1. © 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

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

3. © 2006 Prentice Hall, Inc.6 – 3 Our Faith in Quality of Systems  Have you ever checked a bridge on a highway before you drove over it with your car?  Have you ever checked the validity of the claims on the bottle of your pills?  Have you ever asked a pilot for her license before your flight?  Have you ever asked you doctor for his certificate in medicine?  Why should you consider the ideas?

4. © 2006 Prentice Hall, Inc.6 – 4 Quality Failures Examples  The big dig panel fell on a car and killed a lady (product defect)  A trained doctor who turned into cosmetic surgeon without a license or training in area (fake service)  Hospital operates patient on wrong leg (service error)  Hospital gives patient wrong pills (service error)

5. © 2006 Prentice Hall, Inc.6 – 5 Quality Failures Examples  A person without training practicing natural healing or alternate medicine (fake service)  Arsenic in bottled water (product defect)  Fake drugs on the market (fake product)

6. © 2006 Prentice Hall, Inc.6 – 6 Quality Failures: 20 th Century  US Food and Drug Administration  http://www.fda.gov/opacom/7alerts.html http://www.fda.gov/opacom/7alerts.html  UK Medicines and Healthcare products Regulatory Agency (MHRA)  Fake drugs video clip http://news.bbc.co.uk/1/hi/health/4725881.stm# http://news.bbc.co.uk/1/hi/health/4725881.stm#

7. © 2006 Prentice Hall, Inc.6 – 7 Institutional Practices for Quality Assurance: History 13 th – 19 th Century  From the end of the 13th century to the early 19th century, craftsmen across medieval Europe were organized into unions called guilds, who developed strict rules for product and service quality.  Inspection committees enforced the rules by marking flawless goods with a special mark or symbol.  Craftsmen themselves often placed a second mark on the goods they produced. At first this mark was used to track the origin of faulty items.  But over time the mark came to represent a craftsman’s good reputation. Inspection marks and master-craftsmen marks served as proof of quality for customers throughout medieval Europe.

8. © 2006 Prentice Hall, Inc.6 – 8 Weaknesses of Medieval Quality Assurance Practices  Products got more diverse  Products got more complex and knowledge intensive  Ways of defining quality by the guilds were diverse  It relied on manual inspection of goods by outside guilds  It slowed down the delivery of goods  Mass production era produced more units per day than could be manually inspected (staffing, cost and time issues)  A New Approach was needed !!!

9. © 2006 Prentice Hall, Inc.6 – 9 Statistical-Approaches for Quality : 20 th Century  During the World War II (from 1941), US military products were inspected on delivery to ensure conformance to requirements. The U.S. armed forces inspected virtually every unit produced to ensure that it was safe for operation. This practice required huge inspection forces and caused problems in recruiting competent inspection personnel.  To ease the problems without compromising product safety, the armed forces began to use sampling inspection to replace unit-by-unit inspection. Industry consultants, particularly from Bell Laboratories, helped develop sampling tables and published them in a military standard, known as Mil-Std-105. Later became known as statistical control charts.

10. © 2006 Prentice Hall, Inc.6 – 10 Statistical-Approaches for Quality : After World War II  After the World War II, Japanese manufacturers converted plants from producing military to producing civilian goods for trade. Initially, Japanese goods were shoddy and could not be sold as exports in international markets. Japanese firms asked American statisticians for help.  W. Edwards Deming, was frustrated with American managers for their termination of the use of quality control methods after the war. He introduced his 14- points approach, of focusing on the System and not on inspection to improve quality, in Japan plants. W. Edwards DemingW. Edwards Deming  Joseph M. Juran, trained Japanese managers about role of top managers, customers defining quality, involvement of everyone and continuous improvement. Joseph M. Juran Joseph M. Juran

11. © 2006 Prentice Hall, Inc.6 – 11 America Gets the Message of Statistical-Approaches for Quality :  In the 1970s, price advantages and quality competitiveness of Japanese continued to rise. A 1980 NBC-TV News special report examined the question of quality, “If Japan Can… Why Can’t We?”. It captured the attention from national legislators, administrators and the media.  Congress passed a law intended to increase competitiveness through quality improvement and it introduced a national quality award called Malcolm Baldrige National Quality Award. http://www.quality.nist.gov/ http://www.quality.nist.gov/  U.S. firms began to listen and focus on quality in their strategies and in projects and in the training of staff. The U.S. response, emphasized not only statistics but also a holistic set of principles that became known as Total Quality Management (TQM).

12. © 2006 Prentice Hall, Inc.6 – 12 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

13. © 2006 Prentice Hall, Inc.6 – 13 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

14. © 2006 Prentice Hall, Inc.6 – 14 Quality Models by International Agencies  Industrial Standard Z8101-1981 (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 14000 series (Europe/EC)

15. © 2006 Prentice Hall, Inc.6 – 15 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

16. © 2006 Prentice Hall, Inc.6 – 16 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

17. © 2006 Prentice Hall, Inc.6 – 17 Services: Quality Dimensions  Service density  Service inputs

18. © 2006 Prentice Hall, Inc.6 – 18 Activity:Quality Dimensions Retailing  Which events would you list as evidence of low quality performance in retailing?  Poor quality happens when?

19. © 2006 Prentice Hall, Inc.6 – 19 How Quality Failure Happens! Input Output SYSTEM Good quality Poor quality

20. © 2006 Prentice Hall, Inc.6 – 20 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

21. © 2006 Prentice Hall, Inc.6 – 21 External Failure Internal Failure Prevention Costs of Quality Appraisal Total Cost Quality Improvement Total Cost

22. © 2006 Prentice Hall, Inc.6 – 22 Costs of Quality- Example Example: Comparing firms with Cost of quality approach

23. © 2006 Prentice Hall, Inc.6 – 23 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

24. © 2006 Prentice Hall, Inc.6 – 24 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

25. © 2006 Prentice Hall, Inc.6 – 25 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

26. © 2006 Prentice Hall, Inc.6 – 26 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?

27. © 2006 Prentice Hall, Inc.6 – 27 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

28. © 2006 Prentice Hall, Inc.6 – 28 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

29. © 2006 Prentice Hall, Inc.6 – 29 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

30. © 2006 Prentice Hall, Inc.6 – 30 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

31. © 2006 Prentice Hall, Inc.6 – 31 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

32. © 2006 Prentice Hall, Inc.6 – 32 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.

33. © 2006 Prentice Hall, Inc.6 – 33 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

34. © 2006 Prentice Hall, Inc.6 – 34 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

35. © 2006 Prentice Hall, Inc.6 – 35 Pareto Charts Number of occurrences Room svcCheck-inPool hoursMinibarMisc. 72%16%5%4%3% 12 4 3 254 100 – 100 93 – 93 88 – 88 72 – 72 70 70 – 60 60 – 50 50 – 40 40 – 30 30 – 20 20 – 10 10 – 0 0 – Frequency (number) Causes and percent Cumulative percent Data for October

36. © 2006 Prentice Hall, Inc.6 – 36 Impact of Poor Process Quality on Output 1 2 3 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?

37. © 2006 Prentice Hall, Inc.6 – 37 Impact of Quality Appraisal on Output 1 2 3 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?

38. © 2006 Prentice Hall, Inc.6 – 38 Impact of Quality Prevention on Output 1 2 3 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?

39. © 2006 Prentice Hall, Inc.6 – 39 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