1. Operations Management Managing Quality Chapter 6

2. Outline Quality and strategy. Defining quality.
International quality standards.
Total quality management.
Tools of TQM.
Inspection.
TQM in services.

3. Quality Improves Profitability
Sales Gains
Higher sales.
Higher prices.
Improved reputation.
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.

4. Definitions of Quality
Totality of features & characteristics that bears on a product or services ability to satisfy customer needs. (American Society for Quality)
User-Based: What consumer says it is.
Manufacturing-Based: Degree to which a product conforms to design specification.
Once you have introduced these definitions of quality, ask students to provide example of products that use them.

5. Dimensions of Quality for Goods
Operation or Performance.
Reliability.
Durability.
Conformance.
Serviceability.
Appearance to senses.
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.

6. Implications of Quality
Company reputation.
Real or perceived.
Product liability.
Large $ can be awarded.
Global implications.
Company quality affects national image.
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.

7. International Quality Standards
ISO 9000 series (Europe/EC)
Common quality standards for products sold in Europe (even if made in U.S.).
ISO series (Europe/EC)
Standards for recycling, labeling etc.
One of the most important points to be made from this slide is that quality standards are now international. Students might be asked to explain the benefits of international as opposed to national standards. They might also be asked to consider the limitations we would face if there were no such standards. The problems to be encountered in developing international standards also make for good discussion.
Note to your students that Crosby has great reservations about the standard and the procedures building an effective quality program.

8. Costs of Quality Prevention costs (5-10%) - To prevent failures.
Appraisal costs (15-40%) - To evaluate products.
Failure costs (50-80%):
Internal failure costs - Defective parts or services discovered in-house.
External failure costs - Defective parts or services discovered by customer.
Most organizations do not know the cost of poor quality.

9. Costs of Quality Internal failure costs. External failure costs.
Scrap and rework.
Downtime.
Safety stock inventory.
Overtime.
External failure costs.
Complaint handling and replacement.
Warranties.
Liability.
Loss of goodwill.

10. Traditional Quality Process (Manufacturing)
Customer
Marketing
Engineering
Operations
Specifies
Interprets
Designs
Produces
Need
Need
Product
Product
Defines
Plans
Students might be asked what problems they would foresee in implementing this process.
Quality
Quality
Monitors
Quality

11. TQM - Total Quality Management
Encompasses entire organization from supplier to customer.
Commitment by management to 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.

12. Three Key Figures W. Edwards Deming Joseph Juran Philip Crosby
Management & all employees have responsibility for quality.
14 points.
Deming Prize in Japan.
Joseph Juran
Focus on customer.
Continuous improvement and teams.
Philip Crosby
Quality is free!
Cost of poor quality is underestimated.
One point to make here is that this list represents a recent expression of Demings 14 points - the list is still evolving.
Students may notice that many of these fourteen points seem to be simply common sense. If they raise this issue - ask them to consider jobs they have held. Were these points emphasized or implemented by their employers? If not, why not? This part of the discussion can be used to raise again the issue that proper approaches to quality are not “programs,” with limited involvement and finite duration, but rather philosophies which must become ingrained throughout the organization.

13. Deming’s Points Create consistency of purpose across the organization.
Leadership must play a key role.
Build quality into the products.
Build long term relationships.
Continuously improve product, quality, and service.
Training & education are crucial.
Empower employees.
One point to make here is that this list represents a recent expression of Demings 14 points - the list is still evolving.
Students may notice that many of these fourteen points seem to be simply common sense. If they raise this issue - ask them to consider jobs they have held. Were these points emphasized or implemented by their employers? If not, why not? This part of the discussion can be used to raise again the issue that proper approaches to quality are not “programs,” with limited involvement and finite duration, but rather philosophies which must become ingrained throughout the organization.

14. Malcom Baldrige National Quality Award
Established in 1988 by the U.S. government to promote TQM practices.
“Quality improvement programs are essential to the well-being of our economy and our ability to compete globally.”
Criteria include:
Senior executive leadership.
Strategic planning.
Management of process quality.
Quality results.
Customer satisfaction.
You might make the point that companies actually do consider this a prestigious award.
For further information, visit the web site:

15. Malcom Baldrige National Quality Award - Guidelines
It is crucial to have:
management understanding of the factory floor,
worker involvement in quality, and
emphasis on statistical process control.
“Quality improvement programs must be management-led and customer-oriented, and this may require fundamental changes in the way companies and agencies do business.”
You might make the point that companies actually do consider this a prestigious award.
For further information, visit the web site:

16. Concepts of TQM Top management has primary responsibility.
Focus on customer.
Continuous improvement.
Employee empowerment.
Benchmarking.
Knowledge of tools for TQM.
This slide simply introduces concepts of TQM. These concepts are expanded upon in subsequent slides.

17. Continuous Improvement
Continuously improve process & customer satisfaction.
Involve all operations & work units.
Other names:
Kaizen (Japanese).
Zero-defects.
Six sigma.
Students may have a number of questions with respect to the notion of continuous improvement.
- Why do we need continuous improvement? Why can’t we do it right the first time?
- Doesn’t implementation of continuous improvement introduce a certain instability?
- Are we never “done”?
- Etc.

18. Employee Empowerment
Involve employees in product & process improvements.
85% of quality problems are due to process & material – not employees!
Techniques:
Support workers; workers solve quality problems.
Let workers make decisions.
Train workers; provide tools for improved quality.
Build teams & quality circles.
If you have not done so already, you might at this point discuss:
- why employee empowerment works
- the role of information technology in enabling employee empowerment
- the role of information technology in making employee empowerment a requirement

19. Benchmarking
Selecting best practices to use as a standard (target) for performance.
Determine what to benchmark.
Consider leading organizations in similar areas.
Collect and analyze benchmarking information.
Quantitative measures of performance.
Take action to match or exceed the benchmark.
Ask student to identify firms which they believe could serve as benchmarks. If students are unable to identify any firms - ask them to identify a college or university whose registration system or housing selection system could serve as a benchmark. Most students have enough knowledge of, or friends at,other colleges and universities so as to be able to respond to this question.

20. Tools for TQM Quality Function Deployment (QFD). Taguchi techniques.
Cause-and-effect diagrams.
Pareto charts.
Statistical process control.
Poka-yoke.
This slide simply enables you to introduce the tools of TQM.
Particular tools are elaborated upon in subsequent slides.

21. Quality Function Deployment (QFD)
Determines what will satisfy the customer.
Translates customer desires into target design.
Helps determine product and process to ensure quality.

22. Taguchi Techniques
Experimental design methods to improve product & process design.
Identify key component & process variables affecting product variation.
Taguchi Concepts:
Quality robustness.
Quality loss function.

23. Quality Robustness
Design and make products so that variations in production do not cause failure.
Identify important variations.
Eliminate the effect of variations rather than the cause.
Allow variation, but limit its ability to reduce quality.

24. Quality Loss Function
Poor quality can be viewed as deviation from a desired level.
Most quality characteristics (e.g., length, weight) have a target value.
Large deviations are much more expensive than small deviations.
Quality loss function shows cost of deviation and is not linear.
A deviation twice as large may be 10 times as expensive.
One question to pose to your students: “Of what value is the notion of a “social cost?” How might a manager use this in decision making?

25. Cause and Effect Diagram
Used to find problem sources/solutions.
Other names:
Fish-bone diagram, Ishikawa diagram.
Steps:
Identify problem to correct.
Draw main causes for problem as ‘bones’.
Ask ‘What could have caused problems in these areas?’ Repeat for each sub-area.
This slide introduces the Cause and Effect Diagram. The next several slide show the development of a simple example.
If time is available, it would be helpful to ask students to develop their own examples.

26. Cause and Effect Diagram Example
Too many defects
Problem

27. Cause and Effect Diagram Example
Method
Manpower
Main Cause
Too many defects
Material
Machinery
Main Cause

28. Cause and Effect Diagram Example
Method
Manpower
Drill
Over
Time
Too many defects
Wood
Steel
Lathe
Material
Machinery
Sub-Cause

29. Cause and Effect Diagram Example
Method
Manpower
Tired
Old
Slow
Drill
Over
Time
Steel
Wood
Lathe
Too many defects
Material
Machinery

30. Pareto Charts
The majority of quality problems (defects) have only a few causes.
Pareto chart shows relative importance of causes.
Scratches
70% 54 12 5 4 2 10 20 30 40 50 60 70
Porosity
Nicks
Contamination
Misc.
Causes of Glass Defects, by % of total defects
Number
16% 6% 5% 3%
This slide introduces the Cause and Effect Diagram. The next several slide show the development of a simple example.
If time is available, it would be helpful to ask students to develop their own examples.

31. Statistical Process Control (SPC)
Uses statistics & control charts to identify when to adjust process.
Involves:
Creating standards (upper & lower limits).
Measuring sample output (e.g. mean weight).
Taking corrective action (if necessary).
Done while product is being produced.
This slide introduces the process of Statistical Process Control. Slides illustrating the mechanics will be found in the presentation for supplement 4S.
At some point, you may wish to illustrate or discuss the connection between Statistical Process Control and the Target and Conformance-based quality control discussed earlier.

32. Inspection Examine items to see if they are good or defective.
Detects defective products.
Does not correct deficiencies in process or product.
Issues:
What to inspect?
When & where to inspect?
This slide introduces the concept of inspection.
At this point, one should probably stress the role of inspection in the overall quality control process. Some students seem to have the notion that inspection is quality control.

33. When and Where to Inspect
At the supplier’s plant:
While the supplier is producing.
Before shipping to your facility.
At your facility:
Upon receipt of goods from the supplier.
Before costly or irreversible processes.
When production or service is complete.
At the point of customer contact.
This slide can be used to frame a discussion about when to inspect. If your students have documented an actual production process from a local business, one of these documented processes can serve as an example.

34. Inspection Richey International’s Spies
How do limousine services and luxury hotels maintain quality? They inspect. But when the product is one-on-one service, largely dependent on personal behavior, how do you inspect? You hire spies!
Richey International is the spy. National Executive Service, an international limousine service, Preferred Hotels and Resorts Worldwide, and Intercontinental Hotels have all hired Richey to do quality evaluations via spying. Richey employees posing as customers perform the inspections. However, even then management must have established what the customer expects and specific services that yield customer satisfaction. Only then do managers know where and how to inspect. Aggressive training and objective inspections reinforce behavior that will meet those customer expectations. The training is performed in-house, but Richey International performs the unannounced inspections.
This slide can be used to frame a discussion about when to inspect. If your students have documented an actual production process from a local business, one of these documented processes can serve as an example.

35. Inspection Points in Services
Some Points of Inspection
Organization
Issues to Consider
Restaurant
Kitchen
Cashier station
Dining areas
Food
Clean, proper storage, unadulterated food, health regulations observed, well-organized.
Speed, accuracy, appearance.
Clean, comfortable, regular monitoring by personnel.
Presentation, taste, quantity.

36. TQM In Services Customer contact is important!
Service quality is more difficult to measure than for goods.
Courtesy, competence, communication, etc.
Service quality perceptions depend on:
Expectations versus reality.
Process and outcome.
Type of service (normal vs. exception).
Example: flight cancellation.
At this point, you might consider going back to the slides illustrating the differences between goods and services. Those slides are provided next. If you do not wish to use them, simply skip to the final slide in the sequence.