Topic 9

Quality Management

1-1
 Outline
 Global Company Profile: Arnold Palmer Hospital
 Quality and Strategy
 Defining Quality
 Implications of Quality
 Malcolm Baldrige National Quality Award
 Cost of Quality (COQ)
 Ethics and Quality Management

1-2
 Outline – Continued

 International Quality Standards

 ISO 9000
 ISO14000

1-3
 Outline – Continued
 Total Quality Management
 Continuous Improvement
 Six Sigma
 Employee Empowerment
 Benchmarking
 Just-in-Time (JIT)
 Taguchi Concepts
 Knowledge of TQM Tools

1-4
 Outline – Continued
 Tools of TQM
 Check Sheets
 Scatter Diagrams
 Cause-and-Effect Diagrams
 Pareto Charts
 Flowcharts
 Histograms
 Statistical Process Control (SPC)

1-5
 Outline – Continued

 The Role of Inspection

 When and Where to Inspect
 Source Inspection
 Service Industry Inspection
 Inspection of Attributes versus
Variables
 TQM in Services

1-6
 Learning Objectives
When you complete this chapter you
should be able to:
1. Define quality and TQM
2. Describe the ISO international
quality standards
3. Explain Six Sigma
4. Explain how benchmarking is used
5. Explain quality robust products and
Taguchi concepts
6. Use the seven tools of TQM
1-7
 Managing Quality Provides a
Competitive Advantage
Arnold Palmer Hospital
 Deliver over 16,000 babies annually
 Virtually every type of quality tool is
employed
 Continuous improvement
 Employee empowerment
 Benchmarking
 Just-in-time
 Quality tools
© 2011 Pearson Education, Inc. publishing as Prentice Hall 1-8
 Quality and Strategy

An operations manager’s objective

is to build a total quality
management system that identifies
and satisfies customer needs

1-9
 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

1 - 10
 Two Ways Quality
Improves Profitability
Sales Gains via
 Improved response
 Flexible pricing
 Improved reputation
Improved Increased
Quality Profits
Reduced Costs via
 Increased productivity
 Lower rework and scrap costs
 Lower warranty costs
Figure 6.1
1 - 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
1 - 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

1 - 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

1 - 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

1 - 15
 Key Dimensions of Quality

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

1 - 16
 Malcolm Baldrige National
Quality Award
 Established in 1988 by the U.S.
government
 Designed to promote TQM practices
 Recent winners include
 Honeywell Federal, Midway USA,
AtlantiCare, Heartland Health, Cargill
Corn Milling, PRO-TEC Coating Co.,
City of Coral Springs, Premier Inc.,
Sunny Fresh Foods, Park Place
Lexus, Richland College
1 - 17
 Baldrige Criteria
Applicants are evaluated on:
Categories Points
Leadership 120
Strategic Planning 85
Customer & Market Focus 85
Measurement, Analysis, and
Knowledge Management 90
Workforce Focus 85
Process Management 85
Results 450
1 - 18
 Takumi

A Japanese character that

symbolizes a broader
dimension than quality, a
deeper process than
education, and a more
perfect method than
persistence

1 - 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
1 - 20
 Costs of Quality

Total Total Cost

Cost
External Failure

Internal Failure

Prevention

Appraisal
Quality Improvement
1 - 21
 Leaders in Quality
Leader Philosophy/Contribution
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, zero
defects

Table 6.1
1 - 22
 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
 All stakeholders much be considered

1 - 23
 International Quality
Standards
 ISO 9000 series (Europe/EC)
 Common quality standards for products sold in
Europe (even if made in U.S.)
 2008 update places greater emphasis on
leadership and customer requirements and
satisfaction
 ISO 14000 series (Europe/EC)

1 - 24
 ISO 14000
Environmental Standard
Core Elements:
 Environmental management
 Auditing
 Performance evaluation
 Labeling
 Life cycle assessment

1 - 25
 ISO 14000
Environmental Standard
Advantages:
 Positive public image and reduced
exposure to liability
 Systematic approach to pollution
prevention
 Compliance with regulatory
requirements and opportunities for
competitive advantage
 Reduction in multiple audits
1 - 26
 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

1 - 27
Deming’s Fourteen Points
1. Create consistency of purpose
2. Lead to promote change
3. Build quality into the product; stop
depending on inspections
4. Build long-term relationships based on
performance instead of awarding
business on price
5. Continuously improve product, quality,
and service

Table 6.2
1 - 28
Deming’s Fourteen Points
6. Start training
7. Emphasize leadership
8. Drive out fear
9. Break down barriers between
departments
10. Stop haranguing workers
11. Support, help, and improve

Table 6.2
1 - 29
Deming’s Fourteen Points

12. Remove barriers to pride in work

13. Institute education and self-
improvement
14. Put everyone to work on the
transformation

Table 6.2
1 - 30
Seven Concepts of TQM

1. Continuous improvement
2. Six Sigma
3. Employee empowerment
4. Benchmarking
5. Just-in-time (JIT)
6. Taguchi concepts
7. Knowledge of TQM tools

1 - 31
 Continuous Improvement

 Represents continual improvement of all

processes
 Involves all operations and work centers
including suppliers and customers
 People, Equipment, Materials, Procedures

1 - 32
Shewhart’s PDCA Model

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

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

Figure 6.3

1 - 33
 Six Sigma

 Two meanings
 Statistical definition of a process that is
99.9997% capable, 3.4 defects per million
opportunities (DPMO)
 A program designed to reduce defects, lower
costs, and improve customer satisfaction

1 - 34
 Six Sigma
Lower limits Upper limits
 Two meanings
2,700 defects/million

 Statistical definition of a process that

3.4 defects/million
is 99.9997% capable, 3.4 defects per
million opportunities (DPMO)
 A program designed to reduce
defects, lower costs, Mean
and improve
customer satisfaction
±3
±6
Figure 6.4

1 - 35
 Six Sigma Program
 Originally developed by Motorola,
adopted and enhanced by Honeywell and
GE
 Highly structured approach to process
improvement

6
 A strategy
 A discipline - DMAIC

1 - 36
 Six Sigma
1. Define critical outputs
and identify gaps for
improvement DMAIC Approach
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

1 - 37
 Six Sigma Implementation
 Emphasize defects per million
opportunities 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

1 - 38
 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
1 - 39
 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

1 - 40
 Benchmarking
Selecting best practices to use as a
standard for performance er nal
e i nt king
1. Determine what to Us hmar ig
c b
benchmark ben ou’re h
if y noug
e
2. Form a benchmark team
3. Identify benchmarking partners
4. Collect and analyze benchmarking
information
5. Take action to match or exceed the
benchmark
1 - 41
Best Practices for Resolving
Customer Complaints
Best Practice Justification
Make it easy for clients It is free market research
to complain
Respond quickly to It adds customers and loyalty
complaints
Resolve complaints on It reduces cost
first contact
Use computers to Discover trends, share them, and align
manage complaints your services
Recruit the best for It should be part of formal training and
customer service jobs career advancement

Table 6.3
1 - 42
 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

1 - 43
 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

1 - 44
Just-In-Time (JIT) Example

Work in process
inventory level
(hides problems)

Unreliable Capacity
Vendors Scrap
Imbalances

1 - 45
Just-In-Time (JIT) Example
Reducing inventory reveals
problems so they can be solved

Unreliable Capacity
Vendors Scrap
Imbalances

1 - 46
 Taguchi Concepts

 Engineering and 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

1 - 47
 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

1 - 48
 Quality Loss Function
 Shows that costs increase as the
product moves away from what
the customer wants
Target-
 Costs include customer
oriented
dissatisfaction, warranty quality
and service, internal
scrap and repair, and costs to
society
 Traditional conformance
specifications are too simplistic
1 - 49
 Quality Loss Function
High loss L = D2C
Unacceptable where
Loss (to L = loss to
producing Poor society
organization,
customer, Fair D = distance
from target value
and society) Good
C = cost of
Best deviation
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 6.5
1 - 50
 Tools of TQM
 Tools for Generating Ideas
 Check sheets
 Scatter diagrams
 Cause-and-effect diagrams
 Tools to Organize the Data
 Pareto charts
 Flowcharts

1 - 51
 Tools of TQM

 Tools for Identifying Problems

 Histogram
 Statistical process control chart

1 - 52
 Seven Tools of TQM
(a) Check Sheet: An organized method of
recording data

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

Figure 6.6
1 - 53
 Seven Tools of TQM
(b) Scatter Diagram: A graph of the value
of one variable vs. another variable

Productivity

Absenteeism

Figure 6.6
1 - 54
 Seven Tools of 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 6.6
1 - 55
 Seven Tools of TQM
(d) Pareto Chart: A graph to identify and plot
problems or defects in descending order of
frequency

Frequency

Percent
A B C D E
Figure 6.6
1 - 56
 Seven Tools of TQM
(e) Flowchart (Process Diagram): A chart that
describes the steps in a process

Figure 6.6
1 - 57
 Seven Tools of TQM
(f) Histogram: A distribution showing the
frequency of occurrences of a variable
Distribution

Frequency

Repair time (minutes)

Figure 6.6
1 - 58
 Seven Tools of 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 6.6
1 - 59
 Cause-and-Effect Diagrams
Material Method
(ball) (shooting process)
Grain/Feel Aiming point
(grip)
Size of ball
Air pressure Bend knees
Hand position
Balance
Lopsidedness
Follow-through
Missed
Training Rim size free-throws

Conditioning Motivation Rim height

Consistency Rim alignment Backboard

stability
Concentration

Machine
Manpower
(hoop & Figure 6.7
(shooter)
backboard)
1 - 60
 Pareto Charts
Data for October

70 – – 100
– 93
60 – – 88
54
Frequency (number)

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

1 - 61
 Flow Charts
MRI Flowchart
1. Physician schedules MRI 7. If unsatisfactory, repeat
2. Patient taken to MRI 8. Patient taken back to room
3. Patient signs in 9. MRI read by radiologist
4. Patient is prepped 10. MRI report transferred to
5. Technician carries out MRI physician
6. Technician inspects film 11. Patient and physician discuss

8
80%
1 2 3 4 5 6 7 11
9 10
20%

1 - 62
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
1 - 63
 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 6.8
1 - 64
 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
1 - 65
 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 process
5. When production or service is complete
6. Before delivery to your customer
7. At the point of customer contact

1 - 66
 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

1 - 67
 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
1 - 68
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
1 - 69
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
1 - 70
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
1 - 71
Service Industry Inspection

What is
Organization Standard
Inspected
Olive Garden Busboy Serves water and bread
Restaurant within 1 minute
Busboy Clears all entrée items and
crumbs prior to dessert
Waiter Knows and suggest
specials, desserts

Table 6.4
1 - 72
Service Industry Inspection

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

Table 6.4
1 - 73
Attributes Versus Variables
 Attributes
 Items are either good or bad, acceptable or
unacceptable
 Does not address degree of failure
 Variables
 Measures dimensions such as weight,
speed, height, or strength
 Falls within an acceptable range
 Use different statistical techniques
1 - 74
 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

1 - 75
 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

1 - 76
 Service
Specifications
at UPS

1 - 77
 Determinants of Service
Quality
Reliability Consistency of performance and dependability
Responsiveness Willingness or readiness of employees
Competence Required skills and knowledge
Access Approachability and ease of contact
Courtesy Politeness, respect, consideration, friendliness
Communication Keeping customers informed
Credibility Trustworthiness, believability, honesty
Security Freedom from danger, risk, or doubt
Understanding/ Understand the customer’s needs
knowing the customer
Tangibles Physical evidence of the service

Table 6.5
1 - 78
Service Recovery Strategy

 Managers should have a plan for

when services fail
 Marriott’s LEARN routine
 Listen
 Empathize
 Apologize
 React
 Notify

1 - 79