Quality and Quality Management

1. Quality and Quality Management Report in Production Management Maria Ella T. Betos Katherine J. Erfe

2. Discussion Proper: • Quality, Quality Management and Quality Tools • Total Quality Management and Quality Management System (TQM and QMS) • Focus of Quality Management – Customers • Role of Employees in Quality Improvement • Quality in Services • Six Sigma • The Cost of Quality • The Effect of Quality Management on Productivity • Quality Awards and ISO 9000

3. Quality, Quality Management and Quality Tools • Quality has a pragmatic interpretation and a perceptual or subjective definition • The American Society for Quality defines it as (a) The characteristics of a product or service that bear on its ability to satisfy stated or implied needs; and (b) A product or service free of deficiencies • Consumers may focus on the specification quality of a product/service, or how it compares to competitors in the marketplace. Producers might measure the conformance quality, or degree to which the product/service was produced correctly.

4. Quality, Quality Management and Quality Tools • Dimensions of Quality for Products • Performance • Features • Reliability • Conformance • Durability • Serviceability • Aesthetics • Safety • Other perceptions • Dimensions of Quality for Services • Time and Timeliness • Completeness • Courtesy • Consistency • Accessibility and convenience • Accuracy • Responsiveness

5. THE MEANING OF QUALITY THE MEANING OF QUALITY Producer’s Perspective Consumer’s Perspective P R O D U C T I O N M A R K E T I N G Fitness for Consumer’s use Quality, Quality Management and Quality Tools Quality of Design Quality Characteristic Price Quality of Conformance Conformance to Specifications Cost

6. Quality, Quality Management and Quality Tools QUALITY MANAGEMENT SYSTEM: Evolution

7. W. E Deming’s 14 Points Create a constancy of purpose toward product improvement to achieve long term organizational goals. Adopt a philosophy of preventing poor quality products instead of acceptable levels of poor quality as necessary to compete internationally. Eliminate the need for inspection to achieve by relying instead on statistical quality control to improve product and process design. Select a few suppliers or vendors based on quality commitment rather than competitive prices. Constantly improve the production process by focusing on the two primary sources of quality problems, the system and employees, thus increasing productivity and reducing costs.

8. W. E Deming’s 14 Points Institute worker training that focuses on the prevention of quality problems and the use of statistical quality-control techniques. Instill leadership among supervisors too help employees perform better. Encourage employee involvement by eliminating the fear of reprisal for asking questions or identifying quality problems. Eliminate barriers between departments, and promote cooperation and a team approach for working together. Eliminate slogans and numerical targets that urge employees to achieve higher performance levels without first showing them how to do it.

9. W. E Deming’s 14 Points Eliminate numerical quotas that employees attempt to meet at any cost without regard for quality. Enhance worker pride, artisanry, and self esteem by improving supervision and the production process so that employees can perform to their capabilities. Institute vigorous education and training programs in methods of quality improvement throughout the organization from top management down, so that continuous improvement can occur. Develop a commitment from top management to implement the previous 13 points

10. The Deming Wheel PDCA Cycle 1. PLAN Study process, identify the problem, set goals, and develop the plan for improvement 2. DO Implement the plan on a test basis, measure improvements 3. CHECK Assess the plan; is it working? Goals achieved? 4. ACT Institutionalize improvement; continue the cycle with new problems at stage 1

11. Quality, Quality Management and Quality Tools • Process Flow Chart • – is a diagram of the steps in a job or process. • -it enables everyone involved in identifying and solving quality problem to have a clear picture of how a specific operation works and a common frame of reference.

12. Quality Tools Cause-and-Effect Diagrams –graphical description of the elements of a specific problem and the relationship between those elements. -also called “fishbone” or Ishikawa Diagram -it is used to identify the causes of a quality problem so it can be corrected.

13. Quality Tools Pareto Diagram –Tallying the percentage of defects resulting from different causes to identify major quality problems -it was devised in the early 1950s by the quality expert Joseph Juran who named the method after Vilfredo Pareto, an Italian economist. -it’s a useful visual aid for focusing on major quality problems.

14. Quality Tools Scatter Diagrams –shows relationship between two variables -it identifies a pattern that may cause a quality problem.

15. Quality Tools Check Sheets –is a fact-finding tool used to collect data about quality problems -tallies the number of defects for a variety of previously identified problem causes.

16. Quality Tools Statistical Process Control Charts –means of measuring if a process is doing what it is supposed to do -a chart with statistical upper and lower limits; if the process stays between these limits over time, it is control and a problem does not exist.

17. Total Quality Management andQuality Management System • Total Quality Management is the management approach for quality improvement, and became very popular during the 1980s. This is still a philosophy for managing an organization centered on quality and customer satisfaction as the strategy for achieving long-term success. • Quality Management System is not much of a philosophy, rather, it is a system that complement’s a company’s other systems and functions; a systematic approach designed to meet the individual needs and circumstances of a particular company

18. Focus of Quality Management – Customers • Companies know that to satisfy its customers not only their commitment to quality, but also to support and resources of its suppliers • Partnering – a relationship between a company and its supplier based on mutual quality standards • The primary means for gathering information from customers, and measuring customer satisfaction is the customer survey. • Methodologies: American Customer Satisfaction Index; Kano Model; SERVIQUAL / RATER, J.D. Power and Associates

19. Role of Employees in Quality Improvement • Participative Problem Solving – employees are directly involved in the quality management process. This has been effective in improving quality, increasing employee satisfaction and morale, improving job skills, reducing job turnover and increasing productivity • Kaizen – “change for the better”; involving everyone in a process of gradual, organized, and continuous improvement. • Five elements of Kaizen – Teamwork, Personal Discipline, Improved morale, Quality Circles, Suggestions for improvement ►

20. Role of Employees in Quality Improvement Quality Circle - First established in 1962; Spearheaded by Kaoru Ishikawa; a group composed of workers, who are trained to identify, analyze and solve work-related problems and present their solutions to management in order to improve the performance of the organization, and motivate and enrich the work of employees. Key tool is Deming’s Wheel Process Improvement Teams – also called Quality Improvement Teams (QIT); the key objective of which is to understand the process the team is addressing in terms in how all the parts (functions & departments) work together. Key tool is a process flowchart

21. Quality in Services • “Good Service is Whatever the Customer says it is” • Service defects are not always easy to measure because service output is not usually a tangible physical term • Services tend to be labor intensive • Benchmark – “Best” level of Quality Achievement in one company that the other companies seek to achieve • Quality management in services must also focus also on employee performance related to intangible, difficult-to-measure quality dimensions.

22. Six Sigma is a Project methodology that provides businesses with the tools and expertise to improve processes; increase in product/service quality through a decrease in process variation leading to defect reduction Main idea: number of defects can be measured, and can be systematically determined on how to eliminate them and get close to zero defects as much as possible – having a numerical goal of 3.4 defects per million opportunities Six Sigma (Business Management Strategy) ►

23. Six Sigma (Business Management Strategy)

24. Six Sigma (Business Management Strategy) At 3.8 sigma (99% success) 20,000 lost mails per hour Unsafe drinking water almost 15 minutes each day 5,000 incorrect surgical operations per week 2 short or long landings at most major airports daily 200,000 wrong drug prescriptions each year • At 6 sigma (99.99966% success) • 7 lost mails per hour • One minute of unsafe drinking water every seven months • 1.7 incorrect surgical operations per week • One short or long landing at major airports every five years • 68 wrong drug prescriptions each year

25. Six Sigma (Business Management Strategy) “Executive Leaders” creates relevant improvement targets, stretch goals, and appropriate measures “Champions” monitor and review the status of improvement projects to make sure the system is functioning as expected “Master Black Belts” lead the improvement teams with clear charters, success criteria, and rigorous reviews “Green Belts”, together with the “Black Belts” use an action-learning approach to build their capability and execute the project Business Improvement Campaigns

26. Six Sigma (Business Management Strategy) Making sure that the improvement is sustained and no unexpected and undesirable things occur Who the customers are What they want What needs to improve Process is measured Data is collected Compared to desired state Developing solutions to the problem; Changes are made in the process; Results are measured Determining the Cause Six Sigma Methodologies

27. Six Sigma (Business Management Strategy)

28. Six Sigma (Business Management Strategy) Ensuring target deviations are corrected before they result in defects through control systems Goals consistent with customer demand and enterprise strategy Characteristics Critical to Quality Optimize current process using statistical techniques (i.e. DOE) Investigate and Verify Cause and Effect Relationships Design for Six Sigma (DFSS) - used to design/redesign processes

29. Six Sigma (Business Management Strategy) • BOTTOM LINE: PROFITABILITY • Sample Problem: The Medtek Company produces parts for electronic bed tracking system and sells them to hospitals. It contracted for and sold 1,000 units for Php1,000 each. During the quarter it incurred total variable costs of Php600,000 (including the cost of making scrap) and Total fixed cost of Php300,000. The company currently operates with 10% defect rate to which the cost of defects cannot be reworked. If the six sigma principle is applied during the quarter, it shall incur Php10,000. • REFLECT THE PROFITABILITY FOR BOTH CASES

30. Six Sigma (Business Management Strategy) 1,000 units represents 90% of total production = 1,000 / 90% = 1,111 total units of production • CASE 1: No Six Sigma Principle Applied • CASE 2: Six Sigma Principle Applied  Variable Costs are distributed to additional units of production since they include the cost of scrap

31. The Cost of Quality Prevention Costs Quality Planning Costs Product-Design Costs Process Costs Timing Costs Information Costs “The cost of good quality are those incurred to achieve good quality and to satisfy the customer, as well as costs incurred when quality fails to satisfy the customer” • Appraisal Costs • Inspection and Testing Costs • Test equipment Costs • Operator Costs

32. The Cost of Quality Internal Failure Costs Scrap Cost Rework Cost Process Failure Cost Process Downtime Cost Price-downgrading Cost “The cost of POOR QUALITY is the difference between what it actually costs to produce a product and what would it cost if there are no defects” • External Failure Costs • Customer Complaint Cost • Product Return Cost • Warranty Claims Cost • Product liability Cost • Lost Sales Cost

33. The Effect of Quality Management on Productivity “Measurement of Quality is through Indices – relation of quality cost relative to its base value” Labor Index = Quality Cost / Direct Labor Hours Cost Index = Quality Cost / Manufacturing Cost Sales Index = Quality Cost / Net Sales Production Index = Quality Costs / Units of Finished Product

34. The Effect of Quality Management on Productivity Product Yield – measure of output used as in indicator of productivity; an increase in the percentage of the defective products through improved quality will increase product yield Y = (total input)(% good units) + (total input)(1 – good units)(% reworked) To compute for the manufacturing cost per good product (direct mfg cost per unit)(input) + (rework cost per unit)(reworked units) Product Cost =

35. The Effect of Quality Management on Productivity Quality-Productivity Ratio – combination of concepts of quality index numbers and product yield; this increases if more good quality inputs are produced relative to the total product input good quality units (input units)(unit processing cost) + (reworked units)(rework cost) x 100 QPR = QPR =

36. Quality Awards and ISO 9000 Malcolm Baldrige National Quality Award – manufacturing, services, small businesses, health care, and education American Society for Quality – Armand V. Feigenbaum Medal, Deming Medal, E. Jack Lancaster Medal, the Edwards Medal, Ishikawa Medal President’s Quality Award – Federal Government Organizations International Organization for Standardization – facilitates global consensus agreements on international quality standards ISO 9000 – uniform standards for cross-border transactions Main idea: Most companies will not do business with a supplier unless it has ISO 9000 certification