© 2006 prentice hall, inc.6 – 1 operations management chapter 6 – managing quality © 2006...
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© 2006 Prentice Hall, Inc. 6 – 1
Operations ManagementOperations ManagementChapter 6 – Managing QualityChapter 6 – Managing Quality
© 2006 Prentice Hall, Inc.
PowerPoint presentation to accompanyPowerPoint presentation to accompany Heizer/Render Heizer/Render Operations Management, 8e Operations Management, 8e
© 2006 Prentice Hall, Inc. 6 – 2
OutlineOutline
History of QualityHistory of Quality
Quality and StrategyQuality and Strategy
Defining QualityDefining Quality
Evolution of Quality Management Evolution of Quality Management
International Quality StandardsInternational Quality Standards
TQM ConceptsTQM Concepts
TQM ToolsTQM Tools
Quality: Prevention vs. DetectionQuality: Prevention vs. Detection
© 2006 Prentice Hall, Inc. 6 – 3
Our Faith in Quality of SystemsOur Faith in Quality of Systems
Have you ever checked a bridge on a Have you ever checked a bridge on a highway before you drove over it with highway before you drove over it with your car?your car?
Have you ever checked the validity of Have you ever checked the validity of the claims on the bottle of your pills?the claims on the bottle of your pills?
Have you ever asked a pilot for her Have you ever asked a pilot for her license before your flight?license before your flight?
Have you ever asked you doctor for Have you ever asked you doctor for his certificate in medicine? his certificate in medicine?
Why should you consider the ideas?Why should you consider the ideas?
© 2006 Prentice Hall, Inc. 6 – 4
Quality Failures ExamplesQuality Failures Examples The big dig panel fell on a car and The big dig panel fell on a car and
killed a lady (product defect)killed a lady (product defect)
A trained doctor who turned into A trained doctor who turned into cosmetic surgeon without a license or cosmetic surgeon without a license or training in area (fake service)training in area (fake service)
Hospital operates patient on wrong leg Hospital operates patient on wrong leg (service error)(service error)
Hospital gives patient wrong pills Hospital gives patient wrong pills (service error)(service error)
© 2006 Prentice Hall, Inc. 6 – 5
Quality Failures ExamplesQuality Failures Examples A person without training practicing A person without training practicing
natural healing or alternate medicine natural healing or alternate medicine (fake service)(fake service)
Arsenic in bottled water (product Arsenic in bottled water (product defect)defect)
Fake drugs on the market (fake Fake drugs on the market (fake product)product)
© 2006 Prentice Hall, Inc. 6 – 6
Quality Failures: 20Quality Failures: 20thth Century Century
US Food and Drug Administration US Food and Drug Administration
http://www.fda.gov/opacom/7alerts.html
UK Medicines and Healthcare products Regulatory UK Medicines and Healthcare products Regulatory Agency (MHRA)Agency (MHRA)
Fake drugs Fake drugs video clipvideo clip http://news.bbc.co.uk/1/hi/health/4725881.stm#
© 2006 Prentice Hall, Inc. 6 – 7
Institutional Practices for Quality Institutional Practices for Quality Assurance: History 13Assurance: History 13thth – 19 – 19thth Century Century
From the end of the 13th century to the early 19th From the end of the 13th century to the early 19th century, craftsmen across medieval Europe were century, craftsmen across medieval Europe were organized into unions called guilds, who developed organized into unions called guilds, who developed strict rules for product and service quality. strict rules for product and service quality.
Inspection committees enforced the rules by Inspection committees enforced the rules by marking flawless goods with a special mark or marking flawless goods with a special mark or symbol.symbol.
Craftsmen themselves often placed a second mark Craftsmen themselves often placed a second mark on the goods they produced. At first this mark was on the goods they produced. At first this mark was used to track the origin of faulty items. used to track the origin of faulty items.
But over time the mark came to represent a But over time the mark came to represent a craftsman’s good reputation. Inspection marks and craftsman’s good reputation. Inspection marks and master-craftsmen marks served as proof of quality master-craftsmen marks served as proof of quality for customers throughout medieval Europe. for customers throughout medieval Europe.
© 2006 Prentice Hall, Inc. 6 – 8
Weaknesses of Medieval Quality Weaknesses of Medieval Quality Assurance PracticesAssurance Practices
Products got more diverse Products got more diverse
Products got more complex and knowledge Products got more complex and knowledge intensiveintensive
Ways of defining quality by the guilds were diverseWays of defining quality by the guilds were diverse
It relied on manual inspection of goods by outside It relied on manual inspection of goods by outside guildsguilds
It slowed down the delivery of goodsIt slowed down the delivery of goods
Mass production era produced more units per day Mass production era produced more units per day than could be manually inspected (staffing, cost than could be manually inspected (staffing, cost and time issues)and time issues)
A New Approach was needed !!!A New Approach was needed !!!
© 2006 Prentice Hall, Inc. 6 – 9
Statistical-Approaches for Quality : 20Statistical-Approaches for Quality : 20thth CenturyCentury
During the World War II (from 1941), US military During the World War II (from 1941), US military products were inspected on delivery to ensure products were inspected on delivery to ensure conformance to requirements. The U.S. armed conformance to requirements. The U.S. armed forces inspected virtually every unit produced to forces inspected virtually every unit produced to ensure that it was safe for operation. This practice ensure that it was safe for operation. This practice required huge inspection forces and caused required huge inspection forces and caused problems in recruiting competent inspection problems in recruiting competent inspection personnel.personnel.
To ease the problems without compromising To ease the problems without compromising product safety, the armed forces began to use product safety, the armed forces began to use sampling inspection to replace unit-by-unit sampling inspection to replace unit-by-unit inspection. Industry consultants, particularly from inspection. Industry consultants, particularly from Bell Laboratories, helped develop sampling tables Bell Laboratories, helped develop sampling tables and published them in a military standard, known and published them in a military standard, known as Mil-Std-105. Later became known as statistical as Mil-Std-105. Later became known as statistical control charts. control charts.
© 2006 Prentice Hall, Inc. 6 – 10
Statistical-Approaches for Quality : Statistical-Approaches for Quality : After World War IIAfter World War II
After the World War II, Japanese manufacturers After the World War II, Japanese manufacturers converted plants from producing military to converted plants from producing military to producing civilian goods for trade. Initially, producing civilian goods for trade. Initially, Japanese goods were shoddy and could not be sold Japanese goods were shoddy and could not be sold as exports in international markets. Japanese firms as exports in international markets. Japanese firms asked American statisticians for help.asked American statisticians for help.
W. Edwards Deming, was frustrated with American , was frustrated with American managers for their termination of the use of quality managers for their termination of the use of quality control methods after the war. He introduced his 14-control methods after the war. He introduced his 14-points approach, of focusing on the System and not points approach, of focusing on the System and not on inspection to improve quality, in Japan plants.on inspection to improve quality, in Japan plants.
Joseph M. Juran, trained Japanese managers about , trained Japanese managers about role of top managers, customers defining quality, role of top managers, customers defining quality, involvement of everyone and continuous involvement of everyone and continuous improvement. improvement.
© 2006 Prentice Hall, Inc. 6 – 11
America Gets the Message of America Gets the Message of Statistical-Approaches for Quality :Statistical-Approaches for Quality :
In the 1970s, price advantages and quality In the 1970s, price advantages and quality competitiveness of Japanese continued to rise. A competitiveness of Japanese continued to rise. A 1980 NBC-TV News special report examined the 1980 NBC-TV News special report examined the question of quality, “If Japan Can… Why Can’t We?” question of quality, “If Japan Can… Why Can’t We?” . It captured the attention from national legislators, . It captured the attention from national legislators, administrators and the media. administrators and the media.
Congress passed a law intended to increase Congress passed a law intended to increase competitiveness through quality improvement and it competitiveness through quality improvement and it introduced a national quality award called Malcolm introduced a national quality award called Malcolm Baldrige National Quality Award. Baldrige National Quality Award. http://www.quality.nist.gov/
U.S. firms began to listen and focus on quality in U.S. firms began to listen and focus on quality in their strategies and in projects and in the training of their strategies and in projects and in the training of staff. The U.S. response, emphasized not only staff. The U.S. response, emphasized not only statistics but also a holistic set of principles that statistics but also a holistic set of principles that became known as Total Quality Management (TQM). became known as Total Quality Management (TQM).
© 2006 Prentice Hall, Inc. 6 – 12
Quality Programs by ExpertsQuality Programs by Experts
W. Edwards DemingW. Edwards Deming 14 Points for 14 Points for ManagementManagement
Joseph M. JuranJoseph M. Juran Top management Top management commitment, commitment, fitness for usefitness for use
Armand FeigenbaumArmand Feigenbaum Total Quality Total Quality ControlControl
Philip B. CrosbyPhilip B. Crosby Quality is FreeQuality is Free
© 2006 Prentice Hall, Inc. 6 – 13
Quality Models by National Quality Models by National AgenciesAgencies
Malcom Baldrige National Quality Malcom Baldrige National Quality AwardAward was established in 1988 by was established in 1988 by the U.S. governmentthe U.S. government
Designed to promote TQM practices in Manufacturing, Designed to promote TQM practices in Manufacturing, government, non-profit and services sectorsgovernment, non-profit and services sectors
Japan Quality AwardJapan Quality Award
© 2006 Prentice Hall, Inc. 6 – 14
Quality Models by International Quality Models by International AgenciesAgencies
Industrial Standard Z8101-1981 (Japan)Industrial Standard Z8101-1981 (Japan) Specification for TQMSpecification for TQM
ISO 9000 series (Europe/EC)ISO 9000 series (Europe/EC) Common quality standards for products Common quality standards for products
sold in Europe (even if made in U.S.)sold in Europe (even if made in U.S.)
2000 update places greater emphasis on 2000 update places greater emphasis on leadership and customer satisfactionleadership and customer satisfaction
ISO 14000 series (Europe/EC)ISO 14000 series (Europe/EC)
© 2006 Prentice Hall, Inc. 6 – 15
Quality Models by Industrial Quality Models by Industrial Sector AgentsSector Agents
Capability Maturity Model Integration Capability Maturity Model Integration for improving quality of the Software for improving quality of the Software development industrydevelopment industry
Quality model for the automotive Quality model for the automotive industryindustry
Company-driven quality initiatives, Company-driven quality initiatives, e.g. Six sigma qualitye.g. Six sigma quality
© 2006 Prentice Hall, Inc. 6 – 16
Managing Quality Provides a Managing Quality Provides a Competitive AdvantageCompetitive Advantage
Arnold Palmer HospitalArnold Palmer Hospital
Deliver over 10,000 babies annuallyDeliver over 10,000 babies annually
Virtually every type of quality tool is Virtually every type of quality tool is employedemployed Continuous improvementContinuous improvement
Employee empowermentEmployee empowerment
BenchmarkingBenchmarking
Just-in-timeJust-in-time
Quality toolsQuality tools
© 2006 Prentice Hall, Inc. 6 – 17
Services: Quality DimensionsServices: Quality Dimensions
Service densityService density
Service inputsService inputs
© 2006 Prentice Hall, Inc. 6 – 18
Activity:Quality DimensionsActivity:Quality Dimensions
RetailingRetailing Which events would you list as Which events would you list as
evidence of low quality performance in evidence of low quality performance in retailing?retailing?
Poor quality happens when?Poor quality happens when?
© 2006 Prentice Hall, Inc. 6 – 19
How Quality Failure Happens!How Quality Failure Happens!
InputInputOutput Output SYSTEM
GoodGoodqualityquality
PoorPoorqualityquality
© 2006 Prentice Hall, Inc. 6 – 20
How Quality Failure Happens!How Quality Failure Happens!
InputInput Output 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
© 2006 Prentice Hall, Inc. 6 – 21
External Failure
Internal Failure
Prevention
Costs of QualityCosts of Quality
Appraisal
Total Cost
Quality Improvement
Total CostTotal Cost
© 2006 Prentice Hall, Inc. 6 – 22
Costs of Quality- ExampleCosts of Quality- Example
Example: Comparing firms with Example: Comparing firms with Cost of quality approachCost of quality approach
© 2006 Prentice Hall, Inc. 6 – 23
Impact of Quality FailuresImpact of Quality Failures
1.1. Internal Failure CostsInternal Failure Costs Warranty costsWarranty costs
Repair costsRepair costs
Labor costsLabor costs
Equipment downtime costsEquipment downtime costs
2.2. External failure CostsExternal failure Costs Liability costsLiability costs Loss of livesLoss of lives Harm to healthHarm to health Harm to environmentHarm to environment Customer defectionsCustomer defections
© 2006 Prentice Hall, Inc. 6 – 24
How Quality Performance HappensHow Quality Performance Happens
Preventive Preventive Quality ApproachQuality Approach
-Process improvementProcess improvement-Quality programQuality program-Quality trainingQuality training-Process improvementProcess improvement-Statistical processStatistical process control control-Quality auditQuality audit
-Right things -Right things done late done late-Right things doneRight things done-Right things notRight things not done done- Right things doneRight things done poorly poorly-Wrong thingsWrong things donedone
-Right behaviors-Right behaviorsand practicesand practicesleading to right leading to right things being donethings being doneand in timely and in timely manner, all the timemanner, all the time
-Work-Work inspectioninspection-Product Product rework rework-ProductProduct testing testing- Quality toolsQuality tools-Material Material inspection inspection
Appraisal Appraisal Quality ApproachQuality Approach
© 2006 Prentice Hall, Inc. 6 – 25
How Quality Practices Affect How Quality Practices Affect Organizational PerformanceOrganizational Performance
Organizational PracticesLeadership, Mission statement, Effective operating procedures, Staff support, TrainingYields: What is important (priorities, resources) and what is to be accomplished (objectives, purposes)
Quality PrinciplesCustomer focus, Continuous improvement, Benchmarking, Just-in-time, Tools of TQMYields: How well a firm will perform what is important and things to be accomplished (standards of execution)
Employee FulfilmentEmpowerment, Organizational commitmentYields: Employee attitudes that can accomplish what is important (motivation, participation)
Customer SatisfactionWinning orders, Repeat customersYields: An effective organization with a competitive advantage (results, retention, satisfaction, growth)
Figure 6.2Figure 6.2
© 2006 Prentice Hall, Inc. 6 – 26
Activity:Quality DimensionsActivity:Quality Dimensions
Department of Motor Vehicles (DMV)Department of Motor Vehicles (DMV) What do you think would be the important thing to an What do you think would be the important thing to an
employee of the DMV when reviewing supporting employee of the DMV when reviewing supporting documentation of an applicant?documentation of an applicant?
What do you think would be the important thing to an What do you think would be the important thing to an applicant for a license with regard to documents that applicant for a license with regard to documents that s/he brings to support her/his application?s/he brings to support her/his application?
What do you think would be the important expectation What do you think would be the important expectation of the police department with regard to the DMV of the police department with regard to the DMV issued licenses? issued licenses?
© 2006 Prentice Hall, Inc. 6 – 27
Different ViewsDifferent Views
User-based – better performance, User-based – better performance, more featuresmore features
Manufacturing-based – Manufacturing-based – conformance to standards, conformance to standards, making it right the first timemaking it right the first time
Product-based – specific and Product-based – specific and measurable attributes of the measurable attributes of the product product
© 2006 Prentice Hall, Inc. 6 – 28
Defining QualityDefining Quality
The totality of features and The totality of features and characteristics of a product or characteristics of a product or
service that bears on its ability to service that bears on its ability to satisfy stated or implied needssatisfy stated or implied needs
American Society for QualityAmerican Society for Quality
© 2006 Prentice Hall, Inc. 6 – 29
Ethics and Quality Ethics and Quality ManagementManagement
Operations managers must Operations managers must deliver healthy, safe, quality deliver healthy, safe, quality products and servicesproducts and services
Poor quality risks injuries, Poor quality risks injuries, lawsuits, recalls, and regulationlawsuits, recalls, and regulation
Organizations are judged by Organizations are judged by how they respond to problemshow they respond to problems
© 2006 Prentice Hall, Inc. 6 – 30
TQMTQM
Encompasses entire organization, Encompasses entire organization, from supplier to customerfrom supplier to customer
Stresses a commitment by Stresses a commitment by management to have a continuing, management to have a continuing,
companywide drive toward companywide drive toward excellence in all aspects of products excellence in all aspects of products and services that are important to the and services that are important to the
customercustomer
© 2006 Prentice Hall, Inc. 6 – 31
Key Quality Principles (1)Key Quality Principles (1)
Customer orientationCustomer orientation Everything seen from the view of customerEverything seen from the view of customer
Results orientationResults orientation Measure, track and define results objectivelyMeasure, track and define results objectively
Process orientationProcess orientation View changes from a process point of viewView changes from a process point of view
Employee orientationEmployee orientation creativity, improvement come from creativity, improvement come from
employees. Empower, equip and train thememployees. Empower, equip and train them
© 2006 Prentice Hall, Inc. 6 – 32
Key Quality Principles (2)Key Quality Principles (2) Measurement orientationMeasurement orientation
Define measures, collect data and analyze Define measures, collect data and analyze data about performance using TQM toolsdata about performance using TQM tools
Continuous improvement orientationContinuous improvement orientation Focus on improving continuously not in Focus on improving continuously not in
haphazard or impulsive mannerhaphazard or impulsive manner
Prevention orientationPrevention orientation Prevention of errors is cheaper and more Prevention of errors is cheaper and more
effective than detecting and removing themeffective than detecting and removing them
Variation Elimination orientationVariation Elimination orientation Focus on recognizing and eliminating the Focus on recognizing and eliminating the
root causes of variations in your systems.root causes of variations in your systems.
© 2006 Prentice Hall, Inc. 6 – 33
Tools of TQMTools of TQM Tools for Generating IdeasTools for Generating Ideas
Check sheetsCheck sheetsScatter diagramsScatter diagramsCause and effect diagramsCause and effect diagrams
Tools to Organize the DataTools to Organize the DataPareto chartsPareto chartsFlow chartsFlow charts
Tools for Identifying ProblemsTools for Identifying ProblemsHistogramHistogramStatistical process control chartStatistical process control chart
© 2006 Prentice Hall, Inc. 6 – 34
Cause-and-Effect DiagramsCause-and-Effect Diagrams
MaterialMaterial MachineryMachinery
MethodsMethods ManpowerManpower
InadequateInadequate
supply of supply of magazinesmagazines
Inadequate special Inadequate special
meals on-boardmeals on-board
Insu
ffic
ien
t In
suff
icie
nt
clea
n p
illo
ws
clea
n p
illo
ws
& b
lan
kets
&
bla
nke
ts
on
-bo
ard
on
-bo
ardBroken luggage Broken luggage
carouselcarousel
Mechanical delay Mechanical delay
on planeon plane
Dei
cin
g
Dei
cin
g
equ
ipm
ent
equ
ipm
ent
no
t av
aila
ble
no
t av
aila
ble
Overbooking policiesOverbooking policies
Bumping policiesBumping policies
Mis
tag
ged
M
ista
gg
ed
bag
sb
ags
Po
or
chec
k-in
P
oo
r ch
eck-
in
po
lici
es
po
lici
es
Understaffed Understaffed
ticket countersticket counters
Understaffed Understaffed
crewcrew
Po
orl
y tr
ain
ed
Po
orl
y tr
ain
ed
atte
nd
ants
atte
nd
ants
Dissatisfied Dissatisfied Airline Airline CustomerCustomer
Figure 6.6Figure 6.6
© 2006 Prentice Hall, Inc. 6 – 35
Pareto ChartsPareto Charts
Number of Number of occurrencesoccurrences
Room svcRoom svc Check-inCheck-in Pool hoursPool hours MinibarMinibar Misc.Misc.72%72% 16%16% 5%5% 4%4% 3%3%
1212
44 33 22
5454
– 100100– 9393– 8888
– 7272
70 70 –
60 60 –
50 50 –
40 40 –
30 30 –
20 20 –
10 10 –
0 0 –
Fre
qu
ency
(n
um
ber
)F
req
uen
cy (
nu
mb
er)
Causes and percentCauses and percent
Cu
mu
lati
ve p
erce
nt
Cu
mu
lati
ve p
erce
nt
Data for OctoberData for October
© 2006 Prentice Hall, Inc. 6 – 36
Impact of Poor Process Quality on OutputImpact of Poor Process Quality on Output
11 22 33
MaximumMaximumBatch sizesBatch sizes 100 units100 units 100 units100 units 100 units100 units
Activity Activity 60 mins60 mins 60 mins60 mins 60 mins 60 minstimestimes
Errors afterErrors afteractivity activity 10 units10 units (10%)(10%) 10 units10 units (10%)(10%) 10 units10 units (10%)(10%)
How may defective parts will whole process yield?How may defective parts will whole process yield?
© 2006 Prentice Hall, Inc. 6 – 37
Impact of Quality Appraisal on OutputImpact of Quality Appraisal on Output
11 22 33
MaximumMaximumBatch sizesBatch sizes 100 units100 units 100 units100 units 100 units100 units
Activity 60 mins 10 mins 60 mins 10 mins 60 mins 10 mins Activity 60 mins 10 mins 60 mins 10 mins 60 mins 10 mins
timestimes
Errors afterErrors afteractivity activity 2 units2 units (2%)(2%) 2 2 units units (2%)(2%) 2 units2 units (2%)(2%)
How may defective parts will whole process yield?How may defective parts will whole process yield?
© 2006 Prentice Hall, Inc. 6 – 38
Impact of Quality Prevention on OutputImpact of Quality Prevention on Output
11 22 33
MaximumMaximumBatch sizesBatch sizes 100 units100 units 100 units100 units 100 units100 units
Activity Activity 66 mins66 mins 66 mins66 mins 66 mins 66 minstimestimes
Errors afterErrors afteractivity activity 1 units1 units (1%)(1%) 1 units1 units (1%)(1%) 1 units1 units (1%)(1%)
How may defective parts will whole process yield?How may defective parts will whole process yield?
© 2006 Prentice Hall, Inc. 6 – 39
Ways Quality by Prevention Ways Quality by Prevention Improves ProductivityImproves Productivity
Improved Improved QualityQuality
Increased Increased ProfitsProfits
Increased productivity
Lower rework and scrap costs
Lower warranty costs
Reduced Costs
Improved response
Higher Prices
Improved reputation
Sales Gains
Figure 6.1Figure 6.1