OPSM 301 Operations Management Koç University OPSM 301 Operations Management Class 16: Quality (All of Chapter 6 included) Zeynep Aksin zaksin@ku.edu.tr

Objectives Total Quality Management Defined Quality Specifications and Costs Six Sigma Quality and Tools External Benchmarking ISO 9000 Service Quality 2

Total Quality Management (TQM) Defined Total quality management is defined as managing the entire organization so that it excels on all dimensions of products and services that are important to the customer 3

Quality Management What does the term quality mean? Product-based definition User-based definition Manufacturing based definition

Product-Based Definition According to this view, differences in quality reflect differences in the quantity of some ingredient or attribute possessed by a product (Example: Fine rugs have a large number of knots per square centimeter) This approach seems appropriate only if the attributes in question are considered preferable by virtually all buyers

Manufacturing-Based Definition This approach identifies quality as “conformance to requirements” This approach's primary focus is internal, however, the consumers’ interest in quality is implicitly recognized According to the manufacturing-based approach, improvements in quality lead to lower costs

User-Based Definition This approach starts from the opposite premise that quality “lies in the eyes of the beholder” The goods that best satisfy consumers' preferences are those that they regard as having the highest quality

Shifting Definitions The characteristics that connote quality must be first identified through market research These characteristics must then be translated into identifiable product attributes And finally, manufacturing process must be organized to ensure that products are made precisely to these specifications

Ways in Which Quality Can Improve Productivity Sales Gains Improved response Higher Prices Improved reputation Improved Quality Increased Profits Reduced Costs Increased productivity Lower rework and scrap costs Lower warranty costs

Quality Specifications Quality: Inherent value of the product in the marketplace Dimensions include: Performance, Features, Reliability, Conformance, Durability, Serviceability, Aesthetics, and Perceived Quality (Reputation) 7

Eight Dimensions of Quality Performance Features Reliability Conformance Durability Serviceability Aesthetics Perceived quality

Performance Performance refers to a product's primary operating characteristics (Acceleration of a car, brightness of a TV set) Different brands can easily be ranked objectively on individual aspects of performance

Features Features are the bells and whistles of products and services, they supplement their basic functioning (Push-button windows) It is hard to draw the line separating primary performance characteristics from secondary features Many customers may wish to customize or personalize their purchases, and availability of different features plays an important role in meeting these requirements

Reliability Reliability reflects the probability of a product malfunctioning or failing within a specified time period (Mean time to first failure, mean time between failures) These measures are most relevant to durable goods than to products and services that are consumed instantly Reliability normally becomes more important to consumers as down time and maintenance become more expensive

Conformance Conformance is the degree to which a product's design and operating characteristics meet established standards These standards are normally expressed as a target or center, and deviance from the center is permitted within a specified range

Durability Durability is a measure of product life and may be defined as the amount of use one gets from a product before it breaks down and replacement is preferable to continued repair

Serviceability, Aesthetics, and Perceived Quality Serviceability is a measure of speed, courtesy, competence, and ease of repair Aesthetics (how a product looks, feels, sounds, tastes or smells) is a very subjective quality dimension Perceived quality is the set of inferences we make about quality rather than the reality of itself

Certain dimensions may be pushed to the forefront to gain market share Quality Strategies Certain dimensions may be pushed to the forefront to gain market share Some of the dimensions are mutually reinforcing, some are not The challenge is to compete on selected dimensions

Quality Costs Cost of Control (Quality, Conformance) Prevention costs: reducing the potential for defects Appraisal costs: evaluating products Cost of Failure of Control (Unquality, non-conformance) Internal failure costs:of producing defective parts or service External failure costs: occur after delivery

Continuous Improvement Represents continual improvement of process & customer satisfaction Involves all operations & work units Other names Kaizen (Japanese) Zero-defects Six sigma © 1984-1994 T/Maker Co.

Six Sigma Quality 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

Six Sigma Quality

Six Sigma Quality (Continued) Six Sigma allows managers to readily describe process performance using a common metric: Defects Per Million Opportunities (DPMO)

Six Sigma Quality (Continued) Example of Defects Per Million Opportunities (DPMO) calculation: Suppose we observe 200 letters delivered incorrectly to the wrong addresses in a small city during a single day when a total of 200,000 letters were delivered. What is the DPMO in this situation? So, for every one million letters delivered this city’s postal managers can expect to have 1,000 letters incorrectly sent to the wrong address. Cost of Quality: What might that DPMO mean in terms of over-time employment to correct the errors?

Six Sigma Quality: DMAIC Cycle Define, Measure, Analyze, Improve, and Control (DMAIC) Developed by General Electric as a means of focusing effort on quality using a methodological approach Overall focus of the methodology is to understand and achieve what the customer wants DMAIC consists of five steps….

Six Sigma Quality: DMAIC Cycle (Continued) 1. Define (D) Customers and their priorities 2. Measure (M) Process and its performance 3. Analyze (A) Causes of defects 4. Improve (I) Remove causes of defects 5. Control (C) Maintain quality

The DMAIC Road Map (Ford) DEFINE Define — Select Critical To Satisfaction (CTS) characteristics and performance MEASURE Measure — Create/validate measurement systems ANALYZE Analyze — Identify sources of variation from performance objectives MODIFY DESIGN? Redesign — Revise current measurement systems if incorrect REDESIGN Improve — Discover process relationships and establish new procedures IMPROVE CONTROL Control — Implement process controls

Analytical Tools for Six Sigma and Continuous Improvement Process Analysis Run Charts Pareto Charts Histograms Scatter Diagrams Fish-Bone Charts Control Charts (not covered in this course)

Pareto Analysis The purpose of Pareto Analysis is to identify and highlight major symptoms of major quality problems It is based on the premise that usually a small number of faults cause the majority of malfunctions (to separate the vital few and trivial many)

Developing Pareto Analysis Define classification of defects to be monitored Define the period of time over which the assessment will be made Total the frequency of occurrence of each class of defects over the period Plot the histogram and cumulative distribution of the classes in descending order of the frequency occurrence Identify the classes that constitute the majority of defect occurrences

“80 percent of the problems are due to 20 percent of the causes” Pareto Analysis Frequency Percentage -100% -50% -0% A B C D E F Pareto Law (80/20 Rule): “80 percent of the problems are due to 20 percent of the causes”

Scatter Diagrams A Scatter Diagram is used to interpret data by graphically displaying the relationship between two variables.

Fish-Bone Diagram Also known as cause-and-effect diagram, or Ishikawa diagram Pareto analysis is used to identify key problems or symptoms, Fish-Bone diagram is used to sort causes of the problems Brain storming sessions of groups of workers needed It is a very valuable educational tool

Used to find problem sources/solutions Other names Steps Fish-Bone 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. This slide introduces the Cause and Effect Diagram. The next several slide show the development of a simple example. If time is available, it would be helpful to ask students to develop their own examples.

Causes and Effect Diagram Fishbone diagram - Ishikawa Chart Machine Man Effect Method Material

Cause and Effect Diagram Example Method Manpower Main Cause Too many defects Material Machinery Main Cause

Cause and Effect Diagram Example Method Manpower Drill Overtime Too many defects Wood Steel Lathe Material Machinery Sub-Cause

Cause and Effect Diagram Example Method Manpower Tired Old Slow Drill Overtime Steel Wood Lathe Too many defects Material Machinery

Example: why isn't the phone being answered on time?

Analytical Tools for Six Sigma and Continuous Improvement: Control Charts Can be used to monitor ongoing production process quality and quality conformance to stated standards of quality 970 980 990 1000 1010 1020 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 LCL UCL

Statistical Process Control with Control Charts

Six Sigma Roles and Responsibilities Executive leaders must champion the process of improvement Corporation-wide training in Six Sigma concepts and tools Setting stretch objectives for improvement Continuous reinforcement and rewards

The Shingo System: Fail-Safe Design Shingo’s argument: Defects arise when people make errors Defects can be prevented by providing employees with feedback on errors and putting controls in the process Poka-Yoke includes: Checklists Special tooling that prevents employees from making errors (Poka-Yoke: Japanese slang for “avoiding inadvertent errors” ) 21

Which dial turns on the burner? Knowledge in the World: Which dial turns on the burner? Stove A Stove B

1. Identify those processes needing improvement Benchmarking 1. Identify those processes needing improvement 2. Identify a firm that is the world leader in performing the process 3. Contact the managers of that company and make a personal visit to interview managers and workers 4. Analyze data 20

A prerequisite for global competition? ISO 9000 Series of standards agreed upon by the International Organization for Standardization (ISO) Adopted in 1987 Awarded in 152 countries A prerequisite for global competition? ISO 9000 directs you to "document what you do and then do as you documented" 24

Three Forms of ISO Certification First party: A firm audits itself against ISO 9000 standards Second party: A customer audits its supplier 3. Third party: A "qualified" national or international standards or certifying agency serves as auditor 27

ISO 9000 Standards: Application in Production Flow