Operations Management

Chapter 5

QUALITY
MANAGEMENT

Outline

QUALITY AND STRATEGY

DEFINING QUALITY

Implications of Quality
Malcolm Baldrige National Quality Award
Cost of Quality (COQ)

INTERNATIONAL QUALITY STANDARDS

TOTAL QUALITY MANAGEMENT

Continuous Improvement
Employee Empowerment
Benchmarking
Just-in-Time (JIT)
Taguchi Concepts
Knowledge of TQM Tools
2

Outline - Continued

TOOLS OF TQM

Check sheets
Scatter Diagrams
Cause-and-Effect Diagram
Pareto Charts
Flow Charts
Histograms
Statistical Process Control (SPC)

TQM IN SERVICES

Learning Objectives
When you complete this chapter, you should
be able to:
Identify or Define:

Quality
Malcolm Baldrige National Quality Award
ISO International Quality Standards
Demings, Juran, and Crosby
Taguchi Concepts

Learning Objectives continued

When you complete this chapter, you should
be able to :
Explain:

Why quality is important

Total Quality Management (TQM)
Pareto charts
Process charts
Quality robust products

Ways in Which Quality Can

Improve Productivity
Sales Gains

Improved
Quality

Improved response
Higher Prices
Improved reputation

Reduced Costs

Increased
Profits

Increased productivity
Lower rework and scrap
costs
Lower warranty costs
6

Flow of Activities Necessary to Achieve

Total Quality Management

Organizational Practices

Quality Principles

Employee Fulfillment

Customer Satisfaction
7

1.

Organizational Practices

Leadership
Mission statement
Effective operating procedure
Staff support
Training
Yields: What is important and what is to be
accomplished

2.

Quality Principles

Customer focus
Continuous improvement
Employee empowerment
Benchmarking
Just-in-time
Tools of TQM
Yields: How to do what is important and to
be accomplished

3.

Employment Fulfillment

Empowerment
Organizational commitment
Yields: Employees attitudes that they can
accomplish what is important and to be
accomplished

10

4.

Customer Satisfaction

Winning orders
Repeat customers
Yields: An effective organization with a
competitive advantage

11

Definitions of Quality

ASQ: Product characteristics & features

that affect customer satisfaction
User-Based: What consumer says it is
Manufacturing-Based: Degree to which a
product conforms to design specification
Product-Based: Level of measurable
product characteristic

12

Dimensions of Quality for

Goods

Operation
Reliability & durability
Conformance
Serviceability
Appearance
Perceived quality

Quality

13

Service Quality Attributes

Reliability

Responsiveness

Tangibles

Competence

Understanding

Access

Security

Courtesy
1995 Corel Corp.

Credibility

Communication
14

Importance of Quality

Costs & market

share
Companys
reputation
Product
liability
International
implications

Market Gains
Reputation
Volume
Price

Increased
Profits

Improved
Quality
Lower Costs
Productivity
Rework/Scrap
Warranty

15

Malcom Baldrige National

Quality Award

Established in 1988 by the U.S. government

Designed to promote TQM practices

Some criteria
Senior executive leadership; Strategic planning;
Customer & Market focus; Information analysis;
Human Resource focus; Process management;
Business results; customer satisfaction
Recent winners
Motorola, Xerox, Federal Express, Texas
Instruments.

16

Costs of Quality
Prevention costs
- reducing the potential for defects
Appraisal costs
- evaluating products
Internal failure
- of producing defective parts or service
External costs
- occur after delivery

17

International Quality
Standards

Industrial Standard Z8101-1981 (Japan)

ISO 9000 series (Europe/EC)

Common quality standards for products sold in

Europe (even if made in U.S.)

ISO 14000 series (Europe/EC)

Specification for TQM

Standards for recycling, labeling etc.

ASQC Q90 series; MILSTD (U.S.)

18

EC Environmental Standard
ISO 14000
Core Elements:

Environmental management
Auditing
Performance evaluation
Labeling
Life-cycle assessment

Advantages:

Positive public image & reduced exposure to liability

Good systematic approach to pollution prevention
Compliance with regulatory requirements
Reduction in need of multiple audits
19

Traditional Quality Process

(Manufacturing)
Customer

Marketing

Engineering

Operations

Specifies
Need

Interprets
Need

Designs
Product

Produces
Product

Defines
Quality

Plans
Quality
Monitors
Quality
20

TQM
Encompasses entire organization, from
supplier to customer
Stresses a commitment by management to
have a continuing, company-wide, drive
toward excellence in all aspects of
products and services that are important to
the customer.

21

Achieving
Total Quality Management
Customer
Satisfaction

Effective
Business
Employee
Fulfillment
Quality
Principles
Organizational
Practices

Attitudes
(e.g., Commitment)

How to Do
What to Do

22

Demings Fourteen Points

1.
2.
3.

4.
5.

6.
7.

Create consistency of purpose

Lead to promote change
Build quality into the products
Build long term relationships
Continuously improve product, quality,
and service
Start training
Emphasize leadership
23

Demings Points - continued

8.
9.

10.
11.
12.

13.

14.

Drive out fear

Break down barriers between
departments
Stop haranguing workers
Support, help, improve
Remove barriers to pride in work
Institute a vigorous program of education
and self-improvement
Put everybody in the company to work on
the transformation
24

Concepts of TQM
1.

2.
3.
4.
5.
6.

Continuous improvement
Employee empowerment
Benchmarking
Just-in-time (JIT)
Taguchi concepts
Knowledge of TQM tools

25

1.

Continuous Improvement

Represents continual improvement of

process & customer satisfaction
Involves all operations
& work units
Other names

Kaizen (Japanese)
Zero-defects
Six sigma
1984-1994 T/Maker Co.
26

Shewharts PDCA Model

4.Act

1.Plan

3.Check

2.Do

Implement Identify the

improvement and
the plan
make a plan
Is the plan
working

Test the plan

27

2.

Getting employees involved in product

& process improvements

Employee Empowerment

85% of quality problems are due to process

& material

Techniques

1995 Corel Corp.

Support workers
Let workers make decisions
Build teams & quality circles
28

Quality Circles

Group of 6-12 employees from same

work area
Meet regularly to solve work-related
problems
4 hours/month
Facilitator trains & helps
with meetings

29

1995 Corel Corp.

3.

Benchmarking
Selecting best practices to use
as a standard for performance
Determine what to benchmark
Form a benchmark team
Identify benchmarking partners
Collect and analyze benchmarking
information
Take action to match or exceed the
benchmark
30

Resolving Customer Complaints

Best Practices

Make it easy for clients to complain

Respond quickly to complaints
Resolve complaints on the first contact
Use computers to manage complaints
Recruit the best for customer service jobs

31

4.

Just-in-Time (JIT)
Relationship to quality:

Pull system of production/purchasing

Customer starts production with an order

Involves vendor partnership programs to improve

quality of purchased items
Reduces all inventory levels

JIT cuts cost of quality

JIT improves quality
Better quality means less inventory and better, easier-toemploy JIT system

Inventory hides process & material problems

Improves process & product quality

32

5.

Taguchi Techniques
Experimental design methods to improve
product & process design

Identify key component & process variables

affecting product variation

Taguchi Concepts
a)
b)
c)

Quality robustness
Quality loss function
Target specifications
33

a) Quality Robustness

Ability to produce
products uniformly
regardless of
manufacturing
conditions
Put robustness in
House of Quality
(QFD) matrices
besides functionality

1995 Corel Corp.

1984-1994 T/Maker Co.

34

Quality Function Deployment

(QFD)

Determines what will satisfy the customer

Translates those customer desires into the
target design

35

b) Quality Loss Function

Shows social cost ($) of deviation from target

value
Assumptions

Most measurable quality characteristics (e.g., length,

weight) have a target value
Deviations from target value are undesirable

Equation: L = D2C

L = Loss ($); D = Deviation; C = Cost

36

Quality Loss Function; Distribution

of Products Produced
Quality Loss Function (a)

High loss
Unacceptable

Loss (to
producing
organization,
customer, and
society)
Low loss

Target-oriented
quality yields more
product in the best
category

Poor
Fair
Good
Best

Target-oriented quality
brings products toward
the target value
Conformance-oriented
quality keeps product
within three standard
deviations

Frequency

Lower

Target
Specification

Upper

Distribution of
specifications for product
produced (b)
37

c)

Target Specification Example

A study found U.S. consumers preferred Sony TVs made in

Japan to those made in the U.S. Both factories used the
same designs & specifications. The difference in quality goals
made the difference in consumer preferences.

Freq.
Japanese factory
(Target-oriented)

LSL

Target

USL

U.S. factory
(Conformanceoriented)
38

6.
a)

Tools of TQM
Tools for generating ideas
Check sheet
Scatter diagram
Cause and effect diagram

b)

Tools to organize data

Pareto charts
Process charts (Flow diagrams)

c)

Tools for identifying problems

Histograms
Statistical process control chart
39

Seven Tools for TQM

40

Process Chart

Shows sequence of events in process

Depicts activity relationships
Has many uses

Identify data collection points

Find problem sources
Identify places for improvement
Identify where travel distances can be reduced

41

Process Chart Example

SUBJECT: Request tool purchase
Dist (ft)

Time (min)

Symbol

Description

D Write order
D On desk
75

D To buyer
D Examine
= Operation; = Transport; = Inspect;
D = Delay; = Storage
42

Cause and Effect Diagram

Used to find problem sources/solutions
Other names

Fish-bone diagram, Ishikawa diagram

Steps
Identify problem to correct
Draw main causes for problem as bones
Ask What could have caused problems in these
areas? Repeat for each sub-area.

43

Cause and Effect Diagram

Example
Method
Drill
Slow

Manpower
Tired
Overtime

Old

Wood
Steel
Material

Too many
defects

Lathe

Machinery

44

Statistical Process Control

(SPC)

Uses statistics & control charts to tell when

to adjust process
Developed by Shewhart in 1920s
Involves

Creating standards (upper & lower limits)

Measuring sample output (e.g. mean wgt.)
Taking corrective action (if necessary)

Done while product is being produced

45

Statistical Process Control

Steps
Start

Produce Good
Provide Service
Take Sample

No
Assign.
Causes?
Yes

Inspect Sample

Stop Process

Create
Control Chart

Find Out Why

46

Process Control Chart

Plot of Sample Data Over Time
Sample Value

80
Sample
Value
UCL

60
40

Average

20

LCL

0
1

13

17

21

Time
47

Patterns to Look for in

Control Charts

48

TQM In Services

Service quality is more difficult to measure

than for goods
Service quality perceptions depend on

Expectations versus reality

Process and outcome

Types of service quality

Normal: Routine service delivery

Exceptional: How problems are handled
49

Service Quality Attributes

Reliability

Responsiveness

Tangibles

Competence

Understanding

Access

Security

Courtesy
1995 Corel Corp.

Credibility

Communication
50

Determinants of Service Quality

Reliability consistency and dependability

Responsiveness willingness/readiness of
employees to provide service; timeliness
Competence possession of skills and
knowledge required to perform service
Access approachability and ease of
contact
Courtesy politeness, respect,
consideration, friendliness of contact
personnel
51

Determinants of Service Quality

Communication keeping customers informed

in languages they understand
Credibility trustworthiness, believability,
honesty
Security freedom from danger, risk or doubt
Understanding/knowing the customer making
the effort to understands the customers needs
Tangibles the physical evidence of the service
52