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Lecture 10 Optimising Organisational Performance

Quality and Operational Measures


Understanding Business Organisations
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UnderstandingBusiness
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Understanding Business
Organisations
Lecture10:
Optimising Organisational Performance
Quality and Operational Measures
Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.2
Scope and Coverage
This topic will cover:
The role of quality management within an
organisation
The Plan, Do, Check, Act (PDCA) cycle
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The Plan, Do, Check, Act (PDCA) cycle
Quality systems and standards
Service level agreements (SLAs)
The philosophy of total quality management (TQM)
J ust-in-time (J IT) production
Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.3
Learning Outcomes
By the end of this topic, students will be able to:
Describe what is meant by quality and why it is
important to an organisation and its customers
Understandthe role of service level agreements
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Understand the role of service level agreements
(SLAs) in the customer-supplier relationship
Explain the principles of total quality management
(TQM)
Understand the features and benefits of just-in-time
(J IT)
Lecture 10 Optimising Organisational Performance
Quality and Operational Measures
Understanding Business Organisations
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Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.4
W. Edwards Deming Quality should be aimed at
meeting the needs of the consumer, present and
future
J osephM. J uran Quality is fitness for purpose
What is Quality?
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J oseph M. J uran Quality is fitness for purpose
for which the product is intended
J ohn Oakland Quality is meeting customer
requirements
Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.5
What matters to the customer How the business responds
Low price Producing at low price
High quality products Building quality into processes and products
Fast delivery Short manufacturing time and fast distribution
The Customers Influence on
Quality and Performance
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Product reliability Buildingreliability into products and delivering
dependable service
Leading edge technologies Emphasis on R&D
Wide product range Flexibility to change and wide product mix
Responsive to changes in
customer requirements
Flexibility in volume and delivery, quick response times
to change
Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.6
The Importance of Quality
Good quality wins orders, stimulates demand
and retains customer confidence and loyalty
Poor quality loses orders erodes demand and
damages customer confidence in the
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organisation
Lecture 10 Optimising Organisational Performance
Quality and Operational Measures
Understanding Business Organisations
V1.0 Visuals Handout Page 3
Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.7
Category Associated costs Examples
Prevention Cost of activities undertaken to
prevent defects in the end result
Training, planning, quality
assurance, procedures,
measurements, role, clarity
Appraisal Costs incurred with inspections to
determine if materials, products or
Proof reading, vendor rating,
quality audits, pre-delivery
Quality Costing
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services conform to requirements
y y
inspection
Failure Costs associated with items that
failed to meet the agreed
requirements
Re-work, scrap, complaints,
downgrading products
(seconds), waste (time,
materials)
Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.8
Quality control: post-production
In-process inspections
Quality assurance
Performance measurement
Quality in Operations
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Poka-yoke (mistake proofing)
Statistical process control
Kaizen (continuous
improvement)
Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.9
Planning, doing, checking and acting was
promoted by Deming as an effective continuous
improvement tool:
Plan: collect data define the problemand establish a
PDCA and Continuous
Improvement
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Plan: collect data, define the problem and establish a
strategy
Do: trial the changes on a small scale
Check: monitor the improvement via collection of data
Act: hold the gains if successful, or remedy the
changes if unsuccessful
Lecture 10 Optimising Organisational Performance
Quality and Operational Measures
Understanding Business Organisations
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Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.10
Act Plan
The PDCA Cycle
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Check Do
Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.11
An holistic approach which provides
awareness of the customer-supplier
relationship and continuous improvement in
all departments and functions
Total Quality Management (TQM)
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A simple definition is:
Total: everybody in the organisation is involved
Quality: meeting agreed customer requirements,
first time, every time
Management: it is a leadership responsibility
Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.12
Principle Description
Philosophy Prevention not detection invest in the prevention of
failures
Approach Management led-initiatives encouraging by example
Scale Everyone is responsible for quality
Principles of TQM
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Measurement Costs involved in quality failures the cost of quality
Standard Right first time aim for zero defects
Scope Everyone, everywhere across the whole supply chain
Theme Continuous improvement, there is no instant solution
Lecture 10 Optimising Organisational Performance
Quality and Operational Measures
Understanding Business Organisations
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Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.13
Main Features and Relationships
of TQM
Teams
Culture Communication
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Systems Tools
Processes and
customer supply
chains
Culture Communication
Commitment
Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.14
Agreements with suppliers that explicitly define the service
to be delivered in terms of responsibilities and priorities
SLAs typically include:
The service to be provided
The standards of service
The timetable for delivery
Service Level Agreements
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The timetable for delivery
The respective responsibilities of supplier and customer
Provisions for regulatory and legal compliance
Monitoring and reporting mechanisms
Escalation procedure in the event of slippage
Disputes procedure
Review procedure
Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.15
Provide a framework for the development and
measurement of quality systems
Focus of ISO 9000 is upon what the organisation
does to:
Quality Standards
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Fulfil the customers requirements
Enhance the customer satisfaction
Apply regulatory requirements
Implement continuous performance improvement
Lecture 10 Optimising Organisational Performance
Quality and Operational Measures
Understanding Business Organisations
V1.0 Visuals Handout Page 6
Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.16
ISO standard Areas covered by standard
ISO 9001 Quality of all aspects of operations and product design
ISO 9002 Quality in all aspects of operations
ISO 9003 Q lit i fi l d t i ti l
Quality Standards for Operations
Management
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ISO 9003 Quality in final product inspection only
Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.17
A set of techniques intended to ensure that
supplies arrive in the right quantities exactly when
they are required by operatives just in time
Focus is upon eliminating waste
J ust-In-Time (J IT) Production
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Waste arises from any stock or activity that costs
the organisation money, but does not add value or
generate income
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Simplicity all procedures and operations should
be kept as simple as possible
Visibility all workplaces should be tidy, since
waste can conceal potential problems
Core Themes of J IT
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Continuous J IT should not be viewed as a
passing fad, but an ongoing part of the organisation
Involvement everybody in the organisation must
be committed to it and involved with it
Lecture 10 Optimising Organisational Performance
Quality and Operational Measures
Understanding Business Organisations
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Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.19
Working environment
Quality improvement
Preventative maintenance
Uniformplant load
Key Operational Features of J IT
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Uniform plant load
Process configuration
Changeover flexibility
Pull scheduling
Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.20
Benefits:
Reduced stockholding reduces the working capital needed
Provides an opportunity to reduce the costs of the
operations department
All products are made to the requirement of the customer
Benefits and Drawbacks of J IT
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All products are made to the requirement of the customer
Drawbacks:
Possibility of higher unit costs arising from requirements
made of suppliers
Lack of finished goods stocks can be problematical if for
any reason the order cannot be fulfilled
Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.21
A key aspect of quality is meeting customers needs or
expectations
Good quality wins orders whilst poor quality damages
customer confidence
Quality standards provide a framework for the development
and measurement of quality systems
Summary
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and measurement of quality systems
Total quality management (TQM) focuses upon continuous
improvement
Service level agreements (SLAs) play an important role in
ongoing customer-supplier relationships
J ust-in-time (J IT) production helps to eliminate waste
Lecture 10 Optimising Organisational Performance
Quality and Operational Measures
Understanding Business Organisations
V1.0 Visuals Handout Page 8
Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.22
References
Campbell and Craig (2005), Organisations and the
Business Environment, 2nd edition. Butterworth-
Heinemann, Chapter 24, pp 518-545
Boddy, D. (2005), Management: An Introduction,
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3rd edition, Prentice Hall, Chapter 19
Boddy, D. (2007), Management: An Introduction,
4th edition, Prentice Hall, Chapter 20
Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.23
Lecture 10 Optimising Organisational
Performance Quality and Operational
Measures
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Measures
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