Lecture Fundamentals of operations management (4/e): Chapter 8 - Davis, Aquilano, Chase

Chapter 6 Quality management, after studying this chapter you will be able to: Introduce those individuals, often referred to as quality gurus, who have played a significant role in the evolution of quality management, and describe their specific contributions; identify the different dimensions of quality as they relate to both good and services; define the various elements that comprise the cost of quality;....

PowerPoint Presentation by Charlie Cook

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

• Identify the different dimensions of quality as they

relate to both good and services

• Define the various elements that comprise the cost of quality

• Describe the more successful management quality

initiatives such as total quality management (TQM)

and Six Sigma

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–4

Managerial Issues

Managerial Issues

• Defining quality from the customer’s perspective

• Constant increases in the level of quality of today’s goods and services

• Difficulties encountered in managing service quality

• Identifying quality dimensions that are most important

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–5

The Quality Gurus

The Quality Gurus

• Quality Gurus

–Individuals who have been identified as making

a significant contribution to improving the

quality of goods and services.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–6

The Quality Gurus (cont’d)

The Quality Gurus (cont’d)

• Walter A Shewhart

–Statistician at Bell Laboratories

• Developed statistical control process methods to

distinguish between random and nonrandom variation in industrial processes to keep

processes under control.

• Developed the “plan-do-check-act” (PDCA) cycle

that emphasizes the need for continuous improvement.

• Strongly influenced Deming and Juran.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–7

Shewhart’s Plan­Do­Check­Act (PDCA) Cycle

Shewhart’s Plan­Do­Check­Act (PDCA) Cycle

Exhibit 6.2

Source: Mary Walton, Deming Management at Work

(New York: Perigree Books, 1991), p 22.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–8

The Quality Gurus (cont’d)

The Quality Gurus (cont’d)

• W Edwards Deming

–Advocated Statistical Process Control (SPC)

• Methods which signal shifts in a process that will

likely lead to products and/or services not meeting customer requirements.

• Emphasized an overall organizational approach to

managing quality.

• Demonstrated that quality products are less costly

than poor quality products.

• Identified 14 points critical for improving quality.

–The Deming Prize

• Highest award for industrial excellence in Japan.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–9

Deming’s 14­Point Program  for Improving Quality

Deming’s 14­Point Program  for Improving Quality

Exhibit 6.3

Source: Mary Walton, Deming Management at Work

(New York: Perigree Books, 1991), pp 17–18.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–10

The Quality Gurus (cont’d)

The Quality Gurus (cont’d)

• Joseph M Juran

–Emphasized the importance of producing quality

products through an approach focused on

quality planning, control, and improvement.

–Defined product quality as “fitness for use” as

viewed by the customer in:

• Quality of design • Quality of conformance

• Availability • Safety • Field use

–Categorized the cost of quality as:

• Cost of prevention

• Cost of detection/appraisal

• Cost of failure

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–11

The Quality Gurus (cont’d)

The Quality Gurus (cont’d)

• Armand Feigenbaum

–Proposed the concept of “total quality control,”

making quality everyone’s responsibility.

• Stressed interdepartmental communication.

• Philip Crosby

–Preached that “quality is free.”

• Genichi Taguchi

–Emphasizes the minimization of variation.

• Concerned with the cost of quality to society.

• Extended Juran’s concept of external failure.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–12

Three of the Quality Gurus Compared Three of the Quality Gurus Compared

Exhibit 6.1a

Source: Modified from John S Oakland, Total Quality Management

(London: Heinemann Profession Publishing Ltd., 1989), pp 291–92.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–13

Three of the Quality Gurus Compared (cont’d)

Three of the Quality Gurus Compared (cont’d)

Exhibit 6.1b

Source: Modified from John S Oakland, Total Quality Management

(London: Heinemann Profession Publishing Ltd., 1989), pp 291–92.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

– Courtesy – Credibility – Security – Access – Communication – Understanding the customer

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–15

Additional Views of Quality in Services

Additional Views of Quality in Services

• Technical Quality versus Functional Quality

–Technical quality—the core element of the good

or service.

–Functional quality—customer perception of how

the good functions or the service is delivered.

• Expectations and Perceptions

–Customers’ prior expectations (generalized and

specific service experiences) and perception of service performance affect their satisfaction

with a service.

• Satisfaction = (Perception of Performance) – (Expectation)

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–16

The Cost of Quality

The Cost of Quality

• Cost of Quality

–Framework for identifying quality components

that are related to producing both high quality products and low quality components, with the goal of minimizing the total cost of quality.

–Costs of poor quality:

• Detection/appraisal costs

• Internal failure costs

• External failure costs

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–17

Typical Quality Cost Ratios

Typical Quality Cost Ratios

Exhibit 6.4

Source: A V Feigenbaum, Total Quality Control, 3rd ed (New York:

McGraw-Hill, 1983), p 112; and Joseph M Juran and F.M Gryna, Quality

Planning and Analysis (New York: McGraw-Hill, 1970), p 60.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–19

The Cost of Quality (Juran’s Model)

The Cost of Quality (Juran’s Model)

Cost Category

Cost of prevention Costs associated with the development of

programs to prevent defectives from occurring in the first place

Cost of detection/

appraisal

Costs associated with the test and inspection of subassemblies and products after they have been made

defective product

Internal failure costs—producing

defective products that are identified before shipment

External failure costs—producing

defective products that are delivered to the customer

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

–Easy and painless to invoke

–Easy and quick to collect on

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–21

Organization­wide Quality Initiatives

Organization­wide Quality Initiatives

• Total Quality Management (TQM)

–An approach for integrating quality at all levels

of an organization

• Organization-wide initiative encompassing all

functional areas and levels within the organization.

• Focuses on producing high quality goods and

services.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

–All employees assume responsibility for

inspecting the quality of their work.

• Product/Process Excellence

–Involves product design quality and monitoring

the process for continuous improvement.

• Poka-yokes are devices that prevent defects from

being produced.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–23

Elements of TQM (cont’d)

Elements of TQM (cont’d)

• Continuous Improvement

–A concept that recognizes that quality

improvement is a journey with no end and that there is a need for continually looking for new approaches for improving quality.

• Customer Focus on “Fitness for Use”

–Design quality

• Specific characteristics of a product that

determine its value in the marketplace.

–Conformance quality

• The degree to which a product meets its design

specifications.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

• Causes of TQM Implementation Failures

–Lack of focus on strategic planning and core

competencies

–Obsolete, outdated organizational cultures.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–25

Obstacles to Implementing TQM

Obstacles to Implementing TQM

• Lack of a company-wide definition of quality.

• Lack of a formalized strategic plan for change.

• Lack of a customer focus.

• Poor inter-organizational communication.

• Lack of real employee empowerment.

• Lack of employee trust in senior management.

• View of the quality program as a quick fix.

• Drive for short-term financial results.

• Politics and turf issues.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–26

Three Schools of  Quality Management Programs

Three Schools of  Quality Management Programs

Exhibit 6.6a

Source: Eric W Skopec, Strategic Visions Inc (used by permission).

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–27

Three Schools of  Quality Management Programs

Three Schools of  Quality Management Programs

Exhibit 6.6b

Source: Eric W Skopec, Strategic Visions Inc (used by permission).

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–28

Six Sigma

Six Sigma

• Goals of Six Sigma

–To reduce process variation to the point where

only 3.4 defects per million are produced by a process that involves a high volume of

manufactured units or service transactions on a continuous basis.

–Provide a framework and methodologies to

analyze and evaluate business processes and reduce waste.

• Successful Implementation

–Training and selection of the workforce

–Impressive cost savings of program

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

Source: Dave Harold, “Designing for Six Sigma Capability,”

Control Engineering, January, 1999.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–30

Recognizing and Rewarding Quality

Recognizing and Rewarding Quality

• Promotion of High Quality Goods and Services

–Deming Prize (Japan)

–European Quality Award (European Union)

–Malcolm Baldrige National Quality Award

(MBNQA) (United States)

–ISO9000 certification

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–31

Malcolm Baldrige National Quality Award

Malcolm Baldrige National Quality Award

• Background

–Established in 1987 to recognize total quality

management in American industry.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–32

Malcolm Baldrige  National Quality Award Winners

Malcolm Baldrige  National Quality Award Winners

Exhibit 6.8a

Source: National Institute of Science and Technology

(NIST) website: www.quality.nist.gov

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–33

Malcolm Baldrige  National Quality Award Winners

Malcolm Baldrige  National Quality Award Winners

Exhibit 6.8b

Source: National Institute of Science and Technology

(NIST) website: www.quality.nist.gov

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

Source: 1997 Criteria for Performance Excellence, U.S Dept of

Commerce, National Institute of Standards and Technology.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–35

2001 Award Criteria—Item Listing

2001 Award Criteria—Item Listing

Exhibit 6.10

Source: 2001 Criteria for Performance Excellence, U.S Dept of

Commerce, National Institute of Standards and Technology.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–36

Benefits of the Baldrige Quality Criteria

Benefits of the Baldrige Quality Criteria

• Baldrige guidelines can be used to:

–Help define and design a total quality system –Evaluate ongoing internal relationships among

department, divisions, and functional units

within an organization.

–Assess and assist outside suppliers of goods

and services to a company.

–Assess customer satisfaction.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

• ISO 9000 Series of Quality Standards

–An international set of standards for

documenting the processes that an organization uses to produce its goods and services.

Requirements

for Performance Improvement

Fundamentals and Standards

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–38

ISO 9000 (cont’d)

ISO 9000 (cont’d)

• ISO 9000 Certification

–First party certification—A firm audits itself.

–Second party certification—Customers audit

their suppliers.

–Third party assessment—Company is assessed

by outside registrars from ASQ’s Registration Accreditation Board (RAB).

–ISO 9000/Q90 Registration Process

• Application to registrar

• Preliminary assessment

• Full audit

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

–Stimulate and assist European organizations in

quality improvement activities.

–Support managers in the adoption of TQM.

• EFQM Excellence Model

–A non-prescriptive frame work based on nine

criteria that recognizes that there are many

approaches to achieving sustainable excellence.

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–40

Overview of the EFQM Excellence Model

Overview of the EFQM Excellence Model

Exhibit 6.11

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–41

Recent Winners of the European Quality Award

Recent Winners of the European Quality Award

Exhibit 6.12

Management 4e 

© The McGraw­Hill Companies, Inc., 2003

6–42

The Deming Prize

The Deming Prize

• Deming Prize

–Initiated by Japan in 1951 to recognize the

importance of high quality products.

–Name after W Edwards Deming

–Categories of the Deming Prize:

• The Deming Prize for Individuals

• The Deming Application Prize

• The Quality Control Award for Operations/

Business Units