Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Chapter EightChapter EightManaging QualityManaging Quality

Operations ManagementOperations ManagementContemporary Concepts and Cases 5/eContemporary Concepts and Cases 5/e

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Chapter 8 OutlineChapter 8 OutlineQuality DefinitionsQuality DefinitionsService QualityService QualityQuality Planning, Control, and ImprovementQuality Planning, Control, and ImprovementQuality PioneersQuality PioneersISO 9000 StandardsISO 9000 StandardsMalcolm Baldrige AwardMalcolm Baldrige AwardSupply Chain QualitySupply Chain QualityQuality and Financial PerformanceQuality and Financial PerformanceWhy Some Quality Improvement Efforts FailWhy Some Quality Improvement Efforts Fail

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IntroductionIntroduction

Quality is one of the four key objectives of Quality is one of the four key objectives of operations (cost, flexibility, delivery, quality)operations (cost, flexibility, delivery, quality)

Historical development of quality conceptsHistorical development of quality concepts– Inspection (early 1900s)Inspection (early 1900s)– Statistics quality control (Shewhart - 1940s)Statistics quality control (Shewhart - 1940s)– Quality management (1960s)Quality management (1960s)

Quality is responsibility of everyone in the Quality is responsibility of everyone in the organizationorganization

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QualityQuality

Meeting, or exceeding, customer Meeting, or exceeding, customer requirements now and in the future.requirements now and in the future.

i.e., the product or service is fit for the i.e., the product or service is fit for the customer’s usecustomer’s use

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Dimensions of QualityDimensions of Quality

QUALITYQuality

ofConformance

FieldService

The“Abilities”

Qualityof

Design

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Quality of DesignQuality of Design

Determined before the product is producedDetermined before the product is produced

Translates the “wishes” of customers into Translates the “wishes” of customers into specificationsspecifications

Concurrent design through the QFD processConcurrent design through the QFD process

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Quality of ConformanceQuality of Conformance

Producing a product to meet the Producing a product to meet the specificationsspecifications

(independent of quality of design)(independent of quality of design)

AbilitiesAbilities

AvailabilityAvailability (Continuity of service to customers)(Continuity of service to customers)

ReliabilityReliability (Length of time that a product can be used before (Length of time that a product can be used before it fails—MTBF)it fails—MTBF)

MaintainabilityMaintainability (Restoration of the product or service once (Restoration of the product or service once it has failed—MTTR)it has failed—MTTR)

UptimeAvailability

Uptime Downtime

MTBF

AvailabilityMTBF MTTR

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Field ServiceField Service

Warranty and repair or replacement of the Warranty and repair or replacement of the product after it has been soldproduct after it has been soldAlso called customer service, sales Also called customer service, sales service, or just serviceservice, or just serviceDimensionsDimensions– PromptnessPromptness– CompetenceCompetence– Integrity Integrity

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Different Types of Quality (Figure 8.1)Different Types of Quality (Figure 8.1)

Quality of market research

Quality of concept

Quality of specification

Technology

Employees

Management

Reliability

Maintainability

Logistical support

Promptness

Competence

Integrity

Quality of design

Quality of conformance

Availability

Field service

Customersatisfaction

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Service QualityService Quality

Service measures are perceptual or subjectiveService measures are perceptual or subjective

SERVQUALSERVQUAL is most popular measure is most popular measure– TangiblesTangibles– ReliabilityReliability– ResponsivenessResponsiveness– AssuranceAssurance– EmpathyEmpathy

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Figure 8.2: The Quality CycleFigure 8.2: The Quality Cycle

MARKETINGInterprets customer needsWorks with customer to

design product to fitoperations

Interpretation of needs

CUSTOMERSpecifies quality needs

Needs

OPERATIONSProduces the product or

services

QUALITY CONTROLPlans and monitors

quality

Product

ENGINEERINGDefines design conceptPrepares specifications

Define qualitycharacteristics

Specifications

Concurrent engineering team

(QFD)

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Quality Cycle in Mass Transit SystemFigure 8.3

County planningRegional planningState transportation agency

PlannerScheduler

RoutesSchedulesBudgets

MethodFacilitiesEquipment

EvaluationInspectionAuditsSurveysHearings

Public

Operations office

Rider’sneeds

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Implementation of quality improvement Implementation of quality improvement through the quality cyclethrough the quality cycle

Define quality attributes on the basis of customer needsDefine quality attributes on the basis of customer needs Decide how to measure each attributeDecide how to measure each attribute Set quality standardsSet quality standards Establish appropriate tests for each standardEstablish appropriate tests for each standard Find and correct causes of poor qualityFind and correct causes of poor quality Continue to make improvementsContinue to make improvements

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Poka-YokePoka-YokeDeveloped by Toyota’s Shigeo Shingo in the Developed by Toyota’s Shigeo Shingo in the 1960s1960s

Means ‘Means ‘mistake proofingmistake proofing’’

Design the product and process so that Design the product and process so that mistakes cannot occur or are immediately mistakes cannot occur or are immediately detectabledetectable

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Poka-YokePoka-Yoke

Poka-Yoke: German beer is packaged in green bottles for domestic use, brown bottles for export.

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Quality is not a new ideaQuality is not a new idea

The label on the bottles reads:

“Brewed according to the German Purity Regulations of 1516”

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The Quality PioneersThe Quality Pioneers

W. Edwards Deming (1900-1993)W. Edwards Deming (1900-1993)

Joseph Juran (1904-2008 )Joseph Juran (1904-2008 )

plus many othersplus many others

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W. Edwards DemingW. Edwards DemingThe 14 Management PrinciplesThe 14 Management Principles

Advocate of statistical process controlAdvocate of statistical process control

Emphasis on continuous improvementEmphasis on continuous improvement

PDCA WheelPDCA Wheel

http://www.deming.org/

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CI Methodology: PDCA Cycle CI Methodology: PDCA Cycle (Shewart/Deming Wheel)(Shewart/Deming Wheel)

1. Plan a change aimed at improvement.

1. Plan

2. Execute the change.

2. Do

3. Study the results; did it work?

3. Check

4. Institutionalize the change or abandon or do it again.

4. Act

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Root Causes of Quality ProblemsRoot Causes of Quality Problems

Text: “…most quality problems are caused by Text: “…most quality problems are caused by poor systems, not by the workers”poor systems, not by the workers”

Deming: 90 percent of quality problems are Deming: 90 percent of quality problems are caused by managementcaused by management

J.D. Power: at least 2/3 of long-term quality J.D. Power: at least 2/3 of long-term quality problems in autos are engineering and design problems in autos are engineering and design problemsproblems

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Joseph JuranJoseph JuranQuality “Trilogy”—planning, Quality “Trilogy”—planning,

control and improvementcontrol and improvement

Emphasis on managementEmphasis on management

““Quality HandbookQuality Handbook””

Lived to age 104Lived to age 104

http://www.juran.com/main.html

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When 99.9% Quality is Not EnoughWhen 99.9% Quality is Not Enough

Two million documents would be lost by IRS each yearTwo million documents would be lost by IRS each year

22,000 checks would be deducted from the wrong bank 22,000 checks would be deducted from the wrong bank account in the U.S.account in the U.S.

1314 phone calls in the U.S. misrouted each day1314 phone calls in the U.S. misrouted each day

12 babies would be given to the wrong parents each day12 babies would be given to the wrong parents each day

Two plane landings daily at O’Hare Airport in Chicago Two plane landings daily at O’Hare Airport in Chicago would be unsafewould be unsafe

The space shuttle would explode every time it is The space shuttle would explode every time it is launchedlaunched

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How Much Quality is Enough?How Much Quality is Enough?

1999: 98,000 hospital deaths from medical 1999: 98,000 hospital deaths from medical errors in the U.S.; 7000 from medication errorserrors in the U.S.; 7000 from medication errors

Only 80% of hospitals in the U.S. have Only 80% of hospitals in the U.S. have procedures in place to avoid operating on the procedures in place to avoid operating on the wrong body partswrong body parts

IRS agents give bad or no information 43% of IRS agents give bad or no information 43% of the time (in 2002 study by Dept. of Treasury)the time (in 2002 study by Dept. of Treasury)

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ISO 9000ISO 9000

Guidelines for designing, manufacturing, Guidelines for designing, manufacturing, selling, and servicing products. Est. 1987.selling, and servicing products. Est. 1987.Selecting an ISO 9000 certified supplier Selecting an ISO 9000 certified supplier provides some assurance that supplier follows provides some assurance that supplier follows accepted business practices in areas covered accepted business practices in areas covered by the standard.by the standard.Required by many companies, especially in Required by many companies, especially in Europe, before one can be a supplier.Europe, before one can be a supplier.www.iso.ch

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ISO 9000 StandardsISO 9000 StandardsQuality Management PrinciplesQuality Management Principles

Principle 1 Customer focus Principle 1 Customer focus

Principle 2 Leadership Principle 2 Leadership

Principle 3 Involvement of people Principle 3 Involvement of people

Principle 4 Process approach Principle 4 Process approach

Principle 5 System approach to management Principle 5 System approach to management

Principle 6 Continual improvement Principle 6 Continual improvement

Principle 7 Factual approach to decision making Principle 7 Factual approach to decision making

Principle 8 Mutually beneficial supplier relationships Principle 8 Mutually beneficial supplier relationships

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Airports can be ISO 9000 certified

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Hotels can be ISO 9000 certified

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ISO 14000

Series of standards covering environmental Series of standards covering environmental management systems, environmental auditing, management systems, environmental auditing, evaluation of environmental performance, evaluation of environmental performance, environmental labeling, and life-cycle assessment.environmental labeling, and life-cycle assessment.

Intent is to help organizations improve their Intent is to help organizations improve their environmental performance through documentation environmental performance through documentation control, operational control, control of records, control, operational control, control of records, training, statistical techniques, and corrective and training, statistical techniques, and corrective and preventive actions.preventive actions.

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Malcolm Baldrige Award

Established in 1987 to promote better quality management Established in 1987 to promote better quality management practices and improved quality results by American practices and improved quality results by American industryindustryNamed for Malcolm Baldrige, former Secretary of Named for Malcolm Baldrige, former Secretary of CommerceCommerceGiven to at most three companies in each of six categories Given to at most three companies in each of six categories (see slide 32)(see slide 32)Criteria and point system (see Table 8.3 and Criteria and point system (see Table 8.3 and www.baldrige.gov))

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Baldrige Criteria

1.1. LeadershipLeadership

2.2. Strategic PlanningStrategic Planning

3.3. Customer FocusCustomer Focus

4.4. Measurement, Analysis, and Knowledge Measurement, Analysis, and Knowledge ManagementManagement

5.5. Workforce FocusWorkforce Focus

6.6. Process ManagementProcess Management

7.7. ResultsResults

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Categories for Baldrige Award Applicants

Manufacturing companies or subsidiaries thatManufacturing companies or subsidiaries that– produce and sell manufactured products or manufacturing produce and sell manufactured products or manufacturing

processes orprocesses or– produce agricultural, mining, or construction products.produce agricultural, mining, or construction products.

Service companies or subsidiaries that sell serviceService companies or subsidiaries that sell serviceSmall businessesSmall businessesHealth care organizationsHealth care organizationsEducational institutionsEducational institutionsGovernment/non-profit organizationsGovernment/non-profit organizations

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The 2008 Baldrige Award recipients(85 applicants)

• Cargill Corn Milling North America, Wayzata, Minn. (manufacturing)

• Poudre Valley Health System, Fort Collins, Colo. (health care)

• Iredell-Statesville Schools, Statesville, N.C. (education)

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The 2009 Baldrige Award recipients(70 applicants)

• Honeywell Federal Manufacturing & Technologies, Kansas City, Mo. (manufacturing)

• MidwayUSA, Columbia, Mo. (small business)

• AtlantiCare, Egg Harbor Township, N.J. (health care)

• Heartland Health, St. Joseph, Mo. (health care)

• VA Cooperative Studies Program Clinical Research Pharmacy Coordinating Center, Albuquerque, N.M. (nonprofit)

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Malcolm Baldrige National Quality Award

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Supply Chain QualitySupply Chain Quality

Principles for outsourcing:Principles for outsourcing:

Supplier involved in product designSupplier involved in product design

Suppliers maintain high quality (rolled yield)Suppliers maintain high quality (rolled yield)

Operations must manage risk (e.g. defective Operations must manage risk (e.g. defective toys)toys)

Suppliers should be certified (e.g. ISO 9000)Suppliers should be certified (e.g. ISO 9000)

Don’t rely just on price and product samplesDon’t rely just on price and product samples

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Quality and Financial Quality and Financial PerformancePerformance

Quality costsQuality costs– Prevention CostsPrevention Costs– Appraisal CostsAppraisal Costs– Internal Failure CostsInternal Failure Costs– External Failure CostsExternal Failure Costs

Incurring prevention costs can lead to avoiding or Incurring prevention costs can lead to avoiding or reducing the other three.reducing the other three.

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How Quality Contributes to Profitability How Quality Contributes to Profitability (Fig. 8.5)(Fig. 8.5)

IMPROVED PROFITABILITY

QUALITY(Design and conformance)

LowerCosts

Reducedwaste

Greaterproductivity

GreaterValue

Increased marketshare

Revenuegrowth

Improvedmargins

Improved assetutilization

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Reasons for Failure in Quality Reasons for Failure in Quality Improvement ProgramsImprovement Programs

Focus on short-term financial resultsFocus on short-term financial results

““Blame the employee” syndromeBlame the employee” syndrome

Belief in “tradeoffs” in quality (don’t believe Belief in “tradeoffs” in quality (don’t believe “quality is free”)“quality is free”)

Management interference with true teamworkManagement interference with true teamwork

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More Reasons for Failure in Quality More Reasons for Failure in Quality Improvement ProgramsImprovement Programs

Lack of top management supportLack of top management support

Resistance to changeResistance to change

Internal politics and rivalriesInternal politics and rivalries

Belief the quality is just the latest buzz wordBelief the quality is just the latest buzz word

Insufficient trainingInsufficient training

Management mobilityManagement mobility

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SummarySummary

Quality DefinitionsQuality DefinitionsService QualityService QualityQuality Planning, Control, and ImprovementQuality Planning, Control, and ImprovementQuality PioneersQuality PioneersISO 9000 StandardsISO 9000 StandardsMalcolm Baldrige AwardMalcolm Baldrige AwardSupply Chain QualitySupply Chain QualityQuality and Financial PerformanceQuality and Financial PerformanceWhy Some Quality Improvement Efforts FailWhy Some Quality Improvement Efforts Fail

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End of Chapter Eight