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6 Managing Quality

Outline

• Global Company Profile: Arnold Palmer Hospital• Quality and Strategy • Defining Quality• Malcolm Baldrige National Quality Award • Cost of Quality • International Quality Standards

– ISO 9000, ISO 14000• Ethics and Quality Management• Total Quality Management• Six Sigma Quality• TQM Tools

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Arnold Palmer Hospital

• Deliver over 16,000 babies annually• Virtually every type of quality management

technique is employed– Continuous improvement– Employee empowerment– Benchmarking– Just-in-time– Quality tools

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Quality and Strategy

• An operations manager’s objective is to build a total quality management system that identifies and satisfies customer needs

• Managing quality supports differentiation, low cost, and response strategies

• Quality helps firms increase sales and reduce costs

• Building a quality organization is a demanding task

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Improved Quality

Increased Profits

Increased productivityLower rework and scrap costsLower warranty costs

Reduced Costs

Improved responseHigher PricesImproved reputation

Sales Gains

Figure 6.1

Quality Improves Productivity

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Dimensions of Quality for Goods

Quality

Performance

Features

Reliability

Durability

Conformance

Serviceability

Aesthetics

Perceived quality

Value

Importance of Perceived Quality

• “The issue of public perception is coming into sharper focus now because experts say the Big Three, after years of concentrating on trucks and all but ignoring cars, have markedly improved the quality and look of their sedans and compacts.”

• “If they think it’s an American car, the perception of the vehicle falls dramatically,” said Art Spinella, VP of CNW Market Research, “Detroit gets a bum rap in the US.”

• “Those negative impressions are now souring efforts by Ford Motor Co., General Motors Corp. and Chrysler LLC to halt their long slide in US market share. And for these Detroit auto makers, persuading import buyers to even consider a US car is becoming a new battleground.”

(Neal Boudette, “Detroit Auto Makers Try Some New Tricks,” Wall Street Journal, Sep 14, 2007)

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Under-standing

Tangibles

Reliability

CommunicationCredibility

Security

Responsiveness

Competence

Courtesy

Access

© 1995 Corel Corp.

Service Quality Dimensions

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Malcolm Baldrige National Quality Award

• Established in 1988 by the U.S. government• Designed to promote performance excellence• Seven criteria

– Leadership; strategic planning; customer and market focus; measurement, analysis and knowledge management; human resource focus; process management; business results

• Past winners– Motorola; Xerox; Ritz-Carlton Hotels;

Cadillac; Los Alamos National Bank• Similar award in Japan - Deming Prize

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Cost of Quality – 4 Categories

• Prevention costs – reducing the potential for defective parts or service (training, quality improvement programs, vendor certification)

• Appraisal costs – evaluating products, processes & services (testing, labs, inspectors)

• Internal failure – production of defective parts or service before delivery to customers (rework, scrap, downtime)

• External costs – occur after delivery of defective products or service (warranty, lost goodwill, liabilities, costs to society)

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Internal Failure

Prevention

Appraisal

Total Cost

Quality Improvement

Total Cost

Costs of Quality

External Failure

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International Standards

• ISO 9000 – international quality standards

• ANSI/ASQ Q9000 series - US

• ISO 14000 – international environmental management standards

• These procedures say nothing about the actual quality of the product – they deal entirely with standards to be followed

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Ethics and Quality Management

• Operations managers must deliver healthy, safe, quality products and services

• Poor quality risks injuries, lawsuits, recalls, and regulation – recent Mattel China toy recall

• Organizations are judged by how they respond to problems

• All stakeholders much be considered

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Deming’s Fourteen Points

• Create consistency of purpose• Lead to promote change• Build quality into the products; stop depending

on inspections to catch problems• Build long term relationships based on

performance instead of awarding business based on price

• Continuously improve product, quality, and service

• Start training

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Deming’s 14 Points - continued

• Emphasize leadership• 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

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Total Quality Management (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.

• Continuous Improvement, Employee Empowerment, Benchmarking, Just-in-Time (JIT), Taguchi Concepts, Knowledge of TQM tools

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Continuous Improvement

• Represents continual improvement of process & customer satisfaction

• Involves all operations & work units

• Other names– Kaizen (Japanese)– Zero-defects– Six sigma

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Six Sigma Quality

• Originally developed by Motorola, Six Sigma refers to an extremely high measure of process capability

• A Six Sigma capable process will return no more than 3.4 defects per million operations (DPMO)

• Highly structured approach to process improvement

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Six Sigma

Two meaningsStatistical definition of a process that is 99.9997% capable, 3.4 defects per

million opportunities (DPMO)A program designed to reduce

defects, lower costs, and improve customer satisfaction

Mean

Lower limits Upper limits

3.4 defects/million

±6σ

2,700 defects/million

±3σ

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Employee Empowerment

• Getting employees involved in product & process improvements– 85% of quality problems are due to

process & material • Techniques

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

© 1995 Corel Corp.

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Seven Tools of TQM

Table 6.6

Thank You

Questions? ?