIT) • Taguchi concepts • Knowledge of TQM tools

27. 4-Benchmarking Selecting best practices to use as a standard for performance Use internal benchmarking if you’re big enough • Determine what to benchmark • Form a benchmark team • Identify benchmarking partners • Collect and analyze benchmarking information • Take action to match or exceed the benchmark

28. Best Practices for Resolving Customer Complaints • Make it easy for clients to complain • Respond quickly to complaints • Resolve complaints on first contact • Use computers to manage complaints • Recruit the best for customer service jobs

29. Seven Concepts of TQM • Continuous improvement • Six Sigma • Employee empowerment • Benchmarking • Just-in-time (JIT) • Taguchi concepts • Knowledge of TQM tools

30. What is a “Just In Time” system? And How is it related to Quality?

31. 5-Just-in-Time (JIT): JIT systems are designed to produce or deliver goods as they are needed Relationship to quality: • JIT cuts the cost of quality • JIT improves quality • Better quality means less inventory and better, easier-to-employ JIT system

32. Just-in-Time (JIT) • ‘Pull’ system of production scheduling including supply management • Production only when signaled • Allows reduced inventory levels • Inventory costs money and hides process and material problems • Encourages improved process and product quality

33. Unreliable Vendors Capacity Imbalances Scrap Just-In-Time (JIT) Example Work in process inventory level(hides problems)

34. Just-In-Time (JIT) Example Reducing inventory revealsproblems so they can be solved Unreliable Vendors Capacity Imbalances Scrap

35. Seven Concepts of TQM • Continuous improvement • Six Sigma • Employee empowerment • Benchmarking • Just-in-time (JIT) • Taguchi concepts • Knowledge of TQM tools

36. Taguchi ConceptsMost Quality problems are the result of poor product and process design. • Experimental design methods to improve product and process design • Identify key component and process variables affecting product variation

37. Seven Concepts of TQM • Continuous improvement • Six Sigma • Employee empowerment • Benchmarking • Just-in-time (JIT) • Taguchi concepts • Knowledge of TQM tools

38. Tools of TQM • To empower employees and implement TQM as a continuing effort, everyone in the organization must be trained in the techniques of TQM.

39. Tools of TQM • Tools for Generating Ideas • Check sheets • Scatter diagrams • Cause and effect diagrams • Tools to Organize the Data • Pareto charts • Flow charts • Tools for Identifying Problems • Histogram • Statistical process control chart

40. Seven Tools for TQM (a) Check Sheet: An organized method of recording data / / / / /// / // /// // //// /// // / Hour Defect 1 2 3 4 5 6 7 8 A B C / / // / Figure 6.5

41. Tools of TQM • Tools for Generating Ideas • Check sheets • Scatter diagrams • Cause and effect diagrams • Tools to Organize the Data • Pareto charts • Flow charts • Tools for Identifying Problems • Histogram • Statistical process control chart

42. Productivity Absenteeism Seven Tools for TQM (b) Scatter Diagram: A graph of the value of one variable vs. another variable Figure 6.5

43. Tools of TQM • Tools for Generating Ideas • Check sheets • Scatter diagrams • Cause and effect diagrams • Tools to Organize the Data • Pareto charts • Flow charts • Tools for Identifying Problems • Histogram • Statistical process control chart

44. Cause Materials Methods Effect Manpower Machinery Seven Tools for TQM (c) Cause and Effect Diagram: A tool that identifies process elements (causes) that might effect an outcome Figure 6.5

45. Machinery Material Insufficient clean pillows & blankets on-board Deicing equipment not available Inadequate supply of magazines Mechanical delay on plane Broken luggage carousel Inadequate special meals on-board Dissatisfied Airline Customer Understaffed crew Overbooking policies Understaffed ticket counters Bumping policies Poor check-in policies Poorly trained attendants Mistagged bags Manpower Methods Cause-and-Effect Diagrams Figure 6.6

46. Tools of TQM • Tools for Generating Ideas • Check sheets • Scatter diagrams • Cause and effect diagrams • Tools to Organize the Data • Pareto charts • Flow charts • Tools for Identifying Problems • Histogram • Statistical process control chart

47. Percent Frequency A B C D E Seven Tools for TQM (d) Pareto Charts: A graph to identify and plot problems or defects in descending order of frequency Figure 6.5

48. Data for October 70 – 60 – 50 – 40 – 30 – 20 – 10 – 0 – – 100 – 93 – 88 – 72 54 Frequency (number) Number of occurrences Cumulative percent 12 4 3 2 Room svc Check-in Pool hours Minibar Misc. 72% 16% 5% 4% 3% Causes and percent Pareto Charts

49. Tools of TQM • Tools for Generating Ideas • Check sheets • Scatter diagrams • Cause and effect diagrams • Tools to Organize the Data • Pareto charts • Flow charts • Tools for Identifying Problems • Histogram • Statistical process control chart

50. Seven Tools for TQM (e) Flow Charts (Process Diagrams): A chart that describes the steps in a process Figure 6.5