1. Copyright 2006 John Wiley & Sons, Inc. Beni Asllani University of Tennessee at Chattanooga Operations Management - 5 th Edition Chapter 3 Roberta Russell & Bernard W. Taylor, III Quality Management

2. EJR 20063-2 Outline   Meaning of quality Definitions of quality Dimensions of quality for goods and services Specifications, measurement and conformance quality Summary   Cost of quality   Total quality management (TQM)

3. EJR 20063-3 Outline (2)  Quality management approaches Levels of quality improvement Levels of quality improvement Six sigma Six sigma Baldrige Award Baldrige Award ISO 9000 ISO 9000 Plan-do-check-act cycle Plan-do-check-act cycle Quality tools Quality tools

4. Copyright 2006 John Wiley & Sons, Inc.3-4 Meaning of Quality  American Society for Quality: Quality is "the totality of features and characteristics that satisfy customer needs"  Customer-based quality: meeting customer expectations or requirements  Affected by product positioning  Different for different target markets  Different for different customers in the same target market

5. EJR 20063-5 Meaning of Quality (2)  Fitness for use: the product or service performs as intended  Features: extra items added to basic characteristics  Value: Product or service is superior to competitors with similar prices.  Perceived quality: the quality that the customer thinks she got Differs by customer Differs by customer

6. EJR 20063-6 Meaning of Quality (3)  Dimensions of quality for goods and services Are different for goods and services Are different for goods and services Are used implicitly by customers to define quality Are used implicitly by customers to define quality Are used explicitly by companies to Are used explicitly by companies to Design products Design products Measure product quality Measure product quality  See pages 80 - 82 for specific dimensions of quality

7. EJR 20063-7 Product or Service Specification  Characteristics of the product or service which will be measured to determine quality  Target values for each characteristic  Should be based on customer expectations  Should meet any legal requirements If a product or service consistently meets specifications, it has conformance quality. If a product or service consistently meets specifications, it has conformance quality.

8. EJR 20063-8 Meaning of Quality (4)  Producer-based quality: conformance to specifications. Specifications must be based on customer expectations or requirements Specifications must be based on customer expectations or requirements Initial specifications are set when the product is designed Initial specifications are set when the product is designed Specifications should change over time Specifications should change over time  Meaning of quality: a final perspective – see page 83 and Figure 3.1

9. EJR 20063-9 Measuring Service Quality  Absolute measures are based on a fixed standard and can be measured exactly. Waiting time and service time Waiting time and service time % of transactions without errors. % of transactions without errors. Web site availability Web site availability  Perceptual measures are based on customers’ opinions. How important was this characteristic to the customer? How important was this characteristic to the customer? How satisfied was the customer ? How satisfied was the customer ?

10. EJR 20063-10 Achieving Conformance Quality  Product or service design  Process technology and equipment  Purchasing and materials management  Planning and scheduling  Hiring, training, and supervision  Measurement and control

11. Customer Requirements Product Specifications Statistical Process Control: Measure & monitor quality Meets Specifications? Process Specifications Yes Conformance Quality Fix process or inputs No Product launch activities: Revise periodically Ongoing Activities EJR 2006

12. 3-12 Cost of Quality  Cost of good quality Prevention costs Prevention costs Appraisal costs Appraisal costs  Cost of poor quality Internal failure costs Internal failure costs External failure costs External failure costs  Conformance quality costs less than nonconformance  See pages 99-100 for details

13. EJR 20063-13 Total Quality Management  Study pages 86 – 92  The Plan-Do-Check-Act cycle is a process for continuous improvement. See Figure 3.2, p. 85

14. EJR 20063-14 Levels of quality improvement  Incremental: many small improvements add up to major improvements at modest cost Uses Plan-Do-Check-Act cycle and quality tools Uses Plan-Do-Check-Act cycle and quality tools  Breakthrough improvements: large improvements required to meet business objectives Re-engineer the process Re-engineer the process Six Sigma is often used Six Sigma is often used New technology is often needed New technology is often needed

15. Source: Motorola Web site3-15 Meanings of Six Sigma (1)  A process for developing and delivering near perfect products and services Measure of how much a process deviates from perfection Measure of how much a process deviates from perfection Maximum allowed defects: 3.4 defects per million opportunities (DPMO) Maximum allowed defects: 3.4 defects per million opportunities (DPMO)

16. Source: Motorola Web site3-16 Meanings of Six Sigma (2)  Six Sigma is a business improvement methodology that focuses an organization on: Understanding and managing customer requirements Understanding and managing customer requirements Aligning key business processes to achieve those requirements Aligning key business processes to achieve those requirements Utilizing rigorous data analysis to minimize variation in those processes Utilizing rigorous data analysis to minimize variation in those processes Driving rapid and sustainable improvement to business processes Driving rapid and sustainable improvement to business processes

17. Source: Motorola Web site3-17 Six Sigma(3)  A high performance management system that helps an organization Align its business strategy to critical improvement efforts Align its business strategy to critical improvement efforts Mobilize teams to attack high impact projects Mobilize teams to attack high impact projects Accelerate improved business results Accelerate improved business results Govern efforts to ensure improvements are sustained Govern efforts to ensure improvements are sustained

18. 3-18 DMAIC  A process improvement strategy used in six sigma Define opportunity Define opportunity Measure performance Measure performance Analyze opportunity Analyze opportunity Improve performance Improve performance Control performance Control performance

19. Source: Motorola Web site3-19 Design for Six Sigma (DFSS)  A proactive approach for designing Six Sigma quality into a product, service, or process  More about Six Sigma: read pages 92-95

20. EJR 20063-20 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

21. 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 Source: Baldrige Award Standards

22. EJR 20063-22 Baldrige Award - Business Results  Customer-focused results  Product and service performance  Financial and market results  Human resource results

23. EJR 20063-23 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. 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 National Standards Institute (ANSI) American Society for Quality (ASQ) American Society for Quality (ASQ) Professional organizations Professional organizations

24. EJR 20063-24 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 Be sure that your registrar is acceptable to your customers  Firms must be re-certified periodically.

25. EJR 20063-25 Seven Quality Tools  Pareto Analysis: based on data. Used to set priorities for improvement  Flow Chart: Diagram process. used to examine and improve overall process flow.  Check Sheet: A tool for collecting data easily. Used to verify causes of a quality problem

26. Flow Chart Symbols  Start and Finish.  Circle – used for Start and Finish.  Rectangle – used for an operation – a step that adds value. At least 1 arrow in. Only one arrow out.  Diamond – used for a decision – must have at least 2 possible outcomes. For each outcome, there must be one arrow from the decision box. Each arrow is labeled with its outcome. EJR 2006

27. 3-27 Seven Quality Tools (2)  Histogram: shows distribution of defects or quality measurements (or other data)  Scatter Diagram: shows the relationship between 2 variables. Indicates whether 2 variables are correlated  Quality control chart: Used to monitor quality.

28. EJR 20063-28 Seven Quality Tools (3)  Cause-and-Effect Diagram: Used to identify possible causes of a quality problem  See pages 108-111 for examples of the 7 quality tools.