Quality Management and Purchasing

Session 9 ObjectivesIdentify the marketplace pressures that

are driving quality standards higher in manufacturing

Describe the costs of qualityDescribe the basic attributes of normal

variabilityDefine quality in manufacturing productsUnderstand the use of Pareto analysis,

control charts, and fishbone diagram in solving quality problems

Compare process control with product inspection

Session 9 ObjectivesDiscuss the importance of purchasing, its

objectives and the steps in the purchasing cycleIdentify the documents used to order, receive,

and make payment for goods and servicesList the factors that must be considered in

establishing specifications, and know their importance

Understand the importance of supplier selection and the factors that must be considered

Describe/list the factors to consider in establishing a supplier agreement.

Session OutcomesState the marketplace pressures that are

driving quality standards higher in manufacturing

List and articulate the costs of qualityDescribe the basic attributes of normal

variabilityDefine quality in manufacturing productsUse of Pareto analysis, control charts, and

fishbone diagram in solving quality problemsCompare process control with product

inspection

Session OutcomesPresent and discuss the importance of purchasing,

its objectives and the steps in the purchasing cycleList the documents used to order, receive, and

make payment for goods and servicesList the factors that must be considered in

establishing specifications, and know their importance

Present/discuss the importance of supplier selection and the factors that must be considered

List and explain the factors to consider in establishing a supplier agreement

What is quality?

Fitness for purpose or use (Juran).

Conformance to requirement specifications ( Crosby).

Quality is the ability of a product or service to consistently meet or exceed customer expectations (ASQ).

Conformance to requirement or fitness for use…

- APICS Dictionary User satisfaction: that the goods and/or services satisfy

the needs and expectations of the user (Text book)

What is quality? GSA defines it as: “ Meeting the customer

needs the first time and every time”. Boeing defines it as: “ Providing our

customer with products and services that consistently meet the needs and the expectation”.

Federal Express Defines it as : “ Performance to the standard expected by

customer”. Saudi Aramco defines quality as:

Elements to Achieve Quality Quality and Product policy: deals with product

planning Market segment Estimated sales volume. Price Quality level specified by senior management

according to the wants and needs of the market segment.

Quality and Product design deals with Determine tolerances, appearance and performance Material to be used and dimensions Product cabability.

Elements to Achieve Quality

Quality and manufacturing concerned with Meeting the minimum specification

specified in the product design Selection of the right processes.

Quality and use Communicate with and train the customer After sale service

Dimensions of Quality Performance - main characteristics of

the product/serviceAesthetics - appearance, feel, smell,

tasteSpecial features - extra characteristicsConformance - how well product/service

conforms to customer’s expectationsSafety - Risk of injuryReliability - consistency of performance

Dimensions of Quality

Durability - useful life of the product/service

Perceived Quality - indirect evaluation of quality (e.g. reputation)

Service after sale - handling of customer complaints or checking on customer satisfaction.

Warranty.

Price

Product development cycle

Product Development Cycle

Market PlaceCustomer Market Research

Product Design

ProcessDesign

Operations

Total Quality Management (TQM)

“…TQM is a management approach to long-term success through customer satisfaction. TQM is based on the participation of all members of an organization in improving processes, goods, services, and the culture in which they work”

- APICS Dictionary

Total Quality Management (TQM)Key principles and characteristicsCustomer focus

Meeting or exceeding the user’s expectationsCost of quality

Identifying all the costs associated with qualityTaking action

Using problem-solving toolsInvolving the employeeContinuously improving the process

Why Quality Now?Customer demands________________________________________________________________________

World competition________________________________________________________________________

The Cost/Productivity AdvantageBefore Improvement

After Improvement

Scrap rate 13% 5%

Order size 100 100

Number produced 115 105

Production costs

@ $10 per unit $1,150 $1,050

Sales revenue

@ $15 per unit $1,500 $1,500

profit $ 350 $450

Cost of Quality

Cost of failureInternalExternal

Costs of appraisalCosts of prevention

Cost of Failures

Cost of failure (Internal)Scarp and reworkLost material and labor Lost capacity

Costs of failure (External) Warrants Field service Lost sales/customers.

Cost of Appraisal

Cost of inspection Gauges and equipment Los products Higher work in process

What are other costs of appraisal?

Cost of Prevention

Cost of maintenance Operator training Los products

What other costs of prevention?

Total Quality Cost

Variation

All things varyPeople

SnowflakesLengths of blades of grass

Manufactured productsetc.

What Is A Process A process is a sequence of steps that

produces an output. Examples of processes include:

Manufacturing processes. Assembly Molding Machining

Service processes. Teaching Purchasing Participants give examples.

Chance Variation Random variations inherent to the process. The

variation comes from: Material People Machines MethodsMeasurements.

A process that is operating under chance /natural variation is said to be under statistical control.

Assignable Variation These are variations due to a cause other

than random variation such as tool wear, gauge movement, operator lack of training.

Process control tools specifically the control chart detects whether the process is under statistical control or not. In other words is there an assignable cause for the variation or not?

Pattern of Variability The output of any process has a unique

pattern that can be represented by its shaper, center and spread.

The center is the average.The spread or variation is measured in

SPC by the range and standard deviation.

Process Output Variability

Normal Distribution

9973.0)33(

9545.0)22(

6827.0)(

XP

XP

XP

68%

- 3 - 2 - - - 2 - 3 x

95%

99.7%

f(x)

Probabilities associated with normal distribution

Process Capability Process Capability index Cp is defined as:

Cp = (USL - LSL( / 6

If a process has a standard deviation = 0.0016 and the speciation limit is 1.000 plus or minus 0.005 compute the process capability index. Cp = ( 2* 0.005)/6*0.0016 = 0.01/0.0096 = 1.04

Quality in Manufacturing Products

All product must meet the required specification as a minimum.

All parts must be within specifications and the less deviation from the center of the specs is the better.

Where does the specification come from?

Manufacturing QualityDowel Dimensions (inches)Spec = 1” ± 0.10”

0.99 | 1.00 | 1.01 | 1.02 | 1.03 | 1.04 | 1.05 | 1.06 | 1.07 | 1.08 | 1.09

Problem 9.1 A manufacturer of packaged sugar substitute has

analyzed the output of the filling machine, with results given below. The specification for the process is 140 +/- 40 milligram.

150 140 170 160 130 140 140 160 150 150 160 150 150 160 140

- Plot the data for the information given, including specification- What is the average fill weight for the process?

- What would you do to improve the process?

Problem 9.15

4

3

2

1

100 110 120 130 140 150 160 170 180

Quality Tools

Pareto chartCause-and-effect diagramStratification or scatter diagramsCheck sheetHistogramGraph and control chart

Steps in Pareto Analysis1. Define the category to be analyzed2. Select the measurement unit3. Compile occurrences by unit of measure, and

calculate the total in each category4. Rank the items in descending order5. Find the total cost6. Calculate the percentage by item7. Calculate the cumulative, or running, total of the

percentage8. Graph the data9. Separate the “significant few” from the “trivial

many”

Rental Car Problems

Fishbone Diagram Known as cause and effect diagram or

Ishkawa diagram. It is a sinple technique that helps to solve problems.

Steps for developing fishbone diagram1. Identify the quality characteristic to be studies and enter it in the head of the diagram.2. Label the skelton with a main cause for each of the main bones of the diagram.3. Write down the factors identified under each cause and connect them to the main cause.

4. Once all the possible causes has been listed try to identify the most likely root cause and work on it.

Fishbone Diagram

People Machines Materials

Environment

Method Measuremen

ts

Quality Problems

Step 1: Decide on the effect to examinePhrase effect as

positive (an objective) ornegative (a problem)

Steps of Constructing the Fishbone Daigram

Poor Gas mileage

Step2: Fill the effect box and draw the spine

Step 3 - Identify Main CategoriesStep 3 - Identify Main Categories

Effect

Machine

Materials

Manpower

Methods

Methods Machine

People Materials

PoorGas mileage

Step 4 - Identify Causes Influencing the EffectStep 4 - Identify Causes Influencing the Effect

Step 5 - Add Detailed LevelsStep 6 - Analyze the DiagramStep 5 - Add Detailed LevelsStep 6 - Analyze the Diagram

impatience

Always late

Drive too fast

Control Charts It is a chart that assist in detecting assignable

causes of variation. It has a center line ( which is the average of the averages) and upper control limit and lower control limit.

The most popular type of control charts is the x-bar and R charts.

To construct the x-bar chart usually 20 samples of size 5 are taken from the output of the process and a certain quality characteristic is measures.

Construction of X-bar Chart

Construction of X-bar Chart

Control Charts

X

Upper Control Limit

Lower Control Limit

1”

Control charts – key points

Filled in by operators, not inspectorsRecord the average and range of the processControl limits are set to indicate the normal

variation of the processControl charts do not show product

specification

Limitations of Inspection

Is expensiveDoes not add value to the customerDoes not prevent further defectsIs not dependableGives no information at the source (feedback)

Purchasing

“The term used in industry and management to denote the function of and the responsibility for procuring materials, supplies, and services.”

– APICS Dictionary

Purchasing ObjectivesTo obtain goods and services of the quality

and quantity neededTo obtain goods and services at the right costTo ensure the best possible serviceTo identify qualified suppliers and maintain

good relations

Purchasing and Profits

Purchasing Cycle

Select and maintain qualified suppliersGenerate requisitionsIssue purchase ordersFollow upReceive goodsAuthorize payment

Purchase Order ControlOpen ordersReleased by purchasingCopy kept on file in purchasingUsed by receiving to

Verify the order and receiptReceive and track partial shipmentsForward goods to the user

Closed ordersAll requirements completeFiled for reference

Purchase Order Control (Cont.)

InvoiceRequest for payment by supplier

PaymentAccounting or purchasing compares theOriginal orderOrder receipt documentinvoice

Establishing Specifications

What to buy depends onQuantityCost considerationsWhat the item should do

Quality level neededThose characteristics of product determined by

final useFunction, quality, service, and price are

interrelated

Specification DescriptionFunction specifications may be described byBrandSpecifying physical or chemical

characteristics material, and method of manufacture

Performance requirementsEngineering drawingsMiscellaneous methods, including

Samples“Gimme one just like the last one”

Selecting SuppliersFactors in selecting suppliersTechnical abilityManufacturing capabilityReliabilityAfter-sales serviceLocationPriceFinancial stabilityManagement attitude

Supplier AgreementPrice

Terms

Delivery

Quality

Quantity

Session 9: objectivesIdentify the marketplace pressures that are

driving quality standards higher in manufacturingDescribe the costs of qualityDescribe the basic attributes of normal variabilityDefine quality in manufacturing productsUnderstand the use of Pareto analysis, control

charts, and fishbone diagram in solving quality problems

Compare process control with product inspection

Session 9: objectives (Cont.)Discuss the importance of purchasing, its

objectives and the steps in the purchasing cycleIdentify the documents used to order, receive, and

make payment for goods and servicesList the factors that must be considered in

establishing specifications, and know their importance

Understand the importance of supplier selection and the factors that must be considered

Know the factors to consider in establishing a supplier agreement