1. Operations Management Part II

2. The Value Equation

3. Why Quality is Critical
Quality: Quality is the single most important thing you can work on to improve the effectiveness of your company. It's as simple as that. Things just cascade when you get control of your quality.
John Young, CEO Hewlett Packard

4. Eight Dimensions of Quality
1. Performance
The primary operating characteristics of the product or service.
2. Features
The characteristics that supplement the basic functioning of the product or service.
3. Reliability
Probability of the product or service failing within a specified period of time.
4. Conformance
The degree to which a product or service meets acknowledged standards
David Garvin, “Competing on the Eight Dimensions of Quality,” Harvard Business Review, Nov-Dec 1987

5. Eight Dimensions of Quality
5. Durability
A measure of product life (both technical and economic).
6. Serviceability
The speed, courtesy, competence, and ease of repair or recovery.
7. Aesthetics
How a product or service looks, feels, sounds, tastes, or smells.
8. Perceived Quality
Various tangible and intangible aspects of the product from which quality is inferred.
David Garvin, “Competing on the Eight Dimensions of Quality,” Harvard Business Review, Nov-Dec 1987

6. Quality Costs
Prevention costs: process/product design, training, vendor relations;
Appraisal costs: quality audits, statistical quality control;
Correction costs (internal failure): yield losses, rework charges;
Recovery costs (external failure): returns, repairs, lost business.

7. Quality costs escalate as value is added to product or service:
Cost of finding and correcting a
defective component
Supplier Inspection
0.003
Incoming Inspection
0.03
Fabrication Inspection
0.30
Subproduct Test $3
Final Product Test
$30
$300
Field Service
David Garvin, “Competing on the Eight Dimensions of Quality,” Harvard Business Review, Nov-Dec 1987

8. Deming’s Theory of Quality & Economics
Costs decrease because of less rework, fewer mistakes, fewer delays, snags; better use of machine-time and materials
Improve Quality
Productivity Improves
Capture the market with better quality and lower price
Provide jobs and more jobs
Stay in business
Deming, Out of the Crisis, 1986

9. Six Sigma 6s Developed by Motorola in the 1980s
Adopted and expanded by GE

10. What is Six Sigma?
A measure of quality that strives for near perfection.
Disciplined, data-driven approach to eliminating defects
Scope
From manufacturing to transactions
From products to services
Constantly striving for improvement
Or else, loose ground to your competitors

11. Six Sigma Defined
A process must not produce more than 3.4 defects per million opportunities
A defect is defined as anything outside of customer specifications
% meeting specification

12. Benefits of Six Sigma When Properly Applied General Electric
Reduce costs
Increase revenues
Develop your work force
Provide a common corporate language and methodology
General Electric
Estimates benefits of ~$10 billion during first five years of implementation

13. Implementing Six Sigma
Determine which processes are the best candidates
Define what you mean by a service defect and how you intend to measure it
Probe relentlessly for root causes
Remember, this is a long-term commitment