Operations Management For Competitive Advantage 1

CHASE AQUILANO JACOBS

ninth edition

Operations Management
For Competitive Advantage
Chapter 7

Hassan Hussein
Abdi
Quality Management
CHASE AQUILANO JACOBS ©
ninth edition
The McGraw-Hill Companies, Inc., 200
Operations Management For Competitive Advantage ninth edition 2

Chapter 6
Quality Management
· Overview of Total Quality Management
· The Malcolm Baldrige National Quality Award
· Quality Specifications and Quality Costs
· Continuous Improvement
– Benchmarking
· Fail-safe Design
· ISO 9000

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Total Quality Management (TQM)

Defined
· Total quality management is defined as
managing the entire organization so that it
excels on all dimensions of products and
services that are important to the customer.
· This definition is more applicable than
another commonly used one– ‘conformance
to specification’.

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Malcolm Baldrige National Quality Award

· On August 20, 1987, president Reagan
affixed his signature to Public Law 100-107.
this groundbreaking legislation, known
commonly as the Malcolm Baldridge National
Quality Improve Act, established the nation’s
annual award to recognize total quality
management in American industry.
· The Malcolm Baldrige National Quality
Award represents the United States
government’s endorsement of quality as an
essential part of successful business strategy.
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Malcolm Baldrige National Quality Award

· As an instrument of government, the Baldrige Award
seeks to improve quality and productivity.
1. Helping to stimulate American companies to
improve quality and productivity.
2. Establishing guidelines and criteria
3. Recognizing the achievements of those companies
that improve the quality
4. Providing specific guidance for other American
organisations that wish to learn how to manage for
high quality by making available information how
winning organisations were able to change their
cultures and achieve quality eminence.
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Deming Prize
· Japan too has an award outstanding
business accomplishment.
· Deming Prize, quality concepts provided the
road map for Japanese success in quality
after World War II.
· The Demining prize has become so
esteemed in Japan that each year, much like
America’s Academic Awards, millions of
Japanese watch the Deming Prize ceremony
aired live on Television.

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Eligibility for the Baldrige Award

· There are five categories for the Baldrige
Award
1. Manufacturing companies or subsidiaries
that (a) Produce and sell manufactured products or
manufacturing processes or (b) Produce agricultural,
mining, or construction products.
2. Service companies or subsidiaries that sell
service
3. Small businesses, which are defined as those
that fewer than 500 employees and that operate
independently.
4. Health care organization, for profit or not-for-profit
5. Education institutions, for or not-for-profit
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1994 Malcolm Baldrige National

Quality Award
· 1.0 Leadership (125 points)
· 2.0 Strategic Planning (85 points)
· 3.0 Customer and Market Focus (85 points)
· 4.0 Information and Analysis( 85 points)
· 5.0 Human Resource Focus (85 points)
· 6.0 Process Management (85 Points)
· 7.0 Business Results (450 points)
· Total 1000

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Characteristics of a Baldrige Award

Winner
· The companies formulated a vision of what they
thought quality was and how they would
achieve it.
· Senior management was actively involved.
· Companies carefully planned and organized
their quality effort to be sure it would be
effectively initiated.
· They vigorously controlled the overall process.

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Characteristics of a Baldrige Award

Winner
· For each of the winners, the quality drive
became more than a program. It penetrated
every aspect of corporate life: performance
appraisals and incentive pay supported
quality objectives, hiring practices, team
training, job posting systems, and so on.
· Baldrige winners carry their commitment to
customer satisfaction to extremes.

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Quality Specifications and Quality Costs

· The quality specifications of a product or service
derive from decisions and actions made relative
to the quality of its design and the quality of its
conformance to that design.
· Design quality: Refers to the inherent value of the
product in the marketplace and is thus a strategic
decision for the firm.
– Dimensions include:
» Performance, Features, Reliability, Durability,
Serviceability, Response, Aesthetics, and Reputation.

· Conformance quality: refers to the degree to which

the product or service design specifications are met

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Quality Specifications
· Quality at the Source
· Quality at the Source: means that the person
who does the work takes responsibility for
making sure that his/her output meets
specification. If this can be accomplished,
then in theory, the ultimate goal of Zero
defects throughout the process is
achievable.

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Quality Specifications
· Quality Function Deployment is an
approach to getting the voice of the
customer into the design specification of a
product. This approach, which uses
interfunctional teams from marketing, design
engineering, and manufacturing, has been
credited by Toyota Motor Corporation of
reducing costs on its cars by more than 60
percent by significantly shorting design
times.

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Cost of Quality
· Cost of Quality: Expenditures related to
achieving product or service quality, such as
the costs of prevention, appraisal, internal
failure, and external failure.
· Cost of Quality has been estimated at
between 15 and 20 percent of every sales
dollars--the cost of reworking, scrapping,
repeated service, inspections, tests,
warranties, and other quality-related items.

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Cost of Quality
Three basic assumptions justify an analysis of
the cost of quality:
1. Failures are caused.
2. Prevention is cheaper
3. Performance can be measured.
· The cost of quality are generally classified
into four types.

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Costs of Quality
Appraisal Costs

Costs of
External Failure Quality Prevention Costs
Costs

Internal Failure
Costs

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Costs of Quality
· Appraisal costs
– Costs for the Inspection, testing, and other tasks
to ensure that the product/process is acceptable.
· Prevention costs
– Cost to identify the cause of the defect,
correction action, training, to redesign the
product or system, and for new equipment
· Internal failure costs
– The costs for defects incurred within the system:
scrap, rework and repair.
· External failure costs
– Customer warranty replacements, loss of
customers or goodwill, handling complaints and
product repair.
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Continuous Improvement (CI)

· Continuous improvement (CI) is a
management philosophy that approaches
the challenges of product and process
improvement as a never-ending process of
achieving small wins. It is an integral part of
a Total Quality Management System.
· Continuous Improvement: seeks
continuous improvement of machinery,
materials, labor utilization, and production
methods through application of suggestions
and ideas of team members.
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Continuous Improvement (CI)

Two essential features distinguish continuous
improvement systems from traditional systems,
which termed standard maintaining systems
1. Management's view of performance standards
of the organization: is performance level of the
firm as something to be "continuously
challenged and incrementally upgraded.“
2. The way management views the contribution
and role of its work force believe employee
involvement and team efforts are the key to
improvement .
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Tools and Procedure of CI : PDCA

Cycle (Deming Wheel)
1. Plan a change
4. Institutionalize
aimed at
the change or
improvement.
abandon or
do it again.
4. Act 1. Plan

3. Check 2. Do

3. Study the results; 2. Execute the

did it work? change.
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Benchmarking (External)
1. Identify those processes needing
improvement.
2. Identify a firm that is the world leader in
performing the process.
3. Contact the managers of that company and
make a personal visit to interview managers
and workers.
4. Analyze data.
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The Shingo System: Fail-Safe Design

· Poka-Yoke: Japanese slang for “avoiding
inadvertent errors”
· Poka-Yoke was developed by Shigeo
Shingo from Toyota Motors
– as a tool to achieve Zero Defects.
· The process of Zero Defects is also
known as “Mistake Proofing” or “Fail-
Safe”.

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The Shingo System: Fail-Safe Design

· Shingo’s argument:
– SQC methods do not prevent defects
– They provide information about defects but after
the fact
– Errors can best be prevented by strategic
placement of controls within the process
– Defects arise when people make errors
– Defects can be prevented by providing workers
with feedback on errors
– Might require 100% inspection at all times

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Poka-yoke

· Fail-safe procedures or devices that:

– Prevents the worker from making an error that
leads to a defect before starting a process, or
– Gives rapid feedback of abnormalities in the
process to the worker in time to correct it.
– All three types of inspection rely on some form
of poka-yoke control

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Types of Inspection
· Successive check inspection
– Performed by the next person in the process or
by an objective evaluator such as a group leader
(feedback)
· Self-check inspection
– Done by the individual worker (looking for
defects)
· Source inspection
– Checking for the errors that will cause defects
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The Shingo System: Fail-Safe Design

· All three types of inspection rely on controls
consisting of fail-safe procedures or devices
(called poka-yoke).
· Poka-Yoke includes checklists or special tools
– Special tooling that prevents workers from
making errors
– Gives rapid feedback of abnormalities
· Fail-safe or poka-yoke procedures: Simple
practices that prevent errors or provide
feedback in time for the worker to correct
errors.
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Poka-Yoke Devices
– Error Detection and Alarms

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Poka-Yoke Devices
– Checklists

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ISO 9000
· Series of standards agreed upon by the
International Organization for
Standardization (ISO)
· Adopted in 1987
· More than 100 countries
· A prerequisite for global competition?
· ISO 9000 directs you to "document what you
do and then do as you documented."

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ISO 9000 Series

· 9001
– Model for Quality Assurance in Design,
Production, Installation, and Servicing.
· 9002
– Model for Quality Assurance in Production and
Installation
· 9003
– Model for Quality Assurance in Final Inspection
Test
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Guidelines for Use

· 9000
– Quality Management and Quality Assurance
Standards: Guidelines for Selection and Use.
· 9004
– Quality Management and Quality System
Elements--Guidelines
· In addition to the ISO 9000 series, there is
also the ISO 1400 series, which was
developed to control the impact of an
organization's activities and outputs on the
environment.
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Three Forms of ISO Certification

First party: A firm audits itself against ISO
9000 standards.

Second party: A customer audits its supplier.

Third party: A "qualified" national or

international standards or certifying agency
serves as auditor.

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ISO 9000 In The US

· Level of registration has gone up
significantly even though some companies
were slow to adopt the standards
· Some saw it as a plot to bar US entry into
Europe
· Certification is often easy, especially if
company has quality system in place
· Lack of certification could impact world-
wide competitiveness for the company
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More About ISO 9000

· They are not award programs

· They just provide criteria for measuring
quality systems
· They do not require prescribed method of
process control
· Quite flexible: No one best way
– Provides opportunities and frustrations
· Applies to all industries

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Advantages of ISO 9000

· Offers chance for global competitiveness

· Improves operational efficiency
· Improves profitability
· Improves marketing
· Improves export sales
· Improves on-time deliveries
· Improves cycle time and first-pass yield

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ISO 9000 versus the Baldrige Award

· Which should we pursue first?

· What are the differences between the two?

· Do you have to be ISO 9000 certified before

going for the Baldrige Award?

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ISO 9000 versus the Baldrige Award

· ISO provides building blocks for Baldrige

· Baldrige is more comprehensive
· ISO more limited in scope
– Just a basic standard of minimal requirements
– Worth perhaps about 400 Baldrige points
– Designed to be inclusive not exclusive
– Mandates no approach over another

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Service Quality Measurement: Servqual

· A perceived service quality
questionnaire survey methodology

· Examines “Dimensions of Service

Quality” including:
– Reliability,
– Responsiveness,
– Assurance,
– Empathy, and
– Tangibles (e.g., appearance of physical
facilities, equipment, etc.)

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Service Quality Measurement:

Servqual (Continued)
· New version of this methodology is called
“e-Service Quality” dealing service on the
Internet
· Dimensions of Service Quality on the e-
Service methodology include: Reliability,
Responsiveness, Access, Flexibility, Ease
of Navigation, Efficiency,
Assurance/Trust, Security/Privacy, Price
Knowledge, Site Aesthetics, and
Customization/Personalization

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The End

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