1. © 2005 Wiley1 Total Quality Management Chapter 5

2. Operations and Operations Strategy Products, Processes, & Quality Operations Planning & Control Facilities and Work Systems Mathematical Tools for Operations Project Management Linear Programming Product Design Process Design Just-in-Time Quality Management Statistical Process Control Course Overview

3. Total Quality Management (TQM) Chapter 5 What is quality? Measurement and costs of quality Total Quality Management (TQM) Quality Awards And Certifications TQM Philosophy Quality in Product Design (Quality Function Deployment) Why TQM Programs Fail Customer- Defined Quality How companies meet customer requirements (product specification) Quality Tools

4. © 2005 Wiley4 Why Quality is Important Increases value of products to customers Reduces expensive mistakes Increases profits  Shareholder value

5. © 2005 Wiley5 How Customers Define Quality Customer-defined quality: Meeting quality expectations as defined by the customer High performance design vs. product or service consistency Psychological (perceived quality): the quality that the customer thinks he/she got Value: the good or service is superior to others with similar prices (getting more for your money)

6. © 2005 Wiley6 How Customers Define Quality (2) How customers define quality (2) Fitness for use: how well the product performs its intended function – differs by target market Support services – technical support, repairs, etc. See differences between manufacturing and service organizations, pp. 139-140, Table 5.1 Quality includes all characteristics that are important to customers – not just the core product

7. © 2005 Wiley7 How Companies Meet Customer Product or Service Specification Companies use product or service specifications to meet customer requirements Characteristics of the product or service which will be measured to determine quality Target values (ideal values) for each characteristic Should be based on customer expectations Should meet any legal requirements Conformance quality: If a product or service consistently meets specifications, it has conformance quality.

8. © 2005 Wiley8 Cost of Quality – 4 Categories See Figure 5.1, page 141 Early detection/prevention is less costly Costs may be less by a factor of 10

9. © 2005 Wiley9 Quality–Cost Relationship Cost of doing things wrong: internal and external failure. 20 to 35% of revenues if company has made little effort to improve quality Cost of doing things right: prevention and appraisal. 3 to 4% of revenues Profitability: In the long run, quality is free (Philip Crosby)

10. © 2005 Wiley10 Total Quality Management (TQM) Customer-defined quality: Meeting quality expectations as defined by the customer Integrated organizational effort designed to improve quality on all quality characteristics that are important to customers (core product and anything else that affects customers) Requires a coordinated effort All levels of the organization All functions (departments) in the organization Work with suppliers and listen to customers Evolution of TQM – see Figure 5-3, page 143

11. © 2005 Wiley11 TQM Philosophy Focus on Customer Identify and meet customer needs Stay tuned to changing needs, e.g. fashion styles Continuous Improvement: Continuous learning and problem solving Quality at the Source: Find the problem when it occurs and fix it. Employee Empowerment and problem solving (pages 149-150): Empower all employees. Serve external and internal customers

12. © 2005 Wiley12 TQM Philosophy (2) Quality improvement teams (QIT's or quality circles) Teams formed around processes – 8 to 10 people Meet regularly to analyze and solve problems Self-managed work teams: a work group is responsible for managing its responsibilities. Managers are coaches, not bosses. (less common than QIT's) Benchmarking: Studying practices at “best in class” companies Managing Supplier Quality: Certify suppliers and eliminate receiving inspection

13. © 2005 Wiley13 Plan-Do-Study-Act Cycle (PDSA) PDSA is a problem-solving process used in continuous improvement Plan: Document the current process. What is being done? Collect procedures and flowchart the process Collect performance data and identify problems. Evaluate the current process. What should be changed? Set performance objectives. Develop an improvement plan.

14. © 2005 Wiley14 Plan-Do-Study-Act Cycle (2) Do: Implement the improvement plan on trial basis Study: Collect data on the new process. Compare actual performance with objectives Act Communicate the results from the trial If successful, implement new process throughout the organization. If the trial was not successful or did not fully achieve objectives, go back to Plan step.

15. © 2005 Wiley15 Plan-Do-Study-Act Cycle (3)

16. © 2005 Wiley16 Seven Problem Solving Tools (Seven Quality Tools) Cause-and-Effect Diagrams: Used to identify the cause of a quality problem Followup: Collect data to verify the cause and develop a plan to eliminate the cause. Flowcharts: Used to document the detailed steps in a process Checksheet: A simple way to collect data for analysis. Control charts (explained in Chapter 6)

17. © 2005 Wiley17 Seven Problem Solving Tools (2) Scatter diagram: shows how 2 variable are related to each other If the relationship between the variables is approximately linear, the data can be used in a regression analysis to establish the equation for the relationship Frequency chart for different types of defects Prioritize problems by number of defects or $ cost of defects Solve high-priority problems first If number of defects is used, the 80-20 rule usually applies: a small number of causes will account for most defects

18. © 2005 Wiley18 Seven Problem Solving Tools (3) Histogram: A chart that shows the frequency distribution of observed values of a variable Example: service time at a bank drive-up window Displays whether the distribution is symmetric or skewed See Figure 5-7, page 151

19. © 2005 Wiley19 Quality in Product Design Quality function deployment (QFD) Used by product design teams Used to translate customer preferences into specific technical requirements The technical requirements are used to develop the product specification Operations is responsible for making the product to specifications Products that meet specifications have conformance quality Objective is to satisfy customers Principal tool is House of Quality (pages 154-156). See Figures 5-9 and 5-10.

20. © 2005 Wiley20 Why TQM Efforts Fail Lack of top management support and commitment Lack of a genuine quality culture Continuous improvement Teamwork Training Employee empowerment Recognition and rewards (team or individual) Under-reliance or over-reliance on statistical process control (SPC) SPC is an essential tool for identifying problems and monitoring quality It is important to solve the problems (PDSA, 7 quality tools)

21. © 2005 Wiley21 Quality Award and Certifications Malcolm Baldrige National Quality Award ISO 9000 Certification ISO 14000 Certification (environment)

22. © 2005 Wiley22 Baldrige Award Competitive quality award presented by U. S. government 5 award categories: Manufacturing, services, small business, health care, education All written applications are reviewed by trained examiners Site visits to leading candidates Maximum of 2 awards per category

23. Baldrige Award Criteria Framework A Systems Perspective Organizational Profile Measurement, analysis, & knowledge management (90 pts) Leadership (120 pts) Customer & Market Focus (85 pts) Strategic Planning (85 pts) Human Resource Development & Mgmt. (85 pts) Process Mgmt. (85 pts) Business Results (450 pts) Total = 1,000 pts

24. © 2005 Wiley24 Baldrige Award - Business Results Customer-focused results Product and service performance Financial and market results Human resource results

25. © 2005 Wiley25 ISO 9000 Standards International quality certification program guided by the International Standards Organization (ISO) Any firm that passes an ISO standards audit will be certified. U. S. participates in the development of these standards: American National Standards Institute (ANSI) American Society for Quality (ASQ) Professional organizations

26. © 2005 Wiley26 ISO 9000 ISO 9000 standards audits must be performed by a registrar, a firm that is certified to do ISO 9000 audits Some companies require their suppliers to be certified Be sure that your registrar is acceptable to your customers Firms must be re-certified periodically.

27. © 2005 Wiley27 ISO 14000 A certification program in environmental management Standard-setting and certification procedures are similar to ISO 9000