© 2006 Prentice Hall, Inc.6 – 1 Operations Management Chapter 6 – Managing Quality © 2006 Prentice Hall, Inc. PowerPoint presentation to accompany Heizer/Render.

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© 2006 Prentice Hall, Inc.6 – 1 Operations Management Chapter 6 – Managing Quality © 2006 Prentice Hall, Inc. PowerPoint presentation to accompany Heizer/Render Operations Management, 8e

© 2006 Prentice Hall, Inc.6 – 2 Outline  Quality And Strategy  Defining Quality  Evolution of Quality Management  International Quality Standards  TQM Concepts  TQM Tools  Quality: Prevention vs. Detection

© 2006 Prentice Hall, Inc.6 – 3 Managing Quality Provides a Competitive Advantage Arnold Palmer Hospital  Deliver over 10,000 babies annually  Virtually every type of quality tool is employed  Continuous improvement  Employee empowerment  Benchmarking  Just-in-time  Quality tools

© 2006 Prentice Hall, Inc.6 – 4 Activity:Quality Dimensions Retailing  Which events would you list as evidence of low quality performance in retailing?  Poor quality happens when?

© 2006 Prentice Hall, Inc.6 – 5 How Quality Failure Happens! Input Output   Wrong things are done   Right things are not done   Right things are done poorly   Right things are done late   Right things are done well and in timely manner Events Happening in Service/Production Firm

© 2006 Prentice Hall, Inc.6 – 6 External Failure Internal Failure Prevention Costs of Quality Appraisal Total Cost Quality Improvement Total Cost

© 2006 Prentice Hall, Inc.6 – 7 Impact of Quality Failures 1.Internal Failure Costs  Warranty costs  Repair costs  Labor costs  Equipment downtime costs 2.External failure Costs  Liability costs  Loss of lives  Harm to health  Harm to environment  Customer defections

© 2006 Prentice Hall, Inc.6 – 8 How Quality Performance Happens Preventive Quality Approach -Process improvement -Quality program -Quality training -Process improvement -Statistical process control -Quality audit -Right things done late -Right things done -Right things not done - Right things done poorly -Wrong things done done -Right behaviors and practices leading to right things being done and in timely manner, all the time -Work inspection inspection -Product rework -Product testing - Quality tools -Material inspection Appraisal Quality Approach

© 2006 Prentice Hall, Inc.6 – 9 How Quality Practices Affect Organizational Performance Organizational Practices Leadership, Mission statement, Effective operating procedures, Staff support, Training Yields: What is important (priorities, resources) and what is to be accomplished (objectives, purposes) Quality Principles Customer focus, Continuous improvement, Benchmarking, Just-in-time, Tools of TQM Yields: How well a firm will perform what is important and things to be accomplished (standards of execution) Employee Fulfilment Empowerment, Organizational commitment Yields: Employee attitudes that can accomplish what is important (motivation, participation) Customer Satisfaction Winning orders, Repeat customers Yields: An effective organization with a competitive advantage (results, retention, satisfaction, growth) Figure 6.2

© 2006 Prentice Hall, Inc.6 – 10 Activity:Quality Dimensions Department of Motor Vehicles (DMV)  What do you think would be the important thing to an employee of the DMV when reviewing supporting documentation of an applicant?  What do you think would be the important thing to an applicant for a license with regard to documents that s/he brings to support her/his application?  What do you think would be the important expectation of the police department with regard to the DMV issued licenses?

© 2006 Prentice Hall, Inc.6 – 11 Different Views  User-based – better performance, more features  Manufacturing-based – conformance to standards, making it right the first time  Product-based – specific and measurable attributes of the product

© 2006 Prentice Hall, Inc.6 – 12 Defining Quality The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs American Society for Quality

© 2006 Prentice Hall, Inc.6 – 13 Quality Programs by Experts W. Edwards Deming14 Points for Management Joseph M. JuranTop management commitment, fitness for use Armand FeigenbaumTotal Quality Control Philip B. CrosbyQuality is Free

© 2006 Prentice Hall, Inc.6 – 14 Quality Models by National Agencies  Malcom Baldrige National Quality Award was established in 1988 by the U.S. government  Designed to promote TQM practices in Manufacturing, government, non-profit and services sectors  Japan Quality Award

© 2006 Prentice Hall, Inc.6 – 15 Quality Models by International Agencies  Industrial Standard Z (Japan)  Specification for TQM  ISO 9000 series (Europe/EC)  Common quality standards for products sold in Europe (even if made in U.S.)  2000 update places greater emphasis on leadership and customer satisfaction  ISO series (Europe/EC)

© 2006 Prentice Hall, Inc.6 – 16 Quality Models by Industrial Sector Agents  Capability Maturity Model Integration for improving quality of the Software development industry  Quality model for the automotive industry  Company-driven quality initiatives, e.g. Six sigma quality

© 2006 Prentice Hall, Inc.6 – 17 Ethics and Quality Management  Operations managers must deliver healthy, safe, quality products and services  Poor quality risks injuries, lawsuits, recalls, and regulation  Organizations are judged by how they respond to problems

© 2006 Prentice Hall, Inc.6 – 18 TQM Encompasses entire organization, from supplier to customer Stresses a commitment by management to have a continuing, companywide drive toward excellence in all aspects of products and services that are important to the customer

© 2006 Prentice Hall, Inc.6 – 19 Key Quality Principles (1)  Customer orientation  Everything seen from the view of customer  Results orientation  Measure, track and define results objectively  Process orientation  View changes from a process point of view  Employee orientation  creativity, improvement come from employees. Empower, equip and train them

© 2006 Prentice Hall, Inc.6 – 20 Key Quality Principles (2)  Measurement orientation  Define measures, collect data and analyze data about performance using TQM tools  Continuous improvement orientation  Focus on improving continuously not in haphazard or impulsive manner  Prevention orientation  Prevention of errors is cheaper and more effective than detecting and removing them  Variation Elimination orientation  Focus on recognizing and eliminating the root causes of variations in your systems.

© 2006 Prentice Hall, Inc.6 – 21 Tools of TQM  Tools for Generating Ideas  Check sheets  Scatter diagrams  Cause and effect diagrams  Tools to Organize the Data  Pareto charts  Flow charts  Tools for Identifying Problems  Histogram  Statistical process control chart

© 2006 Prentice Hall, Inc.6 – 22 Cause-and-Effect Diagrams Material Machinery Methods Manpower Inadequate supply of magazines Inadequate special meals on-board Insufficient clean pillows & blankets on-board Broken luggage carousel Mechanical delay on plane Deicing equipment not available Overbooking policies Bumping policies Mistagged bags Poor check-in policies Understaffed ticket counters Understaffed crew Poorly trained attendants Dissatisfied Airline Customer Figure 6.6

© 2006 Prentice Hall, Inc.6 – 23 Pareto Charts Number of occurrences Room svcCheck-inPool hoursMinibarMisc. 72%16%5%4%3% – – – – – – – – – – – 0 0 – Frequency (number) Causes and percent Cumulative percent Data for October

© 2006 Prentice Hall, Inc.6 – 24 Impact of Poor Process Quality on Output Maximum Batch sizes 100 units 100 units 100 units Activity 60 mins 60 mins 60 mins times Errors after activity 10 units (10%) 10 units (10%) 10 units (10%) How may defective parts will whole process yield?

© 2006 Prentice Hall, Inc.6 – 25 Impact of Quality Appraisal on Output Maximum Batch sizes 100 units 100 units 100 units Activity 60 mins 10 mins 60 mins 10 mins 60 mins 10 mins times Errors after activity 2 units (2%) 2 units (2%) 2 units (2%) How may defective parts will whole process yield?

© 2006 Prentice Hall, Inc.6 – 26 Impact of Quality Prevention on Output Maximum Batch sizes 100 units 100 units 100 units Activity 66 mins 66 mins 66 mins times Errors after activity 1 units (1%) 1 units (1%) 1 units (1%) How may defective parts will whole process yield?

© 2006 Prentice Hall, Inc.6 – 27 Ways Quality by Prevention Improves Productivity Improved Quality Increased Profits   Increased productivity   Lower rework and scrap costs   Lower warranty costs Reduced Costs   Improved response   Higher Prices   Improved reputation Sales Gains Figure 6.1