Operations

Management
Managing Quality

PowerPoint presentation to accompany

Heizer/Render
Principles of Operations Management, 6e
Operations Management, 8e

© Prentice Hall, Inc.

Quality and Strategy

 Managing quality supports
differentiation, low cost, and
response strategies
 Quality helps firms increase sales
and reduce costs
 Building a quality organization is a
demanding task

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 Ways Quality Improves
Productivity
Sales Gains
 Improved response
 Higher Prices
 Improved reputation
Improved Increased
Quality Profits
Reduced Costs
 Increased productivity
 Lower rework and scrap costs
 Lower warranty costs

The Flow of Activities

Organizational Practices
Leadership, Mission statement, Effective operating
procedures, Staff support, Training
Yields: What is important and what is to be accomplished

Quality Principles
Customer focus, Continuous improvement, Benchmarking,
Just-in-time, Tools of TQM
Yields: How to do what is important and to be
accomplished
Employee Fulfillment
Empowerment, Organizational commitment
Yields: Employee attitudes that can accomplish
what is important
Customer Satisfaction
Winning orders, Repeat customers
Yields: An effective organization with
a competitive advantage

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 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

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
 Customer Satisfaction (ISO 9001)

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 Implications of Quality
1. Company reputation
 Perception of new products
 Employment practices
 Supplier relations
2. Product liability
 Reduce risk
3. Global implications
 Improved ability to compete

Key Dimensions of Quality

 Performance  Durability
 Features  Serviceability
 Reliability  Aesthetics
 Conformance  Perceived quality
 Value

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 Malcom Baldrige National
Quality Award
Designed to promote TQM practices.
Applicants are evaluated on:
Categories Points
Leadership 120
Strategic Planning 85
Customer & Market Focus 85
Information & Analysis 90
Human Resource Focus 85
Process Management 85
Organizational Results 450

Takumi

A Japanese character
that symbolizes a
broader dimension
than quality, a deeper
process than
education, and a more
perfect method than
persistence

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 Costs of Quality
 Appraisal costs - evaluating
products, parts, and services
 Prevention costs - reducing the
potential for defects
 Internal failure - producing defective
parts or service before delivery
 External costs - defects discovered
after delivery

Costs of Quality

Total Total Cost

Cost
External Failure

Internal Failure

Prevention

Appraisal
Quality Improvement

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 International Standards
 Industrial Standard JIS-Z8101 (Japan)
 Specification for TQM
(JIS: Japanese Industrial Standards)
 International Management Standard: ISO
9001 standard (Quality)
 Common quality standard. 2015 update places
greater emphasis on risk management
 International Management Standard: ISO
14001 standard (Environment)
 Common environmental standard.

ISO 14001
Environmental Standard
Core Elements:
 Environmental management
 Auditing
 Performance evaluation
 Labeling
 Life-cycle assessment

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 Leaders in Quality

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

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

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 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

Deming’s Fourteen Points

1. Create consistency of purpose
2. Lead to promote change
3. Build quality into the product; stop
depending on inspection
4. Build long term relationships based on
performance, not price
5. Continuously improve product, quality,
and service
6. Start training
7. Emphasize leadership

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 Deming’s Fourteen Points
8. Drive out fear
9. Break down barriers between
departments
10. Stop haranguing workers
11. Support, help, improve
12. Remove barriers to pride in work
13. Institute a vigorous program of
education and self-improvement
14. Put everybody in the company to work
on the transformation

Seven Concepts of TQM

 Continuous improvement
 Six Sigma
 Employee empowerment
 Benchmarking
 Just-in-time (JIT)
 Taguchi concepts
 Knowledge of TQM tools

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 Continuous Improvement

 Represents continual
improvement of all processes
 Involves all operations and work
centers including suppliers and
customers
People, Equipment, Materials,
Procedures

Shewhart’s PDCA Model

1.Plan
4. Act Identify the
Implement improvement
the plan and make
a plan

3. Check 2. Do
Is the plan Test the
working? plan

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 Six Sigma
 Originally developed by Motorola,
Six Sigma refers to an extremely
high measure of process capability
 A Six Sigma capable process will
return no more than 3.4 defects per
million operations (DPMO)
 Highly structured approach to
process improvement

Six Sigma
1. Define critical outputs
and identify gaps for DMAIC Approach
improvement
2. Measure the work and
collect process data
3. Analyze the data
4. Improve the process
5. Control the new process to
make sure new performance
is maintained

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 Six Sigma Implementation
 Emphasize DPMO as a standard metric
 Provide extensive training
 Focus on corporate sponsor support
(Champions)
 Create qualified process improvement
experts (Black Belts, Green Belts, etc.)
 Set stretch objectives

This cannot be accomplished without a major

commitment from top level management

Employee Empowerment
 Getting employees involved in product
and process improvements
 85% of quality problems are due to process
and material
 Techniques
 Build communication networks that include
employees
 Develop open, supportive supervisors
 Move responsibility to employees
 Build a high-morale organization
 Create formal team structures

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 Quality Circles
 Group of employees who meet
regularly to solve problems
 Trained in planning, problem
solving, and statistical methods
 Often led by a facilitator
 Very effective when done
properly

Benchmarking
Selecting best practices to use as a
standard for performance
 Determine what to
benchmark
 Form a benchmark team
 Identify benchmarking partners
 Collect and analyze benchmarking
information
 Take action to match or exceed the
benchmark

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Best Practices for Resolving
Customer Complaints
 Make it easy for clients to complain
 Respond quickly to complaints
 Resolve complaints on first contact
 Use computers to manage
complaints
 Recruit the best for customer
service jobs

TQM and Just-in-Time (JIT)

Relationship to quality:

 JIT cuts the cost of quality

 JIT improves quality
 Better quality means less
inventory and better, easier-to-
employ JIT system

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 Just-in-Time (JIT)

 ‘Pull’ system of production scheduling

including supply management
 Production only when signaled
 Allows reduced inventory levels
 Inventory costs money and hides process
and material problems
 Encourages improved process and
product quality

Just-In-Time (JIT) Example

Work in process
inventory level
(hides problems)

Unreliable Capacity
Vendors Scrap
Imbalances

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 Just-In-Time (JIT) Example
Reducing inventory reveals
problems so they can be solved

Unreliable Capacity
Vendors Scrap
Imbalances

Taguchi Concepts

 Experimental design methods to

improve product and process design
 Identify key component and process
variables affecting product variation
 Taguchi Concepts
 Quality robustness
 Quality loss function
 Target-oriented quality

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 Quality Robustness

 Ability to produce products

uniformly in adverse manufacturing
and environmental conditions
 Remove the effects of adverse
conditions
 Small variations in materials and
process do not destroy product
quality

Quality Loss Function

 Shows that costs increase as the

product moves away from what
the customer wants
 Costs include customer
dissatisfaction, warranty and
service, internal scrap and repair,
and costs to society
 Traditional conformance
specifications are too simplistic

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 Quality Loss Function
High loss L = D2C
Unacceptable where
Loss (to L = loss to society
producing Poor
organization, D = distance from
customer, Good target value
and society) C = cost of deviation
Best
Low loss Target-oriented quality
yields more product in
the “best” category
Target-oriented quality
brings product toward
Frequency the target value
Conformance-oriented
quality keeps products
within 3 standard
deviations
Lower Target Upper
Specification

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

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 Seven Tools for TQM
(a) Check Sheet: An organized method of
recording data

Hour
Defect 1 2 3 4 5 6 7 8
A /// / / / / /// /
B // / / / // ///
C / // // ////

Seven Tools for TQM

(b) Scatter Diagram: A graph of the value
of one variable vs. another variable
Productivity

Absenteeism

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 Seven Tools for TQM
(c) Cause and Effect Diagram (Ishikawa Diagram,
Fishbone Diagram): A tool that identifies
process elements (causes) that might effect an
outcome
Cause
Materials Methods
Effect

Manpower Machinery

Cause-and-Effect Diagrams
clean pillows

Machinery
Insufficient

& blankets

Material
not available
on-board

equipment
Deicing

Inadequate
Mechanical delay
supply of
magazines on plane
Inadequate special Broken luggage
meals on-board carousel
Dissatisfied
Airline
Overbooking policies Understaffed Customer
crew
Bumping policies Understaffed
Poorly trained
Poor check-in

ticket counters
attendants
policies
Mistagged
bags

Methods Manpower

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Category 1 Category 2 Category 3

EFECT

Category 4 Category 5

(5M in Green)

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 Seven Tools for TQM
(d) Pareto Charts: A graph to identify and plot
problems or defects in descending order of
frequency
Frequency

Percent
A B C D E

Seven Tools for TQM

(e) Flow Charts (Process Diagrams): A chart
that describes the steps in a process

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 Seven Tools for TQM
(f) Histogram: A distribution showing the
frequency of occurrence of a variable
Frequency Distribution

Repair time (minutes)

Seven Tools for TQM

(g) Statistical Process Control Chart: A chart with
time on the horizontal axis to plot values of a
statistic

Upper control limit

Target value

Lower control limit

Time

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 Pareto Charts
Data for October
– 100
70 – – 93
– 88
60 –
54
Frequency (number)

Cumulative percent
– 72
50 –
40 –
Number of
30 –
occurrences
20 –
12
10 –
4 3 2
0 –
Room svc Check-in Pool hours Minibar Misc.
72% 16% 5% 4% 3%
Causes and percent

Flow Charts
Packing and shipping process

Sealing Quick freeze

Packing Storage Shipping
Weighing storage
station (4 to 6 hrs) dock
Labeling (60 Mins)

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 Statistical Process Control
(SPC)
 Uses statistics and control charts to
tell when to take corrective action
 Drives process improvement
 Four key steps
 Measure the process
 When a change is indicated, find the
assignable cause
 Eliminate or incorporate the cause
 Restart the revised process

An SPC Chart
Plots the percent of free throws missed

20% Upper control limit

10% Coach’s target value

0% | | | | | | | | |
Lower control limit
1 2 3 4 5 6 7 8 9

Game number

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An SPC Chart. X-R Sample

Inspection
 Involves examining items to see if
an item is good or defective
 Detect a defective product
 Does not correct deficiencies in
process or product
 It is expensive
 Issues
 When to inspect
 Where in process to inspect

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 When and Where to Inspect
1. At the supplier’s plant while the supplier
is producing
2. At your facility upon receipt of goods from
the supplier
3. Before costly or irreversible processes
4. During the step-by-step production
processes
5. When production or service is complete
6. Before delivery from your facility
7. At the point of customer contact

Inspection
 Many problems
 Worker fatigue
 Measurement error
 Process variability
 Cannot inspect quality into a
product
 Robust design, empowered
employees, and sound processes
are better solutions

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 TQM In Services
 Service quality is more difficult to
measure than the quality of goods
 Service quality perceptions depend
on
 Intangible differences between
products
 Intangible expectations customers
have of those products

Service Quality
The Operations Manager must
recognize:
1. The tangible component of
services is important
2. The service process is important
3. The service is judged against the
customer’s expectations
4. Exceptions will occur

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Service
Specs
at UPS

Determinants of Service
Quality
 Reliability  Credibility
 Responsiveness  Security
 Competence  Understanding/
 Access knowing the
customer
 Courtesy
 Tangibles
 Communication

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 Ex.: Ishikawa
• Represent a diagram where the effect
is fail the exam.

Q&A

Thank you for your attention !

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