© 2005 Wiley1 Total Quality Management Chapter 5

MGMT 326 Foundations of Operations Introduction Strategy Quality Assurance Capacity, Facilities, & Work Design Planning & Control Products & Processes Product Design Process Design Managing Quality Statistical Process Control

Total Quality Management (TQM) Chapter 5 What is quality? Costs of quality Total Quality Management (TQM) Customer- Defined Quality TQM Philosophy Quality in Product Design (Quality Function Deployment) Quality Tools

© 2005 Wiley4 Why Quality is Important Increases value of products to customers Reduces expensive mistakes Increases profits  Shareholder value

© 2005 Wiley5 How Customers Define Quality Customer-defined quality: Meeting quality expectations as defined by the customer High performance design vs. product or service consistency Psychological (perceived quality): the quality that the customer thinks he/she got Value: the good or service is superior to others with similar prices (getting more for your money)

© 2005 Wiley6 How Customers Define Quality (2) How customers define quality (2) Fitness for use: how well the product performs its intended function – differs by target market Support services – technical support, repairs, etc. See differences between manufacturing and service organizations, pp , Table 5.1 Quality includes all characteristics that are important to customers – not just the core product

© 2005 Wiley7 How Companies Meet Customer Requirements Companies use product or service specifications to meet customer requirements Characteristics of the product or service which will be measured to determine quality Target values (ideal values) for each characteristic Should be based on customer expectations Should meet any legal requirements Conformance quality: If a product or service consistently meets specifications, it has conformance quality.

© 2005 Wiley8 Cost of Quality – 4 Categories Early detection/prevention is less costly Costs may be less by a factor of 10 See pages for cost of quality details

© 2005 Wiley9 Total Quality Management (TQM) Customer-defined quality: Meeting quality expectations as defined by the customer Integrated organizational effort designed to improve quality on all quality characteristics that are important to customers (core product and anything else that affects customers) Requires a coordinated effort All levels of the organization All functions (departments) in the organization Work with suppliers and listen to customers

© 2005 Wiley10 External and internal customers External customers buy goods and/or services from the organization External customers may be people, businesses, government agencies, universities, or non-profit organizations If you work in an organization, internal customers are people in the same organization who use your work product (goods, services, reports, information systems)

© 2005 Wiley11 TQM Philosophy Focus on Customer Identify and meet customer needs Stay tuned to changing needs, e.g. fashion styles Continuous Improvement: Continuous learning and problem solving Quality at the Source: Find the problem when it occurs and fix it. Employee Empowerment and problem solving (pages ): Empower all employees. Serve external and internal customers

© 2005 Wiley12 TQM Philosophy (2) Quality improvement teams (QIT's or quality circles) Teams formed around processes – 8 to 10 people Meet regularly to analyze and solve problems Self-managed work teams: a work group is responsible for managing its responsibilities. Managers are coaches, not bosses. (less common than QIT's) Benchmarking: Studying practices at “best in class” companies Managing Supplier Quality: Certify suppliers and eliminate receiving inspection

© 2005 Wiley13 Plan-Do-Study-Act Cycle (PDSA) PDSA is a problem-solving process used in continuous improvement Plan: Document the current process. What is being done? Collect procedures and flowchart the process Collect performance data and identify problems. Evaluate the current process. What should be changed? Set performance objectives. Develop an improvement plan.

© 2005 Wiley14 Plan-Do-Study-Act Cycle (2) Do: Implement the improvement plan on trial basis Study: Collect data on the new process. Compare actual performance with objectives Act Communicate the results from the trial If successful, implement new process throughout the organization. If the trial was not successful or did not fully achieve objectives, go back to Plan step.

© 2005 Wiley15 PDSA (continued) Cycle is repeated After act phase, start planning and repeat process

© 2005 Wiley16 Seven Problem Solving Tools Cause-and-Effect Diagrams Flowcharts Checksheet Control Charts Scatter Diagrams Pareto Analysis Histograms

Cause-and-Effect Diagrams Used to identify the cause of a quality problem Followup: Collect data to verify the cause and develop a plan to eliminate the cause.

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Flowchart Used to document the detailed steps in a process Often the first step in Process Reengineering

Checksheet Tool Used to Collect Data for Analysis

Control Chart Set confidence intervals for the mean and range of a process (usual behavior) LCL = lower control limit, UCL = upper control limit Is process in control (predictable)? Does process have conformance quality?

Scatter Diagrams A graph that shows how two variables are related to one another Data can be used in a regression analysis to establish equation for the relationship

Pareto Analysis Used to Prioritize Problems Most important problems should be solved first Prioritize by number of defects or $ cost of defects Often called the Rule: Most quality problems are the result of only a few causes. Example: 80% of the problems caused by 20% of causes

Histogram A chart that shows the frequency distribution of observed values of a variable like service time at a bank drive-up window Displays whether the distribution is symmetrical (normal) or skewed

© 2005 Wiley25 Quality in Product Design Quality function deployment (QFD) Used by product design teams Used to translate customer preferences into specific technical requirements The technical requirements are used to develop the product specification Operations is responsible for making the product to specifications Products that meet specifications have conformance quality Objective is to satisfy customers Principal tool is House of Quality (pages )

QFD Details Process used to ensure that the product meets customer specifications Voice of the customer Customer-based benchmarks Voice of the engineer

QFD - House of Quality Adding trade-offs, targets & developing product specifications Targets Technical Benchmarks