Agenda Review homework Lecture/discussion Week 8 assignment Metrics Chapter 3 -  11, 36(c) Case Study: “How We Slashed Response Time” Lecture/discussion Chapter 4: Statistics Metrics Measurement Statistics Week 8 assignment Homework Problems chapter 4 – 2, 3 Quality Metrics

Chapter Four “We best manage what we can measure” Quality Metrics Chapter Four “We best manage what we can measure” Quality Metrics

Metric A metric is a verifiable measure stated in either quantitative or qualitative terms. “95 percent inventory accuracy” “as evaluated by our customers, we are providing above-average service” Quality Metrics

Metric A metric is a verifiable measure that captures performance in terms of how something is being done relative to a standard, allows and encourages comparison, supports business strategy. Quality Metrics

Customer quality measures Customers typically relate quality to: Feature based measures; “have” or “have not” - determined by design Performance measures - “range of values” - conformance to design or ideal value Quality Metrics

True versus substitute performance measures Customers - use “true” performance measures. example: a true measure of a car door may be “easy to close”. true performance measures typically vary by each individual customer. Unfortunately, producers cannot measure performance as each individual customer does. Producers - use “substitute” performance measures these measures are quantifiable (measurable units). Substitute measure for a car door: door closing effort (foot-pounds). Other example: light bulb true performance measure -- brightens the room substitute performance measure – wattage or lumens Quality Metrics

Educating Consumers Sometimes, producers educate consumers on their substitute performance measures. What are substitute performance measures for the following customer desires: Good Gas Mileage Powerful Computer What is the effect of educating consumers on performance measures? Quality Metrics

What is a “metric”? Another term for a substitute performance measure is a metric. Metric is a standard of measurement. In quality management, we use metrics to translate customer needs into producer performance measures. Internal quality metrics scrap and rework process capability (Cp or Cpk) first time through quality (FTTQ) Quality Metrics

Identifying effective metrics Effective metrics satisfy the following conditions: performance is clearly defined in a measurable entity (quantifiable). a capable system exists to measure the entity (e.g., a gage). Effective metrics allow for actionable responses if the performance is unacceptable. There is little value in a metric which identifies nonperformance if nothing can or will be done to remedy it. Example: Is net sales a good metric to measure the performance of a manufacturing department? Quality Metrics

Use of quality metrics Quality metric data may be used to: spot trends in performance. compare alternatives. predict performance. However, organizations should consider the costs and benefits of collecting information for a particular quality metric. collecting data will not necessarily result in higher performance levels. higher quality companies often use fewer metrics than their competitors. Quality Metrics

Acceptable ranges In practice, identifying effective metrics is often difficult. Main reason: non-performance of a metric does not always lead to customer dissatisfaction. Consider the car door example again, if door closing effort is the metric, will a customer be dissatisfied if the actual effort is 50 foot-pounds versus 55 foot-pounds. Producers typically identify ranges of acceptable performance for a metric. (a) For services, ranges often referred to as break points. (b) In manufacturing, these ranges are known as targets, tolerances, or specifications. Quality Metrics

Break points Break points are levels where improved performance will likely change customer behavior. Example: waiting in line Suppose the average customer will only wait for 5 minutes Wait longer than 5 minutes -- customer is dissatisfied. 1-5 minutes -- customer is satisfied. less than 1 minute -- customer is extremely satisfied Should a company try to reduce average wait time from 4 to 2 minutes.? Quality Metrics

Targets, tolerances and specifications Target (nominal) - desired value of a characteristic. A tolerance specifies an allowable deviation from a target value where a characteristic is still acceptable. Lower specification limit (LSL) Upper specification limit (USL) TARGET -1 +1 Quality Metrics