Slides Prepared by John Loucks

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1©© 2002 South-Western/Thomson Learning2002 South-Western/Thomson Learning TMTM

Slides preparedSlides prepared

by John Loucksby John Loucks



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Chapter 7Chapter 7

Operations Quality ManagementOperations Quality Management

Wo r ld -

C lass

Se r v ice



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OverviewOverview

q Nature of Quality Nature of Qualityq Traditional Quality ManagementTraditional Quality Management

q Modern Quality ManagementModern Quality Management

q

Quality Management RecognitionQuality Management Recognitionq Total Quality Management (TQM) ProgramsTotal Quality Management (TQM) Programs

q Quality Management in ServicesQuality Management in Services

q

Wrap-Up: What World-Class Producers DoWrap-Up: What World-Class Producers Do



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What is Quality?What is Quality?

““The quality of a product or service is a customer’sThe quality of a product or service is a customer’s

perception of the degree to which the product or perception of the degree to which the product or service meets his or her expectations.” service meets his or her expectations.”



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Nature of QualityNature of Quality

q Dimensions of QualityDimensions of Qualityq Determinants of QualityDeterminants of Quality

q Costs of QualityCosts of Quality



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Best-In-Class and World-ClassBest-In-Class and World-Class

q Customers’ expectations of quality are not the sameCustomers’ expectations of quality are not the samefor differentfor different classesclasses of products or services.of products or services.

q Best-in-class qualityBest-in-class

quality means being the best product or means being the best product or

service in a particular class of products or services.service in a particular class of products or services.

q Being aBeing a world-class companyworld-class com

pany means that each of itsmeans that each of its

products and services are considered best-in-class by products and services are considered best-in-class by

its customers.its customers.



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Some Dimensions of Product QualitySome Dimensions of Product Quality

q Performance – relative to customer’s intended usePerformance – relative to customer’s intended useq Features – special characteristicsFeatures – special characteristics

q Reliability – likelihood of breakdowns, malfunctionsReliability – likelihood of breakdowns, malfunctions

q

Serviceability – speed/cost/convenience of servicingServiceability – speed/cost/convenience of servicingq Durability – amount of time/use before repairsDurability – amount of time/use before repairs

q Appearance – effects on human sensesAppearance – effects on human senses

q

Customer service – treatment before/during/after saleCustomer service – treatment before/during/after saleq Safety – user protection before/during/after useSafety – user protection before/during/after use



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Determinants of QualityDeterminants of Quality

q

Quality of designQuality of design – products/service designed based – products/service designed basedon customers’ expectations and desireson customers’ expectations and desires

q Quality capability of production processesQuality capability of production processes – – processes must be capable of producing the products processes must be capable of producing the products

designed for the customersdesigned for the customersq Quality of conformanceQuality of conformance – capable processes can – capable processes can

produce inferior product if not operated properly produce inferior product if not operated properlyq Quality of customer serviceQuality of customer service – a superior product does – a superior product does

not mean success; must have quality service alsonot mean success; must have quality service alsoq Organization quality cultureOr ganization quality culture – superior product and – superior product and

service requires organization-wide focus on qualityservice requires organization-wide focus on quality



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Costs of QualityCosts of Quality

q

Scrap and rework Scr ap and rework - rescheduling, repairing, retesting- rescheduling, repairing, retestingq Defective products in the hands of the customer Defective products in the hands of the customer --

recalls, warranty claims, law suits, lost business, …recalls, warranty claims, law suits, lost business, …

q

Detecting defectsDetecting defects - inspection, testing, ….- inspection, testing, ….q Preventing defectsPreventing defects - training, charting performance,- training, charting performance,

product/process redesign, supplier development, …. product/process redesign, supplier development, ….



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Traditional Quality ManagementTraditional Quality Management

q

Rigorous system of inspectionRigorous system of inspectionq Defective products will be identified and discardedDefective products will be identified and discarded

q Quality can be inspected into productsQuality can be inspected into products

q

Main decision is how many products to inspectMain decision is how many products to inspect(largely a question of economics)(largely a question of economics)





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Modern Quality ManagementModern Quality Management

q

Quality GurusQuality Gurusq Quality Drives the Productivity MachineQuality Drives the Productivity Machine

q Other Aspects of the Quality PictureOther Aspects of the Quality Picture



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Quality GurusQuality Gurus

q

W. Edwards DemingW. Edwards Demingq Assisted Japan in improving productivity andAssisted Japan in improving productivity and

quality after World War IIquality after World War II

q

In 1951 Japan establishedIn 1951 Japan established

Deming PrizeDeming Prize

q US was slow in recognizing his contributionsUS was slow in recognizing his contributions

q Introduced Japanese companies to theIntroduced Japanese companies to the Plan-Do-Plan-Do-

Check-Act (PDCA)Check-Act (PDCA) cycle (developed by Shewart)cycle (developed by Shewart)

q DevelopedDeveloped 14 Points14 Points for managersfor managers



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PDCA CyclePDCA Cycle

2. DO2. DO

Try plan onTry plan on

a test basisa test basis

1. PLAN1. PLAN

Identify im-Identify im-provements and provements and

develop plandevelop plan

3. CHECK 3. CHECK

Evaluate planEvaluate plan

to see if itto see if itworksworks

4. ACT4. ACT

PermanentlyPermanentlyimplementimplement

improvementsimprovements



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Deming’s 14 Points for ManagersDeming’s 14 Points for Managers

1. Create constancy of purpose toward product quality1. Create constancy of purpose toward product qualityto achieve organizational goalsto achieve organizational goals

2. Refuse to allow commonly accepted levels of poor 2. Refuse to allow commonly accepted levels of poor qualityquality

3. Stop depending on inspection to achieve quality3. Stop depending on inspection to achieve quality4. Use fewer suppliers, selected based on quality and4. Use fewer suppliers, selected based on quality and

dependability instead of pricedependability instead of price

5. Instill programs for continuous improvement of 5. Instill programs for continuous improvement of costs, quality, service, and productivitycosts, quality, service, and productivity



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6. Train all employees on quality concepts6. Train all employees on quality concepts7. Focus supervision on helping people do a better job7. Focus supervision on helping people do a better job

8. Eliminate fear, create trust, and encourage two-way8. Eliminate fear, create trust, and encourage two-way

communications between workers and managementcommunications between workers and management

9. Eliminate barriers between departments and9. Eliminate barriers between departments and

encourage joint problem-solvingencourage joint problem-solving

10. Eliminate the use of numerical goals and slogans to10. Eliminate the use of numerical goals and slogans to

make workers work harder make workers work harder



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11. Use statistical methods for continuous improvement11. Use statistical methods for continuous improvementof quality and productivity instead of numer. quotasof quality and productivity instead of numer. quotas

12. Remove barriers to pride of workmanship12. Remove barriers to pride of workmanship

13. Encourage education and self-improvement13. Encourage education and self-improvement

14. Clearly define management’s permanent14. Clearly define management’s permanent

commitment to quality and productivitycommitment to quality and productivity



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q

Philip B. CrosbyPhilip B. Crosbyq WroteWrote Quality Is FreeQuality Is Free in 1979in 1979

q Company should have the goal of Company should have the goal of zero defectszero defects

q

Cost of poor quality is greatly underestimatedCost of poor quality is greatly underestimatedq Traditional trade-off between costs of improvingTraditional trade-off between costs of improving

quality and costs of poor quality is erroneousquality and costs of poor quality is erroneous



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q

Armand V. FeigenbaumArmand V. Feigenbaumq Developed concept of Developed concept of total quality control (TQC)total quality control (TQC)

q Responsibility for quality must rest with theResponsibility for quality must rest with the

persons who do the work ( persons who do the work (quality at the sourcequality at the source))

q Kaoru IshikawaKaoru Ishikawa

q WroteWrote Guide to Quality Control Guide to Quality Control in 1972in 1972

q Credited with the concept of Credited with the concept of quality circlesquality circles

q Suggested the use of Suggested the use of fishbone diagramsfishbone diagrams



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q

Joseph M. JuranJoseph M. Juranq Like Deming, discovered late by US companiesLike Deming, discovered late by US companies

q Played early role in teaching Japan about qualityPlayed early role in teaching Japan about quality

q

WroteWrote Quality Control Handbook Quality Control Handbook q Genichi TaguchiGenichi Taguchi

q Contends that constant adjustment of processes toContends that constant adjustment of processes to

achieve product quality is not effectiveachieve product quality is not effective

q Instead, products should be designed to be robustInstead, products should be designed to be robust

enough to handle process and field variationenough to handle process and field variation



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Quality Drives the Productivity MachineQuality Drives the Productivity Machine

q

If production does it right the first time and producesIf production does it right the first time and produces products and services that are defect-free, waste is products and services that are defect-free, waste is

eliminated and costs are reduced.eliminated and costs are reduced.

q Estimated that 20-25% of COGS in the US is spentEstimated that 20-25% of COGS in the US is spent

on finding and correcting errorson finding and correcting errors

q Quality management programs today are viewed byQuality management programs today are viewed by

many companies as productivity improvementmany companies as productivity improvement

programs. programs.



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Other Aspects of the Quality PictureOther Aspects of the Quality Picture

q

Just-in-time (JIT) and lean manufacturingJust-in-time (JIT) and lean manufacturingq Product standardizationProduct standardization

q Automated equipmentAutomated equipment

q

Preventive maintenancePreventive maintenance



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JIT ManufacturingJIT Manufacturing

q

““ A system of enforced problem solving” A system of enforced problem solving”q Lot sizes are cutLot sizes are cut

q In-process inventories are drastically reducedIn-process inventories are drastically reduced

q

Any interruption causes production to stopAny interruption causes production to stopq Quality problems are immediately addressedQuality problems are immediately addressed

q The necessary teamwork contributes to increasedThe necessary teamwork contributes to increased

pride in quality pride in quality



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Quality Management RecognitionQuality Management Recognition

q

Malcolm Baldrige National Quality AwardMalcolm Baldrige National Quality Awardq Deming PrizeDeming Prize

q ISO 9000 StandardsISO 9000 Standards



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Malcolm Baldrige National Quality AwardMalcolm Baldrige National Quality Award

q

Awards given annually to US firmsAwards given annually to US firmsq Nearly all states have quality award programs styled Nearly all states have quality award programs styled

after the Baldrige Awardafter the Baldrige Award

q Criteria includeCriteria includeq LeadershipLeadershipq Strategic planningStrategic planningq Customer and market focusCustomer and market focusq Information and analysisInformation and analysisq Human resource focusHuman resource focusq Process managementProcess managementq Business resultsBusiness results



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The Deming PrizeThe Deming Prize

q

Awarded by the Union of Japanese Scientists andAwarded by the Union of Japanese Scientists andEngineersEngineers

q Recognizes companies that have demonstratedRecognizes companies that have demonstrated

successful quality improvement programssuccessful quality improvement programs

q All (not just Japanese) firms are eligibleAll (not just Japanese) firms are eligible

q Four top-management activities recognizedFour top-management activities recognizedq Senior management activitiesSenior management activitiesq

Customer satisfaction activityCustomer satisfaction activityq Employee involvement activitiesEmployee involvement activitiesq Training activityTraining activity



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ISO 9000 StandardsISO 9000 Standards

q

Quality management guidelines developed by theQuality management guidelines developed by theInternational Organization for StandardizationInternational Organization for Standardization

q Companies become certified by applying to third-Companies become certified by applying to third-

party providers who assess the level of conformity to party providers who assess the level of conformity to

the standardsthe standardsq More than 300,000 companies worldwide are ISOMore than 300,000 companies worldwide are ISO

9000-certified9000-certified

q The US big three automakers have adopted a similar The US big three automakers have adopted a similar set of standards called QS-9000set of standards called QS-9000



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ISO 9000 StandardsISO 9000 Standards

q

Standards based on 8 quality management principlesStandards based on 8 quality management principlesq Customer focused organizationCustomer focused organizationq LeadershipLeadershipq Involvement of peopleInvolvement of peopleq Process approachProcess approachq System approach to managementSystem approach to managementq Continual improvementContinual improvement

q Factual approach to decision makingFactual approach to decision makingq Mutually beneficial supplier relationshipMutually beneficial supplier relationship



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Total Quality Management (TQM) ProgramsTotal Quality Management (TQM) Programs

q

Motorola -Motorola - Six SigmaSix Sigmaq Xerox -Xerox - Leadership through Quality Leadership through Quality

q Intel -Intel - (PDQ)(PDQ)22 or or Perfect Design Quality, Pretty Perfect Design Quality, Pretty

Darn Quick Darn Quick

q Hewlett-Packard -Hewlett-Packard - Total Quality Control Total Quality Control



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Elements of TQMElements of TQM

q

Top management commitment and involvementTop management commitment and involvementq Customer involvementCustomer involvementq Design products for qualityDesign products for qualityq Design production processes for qualityDesign production processes for qualityq Control production processes for qualityControl production processes for quality

q Developing supplier partnershipsDeveloping supplier partnerships

q Customer service, distribution, and installationCustomer service, distribution, and installation

q Building teams of empowered employeesBuilding teams of empowered employeesq Benchmarking and continuous improvementBenchmarking and continuous improvement

T M tT M t



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Top ManagementTop Management

Commitment and InvolvementCommitment and Involvement

q

Support must be genuine or TQM will be seen as justSupport must be genuine or TQM will be seen as justanother passing fadanother passing fad

q Fundamental changes must occur in the culture of theFundamental changes must occur in the culture of the

organizationorganization

q Such fundamental changes are not easy, but areSuch fundamental changes are not easy, but are

impossible without top management’s commitmentimpossible without top management’s commitment

and involvementand involvement



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Customer InvolvementCustomer Involvement

q

Mechanisms to involve the customer Mechanisms to involve the customer q Focus groupsFocus groupsq Market surveysMarket surveysq Customer questionnairesCustomer questionnairesq Market research programsMarket research programs

q Quality Function Deployment (QFD)Quality Function Deployment (QFD)q Formal system for identifying customer wantsFormal system for identifying customer wantsq Eliminate wasteful product features and activitiesEliminate wasteful product features and activities

that do not contributethat do not contribute



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Designing Products for QualityDesigning Products for Quality

q

Designing for Designing for RobustnessRobustnessProduct will perform as intended even if Product will perform as intended even if

undesirable conditions occur in production or inundesirable conditions occur in production or in

field.field.

q Designing for Designing for ManufacturabilityManufactur ability (DFM)(DFM)

Products typically have fewer parts and can beProducts typically have fewer parts and can be

assembled quickly, easily, and error-free.assembled quickly, easily, and error-free.

q Designing for Designing for ReliabilityR eliability

Manufacturing parts to closer tolerances.Manufacturing parts to closer tolerances.

Using redundant components where necessary.Using redundant components where necessary.



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Designing for ReliabilityDesigning for Reliability

q

Each part of a product is designed for a given level of Each part of a product is designed for a given level of component reliabilitycomponent reliability

q Component reliabilityCom ponent reliability is defined as “the probabilityis defined as “the probability

that a part will not fail in a given time period or that a part will not fail in a given time period or

number of trials under ordinary conditions of use”number of trials under ordinary conditions of use”q 3 common measures of component reliability are:3 common measures of component reliability are:

q Reliability (CR)Reliability (CR)

q Failure Rates (FR and FR Failure Rates (FR and FR nn))q Mean Time Between Failures (MTBF)Mean Time Between Failures (MTBF)



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q

ReliabilityReliability CR = 1 - FR CR = 1 - FR

q Failure RatesFailure Rates

q Mean Time Between FailuresMean Time Between Failures

Number of failuresFR =

Number tested

n

Number of failuresFR =

Unit-hours of operation

n

Unit-hours of operation 1MTBF = =

Number of failures FR



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q

The combined reliability of all the components in aThe combined reliability of all the components in a product forms the basis for product forms the basis for system reliabilitysystem reliability (SR)(SR)

q WhenWhen nn independent critical components areindependent critical components are

combined into a product, the SR is determined by:combined into a product, the SR is determined by:

SR = CR SR = CR 11 xx CR CR

22 xx CR CR 33 xx …… xx CR CR

nn

q Consider a product with 50 identical criticalConsider a product with 50 identical critical

components:components:q If each component’s CR = 99.5%, then SR = 77.8%If each component’s CR = 99.5%, then SR = 77.8%q If each component’s CR = 98.0%, then SR = 36.4%If each component’s CR = 98.0%, then SR = 36.4%q If each component’s CR = 90.0%, then SR = 0.5%If each component’s CR = 90.0%, then SR = 0.5%



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Example: Allied SwitchExample: Allied Switch

q

ReliabilityReliabilityAllied Switch has designed a machine havingAllied Switch has designed a machine having

three critical components that interact. The threethree critical components that interact. The three

parts have component reliability of .96, .90, and .98. parts have component reliability of .96, .90, and .98.

What is the system reliability of the machine?What is the system reliability of the machine?

SR = (CR SR = (CR 11) (CR ) (CR

11) (CR ) (CR 11))

= (.96)(.90)(.98)= (.96)(.90)(.98)= .847= .847



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q

ReliabilityReliabilityIf the machine could be redesigned to allowIf the machine could be redesigned to allow

redundancy for the component that presently has aredundancy for the component that presently has a

reliability of .90, what would be the new systemreliability of .90, what would be the new system

reliability of the machine?reliability of the machine?

.96.96 .98.98.90.90

.90.90



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q

ReliabilityReliability

First, compute the CR for the redundant parts.First, compute the CR for the redundant parts.

CR = Probability of primary component workingCR = Probability of primary component working

+ [(Probability of backup component working)+ [(Probability of backup component working)x (Probability of needing backup component)]x (Probability of needing backup component)]

= .90 + [(.90) x (.10)] = .90 + .09 = .99= .90 + [(.90) x (.10)] = .90 + .09 = .99

Now, compute the system reliability. Now, compute the system reliability.SR = (.96) (.99) (.98) = .931SR = (.96) (.99) (.98) = .931

Designing and ControllingDesigning and Controlling



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Designing and ControllingDesigning and Controlling

Production ProcessesProduction Processes

q

The responsibility of producing products of highThe responsibility of producing products of highquality rests with the workers producing the productquality rests with the workers producing the product

q Two types of factors introduce variation inTwo types of factors introduce variation in

production processes production processes

q Controllable factors - can be reduced by workersControllable factors - can be reduced by workers

and managementand management

q Uncontrollable factors - reduced only byUncontrollable factors - reduced only by

redesigning or replacing existing processesredesigning or replacing existing processes



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Process CapabilityProcess Capability

q

Process capabilityProcess ca pability is a production process’ ability tois a production process’ ability to produce products within the desired expectations of produce products within the desired expectations of

customers.customers.

q TheThe process capability index process capability index (PCI) is a way of (PCI) is a way of

measuring that ability.measuring that ability.



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Process Capability Index (PCI)Process Capability Index (PCI)

PCI = (UL - LL) / (6PCI = (UL - LL) / (6σσ))UL = allowed upper limit of the productUL = allowed upper limit of the product

characteristic, based on customer expect.characteristic, based on customer expect.

LL = allowed lower limit of the productLL = allowed lower limit of the productcharacteristic, based on customer expect.characteristic, based on customer expect.

σσ = standard deviation of the product= standard deviation of the productcharacteristic from the production processcharacteristic from the production process

PCIPCI >> 1.00 Process is capable of meeting customer 1.00 Process is capable of meeting customer expectations.expectations.

PCI < 1.00 Process is not capable.PCI < 1.00 Process is not capable.



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Process Capability Index (PCI)Process Capability Index (PCI)

LLLL ULUL

PCI = 0.8PCI = 0.8

PCI = 1.0PCI = 1.0

PCI = 1.2PCI = 1.2

ProcessProcess

is notis notcapablecapable

ProcessProcessisiscapablecapable

ProcessProcessis quiteis quitecapablecapable



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Example: Process CapabilityExample: Process Capability

In order for a certain molded part to beIn order for a certain molded part to beconsidered acceptable, the molding process must beconsidered acceptable, the molding process must beconducted within a limited range of temperature. Theconducted within a limited range of temperature. Thelower limit is 455lower limit is 455oo and the upper limit is 465and the upper limit is 465oo..

Three molding machinesThree molding machines being considered are A, being considered are A,B, and C with standard deviations of B, and C with standard deviations of σσAA = 2.50,= 2.50, σσBB ==

1.25, and1.25, and σσCC = 1.75.= 1.75.

Which of these machines are capable of Which of these machines are capable of

producing the part in accordance with the temperature producing the part in accordance with the temperaturerequirements?requirements?



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Example: Process CapabilityExample: Process Capability

PCIPCIAA = (465 - 455) / (6(2.50)) = 10/15 = 0.67= (465 - 455) / (6(2.50)) = 10/15 = 0.67PCIPCI

BB = (465 - 455) / (6(1.25)) = 10/7.5 = 1.33= (465 - 455) / (6(1.25)) = 10/7.5 = 1.33

PCIPCICC = (465 - 455) / (6(1.75)) = 10/10.5 = 0.95= (465 - 455) / (6(1.75)) = 10/10.5 = 0.95

Machine A is not close to being capable, with a PCIMachine A is not close to being capable, with a PCI

well below 1.00. Machine B is more than adequatewell below 1.00. Machine B is more than adequate

with a PCI well above 1.00. Machine C falls slightlywith a PCI well above 1.00. Machine C falls slightly

short of being capable.short of being capable.



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Developing Supplier PartnershipsDeveloping Supplier Partnerships

q

Supplier becomes part of the customer’s TQMSupplier becomes part of the customer’s TQM program program

q The relationship between the supplier and theThe relationship between the supplier and the

customer becomes long-lasting and durablecustomer becomes long-lasting and durable

Customer Service Distribution andCustomer Service Distribution and



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Customer Service, Distribution, andCustomer Service, Distribution, and

InstallationInstallation

q

Packaging, shipping, and installation must bePackaging, shipping, and installation must beincluded in TQM.included in TQM.

q Warehousing, marketing, and the distributionWarehousing, marketing, and the distribution

function must be committed to perfect quality.function must be committed to perfect quality.

q Contact between the customers and the firm’s productContact between the customers and the firm’s product

must be planned and managed to provide satisfiedmust be planned and managed to provide satisfied

customers.customers.



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Building Teams of Empowered EmployeesBuilding Teams of Empowered Employees

q

Employee training programsEmployee training programsq Employees at all levels are trained in quality.Employees at all levels are trained in quality.

q Works teams and empowermentWorks teams and empowerment

q

Workers are given the authority to act.Workers are given the authority to act.q Quality at the sourceQuality at the source

q Workers are responsible for their own work.Workers are responsible for their own work.

q Quality circlesQuality circles

q Small groups of employees who analyze andSmall groups of employees who analyze and

solve quality problems and implementsolve quality problems and implement

improvement programs.improvement programs.



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Benchmarking and Continuous ImprovementBenchmarking and Continuous Improvement

q

BenchmarkingBenchmarkingq The practice of establishing internal standards of The practice of establishing internal standards of

performance by looking to how world-class performance by looking to how world-class

companies run their businessescompanies run their businesses

q Continuous ImprovementContinuous Improvement

q The company makes small incrementalThe company makes small incremental

improvements toward excellence on a continualimprovements toward excellence on a continual

basis basis



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Quality Management in ServicesQuality Management in Services

q

Since many services are intangible, it is difficult toSince many services are intangible, it is difficult todetermine their qualitydetermine their quality

q Customers set their own standards for servicesCustomers set their own standards for services

q Perceived quality of service affected by thePerceived quality of service affected by the

surroundingssurroundings

q Performance of service employees determines inPerformance of service employees determines in

large part the quality of the serviceslarge part the quality of the services



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Wrap-Up: World-Class PracticeWrap-Up: World-Class Practice

q

Quality begins when business strategy is formulatedQuality begins when business strategy is formulatedq Quality is the weapon of choice to capture globalQuality is the weapon of choice to capture global

marketsmarkets

q Quality drives the productivity machineQuality drives the productivity machine

q Not depending on inspection to catch defects; Not depending on inspection to catch defects;

concentrating on doing things right the first timeconcentrating on doing things right the first time

q Committing tremendous resources to put in placeCommitting tremendous resources to put in place

TQM programs aimed at continuous improvementTQM programs aimed at continuous improvement



End of Chapter 7

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