Managing Quality

Quality and Strategy Defining Quality Implications of Quality Cost of Quality (COQ) Ethics and Quality Management

International Quality Standards ISO 9000 ISO14000 Think!! Why Quality Standards Are Important ?

You should have done couple of them in prerequisite! Total Quality Management Continuous Improvement Six Sigma Employee Empowerment Benchmarking Just-in-Time (JIT) Taguchi Concepts Knowledge of TQM Tools

Tools of TQM Check Sheets Scatter Diagrams Cause-and-Effect Diagrams Pareto Charts Flowcharts Histograms Statistical Process Control (SPC)

The Role of Inspection TQM in Services When and Where to Inspect Source Inspection Service Industry Inspection Inspection of Attributes versus Variables TQM in Services

Define quality and TQM Describe the ISO international quality standards Explain how benchmarking is used Use the seven tools of TQM

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

Strategic Implications of TQM Strong leadership Goals, vision, or mission Operational plans and policies Mechanism for feedback

Two Ways Quality Improves Profitability – Improved response Flexible pricing Improved reputation Sales Gains via Improved Quality Increased Profits Increased productivity Lower rework and scrap costs Lower warranty costs Reduced Costs via Figure 6.1

The Flow of Activities – Organizational Practices Leadership, Mission statement, Effective operating procedures, Staff support, Training Yields: What is important and what is to be accomplished Quality Principles Customer focus, Continuous improvement, Benchmarking, Just-in-time, Tools of TQM Yields: How to do what is important and to be accomplished Employee Fulfillment Empowerment, Organizational commitment Yields: Employee attitudes that can accomplish what is important Customer Satisfaction Winning orders, Repeat customers Yields: An effective organization with a competitive advantage

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

Different Views – Think why conformance is important – link with next slide!! User-based – better performance, more features Manufacturing-based – conformance to standards, making it right the first time

Quality of Conformance Making sure a product or service is produced according to design if new tires do not conform to specifications, they wobble if a hotel room is not clean when a guest checks in, the hotel is not functioning according to specifications of its design

Meaning of Quality: Consumer’s Perspective –Discuss - how quality can be different for different people (e.g. their needs) Fitness for use how well product or service does what it is supposed to Quality of design designing quality characteristics into a product or service A Mercedes and a Ford are equally “fit for use,” but with different design dimensions

Implications of Quality – Company reputation Perception of new products Employment practices Supplier relations Global implications Improved ability to compete

Key Dimensions of Quality – Can you add more to this slide – You know more  Performance Features Reliability Conformance Durability Serviceability Aesthetics Perceived quality Value 7

Dimensions of Quality: Manufactured Products Performance basic operating characteristics of a product; how well a car is handled or its gas mileage Features “extra” items added to basic features, such as a stereo CD or a leather interior in a car Reliability probability that a product will operate properly within an expected time frame; that is, a TV will work without repair for about seven years

Dimensions of Quality: Manufactured Products (cont.) Conformance degree to which a product meets pre–established standards Durability how long product lasts before replacement Serviceability ease of getting repairs, speed of repairs, courtesy and competence of repair person

Dimensions of Quality: Manufactured Products (cont.) Aesthetics how a product looks, feels, sounds, smells, or tastes Safety assurance that customer will not suffer injury or harm from a product; an especially important consideration for automobiles Perceptions subjective perceptions based on brand name, advertising, and the like

Cost of Quality Cost of Achieving Good Quality Prevention costs costs incurred during product design Appraisal costs costs of measuring, testing, and analyzing Cost of Poor Quality Internal failure costs include scrap, rework, process failure, downtime, and price reductions External failure costs include complaints, returns, warranty claims, liability, and lost sales

Prevention Costs Quality planning costs Product-design costs costs of developing and implementing quality management program Product-design costs costs of designing products with quality characteristics Process costs costs expended to make sure productive process conforms to quality specifications Training costs costs of developing and putting on quality training programs for employees and management Information costs costs of acquiring and maintaining data related to quality, and development of reports on quality performance

Appraisal Costs Inspection and testing costs of testing and inspecting materials, parts, and product at various stages and at the end of a process Test equipment costs costs of maintaining equipment used in testing quality characteristics of products Operator costs costs of time spent by operators to gather data for testing product quality, to make equipment adjustments to maintain quality, and to stop work to assess quality

Internal Failure Costs Scrap costs costs of poor-quality products that must be discarded, including labor, material, and indirect costs Rework costs costs of fixing defective products to conform to quality specifications Process failure costs costs of determining why production process is producing poor-quality products Process downtime costs costs of shutting down productive process to fix problem Price-downgrading costs costs of discounting poor-quality products—that is, selling products as “seconds”

External Failure Costs Customer complaint costs costs of investigating and satisfactorily responding to a customer complaint resulting from a poor-quality product Product return costs costs of handling and replacing poor-quality products returned by customer Warranty claims costs costs of complying with product warranties Product liability costs litigation costs resulting from product liability and customer injury Lost sales costs costs incurred because customers are dissatisfied with poor quality products and do not make additional purchases

Hidden costs of poor Quality

Costs of Poor Process Performance Defects: Any instance when a process fails to satisfy its customer. Prevention costs are associated with preventing defects before they happen. Appraisal costs are incurred when the firm assesses the performance level of its processes. Internal failure costs result from defects that are discovered during production of services or products. External failure costs arise when a defect is discovered after the customer receives the service or product.

How can we Improve a Process? Reduce errors Meet or exceed expectations of internal/external customers Make the process safer Make the process more satisfying to the person doing it.

Leaders in Quality W. Edwards Deming 14 Points for Management Joseph M. Juran Top management commitment, fitness for use Armand Feigenbaum Total Quality Control Philip B. Crosby Quality is Free (Why he said that), zero defects

Ethics and Quality Management Managers must deliver healthy, safe, quality products and services Poor quality risks injuries, lawsuits, recalls, and regulation Organizations are judged by how they respond to problems

Encompasses entire organization, from supplier to customer TQM Encompasses entire organization, from supplier to customer 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

Another way to put it At it’s simplest, TQM is all managers leading and facilitating all contributors in everyone’s two main objectives: 1) total client satisfaction through quality products and services; and (2) continuous improvements to processes, systems, people, suppliers, partners, products, and services.

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

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

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

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

Is Resolving Customer Complaints Important. Some best practices Is Resolving Customer Complaints Important ? Some best practices! (Can you think of any other  ?) 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

Just-in-Time (JIT) Relationship to quality?

Just-in-Time (JIT) Allows reduced inventory levels Inventory costs money and hides process and material problems Encourages improved process and product quality

Tools of TQM – Tools for Generating Ideas Tools to Organize the Data Check sheets Scatter diagrams Cause-and-effect diagrams Tools to Organize the Data Pareto charts Flowcharts Tools for Identifying Problems Histogram Statistical process control chart

Statistical Process Control (SPC) Uses statistics and control charts to tell when to take corrective action Drives process improvement

An SPC Chart Plots the percent of free throws missed Upper control limit Coach’s target value Lower control limit Game number | | | | | | | | | 1 2 3 4 5 6 7 8 9 20% 10% 0% Figure 6.8

Inspection Involves examining items to see if an item is good or defective Detect a defective product Does not correct deficiencies in process or product It is expensive Issues When to inspect Where in process to inspect

When and Where to Inspect 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 process When production or service is complete Before delivery to your customer At the point of customer contact

Source Inspection Also known as source control The next step in the process is your customer Ensure perfect product to your customer

Service Industry Inspection Organization What is Inspected Standard Hotel Reception desk Doorman Room Minibar Use customer’s name Greet guest in less than 30 seconds All lights working, spotless bathroom Restocked and charges accurately posted to bill Table 6.5

Service Industry Inspection Organization What is Inspected Standard Hospital Billing Pharmacy Lab Nurses Admissions Accurate, timely, and correct format Prescription accuracy, inventory accuracy Audit for lab-test accuracy Charts immediately updated Data entered correctly and completely Table 6.5

Service Industry Inspection Organization What is Inspected Standard Restaurant (Add More under what is inspected & standard ) Waiter Knows and suggest specials, desserts Table 6.5

Service Industry Inspection Organization What is Inspected Standard Department Store Display areas Stockrooms Salesclerks Attractive, well-organized, stocked, good lighting Rotation of goods, organized, clean Neat, courteous, very knowledgeable Table 6.5

Service Specifications at UPS

Determinants of Service Quality Reliability Consistency of performance and dependability Responsiveness Willingness or readiness of employees Competence Required skills and knowledge Access Approachability and ease of contact Courtesy Politeness, respect, consideration, friendliness Communication Keeping customers informed Credibility Trustworthiness, believability, honesty Security Freedom from danger, risk, or doubt Understanding/ knowing the customer Understand the customer’s needs Tangibles Physical evidence of the service Table 6.5 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Long Waiting Times May Indicate Need for Service Process Redesign (Think – what you can do to redesign following process?)

Service Recovery Strategy – (Think - why recovery strategy is important? What is its relationship with Productivity & Quality?) Managers should have a plan for when services fail Marriott’s LEARN routine Listen Empathize Apologize React Notify

Questions - When Developing Strategies to Improve Service Productivity How to transform inputs into outputs efficiently? Will improving productivity hurt quality? Will improving quality hurt productivity? Add other question 

Managing for Productivity WHAT IS PRODUCTIVITY? Productivity is defined as outputs divided by inputs where: outputs are the goods and services produced, and inputs are labor, capital, materials, and energy Productivity is important because it determines whether a company will make a profit and affects a country’s standard of living Maintaining productivity depends on control

Managing for Productivity Managing for Productivity and Results

Control: When Managers Monitor Performance – WHY IS CONTROL IMPORTANT? Control is making something happen the way it was planned to happen, while controlling is monitoring performance, comparing it with goals, and taking corrective action as needed Recall that: -planning is setting goals and deciding how to achieve them -organizing is arranging tasks, people, and other resources to accomplish the work -leading is motivating people to work hard to achieve the organization’s goals -controlling is making sure performance meets objectives

Why Control is Needed ? There are six reasons why control is needed: 1. To adapt to change & uncertainty - organizations need to be able to deal with change and uncertainty in the environment 2. To discover irregularities and errors - without checks and balances, companies might not survive 3. To reduce costs, increase productivity, or add value - control systems can reduce costs, increase output, and add value to a product

4. To detect opportunities - controls can help firms identify opportunities that might otherwise go unnoticed 5. To deal with complexity - controls help firms deal with the complexities of multiple product lines, customer bases, and so on 6. To decentralize decision making & facilitate teamwork - controls allow top managers to decentralize control to lower levels and encourage teamwork Now think why these six pointers are important & how they can help in improving productivity/quality!! E.g. #1 is about managing change! Why is that important? Tip: Markets are dynamic (change in constant)! Think about all pointers, please!

Four steps in the control process: Set standard, measure performance, compare them, if performance greater than standard - maybe upgrade your standard! 1. Establish Standards The desired performance level for a given goal is a control standard, or performance standard Standards can be broad or narrow 2. Measure Performance Performance is measured using three sources: written reports, oral reports, and personal observation

3. Compare Performance To Standards Measured performance is compared to established standards The amount of deviation acceptable depends on the predetermined range of variation Some firms follow management by exception where managers are informed of a situation only if data show a significant deviation from standards 4. Take Corrective Action, If Necessary Firms can make no changes to the current situation, recognize and reinforce positive performance, or take action to correct negative performance

Steps in the Control Process

Quality and Productivity helps you in achieving market gains & cost savings! What else?  I. Market Gains Improved: Performance Reliability Features etc. Improved reputation for quality Increased Market share Increased Profits Higher Prices

Quality and Productivity II. Cost Savings Increased productivity Lower manufacturing costs Improved reliability or conformance Lower rework and scrap costs Increased Profits Lower service costs Lower warranty and product liability costs

Not just Quality but Manage Total Quality (TQM) I hope we got fair overview of Productivity & Quality Management Please read around the concepts 

Target is to achieve Quality Throughout “A Customer’s impression of quality begins with the initial contact with the company and continues through the life of the product.” Customers look to the total package - sales, service during the sale, packaging, deliver, and service after the sale. Quality extends to how the receptionist answers the phone, how managers treat subordinates, how courteous sales and repair people are, and how the product is serviced after the sale. “All departments of the company must strive to improve the quality of their operations.”

Leaving you with an example