Operations
Management
Managing Quality
Chapter 6
6-1
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
Ways Quality Can Improve Profitability
Sales Gains
Improved response
 Higher Prices
 Improved reputation

Improved
Quality
Reduced Costs
Increased
Profits
Increased productivity
 Lower rework / scrap costs
 Lower warranty costs

6-2
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
Flow of Activities Necessary to
Achieve Total Quality Management
 Organizational Practices
 Quality Principles
 Employee Fulfillment
 Customer Satisfaction
6-3
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
TQM – Organizational Practices
 Organizational Practices
 Leadership
 Mission statement
 Quality Principles
 Effective operating procedure  Employee Fulfillment
 Staff support
 Customer Satisfaction
 Training
What is important and what is to be accomplished
6-4
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
TQM – Quality Principles

 Customer focus
 Continuous improvement
 Employee empowerment
 Benchmarking
 Just-in-time
 Tools of TQM
Organizational Practices
 Quality Principles
 Employee Fulfillment
 Customer Satisfaction
How to do what is important and to be accomplished
6-5
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
TQM – Employee Fulfillment
 Organizational Practices
 Empowerment
 Organizational commitment  Quality Principles
 Employee Fulfillment
 Customer Satisfaction
Employees’ attitudes that they can accomplish
what is important and to be accomplished
6-6
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
TQM – Customer Satisfaction
 Winning orders
 Repeat customers

Organizational Practices

Quality Principles
 Employee Fulfillment
 Customer Satisfaction
An effective organization with
a competitive advantage
6-7
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
Definitions of Quality
ASQ: The totality of features and characteristics of a
product or service that bears on its ability to satisfy
stated or implied needs
CATAGORIES
 User-Based: What consumer says it is
 Product-Based: Level of measurable product characteristic
 Manufacturing-Based: Degree to which a product
conforms to design specification
CONFORMANCE IS THE JOB OF OPERATIONS
6-8
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
Dimensions of Quality for Goods



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

Operation
Reliability & durability
Serviceability
Appearance
Perceived quality
Conformance
6-9
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
Service Quality Attributes
Reliability
Responsiveness
Tangibles
Competence
Understanding
Access
Security
Courtesy
© 1995 Corel Corp.
Credibility
Communication
How do we build quality into our service offerings?
6-10
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
Costs of Quality


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
Prevention costs
Appraisal costs
Internal failure costs
External failure costs
Costs of poor quality are huge but the amounts
are not known with precision. In most companies,
the accounting system provides only a minority of the
information needed to quantify this cost of poor quality
Juran on “Quality by Design” The Free Press (1992)
6-11
© 2004 by Prentice Hall, Inc. ,
Upper Saddle River, N.J. 07458
Prevention Costs
Costs associated with preventing
defects before they happen




Redesigning the process to remove
causes of defects
Redesigning the product or service
Training employees in continuous improvement
Working with suppliers to improve quality
6-12
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
Appraisal Costs
Costs to assess / appraise quality



Test / inspection to identify quality problems
Used to screen out defective product
… this is NOT best practice
As preventive measures improve quality,
appraisal costs decrease
6-13
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
Internal Failure Costs
Costs resulting from defects
discovered during production
of the product or service


Yield / scrap
Rework / correcting mistakes
(note may also affect delivery)
6-14
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
External Failure Costs
Costs resulting from defects
discovered after delivery of the
product or service to the customer

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Warranty service expense
Customer returns
Dissatisfied customers / repeat business
Poor publicity
Lawsuits
6-15
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
Cost of detection and correction
Cost of Detecting Defects
Prevention, not inspection or correction
Process
Final testing
Customer
Where defect is detected
6-16
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
Traditional Quality Process
(Manufacturing)
Customer
Marketing
Engineering
Operations
Specifies
Need
Interprets
Need
Designs
Product
Produces
Product
Defines
Quality
Plans
Quality
Monitors
Quality
6-17
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
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.
6-18
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
Concepts of TQM
Continuous improvement
Employee empowerment
Benchmarking
Just-in-time (JIT)
Taguchi concepts
Knowledge of TQM tools
6-19
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
TQM CONCEPTS
Continuous Improvement
 Continual improvement of people, equipment, suppliers,
materials, process & customer satisfaction
 Based on philosophy that every aspect of
an operation can be improved
Plan
 Involves all operations
and work units
 Other names



Act
Kaizen
Zero-defects
Six sigma
Do
Check
6-20
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
TQM CONCEPTS
Employee Empowerment
 Involving employees in product & process improvement


85% of quality problems are due to processes & materials
The people most closely associated with an operation are in
the best position to identify the changes that should be made
 Techniques

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Support workers
Let workers make decisions
Build teams & quality circles
Training
6-21
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
TQM CONCEPTS
Benchmarking
Selecting best practices in products,
services, processes, or costs to use
as a standard for performance
 Determine what to benchmark
 Form a benchmark team
 Identify benchmarking partners
 Collect and analyze benchmarking information
 Take action to match or exceed the benchmark
6-22
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
TQM CONCEPTS
Best Practices Example –
Resolving Customer Complaints

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


Make it easy for clients to complain
Respond quickly to complaints
Resolve complaints on the first contact
Use computers to manage complaints
Recruit the best for customer service jobs
6-23
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
TQM CONCEPTS
Just-in-Time (JIT)
Relationship to quality:
 JIT cuts the cost of quality
 JIT improves quality
 Better quality means
less inventory and
better, easier-toemploy JIT system
QUALITY
JIT
6-24
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
TQM CONCEPTS
Taguchi Concepts
Experimental design methods to improve product
and process design

Quality Robustness
– Ability to produce products uniformly
regardless of manufacturing conditions
– Removing the effects is often
cheaper than removing the causes
Quality loss function
 Target specifications

6-25
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
TQM CONCEPTS
Taguchi Concepts
Experimental design methods to improve product
and process design

Quality Robustness

Quality loss function
– Identifies all costs
(loss to society)
connected with
poor quality
– Costs increase as
the product moves
away from the target

High
Loss
Quality Loss Function
Unacceptable
Poor
Fair
Good
Best
Low
Loss
Lower
Specification
Target
Upper
Target specifications
6-26
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
Taguchi Concepts
TQM CONCEPTS
Experimental design methods to improve product
and process design
 Quality Robustness
 Quality loss function
 Target-oriented quality
– Philosophy of continuous
improvement to bring the
product exactly on target
– Traditional conformanceoriented specs produce
more units farther from
the target (greater loss)
Quality Loss Function (a)
High
loss
Unacceptable
Poor
Fair
Low
loss
Good
Best
Conformanceoriented quality
keeps product within
three standard
deviations
Frequency
Lower
6-27
Target-oriented
quality yields
more product in
the “best”
category and
brings products
toward the
target level
Upper
Target
Specification
Distribution of
specs for product
produced (b)
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
Seven Tools of TQM
6-28
TQM CONCEPTS
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
TQM CONCEPTS
Process Chart
 Shows sequence of events in process
 Depicts activity relationships
 Has many uses
Identify data collection points
 Find problem sources
 Identify areas for improvement
 Identify where travel distances
can be reduced

Distance
40
94 feet
100 feet
6-29
Time
Description
Key
60 min.
Raw storage
Operation
1 min.
To drill press
Transport
90 min
1 min
Wait for Operator to
set-up
Drill holes
Delay /
Storage
Inspection
1.5 min.
De-burring
6 min.
Operator set-up
1.3 min.
De-burr
To lathe
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
TQM CONCEPTS
Process Chart example
Distance
40
94 feet
100 feet
Time
Description
Key
60 min.
Raw storage
Operation
1 min.
To drill press
Transport
90 min
1 min
Wait for Operator to
set-up
Drill holes
Delay /
Storage
Inspection
1.5 min.
De-burring
6 min.
Operator set-up
1.3 min.
De-burr
To lathe
6-30
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
TQM CONCEPTS
Cause and Effect Diagram
Main Cause
Main Cause
Specific
cause
Specific
cause
Effect
Specific
cause
(problem)
Specific
cause
Specific
cause
Main Cause
Main Cause
6-31
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
TQM CONCEPTS
Cause and Effect Diagram
Example
Method
Manpower
Drilling
too slow
Overtime/
fatigue
Wood
Lathe not
calibrated
Steel
Material
Too many
defects
Machinery
6-32
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6-33
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
TQM CONCEPTS
Inspection
 Examining items to see if they are good or defective
Does not correct deficiencies in process or product
 Does not add value to the product / service

 Why inspect – to ensure that we are producing
at the expected quality level
 Issues
When to inspect
 Where in process to inspect

6-34
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
TQM CONCEPTS
When and Where to Inspect
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At the supplier’s plant while the supplier is producing
At your facility upon receipt of goods from the supplier
Before costly or irreversible processes
During the step-by-step production process
When production or service is complete
Before delivery from your facility
At the point of customer contact
The best inspection can be thought of as no
inspection at all: Source inspection – controlling or
monitoring at the point of production or purchase
6-35
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
TQM CONCEPTS
100% Inspection vs. SPC
Ship
Process
Rework
100%
Inspection
Scrap
Ship
Process
Sample
Feedback
6-36
SPC
(Control
Charting)
Normal variance
or
cause for concern
© 2004 by Prentice Hall,
? Inc. , Upper Saddle River, N.J. 07458
TQM In Services
It is more difficult to measure quality for services
than for goods


Intangible differences between products (services)
Intangible expectations of customers
Reliability
Tangibles
Understanding
Security
Responsiveness
Competence
Access
Courtesy
© 1995 Corel Corp.
Credibility
6-37
Communication
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
Operations Role in Service Quality
 The tangible component of many services
is important
 Operations can design processes (service products)
that have quality attributes
 Customers’ perceptions are the quality standard –
Operations can influence both the quality of the
service and the expectation
 Preparation for exceptions – contingency plans for
sub-optimal operating conditions
6-38
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458
Summary
 TQM is a supply chain-wide philosophy
to continuously improve processes to make
products that will satisfy our customers.
 TQM and Just-in-Time support each other
 In the process of getting better, most companies
also reduce costs and lead time through
elimination of waste.
So TQM is a way to get faster,
better and cheaper simultaneously.
6-39
© 2004 by Prentice Hall, Inc. , Upper Saddle River, N.J. 07458