© 2006 Prentice Hall, Inc.6 – 1 Chapter 6 Managing Quality

© 2006 Prentice Hall, Inc. 6 – 1

Chapter 6

Managing Quality

2© 2006 Prentice Hall, Inc. 6 – 2

Outline

Quality And StrategyQuality And Strategy

Defining QualityDefining Quality

Why Quality is important?Why Quality is important?

Seven tools of TQMSeven tools of TQM


Quality and Strategy

Managing quality supports Managing quality supports differentiationdifferentiation, , low costlow cost, and , and response strategiesresponse strategies

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

Building a quality organization is a Building a quality organization is a demanding taskdemanding task


How Quality improves Profitability?


Ways Quality Improves Productivity

Improved Improved QualityQuality

Increased Increased ProfitsProfits

Increased productivity Lower rework and scrap costs Lower warranty costs

Reduced Costs

Improved response

Higher Prices

Improved reputation

Sales Gains

Figure 6.1Figure 6.1


How do you define Quality?


Defining 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 Views

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

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

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


Implications 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


Malcom Baldrige National Quality Award

Established in 1988 by the U.S. Established in 1988 by the U.S. governmentgovernment

Designed to promote TQM practicesDesigned to promote TQM practices

Recent winnersRecent winners The Bama Companies, Kenneth W. The Bama Companies, Kenneth W.

Monfort College of Business, Monfort College of Business, Caterpillar Financial Services, Baptist Caterpillar Financial Services, Baptist Hospital, Clarke American Checks, Hospital, Clarke American Checks, Los Alamos National BankLos Alamos National Bank


What are the costs of quality?


Costs 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 Quality

Appraisal

Total Cost

Quality Improvement

Total CostTotal Cost


TQM (Total Quality Management)

Refers to a quality emphasis that:

Encompasses entire organization, from

supplier to customer. And Stresses a

commitment by management to have a continuing, companywide drive toward excellence in all aspects of products and services that are important to the customer


Deming’s Fourteen Points (How he implemented TQM!?)

1. Create consistency of purpose2. Lead to promote change3. Build quality into the product; stop

depending on inspection4. Build long term relationships based on

performance, not price5. Continuously improve product, quality, and

service6. Start training7. Emphasize leadership

Table 6.1Table 6.1


Deming’s Fourteen Points

8. Drive out fear9. Break down barriers between departments10. Stop haranguing workers11. Support, help, improve12. Remove barriers to pride in work13. Institute a vigorous program of education

and self-improvement14. Put everybody in the company to work on

the transformation

Table 6.1Table 6.1


We develop those into Seven Concepts of TQM

1. Continuous improvement

2. Six Sigma

3. Employee empowerment

4. Benchmarking

5. Just-in-time (JIT)

6. Taguchi concepts

7. Knowledge of TQM tools


1- Continuous 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 Model for Continuous Improvement



Seven Concepts of TQM


2. Six Sigma


4. Benchmarking


6. Taguchi concepts



2-Six Sigma

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

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

Highly structured approach to Highly structured approach to process improvementprocess improvement


Six Sigma Improvement Model

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




2. Six Sigma


4. Benchmarking


6. Taguchi concepts



3- Employee Empowerment

Getting employees involved in product and process improvements

85% of quality problems are due to process and material

Techniques Build communication networks that include

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


Quality Circles

Group of employees who meet regularly to solve problems

Trained in planning, problem solving, and statistical methods

Often led by a facilitator Very effective when done properly




2. Six Sigma


4. Benchmarking


6. Taguchi concepts



Use internal

benchmarking

if you’re big

enough

4-Benchmarking

Selecting best practicesSelecting best practices to use as a to use as a standard for performancestandard for performance

Determine what to Determine what to benchmarkbenchmark

Form a benchmark teamForm a benchmark team Identify benchmarking partnersIdentify benchmarking partners Collect and analyze benchmarking Collect and analyze benchmarking

informationinformation Take action to match or exceed the Take action to match or exceed the

benchmarkbenchmark


Best Practices for Resolving Customer Complaints

Make it easy for clients to complainMake it easy for clients to complain Respond quickly to complaintsRespond quickly to complaints Resolve complaints on first contactResolve complaints on first contact Use computers to manage Use computers to manage

complaintscomplaints Recruit the best for customer Recruit the best for customer

service jobsservice jobs




2. Six Sigma


4. Benchmarking


6. Taguchi concepts



What is a “Just In Time” system? And How is it related to Quality?


5-Just-in-Time (JIT):

Relationship to quality:

JIT cuts the cost of qualityJIT cuts the cost of quality

JIT improves qualityJIT improves quality

Better quality means less Better quality means less inventory and better, easier-to-inventory and better, easier-to-employ JIT systememploy JIT system

JIT systems are designed to produce or deliver goods

as they are needed


Just-in-Time (JIT)

‘‘Pull’ system of production scheduling Pull’ system of production scheduling including supply managementincluding supply management Production only when signaledProduction only when signaled

Allows reduced inventory levelsAllows reduced inventory levels Inventory costs money and hides process Inventory costs money and hides process

and material problemsand material problems

Encourages improved process and Encourages improved process and product qualityproduct quality


Just-In-Time (JIT) Example

ScrapUnreliable Vendors

Capacity Imbalances

Work in process inventory level

(hides problems)


Just-In-Time (JIT) Example

Reducing inventory revealsReducing inventory revealsproblems so they can be solvedproblems so they can be solved

ScrapUnreliable Vendors

Capacity Imbalances




2. Six Sigma


4. Benchmarking


6. Taguchi concepts



Taguchi Concepts Most Quality problems are the result of poor product and process Most Quality problems are the result of poor product and process design.design.

Experimental design methods to Experimental design methods to improve product and process designimprove product and process design

Identify key component and Identify key component and process variables affecting process variables affecting product variationproduct variation




2. Six Sigma


4. Benchmarking


6. Taguchi concepts



Tools of TQM

To empower employees and implement TQM as a continuing effort, everyone in the organization must be trained in the techniques of TQM.


Tools 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 chartsFlow chartsFlow charts

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 for TQM

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








Seven Tools for TQM

(b)(b) Scatter DiagramScatter Diagram: A graph of the value : 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








Seven Tools for TQM

(c)(c) Cause and Effect DiagramCause and Effect Diagram: A tool that : 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


Cause-and-Effect Diagrams

MaterialMaterial MachineryMachinery

MethodsMethods ManpowerManpower

InadequateInadequate

supply of supply of magazinesmagazines

Inadequate special Inadequate special

meals on-boardmeals on-board

Insu

ffic

ien

t In

suff

icie

nt

clea

n p

illo

ws

clea

n p

illo

ws

& b

lan

kets

&

bla

nke

ts

on

-bo

ard

on

-bo

ardBroken luggage Broken luggage

carouselcarousel

Mechanical delay Mechanical delay

on planeon plane

Dei

cin

g

Dei

cin

g

equ

ipm

ent

equ

ipm

ent

no

t av

aila

ble

no

t av

aila

ble

Overbooking policiesOverbooking policies

Bumping policiesBumping policies

Mis

tag

ged

M

ista

gg

ed

bag

sb

ags

Po

or

chec

k-in

P

oo

r ch

eck-

in

po

lici

es

po

lici

es

Understaffed Understaffed

ticket countersticket counters

Understaffed Understaffed

crewcrew

Po

orl

y tr

ain

ed

Po

orl

y tr

ain

ed

atte

nd

ants

atte

nd

ants

Dissatisfied Dissatisfied Airline Airline CustomerCustomer








Seven Tools for TQM

(d)(d) Pareto ChartsPareto Charts: A graph to identify and plot : 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


Pareto 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 percentCauses and percent

Cu

mu

lati

ve p

erce

nt

Cu

mu

lati

ve p

erce

nt

Data for OctoberData for October







Seven Tools for TQM

(e)(e) Flow ChartsFlow Charts (Process Diagrams): A chart (Process Diagrams): A chart that describes the steps in a processthat describes the steps in a process



Shipping dock

Storage(4 to 6 hrs)

Quick freeze storage

(60 Mins)

Sealing Weighing Labeling

Flow Charts

Packing and shipping processPacking and shipping process

Packing station







Seven Tools for TQM

(f)(f) HistogramHistogram: A distribution showing the : A distribution showing the frequency of occurrence of a variablefrequency of occurrence of a variable


DistributionDistribution

Repair time (minutes)Repair time (minutes)

Fre

qu

en

cyF

req

ue

ncy


Seven Tools for TQM

(g)(g) Statistical Process Control ChartStatistical Process Control Chart: A chart with : 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


Statistical Process Control (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 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



Inspection

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 Inspect?


When 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 processesprocesses

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

6.6. Before delivery from your facilityBefore delivery from your facility

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


TQM 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


Determinants of Service Quality

ReliabilityReliability

ResponsivenessResponsiveness

CompetenceCompetence

AccessAccess

CourtesyCourtesy

CommunicationCommunication

CredibilityCredibility

SecuritySecurity

Understanding/ Understanding/ knowing the knowing the customercustomer

TangiblesTangibles

Documents

© 2006 Prentice Hall, Inc.6 – 1 Chapter 6 Managing Quality