Operations Management

1. Operations Management Chapter 6 – Managing Quality PowerPoint presentation to accompany Heizer/Render Operations Management, 8e © 2006 Prentice Hall, Inc.

2. Outline • History of Quality • Quality and Strategy • Defining Quality • Evolution of Quality Management • International Quality Standards • TQM Concepts • TQM Tools • Quality: Prevention vs. Detection

3. Our Faith in Quality of Systems • Have you ever checked a bridge on a highway before you drove over it with your car? • Have you ever checked the validity of the claims on the bottle of your pills? • Have you ever asked a pilot for her license before your flight? • Have you ever asked you doctor for his certificate in medicine? • Why should you consider the ideas?

4. Quality Failures Examples • The big dig panel fell on a car and killed a lady (product defect) • A trained doctor who turned into cosmetic surgeon without a license or training in area (fake service) • Hospital operates patient on wrong leg (service error) • Hospital gives patient wrong pills (service error)

5. Quality Failures Examples • A person without training practicing natural healing or alternate medicine (fake service) • Arsenic in bottled water (product defect) • Fake drugs on the market (fake product)

6. Quality Failures: 20th Century • US Food and Drug Administration • http://www.fda.gov/opacom/7alerts.html • UK Medicines and Healthcare products Regulatory Agency (MHRA) • Fake drugs video cliphttp://news.bbc.co.uk/1/hi/health/4725881.stm#

7. Institutional Practices for Quality Assurance: History 13th – 19th Century • From the end of the 13th century to the early 19th century, craftsmen across medieval Europe were organized into unions called guilds, who developed strict rules for product and service quality. • Inspection committees enforced the rules by marking flawless goods with a special mark or symbol. • Craftsmen themselves often placed a second mark on the goods they produced. At first this mark was used to track the origin of faulty items. • But over time the mark came to represent a craftsman’s good reputation. Inspection marks and master-craftsmen marks served as proof of quality for customers throughout medieval Europe.

8. Weaknesses of Medieval Quality Assurance Practices • Products got more diverse • Products got more complex and knowledge intensive • Ways of defining quality by the guilds were diverse • It relied on manual inspection of goods by outside guilds • It slowed down the delivery of goods • Mass production era produced more units per day than could be manually inspected (staffing, cost and time issues) • A New Approach was needed !!!

9. Statistical-Approaches for Quality : 20th Century • During the World War II (from 1941), US military products were inspected on delivery to ensure conformance to requirements. The U.S. armed forces inspected virtually every unit produced to ensure that it was safe for operation. This practice required huge inspection forces and caused problems in recruiting competent inspection personnel. • To ease the problems without compromising product safety, the armed forces began to use sampling inspection to replace unit-by-unit inspection. Industry consultants, particularly from Bell Laboratories, helped develop sampling tables and published them in a military standard, known as Mil-Std-105. Later became known as statistical control charts.

10. Statistical-Approaches for Quality : After World War II • After the World War II, Japanese manufacturers converted plants from producing military to producing civilian goods for trade. Initially, Japanese goods were shoddy and could not be sold as exports in international markets. Japanese firms asked American statisticians for help. • W. Edwards Deming, was frustrated with American managers for their termination of the use of quality control methods after the war. He introduced his 14-points approach, of focusing on the System and not on inspection to improve quality, in Japan plants. • Joseph M. Juran, trained Japanese managers about role of top managers, customers defining quality, involvement of everyone and continuous improvement.

11. America Gets the Message of Statistical-Approaches for Quality : • In the 1970s, price advantages and quality competitiveness of Japanese continued to rise. A 1980 NBC-TV News special report examined the question of quality, “If Japan Can… Why Can’t We?” . It captured the attention from national legislators, administrators and the media. • Congress passed a law intended to increase competitiveness through quality improvement and it introduced a national quality award called Malcolm Baldrige National Quality Award. http://www.quality.nist.gov/ • U.S. firms began to listen and focus on quality in their strategies and in projects and in the training of staff. The U.S. response, emphasized not only statistics but also a holistic set of principles that became known as Total Quality Management (TQM).

12. Quality Programs by Experts W. Edwards Deming 14 Points for Management Joseph M. Juran Top management commitment, fitness for use Armand Feigenbaum Total Quality Control Philip B. Crosby Quality is Free

13. Quality Models by National Agencies • Malcom Baldrige National Quality Award was established in 1988 by the U.S. government • Designed to promote TQM practices in Manufacturing, government, non-profit and services sectors • Japan Quality Award

14. Quality Models by International Agencies • Industrial Standard Z8101-1981 (Japan) • Specification for TQM • ISO 9000 series (Europe/EC) • Common quality standards for products sold in Europe (even if made in U.S.) • 2000 update places greater emphasis on leadership and customer satisfaction • ISO 14000 series (Europe/EC)

15. Quality Models by Industrial Sector Agents • Capability Maturity Model Integration for improving quality of the Software development industry • Quality model for the automotive industry • Company-driven quality initiatives, e.g. Six sigma quality

16. Managing Quality Provides a Competitive Advantage Arnold Palmer Hospital • Deliver over 10,000 babies annually • Virtually every type of quality tool is employed • Continuous improvement • Employee empowerment • Benchmarking • Just-in-time • Quality tools

17. Services: Quality Dimensions • Service density • Service inputs

18. Activity:Quality Dimensions Retailing • Which events would you list as evidence of low quality performance in retailing? • Poor quality happens when?

19. How Quality Failure Happens! Goodquality SYSTEM Output Input Poorquality

20. How Quality Failure Happens! Events Happening in Service/Production Firm • Wrong things are done • Right things are not done • Right things are done poorly • Right things are done late • Right things are done well and in timely manner Input Output

21. Total Cost Total Cost External Failure Internal Failure Prevention Appraisal Quality Improvement Costs of Quality

22. Costs of Quality- Example Example: Comparing firms with Cost of quality approach

23. Impact of Quality Failures • Internal Failure Costs • Warranty costs • Repair costs • Labor costs • Equipment downtime costs • External failure Costs • Liability costs • Loss of lives • Harm to health • Harm to environment • Customer defections

24. How Quality Performance Happens Preventive Quality Approach Appraisal Quality Approach • Process improvement • Quality program • Quality training • Process improvement • Statistical process control • Quality audit • -Work • inspection • Product rework • Product testing • Quality tools • Material inspection • -Right things done late • Right things done • Right things not done • Right things done poorly • Wrong things • done -Right behaviorsand practicesleading to right things being doneand in timely manner, all the time

25. Quality Principles Customer focus, Continuous improvement, Benchmarking, Just-in-time, Tools of TQM Yields: How well a firm will perform what is important and things to be accomplished (standards of execution) Employee Fulfilment Empowerment, Organizational commitment Yields: Employee attitudes that can accomplish what is important (motivation, participation) Customer Satisfaction Winning orders, Repeat customers Yields: An effective organization with a competitive advantage (results, retention, satisfaction, growth) How Quality Practices Affect Organizational Performance Organizational Practices Leadership, Mission statement, Effective operating procedures, Staff support, Training Yields: What is important (priorities, resources) and what is to be accomplished (objectives, purposes) Figure 6.2

26. Activity:Quality Dimensions Department of Motor Vehicles (DMV) • What do you think would be the important thing to an employee of the DMV when reviewing supporting documentation of an applicant? • What do you think would be the important thing to an applicant for a license with regard to documents that s/he brings to support her/his application? • What do you think would be the important expectation of the police department with regard to the DMV issued licenses?

27. 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

28. 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

29. Ethics and Quality Management • Operations managers must deliver healthy, safe, quality products and services • Poor quality risks injuries, lawsuits, recalls, and regulation • Organizations are judged by how they respond to problems

30. TQM Encompasses entire organization, from supplier to customer 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

31. Key Quality Principles (1) • Customer orientation • Everything seen from the view of customer • Results orientation • Measure, track and define results objectively • Process orientation • View changes from a process point of view • Employee orientation • creativity, improvement come from employees. Empower, equip and train them

32. Key Quality Principles (2) • Measurement orientation • Define measures, collect data and analyze data about performance using TQM tools • Continuous improvement orientation • Focus on improving continuously not in haphazard or impulsive manner • Prevention orientation • Prevention of errors is cheaper and more effective than detecting and removing them • Variation Elimination orientation • Focus on recognizing and eliminating the root causes of variations in your systems.

33. 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

34. 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

35. 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 svc Check-in Pool hours Minibar Misc. 72% 16% 5% 4% 3% Causes and percent Pareto Charts

36. Impact of Poor Process Quality on Output Activity 60 mins60 mins 60 mins times 1 3 2 MaximumBatch sizes100 units100 units100 units Errors afteractivity 10 units(10%)10 units(10%)10 units(10%) How may defective parts will whole process yield?

37. Impact of Quality Appraisal on Output Activity 60 mins 10 mins 60 mins 10 mins 60 mins 10 mins times 1 3 2 MaximumBatch sizes100 units100 units100 units Errors afteractivity 2 units(2%) 2 units(2%)2 units(2%) How may defective parts will whole process yield?

38. Impact of Quality Prevention on Output Activity 66 mins66 mins 66 mins times 1 3 2 MaximumBatch sizes100 units100 units100 units Errors afteractivity 1 units(1%)1 units(1%)1 units(1%) How may defective parts will whole process yield?

39. 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 by Prevention Improves Productivity Figure 6.1