Operations

Management
Chapter 6 –
Managing Quality

PowerPoint presentation to accompany

Heizer/Render
Principles of Operations Management,
7e
Operations Management, 9e
© 2008 Prentice Hall, 6–1
Inc.
 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
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Inc.
 Outline – Continued
International Quality
Standards
ISO 9000
ISO14000

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

© 2008 Prentice Hall, 6–4

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

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Inc.
 Outline – Continued
The Role of Inspection
When and Where to Inspect
Source Inspection
Service Industry Inspection
Inspection of Attributes versus
Variables
TQM in Services

© 2008 Prentice Hall, 6–6

Inc.
 Learning Objectives
When you complete this chapter you
should be able to:
Define quality and TQM
Describe the ISO international
quality standards
Explain Six Sigma
Explain how benchmarking is used
Explain quality robust products and
Taguchi concepts
Use the seven tools of TQM
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 Quality means Luxury

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 Quality does not mean
luxury!

Meets the specification given by the seller and the expectations of the
buyer

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 Quality implies higher costs

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Inc.
 Quality does not cost more

Quality does not add cost, it is lack of quality that is costly

(Maintenance, Repair, Loss of Sales, Return)

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 Quality problems are
caused by operators

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 Quality problems are rarely caused by
operators

The cause of 80% of the problem lies

elsewhere. It may be:
• Policy.
• Inadequate system.
• Compliance.
• Process is poorly designed

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Inc.
 Quality problems are solved by the inspection
department

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Inc.
 Quality problems cannot be solved by the
Quality department alone

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 What is Quality
• Dr. Joseph M. Juran:
“ Fitness for use”

• Philip Crosby:
“Conformance to requirements”

• Dr Edward Deming:
“Quality is predictable degree of uniformity and
dependability, at low cost and suited to market.”

• ISO 9000:
“ Degree to which a set of internet characteristics fulfils
requirement”
© 2008 Prentice Hall, 6 – 16
Inc.
 Managing Quality Provides a
Competitive Advantage
Arnold Palmer
Hospital
Deliver over 13,000 babies annually
Virtually every type of quality tool is
employed
Continuous improvement
Employee empowerment
Benchmarking
Just-in-time
Quality tools
© 2008 Prentice Hall, 6 – 17
Inc.
© 2008 Prentice Hall, 6 – 18
Inc.
 Quality and Strategy
Managing quality supports
differentiation, low cost, and response
strategies
Quality helps firms increase sales and
reduce costs
Improved quality allows costs to drop as
firms increase productivity and lower
rework, scrap, and warranty costs.
Produce quality steel at low cost.

Bose Corp. successfully differentiate its stereo speakers as among

the best in the world.

Dell Computers rapidly responds

© 2008 Prentice Hall, 6 – 19
Inc.
 Quality and Strategy
Quality, or the lack of quality, affects the
entire organization from supplier to
customer and from product design to
maintenance.

A successful quality strategy begins with

an organizational culture that fosters
quality, followed by an understanding of
the principles of quality, and then
engaging employees in the necessary
activities to implement quality.

© 2008 Prentice Hall, 6 – 20

Inc.
 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
© 2008 Prentice Hall, 6 – 21
Inc.
 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 a competitive advantage
6.2
© 2008 Prentice Hall, 6 – 22
Inc.
 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

The ability of a product or

service to meet customer
needs.

© 2008 Prentice Hall, 6 – 23

Inc.
 Different Views
User-based – better performance,
more features quality “lies in the eyes of the beholder.”
Manufacturing-based –
conformance to standards,
making it right the first time
Product-based – specific and
measurable attributes of the
product really good ice cream has high
butterfat levels.

© 2008 Prentice Hall, 6 – 24

Inc.
 Implications of Quality
1. Company reputation
Perception of new products
Employment practices
Supplier relations
2. Product liability
(Be Liable for damages resulting from their use)
Reduce risk
3. Global implications
Improved ability to compete
© 2008 Prentice Hall,
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Quality will show up in
Impure foods that
cause illness, nightgowns
that burn, tires that fall
apart, or auto fuel tanks
that explode
on impact can all lead to
Consumer Product Safety Act
huge legal expenses,
large settlements or
losses, and terrible
publicity.
6 – 25
 Key Dimensions of Quality

Performance Durability(toughness / Strength)

Features Serviceability
Reliability/ Aesthetics
Consistent Perceived quality
Conformance Value / Worth

© 2008 Prentice Hall, 6 – 26

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 Malcom Baldrige National
Quality Award
Established in 1988 by the U.S.
government
Designed to promote TQM practices
Recent winners
Premier Inc., MESA Products, Sunny
Fresh Foods, Park Place Lexus, North
Mississippi Medical Center, The Bama
Companies, Richland College, Texas
Nameplate Company, Inc.
© 2008 Prentice Hall, 6 – 27
Inc.
 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
© 2008 Prentice Hall, 6 – 28
Inc.
 Takumi
"TAKUMI" is a
A Japanese character Japanese word to
that symbolizes a describe Craftsmen /
broader dimension Artisans.
than quality, a deeper Superior Skill
process than
education, and a more
perfect method than
persistence

© 2008 Prentice Hall, 6 – 29

Inc.
 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

© 2008 Prentice Hall, 6 – 30

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 Costs of Quality

Total Total Cost

Cost External
Failure

Internal
Failure

Preventio
n
Appraisa
l
Quality
Improvement
© 2008 Prentice Hall, 6 – 31
Inc.
 Costs of Quality

The first three costs can be reasonably

estimated, but external costs are very
hard to quantify. When GE had to recall
3.1 million dishwashers (because of a
defective switch alleged to have started
seven fires), the cost of repairs
exceeded the value of all the machines.
This leads to the belief by many experts
that the cost of poor quality is
consistently underestimated.

© 2008 Prentice Hall, 6 – 32

Inc.
 Leaders in Quality

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

© 2008 Prentice Hall, 6 – 33

Inc.
 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
Worldwide recall, as conducted by both Johnson & Johnson
(for Tylenol) and Perrier (for sparkling water), when each of
these products was found to be contaminated.

© 2008 Prentice Hall, 6 – 34

Inc.
 International Quality
Standards
ISO 9000 series (Process Standard)
Common quality standards
ISO 9000 is the quality standard with
international recognition.
2000 update places greater emphasis on
leadership and customer satisfaction
ISO 14000 series (Environmental
Standard)

© 2008 Prentice Hall, 6 – 35

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 ISO 14000
Environmental Standard
Core Elements:
Environmental management
Auditing
Performance evaluation
Labeling
Life cycle assessment

© 2008 Prentice Hall, 6 – 36

Inc.
 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

© 2008 Prentice Hall, 6 – 37

Inc.
 Table 6.1
© 2008 Prentice Hall, 6 – 38
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 Seven Concepts of TQM
Continuous improvement
Six Sigma
Employee empowerment
Benchmarking
Just-in-time (JIT)
Taguchi concepts
Knowledge of TQM tools

© 2008 Prentice Hall, 6 – 39

Inc.
 Continuous Improvement
Represents continual
improvement of all processes
Never-ending process of
continuous improvement
Involves all operations and work
centers including suppliers and
customers
People, Equipment, Materials,
Procedures

© 2008 Prentice Hall, 6 – 40

Inc.
 Shewhart’s PDCA Model
Continuous improvement
efforts
U.S., TQM and zero
defects are also 1. Plan
used to describe 4. Act Identify the
Implement improvement
Japanese the plan and make
use the word a plan
kaizen

3. Check 2. Do
Is the Test the
plan plan
working?
Figure
6.3
© 2008 Prentice Hall, 6 – 41
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 Health and Safety Policy

© 2008 Prentice Hall, 6 – 42

Inc.
 Six Sigma
Two meanings
Statistical definition of a process that is
99.9997% capable, 3.4 defects per
million opportunities (DPMO).
A measure of quality that strives for
near perfection, Operational Excellence /
Superiority
A program designed to reduce defects,
lower costs, and improve customer
satisfaction.

© 2008 Prentice Hall, 6 – 43

Inc.
 Six Sigma

Two meanings
Lower Upper
limits limits
Statistical definition
2,700 defects/ of a process that
million
is 99.9997% capable, 3.4 defects per
3.4 defects/
million opportunities (DPMO)
million
A program designed to reduce
defects, lower costs, and improve
customer satisfactionMea
n
±3
Figure σ
6.4 ±6
σ
For example, if 1 million passengers pass through the St. Louis Airport
with checked baggage each month, a Six Sigma program for baggage
© 2008 Prentice Hall, handling will result in only 3.4 passengers with misplaced luggage. 6 – 44
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 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

© 2008 Prentice Hall, 6 – 45

Inc.
 Six Sigma Program
Motorola developed Six Sigma in the 1980s, in response to customer complaints
About its products and in response to stiff competition. The company first set a goal
of reducing defects by 90%. Within one year, it had achieved such impressive
results—through benchmarking competitors, soliciting new ideas from employees,
changing reward plans, adding training, and revamping critical processes—that it
documented the procedures into what it called Six Sigma. Although the concept was
rooted in manufacturing, GE later expanded Six Sigma into services, including
human resources, sales, customer services, and financial/credit services. The
concept of wiping out defects turns out to be the same in both manufacturing and
services.

6
© 2008 Prentice Hall, 6 – 46
Inc.
 Six Sigma
1. Define critical outputs
and identify gaps for DMAIC Approach
improvement
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
© 2008 Prentice Hall, 6 – 47
Inc.
 Cleaning Your Garage
DEFINE: Identify the scope of the cleaning project (cleaning the garage,
not whole house).

MEASURE: Pace off the square footage of the overall garage and of the
open floor space. Set a goal for required amount of open floor space.

ANALYZE: Understand the types and amounts of materials currently in

place and the available storage locations.

IMPROVE: Use Lean tools (e.g. 5S) to execute cleaning and organizing,
including removing unessential materials. Install improved vertical storage
facilities to minimize floor space used.

CONTROL: Label storage spots. Put “after” photos in place as ongoing

targets. Conduct weekly audits to ensure “stuff” doesn’t accumulate.

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 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
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Inc.
 What is 5S?
5S is a system for organizing spaces so
work can be performed efficiently,
effectively, and safely.

This system focuses on putting

everything where it belongs and keeping
the workplace clean, which makes it
easier for people to do their jobs without
wasting time or risking injury.

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Inc.
 What is 5S?
The term 5S comes from five Japanese
words:

Seiri (Sort)
Seiton (Set in Order)
Seiso (Shine)
Seiketsu (Standardize)
Shitsuke (Sustain)

6S – Safety

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 Employee Empowerment
Getting employees involved in
product and process
improvements
85% of quality problems are due
to process and material not with
employee performance
High degree of involvement by
those who understand the
shortcomings of the system.
Those dealing with the system on
a daily basis understand it better
than anyone else.

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 Employee Empowerment
Organizations provide their employees with a
certain degree of autonomy and control in their
day-to-day activities.

This can include having a voice in process

improvement, helping to create and manage new
systems and tactics, and running smaller
departments with less oversight from higher-level
management.

© 2008 Prentice Hall, 6 – 53

Inc.
 Employee Empowerment
Techniques
Build communication networks
that include employees
Develop open, supportive supervisors
Move responsibility to employees
Build a high-morale organization
Create formal team structures as team and
quality circles

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Inc.
 Quality Circles
A group of employees meeting
regularly with a facilitator to solve
work-related problems in their work
area.
Trained in planning, problem
solving, and statistical methods
Often led by a facilitator
Generally meet once a week
Very effective when done properly
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Inc.
 Benchmarking
Selecting best practices to use as a
standard for performance rnal
inte ing
k
Determine what to Use hmar big
en c ’re
benchmark b you h
if ug
Form a benchmark team eno
Identify benchmarking partners
Collect and analyze benchmarking
information
Take action to match or exceed the
benchmark
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 Benchmarking
A call center might benchmark their customer
satisfaction rating by asking customers to rate
their service based on their experiences.

They might also collect data about waiting times,

call lengths, first contact resolution rating,
occupancy and shrinkage.

These figures could be used to boost performance

by improving processes and systems and also as a
tool to help improve motivation among the staff.

Table 6.3
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 Best Practices for Resolving
Customer Complaints
Make it easy for clients to complain
Respond quickly to complaints
Resolve complaints on first contact
Use computers to manage
complaints
Recruit the best for customer
service jobs
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 Just-in-Time (JIT)

JIT systems are designed to produce

or deliver goods just as they are
needed

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Inc.
 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

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 Just-in-Time (JIT)

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 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

© 2008 Prentice Hall, 6 – 62

Inc.
 Just-In-Time (JIT) Example

Work in process
inventory level
(hides problems)

Unreliable Capacity
Vendors Scrap
Imbalances

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

Unreliable Capacity
Vendors Scrap
Imbalances

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Inc.
 Taguchi Concepts
Most quality problems are the result of poor
product and process design.

Genichi Taguchi has provided us with three

concepts aimed at improving both product and
process quality:
1. Quality robustness ,
2. Target-oriented quality, and
3. The quality loss function .

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 Quality Robustness
Ability to produce products uniformly
in adverse manufacturing and
environmental conditions
Remove the effects of adverse
conditions instead of removing the
cause.
Small variations in materials and
process do not destroy product quality
Removing the effects is cheaper than
removing the causes and more effective
in producing a robust product

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Inc.
 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
© 2008 Prentice Hall, 6 – 67
Inc.
 Quality Loss Function
High loss L = D2C
Unacceptabl where
Loss (to e L = loss to society
producing Poo
organization, D = distance from
r
Fai target value
customer,
and society) r
Goo C = cost of
deviation
d
Bes Target-oriented quality
Low yields more product in the
t
loss “best” category
(Continuous Improvement)
Target-oriented
quality brings product
Frequenc toward the target value
y Conformance-oriented
quality keeps products
within 3 standard
deviations
Lowe Target Uppe
r Specificatio r Figure
n 6.5
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 Tools of TQM
Tools for Generating Ideas
Check sheets
Scatter diagrams
Cause-and-effect diagrams
Tools to Organize the Data
Pareto charts
Flowcharts
Tools for Identifying Problems
Histogram
Statistical process control chart
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 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
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 Seven Tools of TQM
(b) Scatter Diagram: A graph of the
value of one variable vs. another
variable
Productivit
y

Absenteeism

Figure
6.6
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 Seven Tools of TQM
(c) Cause-and-Effect Diagram: A tool that
identifies process elements (causes) that
might effect an outcome
Ishikawa
diagram or a Caus
fish-bone e
Material Method
chart s s Effect

Manpowe Machiner
r y Figure
6.6
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 Seven Tools of TQM
(d) Pareto Chart: A graph to identify and plot
problems or defects in descending order
of frequency
Frequency

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

Figure
6.6
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 Seven Tools of TQM
(f) Histogram: A distribution showing the
frequency of occurrences of a variable
Distributio
n
Frequency

Repair time
(minutes) Figure
6.6
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 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
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 Cause-and-Effect Diagrams
Materia Method
l (shooting
(ball) Grain/Feel process) Aiming point
(grip)
Size of ball
Air Bend
pressure Hand position knees
Balanc
Lopsidedness e
Follow-through
Missed
Trainin
free-throws
Rim size
g
Conditionin Motivation Rim
g height
Consistenc Rim alignment Backboard
y stability
Concentration

Machine
Manpowe
(hoop & Figure
r
backboard 6.7
(shooter)
)
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 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

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Inc.
 An SPC Chart
Plots the percent of free throws
20 missed

Upper control
% limit

Coach’s target
10 value

| | | | | | | | |
Lower control
1 2 3 4 5 6 7 8 9
% limit
Game
number Figure
0% 6.8
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 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

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Inc.
 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

© 2008 Prentice Hall, 6 – 85

Inc.
 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
© 2008 Prentice Hall, 6 – 86
Inc.
 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

© 2008 Prentice Hall, 6 – 87

Inc.
 Table 6.5

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Inc.
 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

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Inc.
 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

© 2008 Prentice Hall, 6 – 90

Inc.
 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

© 2008 Prentice Hall, 6 – 91

Inc.
 Service
Specifications
at UPS

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© 2008 Prentice Hall, 6 – 93
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 Service Recovery Strategy
Managers should have a plan for
when services fail
Marriott’s LEARN routine
Listen
Empathize
Apologize
React
Notify

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Inc.