Quality Management

Definitions of Quality Quality is the ability of a product or service to consistently meet or exceed customer expectations. Quality is a service’s and product’s fitness for its intended use

Importance of Quality Sales Gains Improved response Higher Prices Improved reputation Increased volume Improved Quality Increased Profits Reduced Costs Increased productivity Lower rework and scrap costs Lower warranty costs This slide not only looks at the impact of quality on productivity - it also enables you to begin a discussion as to the meaning of quality (or perhaps the differing meanings among different people). To many people, the notion of “high quality” carries with it the assumption of “high price.” This slide provides an initial point to challenge that assumption.

Dimensions of Quality (1 of 2) Performance – basic operating characteristics of the product/service Aesthetics - appearance, feel, sound, smell, taste Special Features - extra items added to the basic characteristics Conformance - how well product/service conforms to customer’s expectations, meeting preestablished standards Reliability - consistency of performance, probability product will operate over time It may be most helpful to provide, or ask you students to provide, examples of products for which the notion of quality is based upon one or more of the dimensions listed. Quality

Dimensions of Quality (2 of 2) Durability – useful life of the product/service. Life span before replacement Safety- freedom from injury or harm Perceived Quality – subjective perceptions based on brand name, advertising, etc. indirect evaluation of quality (e.g. reputation) Serviceability – service after sale, ease of getting repairs, speed & competence of repairs

Examples of Quality Dimensions (1 of 2)

Examples of Quality Dimensions (2 of 2)

Dimensions of Service Quality Consistency Tangibles Reliability Communication Credibility Security Responsiveness Competence Courtesy Accessibility © 1995 Corel Corp. Under- standing Completeness Accuracy Although the text considers service quality at the end of the chapter, you may wish, at this point, to contrast the notion of quality for goods with that for services. If not, skip this slide - it is repeated at the point at which the issues are raised in the text. Time, timeliness Convenience

Dimensions of Service Quality (examples) 1. Tangibles Were the facilities clean, personnel neat? 2. Convenience Was the service center conveniently located? 3. Reliability Was the problem fixed? 4. Responsiveness Were customer service personnel willing and able to answer questions? 5. Time How long did the customer wait? 6. Assurance Did the customer service personnel seem knowledgeable about the repair? 7. Courtesy Were customer service personnel and the cashierfriendly and courteous?

Costs of Quality (1 of 2) Cost of achieving good quality Appraisal Costs Costs incurred to evaluate the products, costs of activities designed to uncover defects, inspection and testing, test equipment, operator Prevention Costs Costs incurred to reduce the potential for defects, all TQ training, planning, product design, customer assessment, process control, and quality improvement costs to prevent defects from occurring

Costs of Quality (2 of 2) Cost of poor quality-failure costs - costs incurred by defective parts/products or faulty services. Internal Failure Costs Costs incurred to fix problems that are detected before the product/service is delivered to the customer. (eg. scrap, rework on the defective parts, process failure, process downtime, price downgrading) External Failure Costs All costs incurred to fix problems that are detected after the product/service is delivered to the customer.(customer complaints, product return, warranty, product liability, lost sales)

Quality–Cost Relationship Increased prevention costs lead to decreased failure costs Improved quality leads to increased sales and market share Quality improvement at the design stage Higher quality products can command higher prices

Quality and Productivity output input Fewer defects increase output Quality improvement reduces inputs

Determinants of Quality Design (quality of) Intention of designers to include or exclude features in a product or service Conformance (quality of) The degree to which goods or services conform to the intent of the designers, ensuring product or service produced according to design (degree to which the design specifications are met) Depends on: Design of production process Performance of machinery Materials Training

Other Determinants That Affect Quality Production/operations system Packaging and shipping Marketing and sales Value-added services Quality Systems Top management

Evolution of Quality Management 1924 - Statistical process control charts 1930 - Tables for acceptance sampling 1940’s - Statistical sampling techniques 1950’s - Quality assurance/TQC 1960’s - Zero defects 1970’s - Quality assurance in services

Quality Assurance vs. Strategic Approach Emphasis on finding and correcting defects before reaching market Strategic Approach Proactive, focusing on preventing mistakes from occurring Greater emphasis on customer satisfaction

The Quality Gurus Walter Shewhart “Father of statistical quality control” W. Edwards Deming Joseph M. Juran Armand Feignbaum Philip B. Crosby Kaoru Ishikawa Genichi Taguchi

Key Contributors to Quality Management

Total Quality Management

TQM Encompasses entire organization, from supplier to customer Stresses a commitment by management to have a continuing, company-wide drive toward excellence on all dimensions of products and services that are important to the customer Can be defined as a philosophy that involves everyone in an organization in a continual effort to improve quality and achieve customer satisfaction. A point to be made here is that TQM is not a program but a philosophy.

TQM Throughout the Organization Marketing, sales, research Engineering Purchasing Human resources Management Packing, storing, shipping After-sale support

Quality Principles (Elements of TQM) Customer focus Continuous improvement Employee empowerment Close relations with external suppliers Team approach Quality at the source Supplier quality Decision based on facts Knowledge of TQM tools Yields: How to do what is important and to be accomplished

Employee Fulfillment Empowerment Organizational commitment Yields: Employees’ attitudes that they can accomplish what is important and to be accomplished

TQM and External Suppliers Support of suppliers required to satisfy customer expectations Single-sourcing Partnering Suppliers may be required to adopt quality programs or meet specific standards

Customer Satisfaction Winning orders, loyal customers, repeated sales Requires some form of measurement system Customer surveys are widely used Total customer satisfaction is often an organization’s overriding objective Yields: An effective organization with a competitive advantage

Achieving Total Quality Management Customer Satisfaction Attitudes (e.g., Commitment) Employee Fulfillment How to Do Quality Principles Again, a point to be made here is the universality required to achieve TQM. What to Do Organizational Practices

Continuous Improvement Philosophy that seeks to make never-ending improvements to the process of converting inputs into outputs to assure customer satisfaction Involves all operations & work units Other names Kaizen (Japanese) Zero-defects Six sigma Students may have a number of questions with respect to the notion of continuous improvement. - Why do we need continuous improvement? Why can’t we do it right the first time? - Doesn’t implementation of continuous improvement introduce a certain instability? - Are we never “done”? - Etc.

Continuous Improvement: Shewhart’s PDCA Model 4.Act 1.Plan Institutionalize improvement, implement the plan Identify the problem and develop the plan for improvement 3.Check 2.Do Assess the plan; Is it working Implement the pan on a test basis

The Process Improvement Cycle Implement the Improved process Select a process Study/document Seek ways to Improve it Design an Evaluate Document

Six Sigma Quality Statistically Conceptually Having no more than 3.4 defects per million Conceptually A philosophy and set of methods companies use to eliminate defects in their products and processes Seeks to reduce variation in the processes that lead to product defects The name, “six sigma” refers to the variation that exists within plus or minus six standard deviations of the process outputs Requires the use of certain tools and techniques

Six Sigma Process Define Measure Analyze Improve Control DMAIC

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

Employee Empowerment Getting employees involved in product & process improvements 85% of quality problems are due to process & material Techniques of employee empowerment Support workers Let workers make decisions Build teams & quality circles © 1995 Corel Corp. If you have not done so already, you might at this point discuss: - why employee empowerment works - the role of information technology in enabling employee empowerment - the role of information technology in making employee empowerment a requirement

Quality at the Source The philosophy of making each worker responsible for the quality of his or her work.

Employee Empowerment Technique: Quality Circles Group of 6-12 employees from same work area Meet regularly to solve work-related problems 4 hours/month Facilitator trains & helps with meetings You might discuss: - the benefits and the limitations of quality circles - the impact of quality circles on workers - requirements for quality circles to be successful - implementation of quality circles in the U.S. © 1995 Corel Corp.

The Quality Circle Process Presentation Implementation Monitoring Solution Problem results Problem Analysis Cause and effect Data collection and analysis Problem Identification List alternatives Consensus Brainstorming Training Group processes Data collection Problem analysis Organization 8-10 members Same area Supervisor/moderator

The TQM Approach Find out what the customer wants Design a product or service that meets or exceeds customer wants Design processes that facilitates doing the job right the first time Keep track of results Extend these concepts to suppliers

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

Deming’s Fourteen Points Create consistency of purpose Adapt philosophy of prevention Cease mass inspection Select a few suppliers based on quality Constantly improve system and workers Institute worker training Instill leadership among supervisors One point to make here is that this list represents a recent expression of Demings 14 points - the list is still evolving. Students may notice that many of these fourteen points seem to be simply common sense. If they raise this issue - ask them to consider jobs they have held. Were these points emphasized or implemented by their employers? If not, why not? This part of the discussion can be used to raise again the issue that proper approaches to quality are not “programs,” with limited involvement and finite duration, but rather philosophies which must become ingrained throughout the organization.

Deming’s Points - continued Eliminate fear among employees Break down barriers between departments Eliminate slogans Remove numerical quotas Enhance worker pride Institute vigorous training and education programs Develop commitment from top management to implement these 13 points

Tools of TQM Tools for organizing data, identifying problems generating ideas and improving the processes Check sheet Scatter diagram Cause and effect diagram Pareto charts Process charts (Flow charts) Run charts Histograms Statistical process control chart 1 2 3 4 Dirt Old Temp Fault x UCL LCL 5 Process

Check Sheet Integrated Circuits |||| COMPONENTS REPLACED BY LAB TIME PERIOD: 22 Feb to 27 Feb 2002 REPAIR TECHNICIAN: Bob TV SET MODEL 1013 Integrated Circuits |||| Capacitors |||| |||| |||| |||| |||| || Resistors || Transformers |||| Commands CRT |

Histogram Number of Lots 1 2 3 4 Can be used to identify the frequency of quality defect occurrence and display quality performance Number of Lots 1 2 3 4 Defects in lot

Pareto Chart NUMBER OF CAUSE DEFECTS PERCENTAGE Poor design 80 64 % Wrong part dimensions 16 13 Defective parts 12 10 Incorrect machine calibration 7 6 Operator errors 4 3 Defective material 3 2 Surface abrasions 3 2 125 100 %

Percent from each cause Pareto Chart Percent from each cause Causes of poor quality Machine calibrations Defective parts Wrong dimensions Poor Design Operator errors Defective materials Surface abrasions 10 20 30 40 50 60 70 (64) (13) (10) (6) (3) (2)

Process Chart Shows sequence of events in process Depicts activity relationships Has many uses Identify data collection points Find problem sources Identify places for improvement Identify where travel distances can be reduced

Process Chart Example SUBJECT: Request tool purchase Dist (ft) Time (min) Symbol Description lðo D Ñ Write order ¡ðo D Ñ On desk 75 ¡ è o To buyer ¡ðn Examine ¡ = Operation; ð = Transport; o = Inspect; D = Delay; Ñ = Storage

Flow Chart No, Continue… Yes Can be used to find quality problems Material Received from Supplier Inspect Material for Defects Defects found? Yes Can be used to find quality problems Return to Supplier for Credit

Scatter Diagram Y X

Cause and Effect Diagram Used to find problem sources/solutions Other names Fish-bone diagram, Ishikawa diagram Steps Identify problem to correct Draw main causes for problem as ‘bones’ Ask ‘What could have caused problems in these areas?’ Repeat for each sub-area.

Cause-and-Effect Diagram Materials Methods Equipment People Environment Cause Can be used to systematically track backwards to find a possible cause of a quality problem

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

Fishbone Chart - Problems with Airline Customer Service

Control Chart 970 980 990 1000 1010 1020 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 UCL LCL Can be used to monitor ongoing production process quality and Quality conformance to stated standards of quality

Control Chart Number of defects Sample number 18 12 6 3 9 15 21 24 27 10 14 16 Sample number Number of defects UCL = 23.35 LCL = 1.99 c = 12.67

Run Chart Can be used to identify when equipment or processes are not Behaving according to specifications Time (Hours) Diameter

Methods for Generating Ideas Brainstorming Quality circles Benchmarking 5W2H

Applications That Facilitate TQM Benchmarking Just-in-time (JIT) Quality Function Deployment (House of Quality) Taguchi concepts and techniques (Quality Loss Function)

Benchmarking Selecting best practices to use as a standard for performance Identify a critical process that needs to be improved Form a benchmark team Identify benchmarking partners (an organization that excels in this process) Contact the organization Collect and analyze benchmarking information Improve the critical process, ie. take action to match or exceed the benchmark Ask student to identify firms which they believe could serve as benchmarks. If students are unable to identify any firms - ask them to identify a college or university whose registration system or housing selection system could serve as a benchmark. Most students have enough knowledge of, or friends at,other colleges and universities so as to be able to respond to this question.

Just-in-Time (JIT) Relationship to quality: JIT cuts cost of quality JIT improves quality Better quality means less inventory and better, easier-to-employ JIT system This slide introduces a discussion about JIT. Subsequent slides elaborate.

Quality Function Deployment (QFD) Determines what will satisfy the customer Translates those customer desires into the target design

Taguchi Techniques Experimental design methods to improve product & process design Identify key component & process variables affecting product variation Taguchi Concepts Quality robustness Quality loss function Target specifications

Taguchi Concepts – Quality Robustness © 1984-1994 T/Maker Co. Ability to produce products uniformly regardless of manufacturing conditions Put robustness in House of Quality matrices besides functionality

Taguchi Techniques: Quality Loss Function Shows social cost ($) of deviation from target value Assumptions Most measurable quality characteristics (e.g., length, weight) have a target value Deviations from target value are undesirable Equation: L = D2C L = Loss ($); D = Deviation; C = Cost One question to pose to your students: “Of what value is the notion of a “social cost?” How might a manager use this in decision making?

Taguchi’s View of Variation Traditional view is that quality within the LS and US is good and that the cost of quality outside this range is constant, where Taguchi views costs as increasing as variability increases, so seek to achieve zero defects and that will truly minimize quality costs. Incremental Cost of Variability High Zero Lower Spec Target Upper Traditional View Incremental Cost of Variability High Zero Lower Spec Target Upper Taguchi’s View

Quality Loss Function; Distribution of Products Produced High loss Quality Loss Function (a) Unacceptable Loss (to producing organization, customer, and society) Target-oriented quality yields more product in the “best” category Poor Fair Good Best Low loss Target-oriented quality brings products toward the target value Conformance-oriented quality keeps product within three standard deviations Frequency Distribution of specifications for product produced (b) Lower Target Upper Specification

TQM In Services Service quality is more difficult to measure than for goods Service quality perceptions depend on Expectations versus reality Process and outcome Types of service quality Normal: Routine service delivery Exceptional: How problems are handled At this point, you might consider going back to the slides illustrating the differences between goods and services. Those slides are provided next. If you do not wish to use them, simply skip to the final slide in the sequence.

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

Obstacles to Implementing TQM Lack of : Company-wide definition of quality Strategic plan for change Customer focus Real employee empowerment Strong motivation Time to devote to quality initiatives Leadership

Obstacles to Implementing TQM Poor inter-organizational communication View of quality as a “quick fix” Emphasis on short-term financial results Internal political and “turf” wars

Criticisms of TQM Blind pursuit of TQM programs Programs may not be linked to strategies Quality-related decisions may not be tied to market performance Failure to carefully plan a program

Quality Awards Baldrige Award Deming Prize European Quality Award

Quality Certification ISO 9000 Set of international standards on quality management and quality assurance, critical to international business Adopted in 1987 ISO 9000 requires companies “to document everything they do that affects the quality of goods and services and than do as they documented” ISO 14000 A set of international standards for assessing a company’s environmental performance

ISO 9000 Quality Management Principles A systems approach to management Continual improvement Factual approach to decision making Mutually beneficial supplier relationships Customer focus Leadership People involvement Process approach