Quality Management

6 – 1

Departament d’Economia de l’Empresa / Department of Business Economics & Administration

Operations ManagementOperations Management

Session 4 / 5 – Session 4 / 5 – Managing QualityManaging Quality

6 – 2Departament d’Economia de l’Empresa /

Department of Business Economics & Administration

OutlineOutline Global Company Profile: Arnold Global Company Profile: Arnold

Palmer HospitalPalmer Hospital

Quality and StrategyQuality and Strategy

Defining QualityDefining Quality Implications of QualityImplications of Quality

Cost of Quality (COQ)Cost of Quality (COQ)

Ethics and Quality ManagementEthics and Quality Management



Outline – ContinuedOutline – Continued

International Quality StandardsInternational Quality Standards ISO 9000ISO 9000

ISO14000ISO14000




Total Quality ManagementTotal Quality Management Continuous ImprovementContinuous Improvement

Six SigmaSix Sigma

Employee EmpowermentEmployee Empowerment

BenchmarkingBenchmarking

Just-in-Time (JIT)Just-in-Time (JIT)

Taguchi ConceptsTaguchi Concepts

Knowledge of TQM ToolsKnowledge of TQM Tools




Tools of TQMTools of TQM Check SheetsCheck Sheets

Scatter Diagrams Scatter Diagrams

Cause-and-Effect DiagramsCause-and-Effect Diagrams

Pareto ChartsPareto Charts

FlowchartsFlowcharts

HistogramsHistograms

Statistical Process Control (SPC)Statistical Process Control (SPC)




The Role of InspectionThe Role of Inspection When and Where to InspectWhen and Where to Inspect

Source InspectionSource Inspection

Service Industry InspectionService Industry Inspection

Inspection of Attributes versus Inspection of Attributes versus VariablesVariables

TQM in ServicesTQM in Services



Learning ObjectivesLearning Objectives

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

Define quality and TQMDefine quality and TQM

Describe the ISO international Describe the ISO international quality standardsquality standards

Explain the Six Sigma conceptExplain the Six Sigma concept

Explain quality robust products and Explain quality robust products and Taguchi conceptsTaguchi concepts

Understand the use of the seven Understand the use of the seven tools of TQMtools of TQM



Managing Quality Provides a Managing Quality Provides a Competitive AdvantageCompetitive Advantage

Arnold Palmer HospitalArnold Palmer Hospital

Deliver over 13,000 babies annuallyDeliver over 13,000 babies annually

Virtually every type of quality tool is Virtually every type of quality tool is employedemployed Continuous improvementContinuous improvement

Employee empowermentEmployee empowerment


Just-in-timeJust-in-time

Quality toolsQuality tools



Quality and StrategyQuality and Strategy

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

Quality helps firms increase sales Quality helps firms increase sales and reduce costsand reduce costs

Building a quality organization is Building a quality organization is a demanding taska demanding task



Two Ways Quality Two Ways Quality Improves ProfitabilityImproves Profitability

Improved Improved QualityQuality

Increased Increased ProfitsProfits

Increased productivity

Lower rework and scrap costs

Lower warranty costs

Reduced Costs via

Improved response

Flexible pricing

Improved reputation

Sales Gains via

Figure 6.1Figure 6.1



The Flow of ActivitiesThe Flow of Activities

Organizational PracticesLeadership, Mission statement, Effective operating procedures, Staff support, TrainingYields: What is important and what is to be

accomplished

Quality PrinciplesCustomer focus, Continuous improvement, Benchmarking, Just-in-time, Tools of TQMYields: How to do what is important and to be

accomplished

Employee FulfillmentEmpowerment, Organizational commitmentYields: Employee attitudes that can accomplish

what is importantCustomer SatisfactionWinning orders, Repeat customersYields: An effective organization with

a competitive advantage




Defining QualityDefining Quality

The totality of features and The totality of features and characteristics of a product or characteristics of a product or

service that bears on its ability to service that bears on its ability to satisfy stated or implied needssatisfy stated or implied needs

American Society for QualityAmerican Society for Quality



Different ViewsDifferent Views

User-based – better performance, User-based – better performance, more featuresmore features

Manufacturing-based – Manufacturing-based – conformance to standards, conformance to standards, making it right the first timemaking it right the first time

Product-based – specific and Product-based – specific and measurable attributes of the measurable attributes of the product product



Implications of QualityImplications of Quality

1.1. Company reputationCompany reputation Perception of new productsPerception of new products

Employment practicesEmployment practices

Supplier relationsSupplier relations

2.2. Product liabilityProduct liability Reduce riskReduce risk

3.3. Global implicationsGlobal implications Improved ability to competeImproved ability to compete



Key Dimensions of QualityKey Dimensions of QualityKey Dimensions of QualityKey Dimensions of Quality

PerformancePerformance

FeaturesFeatures

ReliabilityReliability

ConformanceConformance

DurabilityDurability

ServiceabilityServiceability

AestheticsAesthetics

Perceived qualityPerceived quality

ValueValue



Costs of QualityCosts of Quality

Prevention costs - reducing the Prevention costs - reducing the potential for defectspotential for defects

Appraisal costs - evaluating Appraisal costs - evaluating products, parts, and servicesproducts, parts, and services

Internal failure - producing defective Internal failure - producing defective parts or service before deliveryparts or service before delivery

External costs - defects discovered External costs - defects discovered after deliveryafter delivery



External Failure

Internal Failure

Prevention

Costs of QualityCosts of Quality

Appraisal

Total Cost

Quality Improvement

Total CostTotal Cost



Leaders in QualityLeaders in Quality

W. Edwards DemingW. Edwards Deming 14 Points for 14 Points for ManagementManagement

Joseph M. JuranJoseph M. Juran Top management Top management commitment, commitment, fitness for usefitness for use

Armand FeigenbaumArmand Feigenbaum Total Quality Total Quality ControlControl

Philip B. CrosbyPhilip B. Crosby Quality is Free, Quality is Free, zero defectszero defects



Ethics and Quality Ethics and Quality ManagementManagement

Operations managers must deliver Operations managers must deliver healthy, safe, quality products and healthy, safe, quality products and servicesservices

Poor quality risks injuries, lawsuits, Poor quality risks injuries, lawsuits, recalls, and regulationrecalls, and regulation

Organizations are judged by how Organizations are judged by how they respond to problemsthey respond to problems

All stakeholders much be All stakeholders much be consideredconsidered



International Quality International Quality StandardsStandards

ISO 9000 series (Europe/EC)ISO 9000 series (Europe/EC) Common quality standards for products Common quality standards for products

sold in Europe (even if made in U.S.)sold in Europe (even if made in U.S.)

2000 update places greater emphasis on 2000 update places greater emphasis on leadership and customer satisfactionleadership and customer satisfaction

ISO 14000 series (Europe/EC)ISO 14000 series (Europe/EC)



ISO 14000ISO 14000Environmental StandardEnvironmental Standard

Core Elements:Core Elements:

Environmental managementEnvironmental management

AuditingAuditing

Performance evaluationPerformance evaluation

LabelingLabeling

Life cycle assessmentLife cycle assessment



TQMTQM

Encompasses entire organization, Encompasses entire organization, from supplier to customerfrom supplier to customer

Stresses a commitment by Stresses a commitment by management to have a continuing, management to have a continuing,

companywide drive toward companywide drive toward excellence in all aspects of products excellence in all aspects of products

and services that are important to and services that are important to the customerthe customer



Seven Concepts of TQMSeven Concepts of TQM

Continuous improvementContinuous improvement

Six SigmaSix Sigma

Employee empowermentEmployee empowerment


Just-in-time (JIT)Just-in-time (JIT)

Taguchi conceptsTaguchi concepts

Knowledge of TQM toolsKnowledge of TQM tools



Continuous ImprovementContinuous Improvement

Represents continual Represents continual improvement of all processes improvement of all processes

Involves all operations and work Involves all operations and work centers including suppliers and centers including suppliers and customerscustomersPeople, Equipment, Materials, People, Equipment, Materials,

ProceduresProcedures



2. DoTest the

plan

3. CheckIs the plan working?

4. ActImplement

the plan

1.PlanIdentify the

improvement and make

a plan

Shewhart’s PDCA ModelShewhart’s PDCA Model




Six SigmaSix Sigma

Two meaningsTwo meanings Statistical definition of a process that Statistical definition of a process that

is 99.9997% capable, 3.4 defects per is 99.9997% capable, 3.4 defects per million opportunities (DPMO)million opportunities (DPMO)

A program designed to reduce A program designed to reduce defects, lower costs, and improve defects, lower costs, and improve customer satisfactioncustomer satisfaction



Two meaningsTwo meanings Statistical definition of a process that Statistical definition of a process that

is 99.9997% capable, 3.4 defects per is 99.9997% capable, 3.4 defects per million opportunities (DPMO)million opportunities (DPMO)

A program designed to reduce A program designed to reduce defects, lower costs, and improve defects, lower costs, and improve customer satisfactioncustomer satisfaction

Six SigmaSix Sigma

Mean

Lower limits Upper limits

3.4 defects/million

±6

2,700 defects/million

±3

Figure 6.4



Six SigmaSix Sigma

1.1. Define critical outputs Define critical outputs and identify gaps for and identify gaps for improvementimprovement

2.2. Measure the work and Measure the work and collect process datacollect process data

3.3. Analyze the dataAnalyze the data

4.4. Improve the processImprove the process

5.5. Control the new process to Control the new process to make sure new performance make sure new performance is maintainedis maintained

DMAIC ApproachDMAIC Approach



Employee EmpowermentEmployee Empowerment

Getting employees involved in product Getting employees involved in product and process improvementsand process improvements 85% of quality problems are due 85% of quality problems are due

to process and materialto process and material TechniquesTechniques

Build communication networks Build communication networks that include employeesthat include employees

Develop open, supportive supervisorsDevelop open, supportive supervisors Move responsibility to employeesMove responsibility to employees Build a high-morale organizationBuild a high-morale organization Create formal team structuresCreate formal team structures



Quality CirclesQuality Circles

Group of employees who meet Group of employees who meet regularly to solve problemsregularly to solve problems

Trained in planning, problem Trained in planning, problem solving, and statistical methodssolving, and statistical methods

Often led by a facilitatorOften led by a facilitator

Very effective when done Very effective when done properlyproperly



Taguchi ConceptsTaguchi Concepts

Engineering and experimental Engineering and experimental design methods to improve product design methods to improve product and process designand process design Identify key component and process Identify key component and process

variables affecting product variationvariables affecting product variation

Taguchi ConceptsTaguchi Concepts Quality robustnessQuality robustness

Quality loss functionQuality loss function

Target-oriented qualityTarget-oriented quality



Quality RobustnessQuality Robustness

Ability to produce products Ability to produce products uniformly in adverse manufacturing uniformly in adverse manufacturing and environmental conditionsand environmental conditions Remove the effects of adverse Remove the effects of adverse

conditionsconditions

Small variations in materials and Small variations in materials and process do not destroy product process do not destroy product qualityquality



Tools of TQMTools of TQM Tools for Generating IdeasTools for Generating Ideas

Check sheetsCheck sheetsScatter diagramsScatter diagramsCause-and-effect diagramsCause-and-effect diagrams

Tools to Organize the DataTools to Organize the DataPareto chartsPareto chartsFlowchartsFlowcharts

Tools for Identifying ProblemsTools for Identifying ProblemsHistogramHistogramStatistical process control chartStatistical process control chart



/

/

/ / /// /

// ///

// ////

///

//

/

Hour

Defect 1 2 3 4 5 6 7 8

A

B

C

/

/

//

/

Seven Tools of TQMSeven Tools of TQM

(a)(a) Check Sheet: An organized method of Check Sheet: An organized method of recording datarecording data





(b)(b) Scatter Diagram: A graph of the value Scatter Diagram: A graph of the value of one variable vs. another variableof one variable vs. another variable

AbsenteeismAbsenteeism

Pro

du

cti

vit

yP

rod

uc

tiv

ity





(c)(c) Cause-and-Effect Diagram: A tool that Cause-and-Effect Diagram: A tool that identifies process elements (causes) that identifies process elements (causes) that might effect an outcomemight effect an outcome


CauseCause

MaterialsMaterials MethodsMethods

ManpowerManpower MachineryMachinery

EffectEffect




(d)(d) Pareto Chart: A graph to identify and plot Pareto Chart: A graph to identify and plot problems or defects in descending order of problems or defects in descending order of frequencyfrequency


Fre

qu

en

cyF

req

ue

ncy

Pe

rce

nt

Pe

rce

nt

AA BB CC DD EE




(e)(e) Flowchart (Process Diagram): A chart that Flowchart (Process Diagram): A chart that describes the steps in a processdescribes the steps in a process





(f)(f) Histogram: A distribution showing the Histogram: A distribution showing the frequency of occurrences of a variablefrequency of occurrences of a variable


DistributionDistribution

Repair time (minutes)Repair time (minutes)

Fre

qu

en

cyF

req

ue

ncy




(g)(g) Statistical Process Control Chart: A chart with Statistical Process Control Chart: A chart with time on the horizontal axis to plot values of a time on the horizontal axis to plot values of a statisticstatistic


Upper control limitUpper control limit

Target valueTarget value

Lower control limitLower control limit

TimeTime



Cause-and-Effect DiagramsCause-and-Effect DiagramsMaterialMaterial

(ball)(ball)MethodMethod

(shooting process)(shooting process)

MachineMachine(hoop &(hoop &

backboard)backboard)

ManpowerManpower(shooter)(shooter)

Missed Missed free-throwsfree-throws


Rim alignmentRim alignment

Rim sizeRim size

Backboard Backboard stabilitystability

Rim heightRim height

Follow-throughFollow-through

Hand positionHand position

Aiming pointAiming point

Bend kneesBend knees

BalanceBalance

Size of ballSize of ball

LopsidednessLopsidedness

Grain/Feel Grain/Feel (grip)(grip)

Air pressureAir pressure

TrainingTraining

ConditioningConditioning MotivationMotivation

ConcentrationConcentration

ConsistencyConsistency



Pareto ChartsPareto Charts

Number of Number of occurrencesoccurrences

Room svcRoom svc Check-inCheck-in Pool hoursPool hours MinibarMinibar Misc.Misc.72%72% 16%16% 5%5% 4%4% 3%3%

1212

44 33 22

5454

– 100100– 9393– 8888

– 7272

70 70 –

60 60 –

50 50 –

40 40 –

30 30 –

20 20 –

10 10 –

0 0 –

Fre

qu

ency

(n

um

ber

)F

req

uen

cy (

nu

mb

er)

Causes and percent of the totalCauses and percent of the total

Cu

mu

lati

ve p

erce

nt

Cu

mu

lati

ve p

erce

nt

Data for OctoberData for October



Flow ChartsFlow Charts

MRI FlowchartMRI Flowchart1.1. Physician schedules MRIPhysician schedules MRI2.2. Patient taken to MRIPatient taken to MRI3.3. Patient signs inPatient signs in4.4. Patient is preppedPatient is prepped5.5. Technician carries out MRITechnician carries out MRI6.6. Technician inspects filmTechnician inspects film

7.7. If unsatisfactory, repeatIf unsatisfactory, repeat8.8. Patient taken back to roomPatient taken back to room9.9. MRI read by radiologistMRI read by radiologist10.10. MRI report transferred to MRI report transferred to

physicianphysician11.11. Patient and physician discussPatient and physician discuss

1111

1010

20%20%

99

8880%80%

11 22 33 44 55 66 77



Statistical Process Control Statistical Process Control (SPC)(SPC)

Uses statistics and control charts to Uses statistics and control charts to tell when to take corrective actiontell when to take corrective action

Drives process improvementDrives process improvement

Four key stepsFour key steps Measure the processMeasure the process

When a change is indicated, find the When a change is indicated, find the assignable causeassignable cause

Eliminate or incorporate the causeEliminate or incorporate the cause

Restart the revised processRestart the revised process



An SPC ChartAn SPC Chart

Upper control limitUpper control limit

Coach’s target valueCoach’s target value

Lower control limitLower control limit

Game numberGame number

| | | | | | | | |

11 22 33 44 55 66 77 88 99

20%20%

10%10%

0%0%

Plots the percent of free throws missedPlots the percent of free throws missed




InspectionInspection

Involves examining items to see if Involves examining items to see if an item is good or defectivean item is good or defective

Detect a defective productDetect a defective product Does not correct deficiencies in Does not correct deficiencies in

process or productprocess or product It is expensiveIt is expensive

IssuesIssues When to inspectWhen to inspect Where in process to inspectWhere in process to inspect



When and Where to InspectWhen and Where to Inspect

1.1. At the supplier’s plant while the supplier is At the supplier’s plant while the supplier is producingproducing

2.2. At your facility upon receipt of goods from At your facility upon receipt of goods from the supplierthe supplier

3.3. Before costly or irreversible processesBefore costly or irreversible processes

4.4. During the step-by-step production During the step-by-step production processprocess

5.5. When production or service is completeWhen production or service is complete

6.6. Before delivery to your customerBefore delivery to your customer

7.7. At the point of customer contactAt the point of customer contact



InspectionInspection

Many problemsMany problems Worker fatigueWorker fatigue

Measurement errorMeasurement error

Process variabilityProcess variability

Cannot inspect quality into a Cannot inspect quality into a productproduct

Robust design, empowered Robust design, empowered employees, and sound processes employees, and sound processes are better solutionsare better solutions



Source InspectionSource Inspection

Also known as source controlAlso known as source control

The next step in the process is The next step in the process is your customeryour customer

Ensure perfect product Ensure perfect product to your customerto your customer

Poka-yoke is the concept of foolproof devices or techniques designed to pass only

acceptable product




OrganizationOrganization What is What is InspectedInspected StandardStandard

Jones Law OfficeJones Law Office Receptionist Receptionist performanceperformance

BillingBilling

AttorneyAttorney

Is phone answered by the Is phone answered by the second ringsecond ring

Accurate, timely, and Accurate, timely, and correct formatcorrect format

Promptness in returning Promptness in returning callscalls

Table 6.5Table 6.5





Hard Rock HotelHard Rock Hotel Reception Reception deskdesk

DoormanDoorman

RoomRoom

MinibarMinibar

Use customer’s nameUse customer’s name

Greet guest in less than 30 Greet guest in less than 30 secondsseconds

All lights working, spotless All lights working, spotless bathroombathroom

Restocked and charges Restocked and charges accurately posted to billaccurately posted to bill

Table 6.5Table 6.5





Arnold Palmer Arnold Palmer HospitalHospital

BillingBilling

PharmacyPharmacy

LabLab

NursesNurses

AdmissionsAdmissions

Accurate, timely, and Accurate, timely, and correct formatcorrect format

Prescription accuracy, Prescription accuracy, inventory accuracyinventory accuracy

Audit for lab-test accuracyAudit for lab-test accuracy

Charts immediately Charts immediately updatedupdated

Data entered correctly and Data entered correctly and completelycompletely

Table 6.5Table 6.5





Olive Garden Olive Garden RestaurantRestaurant

BusboyBusboy

BusboyBusboy

WaiterWaiter

Serves water and bread Serves water and bread within 1 minutewithin 1 minute

Clears all entrée items and Clears all entrée items and crumbs prior to dessertcrumbs prior to dessert

Knows and suggest Knows and suggest specials, dessertsspecials, desserts

Table 6.5Table 6.5





Nordstrom Nordstrom Department Department StoreStore

Display areasDisplay areas

StockroomsStockrooms

SalesclerksSalesclerks

Attractive, well-organized, Attractive, well-organized, stocked, good lightingstocked, good lighting

Rotation of goods, Rotation of goods, organized, cleanorganized, clean

Neat, courteous, very Neat, courteous, very knowledgeableknowledgeable

Table 6.5Table 6.5



Attributes Versus VariablesAttributes Versus Variables

AttributesAttributes Items are either good or bad, Items are either good or bad,

acceptable or unacceptableacceptable or unacceptable Does not address degree of failureDoes not address degree of failure

VariablesVariables Measures dimensions such as weight, Measures dimensions such as weight,

speed, height, or strengthspeed, height, or strength Falls within an acceptable rangeFalls within an acceptable range

Use different statistical techniquesUse different statistical techniques



TQM In ServicesTQM In Services

Service quality is more difficult to Service quality is more difficult to measure than the quality of goodsmeasure than the quality of goods

Service quality perceptions depend Service quality perceptions depend on on Intangible differences between Intangible differences between

productsproducts

Intangible expectations customers Intangible expectations customers have of those productshave of those products



Service QualityService Quality

The Operations Manager must The Operations Manager must recognize:recognize:

1.1. The tangible component of The tangible component of services is importantservices is important

2.2. The service process is importantThe service process is important

3.3. The service is judged against the The service is judged against the customer’s expectationscustomer’s expectations

4.4. Exceptions will occurExceptions will occur



ServiceServiceSpecificationsSpecifications

at UPSat UPS



Determinants of Service Determinants of Service QualityQuality

ReliabilityReliability

ResponsivenessResponsiveness

CompetenceCompetence

AccessAccess

CourtesyCourtesy

CommunicationCommunication

CredibilityCredibility

SecuritySecurity

Understanding/ Understanding/ knowing the knowing the customercustomer

TangiblesTangibles



Service Recovery StrategyService Recovery Strategy

Managers should have a plan for Managers should have a plan for when services failwhen services fail

Marriott’s LEARN routineMarriott’s LEARN routine ListenListen

EmpathizeEmpathize

ApologizeApologize

ReactReact

NotifyNotify

Education

Quality Management