Session Managing Quality

Session Outline Continuous Improvement Employee Empowerment Six Sigma Taguchi Concepts Just-in-Time (JIT) Benchmarking

This Session Weekly Activity: Leadership Style In 1939, Professor Kurt Lewin undertook a study which identified three (3) major leadership styles: Authorative (autocratic) Participative (democratic) Delegative (Laissez-Faire) Answer the 18 questions at: http://psychology.about.com/library/quiz/bl-leadershipquiz.htm See what your predominant leadership style is.

Topic Example Video The following video explains what is quality. Take note of the key points. http://www.youtube.com/watch?v=QJNVrY_Z2NM

What Is Quality? “The degree of excellence of a thing” (Webster’s Dictionary) “The totality of features and characteristics that satisfy needs” (ASQ) Fitness for use Quality of design

Definitions of Quality American Society of Quality: Product characteristics & features that affect customer satisfaction User-Based: What consumer says it is Manufacturing-Based: Degree to which a product conforms to design specification Product-Based: Level of measurable product characteristic Once you have introduced these definitions of quality, ask students to provide example of products that use them.

Takumi A Japanese character that symbolizes a broader dimension than quality, a deeper process than education, and a more perfect method than persistence

Producer’s Perspective Consumer’s Perspective The Meaning of Quality Fitness for Consumer Use Producer’s Perspective Consumer’s Perspective Quality of Conformance Conformance to criteria Cost Quality of Design Quality characteristics Price Marketing Production The Meaning of Quality

Quality of Conformance Ensuring product or service produced according to design Depends on Design of production process Performance of machinery Materials Training

Service Quality The Operations Manager must recognize: The tangible component of services is important The service process is important The service is judged against the customer’s expectations Exceptions will occur

Goods Dimensions of Quality Operation Reliability & durability Conformance Serviceability Appearance Perceived quality Quality 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.

UPS Service Specifications

Service Quality Attributes Tangibles Reliability Communication Credibility Security Responsiveness Competence Courtesy Access Under- standing 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.

Service Quality Determinants Reliability – consistency and dependability Responsiveness – willingness/readiness of employees to provide service; timeliness Competence – possession of skills and knowledge required to perform service Access – approachability and ease of contact Courtesy – politeness, respect, consideration, friendliness of contact personnel

Service Quality Determinants Communication – keeping customers informed in languages they understand Credibility – trustworthiness, believability, honesty Security – freedom from danger, risk or doubt Understanding/knowing the customer – making the effort to understands the customer’s needs Tangibles – the physical evidence of the service

International Standards Information regarding International and Australian standards for quality management and quality system elements guidelines can be obtained from state and territory offices of Standards Australia . A good starting point would be the state office: Standards Association of Australia. Website: www.standards.com.au

Productivity Improvements Sales Gains Improved response Higher Prices Improved reputation Costs & market share Company’s reputation Product liability International implications Increased Profits Improved Quality 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.

Costs of Quality Prevention costs - reducing the potential for defects through planning, design, process, training, information Appraisal costs - evaluating products, inspection and testing, test equipment, operator suitability Internal failure - of producing defective parts or service, scrap/wastage, rework, process failure, process down-time, price reduction External costs - occur after delivery, customer complaints, product returns, warranty, product liability, lost sales

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

Quality Philosophers Walter Shewhart W. Edwards Deming Joseph Juran Philip Crosby Armand Feigenbaum

Topic Example Video The following video discusses Total Quality Management. Take note of the key points. http://www.youtube.com/watch?v=U_GnYwReTzc

Encompasses entire organization, from supplier to customer TQM Encompasses entire organization, from supplier to customer Stresses a commitment by management to have a continuing, company-wide, drive toward excellence in all aspects of products and services that are important to the customer. A point to be made here is that TQM is not a program but a philosophy.

Intense Customer Focus Continual Improvement Total quality management Total quality management This CTR corresponds to the discussion of TQM on pp. 64-66 and summarises the material in Table 2-4 on p. 65. TQM is also discussed in Chapters 8, 12, 14, 19, & 20. Intense Customer Focus Total quality management TQM is a philosophy of management that is driven by customer needs and expectations. TQM emphasises the use of statistics to analyse variability in production processes to produce uniform quality and predictable quantities of acceptable output. The most prominent proponent of TQM is W. Edwards Deming who is largely credited with shaping the development of Japan’s approach to management and production. TQM represents a turnabout in thinking about costs. Although quality costs more, earlier management thinking did not factor in the costs of replacing usable goods or the cumulative effect of rising consumer expectations for better performance. By expanding the idea of what costs are, TQM has helped many of the highest quality manufacturers become the overall low cost producers as well. TQM also expands the definition of customer. Under TQM, a ‘customer’ is anyone and everyone who interacts with the organisation’s products or services, either internally or externally. Thus suppliers and employees are customers. Continual Improvement Continual Improvement Quality Quality Measurement Measurement Empowerment Empowerment

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

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

TQM Activity Flowmodel Organizational Practices Quality Principles Employee Fulfillment This slide simply introduces the four activities. Subsequent slides expand on each. Customer Satisfaction

Organizational Practices Leadership Mission statement Effective operating procedure Staff support Training Yields: What is important and what is to be accomplished One might begin discussion of this slide by introducing the difference between “leadership” and “management.” The point should also be made, again, about the need for involvement and commitment throughout the organization.

Quality Principles Customer focus Continuous improvement Employee empowerment Benchmarking Just-in-time Tools of TQM Yields: How to do what is important and to be accomplished Some students may find the notion of “continuous improvement” (Why can’t we do it right the first time?) and “employee empowerment” (Doesn’t this reduce or abrogate the role of the manager?) the most difficult to accept. If you have not done so already, this might be a good time to discuss each in some depth. The following slide may be used in a discussion of empowerment.

Employment Fulfillment Empowerment Organizational commitment Yields: Employees’ attitudes that they can accomplish what is important and to be accomplished This slide can be used to form the basis for a discussion of empowerment. If you wish to discuss empowerment - begin by asking students to define the term. You may find students are already comfortable with the term, in which case the discussion can be rather short; or, you may find they have unrealistic expectations (or desires?) - in which case you may wish to pursue the discussion at greater length. It may be helpful to ask students to identify the benefits and pitfalls to both management and worker. (For example, empowerment requires workers to assume greater responsibility.)

Customer Satisfaction Winning orders Repeat customers Yields: An effective organization with a competitive advantage The main point that one might make with this slide is that the customer is, ultimately, the most important person in your business.

Deming:Productivity Improvements Improving productivity This CTR relates to the material on p. 711-713 and corresponds to the information on Table 19-1 on p. 713. This CTR summarises W. Edwards Deming’s 14 points for improving management productivity. If you are featuring TQM throughout the course, you may wish to integrate additional material here. Deming:Productivity Improvements 14. Make top managers responsible 13. Train employees in new skills 12. Train employees in statistics 11. Require quality work 10. Avoid strictly numerical goals 9. Encourage cooperation 8. Drive out fear 7. Raise line supervisor quality 6. Train workers 5. Identify problems 4. Fewest suppliers 3. Statistical control 2. Continuous quality 1. Plan for future Deming’s fourteen points 1. Plan for the long-term future. Productivity gains do not come in short-term plans. Only a continuing commitment to the future can make a real contribution to productivity. 2. Never be complacent concerning the quality of your product. Constant improvement must be the goal regardless of how good the product is already. 3. Establish statistical control over your production processes and require your suppliers to do so as well. Statistical analysis objectively identifies problems. 4. Deal with the fewest number of suppliers – the best ones. 5. Find out the extent of problems. Are they confined to particular parts of the production process or stem from the overall process itself? 6. Train workers for the job that you are asking them to perform. 7. Raise the quality of your line supervisors – constantly. 8. Drive out fear. 9. Encourage departments to work closely together rather than concentrate on departmental or divisional distinctions. 10. Do not be sucked into adopting strictly numerical goals, including “zero defect.” 11. Require your workers to do quality work, not just be present 9 to 5. 12. Train your employees to understand statistical methods. 13. Train your employees in new skills as the need arises. 14. Make top managers responsible for implementing these principles.

Concepts of TQM Continuous improvement Employee empowerment Benchmarking Just-in-time (JIT) Taguchi concepts Knowledge of TQM tools This slide simply introduces concepts of TQM. These concepts are expanded upon in subsequent slides.

Topic Example Video The following video outlines the Just-in-Time (JIT) concept as practiced by MacDonalds. Take note of the key points. http://www.youtube.com/watch?v=FpwwcpubUIw

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) Reducing inventory reveals problems so they can be solved Unreliable Vendors Capacity Imbalances Scrap

Taguchi Concepts Engineering and experimental design methods to improve product and process design Identify key component and process variables affecting product variation Taguchi Concepts Quality robustness Quality loss function Target-oriented quality

The Five Platforms of TQM 1. Customer focus 2. Work systems and processes 3. Continuous improvement 4. People working together 5. Systematic analytical tools and techniques

Customer Focus External customers - identify who they are and exactly what they want from the organisation. Internal customers - need to work together to satisfy external customers by integrating all internal operations into an interdependent ‘whole’. This adds value, achieves continuous improvement and better results. Trading partnerships - forging co-operative relationships with customers and suppliers to so everyone ‘wins’.

Work Systems and Processes Improving systems by simplifying and streamlining them to avoid unnecessary activities and duplication of effort and enable people to ‘get it right the first time”. Four main focus areas: Suppliers (inputs) Process (ie. bottlenecks) Transfer (prior to delivery/handover) Customer service (post-purchase follow-up)

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

Continuous Improvement Japanese word for continuous incremental improvement is ‘Kaizen’. The Kaizen approach is “to keep examining everything that is done so see how it can be done better”. Incremental improvements are cost effective and add up to improved productivity and performance in the long run.

People Working Together “When spider webs unite, they can tie up a lion” - Ethiopian Proverb. To achieve ongoing improvements to processes, products, services and the organisation as a whole, people must work together. This requires an attitude that places, quality, teamwork and continuous improvement at the very core of an organisation’s culture. Cultures therefore need to be based on shared values and vision, commitment to goals, an empowered, creative workforce, willing to learn, change, develop and grow who operate in a team environment with supportive management.

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

Systematic Tools & Techniques Used to investigate and improve systems and procedures. Provides objective and systematic ways to identify and resolve problems, streamline systems and process and build quality into those systems.

Topic Example Video The following video explains the benefits of organisations using a six sigma approach. Take note of the key points. http://www.youtube.com/watch?v=aNMULFcLuIM

Normal Distribution Approximate percentage of area within given standard deviations (empirical rule). 99.7% 95% 68%

Six Sigma Two meanings Statistical definition of a process that is 99.9997% capable, 3.4 defects per million opportunities (DPMO) A program designed to reduce defects, lower costs, and improve customer satisfaction

Six Sigma Lower limits Upper limits 2,700 defects/million ±3 Mean ±6 Figure 6.4

Six Sigma Originally developed by Motorola, adopted and enhanced by Honeywell and GE Highly structured approach to process improvement A strategy A discipline - DMAIC 6

Six Sigma 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

Six Sigma Emphasize defects per million opportunities 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

Topic Example Video The following video explains the 7 quality control tools. Take note of the key points. http://www.youtube.com/watch?v=LdhC4ziAhgY

Tools of TQM Tools for generating ideas Tools to organize data Check sheet Scatter diagram Cause and effect diagram Tools to organize data Pareto charts Process charts (Flow diagrams) Tools for identifying problems Histograms Statistical process control chart

Seven Tools for TQM

Implementing TQM TQM TECHNOLOGY Flexible process This CTR relates to the material on pp. 454-457 and corresponds to Figure 12-5 on p. 456. Implementing TQM TQM Flexible process Education and training TECHNOLOGY Key components for implementation Technology TQM directs technological change toward developing flexible processes to support continuous improvement. Work processes are subject to continual change and fine tuning. Education and training must correspond to enhancing technological sophistication. Structure TQM requires a structure that effectively decentralise decision making with reduced vertical differentiation, wider spans of control, and reduced divisions of labour, and increased use of cross-functional teams. People TQM increases the responsibility the organisation places in its people at all levels. This requires not only technological training, but continual improvement and training in team-building skills, interpersonal communication, and analytical skills in problem-solving and decision making. Change agent TQM requires and demands the support of top management – with the CEO as the head change agent. The risks of change and the reasons people resist it discussed earlier mean that the very top of the organisation must demonstrate its uncompromising commitment if TQM is to be successfully adopted. STRUCTURE Decentralisation Reduced vertical differentiation Reduced division of labour Wider span of control Cross-functional teams PEOPLE Education and training Supportive Performance Evaluation and reward CHANGE AGENT Active leadership from top management

Inspection Many problems Cannot inspect quality into a product Worker fatigue Measurement error Process variability Cannot inspect quality into a product Robust design, empowered employees, and sound processes are better solutions

Inspection 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 process When production or service is complete Before delivery to your customer At the point of customer contact

Source Inspection Also known as source control The next step in the process is your customer Ensure perfect product to your customer Poka-yoke is the concept of foolproof devices or techniques designed to pass only acceptable product

Service Industry Inspection Organization What is Inspected Standard Arnold Palmer Hospital Billing Pharmacy Lab Nurses Admissions Accurate, timely, and correct format Prescription accuracy, inventory accuracy Audit for lab-test accuracy Charts immediately updated Data entered correctly and completely Table 6.5

PDCA Cycle 3.Check: Is the plan working 4.Act: Implement the plan Identify the improvement and make a plan 3.Check: Is the plan working 2.Do: Test the plan

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 Quality Circle Process

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

Website Benchmarking Factors Use of meta tags Yes: 70%, No: 30% Meaningful homepage title Yes: 97%, No: 3% Unique domain name Yes: 91%, No: 9% Search engine registration Above 96% Average loading speed 28K: 19.31, 56K: 10.88, T1: 2.59 Average number of spelling errors 0.16 Visibility of contact information Yes: 74%, No: 26% Presence of search engine Yes: 59%, No: 41% Translation to multiple languages Yes: 11%, No: 89% Table 6.3

Best Practice Quality Checklist Customer focus Planning Process improvement Supplier relationships Involvement and commitment Communication Leadership

Customer Focus Do we define quality in terms of customer expectations and perceptions? Do we clearly understand our customer’s expectations? Do we strive to meet and exceed those expectations? Do we have service-level agreement with our key customers that formalises expectations and reviews procedures?

Planning Do we have a well tested strategic and quality plan that identifies our quality vision? Do our employees know and support our quality plan? Is our quality plan supported in day-to-day actions? Do we set quantifiable targets for improvements?

Process Improvement Have we documented and standardised our key business processes and evaluated them against customer expectations? Do we continually improve these processes?

Supplier relationships Do we select our suppliers based on best value for money and their commitment to continuous improvement? Do we have well developed working relationships with our key suppliers? Do we have partnership arrangements with key suppliers that set out our expectations, performance standards and procedures, and problem-solving processes?

Involvement and Commitment Do our managers and employees know they are each responsible and accountable for quality? Are they trained in TQM tools and techniques, including team building? Do they have 'total quality attitudes' and behaviours?

Communication Do we measure our results and communicate them to all employees? Do we benchmark with other organisations? Do people share information and contribute ideas?

Leadership Is management fully committed to implementing total quality? Do they take a strong and visible role in leading change? Are they role models for total quality attitudes, actions and behaviours?

Recap Video The following video recaps on the importance of quality for organisations. Take note of the key points. http://www.youtube.com/watch?v=rtyQgm-n7KU

Next Session Task 1: Undertake Simulation Games: Heizer & Render – Managing Quality Ch. 6. http://wps.prenhall.com/bp_heizer_opsmgmt_10/147/37738/9661053.cw/index.html Task 2: Undertake Chapter Self-study Quizz: Heizer & Render – Managing Quality Ch. 6. Task 3: Undertake Case Study – Westover Electric Inc. Discuss the questions outlined in the case study.