PTTE 434 - Lecture 1 Quality Assurance, Organization & Management

1. PTTE 434 - Lecture 1Quality Assurance,Organization & Management Jim Wixson, CVS, CMfgE wix@srv.net (208) 520-2296 (mobile) (425) 385-8028 (Everett Apartment) (425) 294-6947 (Boeing Office)

2. Lecture 1 - Objectives • Learn the five definitions of quality • Learn about some of the various quality “movements. • Understand the concept of “Cost of Poor Quality.” • Understand the concept of “Continuous Improvement.” • Talk about some of the continuous improvement leaders and tools. • Learn about the importance of defining the problem well before trying to solve it.

3. Garvin’s Five Definitions of Quality • Transcendent Definition (Relative Quality): Quality is universally recognizable; it is related to a comparison of features and characteristics of products. • Product-Based: Quality is a precise and measurable variable. Differences in quality reflect differences in quantity of some product attribute. • User-Based Definition: Quality is “fitness for intended use.”

4. Garvin’s Five Definitions of Quality (Cont’d) • Manufacturing-Based Definition: Quality is “conformance to specifications.” • Value-Based Definition: Quality is defined in terms of costs and prices. A quality product is one that provides performance at an acceptable price or conformance at an acceptable costs.

5. Quality Revolution or Quality Confusion? Quality Control Quality Planning Quality Circles Zero Defects Quality Assurance Continuous Quality Improvement Defect Prevention Total Quality Management Six Sigma Quality Function Deployment Statistical Process Control

6. Juran’s Approach • Balanced approach using managerial, statistical, and technological concepts of quality • Operational Framework: Quality Planning, Control, and Improvement

7. W. Edwards Deming • Broad Systems view of quality • 14 points focused on four parts: • systems approach • statistical variation • nature and scope of knowledge • psychology and understanding of human behavior

8. A. V. Feigenbaum • Emphasized “Total Quality Control” throughout all functions of the organization. • Total Quality Control means both planning and control. • Provide technical and managerial procedures to ensure customer satisfaction and an economical cost of quality.

9. Philip Crosby • Defined quality as: Conformance to requirements. • The only performance standard is ZERO DEFECTS. • All levels of employees can be motivated, but, they need the right tools.

10. Crosby’s Four Absolutes of Quality Management • Quality is defined as conformance to requirements, not as 'goodness' nor 'elegance'. • The system for causing quality is prevention, not appraisal. • The performance standard must be Zero Defects, not 'that's close enough'. • The measurement of quality is the Price of Non-conformance, not indices.

11. Kaoru Ishikawa • Showed the Japanese how to integrate the many tools of quality, especially the simpler tools. • Basic 7 Tools: Histograms, Pareto Charts, Cause and Effect Diagrams, Run Charts, Scatter Diagrams, Flow Charts, Control Charts

12. Six Sigma?

13. Show Film Carving a Career in Quality, Phillip Cosby and Assoc., 25 min.

14. It can’t be done! “Management wants us to add on these quality activities to our regular duties without giving us the additional time [to accomplish them] -- it can’t be done!” • Discussion - How can it be done? • Has your employer implemented any quality improvement programs? • How was it done?

15. Quality? - Convincing Management • Loss of production • Loss of customers • Loss of business • Loss of jobs • Class - Can you list some more reasons?

16. Competitor Competitor Competitor Hidden costs of poor quality Reprocessing Rejects Sorting Inspection Customer returns Warranty expenses Downgrading of product Sea of Competition Lost sales Overtime to correct errors Process downtime Loss of good will Extra inventory Paperwork errors Lost discounts Delays Damaged goods Obsolete inventory Premium freight costs Incorrect orders shipped Customer allowances Extra process capacity

17. Quality? - Convincing Management • Quality is no longer just a technical issue, it is a business issue. • In order for a quality program to succeed, top management must be involved and committed to its success. • A company’s success is directly related to management’s commitment to quality.

18. 35,000 300,000 30,000 $28,500 $28,000 250,000 $27,000 $26,000 25,000 200,000 20,000 150,000 15,000 100,000 10,000 50,000 5,000 0 0 1Q 2Q 3Q 4Q Annual Avg. profit lost (000s) Households defecting Opportunity Cost of Attrition Number of Households Dollars (000s) 125,000 124,000 122,500 120,000 Quarters

19. Total quality costs per good unit of product Failure costs Optimum cost Costs of appraisal plus prevention Optimum Cost of Quality Cost per Good Unit of Product 0 100 (No quality) Quality of Conformance % (Perfection)

20. Two Components of Quality

21. Purchasing Suppliers Quality Progress Feedback Market research Use Customer service Retailing Marketing, administrative support Specification Wholesaling Product development and design Market research Inspection Test Production Process Control Operations planning

22. Little Q and Big Q

23. I Am Responsible for Quality My input My output My supplier My customer As a As a As a Good Process Owner or User Good Customer Good Supplier Requirements and feedback Requirements and feedback I will: I will: I will: Continuous Improvement 1. Learn to apply the tools of quality - teach others. 2. Continuously improve my process - reduce defects, cycle time, and know benchmarks. 3. Document and display my process, defect levels, and CI projects. 1. Agree on and document my requirements with my supplier. 2. Return defective inputs to my supplier promptly and tactfully. 3. Feedback input quality data to my supplier. 1. Understand my customer requirements, and agree on and document my deliverables. 2. Reduce defects and variations in my output. 3. Measure my output quality from my customer’s perspective.

24. Competitive Standing

25. Attribute Comparison - Radar Graph

26. 100 Product 80 Sales 60 Repairs 40 Billing 20 17.5 35 52.5 70 0 Performance - Satisfaction Map Leverage competitive strength Maintain Status quo Performance (% satisfied) Assign little or no priority on action. Add resources to achieve improvement Importance

27. Convincing upper management Return on assets (ROA) = Profit margin x Asset turnover Assume COPQ* = 10% of sales revenue Profit margin = 7% Asset turnover = 3.0 => ROA = 7% x 3.0 =21% Assume COPQ reduced to 6% of sales revenue => Profit margin = 7% + (10% - 6%) = 11% Asset turnover = 3.0 => ROA = 11% x 3.0 = 33% A 4% reduction in COPQ results in a 12% increase in ROA!! *Cost of Poor Quality

28. Convincing upper management • Estimate the size of quality related losses. • Identify ways of improving quality. • Estimate the savings and other benefits. • Calculate return on investment (ROI) • Use a successful case history to justify a broader program. • If all else fails, take pictures of waste and/or hazards (EIMCO example).

29. The US approach has historically been command-and-control oriented. The Japanese approach is based on an ethic of consistency and emphasis on reduction of waste. The Europeans have adopted broad standards that can be adapted to the diverse nation states of the EC. Are Quality Approaches Influenced By Culture? Quality Approaches are Influence by Culture

30. The US approach has historically been command-and-control oriented. National and International Quality Awards • Malcolm Baldrige National Quality Award • Deming Prize • European Quality Award • Shingo Prize

31. The Malcolm Baldrige National Quality Award • Malcolm Baldrige National Quality Award • The award is open to small (less than 500 employees) and large firms (more than 500 employees) in the manufacturing and service sectors. • There can be only two winners per category each year. That limits the number of yearly awards to six.

32. The Malcolm Baldrige National Quality Award • The President of the United States traditionally presents the Awards at a special ceremony in Washington, DC. Awards are made annually to recognize U.S. organizations for performance excellence. The Award eligibility categories are: • manufacturing businesses • service businesses • small businesses • education organizations • health care organizations • Recipients are expected to share information about their successful performance strategies with other U.S. organizations.

33. The Malcolm Baldrige National Quality Award • The Award is named for Malcolm Baldrige, who served as Secretary of Commerce from 1981 until his tragic death in a rodeo accident in 1987. His managerial excellence contributed to long-term improvement in efficiency and effectiveness of government.

34. The Malcolm Baldrige National Quality Award • The Malcolm Baldrige National Quality Award was created by Public Law 100-107, signed into law on August 20, 1987. • The Award Program, responsive to the purposes of Public Law 100-107, led to the creation of a new public-private partnership. • Principal support for the program comes from the Foundation for the Malcolm Baldrige National Quality Award, established in 1988.

35. The Malcolm Baldrige National Quality Award • Key Characteristics of the MBNQA Criteria • The criteria focus on business results. Companies must show outstanding results in a variety of areas to win. • The Baldrige criteria are nonprescriptive and adaptive. Although the focus on the Baldrige award is on results, the means for obtaining these results are not prescribed.

36. The Malcolm Baldrige National Quality Award • Key Characteristics of the MBNQA (cont.) • The criteria support company-wide alignment of goals and processes. • The criteria permit goal-based diagnosis. • The criteria and scoring guidelines provide assessment dimensions.

37. MBNQA Criteria • The Criteria are designed to help organizations use an integrated approach to organizational performance management that results in: • delivery of ever-improving value to customers, • contributing to marketplace success • improvement of overall organizational effectiveness and capabilities • organizational and personal learning

38. MBNQA Criteria • The Criteria are the basis for organizational self-assessments,for making Awards, and for giving feedback to applicants. In addition, the Criteria have three important roles in strengthening U.S. competitiveness: • to help improve organizational performance practices, capabilities, and results • to facilitate communication and sharing of best practices information among U.S. organizations of all types • to serve as a working tool for understanding and managing performance and for guiding organizational planning and opportunities for learning

39. Baldrige Award Framework Customer and Market Focused Strategy and Action Plans 2 Strategic planning 5 HR develop. & management 7 Business results 1 Leadership 3 Customer and market focus 6 Process management 4 Information and analysis The Malcolm Baldrige National Quality Award

40. The first phase of the Award cycle is to establish that the applicant meets the eligibility requirements. Applicants submit an Eligibility Certification Package certifying that the organization is eligible to apply for the Award. In the second phase, Board of Examiners to conduct a rigorous evaluation of an organization's performance management system and the results of its processes. The third phase of the Award cycle involves the review of the application package. Applications are reviewed and evaluated by members of the Board of Examiners, all of whom adhere to strict rules regarding conflict of interest. The review is conducted in three stages: Stage 1 - Independent ReviewStage 2 - Consensus ReviewStage 3 - Site Visit Review

41. The Malcolm Baldrige National Quality Award • Being a Baldrige Examiner • Appointment to the board of Trustees for the MBNQA Board of Examiners is a very prestigious designation. • Examiners are unpaid volunteers, and must be willing to give up approximately 10% of their year to serve as an examiner.

42. The Malcolm Baldrige National Quality Award • For more information on the Malcolm Baldridge National Quality Award, visit: http://www.quality.nist.gov/

43. The Japanese approach is based on an ethic of consistency and emphasis on reduction of waste. Quality Improvement: The Japanese Way • Deming Prize • The Deming Prize for quality was established in 1951 by the Japanese Union of Scientists and Engineers (JUSE). • The Deming Prize is much more focused on processes than is the Baldrige.

44. What is the Deming Prize? • The Deming Application PrizeGiven to companies or divisions of companies that have achieved distinctive performance improvement through the application of TQM in a designated year. • The Deming Prize for IndividualsGiven to individuals who have made outstanding contributions to the study of TQM or statistical methods used for TQM, or individuals who have made outstanding contributions in the dissemination of TQM. • The Quality Control Award for Operations Business UnitsGiven to operations business units of a company that have achieved distinctive performance improvement through the application of quality control/management in the pursuit of TQM in a designated year.

45. The Deming Prize • For more information on the Deming Prize visit: http://www.deming.org/demingprize/

46. Other Japanese Contributions to Quality Thought • Lean Manufacturing (Toyota Production System) • Lean is a method of systematically eliminating waste in a production system. • Lean dramatically reduces cycle time. • Lean focuses on the company’s “value stream” to identify wasted movement, wasted time, wasted inventory, and wasted space. • Lean has been adopted by many US manufacturers and other firms and has aided them in achieving dramatic improvements in operations

47. Other Japanese Contributions to Quality Thought - 5 S’s • Other Japanese Contributions to Quality (cont.) • The Five S’s. The five Ss are a sequential process that companies follow to literally “clean up their acts.” The Ss are: • Seri (Sort): organizing by getting rid of the unnecessary. • Seiton (set in order): neatness that is achieved by straightening offices and work areas. • Siso (Shine): cleaning plant and equipment to eliminate dirtiness that can hide or obscure problems. • Seiketsu (Standardize): standardizing locations for tools and other materials. • Shetsuke (Sustain): discipline in maintaining the prior four Ss.

48. Other Japanese Contributions to Quality Thought • Other Japanese Contributions to Quality (cont.) • Quality Circles • Are natural work teams made up of workers that are empowered to improve processes they use. • Total Productive Maintenance (TPM) • The idea behind this concept is that the worst condition a machine should ever by is on the day you purchase it.

49. Shingo Prize for Excellence in Manufacturing • Named for Japanese industrial engineerShigeo Shingo who distinguished himself as one of the world’s leading experts in improving manufacturing processes. • The Prize was established in 1988 to promote awareness of Lean manufacturing concepts • Recognizes companies in the United States, Canada, and Mexico that achieve world-class manufacturing status.

50. Shingo Prize for Excellence in Manufacturing • The Shingo Prize recognizes organizations and research that is consistent with itsmission and model with two types of prizes: • Business Prize—promotes use of world-class manufacturing strategies and practices to achieve world-class results. • Research Prize—promotes research and writing regarding new knowledge and understanding of manufacturing processes. • Business Week referred to the Shingo Prize as the “Nobel prize of manufacturing,” because it establishes the standard for world-class excellence.