Understanding Business Organisations V1.0 Visuals Handout Page 1 UnderstandingBusiness NCC Education Limited V1.0 Understanding Business Organisations Lecture10: Optimising Organisational Performance Quality and Operational Measures Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.2 Scope and Coverage This topic will cover: The role of quality management within an organisation The Plan, Do, Check, Act (PDCA) cycle NCC Education Limited V1.0 The Plan, Do, Check, Act (PDCA) cycle Quality systems and standards Service level agreements (SLAs) The philosophy of total quality management (TQM) J ust-in-time (J IT) production Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.3 Learning Outcomes By the end of this topic, students will be able to: Describe what is meant by quality and why it is important to an organisation and its customers Understandthe role of service level agreements NCC Education Limited V1.0 Understand the role of service level agreements (SLAs) in the customer-supplier relationship Explain the principles of total quality management (TQM) Understand the features and benefits of just-in-time (J IT) Lecture 10 Optimising Organisational Performance Quality and Operational Measures Understanding Business Organisations V1.0 Visuals Handout Page 2 Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.4 W. Edwards Deming Quality should be aimed at meeting the needs of the consumer, present and future J osephM. J uran Quality is fitness for purpose What is Quality? NCC Education Limited V1.0 J oseph M. J uran Quality is fitness for purpose for which the product is intended J ohn Oakland Quality is meeting customer requirements Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.5 What matters to the customer How the business responds Low price Producing at low price High quality products Building quality into processes and products Fast delivery Short manufacturing time and fast distribution The Customers Influence on Quality and Performance NCC Education Limited V1.0 Product reliability Buildingreliability into products and delivering dependable service Leading edge technologies Emphasis on R&D Wide product range Flexibility to change and wide product mix Responsive to changes in customer requirements Flexibility in volume and delivery, quick response times to change Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.6 The Importance of Quality Good quality wins orders, stimulates demand and retains customer confidence and loyalty Poor quality loses orders erodes demand and damages customer confidence in the NCC Education Limited V1.0 organisation Lecture 10 Optimising Organisational Performance Quality and Operational Measures Understanding Business Organisations V1.0 Visuals Handout Page 3 Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.7 Category Associated costs Examples Prevention Cost of activities undertaken to prevent defects in the end result Training, planning, quality assurance, procedures, measurements, role, clarity Appraisal Costs incurred with inspections to determine if materials, products or Proof reading, vendor rating, quality audits, pre-delivery Quality Costing NCC Education Limited V1.0 services conform to requirements y y inspection Failure Costs associated with items that failed to meet the agreed requirements Re-work, scrap, complaints, downgrading products (seconds), waste (time, materials) Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.8 Quality control: post-production In-process inspections Quality assurance Performance measurement Quality in Operations NCC Education Limited V1.0 Poka-yoke (mistake proofing) Statistical process control Kaizen (continuous improvement) Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.9 Planning, doing, checking and acting was promoted by Deming as an effective continuous improvement tool: Plan: collect data define the problemand establish a PDCA and Continuous Improvement NCC Education Limited V1.0 Plan: collect data, define the problem and establish a strategy Do: trial the changes on a small scale Check: monitor the improvement via collection of data Act: hold the gains if successful, or remedy the changes if unsuccessful Lecture 10 Optimising Organisational Performance Quality and Operational Measures Understanding Business Organisations V1.0 Visuals Handout Page 4 Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.10 Act Plan The PDCA Cycle NCC Education Limited V1.0 Check Do Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.11 An holistic approach which provides awareness of the customer-supplier relationship and continuous improvement in all departments and functions Total Quality Management (TQM) NCC Education Limited V1.0 A simple definition is: Total: everybody in the organisation is involved Quality: meeting agreed customer requirements, first time, every time Management: it is a leadership responsibility Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.12 Principle Description Philosophy Prevention not detection invest in the prevention of failures Approach Management led-initiatives encouraging by example Scale Everyone is responsible for quality Principles of TQM NCC Education Limited V1.0 Measurement Costs involved in quality failures the cost of quality Standard Right first time aim for zero defects Scope Everyone, everywhere across the whole supply chain Theme Continuous improvement, there is no instant solution Lecture 10 Optimising Organisational Performance Quality and Operational Measures Understanding Business Organisations V1.0 Visuals Handout Page 5 Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.13 Main Features and Relationships of TQM Teams Culture Communication NCC Education Limited V1.0 Systems Tools Processes and customer supply chains Culture Communication Commitment Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.14 Agreements with suppliers that explicitly define the service to be delivered in terms of responsibilities and priorities SLAs typically include: The service to be provided The standards of service The timetable for delivery Service Level Agreements NCC Education Limited V1.0 The timetable for delivery The respective responsibilities of supplier and customer Provisions for regulatory and legal compliance Monitoring and reporting mechanisms Escalation procedure in the event of slippage Disputes procedure Review procedure Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.15 Provide a framework for the development and measurement of quality systems Focus of ISO 9000 is upon what the organisation does to: Quality Standards NCC Education Limited V1.0 Fulfil the customers requirements Enhance the customer satisfaction Apply regulatory requirements Implement continuous performance improvement Lecture 10 Optimising Organisational Performance Quality and Operational Measures Understanding Business Organisations V1.0 Visuals Handout Page 6 Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.16 ISO standard Areas covered by standard ISO 9001 Quality of all aspects of operations and product design ISO 9002 Quality in all aspects of operations ISO 9003 Q lit i fi l d t i ti l Quality Standards for Operations Management NCC Education Limited V1.0 ISO 9003 Quality in final product inspection only Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.17 A set of techniques intended to ensure that supplies arrive in the right quantities exactly when they are required by operatives just in time Focus is upon eliminating waste J ust-In-Time (J IT) Production NCC Education Limited V1.0 Waste arises from any stock or activity that costs the organisation money, but does not add value or generate income Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.18 Simplicity all procedures and operations should be kept as simple as possible Visibility all workplaces should be tidy, since waste can conceal potential problems Core Themes of J IT NCC Education Limited V1.0 Continuous J IT should not be viewed as a passing fad, but an ongoing part of the organisation Involvement everybody in the organisation must be committed to it and involved with it Lecture 10 Optimising Organisational Performance Quality and Operational Measures Understanding Business Organisations V1.0 Visuals Handout Page 7 Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.19 Working environment Quality improvement Preventative maintenance Uniformplant load Key Operational Features of J IT NCC Education Limited V1.0 Uniform plant load Process configuration Changeover flexibility Pull scheduling Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.20 Benefits: Reduced stockholding reduces the working capital needed Provides an opportunity to reduce the costs of the operations department All products are made to the requirement of the customer Benefits and Drawbacks of J IT NCC Education Limited V1.0 All products are made to the requirement of the customer Drawbacks: Possibility of higher unit costs arising from requirements made of suppliers Lack of finished goods stocks can be problematical if for any reason the order cannot be fulfilled Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.21 A key aspect of quality is meeting customers needs or expectations Good quality wins orders whilst poor quality damages customer confidence Quality standards provide a framework for the development and measurement of quality systems Summary NCC Education Limited V1.0 and measurement of quality systems Total quality management (TQM) focuses upon continuous improvement Service level agreements (SLAs) play an important role in ongoing customer-supplier relationships J ust-in-time (J IT) production helps to eliminate waste Lecture 10 Optimising Organisational Performance Quality and Operational Measures Understanding Business Organisations V1.0 Visuals Handout Page 8 Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.22 References Campbell and Craig (2005), Organisations and the Business Environment, 2nd edition. Butterworth- Heinemann, Chapter 24, pp 518-545 Boddy, D. (2005), Management: An Introduction, NCC Education Limited V1.0 3rd edition, Prentice Hall, Chapter 19 Boddy, D. (2007), Management: An Introduction, 4th edition, Prentice Hall, Chapter 20 Optimising Organisational Performance Quality and Operational Measures Lecture 10 - 10.23 Lecture 10 Optimising Organisational Performance Quality and Operational Measures NCC Education Limited V1.0 Measures Any Questions?