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  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 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

4. © 2006 Prentice Hall, Inc.6 – 4 Activity:Quality Dimensions Retailing  Which events would you list as evidence of low quality performance in retailing?  Poor quality happens when?

5. © 2006 Prentice Hall, Inc.6 – 5 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

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

7. © 2006 Prentice Hall, Inc.6 – 7 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

8. © 2006 Prentice Hall, Inc.6 – 8 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

9. © 2006 Prentice Hall, Inc.6 – 9 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

10. © 2006 Prentice Hall, Inc.6 – 10 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?

11. © 2006 Prentice Hall, Inc.6 – 11 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

12. © 2006 Prentice Hall, Inc.6 – 12 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

13. © 2006 Prentice Hall, Inc.6 – 13 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

14. © 2006 Prentice Hall, Inc.6 – 14 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

15. © 2006 Prentice Hall, Inc.6 – 15 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)

16. © 2006 Prentice Hall, Inc.6 – 16 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

17. © 2006 Prentice Hall, Inc.6 – 17 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

18. © 2006 Prentice Hall, Inc.6 – 18 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

19. © 2006 Prentice Hall, Inc.6 – 19 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

20. © 2006 Prentice Hall, Inc.6 – 20 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.

21. © 2006 Prentice Hall, Inc.6 – 21 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

22. © 2006 Prentice Hall, Inc.6 – 22 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

23. © 2006 Prentice Hall, Inc.6 – 23 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

24. © 2006 Prentice Hall, Inc.6 – 24 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?

25. © 2006 Prentice Hall, Inc.6 – 25 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?

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

27. © 2006 Prentice Hall, Inc.6 – 27 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