9-1 Operations Management MBA105 Chapter 9/11 Williams J. Srevenson 7 th Edition Introduction to Quality Total Quality Management

9-2 Learning Objectives  Define quality.  Importance of quality.  Determinants of quality.  Costs & quality.  Quality awards.  quality gurus  TQM  Quality tools

9-3 Quality Management  What does the term quality mean?  Quality is the ability of a product or service to consistently meet or exceed customer expectations.  degree of excellence of a thing.  Totality of features and characteristics that satisfy needs

9-4 Quality Cost and Productivity Vs. Quality USA Organizations Focus in Cost and productivity (2 nd war – mid 1980s) WHY AMERICAN ORGANIZATIONS BEHAVIOR CHANGE TWARD QUALITY??

9-5 Evolution of Quality Management  Fredrick Taylor (Scientific Management)  Statistical process control charts  Tables for acceptance sampling  1940’s - Statistical sampling techniques  1950’s - Quality assurance/TQC ( DEMING)  1960’s - Zero defects  1970’s - Quality assurance in services

9-6 Quality Assurance vs. Strategic Approach  Quality Assurance  Emphasis on finding and correcting defects before reaching market  Strategic Approach  Proactive, focusing on preventing mistakes from occurring  Greater emphasis on customer satisfaction

9-7 Dimensions of Quality  Performance  basic operating characteristics of a product; how well a car is handled.  Features  “extra” items added to basic features, such as a stereo CD or a leather interior in a car  Reliability  probability that a product will operate properly within an expected time frame; that is, a TV will work without repair for about seven years

9-8 Dimensions of Quality (Cont’d)  Conformance  degree to which a product meets pre– established standards  Durability  how long product lasts before replacement  Serviceability  ease of getting repairs, speed of repairs, courtesy and competence of repair person

9-9 Dimensions of Quality (Cont’d)  Aesthetics  how a product looks, feels, sounds, smells, or tastes  Safety  assurance that customer will not suffer injury or harm from a product; an especially important consideration for automobiles  Perceptions  subjective perceptions based on brand name, advertising, and the like

9-10 Dimensions of Quality: Service  Time and Timeliness  How long must a customer wait for service, and is it completed on time?  Is an overnight package delivered overnight?  Completeness:  Is everything customer asked for provided?  Is a mail order from a catalogue company complete when delivered?

9-11 Dimensions of Quality: Service  Courtesy:  How are customers treated by employees?  Are catalogue phone operators nice and are their voices pleasant?  Consistency  Is the same level of service provided to each customer each time?  Is your newspaper delivered on time every morning?

9-12 Dimensions of Quality: Service  Accessibility and convenience  How easy is it to obtain service?  Does a service representative answer you calls quickly?  Accuracy  Is the service performed right every time?  Is your bank or credit card statement correct every month?

9-13 Dimensions of Quality: Service  Responsiveness  How well does the company react to unusual situations?  How well is a telephone operator able to respond to a customer’s questions?

9-14 Challenges with Service Quality  Customer expectations often change  Different customers have different expectations  Each customer contact is a “moment of truth”  Customer participation can affect perception of quality  Fail-staffing must be designed into the system

9-15 Quality Gurus  Walter Shewart  In 1920s, developed control charts  Introduced the term “quality assurance”  W. Edwards Deming  Developed courses during World War II to teach statistical quality-control techniques to engineers and executives of companies that were military suppliers  After the war, began teaching statistical quality control to Japanese companies  Joseph M. Juran  Followed Deming to Japan in 1954  Focused on strategic quality planning

9-16 Quality Gurus (cont.)  Armand V. Feigenbaum  In 1951, introduced concepts of total quality control and continuous quality improvement  Philip Crosby  In 1979, emphasized that costs of poor quality far outweigh the cost of preventing poor quality  In 1984, defined absolutes of quality management— conformance to requirements, prevention, and “zero defects”  Kaoru Ishikawa  Promoted use of quality circles  Developed “fishbone” diagram  Emphasized importance of internal customer

9-17 Determinants of Quality (cont’d)  Quality of design  Intension of designers to include or exclude features in a product or service: Different car models with different features  size  Appearance  Roominess  Fuel economy  Comfort  Material used

9-18 Determinants of Quality (cont’d)  Quality of Conformance  Making sure a product or service is produced according to design:  if new tires do not conform to specifications, they wobble  if a hotel room is not clean when a guest checks in, the hotel is not functioning according to specifications of its design

9-19 The Consequences of Poor Quality  Loss of business  Liability  Productivity  Costs

9-20 Benefits of Good Quality  Organizations will benefit in different way: Enhance reputation Increase market share Greater customer loyalty Lower liability Cost Fewer complains Lower production cost Higher profits

9-21  Top management  Design  Procurement  Production/operations  Quality assurance  Packaging and shipping  Marketing and sales  Customer service Responsibility for Quality

9-22 Costs of Quality  Failure Costs - costs incurred by defective parts/products or faulty services.  Internal Failure Costs  Costs incurred to fix problems that are detected during the production.  Defective materials  Incorrect machine setting  Faulty equipment  Carelessness  Wrong procedure

9-23 Costs of Quality  External Failure Costs  All costs incurred to fix problems that are detected after the product/service is delivered to the customer.  Warranty work  Handling of complains  Replacement  Liability

9-24 Costs of Quality (continued)  Appraisal Costs  Costs of activities designed to ensure quality or uncover defects  Cost of inspector  Testing  Test equipment  Labs  Field testing

9-25 Costs of Quality (continued)  Prevention Costs  Cost of preventing defects form occurring  Planning and adminstration  Working with vendors  Training  Quality control procedures

9-26 Total Quality Management A philosophy that involves everyone in an organization in a continual effort to improve quality and achieve customer satisfaction. Continuous Improvement Involvement of Everyone Customer Satisfaction

9-27 Elements of TQM 1.Continual improvement ( never ending) 2.Competitive benchmarking 3.Employee empowerment 4.Team approach 5.Decisions based on facts 6.Knowledge of tools 7.Supplier quality 8.Champion 9.Quality at the source 10.Suppliers

9-28 Continuous Improvement  Philosophy that seeks to make never- ending improvements to the process of converting inputs into outputs.  Kaizen: Japanese word for continuous improvement.

9-29 Quality at the Source The philosophy of making each worker responsible for the quality of his or her work.

9-30 Process Improvement and Tools  Process improvement - a systematic approach to improving a process  Process mapping  Analyze the process  Redesign the process  Tools  There are a number of tools that can be used for problem solving and process improvement  Tools aid in data collection and interpretation, and provide the basis for decision making

9-31 Basic Quality Tools  Flowcharts  Check sheets  Histograms  Pareto Charts  Scatter diagrams  Control charts  Cause-and-effect diagrams  Run charts

9-32 Quality Tools Flow Chart : displays the steps in a process showing order and relationships helps in understanding of that process and identifies potential weaknesses i.e. poor performance Cause and Effect Also know as fishbone or Ishikawa

9-33 Quality Tools

9-34 Quality Tools

9-35 Flow Chart Operation Decision Start/ Finish Operation Decision

9-36 Check Sheet COMPONENTS REPLACED BY LAB TIME PERIOD: 22 Feb to 27 Feb 2002 REPAIR TECHNICIAN: Bob TV SET MODEL 1013 Integrated Circuits |||| Capacitors |||| |||| |||| |||| |||| || Resistors || Transformers |||| Commands CRT |

9-37 Histogram

9-38 Pareto Analysis NUMBER OF CAUSEDEFECTSPERCENTAGE Poor design8064% Wrong part dimensions1613 Defective parts1210 Incorrect machine calibration76 Operator errors43 Defective material32 Surface abrasions %

9-39 Percent from each cause Causes of poor quality Machine calibrations Defective parts Wrong dimensions Poor Design Operator errors Defective materials Surface abrasions (64) (13) (10) (6) (3) (2)(2)

9-40 Scatter Diagram Y X

9-41 Control Chart UCL LCL

9-42 Cause-and-Effect Diagram Figure 9.12 Quality Problem Quality Problem Out of adjustment Tooling problems Old / worn Machines Faulty testing equipment testing equipment Incorrect specifications Improper methods Measurement Poor supervision Lack of concentration Inadequate training Human Deficiencies in product design Ineffective quality management Poor process design Process Inaccuratetemperaturecontrol Dust and Dirt Environment Defective from vendor Not to specifications Material- handling problems Materials

9-43 Run Chart Time (Hours) Diameter

9-44 Tracking Improvements UCL LCL UCL Process not centered and not stable Process centered and stable Additional improvements made to the process Figure 9-18

9-45 Methods for Generating Ideas  Brainstorming  Quality circles  Interviewing  Benchmarking  5W2H

McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. 12 Inventory Management

9-47 Inventory Models  Independent demand – finished goods, items that are ready to be sold  E.g. a computer  Dependent demand – components of finished products  E.g. parts that make up the computer

9-48 Types of Inventories  Raw materials & purchased parts  Partially completed goods called work in progress  Finished-goods inventories  (manufacturing firms) or merchandise (retail stores)

9-49 Functions of Inventory  To meet anticipated demand  To smooth production requirements (to build inventories during preseason period)  To decouple operations (in terms of operational difficulties)  To protect against stock-outs

9-50 Functions of Inventory (Cont’d)  To take advantage of order cycles (to produce in economic lot size)  To help hedge against price increases  To permit operations (work in progress inventory)  To take advantage of quantity discounts

9-51 Objective of Inventory Control  To achieve satisfactory levels of customer service while keeping inventory costs within reasonable bounds  Level of customer service  Costs of ordering and carrying inventory Inventory turnover is the ratio of average cost of goods sold to average inventory investment.

9-52  A system to keep track of inventory  A reliable forecast of demand  Knowledge of lead times  Reasonable estimates of  Holding costs  Ordering costs  Shortage costs  A classification system Effective Inventory Management

9-53 Inventory Counting Systems  Periodic System Physical count of items made at periodic intervals ( Manager periodically check the shelves)  Perpetual Inventory System (Continuous) System that keeps track of removals from inventory continuously, thus monitoring current levels of each item

9-54 Inventory Counting Systems (Cont’d)  Two-Bin System - Two containers of inventory; reorder when the first is empty  Universal Bar Code - Bar code printed on a label that has information about the item to which it is attached

9-55  Lead time: time interval between ordering and receiving the order  Holding (carrying) costs: cost to carry an item in inventory for a length of time, usually a year  Ordering costs: costs of ordering and receiving inventory  Shortage costs: costs when demand exceeds supply Key Inventory Terms