Chapter 6 Managing Quality

Outline Quality And Strategy Defining Quality Why Quality is important? 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

How Quality improves Profitability?

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

How do you define Quality?

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 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

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

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

What are the costs of quality?

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

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

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

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

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

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

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

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

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

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

Six Sigma Improvement Model 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 DMAIC Approach

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

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

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

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

Use internal benchmarking if you’re big enough 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

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

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

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

5-Just-in-Time (JIT): JIT cuts the cost of quality 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

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

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

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

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

Taguchi Concepts Most 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

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

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.

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 Flow charts Tools for Identifying Problems Histogram Statistical process control chart

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

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 Flow charts Tools for Identifying Problems Histogram Statistical process control chart

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

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 Flow charts Tools for Identifying Problems Histogram Statistical process control chart

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

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

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 Flow charts Tools for Identifying Problems Histogram Statistical process control chart

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

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

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 Flow charts Tools for Identifying Problems Histogram Statistical process control chart

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

Sealing Weighing Labeling Flow Charts Packing and shipping process Packing station Sealing Weighing Labeling Quick freeze storage (60 Mins) Storage (4 to 6 hrs) Shipping dock

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 Flow charts Tools for Identifying Problems Histogram Statistical process control chart

Seven Tools for TQM (f) Histogram: A distribution showing the frequency of occurrence of a variable Distribution Repair time (minutes) Frequency Figure 6.5

Seven Tools for TQM (g) Statistical Process Control Chart: A chart with time on the horizontal axis to plot values of a statistic Upper control limit Target value Lower control limit Time Figure 6.5

Statistical Process Control (SPC) Uses statistics and control charts to tell when to take corrective action Drives process improvement Four key steps Measure the process When a change is indicated, find the assignable cause Eliminate or incorporate the cause Restart the revised process

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 6.7

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?

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 processes When production or service is complete Before delivery from your facility At the point of customer contact

TQM In Services Service quality is more difficult to measure than the quality of goods Service quality perceptions depend on Intangible differences between products Intangible expectations customers have of those products

Determinants of Service Quality Reliability Responsiveness Competence Access Courtesy Communication Credibility Security Understanding/ knowing the customer Tangibles