Operations Management For Competitive Advantage 1 Quality Management Operations Management For Competitive Advantage Chapter 7

Operations Management For Competitive Advantage 2 Chapter 7 Quality Management  Total Quality Management Defined  Malcolm Baldrige National Quality Award  Quality Specifications  Costs of Quality  Continuous Improvement  SPC Tools  Benchmarking  Fail-safing  ISO 9000

Operations Management For Competitive Advantage 3 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.

Operations Management For Competitive Advantage 4  1.0 Leadership (125 points)  2.0 Strategic Planning (85 points)  3.0 Customer and Market Focus (85 points)  4.0 Information and Analysis (85 points)  5.0 Human Resource Focus (85 Points)  6.0 Process Management (85 points)  7.0 Business Results (450 points) 1999 Malcolm Baldrige National Quality Award

Operations Management For Competitive Advantage 5 Categories for the Baldrige Award  Manufacturing companies or subsidiaries that – produce and sell manufactured products or manufacturing processes or – produce agricultural, mining, or construction products.  Service companies or subsidiaries that sell service  Small businesses  Health care organizations  Educational institutions

Operations Management For Competitive Advantage 6 Characteristics of a Baldrige Award Winner  The companies formulated a vision of what they thought quality was and how they would achieve it.  Senior management was actively involved.  Companies carefully planned and organized their quality effort to be sure it would be effectively initiated.  They vigorously controlled the overall process.

Operations Management For Competitive Advantage 7 Quality Specifications  Design quality: Inherent value of the product in the marketplace –Dimensions include: Performance, Features, Reliability, Durability, Serviceability, Response, Aesthetics, and Reputation.  Conformance quality: Degree to which the product or service design specifications are met

Operations Management For Competitive Advantage 8 Costs of Quality External Failure Costs Appraisal Costs Prevention Costs Internal Failure Costs Costs of Quality

Operations Management For Competitive Advantage 9 Continuous Improvement (CI)  Management's view of performance standards of the organization – performance level of the firm as something to be "continuously challenged and incrementally upgraded."  The way management views the contribution and role of its workforce – believe employee involvement and team efforts are the key to improvement

Operations Management For Competitive Advantage 10 CI Methodology: PDCA Cycle (Deming Wheel) 1. Plan a change aimed at improvement. 1. Plan 2. Execute the change. 2. Do 3. Study the results; did it work? 3. Check 4. Institutionalize the change or abandon or do it again. 4. Act

Operations Management For Competitive Advantage 11 Example: Process Flow Chart No, Continue… Material Received from Supplier Inspect Material for Defects Defects found? Return to Supplier for Credit Yes Can be used to find quality problems.

Operations Management For Competitive Advantage 12 Example: Pareto Analysis Can be used to find when 80% of the problems may be attributed to 20% of the causes. Can be used to find when 80% of the problems may be attributed to 20% of the causes. Assy. Instruct. Frequency DesignPurch. Training Other 80%

Operations Management For Competitive Advantage 13 Example: Run Chart Time (Hours) Diameter Can be used to identify when equipment or processes are not behaving according to specifications.

Operations Management For Competitive Advantage 14 Example: Histogram Number of Lots Data Ranges Defects in lot Can be used to identify the frequency of quality defect occurrence and display quality performance.

Operations Management For Competitive Advantage 15 Example: Scatter Diagram Hours of Training Defects Can be used to illustrate the relationships between quality behavior and training.

Operations Management For Competitive Advantage 16 Example: Checksheet Billing Errors Wrong Account Wrong Amount A/R Errors Wrong Account Wrong Amount Monday Can be used to keep track of defects or used to make sure people collect data in a correct manner.

Operations Management For Competitive Advantage 17 Example: Cause & Effect Diagram Effect ManMachine MaterialMethod Environment Possible causes: The results or effect. Can be used to systematically track backwards to find a possible cause of a quality problem (or effect).

Operations Management For Competitive Advantage 18 Example: Control Charts LCL UCL Can be used to monitor ongoing production process quality and quality conformance to stated standards of quality.

Operations Management For Competitive Advantage 19 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.

Operations Management For Competitive Advantage 20 The Shingo System: Fail-Safe Design  Shingo’s argument: – SQC methods do not prevent defects – Defects arise when people make errors – Defects can be prevented by providing workers with feedback on errors  Poka-Yoke includes: –Checklists –Special tooling that prevents workers from making errors

Operations Management For Competitive Advantage 21 ISO 9000  Series of standards agreed upon by the International Organization for Standardization (ISO)  Adopted in 1987  More than 100 countries  A prerequisite for global competition?  ISO 9000 directs you to "document what you do and then do as you documented."

Operations Management For Competitive Advantage 22 Three Forms of ISO Certification First party: A firm audits itself against ISO 9000 standards. Second party: A customer audits its supplier. Third party: A "qualified" national or international standards or certifying agency serves as auditor.

Operations Management For Competitive Advantage 23 ISO 9000 versus the Baldrige Award  Which should we pursue first?  What are the differences between the two?  Do you have to be ISO 9000 certified before going for the Baldrige Award?