Production & Operations

Management
Dr. Akshay G Khanzode

Session – 17_18

Quality in Operations Management || Dr. Akshay G Khanzode

Content of Presentation
• Evolution of Quality Management
• Quality Gurus, Awards & Certifications
• Dimensions & Determinants of Quality for Products and Services
• Costs of Quality
• Total Quality Management [TQM]
• Problem Solving and Process Improvement
• Quality Tools

Quality in Operations Management || Dr. Akshay G Khanzode

 Quality Management
• Quality
• The ability of a product or service to consistently meet or exceed customer
expectations
• For a decade or so, quality was an important focal point in business. After a while, this
emphasis began to fade as other concerns took precedence
• There has been a recent resurgence in attention to quality given recent experiences with the
costs and adverse attention associated with highly visible quality failures:
• Auto recalls
• Toys
• Produce
• Dog food
• Pharmaceuticals

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Quality Contributors
• Walter Shewart
• “father of statistical quality control”
• Control charts
• Variance reduction
• W. Edwards Deming
• Special vs. common cause variation
• The 14 points
• Joseph Juran
• Quality Control Handbook, 1951
• Viewed quality as fitness-for-use
• Quality trilogy– quality planning, quality control, quality improvement

Quality in Operations Management || Dr. Akshay G Khanzode

Quality Contributors (contd.)
• Armand Feigenbaum
• Quality is a “total field”
• The customer defines quality
• Philip B. Crosby
• Zero defects
• Quality is Free, 1979
• Kaoru Ishikawa
• Cause-and-effect diagram
• Quality circles
• Recognized the internal customer

Quality in Operations Management || Dr. Akshay G Khanzode

Quality Contributors (contd.)
• Genichi Taguchi
• Taguchi loss function
• Taiichi Ohno and Shigeo Shingo
• Developed philosophy and methods of kaizen

Quality in Operations Management || Dr. Akshay G Khanzode

 Dimensions of Product Quality
• Performance – main characteristics of the product
• Aesthetics – appearance, feel, smell, taste
• Special features – extra characteristics
• Conformance – how well the product conforms to design specifications
• Reliability – consistency of performance
• Durability – the useful life of the product
• Perceived quality – indirect evaluation of quality
• Serviceability – handling of complaints or repairs
• Consistency – quality doesn’t vary

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Quality in Operations Management || Dr. Akshay G Khanzode
 Dimensions of Service Quality
• Convenience – the availability and accessibility of the service
• Reliability – ability to perform a service dependably, consistently, and accurately
• Responsiveness – willingness to help customers in unusual situations and to deal with problems
• Time – the speed with which the service is delivered
• Assurance – knowledge exhibited by personnel and their ability to convey trust and confidence
• Courtesy – the way customers are treated by employees
• Tangibles – the physical appearance of facilities, equipment, personnel, and communication
materials
• Consistency – the ability to provide the same level of good quality repeatedly
• Expectancy – meet (or exceed) customer expectations

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Quality in Operations Management || Dr. Akshay G Khanzode
 Assessing Service Quality
• Audit service to identify strengths and weaknesses
• In particular, look for discrepancies between:
1. Customer expectations and management perceptions of those expectations
2. Management perceptions customer expectations and service-quality
specifications
3. Service quality and service actually delivered
4. Service actually delivered and what is communicated about the service to
customers
5. Customers’ expectations of the service provider and their perceptions of provider
delivery

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Quality in Operations Management || Dr. Akshay G Khanzode
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Quality in Operations Management || Dr. Akshay G Khanzode
Determinants of Quality
• Quality of design
• Intention of designers to include or exclude features in a product or service
• Quality of conformance
• The degree to which goods or services conform to the intent of the designers
• Ease-of-Use and user instructions
• Increase the likelihood that a product will be used for its intended purpose and
in such a way that it will continue to function properly and safely
• After-the-sale service
• Taking care of issues and problems that arise after the sale

Quality in Operations Management || Dr. Akshay G Khanzode

Responsibility for Quality
• Top management • Everyone in the organization has some
• Design responsibility for quality, but certain
areas of the organization are involved
• Procurement in activities that make them key areas
• Production/operations of responsibility.
• Quality assurance
• Packaging and shipping
• Marketing and sales
• Customer service

Quality in Operations Management || Dr. Akshay G Khanzode

Benefits of Good Quality
• Enhanced reputation for quality
• Ability to command premium prices
• Increased market share
• Greater customer loyalty
• Lower liability costs
• Fewer production or service problems
• Lower production costs
• Higher profits

Quality in Operations Management || Dr. Akshay G Khanzode

The Consequences of Poor Quality
• Loss of business
• Liability
• Productivity
• Costs

Quality in Operations Management || Dr. Akshay G Khanzode

 Costs of Quality
• Appraisal Costs
• Costs of activities designed to ensure quality or uncover defects
• Prevention Costs
• All TQ training, TQ planning, customer assessment, process control, and quality
improvement costs to prevent defects from occurring

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Quality in Operations Management || Dr. Akshay G Khanzode
 Costs of Quality
• Failure Costs - costs incurred by defective parts/products or
faulty services.
• Internal Failure Costs
• Costs incurred to fix problems that are detected before the product/service is
delivered to the customer.
• External Failure Costs
• All costs incurred to fix problems that are detected after the product/service is
delivered to the customer

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Quality in Operations Management || Dr. Akshay G Khanzode
 Ethics and Quality
• Substandard work
• Defective products
• Substandard service
• Poor designs
• Shoddy workmanship
• Substandard parts and materials

Having knowledge of this and failing to correct

and report it in a timely manner is unethical.

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Quality in Operations Management || Dr. Akshay G Khanzode
 Quality Awards
• Quality Awards
• Deming Prize
• Malcolm Baldrige National Quality Award
• European Quality Award

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Quality in Operations Management || Dr. Akshay G Khanzode
Quality Awards
Deming Prize

European Foundati
on for Quality Mod
el (EFQM) Excelle
nce Award

Baldrige Award

Quality in Operations Management || Dr. Akshay G Khanzode

The Baldrige Competition
• Award Categories
1. Education
2. Healthcare
3. Manufacturing
4. Nonprofit/Government
5. Service
6. Small Business
• Purpose of the Award
1. Stimulate efforts to improve quality
2. Recognize quality achievements
3. Publicize successful programs

Quality in Operations Management || Dr. Akshay G Khanzode

 Baldrige Criteria
I. Leadership
II. Strategic planning
III. Customer focus
IV. Measurement, Analysis, and Knowledge Management
V. Workforce focus
VI. Operations focus
VII.Results

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Quality in Operations Management || Dr. Akshay G Khanzode
Quality Certification
International Organization for Standardization
• ISO 9000
• Set of international standards on quality management and quality
assurance, critical to international business
• ISO 14000
• A set of international standards for assessing a company’s
environmental performance
• ISO 24700
• Pertains to the quality and performance of office equipment that
contains reused components

Quality in Operations Management || Dr. Akshay G Khanzode

 Quality Certification
• ISO 9000
• Quality Principles
• Principle 1 Customer focus
• Principle 2 Leadership
• Principle 3 Involvement of people
• Principle 4 Process approach
• Principle 5 System approach to management
• Principle 6 Continual improvement
• Principle 7 Factual approach to decision making
• Principle 8 Mutually beneficial supplier relationships

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Quality in Operations Management || Dr. Akshay G Khanzode
 Quality and the Supply Chain
• Business leaders are increasingly recognizing the importance of
their supply chains in achieving their quality goals
• Requires:
• Measuring customer perceptions of quality
• Identifying problem areas
• Correcting these problems
• Supply chain quality management can benefit from a collaborative
relationship with suppliers
• Helping suppliers with quality assurance efforts
• Information sharing on quality-related matters

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Quality in Operations Management || Dr. Akshay G Khanzode
Total Quality Management
• A philosophy that involves everyone in an organization in a continual
effort to improve quality and achieve customer satisfaction.

T Q M

Quality in Operations Management || Dr. Akshay G Khanzode

 TQM Approach
1. Find out what the customer wants
2. Design a product or service that meets or exceeds customer wants
3. Design processes that facilitate doing the job right the first time
4. Keep track of results
5. Extend these concepts throughout the supply chain
6. Top management must be involved and committed

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Quality in Operations Management || Dr. Akshay G Khanzode
 TQM Elements
1. Continuous improvement
2. Competitive benchmarking
3. Employee empowerment
4. Team approach
5. Decision based on fact, not opinion
6. Knowledge of tools
7. Supplier quality
8. Champion
9. Quality at the source
10. Suppliers are partners in the process
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Quality in Operations Management || Dr. Akshay G Khanzode
Continuous Improvement
• Philosophy that seeks to make never-ending
improvements to the process of converting inputs
into outputs
• Kaizen
• Japanese word for continuous improvement.

Quality in Operations Management || Dr. Akshay G Khanzode

Quality at the Source

• The philosophy of making each worker

responsible for the quality of his or her
work
• “Do it right” and “If it isn’t right, fix it”

Quality in Operations Management || Dr. Akshay G Khanzode

 Obstacles to Implementing TQM
• Obstacles include:
1. Lack of company-wide definition of quality
2. Lack of strategic plan for change
3. Lack of customer focus
4. Poor inter-organizational communication
5. Lack of employee empowerment
6. View of quality as a “quick fix”
7. Emphasis on short-term financial results
8. Inordinate presence of internal politics and “turf” issues
9. Lack of strong motivation
10. Lack of time to devote to quality initiatives
11. Lack of leadership
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 Act Plan
PDSA Cycle
• Plan-Do-Study-Act (PDSA) Cycle
Study Do
• Plan
• Begin by studying and documenting the current process.
• Collect data on the process or problem
• Analyze the data and develop a plan for improvement
• Specify measures for evaluating the plan
• Do
• Implement the plan, document any changes made, collect data
for analysis

Quality in Operations Management || Dr. Akshay G Khanzode

PDSA Cycle Act Plan

• Plan-Do-Study-Act (PDSA) Cycle

• Study Study Do
• Evaluate the data collection during the do phase
• Check results against goals formulated during the plan phase
• Act
• If the results are successful, standardize the new method and communicate
it to the relevant personnel
• Implement training for the new method
• If unsuccessful, revise the plan and repeat the process

Quality in Operations Management || Dr. Akshay G Khanzode

Problem Solving

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Process Improvement
• Process Improvement
• A systematic approach to improving a process
• Map the process
• Collect information about the process and identify each step in the
process
• Prepare a flowchart that accurately depicts the process
• Analyze the process
• Ask critical questions about the process
• Ask specific questions about each step in the process
• Redesign the process

Quality in Operations Management || Dr. Akshay G Khanzode

Basic Quality Tools

Quality in Operations Management || Dr. Akshay G Khanzode

Flow Chart

Quality in Operations Management || Dr. Akshay G Khanzode

Flow Chart

Quality in Operations Management || Dr. Akshay G Khanzode

Check Sheets

What about ‘who’, ‘when’ and ‘where’? (Meta Data)

Quality in Operations Management || Dr. Akshay G Khanzode

Check Sheets

Quality in Operations Management || Dr. Akshay G Khanzode

Pareto Charts (Vilfredo Pareto, Joseph Juran)

Quality in Operations Management || Dr. Akshay G Khanzode

Cause-and-Effect Diagram

Quality in Operations Management || Dr. Akshay G Khanzode

Cause-and-Effect Diagram

Quality in Operations Management || Dr. Akshay G Khanzode

Scatter Diagrams

Quality in Operations Management || Dr. Akshay G Khanzode

Scatter Diagrams

Quality in Operations Management || Dr. Akshay G Khanzode

Aggregate Planning
• Aggregate planning
• Intermediate-range capacity planning that typically covers a time horizon of 2
to 18 months
• Useful for organizations that experience seasonal, or other variations in
demand
• Goal:
• Achieve a production plan that will effectively utilize the organization’s resources to
satisfy demand

Quality in Operations Management || Dr. Akshay G Khanzode

The Planning Sequence

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Why Use Aggregate Planning
• Why do organizations need to do aggregate planning?
• Planning
• It takes time to implement plans
• Strategic
• Aggregation is important because it is not possible to predict with accuracy the timing
and volume of demand for individual items
• It is connected to the budgeting process
• It can help synchronize flow throughout the supply chain; it affects costs, equipment
utilization; employment levels; and customer satisfaction

Quality in Operations Management || Dr. Akshay G Khanzode

Aggregation
• The plan must be in units of measurement that can be understood by the firm’s
non-operations personnel
• Aggregate units of output per month
• Dollar value of total monthly output
• Total output by factory
• Measures that relate to capacity such as labor hours

Quality in Operations Management || Dr. Akshay G Khanzode

 Dealing with Variation
• Most organizations use rolling 3, 6, 9, and 12 month forecasts
• Forecasts are updated periodically, rather than relying on a once-a-year forecast
• This allows planners to take into account any changes in either expected demand
or expected supply and to develop revised plans

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Dealing with Variation (cont.)
• Strategies to counter variation:
• Maintain a certain amount of excess capacity to handle increases in demand
• Maintain a degree of flexibility in dealing with changes
• Hiring temporary workers
• Using overtime
• Wait as long as possible before committing to a certain level of supply capacity
• Schedule products or services with known demands first
• Wait to schedule other products until their demands become less uncertain

Quality in Operations Management || Dr. Akshay G Khanzode

Overview of Aggregate Planning

Forecast of
Develop a Update the
aggregate
general plan to aggregate plan
demand for the
meet demand periodically
intermediate
requirements (e.g., monthly)
range
 Demand and Supply
• Aggregate planners are concerned with the
• Demand quantity
• If demand exceeds capacity, attempt to achieve balance by altering
capacity, demand, or both
• Timing of demand
• Even if demand and capacity are approximately equal, planners
still often have to deal with uneven demand within the planning
period

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Aggregate Planning Inputs
• Resources • Costs
• Workforce/production rates • Inventory carrying
• Facilities and equipment • Back orders
• Demand forecast • Hiring/firing
• Overtime
• Policies • Inventory changes
• Workforce changes • Subcontracting
• Subcontracting
• Overtime
• Inventory levels/changes
• Back orders
Aggregate Planning Outputs
• Total cost of a plan
• Projected levels of
• Inventory
• Output
• Employment
• Subcontracting
• Backordering

Quality in Operations Management || Dr. Akshay G Khanzode

Aggregate Planning Strategies
• Proactive
• Alter demand to match capacity
• Reactive
• Alter capacity to match demand
• Mixed
• Some of each

Quality in Operations Management || Dr. Akshay G Khanzode

Demand Options
• Pricing
• Used to shift demand from peak to off-peak periods
• Price elasticity is important
• Promotion
• Advertising and other forms of promotion
• Back orders
• Orders are taken in one period and deliveries promised for a later period
• New demand
 Supply Options
• Hire and layoff workers
• Overtime/slack time
• Part-time workers
• Inventories
• Subcontracting

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 Prominent Aggregate Planning Strategies
1. Maintain a level workforce
2. Maintain a steady output rate
3. Match demand period by period
4. Use a combination of decision variables

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Aggregate Planning Pure Strategies
• Level capacity strategy:
• Maintaining a steady rate of regular-time output while meeting variations in
demand by a combination of options:
• Inventories, overtime, part-time workers, subcontracting, and back orders
• Chase demand strategy:
• Matching capacity to demand; the planned output for a period is set at the
expected demand for that period

Quality in Operations Management || Dr. Akshay G Khanzode

 Chase Approach
• Capacities are adjusted to match demand requirements over the planning
horizon
• Advantages
• Investment in inventory is low
• Labor utilization in high
• Disadvantages
• The cost of adjusting output rates and/or workforce levels

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Level Approach
• Capacities are kept constant over the planning horizon
• Advantages
• Stable output rates and workforce
• Disadvantages
• Greater inventory costs
• Increased overtime and idle time
• Resource utilizations vary over time

Quality in Operations Management || Dr. Akshay G Khanzode

Techniques for Aggregate Planning
• General procedure:
1. Determine demand for each period
2. Determine capacities for each period
3. Identify company or departmental policies that are pertinent
4. Determine unit costs
5. Develop alternative plans and costs
6. Select the plan that best satisfies objectives. Otherwise return to step 5.

Quality in Operations Management || Dr. Akshay G Khanzode

 Trial-and-Error Techniques
• Trial-and-error approaches consist of developing simple table or graphs that enable
planners to visually compare projected demand requirements with existing capacity
• Alternatives are compared based on their total costs
• Disadvantage of such an approach is that it does not necessarily result in an optimal
aggregate plan

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Cumulative Graph
 Mathematical Techniques
• Linear programming models
• Simulation models
• Computerized models that can be tested under different scenarios to identify
acceptable solutions to problems

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Aggregate Planning Example
Period 1 2 3 4 5 6 Total
Forecast 200 200 300 400 500 200 1,800
Costs
Output
Regular time = $2 per skateboard
Overtime = $3 per skateboard
Subcontract = $6 per skateboard
Inventory = $1 per skateboard per period on average inventory
Back orders = $5 per skateboard per period

Planners for a company that makes several models of skateboards are about to prepare an
aggregate plan that will cover six periods.

They want to evaluate a plan that calls for a steady rate of regular-time output, mainly
using inventory to absorb the uneven demand but allowing some backlog. Overtime and
subcontracting are not used because they want steady output. They intend to start with
zero inventory on hand in the first period.
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Aggregate Planning Example (cont.)
Period 1 2 3 4 5 6 Total
Forecast 200 200 300 400 500 200 1,800
Output
Regular time 300 300 300 300 300 300 1,800
Overtime --- --- --- --- --- ---
Subcontract --- --- --- --- --- ---
Inventory
Output 2 Forecast 100 100 0 (100) (200) 100 0
Inventory
Beginning 0 100 200 200 100 0
Ending 100 200 200 100 0 0
Average 50 150 200 150 50 0 600
Backlog 0 0 0 0 100 0 100

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Aggregate Planning Example (cont.)
Period 1 2 3 4 5 6 Total
Costs
Output
Regular time $600 $600 $600 $600 $600 $600 $3,600
Overtime --- --- --- --- --- ---
Subcontract --- --- --- --- --- ---
Hire/Layoff --- --- --- --- --- ---
Inventory $50 $150 $200 $150 $50 $0 $600
Backlog $0 $0 $0 $0 $500 $0 $500
Total $650 $750 $800 $750 $1,150 $600 $4,700

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