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BA 339 – OM – Chapter 6. Managing Quality Quality & Strategy Defining Quality - Product & Services Quality Standards & Assessment Approaches – ISO, ASQ, QA, MBNQA TQM – continuous improvement, empowerment, benchmarking, JIT, 6-sigma, PDCA cycle, cause-effect, Pareto, Cost of Quality

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ba 339 om chapter 6
BA 339 – OM – Chapter 6
  • Managing Quality
    • Quality & Strategy
    • Defining Quality - Product & Services
    • Quality Standards & Assessment Approaches – ISO, ASQ, QA, MBNQA
    • TQM – continuous improvement, empowerment, benchmarking, JIT, 6-sigma, PDCA cycle, cause-effect, Pareto,
    • Cost of Quality
    • Quality Tools
    • Statistical Process Control (SPC)
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BA 339 – OM – Chapter 6
  • Quality & Strategy
    • Included (implicitly or explicitly) in mission statement & strategy > Yields how to do what is important and to be accomplished
      • Lower cost (productivity) > improved quality (reputation, product liability) > market gains > profitability
    • Quality principles:
      • Employee empowerment – builds organizational commitment & capability; Yields employee attitude that they can accomplish what is important & to be accomplished.
        • Includes changing organizational culture (internal/external customer focus), individual development, and awards & incentives
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BA 339 – OM – Chapter 6
  • Quality & Strategy
    • Quality principles
      • Customer focus – wins business & repeat customers; Yields an effective organization with a competitive advantage
      • Continuous improvement – develops responsiveness at all levels of the organization; Yield competitive advantage in the marketplace
      • Benchmarking – fosters an attitude of looking for better ways of doing business; Yields culture of continuous improvement
      • Just-in-time – provides a consistent focus for reducing waste; Yields a daily focus on efficient performance and competitiveness
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BA 339 – OM – Chapter 6
  • Quality & Strategy
    • Customers, Quality, & Costs
      • Customers will tell twice as many people about bad experiences as good experiences
      • A dissatisfied customer will tell 8-10 people about the bad experience
      • 70% of upset customers will remain your customer if you resolve the complaint satisfactorily
      • It’s easier to get customers to repeat than it is to find new business
      • Service firms rely on repeat customers for 85% - 95% of their business
      • 80% of new product/service ideas come from customer ideas
      • Cost of keeping an existing customer is 1/6 of the cost of attracting a new customer
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BA 339 – OM – Chapter 6
  • Defining Quality – Garvin’s 8 Product Quality Dimensions
    • Performance – efficiency with which a product achieves its intended purpose. Ex. Fuel efficiency, return on a mutual fund
    • Features – product attributes that supplement the product’s performance. Ex. Surround sound or HDTV of a TV, retail store carrying TVs in a $200 - $12,000 price range
    • Reliability – propensity for a product to perform consistently over it useful design life. Ex. Refrigerator w/ 98% reliability = 2% chance of failure during useful 10 year life
    • Conformance – ability of a product to perform within allowable ranges of tolerances for any number of dimensions. Ex. No. of ounces of pulp in a gallon of pulp-free OJ (spec. driven, easily quantified)
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BA 339 – OM – Chapter 6
  • Defining Quality – Garvin’s 8 Product Quality Dimensions
    • Durability – degree to which a product tolerates stress or trauma without failing. Ex. Trash can vs. light bulb.
    • Serviceability – ease of repair for a product. Ex. Products requiring service technician > rapid, courteous, competent service considered serviceable
    • Aesthetics – subjective sensory characteristics (taste, feel, sound, look, smell). Ex. Leather vs. vinyl car interiors
    • Perceived quality – based on customer opinion, entirely perception-based. Ex. College football polls, brand image & recognition (Ex., Mercedes – viewed as workhorse by European countries and a status symbol in U.S.)
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BA 339 – OM – Chapter 6
  • Defining Quality – Parasuraman, Zeithamel & Berry’s Service Quality Dimensions
    • Tangibles – Physical appearance of the service facility, equipment & personnel. Ex. Stylishly dressed hairstylists
    • Service reliability – dependability & accuracy relative to promised service.
    • Responsiveness – willingness of service provider to be helpful & prompt. Ex. Credit card service
    • Assurance – refers to knowledge and courtesy of employees and their ability to inspire trust and confidence. Ex. Professional services (medical, consulting; restaurant)
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BA 339 – OM – Chapter 6
  • Defining Quality – Parasuraman, Zeithamel & Berry’s Service Quality Dimensions
    • Empathy – customer feeling that service is personalized. Ex. Restaurant service
    • Availability – ease of access to services and service provider
    • Professionalism – characteristics include organized, knowledgeable, competent, customer focused
    • Timeliness – ability of the service to meet time commitments; includes prompt, quick delivery
    • Completeness – ability to provide full, comprehensive service in single session
    • Pleasantness – deals with attitude of service personnel and their interaction with customers
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BA 339 – OM – Chapter 6
  • Quality Perspectives – functional, based on role/function we perform in the organization
    • Engineering – product design, concurrent, reliability, redundancy, SPC
    • Operations – systems perspective, process oriented, inputs/outputs, planning/organizing/controlling
    • Strategic – mission, core values, strategy process, alignment, plan/do/check/act
    • Marketing – relationship management, customer identification/management, systems
    • Financial – ROI (marginal, diminishing), quantifiable, result-oriented
    • Human Resources – job analysis, selection, evaluations, training/development, horizontal & vertical deployment
  • Contingency Perspective – context is critical
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BA 339 – OM – Chapter 6
  • Quality Standards
    • Global importance of quality has resulted in acceptance of common standards
    • European standards
      • ISO 9000 series (updated, ISO 9001-2000)
        • ANSI/ASQ Q90 – same as ISO
        • QS9000 – auto industry standard
      • ISO 14001 – Environmental Management Systems
      • ISO – Greek for “uniform” or “equal”
      • ISO – International Organization for Standardization
    • U.S standards
      • Malcolm Baldrige National Quality Award – 7 criteria can be used as standards/guide
    • Japanese standards
      • Deming Prize – 10 categories
      • Total Quality Control – Deming’s 14 points (p. 175) + visibility, in-process inspection, N=2, total workforce involvement, 5 S’s, quality circles, preventive maintenance
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BA 339 – OM – Chapter 6
  • ISO 9001:2000
    • Movement away from procedure-focused approach to process-focus
    • Organized around 8 quality management principles:
      • Customer-focused organization
      • Leadership
      • Involvement of people
      • Process approach
      • System approach to management
      • Continual improvement
      • Factual approach to decision-making
      • Mutually beneficial supplier relationships
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BA 339 – OM – Chapter 6
  • Malcolm Baldrige National Quality Award
    • 7 Criteria include:
      • Leadership – values, expectations, public responsibilities
      • Strategic Planning – planning, deployment, performance
      • Customer & Market Focused – requirements & satisfaction
      • Information Analysis – system effectiveness & success
      • Human Resource Focus – workforce potential & performance results
      • Process Management – systems/process & quality
      • Business Results – benchmarking in customer satisfaction, financials, HR, suppliers, & operations
    • Considerable overlap with ISO 9001:2000
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  • ISO Certification
    • Costly to Implement – Example: Manufacturing firm of 3000 might expend $200K in employee time alone
    • External benefits
      • Potential sales advantage (preferred over non-certified company)
      • Registered companies have avg. of 48% increased profitability and 76% improvement in marketing
    • Internal benefits (jump starts TQM programs)
      • ISO certified companies are consistently more profitable
      • Registered companies have 10% improvement in costs of production (result of quality improvement)
      • Example: DuPont – Improved on-time delivery from 70% to 90%; decreased product cycle time from 15 to 1.5 days; decrease in nonconforming product from 500 ppm to 150 ppm; reduction in test methods from 3200 to 1100; first pass yield ^ from 72% to 92%
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BA 339 – OM – Chapter 6
  • Total Quality Management (TQM)
    • Deming’s 14 Points (p. 175)
    • 6 Quality concepts
      • Continuous improvement
      • Employee empowerment
      • Benchmarking
      • Just-in-time (JIT)
      • Taguchi concepts
      • Knowledge of TQM tools
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BA 339 – OM – Chapter 6
  • TQM
    • Continuous improvement
      • Based on Japanese concept of “kaizen” (philosophy of continually seeking ways to improve operation)
      • Applies to process improvement
        • Rooted in process management approach – Identify > Define > Measure > Manage > Improve
      • Involves identifying benchmarks of excellent practices & instilling employee ownership in the process
      • Also known by: 6-sigma, Zero-defects
      • Utilizes the Plan-Do-Check-Act cycle for problem solving
        • Plan – select process, documents process, sets goals, develops a plan w/ quantifiable measures
        • Do – implement plan and monitor progress (document)
        • Check – analyze data/results, compare results with plan
        • Act – document revised process > becomes standard for all
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BA 339 – OM – Chapter 6
  • TQM
    • Continuous improvement
      • Steps essential to success:
        • Train employees in SPC methods and other quality tools
        • Make SPC and other quality methods a normal part of daily operations
        • Thorough understanding of process management – Identify > Define > Measure > Manage > Improve
        • Build work teams and employee involvement
        • Utilize problem-solving tools within the work teams
        • Develop a sense of ownership in the process
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BA 339 – OM – Chapter 6
  • TQM
    • Employee empowerment
      • Involve employees in:
        • Product/service design, process design (85% of quality problems are due to process/material problems)
      • Techniques:
        • Build communication networks that include employees
        • Develop open, supportive supervisors
        • Move responsibilities to production workers
        • Build high-morale organizations
        • Build teams and quality circles (vertically and horizontally in the organization)
          • Facilitator trains and helps with meetings
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BA 339 – OM – Chapter 6
  • TQM
    • Benchmarking
      • Select best practice to use as a standard for performance
        • Determine what to benchmark
        • Form a benchmark team
        • Identify benchmarking partners
        • Collect & analyze benchmarking information
        • Take action to match or exceed the benchmark
      • Process benchmarking requires process definition (mapping) and measurement, gap analysis, and assessment of organizational capabilitiess
      • Example: Resolving customer complaints
        • 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
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BA 339 – OM – Chapter 6
  • TQM
    • Just-in-time (JIT)
      • “Pull” system of production/purchasing > driven by customer order/need
      • Goal is to reduce waste and inventory levels
        • Inventory hides process & material problems
        • Reduced inventory identifies problems to be addressed
      • Improves process and product quality
      • Involves “vendor partnership programs” to improve quality of purchased items
      • Cuts cost of quality
      • Better quality means less inventory and a better JIT system
      • Basis for lean manufacturing
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BA 339 – OM – Chapter 6
  • Cost of Quality
    • Losses from poor quality estimated @ 20-30% of gross sales for defective or unsatisfactory products. Example: Power surges on GM computer-driven robots shut down assembly line – source > utility’s faulty underground wiring cost $500K/hr.
    • Four major categories:
      • Prevention costs – costs associated with preventing defects before they happen. Include re-design, employee training, improving supplier quality
      • Appraisal costs – incurred in assessing the level of quality attained. Helps identify quality problems. Decrease as quality improves.
      • Internal failure costs – include yield losses (scrap) and re-work losses
      • External failure costs – include lost customers, warranty costs, and litigation costs
    • Cost of Quality Calculation Exercise
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BA 339 – OM – Chapter 6
  • Quality Tools
    • Quality Function Deployment (QFD – House of Quality)
    • Taguchi concepts
      • Quality loss function
    • Tools for generating ideas
      • Check sheet, scatter diagram, cause-and–effect diagram
    • Tools for organizing data
      • Pareto chart, flowchart
    • Tools for identifying problems
      • Histogram, SPC chart, 5 Why’s
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BA 339 – OM – Chapter 6
  • Quality Function Deployment (QFD) – aka, House of Quality
    • Use to determine customer needs and translate those needs into a product design
    • 6 Steps
      • Determine the customer wants
      • Identify how the product/service satisfies customer’s wants
      • Relate customer wants to product hows
      • Identify relationship between firm’s hows
      • Develop importance ratings (between customer and firm’s importance ratings)
      • Evaluate competing products
    • Example: Customer requirements > design characteristics > specific components > production process > quality plan
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BA 339 – OM – Chapter 6
  • Taguchi Concepts
    • Designed to improve product and process quality
      • Quality robustness – products and services that can be produced uniformly & consistently in adverse conditions. Focus on removing the effects of adverse conditions vs. removing the cause.
      • Quality loss function – identifies all costs connected with poor quality and shows how these costs increase as the product/service moves away from being exactly what the customer wants.
        • Includes warranty costs, customer dissatisfaction, scrap, repair, and inspection
        • Function (costs) increases at an increasing rate as product moves away from target value (see p. 179)
      • Target-oriented quality – focus of quality is to keep product exactly on spec., not within tolerance limits
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BA 339 – OM – Chapter 6
  • Tools for Generating Ideas
    • Check sheets – tallies data in simple matrix form
      • Example: Defects by hour, meals by hour, etc.
    • Scatter diagram – graphs values by comparing one variable to another
      • Example: Productivity vs. absenteeism
    • Cause-and-effect (Ishikawa) diagram – identifies process elements (causes) and their impact upon on an outcome (effect)
      • Example: Materials, methods, manpower, other impacts on broken fiber board
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BA 339 – OM – Chapter 6
  • Tools for Organizing Data
    • Pareto analysis
      • Vilfredo Pareto (19th century Italian scientist)
      • Pareto principle:
        • Majority of an activity is caused by relatively few factors
        • Also known as the 80/20 rule; 80% of quality problems are caused by 20% of the factors (the “vital few”)
      • Pareto chart:
        • Bar chart that plots factors in decreasing order of frequency along the horizontal axis
        • Two vertical axis – left show frequency (e.g., histogram) while the right shows cumulative percentage of frequency
    • Flowchart – chart that describes steps in a process (AKA process map); multiple types (see handout)
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BA 339 – OM – Chapter 6
  • Tools for Identifying Problems
    • Histogram
      • Distribution of showing the frequency of occurrences of a variable
      • Advantage:
        • Illustrates distribution and spread of occurrences
        • Can be used to conduct statistical analysis (mean, standard deviation)
    • SPC Chart (Control chart)
      • Chart with time on the horizontal axis used to plot values of a statistic
      • Utilize upper and lower control limits to illustrate out of tolerance processes/products and patterns within data
    • 5 Why’s