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1 2002 South-Western/Thomson Learning2002 South-Western/Thomson Learning TMTM

Slides preparedSlides prepared

by John Loucksby John Loucks

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Chapter 7Chapter 7Chapter 7Chapter 7

Operations Quality ManagementOperations Quality Management

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OverviewOverviewOverviewOverview

Nature of QualityNature of Quality

Traditional Quality ManagementTraditional Quality Management

Modern Quality ManagementModern Quality Management

Quality Management RecognitionQuality Management Recognition Total Quality Management (TQM) ProgramsTotal Quality Management (TQM) Programs

Quality Management in ServicesQuality Management in Services

WrapWrap--Up: What WorldUp: What World--Class Producers DoClass Producers Do

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What is Quality?What is Quality?What is Quality?What is Quality?

The quality of a product or service is a customersThe quality of a product or service is a customers

perception of the degree to which the product orperception of the degree to which the product orservice meets his or her expectations.service meets his or her expectations.

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Nature of QualityNature of QualityNature of QualityNature of Quality

Dimensions of QualityDimensions of Quality

Determinants of QualityDeterminants of Quality

Costs of QualityCosts of Quality

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BestBest--InIn--Class and WorldClass and World--ClassClassBestBest--InIn--Class and WorldClass and World--ClassClass

Customers expectations of quality are not the sameCustomers expectations of quality are not the same

for differentfor different classesclasses of products or services.of products or services.

BestBest--inin--class qualityclass quality means being the best product ormeans being the best product or

service in a particular class of products or services.service in a particular class of products or services. Being aBeing a worldworld--class companyclass company means that each of itsmeans that each of its

products and services are considered bestproducts and services are considered best--inin--class byclass by

its customers.its customers.

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Some Dimensions of Product QualitySome Dimensions of Product QualitySome Dimensions of Product QualitySome Dimensions of Product Quality

PerformancePerformance relative to customers intended userelative to customers intended use

FeaturesFeatures special characteristicsspecial characteristics

ReliabilityReliability likelihood of breakdowns, malfunctionslikelihood of breakdowns, malfunctions

ServiceabilityServiceability speed/cost/convenience of servicingspeed/cost/convenience of servicing DurabilityDurability amount of time/use before repairsamount of time/use before repairs

AppearanceAppearance effects on human senseseffects on human senses

Customer serviceCustomer service treatment before/during/after saletreatment before/during/after sale SafetySafety user protection before/during/after useuser protection before/during/after use

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Determinants of QualityDeterminants of QualityDeterminants of QualityDeterminants of Quality

Quality of designQuality of design products/service designed basedproducts/service designed basedon customers expectations and desireson customers expectations and desires

Quality capability of production processesQuality capability of production processes processes must be capable of producing the productsprocesses must be capable of producing the products

designed for the customersdesigned for the customers Quality of conformanceQuality of conformance capable processes cancapable processes can

produce inferior product if not operated properlyproduce inferior product if not operated properly

Quality of customer serviceQuality of customer service a superior product doesa superior product does

not mean success; must have quality service alsonot mean success; must have quality service also Organization quality cultureOrganization quality culture superior product andsuperior product and

service requires organizationservice requires organization--wide focus on qualitywide focus on quality

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Costs of QualityCosts of Quality

Scrap and reworkScrap and rework -- rescheduling, repairing, retestingrescheduling, repairing, retesting

Defective products in the hands of the customerDefective products in the hands of the customer --

recalls, warranty claims, law suits, lost business, recalls, warranty claims, law suits, lost business,

Detecting defectsDetecting defects -- inspection, testing, .inspection, testing, . Preventing defectsPreventing defects -- training, charting performance,training, charting performance,

product/process redesign, supplier development, .product/process redesign, supplier development, .

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Traditional Quality ManagementTraditional Quality ManagementTraditional Quality ManagementTraditional Quality Management

Rigorous system of inspectionRigorous system of inspection

Defective products will be identified and discardedDefective products will be identified and discarded

Quality can be inspected into productsQuality can be inspected into products

Main decision is how many products to inspectMain decision is how many products to inspect(largely a question of economics)(largely a question of economics)

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Traditional View of How Much to InspectTraditional View of How Much to InspectTraditional View of How Much to InspectTraditional View of How Much to Inspect

Annual Cost ($)Annual Cost ($)

% of Products Inspected% of Products Inspected00

OptimalOptimal

Level ofLevel of

InspectionInspection

Cost of Scrap,Cost of Scrap,Rework, andRework, and

Detecting DefectsDetecting Defects

Cost of DefectiveCost of DefectiveProducts toProducts toCustomersCustomers

Total QualityTotal QualityControl CostsControl Costs

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Modern Quality ManagementModern Quality Management

Quality GurusQuality Gurus

Quality Drives the Productivity MachineQuality Drives the Productivity Machine

Other Aspects of the Quality PictureOther Aspects of the Quality Picture

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Quality GurusQuality GurusQuality GurusQuality Gurus

W. Edwards DemingW. Edwards Deming

Assisted Japan in improving productivity andAssisted Japan in improving productivity and

quality after World War IIquality after World War II

In 1951 Japan establishedIn 1951 Japan established Deming PrizeDeming Prize US was slow in recognizing his contributionsUS was slow in recognizing his contributions

Introduced Japanese companies to theIntroduced Japanese companies to the PlanPlan--DoDo--

CheckCheck--Act (PDCA)Act (PDCA) cycle (developed by Shewart)cycle (developed by Shewart)

DevelopedDeveloped 14 Points14 Points for managersfor managers

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PDCA CyclePDCA CyclePDCA CyclePDCA Cycle

2. DO2. DO

Try plan onTry plan on

a test basisa test basis

1. PLAN1. PLAN

Identify imIdentify im--provements andprovements and

develop plandevelop plan

3. CHECK3. CHECK

Evaluate planEvaluate plan

to see if itto see if itworksworks

4. ACT4. ACT

PermanentlyPermanentlyimplementimplement

improvementsimprovements

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Demings 14 Points for ManagersDemings 14 Points for ManagersDemings 14 Points for ManagersDemings 14 Points for Managers

1. Create constancy of purpose toward product quality1. Create constancy of purpose toward product qualityto achieve organizational goalsto achieve organizational goals

2. Refuse to allow commonly accepted levels of poor2. Refuse to allow commonly accepted levels of poorqualityquality

3. Stop depending on inspection to achieve quality3. Stop depending on inspection to achieve quality

4. Use fewer suppliers, selected based on quality and4. Use fewer suppliers, selected based on quality anddependability instead of pricedependability instead of price

5. Instill programs for continuous improvement of5. Instill programs for continuous improvement ofcosts, quality, service, and productivitycosts, quality, service, and productivity

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6. Train all employees on quality concepts6. Train all employees on quality concepts7. Focus supervision on helping people do a better job7. Focus supervision on helping people do a better job

8. Eliminate fear, create trust, and encourage two8. Eliminate fear, create trust, and encourage two--wayway

communications between workers and managementcommunications between workers and management9. Eliminate barriers between departments and9. Eliminate barriers between departments and

encourage joint problemencourage joint problem--solvingsolving

10. Eliminate the use of numerical goals and slogans to10. Eliminate the use of numerical goals and slogans to

make workers work hardermake workers work harder

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11. Use statistical methods for continuous improvement11. Use statistical methods for continuous improvementof quality and productivity instead of numer. quotasof quality and productivity instead of numer. quotas

12. Remove barriers to pride of workmanship12. Remove barriers to pride of workmanship

13. Encourage education and self13. Encourage education and self--improvementimprovement14. Clearly define managements permanent14. Clearly define managements permanent

commitment to quality and productivitycommitment to quality and productivity

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Philip B. CrosbyPhilip B. Crosby

WroteWrote Quality Is FreeQuality Is Free in 1979in 1979

Company should have the goal ofCompany should have the goal of zero defectszero defects

Cost of poor quality is greatly underestimatedCost of poor quality is greatly underestimated Traditional tradeTraditional trade--off between costs of improvingoff between costs of improving

quality and costs of poor quality is erroneousquality and costs of poor quality is erroneous

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Armand V. FeigenbaumArmand V. Feigenbaum

Developed concept ofDeveloped concept of total quality control (TQC)total quality control (TQC)

Responsibility for quality must rest with theResponsibility for quality must rest with the

persons who do the work (persons who do the work (quality at the sourcequality at the source)) Kaoru IshikawaKaoru Ishikawa

WroteWrote Guide to Quality ControlGuide to Quality Controlin 1972in 1972

Credited with the concept ofCredited with the concept of quality circlesquality circles

Suggested the use ofSuggested the use of fishbone diagramsfishbone diagrams

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Quality Drives the Productivity MachineQuality Drives the Productivity Machine

If production does it right the first time and producesIf production does it right the first time and producesproducts and services that are defectproducts and services that are defect--free, waste isfree, waste is

eliminated and costs are reduced.eliminated and costs are reduced.

Estimated that 20Estimated that 20--25% of COGS in the US is spent25% of COGS in the US is spent

on finding and correcting errorson finding and correcting errors

Quality management programs today are viewed byQuality management programs today are viewed by

many companies as productivity improvementmany companies as productivity improvement

programs.programs.

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Other Aspects of the Quality PictureOther Aspects of the Quality Picture

JustJust--inin--time (JIT) and lean manufacturingtime (JIT) and lean manufacturing

Product standardizationProduct standardization

Automated equipmentAutomated equipment

Preventive maintenancePreventive maintenance

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JIT ManufacturingJIT ManufacturingJIT ManufacturingJIT Manufacturing

A system of enforced problem solvingA system of enforced problem solving

Lot sizes are cutLot sizes are cut

InIn--process inventories are drastically reducedprocess inventories are drastically reduced

Any interruption causes production to stopAny interruption causes production to stop Quality problems are immediately addressedQuality problems are immediately addressed

The necessary teamwork contributes to increasedThe necessary teamwork contributes to increased

pride in qualitypride in quality

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Quality Management RecognitionQuality Management Recognition

Malcolm Baldrige National Quality AwardMalcolm Baldrige National Quality Award

Deming PrizeDeming Prize

ISO 9000 StandardsISO 9000 Standards

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Malcolm Baldrige National Quality AwardMalcolm Baldrige National Quality AwardMalcolm Baldrige National Quality AwardMalcolm Baldrige National Quality Award

Awards given annually to US firmsAwards given annually to US firms

Nearly all states have quality award programs styledNearly all states have quality award programs styled

after the Baldrige Awardafter the Baldrige Award

Criteria includeCriteria include LeadershipLeadership Strategic planningStrategic planning Customer and market focusCustomer and market focus Information and analysisInformation and analysis Human resource focusHuman resource focus Process managementProcess management Business resultsBusiness results

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The Deming PrizeThe Deming PrizeThe Deming PrizeThe Deming Prize

Awarded by the Union of Japanese Scientists andAwarded by the Union of Japanese Scientists andEngineersEngineers

Recognizes companies that have demonstratedRecognizes companies that have demonstrated

successful quality improvement programssuccessful quality improvement programs

All (not just Japanese) firms are eligibleAll (not just Japanese) firms are eligible

Four topFour top--management activities recognizedmanagement activities recognized

Senior management activitiesSenior management activities

Customer satisfaction activityCustomer satisfaction activity Employee involvement activitiesEmployee involvement activities

Training activityTraining activity

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ISO 9000 StandardsISO 9000 Standards

Quality management guidelines developed by theQuality management guidelines developed by theInternational Organization for StandardizationInternational Organization for Standardization

Companies become certified by applying to thirdCompanies become certified by applying to third--

party providers who assess the level of conformity toparty providers who assess the level of conformity to

the standardsthe standards

More than 300,000 companies worldwide are ISOMore than 300,000 companies worldwide are ISO

90009000--certifiedcertified

The US big three automakers have adopted a similarThe US big three automakers have adopted a similarset of standards called QSset of standards called QS--90009000

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ISO 9000 StandardsISO 9000 StandardsISO 9000 StandardsISO 9000 Standards

Standards based on 8 quality management principlesStandards based on 8 quality management principles

Customer focused organizationCustomer focused organization

LeadershipLeadership

Involvement of peopleInvolvement of people Process approachProcess approach

System approach to managementSystem approach to management

Continual improvementContinual improvement

Factual approach to decision makingFactual approach to decision making Mutually beneficial supplier relationshipMutually beneficial supplier relationship

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Total Quality Management (TQM) ProgramsTotal Quality Management (TQM) ProgramsTotal Quality Management (TQM) ProgramsTotal Quality Management (TQM) Programs

MotorolaMotorola -- Six SigmaSix Sigma

XeroxXerox -- Leadership through QualityLeadership through Quality

IntelIntel -- (PDQ)(PDQ)22 oror PerfectDesign Quality,PrettyPerfectDesign Quality,Pretty

Darn QuickDarn Quick HewlettHewlett--PackardPackard -- TotalQuality ControlTotalQuality Control

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Elements ofTQMElements ofTQM

Top management commitment and involvementTop management commitment and involvement Customer involvementCustomer involvement

Design products for qualityDesign products for quality

Design production processes for qualityDesign production processes for quality

Control production processes for qualityControl production processes for quality

Developing supplier partnershipsDeveloping supplier partnerships

Customer service, distribution, and installationCustomer service, distribution, and installation

Building teams of empowered employeesBuilding teams of empowered employees

Benchmarking and continuous improvementBenchmarking and continuous improvement

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Top ManagementTop Management

Commitment and InvolvementCommitment and Involvement

Top ManagementTop Management

Commitment and InvolvementCommitment and Involvement

Support must be genuine or TQM will be seen as justSupport must be genuine or TQM will be seen as justanother passing fadanother passing fad

Fundamental changes must occur in the culture of theFundamental changes must occur in the culture of the

organizationorganization

Such fundamental changes are not easy, but areSuch fundamental changes are not easy, but are

impossible without top managements commitmentimpossible without top managements commitment

and involvementand involvement

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Customer InvolvementCustomer InvolvementCustomer InvolvementCustomer Involvement

Mechanisms to involve the customerMechanisms to involve the customer

Focus groupsFocus groups

Market surveysMarket surveys

Customer questionnairesCustomer questionnaires Market research programsMarket research programs

Quality Function Deployment (QFD)Quality Function Deployment (QFD)

Formal system for identifying customer wantsFormal system for identifying customer wants

Eliminate wasteful product features and activitiesEliminate wasteful product features and activitiesthat do not contributethat do not contribute

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Designing Products for QualityDesigning Products for QualityDesigning Products for QualityDesigning Products for Quality

Designing forDesigning for RobustnessRobustness

Product will perform as intended even ifProduct will perform as intended even if

undesirable conditions occur in production or inundesirable conditions occur in production or in

field.field.

Designing forDesigning for ManufacturabilityManufacturability (DFM)(DFM)

Products typically have fewer parts and can beProducts typically have fewer parts and can be

assembled quickly, easily, and errorassembled quickly, easily, and error--free.free.

Designing forDesigning for ReliabilityReliability

Manufacturing parts to closer tolerances.Manufacturing parts to closer tolerances.

Using redundant components where necessary.Using redundant components where necessary.

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Designing for ReliabilityDesigning for ReliabilityDesigning for ReliabilityDesigning for Reliability

Each part of a product is designed for a given level ofEach part of a product is designed for a given level ofcomponent reliabilitycomponent reliability

Component reliabilityComponent reliability is defined as the probabilityis defined as the probability

that a part will not fail in a given time period orthat a part will not fail in a given time period or

number of trials under ordinary conditions of usenumber of trials under ordinary conditions of use

3 common measures of component reliability are:3 common measures of component reliability are:

Reliability (CR)Reliability (CR)

Failure Rates (FR and FRFailure Rates (FR and FRnn))

Mean Time Between Failures (MTBF)Mean Time Between Failures (MTBF)

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ReliabilityReliabilityCR = 1CR = 1 -- FRFR

Failure RatesFailure Rates

Mean Time Between FailuresMean Time Between Failures

Number of failures

FR = Number tested

n

Number of failuresFR =

Unit-hours of operation

n

Unit-hours of operation 1MTBF = =

Number of failures FR

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The combined reliability of all the components in aThe combined reliability of all the components in aproduct forms the basis forproduct forms the basis for system reliabilitysystem reliability (SR)(SR)

WhenWhen nn independent critical components areindependent critical components are

combined into a product, the SR is determined by:combined into a product, the SR is determined by:

SR = CRSR = CR11 xx CRCR22 xx CRCR33 xx xx CRCRnn

Consider a product with 50 identical criticalConsider a product with 50 identical critical

components:components:

If each components CR = 99.5%, then SR = 77.8%If each components CR = 99.5%, then SR = 77.8% If each components CR = 98.0%, then SR = 36.4%If each components CR = 98.0%, then SR = 36.4%

If each components CR = 90.0%, then SR = 0.5%If each components CR = 90.0%, then SR = 0.5%

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Example: Allied SwitchExample: Allied SwitchExample: Allied SwitchExample: Allied Switch

ReliabilityReliability

Allied Switch has designed a machine havingAllied Switch has designed a machine having

three critical components that interact. The threethree critical components that interact. The three

parts have component reliability of .96, .90, and .98.parts have component reliability of .96, .90, and .98.

What is the system reliability of the machine?What is the system reliability of the machine?

SR = (CRSR = (CR11) (CR) (CR11) (CR) (CR11))

= (.96)(.90)(.98)= (.96)(.90)(.98)

= .847= .847

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If the machine could be redesigned to allowIf the machine could be redesigned to allow

redundancy for the component that presently has aredundancy for the component that presently has a

reliability of .90, what would be the new systemreliability of .90, what would be the new system

reliability of the machine?reliability of the machine?

.96.96 .98.98

.90.90

.90.90

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First, compute the CR for the redundant parts.First, compute the CR for the redundant parts.

CR = Probability of primary component workingCR = Probability of primary component working

+ [(Probability of backup component working)+ [(Probability of backup component working)x (Probability of needing backup component)]x (Probability of needing backup component)]

= .90 + [(.90) x (.10)] = .90 + .09 = .99= .90 + [(.90) x (.10)] = .90 + .09 = .99

Now, compute the system reliability.Now, compute the system reliability.SR = (.96) (.99) (.98) = .931SR = (.96) (.99) (.98) = .931

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Designing and ControllingDesigning and Controlling

Production ProcessesProduction Processes

Designing and ControllingDesigning and Controlling

Production ProcessesProduction Processes

The responsibility of producing products of highThe responsibility of producing products of highquality rests with the workers producing the productquality rests with the workers producing the product

Two types of factors introduce variation inTwo types of factors introduce variation in

production processesproduction processes

Controllable factorsControllable factors -- can be reduced by workerscan be reduced by workers

and managementand management

Uncontrollable factorsUncontrollable factors -- reduced only byreduced only by

redesigning or replacing existing processesredesigning or replacing existing processes

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Process CapabilityProcess CapabilityProcess CapabilityProcess Capability

Process capabilityProcess capability is a production process ability tois a production process ability toproduce products within the desired expectations ofproduce products within the desired expectations of

customers.customers.

TheThe process capability indexprocess capability index (PCI) is a way of(PCI) is a way of

measuring that ability.measuring that ability.

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Process Capability Index (PCI)Process Capability Index (PCI)Process Capability Index (PCI)Process Capability Index (PCI)

PCI = (ULPCI = (UL -- LL) / (6LL) / (6WW))

UL = allowed upper limit of the productUL = allowed upper limit of the productcharacteristic, based on customer expect.characteristic, based on customer expect.

LL = allowed lower limit of the productLL = allowed lower limit of the productcharacteristic, based on customer expect.characteristic, based on customer expect.

WW = standard deviation of the product= standard deviation of the productcharacteristic from the production processcharacteristic from the production process

PCIPCI >> 1.00 Process is capable of meeting customer1.00 Process is capable of meeting customerexpectations.expectations.

PCI < 1.00 Process is not capable.PCI < 1.00 Process is not capable.

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Process Capability Index (PCI)Process Capability Index (PCI)Process Capability Index (PCI)Process Capability Index (PCI)

LLLL ULULPCI = 0.8PCI = 0.8

PCI = 1.0PCI = 1.0

PCI = 1.2PCI = 1.2

ProcessProcessis notis notcapablecapable

ProcessProcessisis

capablecapable

ProcessProcessis quiteis quitecapablecapable

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Example: Process CapabilityExample: Process CapabilityExample: Process CapabilityExample: Process Capability

In order for a certain molded part to beIn order for a certain molded part to beconsidered acceptable, the molding process must beconsidered acceptable, the molding process must beconducted within a limited range of temperature. Theconducted within a limited range of temperature. Thelower limit is 455lower limit is 455oo and the upper limit is 465and the upper limit is 465oo..

Three molding machinesThree molding machines being considered are A,being considered are A,B, and C with standard deviations ofB, and C with standard deviations ofWWAA = 2.50,= 2.50, WWBB ==1.25, and1.25, and WWCC = 1.75.= 1.75.

Which of these machines are capable ofWhich of these machines are capable of

producing the part in accordance with the temperatureproducing the part in accordance with the temperaturerequirements?requirements?

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Developing Supplier PartnershipsDeveloping Supplier PartnershipsDeveloping Supplier PartnershipsDeveloping Supplier Partnerships

Supplier becomes part of the customers TQMSupplier becomes part of the customers TQMprogramprogram

The relationship between the supplier and theThe relationship between the supplier and the

customer becomes longcustomer becomes long--lasting and durablelasting and durable

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Customer Service, Distribution, and InstallationCustomer Service, Distribution, and Installation

Packaging, shipping, and installation must bePackaging, shipping, and installation must beincluded in TQM.included in TQM.

Warehousing, marketing, and the distributionWarehousing, marketing, and the distribution

function must be committed to perfect quality.function must be committed to perfect quality.

Contact between the customers and the firms productContact between the customers and the firms product

must be planned and managed to provide satisfiedmust be planned and managed to provide satisfied

customers.customers.

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Building Teams of Empowered EmployeesBuilding Teams of Empowered Employees

Employee training programsEmployee training programs

Employees at all levels are trained in quality.Employees at all levels are trained in quality.

Works teams and empowermentWorks teams and empowerment

Workers are given the authority to act.Workers are given the authority to act. Quality at the sourceQuality at the source

Workers are responsible for their own work.Workers are responsible for their own work.

Quality circlesQuality circles

Small groups of employees who analyze andSmall groups of employees who analyze and

solve quality problems and implementsolve quality problems and implement

improvement programs.improvement programs.

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Benchmarking and Continuous ImprovementBenchmarking and Continuous Improvement

BenchmarkingBenchmarking

The practice of establishing internal standards ofThe practice of establishing internal standards of

performance by looking to how worldperformance by looking to how world--classclass

companies run their businessescompanies run their businesses

Continuous ImprovementContinuous Improvement

The company makes small incrementalThe company makes small incremental

improvements toward excellence on a continualimprovements toward excellence on a continual

basisbasis

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Quality Management in ServicesQuality Management in ServicesQuality Management in ServicesQuality Management in Services

Since many services are intangible, it is difficult toSince many services are intangible, it is difficult todetermine their qualitydetermine their quality

Customers set their own standards for servicesCustomers set their own standards for services

Perceived quality of service affected by thePerceived quality of service affected by thesurroundingssurroundings

Performance of service employees determines inPerformance of service employees determines in

large part the quality of the serviceslarge part the quality of the services

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WrapWrap--Up:WorldUp:World--Class PracticeClass PracticeWrapWrap--Up:WorldUp:World--Class PracticeClass Practice

Quality begins when business strategy is formulatedQuality begins when business strategy is formulated

Quality is the weapon of choice to capture globalQuality is the weapon of choice to capture global

marketsmarkets

Quality drives the productivity machineQuality drives the productivity machine Not depending on inspection to catch defects;Not depending on inspection to catch defects;

concentrating on doing things right the first timeconcentrating on doing things right the first time

Committing tremendous resources to put in placeCommitting tremendous resources to put in place

TQM programs aimed at continuous improvementTQM programs aimed at continuous improvement

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End of Chapter 7End of Chapter 7

g_oqm_jk_7

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