Operations

Management
Chapter 6 –
Managing Quality
Lectured by : Ren Kun

© 2006
© 2006 Prentice
Prentice Hall, Inc. Hall, Inc. 6–1
 Outline
 Global Company Profile: Arnold
Palmer Hospital
 Quality And Strategy
 Defining Quality
 Implications of Quality
 Malcolm Baldrige National Quality
Award
 Cost of Quality (COQ)

© 2006 Prentice Hall, Inc. 6–2

 Outline – Continued

 Ethics and Quality Management

 International Quality Standards
 ISO 9000
 ISO14000

© 2006 Prentice Hall, Inc. 6–3

 Outline – Continued
 Total Quality Management
 Continuous Improvement
 Six Sigma
 Employee Empowerment
 Benchmarking
 Just-in-Time (JIT)
 Taguchi Concepts
 Knowledge of TQM Tools
© 2006 Prentice Hall, Inc. 6–4
 Outline – Continued
 Tools Of TQM
 Check Sheets
 Scatter Diagrams
 Cause-and-Effect Diagram
 Pareto Charts
 Flow Charts
 Histograms
 Statistical Process Control (SPC)
© 2006 Prentice Hall, Inc. 6–5
 Outline – Continued
 The Role Of Inspection
 When and Where to Inspect
 Source Inspection
 Service Industry Inspection
 Inspection of Attributes versus
Variables
 TQM In Services

© 2006 Prentice Hall, Inc. 6–6

 Learning Objectives
When you complete this chapter, you
should be able to:
Identify or Define:
 Quality
 Malcolm Baldrige National Quality
Award
 ISO International Quality Standards
 Taguchi Concepts

© 2006 Prentice Hall, Inc. 6–7

 Learning Objectives
When you complete this chapter, you
should be able to:
Explain:
 Why quality is important
 Total Quality Management (TQM)
 Seven tools of TQM
 Quality robust products
 Deming, Juran, Feigenbaum, and
Crosby’s ideas
© 2006 Prentice Hall, Inc. 6–8
 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
© 2006 Prentice Hall, Inc. 6–9
 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

© 2006 Prentice Hall, Inc. 6 – 10

 Ways Quality Improves
Productivity
Sales Gains
 Improved response
 Higher Prices
 Improved reputation
Improved Increased
Quality Profits
Reduced Costs
 Increased productivity
 Lower rework and scrap costs
 Lower warranty costs
Figure 6.1

© 2006 Prentice Hall, Inc. 6 – 11

 The Flow of Activities
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
Figure 6.2 a competitive advantage

© 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

© 2006 Prentice Hall, Inc. 6 – 13

 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

© 2006 Prentice Hall, Inc. 6 – 14

 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
© 2006 Prentice Hall, Inc. 6 – 15
 Key Dimensions of Quality

 Performance  Durability
 Features  Serviceability
 Reliability  Aesthetics
 Conformance  Perceived quality
 Value

© 2006 Prentice Hall, Inc. 6 – 16

 Malcom Baldrige National
Quality Award
 Established in 1988 by the U.S.
government
 Designed to promote TQM practices
 Recent winners
 The Bama Companies, Kenneth W.
Monfort College of Business,
Caterpillar Financial Services, Baptist
Hospital, Clarke American Checks,
Los Alamos National Bank
© 2006 Prentice Hall, Inc. 6 – 17
 Baldrige Criteria
Applicants are evaluated on:
Categories Points
Leadership 120
Strategic Planning 85
Customer & Market Focus 85
Information & Analysis 90
Human Resource Focus 85
Process Management 85
Organizational Results 450
© 2006 Prentice Hall, Inc. 6 – 18
 Takumi

A Japanese character
that symbolizes a
broader dimension
than quality, a deeper
process than
education, and a more
perfect method than
persistence

© 2006 Prentice Hall, Inc. 6 – 19

 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

© 2006 Prentice Hall, Inc. 6 – 20

 Costs of Quality

Total Total Cost

Cost
External Failure

Internal Failure

Prevention

Appraisal
Quality Improvement

© 2006 Prentice Hall, Inc. 6 – 21

 International Quality
Standards
 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)

© 2006 Prentice Hall, Inc. 6 – 22

 ISO 14000
Environmental Standard
Core Elements:
 Environmental management
 Auditing
 Performance evaluation
 Labeling
 Life-cycle assessment

© 2006 Prentice Hall, Inc. 6 – 23

 Leaders in Quality

W. Edwards Deming 14 Points for

Management
Joseph M. Juran Top management
commitment,
fitness for use
Armand Feigenbaum Total Quality
Control
Philip B. Crosby Quality is Free

© 2006 Prentice Hall, Inc. 6 – 24

 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

© 2006 Prentice Hall, Inc. 6 – 25

 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

© 2006 Prentice Hall, Inc. 6 – 26

 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
© 2006 Prentice Hall, Inc. 6 – 27
 Deming’s Fourteen Points
8. Drive out fear
9. Break down barriers between
departments
10. Stop haranguing 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
© 2006 Prentice Hall, Inc. 6 – 28
 Seven Concepts of TQM
 Continuous improvement
 Six Sigma
 Employee empowerment
 Benchmarking
 Just-in-time (JIT)
 Taguchi concepts
 Knowledge of TQM tools
© 2006 Prentice Hall, Inc. 6 – 29
 Continuous Improvement

 Represents continual
improvement of all processes
 Involves all operations and work
centers including suppliers and
customers
People, Equipment, Materials,
Procedures

© 2006 Prentice Hall, Inc. 6 – 30

 Shewhart’s PDCA Model

1.Plan
4. Act Identify the
Implement improvement
the plan and make
a plan

3. Check 2. Do
Is the plan Test the
working? plan

Figure 6.3

© 2006 Prentice Hall, Inc. 6 – 31

 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

© 2006 Prentice Hall, Inc. 6 – 32

 Six Sigma
1. Define critical outputs
and identify gaps for DMAIC Approach
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
© 2006 Prentice Hall, Inc. 6 – 33
 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

© 2006 Prentice Hall, Inc. 6 – 34

 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
© 2006 Prentice Hall, Inc. 6 – 35
 Quality Circles
 Group of employees who meet
regularly to solve problems
 Trained in planning, problem
solving, and statistical methods
 Often led by a facilitator
 Very effective when done
properly

© 2006 Prentice Hall, Inc. 6 – 36

 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
© 2006 Prentice Hall, Inc. 6 – 37
 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
© 2006 Prentice Hall, Inc. 6 – 38
 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

© 2006 Prentice Hall, Inc. 6 – 39

 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

© 2006 Prentice Hall, Inc. 6 – 40

 Just-In-Time (JIT) Example

Work in process
inventory level
(hides problems)

Unreliable Capacity
Vendors Scrap
Imbalances

© 2006 Prentice Hall, Inc. 6 – 41

 Just-In-Time (JIT) Example
Reducing inventory reveals
problems so they can be solved

Unreliable Capacity
Vendors Scrap
Imbalances

© 2006 Prentice Hall, Inc. 6 – 42

 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

© 2006 Prentice Hall, Inc. 6 – 43

 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

© 2006 Prentice Hall, Inc. 6 – 44

 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
© 2006 Prentice Hall, Inc. 6 – 45
 Quality Loss Function
High loss L = D2C
Unacceptable where
Loss (to L = loss to society
producing Poor
organization, D = distance from
customer, Good target value
and society) C = cost of deviation
Best
Low loss Target-oriented quality
yields more product in
the “best” category
Target-oriented quality
brings product toward
Frequency the target value
Conformance-oriented
quality keeps products
within 3 standard
deviations
Lower Target Upper
Specification Figure 6.4
© 2006 Prentice Hall, Inc. 6 – 46
 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
© 2006 Prentice Hall, Inc. 6 – 47
 Seven Tools for TQM
(a) Check Sheet: An organized method of
recording data

Hour
Defect 1 2 3 4 5 6 7 8
A /// / / / / /// /
B // / / / // ///
C / // // ////

Figure 6.5

© 2006 Prentice Hall, Inc. 6 – 48

 Seven Tools for TQM
(b) Scatter Diagram: A graph of the value
of one variable vs. another variable
Productivity

Absenteeism

Figure 6.5

© 2006 Prentice Hall, Inc. 6 – 49

 Seven Tools for TQM
(c) Cause and Effect Diagram: A tool that
identifies process elements (causes) that
might effect an outcome

Cause
Materials Methods
Effect

Manpower Machinery
Figure 6.5

© 2006 Prentice Hall, Inc. 6 – 50

 Seven Tools for TQM
(d) Pareto Charts: A graph to identify and plot
problems or defects in descending order of
frequency
Frequency

Percent
A B C D E
Figure 6.5

© 2006 Prentice Hall, Inc. 6 – 51

 Seven Tools for TQM
(e) Flow Charts (Process Diagrams): A chart
that describes the steps in a process

Figure 6.5

© 2006 Prentice Hall, Inc. 6 – 52

 Seven Tools for TQM
(f) Histogram: A distribution showing the
frequency of occurrence of a variable
Distribution
Frequency

Repair time (minutes)

Figure 6.5

© 2006 Prentice Hall, Inc. 6 – 53

 Seven Tools for TQM
(g) Statistical Process Control Chart: A chart with
time on the horizontal axis to plot values of a
statistic

Upper control limit

Target value

Lower control limit

Time
Figure 6.5

© 2006 Prentice Hall, Inc. 6 – 54

 Cause-and-Effect Diagrams

clean pillows
Machinery

Insufficient

& blankets
Material

not available
on-board

equipment
Deicing
Inadequate
Mechanical delay
supply of
magazines on plane
Inadequate special Broken luggage
meals on-board carousel
Dissatisfied
Airline
Overbooking policies Understaffed Customer
crew
Bumping policies Understaffed

Poorly trained
Poor check-in

ticket counters

attendants
policies
Mistagged
bags

Methods Manpower
Figure 6.6

© 2006 Prentice Hall, Inc. 6 – 55

 Pareto Charts
Data for October
– 100
70 – – 93
– 88
60 –
54
Frequency (number)

Cumulative percent
– 72
50 –
40 –
Number of
30 –
occurrences
20 –
12
10 –
4 3 2
0 –
Room svc Check-in Pool hours Minibar Misc.
72% 16% 5% 4% 3%
Causes and percent

© 2006 Prentice Hall, Inc. 6 – 56

 Flow Charts
Packing and shipping process

Sealing Quick freeze

Packing Storage Shipping
Weighing storage
station (4 to 6 hrs) dock
Labeling (60 Mins)

© 2006 Prentice Hall, Inc. 6 – 57

 Statistical Process Control
(SPC)
 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
© 2006 Prentice Hall, Inc. 6 – 58
 An SPC Chart
Plots the percent of free throws missed

20% Upper control limit

10% Coach’s target value

0% | | | | | | | | |
Lower control limit
1 2 3 4 5 6 7 8 9

Game number
Figure 6.7

© 2006 Prentice Hall, Inc. 6 – 59

 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
© 2006 Prentice Hall, Inc. 6 – 60
 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
© 2006 Prentice Hall, Inc. 6 – 61
 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
© 2006 Prentice Hall, Inc. 6 – 62
 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

© 2006 Prentice Hall, Inc. 6 – 63

 Service Industry Inspection
What is
Organization Standard
Inspected
Jones Law Office Receptionist Is phone answered by the
performance second ring
Billing Accurate, timely, and
correct format
Attorney Promptness in returning
calls

Table 6.4

© 2006 Prentice Hall, Inc. 6 – 64

 Service Industry Inspection
What is
Organization Standard
Inspected
Hard Rock Hotel Reception Use customer’s name
desk
Doorman Greet guest in less than 30
seconds
Room All lights working, spotless
bathroom
Minibar Restocked and charges
accurately posted to bill

Table 6.4

© 2006 Prentice Hall, Inc. 6 – 65

 Service Industry Inspection
What is
Organization Standard
Inspected
Arnold Palmer Billing Accurate, timely, and
Hospital correct format
Pharmacy Prescription accuracy,
inventory accuracy
Lab Audit for lab-test accuracy
Nurses Charts immediately
updated
Admissions Data entered correctly and
completely

Table 6.4

© 2006 Prentice Hall, Inc. 6 – 66

 Service Industry Inspection
What is
Organization Standard
Inspected
Hard Rock Cafe Busboy Serves water and bread
within 1 minute
Busboy Clears all entrée items and
crumbs prior to dessert
Waiter Knows and suggest
specials and desserts

Table 6.4

© 2006 Prentice Hall, Inc. 6 – 67

 Service Industry Inspection
What is
Organization Standard
Inspected
Nordstrom’s Display areas Attractive, well-organized,
Department stocked, good lighting
Store Stockrooms Rotation of goods,
organized, clean
Salesclerks Neat, courteous, very
knowledgeable

Table 6.4

© 2006 Prentice Hall, Inc. 6 – 68

 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

© 2006 Prentice Hall, Inc. 6 – 69

 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

© 2006 Prentice Hall, Inc. 6 – 70

 Service
Specs
at UPS

© 2006 Prentice Hall, Inc. 6 – 71

 Determinants of Service
Quality
 Reliability  Credibility
 Responsiveness  Security
 Competence  Understanding/
 Access knowing the
customer
 Courtesy
 Tangibles
 Communication

© 2006 Prentice Hall, Inc. 6 – 72