MANAGING QUALITY AND TIME

TO CREATE VALUE

Dinda Ayuningtyas
Rizki Febrian
Maftuh Prihantono
Wika Wahyu Firmansyah Putra
Reza Pranata Putra
Sulton

Just-in-Time

Kelompok 5 STAR-BPKP Batch 4

McGraw-Hill/Irwin

Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved.

Part I
7-2

Importance of Quality
TQM vs ROQ
Dimensions of Quality

Importance of Quality
7-3

Poor quality

Lost customers

Poor Reputation

Lower Profits

Costs of Improving Quality (2 approaches)

7-4

Which is
more
important?

Total Quality Management (TQM)

7-5

Customerswill
will
Customers
seekout
outthe
the
seek
highest quality
quality
highest
product.
product.

Therefore,
Therefore,
quality is
is
quality
free.
free.

Improving quality
qualitymore
more
Improving
thanpays
paysits
itsown
ownway
wayby
by
than
creatinghigher
higherprofits.
profits.
creating

Total Quality Management (TQM)

7-6

W.
W.Edwards
EdwardsDeming
Deming
proposed
proposedthat
that improving
improving
quality
qualityreduces
reducescost
cost and
and
improves
improves profitability.
profitability.

Quality
Qualitycan
canbe
beand
and
should
should be
be improved
improved
continuously.
continuously.
Revenues
Max Profit
Cost
Max Quality

Return on Quality (ROQ)

7-7

There is a trade-off between the costs and benefits of quality.

Profit is maximized
at the optimum
quality level.

The optimum quality level is

always achieved before the
maximum quality level is reached.

Cost
Revenues
Max Profit
Optimum Quality

Return on Quality (ROQ)

7-8

Striving for higher quality levels at ever higher costs

is a case of diminishing returns.
The higher costs to attain higher quality levels may be
more than the customer is willing to pay.
Cost
Revenues
Max Profit
Optimum Quality

Dimensions of Quality

Product
Product or
or
Service
Service Attributes
Attributes
Tangible
Tangible
Performance
Performance
Adherence
Adherence to
to
specifications
specifications
Functionality
Functionality
Intangible
Intangible
Reputation
Reputation
Appearance
Appearance
Appeal
Appeal

7-9

Customer
Customer service
service
before
before and
and after
after the
the sale
sale
Prompt
Prompt and
and accurate
accurate
responses
responses to
to customer
customer
inquires
inquires
Proper
Proper treatment
treatment of
of
customers
customers by
by salespeople
salespeople
On-time
On-time deliveries
deliveries
Customer
Customer follow-up
follow-up
after
after the
the sale
sale
Timely
Timely and
and accurate
accurate
resolution
resolution of
of customer
customer
concerns
concerns
Good
Good warranty
warranty and
and
repair
repair services
services

Part II
7-11

Lead Indicators of Quality

Diagnostic Information
Costumer Satisfaction

Lead Indicators of Quality

7-12

Variation
Variation indicates
indicates poor
poor quality.
quality. To
To
measure
measure variation,
variation, there
there are
are several
several tools
tools
that
that can
can be
be used:
used:
Run
Run Charts
Charts

AAgraphical
graphical display
displayof
ofthe
the
frequency
frequencydistribution
distributionof
of
attributes.
attributes.

Defects

Histograms
Histograms

Control
Control Charts
Charts

Lead Indicators of Quality

7-13

Variation
Variation indicates
indicates poor
poor quality.
quality. To
To
measure
measure variation,
variation, there
there are
are several
several tools
tools
that
that can
can be
be used:
used:
Run
Run Charts
Charts

AAgraph
graphshowing
showing trends
trends
in
invariation
variationover
overtime.
time.

Defects

Histograms
Histograms

Control
Control Charts
Charts

Lead Indicators of Quality

7-14

Variation
Variation indicates
indicates poor
poor quality.
quality. To
To
measure
measure variation,
variation, there
there are
are several
several tools
tools
that
that can
can be
be used:
used:
Histograms
Histograms

Run
Run Charts
Charts

Control
Control Charts
Charts

Defects

UCL
LCL

Notice
AArun
that
with
process
upper
Notice
runchart
chart
thatthis
this
with
process
upper
and
seems
lower
control
be
limits.
of
and
seems
lowerto
to
control
beout
out
limits.
of
control
controlon
onFridays.
Fridays.

Diagnostic Information
7-15

While
While lead
lead indicators
indicators tell
tell us
us that
that there
there
IS
IS aa problem,
problem, diagnostic
diagnostic tools
tools help
help
determine
determine WHAT
WHATthe
the problem
problem is.
is.
Cause-andCause-andEffect
Effect Diagrams
Diagrams

Flow
Flow Charts
Charts

Scatter
Scatter
Diagrams
Diagrams

Pareto
ParetoCharts
Charts

1. Cause-and-Effect Diagrams
7-16

Other
Wrong
directions
from customer
Ice
Road
Work
Road
Conditions

Trucks

Flat Tire

Breakdown

Rain or
snow

Too slow
Dont know
the route

Defect
Defect ==
Late
Late
Deliveries
Deliveries

Poorly
Trained
Drivers Sometimes called fishbone
Sometimes called fishbone
or
or Ishikawa
Ishikawa diagrams
diagrams

2. Scatter Diagrams
7-17

A
Aplot
plot of
of two
two variables
variables that
that might
might be
be related.
related.
Patterns
Patterns often
often indicate
indicate aa causal
causal relationship.
relationship.

This
Thispattern
pattern indicates
indicates
aacausal
causal relationship.
relationship.

3. Flowcharts
7-18

A
Agraphical
graphical
illustration
illustration of
of
sequential
sequential linkages
linkages
among
among process
process
activities.
activities.
Standardized
Standardized
symbols
symbols are
are used
used to
to
represent
represent decisions,
decisions,
actions,
actions, documents,
documents,
and
and storage
storage devices.
devices.

4. Pareto Charts
7-19

Frequency of Complaint

AAhistogram
histogramof
ofcauses
causesof
of an
an error
error or
orerrors
errorsarranged
arrangedin
in
order
order of
offrequency
frequencyor
or size.
size. Helps
Helpsin
inprioritizing
prioritizing
actions
actionsto
toaddress
addressproblems.
problems.

Customer Satisfaction
7-20

The
The degree
degree to
to
which
which
expectations
expectations of
of
product
product attributes,
attributes,
customer
customer service,
service,
and
and price
price have
have
been
been met
met or
or
exceeded.
exceeded.

Common
Common tools
tools for
for
measuring
measuring
customer
customer
satisfaction
satisfaction

Phone
Phone Surveys
Surveys

Questionnaires
Questionnaires

Focus
Focus Groups
Groups

Part III
7-21

Cost of Quality
Cost to Control Quality
Managing Time in a Competitive Environment

Cost of Quality (COQ)

7-22

Out-of-pocket
Out-of-pocket costs
costs associated
associated with
with quality
quality
generally
generally fall
fall into
into two
two categories:
categories:
Costs
Costsof
ofcorrective
corrective
measures
measurestaken
taken
because
becauseof
of aa failure
failureto
to
control
control quality.
quality.
Costs
Costsof
ofactivities
activities
designed
designedto
tocontrol
control
quality.
quality.

Cost to Control Quality

Prevention
Prevention

7-23

Appraisal
Appraisal

Activities
Activitiesthat
that seek
seekto
to
prevent
prevent defects
defectsin
inthe
the
products
productsor
orservices
services
being
beingproduced.
produced.
Certifying
CertifyingSuppliers
Suppliers

Activities
Activitiesfor
forinspecting
inspecting
inputs
inputsand
andattributes
attributesof
of
individual
individualunits
unitsof
of
product
productand
andservice.
service.
Inspecting
InspectingMaterials
Materials

Designing
Designingfor
for
Manufacturability
Manufacturability
Quality
QualityTraining
Training

Inspecting
InspectingMachines
Machines
Inspecting
InspectingProcesses
Processes

Quality
QualityEvaluations
Evaluations
Process
ProcessImprovements
Improvements
Value-Added

Statistical
Statistical Process
Process
Control
Control
Sampling
Sampling and
and Testing
Testing
Non-Value-Added

Cost to Control Quality

Prevention
Prevention
Activities
Activitiesthat
that seek
seekto
to
prevent
prevent defects
defectsin
inthe
the
products
productsor
orservices
services
being
beingproduced.
produced.
Certifying
CertifyingSuppliers
Suppliers
Designing
Designingfor
for
Manufacturability
Manufacturability
Quality
QualityTraining
Training
Quality
QualityEvaluations
Evaluations
Process
ProcessImprovements
Improvements
Value-Added

7-24

Companies with
the highest quality
levels tend to
have most of their
quality expenditures
in this area.

Managing Time in a Competitive Environment

7-27

Product development time

We need to
reduce . . .

Customer response time

Production cycle time

Less
Less time
time means
means quicker
quicker response
response to
to changing
changing customer
customer
needs
needs and
and to
to changing
changing conditions
conditions in
in the
the marketplace.
marketplace.

Time-based ABC and ABM

7-28

ABC and ABM are costly to implement.

A single more economical measure of

the cost-driver rate is proposed:

The total cost of supplying capacity to

complete certain types of activities divided
by the total time available to complete
them.
This approach allows:

The combining of various activities carried out

by individual employees or a single
department, to obtain a single time total.
The study of groups of activities in an
integrated way,
Intervention and modification of activities.

Part IV
7-29

Management of Process Efficiency

Measuring Productivity
Measuring Cycle Time
Measuring Throughput Efficiency

Management of Process Efficiency

Production
Processes
(goods and
services for
customers)

7-30

Business
Processes
(supporting
activities)

Cycle time
Productivity

Throughput time ratio

Management of Process Efficiency

7-31

Low
Low cycle
cycle
time
time
High
High
quality
quality

High
High
productivity
productivity
High
High
throughput
throughput

Throughput is the amount of goods and services

delivered to customers during a period of time.

Measuring Productivity
7-32

Specific
Specificproductivity
productivitymeasures
measurescompare:
compare:

Example: Historical trend of sales per employee

Measuring Cycle Time

7-33

This
This measure
measure is
is most
most useful
useful when
when itit includes:
includes:
the
the value-added
value-added time
time (spent
(spent on
on good
good units)
units)
the
the non-value-added
non-value-added time
time (spent
(spent on
on
reworking
reworking or
or disposal
disposal of
of defective
defective units).
units).

Measuring Throughput Efficiency

7-34

An
An estimate
estimate of
of the
the percentage
percentage of
of cycle
cycle time
time
that
that was
was really
really spent
spent in
in adding
adding value
value to
to goods
goods
and
and services.
services.

Managing Process Capacity

7-35

Theoretical capacity
(100%)
Planned or
unavoidable
downtime

Practical
capacity

Demand for
output

Excess
capacity

Part V
7-36

JIT Concept and Goals

JIT and Its Effect on the Cost Management System

Managing Quality + Time + Productivity +

Capacity = JIT
7-37

The
The objective
objective of
of JIT
JIT is
is to
to .. .. ..
purchase
purchase materials
materials
produce
produce products
products
deliver
deliver products
products
.. .. .. just
just when
when they
they are
are needed.
needed.

Managing Quality + Time + Productivity +

Capacity = JIT
7-38

The
Thegoal
goal is
isto
tomanage
managecosts
costsso
sothat
thatthe
thesavings
savings
associated
associatedwith
withJIT
JITexceed
exceedthe
thecost
cost of
of implementing
implementingJIT
JIT

Advantages:
Advantages:
Inventory
Inventorysavings
savingsof
of
space,
space,insurance,
insurance, capital
capital
and
andpersonnel
personnel
More
Moreemphasis
emphasison
on
quality
quality
Rapid
Rapidresponse
responseto
to
customer
customerneeds
needs

Implementation
Implementationcosts:
costs:
Employee
Employee retraining
retraining
Technology
Technologyimprovement
improvement
Exposure
Exposureto
towork
work
stoppage
stoppagerisks
risks

JIT and Its Effect on the Cost Management System

JIT

Pull-through system
Insignificant inventories
Small supplier base
Long-term supplier contracts
Cellular structure
Multiskilled labor
Decentralized services
High employee involvement
Facilitating management
style
Total quality control
Buyers market
Value-chain focus

Traditional
Push-through system
Significant inventories
Large supplier base
Short-term supplier contracts
Departmental structure
Specialized labor
Centralized services
Low employee involvement
Supervisory management style
Acceptable quality level
Sellers market
Value-added focus
39

Traditional Push Manufacturing - Example

7-40

Forecast Sales

Make sales
from finished
goods inventory

Order components

Store Inventory

Begin Production in
Anticipation of Sales

Prepare
Production
Schedule

JIT Pull Manufacturing - Example

7-41

Customer
places an order

Create Production
Order

Generate component
requirements

Goods delivered
just in time

Production begins
as parts arrive

Components
are ordered

Part VI
7-42

JIT Success Factors

JIT Advantages and Weakness

Control Charts

JIT Success Factors

7-43

1.
1.
Commitment
Commitment
to
toquality.
quality.

2.
2. Flexible
Flexible
capacity.
capacity.

4.
4.Smooth
Smooth
production
production
flow.
flow.
5.
5.WellWelltrained
trained
workforce.
workforce.

3.
3. Reliable
Reliable
supplier
supplier
relations.
relations.
6.
6.Reduced
Reduced
cycle
cycleand
and
response
response
times.
times.

Advantages and Weakness

7-44

7-47

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