Week 2 BUSN 6110 Summer 2011

Quality Management Quality is a measure of goodness that is inherent to a product or service. Bottom line: perspective has to be from the Customer – fitness for use

What Is Quality? “The degree of excellence of a thing” (Webster’s Dictionary) “The totality of features and characteristics that satisfy needs” (ASQ) Fitness for use Quality of design

Quality Quality Management – not owned by any functional area – cross functional Measure of goodness that is inherent to a product or service

FedEx and Quality Digitally Assisted Dispatch System – communicate with 30K couriers 1-10-100 rule  1 – if caught and fixed as soon as it occurs, it costs a certain amount of time and money to fix  10 – if caught later in different department or location = as much as 10X cost  100 – if mistake is caught by the customer = as much as 100X to fix

Product Quality Dimensions Product Based – found in the product attributes User Based – if customer satisfied Manufacturing Based – conform to specs Value Based – perceived as providing good value for the price

Dimensions of Quality (Garvin) Performance Basic operating characteristics Features “Extra” items added to basic features Reliability Probability product will operate over time

Dimensions of Quality (Garvin) Conformance Meeting pre-established standards Durability Life span before replacement Serviceability Ease of getting repairs, speed & competence of repairs

Dimensions of Quality (Garvin) Aesthetics Look, feel, sound, smell or taste Safety Freedom from injury or harm Other perceptions Subjective perceptions based on brand name, advertising, etc

Service Quality Time & Timeliness Completeness Courtesy Customer waiting time, completed on time Completeness Customer gets all they asked for Courtesy Treatment by employees

Service Quality Consistency Accessibility & Convenience Accuracy Same level of service for all customers Accessibility & Convenience Ease of obtaining service Accuracy Performed right every time Responsiveness Reactions to unusual situations

Quality of Conformance Ensuring product or service produced according to design Depends on Design of production process Performance of machinery Materials Training

Quality Philosophers Walter Shewhart – Statistical Process Control W. Edwards Deming Joseph Juran – strategic and planning based Armand Fiegenbaum – total quality control “entire business must be involved in quality improvement”

Deming’s 14 Points Create constancy of purpose Adopt philosophy of prevention Cease mass inspection Select a few suppliers based on quality Constantly improve system and workers Institute worker training

Deming’s 14 Points Instill leadership among supervisors Eliminate fear among employees Eliminate barriers between departments Eliminate slogans Remove numerical quotas

Deming’s 14 Points Enhance worker pride Institute vigorous training and education programs Develop a commitment from top management to implement these 13 points

The Deming Wheel (or PDCA Cycle) 1. Plan Identify the problem and develop the plan for improvement. 2. Do Implement the plan on a test basis. 3. Study/Check Assess the plan; is it working? 4. Act Institutionalize improvement; continue the cycle. Also known as the Shewart Cycle

Six Sigma Quality management program that measures and improves the operational performance of a company by identifying and correcting defects in the company’s processes and products

Six Sigma Started By Motorola Define Measure Analyze Improve Control Made Famous by General Electric 40% of GE executives’ bonuses tied to 6 sigma implementation

Malcolm Baldrige National Quality Award Category 3 – determine requirements, expectations, preferences of customers and markets Category 4 – what is important to the customer and the company; how does company improve

Total Quality Management Customer defined quality Top management leadership Quality as a strategic issue All employees responsible for quality Continuous improvement Shared problem solving Statistical quality control Training & education for all employees

Strategic Implications of TQM Quality is key to effective strategy Clear strategic goal, vision, mission High quality goals Operational plans & policies Feedback mechanism Strong leadership

TQM in Service Companies Inputs similar to manufacturing Processes & outputs are different Services tend to be labor intensive Quality measurement is harder Timeliness is important measure TQM principles apply to services

Cost of Quality Cost of achieving good quality Prevention Appraisal Planning, Product design, Process, Training, Information Appraisal Inspection and testing, Test equipment, Operator Cost of achieving good quality Prevention quality planning, product design process, training information Appraisal inspection & testing test equipment operator Cost of poor quality Internal failure costs scrap, rework process failure & downtime downgrading products External failure costs customer complaints returns, warranty product liability, lost sales 18

Cost of Quality Cost of poor quality Internal failure costs Scrap, Rework, Process failure, Process downtime, Price-downgrading External failure costs Customer complaints, Product return, Warranty, Product liability, Lost sales Cost of achieving good quality Prevention quality planning, product design process, training information Appraisal inspection & testing test equipment operator Cost of poor quality Internal failure costs scrap, rework process failure & downtime downgrading products External failure costs customer complaints returns, warranty product liability, lost sales 18

Employees and Quality Improvement Employee involvement Quality circles Process improvement teams Employee suggestions

Cause-and-Effect Diagram Quality Problem Out of adjustment Tooling problems Old / worn Machines Faulty testing equipment Incorrect specifications Improper methods Measurement Poor supervision Lack of concentration Inadequate training Human Deficiencies in product design Ineffective quality management Poor process design Process Inaccurate temperature control Dust and Dirt Environment Defective from vendor Not to specifications Material- handling problems Materials Also known as Ishikawa Diagram or Fish Bone

Lots of Hoopla and no follow through Hot House Quality Lots of Hoopla and no follow through

ISO 9000:2000 Customer focus Leadership Involvement of the people Process approach Systems approach to management Continual process improvement – GAO Factual approach to decision making Mutually beneficial supplier relationships

Implications Of ISO 9000 Truly international in scope Certification required by many foreign firms U.S. firms export more than $150 billion annually to Europe Adopted by U.S. Navy, DuPont, 3M, AT&T, and others

ISO Accreditation 3rd party registrar assesses quality program European registration 3rd party registrar assesses quality program European Conformity (CE) mark authorized United States 3rd party registrars American National Standards Institute (ANSI) American Society for Quality (ASQ) Registrar Accreditation Board (RAB)

Product Development Chapter 6

Introduction Product Development is a process which generates concepts, designs, and plans to create services and goods to meet customer needs. 1. Analyze market to assess need 2. Design product 3. Design process for making product 4. Develop plan to market product 5. Develop plan for full-scale production 6. Analyze financial feasibility

Increasing Importance of Product Development Customers demand greater product variety. Customers are causing shorter product life cycles. Improving technology is causing new products to be introduced The impact of increasing product variety and shortening product life cycles is having a multiplicative effect on the need for product development. Today, in order to be competitive, the firm may have to produce many different products with a life cycle of only five years or less. End of Life issues

Product Design Specifies materials Determines dimensions & tolerances Defines appearance Sets performance standards

Service Design Specifies what the customer is to experience Physical items Sensual benefits Psychological benefits

An Effective Design Process Matches product/service characteristics with customer needs Meets customer requirements in simplest, most cost-effective manner Reduces time to market - haste vs. speed to market Minimizes revisions - quality designed into the product

Stages in the Design Process Idea Generation — Product Concept - can you create your own market? What role does the voice of the customer play in idea generation? Feasibility Study — Performance Specifications Preliminary Design — Prototype - testing and redesign Final Design — Final Design Specifications Process Planning — Manufacturing Specifications - make to order/stock – assembly line?

Idea Generation Suppliers, distributors, salespersons Trade journals and other published material Warranty claims, customer complaints, failures Customer surveys, focus groups, interviews Field testing, trial users Research and development

More Idea Generators Perceptual Maps Visual comparison of customer perceptions Benchmarking Comparing product/service against best-in-class Reverse engineering Dismantling competitor’s product to improve your own product

Perceptual Map of Breakfast Cereals HIGH NUTRITION LOW NUTRITION GOOD TASTE BAD TASTE

Perceptual Map of Breakfast Cereals HIGH NUTRITION LOW NUTRITION GOOD TASTE Cocoa Puffs BAD TASTE Rice Krispies Wheaties Cheerios Shredded Wheat © Russell and Taylor, Prentice Hall, 2004

Perceptual Map of Breakfast Cereals HIGH NUTRITION LOW NUTRITION GOOD TASTE Cocoa Puffs BAD TASTE Rice Krispies Wheaties Cheerios Shredded Wheat How do I get here? © Russell and Taylor, Prentice Hall, 2004

Feasibility Study Market Analysis - Market Segmentation Economic Analysis Technical / Strategic Analysis Performance Specifications Risk Analysis

Economic Analysis Can we produce it at a volume to make a profit? If not, why produce? How many do we have to make to break even?

Sales Price – Variable Costs Break Even Analysis Total Costs = Total Revenues (Volume x Price) = (Fixed Costs + Variable Costs) Profit = (Total Revenue – Total Costs) Fixed Costs Sales Price – Variable Costs B/E Point =

Sales Price ($10) – Variable Costs ($5) Example Fixed Costs = $2000 Variable Costs = $5/item Sales Price = $10/item Fixed Costs ($2000) Sales Price ($10) – Variable Costs ($5) B/E PT = B/E point = ($2000/$5) 400 items

Risk Analysis 1. Identify the Hazards 2. Assess hazards to determine risks. 3. Develop controls and make risk decisions. 4. Implement controls. 5. Supervise and evaluate.

Preliminary Design Create form & functional design Build prototype How will it look? Create form & functional design Build prototype Test prototype Revise prototype Retest

Functional Design (How the Product Performs) Reliability Probability product performs intended function for specified length of time Maintainability Ease and/or cost or maintaining/repairing product

System Availability PROVIDER MTBF (HR) MTTR (HR) A 60 4.0 B 36 2.0 System Availability, SA = MTBF MTBF + MTTR PROVIDER MTBF (HR) MTTR (HR) A 60 4.0 B 36 2.0 C 24 1.0 At first glance it would appear that the items from Provider A has the longest mean time between failures. This is why the Systems Availability computation is necessary.

System Availability PROVIDER MTBF (HR) MTTR (HR) A 60 4.0 B 36 2.0 C 24 1.0 Although Provider A’s products have the longest mean time between failure, look at the Mean Time To Repair – when calculating the System Availability, the products from Provider C provides the best System Availability. SAA = 60 / (60 + 4) = .9375 or 93.75% SAB = 36 / (36 + 2) = .9473 or 94.73% SAC = 24 / (24 + 1) = .96 or 96%

Production Design Part of the preliminary design phase Simplification Standardization Modularity

Final Design & Process Plans Produce detailed drawings & specifications Create workable instructions for manufacture Select tooling & equipment Prepare job descriptions Determine operation & assembly order Program automated machines

Improving the Design Process Design teams Concurrent design Design for manufacture & assembly Design to prevent failures and ensure value Design for environment Measure design quality Utilize quality function deployment Design for robustness Engage in collaborative design

Preferred solution = cross functional teams Design Teams Preferred solution = cross functional teams Marketing, manufacturing, engineering Suppliers, dealers, customers Lawyers, accountants, insurance companies

Concurrent Design Improves quality of early design decisions Decentralized - suppliers complete detailed design Incorporates production process Scheduling and management can be complex as tasks are done in parallel include the customer in the process!!

Design for Manufacture and Assembly Design a product for easy & economical production Incorporate production design early in the design phase Improves quality and reduces costs Shortens time to design and manufacture also known as Design for Six Sigma

Design for Six Sigma Define – the goals of the design activity Measure – customer input to determine what is critical to quality from the customers’ perspective – what are customer delighters? What aspects are critical to quality? Analyze – innovative concepts for products and services to create value for the customer Design – new processes, products, and services to deliver customer value Verify – new systems perform as expected

DFM Guidelines Minimize the number of parts, tools, fasteners, and assemblies Use standard parts and repeatable processes Modular design Design for ease of assembly, minimal handling Allow for efficient testing and parts replacement

Design for Assembly (DFA) Procedure for reducing number of parts Evaluate methods for assembly Determine assembly sequence

Design Review Failure Mode and Effects Analysis (FMEA) A systematic approach for analyzing causes & effects of failures Prioritizes failures Attempts to eliminate causes

Value Analysis (Value Engineering) Is there value added? Ratio of value / cost Assessment of value : 1. Can we do without it? 2. Does it do more than is required? 3. Does it cost more than it is worth? 4. Can something else do a better job 5. Can it be made by less costly method, tools, material? 6. Can it be made cheaper, better or faster by someone else? Should we contract it out?

Design for Environment Design from recycled material Use materials which can be recycled Design for ease of repair Minimize packaging Minimize material & energy used during manufacture, consumption & disposal green laws in Europe -

Design for Robustness Product can fail due to poor design quality Products subjected to many conditions Robust design studies Controllable factors - under designer’s control Uncontrollable factors - from user or environment Designs products for consistent performance

A Well-Designed Service System is Consistent with firm’s strategic focus Customer friendly Easy to sustain Effectively linked between front & back office Cost effective Visible to customer

CHAPTER 8 Process Selection affects the outcome – in production or sports:

What is Process Selection? Series of decisions that includes technical/engineering issues and volume/scale issues Technical/engineering: basic methods that produce a good or service Scale: how many or how much to produce; how many to serve at a time Trade off analysis between capacity and costs

Why process selection is critical Dell – from make/assemble to order in Texas to make/assemble to stock off shore Does this work? Break even analysis may depend on process costs Which process gives the lowest costs – assumption?

The Point of Indifference Comparing Two Processes What is it? Who cares? How do you calculate it?

Comparing Two Processes Process A Fixed = $2000 Variable = $5/item Process B Fixed = $11000 Variable = $2/item

Comparing the Processes FixedA + (VarA)x = FixedB + (VarB)x 2000 + 5x = 11,000 + 2x 3x = 9000 X = 3000 So what?

Trade off analysis Customer demanded quantity drives the trade off analysis and decision process Example: → retail stocks at Christmas 2008 and 2009 season - goal save money by stocking less → At what point do you lose sales due to lower stockage levels?

Process Design/Selection/Capacity Have to be simultaneous operations – some texts suggest sequential steps Decision process has to be customer based → what should it be? → how many should be produced/how many are we capable of producing? → how should it be produced?

Process Strategy - Defines Capital intensity Process flexibility Vertical integration Customer involvement

Goal of Process Design Reduce lead time for product to the customer Is it best to be the first to market and establish the market? Or, be the follower and let someone else do the R&D/design/risk?

Problems with Managing Large, Unfocused Operations Growing facilities add more levels of management and make coordination and control difficult. New products are added to the facility as customers demand greater product variety. Hidden overhead costs increase as managers add staff to deal with increased complexity.

Process Planning Make-or-buy decisions Process selection Specific equipment selection Process plans Process analysis

Make-or-Buy Decisions 1. Cost 2. Capacity 3. Quality 4. Speed 5. Reliability 6. Expertise What about Proprietary Information? Barrier to Make-or-Buy?

Source: Aberdeen Research, “Low-Cost Country Sourcing Success Strategies: Maximizing and Sustaining the Next Big Supply Savings Opportunity,” Jun 2005

Process Plans Blueprints Bill of material Flat or multiple layers - part or assembly Assembly chart / product structure diagram Operations process chart - list of operations involved in assembly Routing sheet - sequence of events

Process Analysis The systematic examination of all aspects of a process to improve its operation Faster More efficient Less costly More responsive Basic tools Process flowchart Process diagrams Process maps

Operations Process Chart Part name Crevice Tool Part No. 52074 Usage Hand-Vac Assembly No. 520 Oper. No. Description Dept. Machine/Tools Time 10 Pour in plastic bits 041 Injection molding 2 min 20 Insert mold 041 #076 2 min 30 Check settings 041 113, 67, 650 20 min & start machine 40 Collect parts & lay flat 051 Plastics finishing 10 min 50 Remove & clean mold 042 Parts washer 15 min 60 Break off rough edges 051 Plastics finishing 10 min

Process Analysis – What processes feed other processes?

Process Flowchart Operation Transport Inspect Step Delay Storage Distance (feet) Time (min) Description of process 1 2 3 4 5 6 7 8 9 10 11 Unload apples from truck Move to inspection station Weigh, inspect, sort Move to storage Wait until needed Move to peeler Apples peeled and cored Soak in water until needed Place in conveyor Move to mixing area Total Page 1 0f 3 480 30 20 15 360 190 ft 20 ft 50 ft 100 ft Date: 9-30-02 Analyst: TLR Location: Graves Mountain Process: Apple Sauce

Principles for Redesigning Processes Walk the Process! Remove waste, simplify, consolidate Link processes to create value Let the swiftest and most capable execute Capture information digitally, data mine, and use information to improve operations

Principles for Redesigning Processes Provide visibility through information about process status Fit the process with sensors and feedback loops Add analytic capabilities Connect, collect and create knowledge around the process Personalize the process

Techniques for Generating Innovative Ideas Vary entry point to a problem Draw analogies Change your perspective Use attribute brainstorming

RFID Active Tags Always on Battery powered Can be read from up to 300 ft US Army Savi Tags Passive Tags Small Must be activated May be turned off England California Rolex

Robotics Questions? Programmable manipulators Follow specified path Better than humans with respect to Hostile environments Long hours Consistency Adoption has been slowed by ineffective integration and adaptation of systems Welding at Harley Davidson Plant Questions?