Managing Business

Operations
Quality Management

1
Managing Business Operations
 Agenda

Understand what is quality and why is it so

important.
Understand how quality problems can be
diagnosed.
Be able to explain total quality management
(TQM)

Essentials of Operations Management Slack, Brandon-Jones and Johnston

Slack et al’s model of operations management

Direct

Operations
Management
Design Develop

Deliver

Quality Operations
management improvement

Essentials of Operations Management Slack, Brandon-Jones and Johnston

 Defining Quality

There are many definitions of quality;

here we define it as ‘consistent
conformance to customers’
expectations’.

Slack et al., (2010)

© 2011 Pearson Education, Inc. publishing as

Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 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
© 2011 Pearson Education, Inc. publishing as
Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 Key Dimensions of Quality

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

© 2011 Pearson Education, Inc. publishing as

Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 Ethics and Quality
Management
 Operations managers must deliver
healthy, safe, quality products and
services
 Poor quality risks injuries, lawsuits,
recalls, and regulation
 Organisations are judged by how
they respond to problems
 All stakeholders must be considered
© 2011 Pearson Education, Inc. publishing as
Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 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

© 2011 Pearson Education, Inc. publishing as

Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
Perceived quality is governed by the gap between
customers’ expectations and their perceptions of the
product or service

Gap Gap
Customers’ Customers’
expectations perceptions
for the Customers’ Customers’
Customers’ expectations perceptions Customers’ of the
product or perceptions expectations product or
service for the of the
of the product or product or for the service
product or service service product or
service service

Expectations > Expectations = Expectations <

perceptions perceptions perceptions

Perceived quality is Perceived quality is Perceived quality is

poor acceptable good

Slack, Brandon-Jones and Johnston, Essentials of Operations Management, 1st Edition, © Slack, Brandon-Jones and Johnston, 2011
A “Gap” model of Quality

Previous Word of mouth Image of product

Experience communications or service

Customer’s Customer’s
expectations Gap ? perceptions
The concerning a concerning the
customer’s product or service product or service
domain Gap 4
Customer’s own
specification of
quality
The actual product
Gap 1 or service
Management’s Organisation’s
concept of the specification of
product or service quality
Gap 3
Gap 2 The operation’s domain
Slack, Brandon-Jones and Johnston, Essentials of Operations Management, 1st Edition, © Slack, Brandon-Jones and Johnston, 2011
The perception-expectation gap

Action required to ensure high Main organizational

Gap perceived quality responsibility

Ensure consistency between internal Marketing, operations,

Gap 1 quality specification and the product/service
expectations of customers development

Ensure internal specification meets Marketing, operations,

Gap 2 product/service
its intended concept of design
development
Ensure actual product or service
Gap 3 conforms to internally specified Operations
quality level
Ensure that promises made to
Gap 4 customers concerning the product or Marketing
service can really be delivered

Slack, Brandon-Jones and Johnston, Essentials of Operations Management, 1st Edition, © Slack, Brandon-Jones and Johnston, 2011
Quality characteristics of goods and services

Functionality - how well the product or service does the

job for which it was intended.

Appearance - aesthetic appeal, look, feel, sound and

smell of the product or service.

Reliability - consistency of product or services

performance over time.

Durability - the total useful life of the product or service.

Recovery - the ease with which problems with the

product or service can be rectified or resolved.

Contact - the nature of the person-to-person contacts

that take place.

Slack, Brandon-Jones and Johnston, Essentials of Operations Management, 1st Edition, © Slack, Brandon-Jones and Johnston, 2011
 Managing Quality Provides a
Competitive Advantage
For example, a Hospital
Which delivers over 16,000 babies
annually needs to employ every type of
quality tool such as:
 Continuous improvement
 Employee empowerment
 Just-in-time
 Quality tools

© 2011 Pearson Education, Inc. publishing as

Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 Quality and Strategy

An operations manager’s objective

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

© 2011 Pearson Education, Inc. publishing as

Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 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

© 2011 Pearson Education, Inc. publishing as

Figure 6.1
Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 The Flow of Activities
Organisational 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, Organisational commitment
Yields: Employee attitudes that can accomplish
what is important
Customer Satisfaction
Winning orders, Repeat customers
Yields: An effective organisation with
Figure 6.2 a competitive advantage
© 2011 Pearson Education, Inc. publishing as
Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 TQM

© 2011 Pearson Education, Inc. publishing as

Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
Total quality management can be viewed as a natural
extension of earlier approaches to quality management
 Quality is strategic
 Teamwork
Makes quality
 Staff empowerment
central and strategic
 Involves customers and suppliers
in the organisation
Broadens the  Quality systems
organisational  Quality costing
responsibility for quality  Problem solving
 Quality planning
Solves the root  Statistics
cause of quality  Process analysis
problems  Quality
standards
Prevents ‘out of  Error
specification’ products and detection
services reaching market  Rectification

Quality Quality Total Quality

Inspection
control assurance Management

Slack, Brandon-Jones and Johnston, Essentials of Operations Management, 1st Edition, © Slack, Brandon-Jones and Johnston, 2011
 Continuous Improvement

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

© 2011 Pearson Education, Inc. publishing as

Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 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
© 2011 Pearson Education, Inc. publishing as
Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 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

© 2011 Pearson Education, Inc. publishing as

Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 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

© 2011 Pearson Education, Inc. publishing as

Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 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
© 2011 Pearson Education, Inc. publishing as
Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 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 organisation
 Create formal team structures
© 2011 Pearson Education, Inc. publishing as
Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 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
 Allows reduced inventory levels
 Inventory costs money and hides process
and material problems
 Encourages improved process and product
quality © 2011 Pearson Education, Inc. publishing as
Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 Just-In-Time (JIT) Example

Work in process
inventory level
(hides problems)

Unreliable Capacity
Vendors Scrap
Imbalances
© 2011 Pearson Education, Inc. publishing as
Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 Just-In-Time (JIT) Example
Reducing inventory reveals
problems so they can be solved

Unreliable Capacity
Vendors Scrap
Imbalances
© 2011 Pearson Education, Inc. publishing as
Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 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
© 2011 Pearson Education, Inc. publishing as
Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 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. During the step-by-step production
process
4. When production or service is complete
5. Before delivery to your customer
6. At the point of customer contact

© 2011 Pearson Education, Inc. publishing as

Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 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

© 2011 Pearson Education, Inc. publishing as

Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 Service Quality
The Operations Manager must
recognise:
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

© 2011 Pearson Education, Inc. publishing as

Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 Service
Specifications
at UPS

© 2011 Pearson Education, Inc. publishing as

Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 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

© 2011 Pearson Education, Inc. publishing as Table 6.5

Prentice Hall
Essentials of Operations Management Slack, Brandon-Jones and Johnston
 34
Managing Business Operations