© 2006 Prentice Hall, Inc.6 – 1 Operations Management Chapter 6 – Managing Quality © 2006 Prentice Hall, Inc. PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 6e Operations Management, 8e

© 2006 Prentice Hall, Inc.6 – 2 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

© 2006 Prentice Hall, Inc.6 – 3 Service Quality For services, the assessment of quality is made during the service delivery process.For services, the assessment of quality is made during the service delivery process. Customer satisfaction can be measured as the difference between the customer’s service expectation and the service actually received.Customer satisfaction can be measured as the difference between the customer’s service expectation and the service actually received.

© 2006 Prentice Hall, Inc.6 – 4 Gaps in Service Quality Measuring the gap between expected service and perceived service is a routine customer feedback process practiced by many companiesMeasuring the gap between expected service and perceived service is a routine customer feedback process practiced by many companies

© 2006 Prentice Hall, Inc.6 – 5 Service Recovery Letters of apologyLetters of apology Replacement Product/Complimentary serviceReplacement Product/Complimentary service

© 2006 Prentice Hall, Inc.6 – 6 Malcom Baldrige National Quality Award  Established in 1988 by the U.S. government  Designed to promote TQM practices 

© 2006 Prentice Hall, Inc.6 – 7 International Quality Standards  To do business globally, being listed on an ISO directory is crucial  ISO 9000  Organizations must go through a 9 to 18 month process involving documenting procedures, on-site assessment, and ongoing product/service audits  ISO series  An environmental management standard which focuses on pollution prevention and ecological impact

© 2006 Prentice Hall, Inc.6 – 8 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

© 2006 Prentice Hall, Inc.6 – 9 Seven Concepts of TQM  Continuous improvement  Six Sigma  Employee empowerment  Benchmarking  Just-in-time (JIT)  Taguchi concepts  Knowledge of TQM tools

© 2006 Prentice Hall, Inc.6 – 10 Continuous Improvement  Represents continual improvement of all processes  Involves all operations and work centers including suppliers and customers  People, Equipment, Materials, Procedures

© 2006 Prentice Hall, Inc.6 – 11 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

© 2006 Prentice Hall, Inc.6 – 12 Six Sigma Implementation  Emphasize DPMO as a standard metric  Provide extensive training  Focus on corporate sponsor support (Champions)  Create qualified process improvement experts (Black Belts, Green Belts, etc.)  Set stretch objectives This cannot be accomplished without a major commitment from top level management

© 2006 Prentice Hall, Inc.6 – 13 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

© 2006 Prentice Hall, Inc.6 – 14 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

© 2006 Prentice Hall, Inc.6 – 15 Use internal benchmarking if you’re big enough Benchmarking Selecting best practices to use as a standard for performance  Determine what to benchmark  Form a benchmark team  Identify benchmarking partners  Collect and analyze benchmarking information  Take action to match or exceed the benchmark

© 2006 Prentice Hall, Inc.6 – 16 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

© 2006 Prentice Hall, Inc.6 – 17 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

© 2006 Prentice Hall, Inc.6 – 18 Taguchi Concepts  Experimental design methods to improve product and process design  Uses Robust Design method  Plan for the worst conditions and design quality around the worst conditions  Example: Grocery Stores and coming Hurricane (design store to handle the traffic associated with this worst condition)

© 2006 Prentice Hall, Inc.6 – 19 Tools of TQM  Tools for Generating Ideas  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

© 2006 Prentice Hall, Inc.6 – 20 //// ////// ///// ////// /// // / Hour Defect A B C / // / Seven Tools for TQM (a)Check Sheet: An organized method of recording data Figure 6.5

© 2006 Prentice Hall, Inc.6 – 21 Seven Tools for TQM (b)Scatter Diagram: A graph of the value of one variable vs. another variable Absenteeism Productivity Figure 6.5

© 2006 Prentice Hall, Inc.6 – 22 Seven Tools for TQM (c)Cause and Effect Diagram: A tool that identifies process elements (causes) that might effect an outcome Figure 6.5 CauseMaterialsMethods ManpowerMachinery Effect

© 2006 Prentice Hall, Inc.6 – 23 Cause-and-Effect Diagrams Material Machinery Methods Manpower Inadequate supply of magazines Inadequate special meals on-board Insufficient clean pillows & blankets on-board Broken luggage carousel Mechanical delay on plane Deicing equipment not available Overbooking policies Bumping policies Mistagged bags Poor check-in policies Understaffed ticket counters Understaffed crew Poorly trained attendants Dissatisfied Airline Customer Figure 6.6

© 2006 Prentice Hall, Inc.6 – 24 Seven Tools for TQM (d)Pareto Charts: A graph to identify and plot problems or defects in descending order of frequency Figure 6.5 Frequency Percent ABCDEABCDEABCDEABCDE

© 2006 Prentice Hall, Inc.6 – 25 Pareto Charts Number of occurrences Room svcCheck-inPool hoursMinibarMisc. 72%16%5%4%3% – – – – – – – – – – – 0 0 – Frequency (number) Causes and percent Cumulative percent Data for October

© 2006 Prentice Hall, Inc.6 – 26 Seven Tools for TQM (e)Flow Charts (Process Diagrams): A chart that describes the steps in a process Figure 6.5

© 2006 Prentice Hall, Inc.6 – 27 Shipping dock Storage (4 to 6 hrs) Quick freeze storage (60 Mins) Sealing Weighing Labeling Flow Charts Packing and shipping process Packing station

© 2006 Prentice Hall, Inc.6 – 28 Seven Tools for TQM (f)Histogram: A distribution showing the frequency of occurrence of a variable Figure 6.5 Distribution Repair time (minutes) Frequency

© 2006 Prentice Hall, Inc.6 – 29 Seven Tools for TQM (g)Statistical Process Control Chart: A chart with time on the horizontal axis to plot values of a statistic Figure 6.5 Upper control limit Target value Lower control limit Time

© 2006 Prentice Hall, Inc.6 – 30 Statistical Process Control (SPC)  Uses statistics and control charts to tell when to take corrective action  Drives process improvement

© 2006 Prentice Hall, Inc.6 – 31 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

© 2006 Prentice Hall, Inc.6 – 32 Service Industry Inspection Organization What is Inspected Standard Jones Law Office Receptionist performance BillingAttorney Is phone answered by the second ring Accurate, timely, and correct format Promptness in returning calls Table 6.4

© 2006 Prentice Hall, Inc.6 – 33 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

© 2006 Prentice Hall, Inc.6 – 34 Service Specs at UPS

© 2006 Prentice Hall, Inc.6 – 35 Determinants of Service Quality  Reliability  Responsiveness  Competence  Access  Courtesy  Communication  Credibility  Security  Understanding/ knowing the customer  Tangibles