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Chapter 6. Managing Quality. Outline. Quality And Strategy Defining Quality Why Quality is important? Seven tools of TQM. Quality and Strategy. Managing quality supports differentiation , low cost , and response strategies Quality helps firms increase sales and reduce costs

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Chapter 6

Managing Quality


Outline

  • Quality And Strategy

  • Defining Quality

  • Why Quality is important?

  • Seven tools of TQM


Quality and Strategy

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

  • Quality helps firms increase sales and reduce costs

  • Building a quality organization is a demanding task


How Quality improves Profitability?


Sales Gains

  • Improved response

  • Higher Prices

  • Improved reputation

Improved Quality

Increased Profits

Reduced Costs

  • Increased productivity

  • Lower rework and scrap costs

  • Lower warranty costs

Ways Quality Improves Productivity

Figure 6.1


How do you define Quality?


Defining Quality

The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs

American Society for Quality


Different Views

  • User-based – better performance, more features

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

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


Implications of Quality

  • Company reputation

    • Perception of new products

    • Employment practices

    • Supplier relations

  • Product liability

    • Reduce risk

  • Global implications

    • Improved ability to compete


Malcom Baldrige National Quality Award

  • Established in 1988 by the U.S. government

  • Designed to promote TQM practices

  • Recent winners

    • The Bama Companies, Kenneth W. Monfort College of Business, Caterpillar Financial Services, Baptist Hospital, Clarke American Checks, Los Alamos National Bank


What are the costs of quality?


Costs of Quality

  • Prevention costs - reducing the potential for defects

  • Appraisal costs - evaluating products, parts, and services

  • Internal failure - producing defective parts or service before delivery

  • External costs - defects discovered after delivery


Total Cost

Total Cost

External Failure

Internal Failure

Prevention

Appraisal

Quality Improvement

Costs of Quality


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!?)

  • Create consistency of purpose

  • Lead to promote change

  • Build quality into the product; stop depending on inspection

  • Build long term relationships based on performance, not price

  • Continuously improve product, quality, and service

  • Start training

  • Emphasize leadership

Table 6.1


Deming’s Fourteen Points

  • Drive out fear

  • Break down barriers between departments

  • Stop haranguing workers

  • Support, help, improve

  • Remove barriers to pride in work

  • Institute a vigorous program of education and self-improvement

  • Put everybody in the company to work on the transformation

Table 6.1


We develop those into Seven Concepts of TQM

  • Continuous improvement

  • Six Sigma

  • Employee empowerment

  • Benchmarking

  • Just-in-time (JIT)

  • Taguchi concepts

  • Knowledge of TQM tools


1- Continuous Improvement

  • Represents continual improvement of all processes

  • Involves all operations and work centers including suppliers and customers

    • People, Equipment, Materials, Procedures


Plan

Identify the improvement and make a plan

4. Act

Implement the plan

3. Check

Is the plan working?

2. Do

Test the plan

Shewhart’s PDCA Model for Continuous Improvement

Figure 6.3


Seven Concepts of TQM

  • Continuous improvement

  • Six Sigma

  • Employee empowerment

  • Benchmarking

  • Just-in-time (JIT)

  • Taguchi concepts

  • Knowledge of TQM tools


2-Six Sigma

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

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

  • Highly structured approach to process improvement


Define critical outputs and identify gaps for improvement

Measure the work and collect process data

Analyze the data

Improve the process

Control the new process to make sure new performance is maintained

Six Sigma Improvement Model

DMAIC Approach


Seven Concepts of TQM

  • Continuous improvement

  • Six Sigma

  • Employee empowerment

  • Benchmarking

  • Just-in-time (JIT)

  • Taguchi concepts

  • Knowledge of TQM tools


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


Seven Concepts of TQM

  • Continuous improvement

  • Six Sigma

  • Employee empowerment

  • Benchmarking

  • Just-in-time (JIT)

  • Taguchi concepts

  • Knowledge of TQM tools


4-Benchmarking

Selecting best practices to use as a standard for performance

Use internal benchmarking if you’re big enough

  • Determine what to benchmark

  • Form a benchmark team

  • Identify benchmarking partners

  • Collect and analyze benchmarking information

  • Take action to match or exceed the benchmark


Best Practices for Resolving Customer Complaints

  • Make it easy for clients to complain

  • Respond quickly to complaints

  • Resolve complaints on first contact

  • Use computers to manage complaints

  • Recruit the best for customer service jobs


Seven Concepts of TQM

  • Continuous improvement

  • Six Sigma

  • Employee empowerment

  • Benchmarking

  • Just-in-time (JIT)

  • Taguchi concepts

  • Knowledge of TQM tools


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


5-Just-in-Time (JIT):

JIT systems are designed to produce or deliver goods

as they are needed

Relationship to quality:

  • JIT cuts the cost of quality

  • JIT improves quality

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


Just-in-Time (JIT)

  • ‘Pull’ system of production scheduling including supply management

    • Production only when signaled

  • Allows reduced inventory levels

    • Inventory costs money and hides process and material problems

  • Encourages improved process and product quality


Unreliable Vendors

Capacity Imbalances

Scrap

Just-In-Time (JIT) Example

Work in process inventory level(hides problems)


Just-In-Time (JIT) Example

Reducing inventory revealsproblems so they can be solved

Unreliable Vendors

Capacity Imbalances

Scrap


Seven Concepts of TQM

  • Continuous improvement

  • Six Sigma

  • Employee empowerment

  • Benchmarking

  • Just-in-time (JIT)

  • Taguchi concepts

  • Knowledge of TQM tools


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

  • Experimental design methods to improve product and process design

    • Identify key component and process variables affecting product variation


Seven Concepts of TQM

  • Continuous improvement

  • Six Sigma

  • Employee empowerment

  • Benchmarking

  • Just-in-time (JIT)

  • Taguchi concepts

  • Knowledge of TQM tools


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 Ideas

    • Check sheets

    • Scatter diagrams

    • Cause and effect diagrams

  • Tools to Organize the Data

    • Pareto charts

    • Flow charts

  • Tools for Identifying Problems

    • Histogram

    • Statistical process control chart


Seven Tools for TQM

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

/

/

//////

/////

//////

///

//

/

Hour

Defect12345678

A

B

C

/

/

//

/

Figure 6.5


Tools of TQM

  • Tools for Generating Ideas

    • Check sheets

    • Scatter diagrams

    • Cause and effect diagrams

  • Tools to Organize the Data

    • Pareto charts

    • Flow charts

  • Tools for Identifying Problems

    • Histogram

    • Statistical process control chart


Productivity

Absenteeism

Seven Tools for TQM

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

Figure 6.5


Tools of TQM

  • Tools for Generating Ideas

    • Check sheets

    • Scatter diagrams

    • Cause and effect diagrams

  • Tools to Organize the Data

    • Pareto charts

    • Flow charts

  • Tools for Identifying Problems

    • Histogram

    • Statistical process control chart


Cause

Materials

Methods

Effect

Manpower

Machinery

Seven Tools for TQM

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

Figure 6.5


Machinery

Material

Insufficient clean pillows

& blankets on-board

Deicing equipment not available

Inadequate

supply of magazines

Mechanical delay on plane

Broken luggage carousel

Inadequate special meals on-board

Dissatisfied Airline Customer

Understaffed crew

Overbooking policies

Understaffed ticket counters

Bumping policies

Poor check-in policies

Poorly trained attendants

Mistagged bags

Manpower

Methods

Cause-and-Effect Diagrams

Figure 6.6


Tools of TQM

  • Tools for Generating Ideas

    • Check sheets

    • Scatter diagrams

    • Cause and effect diagrams

  • Tools to Organize the Data

    • Pareto charts

    • Flow charts

  • Tools for Identifying Problems

    • Histogram

    • Statistical process control chart


Percent

Frequency

ABCDE

Seven Tools for TQM

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

Figure 6.5


Data for October

70 –

60 –

50 –

40 –

30 –

20 –

10 –

0 –

– 100

– 93

– 88

– 72

54

Frequency (number)

Number of occurrences

Cumulative percent

12

4

3

2

Room svcCheck-inPool hoursMinibarMisc.

72%16%5%4%3%

Causes and percent

Pareto Charts


Tools of TQM

  • Tools for Generating Ideas

    • Check sheets

    • Scatter diagrams

    • Cause and effect diagrams

  • Tools to Organize the Data

    • Pareto charts

    • Flow charts

  • Tools for Identifying Problems

    • Histogram

    • Statistical process control chart


Seven Tools for TQM

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

Figure 6.5


Sealing Weighing Labeling

Quick freeze storage

(60 Mins)

Packing station

Storage

(4 to 6 hrs)

Shipping dock

Flow Charts

Packing and shipping process


Tools of TQM

  • Tools for Generating Ideas

    • Check sheets

    • Scatter diagrams

    • Cause and effect diagrams

  • Tools to Organize the Data

    • Pareto charts

    • Flow charts

  • Tools for Identifying Problems

    • Histogram

    • Statistical process control chart


Distribution

Frequency

Repair time (minutes)

Seven Tools for TQM

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

Figure 6.5


Upper control limit

Target value

Lower control limit

Time

Seven Tools for TQM

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

Figure 6.5


Statistical Process Control (SPC)

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

  • Drives process improvement

  • Four key steps

    • Measure the process

    • When a change is indicated, find the assignable cause

    • Eliminate or incorporate the cause

    • Restart the revised process


Plots the percent of free throws missed

20%

10%

0%

Upper control limit

Coach’s target value

|||||||||

123456789

Lower control limit

Game number

An SPC Chart

Figure 6.7


Inspection

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

  • Detect a defective product

    • Does not correct deficiencies in process or product

    • It is expensive

  • Issues

    • When to inspect

    • Where in process to inspect


When and Where to Inspect?


When and Where to Inspect

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 processes

When production or service is complete

Before delivery from your facility

At the point of customer contact


TQM In Services

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

  • Service quality perceptions depend on

    • Intangible differences between products

    • Intangible expectations customers have of those products


Determinants of Service Quality

  • Reliability

  • Responsiveness

  • Competence

  • Access

  • Courtesy

  • Communication

  • Credibility

  • Security

  • Understanding/ knowing the customer

  • Tangibles


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