1. © 2006 Prentice Hall, Inc.6 – 1 Managing Quality Ch6 Production Planning and Control

2. © 2006 Prentice Hall, Inc.6 – 2 Quality and Strategy  Managing quality supports differentiation, low cost, and response strategies  Quality helps firms increase sales and reduce costs  Building a quality organization is a demanding task

3. © 2006 Prentice Hall, Inc.6 – 3 Ways Quality 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

4. © 2006 Prentice Hall, Inc.6 – 4 The Flow of Activities Necessary to Achieve TQM Organizational Practices Leadership, Mission statement, Effective operating procedures, Staff support, Training Yields: What is important and what is to be accomplished Quality Principles Customer focus, Continuous improvement, Benchmarking, Just-in-time, Tools of TQM Yields: How to do what is important and to be accomplished Employee Fulfillment Empowerment, Organizational commitment Yields: Employee attitudes that can accomplish what is important Customer Satisfaction Winning orders, Repeat customers Yields: An effective organization with a competitive advantage

5. © 2006 Prentice Hall, Inc.6 – 5 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 Quality Definition

6. © 2006 Prentice Hall, Inc.6 – 6 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

7. © 2006 Prentice Hall, Inc.6 – 7 Implications of Quality 1.Company reputation  Perception of new products  Employment practices  Supplier relations 2.Product liability  Reduce risk 3.Global implications  Improved ability to compete

8. © 2006 Prentice Hall, Inc.6 – 8 Key Dimensions of Quality  Performance  Features  Reliability  Conformance  Durability  Serviceability  Aesthetics (  Aesthetics (es-thet-ik)  Perceived quality  Value

9. © 2006 Prentice Hall, Inc.6 – 9 Malcolm Baldrige National Quality Award  Established in 1988 by the U.S. government  Designed to promote TQM practices  Recent winners The 2013 Baldrige Award recipients—listed with their category—are: Pewaukee School District, Pewaukee, Wis. (education) Baylor Regional Medical Center at Plano, Plano, Texas (health care)* Sutter Davis Hospital, Davis, Calif. (health care)

10. © 2006 Prentice Hall, Inc.6 – 10 Baldrige Criteria Applicants are evaluated on: CategoriesPoints Leadership120 Strategic Planning 85 Customer & Market Focus85 Information & Analysis 90 Human Resource Focus85 Process Management 85 Organizational Results450

11. © 2006 Prentice Hall, Inc.6 – 11 Costs of Quality  Prevention costs - reducing the potential for defects  Appraisal costs - evaluating products, parts, and services  Internal failure - producing defective parts or service before delivery  External costs - defects discovered after delivery

12. © 2006 Prentice Hall, Inc.6 – 12 External Failure Internal Failure Prevention Costs of Quality Appraisal Total Cost Quality Improvement Total Cost

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

14. © 2006 Prentice Hall, Inc.6 – 14 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

15. © 2006 Prentice Hall, Inc.6 – 15 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

16. © 2006 Prentice Hall, Inc.6 – 16 Deming’s Fourteen Points 1.Create consistency of purpose 2.Lead to promote change 3.Build quality into the product; stop depending on inspection 4.Build long term relationships based on performance, not price 5.Continuously improve product, quality, and service 6.Start training 7.Emphasize leadership Table 6.1

17. © 2006 Prentice Hall, Inc.6 – 17 Deming’s Fourteen Points 8.Drive out fear 9.Break down barriers between departments 10.Stop lecturing workers 11.Support, help, improve 12.Remove barriers to pride in work 13.Institute a vigorous program of education and self-improvement 14.Put everybody in the company to work on the transformation Table 6.1

18. © 2006 Prentice Hall, Inc.6 – 18 Seven Concepts of TQM  Continuous improvement  Six Sigma  Employee empowerment  Benchmarking  Just-in-time (JIT)  Taguchi concepts  Knowledge of TQM tools

19. © 2006 Prentice Hall, Inc.6 – 19 Continuous Improvement  Represents continual improvement of all processes  Involves all operations and work centers including suppliers and customers  People, Equipment, Materials, Procedures

20. © 2006 Prentice Hall, Inc.6 – 20 2. Do Test the plan 3. Check Is the plan working? 4. Act Implement the plan 1.Plan Identify the improvement and make a plan Shewhart’s PDCA Model

21. © 2006 Prentice Hall, Inc.6 – 21 Six Sigma  Originally developed by Motorola, Six Sigma refers to an extremely high measure of process capability  A Six Sigma capable process will return no more than 3.4 defects per million operations (DPMO)  Highly structured approach to process improvement

22. © 2006 Prentice Hall, Inc.6 – 22 What is Six Sigma? Six Sigma is about helping organization make more money by improving customer value and efficiency. This is accomplished by producing products and services that are cheaper, faster, and better, thus reducing waste. Waste is defined as the difference between potential and actual quality

23. © 2006 Prentice Hall, Inc.6 – 23 Core Philosophy of Six Sigma is based on the Key Concepts Think in terms of key business processes, customer requirements, and overall strategic objectives. Think in terms of key business processes, customer requirements, and overall strategic objectives. Focus on corporate sponsors responsible for championing projects, support team activities, help to overcome resistance to change, and obtaining resources. Focus on corporate sponsors responsible for championing projects, support team activities, help to overcome resistance to change, and obtaining resources. Emphasize quantifiable measures such as defects per million opportunities (dpmo) that can be applied to all parts of an organization Emphasize quantifiable measures such as defects per million opportunities (dpmo) that can be applied to all parts of an organization

24. © 2006 Prentice Hall, Inc.6 – 24 Core Philosophy of Six Sigma is based on the Key Concepts (Cont.) Ensure that appropriate metrics are identified early and focus on business results, thereby providing incentives and accountability. Ensure that appropriate metrics are identified early and focus on business results, thereby providing incentives and accountability. Provide extensive training followed by project team deployment Provide extensive training followed by project team deployment Create highly qualified process improvement experts (“green belts,” “black belts,” and “master black belts”) who can apply improvement tools and lead teams. Create highly qualified process improvement experts (“green belts,” “black belts,” and “master black belts”) who can apply improvement tools and lead teams. Stretch objectives for improvement. Stretch objectives for improvement.

25. © 2006 Prentice Hall, Inc.6 – 25 What Is Six Sigma? – Sigma Scale Six Sigma Is A Statistical Unit Of Measure That Reflects Process Capability  DPMO 63.4 5230 46,210 366,800 2308,000 1697,672 Process Capability Errors/Defects Per Million Opportunities 6e Most Service Organizations Are ~ 3 Sigma

26. © 2006 Prentice Hall, Inc.6 – 26 Classical View of Performance Practical Meaning of “99% Good”: 20,000 lost articles of mail per hour 20,000 lost articles of mail per hour 15 minutes of unsafe drinking water each day 15 minutes of unsafe drinking water each day 5,000 incorrect surgical operations per week 5,000 incorrect surgical operations per week 2 short or long landings at most major airports each day 2 short or long landings at most major airports each day 200,000 wrong drug prescriptions each year 200,000 wrong drug prescriptions each year No electricity for almost 7 hours each month No electricity for almost 7 hours each month 3 Sigma 4 Sigma 6 Sigma 93.32% 99.38% 99.9999% Historical Standard Current Standard New Standard Capability Long-Term Yield Standard

27. © 2006 Prentice Hall, Inc.6 – 27 Impact of Six Sigma Difference between 4 and 6 sigma: Phone without service 4 hours vs 9 sec/month 1 non-confirming package in 3 truck loads vs 5,000 From 3 to 4 sigma improvements 10 folds From 4 to 5 sigma improvements 30 folds From 5 to 6 sigma improvements 70 folds

28. © 2006 Prentice Hall, Inc.6 – 28 Six Sigma 1.Define critical outputs and identify gaps for improvement 2.Measure the work and collect process data 3.Analyze the data 4.Improve the process 5.Control the new process to make sure new performance is maintained DMAIC Approach

29. © 2006 Prentice Hall, Inc.6 – 29 Six Sigma Implementation  Emphasize DPMO as a standard metric  Provide extensive training  Focus on corporate sponsor support (Champions)  Create qualified process improvement experts (Black Belts, Green Belts, etc.)  Set stretch objectives This cannot be accomplished without a major commitment from top level management

30. © 2006 Prentice Hall, Inc.6 – 30 Employee Empowerment  Getting employees involved in product and process improvements  85% of quality problems are due to process and material  Techniques  Build communication networks that include employees  Develop open, supportive supervisors  Move responsibility to employees  Build a high-morale organization  Create formal team structures

31. © 2006 Prentice Hall, Inc.6 – 31 Quality Circles  Group of employees who meet regularly to solve problems (brainstorming sessions)  The group members are trained in planning, problem solving, and statistical methods  Often led by a facilitator  Very effective when done properly

32. © 2006 Prentice Hall, Inc.6 – 32 Use internal benchmarking if you’re big enough Benchmarking Selecting best practices to use as a standard for performance  Determine what to benchmark  Form a benchmark team  Identify benchmarking partners  Collect and analyze benchmarking information  Take action to match or exceed the benchmark

33. © 2006 Prentice Hall, Inc.6 – 33 Best Practices for Resolving Customer Complaints  Make it easy for clients to complain  Respond quickly to complaints  Resolve complaints on first contact  Use computers to manage complaints  Recruit the best for customer service jobs

34. © 2006 Prentice Hall, Inc.6 – 34 Just-in-Time (JIT) Relationship to quality:  JIT cuts the cost of quality  JIT improves quality  Better quality means less inventory and better, easier-to-employ JIT system

35. © 2006 Prentice Hall, Inc.6 – 35 Just-in-Time (JIT)  ‘Pull’ system of production scheduling including supply management  Production only when signaled  Allows reduced inventory levels  Inventory costs money and hides process and material problems  Encourages improved process and product quality

36. © 2006 Prentice Hall, Inc.6 – 36 Just-In-Time (JIT) Example Scrap Unreliable Vendors Capacity Imbalances Work in process inventory level (hides problems)

37. © 2006 Prentice Hall, Inc.6 – 37 Just-In-Time (JIT) Example Reducing inventory reveals problems so they can be solved Scrap Unreliable Vendors Capacity Imbalances

38. © 2006 Prentice Hall, Inc.6 – 38 Taguchi Concepts  Experimental design methods to improve product and process design  Identify key component and process variables affecting product variation  Taguchi Concepts  Quality robustness  Quality loss function  Target-oriented quality

39. © 2006 Prentice Hall, Inc.6 – 39 Quality Robustness  Ability to produce products uniformly in adverse manufacturing and environmental conditions  Remove the effects of adverse conditions  Small variations in materials and process do not destroy product quality

40. © 2006 Prentice Hall, Inc.6 – 40 Quality Loss Function  Shows that costs increase as the product moves away from what the customer wants  Costs include customer dissatisfaction, warranty and service, internal scrap and repair, and costs to society  Traditional conformance specifications are too simplistic

41. © 2006 Prentice Hall, Inc.6 – 41 Unacceptable Poor Good Best Quality Loss Function High loss Loss (to producing organization, customer, and society) Low loss Frequency LowerTargetUpper Specification Target-oriented quality yields more product in the “best” category Target-oriented quality brings product toward the target value Conformance-oriented quality keeps products within 3 standard deviations L = D 2 C where L =loss to society D =distance from target value C =cost of deviation

42. © 2006 Prentice Hall, Inc.6 – 42 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

43. © 2006 Prentice Hall, Inc.6 – 43 Seven Tools for TQM (a)Check Sheet: An organized method of recording data Month Lost Departure Mechanical Overbooked Other Luggage Delay January12331 February33010 March25323 April54402 May47230 June38111 July66302 August79030 September47302 October311230 November210100 December412201 Total4484241612

44. © 2006 Prentice Hall, Inc.6 – 44 Seven Tools for TQM (b)Scatter Diagram: A graph of the value of one variable vs. another variable Late Passengers Departure Delays

45. © 2006 Prentice Hall, Inc.6 – 45 Seven Tools for TQM (c)Cause and Effect Diagram: A tool that identifies process elements (causes) that might effect an outcome EquipmentPersonnel Procedure Materia l Other Aircraft late to gate Late arrival Gate occupied Mechanical failures Late pushback tug Weather Air traffic Late food service Late fuel Late baggage to aircraft Gate agents cannot process passengers quickly enough Too few agents Agents undertrained Agents undermotivated Agents arrive at gate late Late cabin cleaners Late or unavailable cockpit crews Late or unavailable cabin crews Poor announcement of departures Weight and balance sheet late Delayed checkin procedure Confused seat selection Passengers bypass checkin counter Checking oversize baggage Issuance of boarding pass Acceptance of late passengers Cutoff too close to departure time Desire to protect late passengers Desire to help company’s income Poor gate locations Delayed Flight Departure

46. © 2006 Prentice Hall, Inc.6 – 46 Seven Tools for TQM (d)Pareto Charts: A graph to identify and plot problems or defects in descending order of frequency Frequency Percent ABCDEABCDEABCDEABCDE CausePercentage of Incidents Cumulative Percentage Late passengers 53.3 Waiting for pushback 15.068.3 Waiting for fuel 11.379.6 Late weight and balance sheet 8.788.3

47. © 2006 Prentice Hall, Inc.6 – 47 Seven Tools for TQM (e)Flow Charts (Process Diagrams): A chart that describes the steps in a process

48. © 2006 Prentice Hall, Inc.6 – 48 Seven Tools for TQM (f)Histogram: A distribution showing the frequency of occurrence of a variable

49. © 2006 Prentice Hall, Inc.6 – 49 Seven Tools for TQM (g)Statistical Process Control Chart: A chart with time on the horizontal axis to plot values of a statistic Figure 6.5 Upper control limit Target value Lower control limit Time

50. © 2006 Prentice Hall, Inc.6 – 50 Statistical Process Control (SPC) (g) Statistical Process Control Chart: A chart with time on the horizontal axis to plot values of a statistic  Uses statistics and control charts to tell when to take corrective action  Drives process improvement  Four key steps  Measure the process  When a change is indicated, find the assignable cause  Eliminate or incorporate the cause  Restart the revised process

51. © 2006 Prentice Hall, Inc.6 – 51 An SPC Chart Upper control limit Coach’s target value Lower control limit Game number |||||||||123456789123456789|||||||||12345678912345678920%10%0% Plots the percent of free throws missed

52. © 2006 Prentice Hall, Inc.6 – 52 Inspection  Involves examining items to see if an item is good or defective  Detect a defective product  Does not correct deficiencies in process or product  It is expensive  Issues  When to inspect?  Where in process to inspect?

53. © 2006 Prentice Hall, Inc.6 – 53 When and Where to Inspect 1.At the supplier’s plant while the supplier is producing 2.At your facility upon receipt of goods from the supplier 3.Before costly or irreversible processes 4.During the step-by-step production processes 5.When production or service is complete 6.Before delivery from your facility 7.At the point of customer contact

54. © 2006 Prentice Hall, Inc.6 – 54 Inspection  Many problems  Worker fatigue  Measurement error  Process variability  Cannot inspect quality into a product  Robust design, empowered employees, and sound processes are better solutions

55. © 2006 Prentice Hall, Inc.6 – 55 Source Inspection  Also known as source control  The next step in the process is your customer  Ensure perfect product to your customer Poka-yoke is the concept of foolproof devices or techniques designed to pass only acceptable product

56. © 2006 Prentice Hall, Inc.6 – 56 Service Industry Inspection Organization What is Inspected Standard Jones Law Office Receptionist performance BillingAttorney Is phone answered by the second ring Accurate, timely, and correct format Promptness in returning calls Table 6.4

57. © 2006 Prentice Hall, Inc.6 – 57 Service Industry Inspection Organization What is Inspected Standard Hard Rock Hotel Reception desk DoormanRoomMinibar Use customer’s name Greet guest in less than 30 seconds All lights working, spotless bathroom Restocked and charges accurately posted to bill Table 6.4

58. © 2006 Prentice Hall, Inc.6 – 58 Service Industry Inspection Organization What is Inspected Standard Arnold Palmer Hospital BillingPharmacyLabNursesAdmissions Accurate, timely, and correct format Prescription accuracy, inventory accuracy Audit for lab-test accuracy Charts immediately updated Data entered correctly and completely Table 6.4

59. © 2006 Prentice Hall, Inc.6 – 59 Service Industry Inspection Organization What is Inspected Standard Hard Rock Cafe BusboyBusboyWaiter Serves water and bread within 1 minute Clears all entrée items and crumbs prior to dessert Knows and suggest specials and desserts Table 6.4

60. © 2006 Prentice Hall, Inc.6 – 60 Service Industry Inspection Organization What is Inspected Standard Nordstrom’s Department Store Display areas StockroomsSalesclerks Attractive, well-organized, stocked, good lighting Rotation of goods, organized, clean Neat, courteous, very knowledgeable Table 6.4

61. © 2006 Prentice Hall, Inc.6 – 61 TQM In Services  Service quality is more difficult to measure than the quality of goods  Service quality perceptions depend on  Intangible differences between products  Intangible expectations customers have of those products

62. © 2006 Prentice Hall, Inc.6 – 62 Service Quality The Operations Manager must recognize: 1.The tangible component of services is important 2.The service process is important 3.The service is judged against the customer’s expectations 4.Exceptions will occur

63. © 2006 Prentice Hall, Inc.6 – 63 Determinants of Service Quality  Reliability  Responsiveness  Competence  Access  Courtesy  Communication  Credibility  Security  Understanding/ knowing the customer  Tangibles

64. © 2006 Prentice Hall, Inc.6 – 64 Questions???