Heizer - 06 Added

Operations
Management
Chapter 6 –
Managing Quality
PowerPoint presentation to accompany

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

 Total Quality Management
 Continuous Improvement
 Six Sigma
 Employee Empowerment
 Benchmarking
 Just-in-Time (JIT)
 Taguchi Concepts
 Knowledge of TQM Tools
 Tools of TQM
 Check Sheets
 Scatter Diagrams
 Cause-and-Effect Diagrams
 Pareto Charts
 Flowcharts
 Histograms
 Statistical Process Control (SPC)
 The Role of Inspection
 When and Where to Inspect
 Source Inspection
 Service Industry Inspection
 Inspection of Attributes versus
Variables
 TQM in Services

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
Quality means Luxury

Quality does not mean
luxury!
Meets the specification given by the seller and the expectations of the
buyer

Quality implies higher costs
© 2008 Prentice Hall, Inc. 6 – 10

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

(Maintenance, Repair, Loss of Sales, Return)

Quality problems are
caused by operators

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

Quality problems are solved by the inspection
department

Quality problems cannot be solved by the
Quality department alone

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”

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
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

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.

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
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 6.2 a competitive advantage

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.

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.

Implications of Quality
1. Company reputation Quality will show up in
 Perception of new products Impure foods that

cause illness, nightgowns
 Employment practices that burn, tires that fall
apart, or auto fuel tanks
 Supplier relations that explode
on impact can all lead to
2. Product liability Consumer Product Safety Act

huge legal expenses, large
settlements or losses, and
(Be Liable for damages resulting from their use) terrible
publicity.
 Reduce risk
3. Global implications
 Improved ability to compete

Key Dimensions of Quality
 Performance  Durability (toughness / Strength)
 Features  Serviceability
 Reliability/  Aesthetics
Consistent
 Perceived quality
 Conformance
 Value / Worth

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.
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
Takumi
"TAKUMI" is a Japanese
A Japanese character word to describe
that symbolizes a Craftsmen / Artisans.
broader dimension Superior Skill
than quality, a deeper
process than
education, and a more
perfect method than
persistence

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

Costs of Quality
Total Total Cost

Cost
External Failure
Internal Failure
Prevention
Appraisal
Quality Improvement

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.

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
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.

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)

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

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

Table 6.1
Seven Concepts of TQM
 Continuous improvement
 Six Sigma
 Employee empowerment
 Benchmarking
 Just-in-time (JIT)
 Taguchi concepts
 Knowledge of TQM tools
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
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 use the plan and make
the word a plan
kaizen
3. Check 2. Do
Is the plan Test the
working? plan
Figure 6.3

Health and Safety Policy

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.

Six Sigma
 Two meanings
Lower limits Upper limits
 Statistical definition of a process that

2,700 defects/million
is 99.9997% capable, 3.4 defects per

3.4 defects/million
million opportunities (DPMO)
 A program designed to reduce
defects, lower costs, and improve
customer satisfactionMean
±3
Figure 6.4
±6
For example, if 1 million passengers pass through the St. Louis Airport
with checked baggage each month, a Six Sigma program for baggage
handling will result in only 3.4 passengers with misplaced luggage.
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

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.
© 2008 Prentice Hall, Inc.

6 6 – 46
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
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.

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
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.

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

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.

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.

 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

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

Benchmarking
Selecting best practices to use as a
standard for performance rnal
e i nt king
e
Us hmar ig
 Determine what to c re b
be n ’
benchmark o u
if y nough
e
 Form a benchmark team
 Identify benchmarking partners
 Collect and analyze benchmarking
information
 Take action to match or exceed the
benchmark
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
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
Just-in-Time (JIT)
 JIT systems are designed to produce

or deliver goods just as they are
needed

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

Just-in-Time (JIT)

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

Just-In-Time (JIT) Example
Work in process
inventory level
(hides problems)
Unreliable Capacity
Vendors Scrap
Imbalances

Just-In-Time (JIT) Example
Reducing inventory reveals
problems so they can be solved
Unreliable Capacity
Vendors Scrap
Imbalances

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 .

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
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
Quality Loss Function
High loss L = D2 C
Unacceptable where
Loss (to L= loss to
producing Poor society
organization,
customer, Fair D=
and society) distance from
Good target value
Best Target-oriented quality
Low loss C = productcost
yields more of
in the
deviation
“best” category
(Continuous Improvement)
Target-oriented quality
brings product toward
Frequency the target value
Conformance-oriented
quality keeps products
within 3 standard
deviations
Lower Target Upper
Specification Figure 6.5
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
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

Seven Tools of TQM
(b) Scatter Diagram: A graph of the value
of one variable vs. another variable
Productivity
Absenteeism
Figure 6.6

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 Cause
fish-bone Materials Methods
chart Effect
Manpower Machinery
Figure 6.6

Seven Tools of TQM
(d) Pareto Chart: A graph to identify and plot
problems or defects in descending order of
frequency
Frequency
Percent
A B C D E
Figure 6.6

Seven Tools of TQM
(e) Flowchart (Process Diagram): A chart that
describes the steps in a process
Figure 6.6

Seven Tools of TQM
(f) Histogram: A distribution showing the
frequency of occurrences of a variable
Distribution
Frequency
Repair time (minutes)

Figure 6.6

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

Cause-and-Effect Diagrams
Material Method
(ball) (shooting process)
Grain/Feel Aiming point
(grip)
Size of ball
Air pressure Bend knees
Hand position
Balance
Lopsidedness
Follow-through
Missed
Training
free-throws
Rim size
Conditioning Motivation Rim height
Consistency Rim alignment Backboard

stability
Concentration
Machine
Manpower
(hoop & Figure 6.7
(shooter)
backboard)
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
An SPC Chart
Plots the percent of free throws missed
Upper control limit

20%
10%
Coach’s target value
| | | | | | | | | Lower control limit

0% 1 2 3 4 5 6 7 8 9
Game number
Figure 6.8

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
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
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
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

Table 6.5

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

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

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

Service
Specifications
at UPS

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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Operations

PowerPoint presentation to accompany

© 2008 Prentice Hall, Inc. 6–3

© 2008 Prentice Hall, Inc. 6–6

© 2008 Prentice Hall, Inc. 6–8

© 2008 Prentice Hall, Inc. 6–9

© 2008 Prentice Hall, Inc. 6 – 10

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

© 2008 Prentice Hall, Inc. 6 – 11

© 2008 Prentice Hall, Inc. 6 – 12

The cause of 80% of the problem lies

© 2008 Prentice Hall, Inc. 6 – 13

© 2008 Prentice Hall, Inc. 6 – 14

© 2008 Prentice Hall, Inc. 6 – 15

© 2008 Prentice Hall, Inc. 6 – 16

Bose Corp. successfully differentiate its stereo speakers as among

Dell Computers rapidly responds

 A successful quality strategy begins with

© 2008 Prentice Hall, Inc. 6 – 20

© 2008 Prentice Hall, Inc. 6 – 22

The totality of features and

The ability of a product or

© 2008 Prentice Hall, Inc. 6 – 23

© 2008 Prentice Hall, Inc. 6 – 24

 Perception of new products Impure foods that

2. Product liability Consumer Product Safety Act

© 2008 Prentice Hall, Inc. 6 – 25

 Performance  Durability (toughness / Strength)

© 2008 Prentice Hall, Inc. 6 – 26

© 2008 Prentice Hall, Inc. 6 – 29

© 2008 Prentice Hall, Inc. 6 – 30

Total Total Cost

© 2008 Prentice Hall, Inc. 6 – 31

 The first three costs can be reasonably

© 2008 Prentice Hall, Inc. 6 – 32

W. Edwards Deming 14 Points for

© 2008 Prentice Hall, Inc. 6 – 34

© 2008 Prentice Hall, Inc. 6 – 35

© 2008 Prentice Hall, Inc. 6 – 36

Encompasses entire organization,

© 2008 Prentice Hall, Inc. 6 – 37

© 2008 Prentice Hall, Inc. 6 – 41

© 2008 Prentice Hall, Inc. 6 – 42

© 2008 Prentice Hall, Inc. 6 – 43

 Statistical definition of a process that

is 99.9997% capable, 3.4 defects per

© 2008 Prentice Hall, Inc. 6 – 45

© 2008 Prentice Hall, Inc.

ANALYZE: Understand the types and amounts of materials currently in

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

© 2008 Prentice Hall, Inc. 6 – 48

 This system focuses on putting

© 2008 Prentice Hall, Inc. 6 – 50

© 2008 Prentice Hall, Inc. 6 – 51

© 2008 Prentice Hall, Inc. 6 – 52

This can include having a voice in process

© 2008 Prentice Hall, Inc. 6 – 53

© 2008 Prentice Hall, Inc. 6 – 54

© 2008 Prentice Hall, Inc. 6 – 55

They might also collect data about waiting times,

These figures could be used to boost performance

 JIT systems are designed to produce

© 2008 Prentice Hall, Inc. 6 – 59