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Outline
Operations
 Global Company Profile: Arnold
Management Palmer Hospital
 Quality and Strategy
Managing Quality  Defining Quality
 Implications of Quality
 Malcolm Baldrige National Quality
Award
 Cost of Quality (COQ)
 Ethics and Quality Management
6–1 6–2

Outline – Continued Outline – Continued

 International Quality Standards  Total Quality Management
 ISO 9000  Continuous Improvement
 ISO14000  Six Sigma
 Employee Empowerment
 Benchmarking
 Just-in-Time (JIT)
 Taguchi Concepts
 Knowledge of TQM Tools
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Outline – Continued Outline – Continued

 Tools of TQM  The Role of Inspection
 Check Sheets  When and Where to Inspect
 Scatter Diagrams  Source Inspection
 Cause-and-Effect Diagrams  Service Industry Inspection
 Pareto Charts  Inspection of Attributes versus
 Flowcharts Variables
 Histograms  TQM in Services
 Statistical Process Control (SPC)
6–5 6–6

Learning Objectives Managing Quality Provides a

Competitive Advantage
When you complete this chapter you
should be able to: Arnold Palmer Hospital
 Define quality and TQM  Deliver over 13,000 babies annually
 Describe the ISO international  Virtually every type of quality tool is
quality standards employed
 Explain Six Sigma  Continuous improvement
 Explain how benchmarking is used  Employee empowerment
 Explain quality robust products and  Benchmarking
Taguchi concepts  Just-in-time
 Use the seven tools of TQM  Quality tools
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Two Ways Quality

Quality and Strategy Improves Profitability
 Managing quality supports Sales Gains via
differentiation, low cost, and  Improved response
response strategies
 Flexible pricing
 Quality helps firms increase sales  Improved reputation
and reduce costs Improved Increased
Quality Profits
Reduced Costs via
 Building a quality organization is  Increased productivity
a demanding task
 Lower rework and scrap costs
 Lower warranty costs
Figure 6.1
6–9 6 – 10

Defining Quality
Different Views
The totality of features and
characteristics of a product or  User-based – better performance,
service that bears on its ability to more features
satisfy stated or implied needs
 Manufacturing-based –
American Society for Quality
conformance to standards,
making it right the first time
 Product-based – specific and
measurable attributes of the
product

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Meaning of Quality Implications of Quality

Meaning of Quality 1. Company reputation
 Perception of new products
Producer’s Perspective Consumer’s Perspective  Employment practices
 Supplier relations
Quality of Conformance Quality of Design

Production • Conformance to Marketing

2. Product liability
• Quality characteristics
specifications
• Cost
• Price
 Reduce risk

Fitness for
3. Global implications
Consumer Use
 Improved ability to compete
6 – 14 6 – 15

Professional football player Drew Brees and wife Brittany check in as the first
guests of the Ritz-Carlton in New Orleans when it reopened after Hurricane Katrina.
The Ritz-Carlton is the only two-time winner of the Malcolm Baldrige National
Quality Award in the service category and its goal is a totally defect-free experience
for its guests.
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Malcom Baldrige National Baldrige Criteria

Quality Award Applicants are evaluated on:
 Established in 1988 by the U.S. Categories Points
government Leadership 120
 Designed to promote TQM Strategic Planning 85
practices Customer & Market Focus 85
 Recent winners Measurement, Analysis, and
 Motorola, Xerox,Federal Express, Knowledge Management 90
IBM, Ritz Carlton,
Workforce Focus 85
Process Management 85
Results 450
6 – 19 6 – 20

PQA Criteria
Philippine Quality Award
Awardees are evaluated on:
Leadership
 The PQA sets a standard of excellence to help Filipino
organizations achieve world-class performance and Strategic Planning
serves as a ―template‖ for competitiveness based on
the principles of Total Quality Management (TQM). Customer & Market Focus
 The highest national recognition for exemplary Information and Analysis
organizational performance of private and public Human Resource Focus
organizations in the country
Process Management
 It is a national quality award comparable with the
Malcolm Baldrige National Quality Award (MBNQA) of Business / Organizational Results
the US and those in Europe and Asia.

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PQA Recipients Costs of Quality

Total Total Cost

Cost
External Failure

Internal Failure

Prevention

Appraisal
Quality Improvement

6 – 23 6 – 25

Costs of Quality Leaders in Quality

• Walter Shewhart
 Prevention costs - reducing the – In 1920s, developed control charts
potential for defects – Introduced term ―quality assurance‖
• W. Edwards Deming
 Appraisal costs - evaluating – Developed courses during World War II to teach
products, parts, and services statistical quality-control techniques to engineers
and executives of companies that were military
suppliers
 Internal failure - producing defective – After war, began teaching statistical quality control
parts or service before delivery to Japanese companies
– 14 Points for Management
 External costs - defects discovered • Joseph M. Juran
after delivery – Followed Deming to Japan in 1954
– Focused on strategic quality planning
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Leaders in Quality Ethics and Quality

 Armand V. Feigenbaum
Management
 In 1951, introduced concepts of total quality
control and continuous quality improvement  Operations managers must deliver
 Philip Crosby healthy, safe, quality products and
 In 1979, emphasized that costs of poor quality far services
outweigh cost of preventing poor quality
 In 1984, defined absolutes of quality  Poor quality risks injuries, lawsuits,
management—conformance to requirements, recalls, and regulation
prevention, and ―zero defects‖
--- Quality Is Free  Organizations are judged by how
 Kaoru Ishikawa they respond to problems
 Promoted use of quality circles  All stakeholders must be
 Developed ―fishbone‖ diagram
considered
 Emphasized importance of internal customer
6 – 29 6 – 30

ISO 9000
Series

International Quality
 ISO 9000 series
Standards
 Common quality standards for products
sold
 1994 update
 2000 update places greater emphasis on
leadership and customer satisfaction
 2008 update

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ISO 14000 TQM

Environmental Standard
• Refers to a quality emphasis that
Core Elements: encompasses the entire organization,
from supplier to customer
 Environmental management
 Auditing • Stresses a commitment by management
to have a continuing, companywide drive
 Performance evaluation toward excellence in all aspects of
 Labeling products and services that are important
 Life cycle assessment to the customer

6 – 33 6 – 34

Deming’s Fourteen Points Deming’s Fourteen Points

6. Institute worker training
1. Create constancy of purpose
7. Instill leadership among
2. Adopt philosophy of prevention supervisors
3. Cease mass inspection
8. Eliminate fear among employees
4. Select a few suppliers based on
9. Eliminate barriers between
quality
departments
5. Constantly improve system and
10. Eliminate slogans
workers

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Deming’s Fourteen Points Seven Concepts of TQM

11. Remove numerical quotas  Continuous improvement
12. Enhance worker pride  Six Sigma
13. Institute vigorous training and  Employee empowerment
education programs
 Benchmarking
14. Develop a commitment from top
management to implement above  Just-in-time (JIT)
13 points  Taguchi concepts
 Knowledge of TQM tools
6 – 37 6 – 38

Continuous Improvement Shewhart’s PDCA Model

 Represents continual 1.Plan

4. Act
improvement of all processes Identify the
Implement improvement
 Involves all operations and work the plan and make
a plan
centers including suppliers and
customers 3. Check 2. Do
Is the plan Test the
People, Equipment, Materials, working? plan
Procedures
Figure 6.3

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Six Sigma
 Two meanings
 Statistical definition of a process that
is 99.9997% capable, 3.4 defects per
million opportunities (DPMO)
 A program designed to reduce
defects, lower costs, and improve
customer satisfaction

41 6 – 41 6 – 42

Six Sigma Six Sigma Program

 Two meanings
Lower limits Upper limits
 Originally developed by Motorola,
 Statistical
2,700 defects/million
definition of a process that adopted and enhanced by
is 99.9997% capable, 3.4 defects per Honeywell and GE
3.4 defects/million
million opportunities (DPMO)
 Highly structured approach to
 A program designed to reduce
defects, lower costs, and improve process improvement
customer satisfactionMean  A strategy

Figure 6.4
±3
±6

6 – 43
 A discipline - DMAIC
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Six Sigma Six Sigma Implementation

1. Define critical outputs  Emphasize defects per million
and identify gaps for DMAIC Approach opportunities as a standard metric
improvement  Provide extensive training
2. Measure the work and  Focus on corporate sponsor support
collect process data (Champions)
3. Analyze the data
 Create qualified process improvement
experts (Black Belts, Green Belts, etc.)
4. Improve the process  Set stretch objectives
5. Control the new process to
make sure new performance This cannot be accomplished without a major
is maintained commitment from top level management
6 – 45 6 – 46

Employee Empowerment Quality Circles

 Getting employees involved in product
and process improvements  Group of employees who meet
 85% of quality problems are due
regularly to solve problems
to process and material  Trained in planning, problem
 Techniques solving, and statistical methods
 Build communication networks
that include employees  Often led by a facilitator
 Develop open, supportive supervisors  Very effective when done
 Move responsibility to employees properly
 Build a high-morale organization
 Create formal team structures
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Benchmarking Benchmarking Factors for

Web Sites
Selecting best practices to use as a Use of meta tags Yes: 70%, No: 30%
standard for performance Meaningful homepage title Yes: 97%, No: 3%
 Determine what to Unique domain name Yes: 91%, No: 9%
benchmark Search engine registration Above 96%
 Form a benchmark team Average loading speed 28K: 19.31, 56K:
10.88, T1: 2.59
 Identify benchmarking partners Average number of spelling errors 0.16
 Collect and analyze benchmarking Visibility of contact information Yes: 74%, No: 26%
information Presence of search engine Yes: 59%, No: 41%
 Take action to match or exceed the Translation to multiple languages Yes: 11%, No: 89%
benchmark
Table 6.3
6 – 49 6 – 50

Best Practices for Resolving Just-in-Time (JIT)

Customer Complaints • An inventory strategy implemented to improve
the return on investment of a business by
 Make it easy for clients to complain reducing in-process inventory and cycle time.

 Respond quickly to complaints • JIT is an all-encompassing manufacturing and

service management philosophy that is founded on
 Resolve complaints on first contact the concept of elimination of waste.
 Use computers to manage
complaints  The term just-in-time stems from a primary form of
waste elimination: reducing inventories (in
 Recruit the best for customer manufacturing) and waiting times (in services).
service jobs
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Waste in Operations Waste in Operations (cont.)

6 – 53 6 – 54

Waste in Operations (cont.) 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) Example Just-In-Time (JIT) Example

Reducing inventory reveals
problems so they can be solved

Work in process
inventory level
(hides problems)

Unreliable Capacity Unreliable Capacity

Vendors Scrap Vendors Scrap
Imbalances Imbalances

6 – 57 6 – 58

Taguchi Concepts Tools of TQM

 Engineering and experimental  Tools for Generating Ideas
design methods to improve product Check sheets
and process design Scatter diagrams
 Identify key component and process Cause-and-effect diagrams
variables affecting product variation  Tools to Organize the Data
 Taguchi Concepts Pareto charts
 Quality robustness Flowcharts
 Quality loss function  Tools for Identifying Problems
Histogram
 Target-oriented quality
Statistical process control chart
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Seven Tools of TQM Seven Tools of TQM

(a) Check Sheet: An organized method of (b) Scatter Diagram: A graph of the value
recording data of one variable vs. another variable

Hour
Defect 1 2 3 4 5 6 7 8

Productivity
A /// / / / / /// /
B // / / / // ///
C / // // ////

Absenteeism

Figure 6.6 Figure 6.6

6 – 64 6 – 65

Seven Tools of TQM Cause-and-Effect Diagrams

(c) Cause-and-Effect Diagram: A tool that Material Method
(ball) (shooting process)
identifies process elements (causes) that Grain/Feel Aiming point
might effect an outcome (grip)
Size of ball
Air pressure Bend knees
Cause Hand position
Balance
Lopsidedness
Materials Methods Follow-through
Missed
Effect Training Rim size
free-throws

Conditioning Motivation Rim height

Consistency Rim alignment Backboard

stability
Concentration

Machine
Manpower Machinery Manpower
(hoop &
(shooter) Figure 6.7
Figure 6.6 backboard)
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Seven Tools of TQM

(d) Pareto Chart: A graph to identify and plot
problems or defects in descending order of
frequency
DRAW A FISHBONE DIAGRAM SHOWING
REASONS WHY YOU MIGHT ARRIVE LATE
FOR CLASS IN THE MORNING

Frequency

Percent
A B C D E
Figure 6.6
6 – 68 6 – 69

Seven Tools of TQM 70

60
(64)
Pareto
Pareto Analysis Chart
Percent from each cause

50

NUMBER OF 40
CAUSE DEFECTS PERCENTAGE
30
Poor design 80 64 %
Wrong part dimensions 16 13 20
(13)
Defective parts 12 10 (10)
10 (6)
Incorrect machine calibration 7 6 (3) (2) (2)
Operator errors 4 3
0
Defective material 3 2
Surface abrasions 3 2
125 100 %

Causes of poor quality

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Seven Tools of TQM Pareto Charts

The hard Rock Hotel in Bali has just Data for October

collected the data from 75 complaint calls to 70 –

– 100
– 93
the general manager during the month of – 88
60 –

Frequency (number)
54
October. The manager wants to prepare an

Cumulative percent
– 72
50 –
analysis of the complaints. The data 40 –
provided are room service, 54 ; Check-in 30 – Number of
delays,12; hours the pool is open, 4; minibar occurrences
20 –
prices,3; and miscellaneous, 2; 12
10 –
4 3 2
0 –
Analyze the complaints using a Pareto Chart Room svc Check-in Pool hours Minibar Misc.
72% 16% 5% 4% 3%
Causes and percent of the total
Figure 6.6
6 – 72 6 – 73

Seven Tools of TQM Flow Charts

(e) Flowchart (Process Diagram): A chart that
describes the steps in a process: A chart
MRI Flowchart
that graphically represents a process or 1. Physician schedules MRI 7. If unsatisfactory, repeat
system using annotated boxes and 2. Patient taken to MRI 8. Patient taken back to room
interconnected lines. 3. Patient signs in 9. MRI read by radiologist
4. Patient is prepped 10. MRI report transferred to
5. Technician carries out MRI physician
6. Technician inspects film 11. Patient and physician discuss

8
80%
1 2 3 4 5 6 7 11
9 10
20%
Figure 6.6
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Seven Tools of TQM Seven Tools of TQM

(f) Histogram: A distribution showing the (g) Statistical Process Control Chart: A chart with
frequency of occurrences of a variable time on the horizontal axis to plot values of a
statistic
Distribution
Frequency

Upper control limit

Target value

Lower control limit

Repair time (minutes) Time

Figure 6.6 Figure 6.6
6 – 76 6 – 77

Statistical Process Control An SPC Chart

(SPC)
Plots the percent of free throws missed
 Uses statistics and control charts to
tell when to take corrective action 20% Upper control limit
 Drives process improvement
 Four key steps 10% Coach’s target value
 Measure the process
 When a change is indicated, find the 0% | | | | | | | | |
Lower control limit
assignable cause 1 2 3 4 5 6 7 8 9

 Eliminate or incorporate the cause Game number

 Restart the revised process Figure 6.8

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Inspection When and Where to Inspect

 Involves examining items to see if 1. At the supplier’s plant while the supplier
an item is good or defective is producing
2. At your facility upon receipt of goods from
 Detect a defective product the supplier
 Does not correct deficiencies in 3. Before costly or irreversible processes
process or product
4. During the step-by-step production
 It is expensive process
 Issues 5. When production or service is complete
 When to inspect 6. Before delivery to your customer
 Where in process to inspect 7. At the point of customer contact
6 – 80 6 – 81

Inspection Source Inspection

 Many problems  Also known as source control
 Worker fatigue
 The next step in the process is
 Measurement error your customer
 Process variability
 Ensure perfect product
 Cannot inspect quality into a to your customer
product
 Robust design, empowered Poka-yoke is the concept of foolproof devices
employees, and sound processes or techniques designed to pass only
acceptable product
are better solutions
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Service Industry Inspection Service Industry Inspection

What is What is
Organization Standard Organization Standard
Inspected Inspected
Jones Law Office Receptionist Is phone answered by the Hard Rock Hotel Reception Use customer’s name
performance second ring desk
Billing Accurate, timely, and Doorman Greet guest in less than 30
correct format seconds
Attorney Promptness in returning Room All lights working, spotless
calls bathroom
Minibar Restocked and charges
accurately posted to bill

Table 6.5 Table 6.5

6 – 84 6 – 85

Service Industry Inspection Service Industry Inspection

What is What is
Organization Standard Organization Standard
Inspected Inspected
Arnold Palmer Billing Accurate, timely, and Olive Garden Busboy Serves water and bread
Hospital correct format Restaurant within 1 minute
Pharmacy Prescription accuracy, Busboy Clears all entrée items and
inventory accuracy crumbs prior to dessert
Lab Audit for lab-test accuracy Waiter Knows and suggest
specials, desserts
Nurses Charts immediately
updated
Admissions Data entered correctly and
completely

Table 6.5 Table 6.5

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Service Industry Inspection Attributes Versus Variables

What is  Attributes
Organization Standard
Inspected
 Items are either good or bad,
Nordstrom Display areas Attractive, well-organized, acceptable or unacceptable
Department stocked, good lighting
Store  Does not address degree of failure
Stockrooms Rotation of goods,
organized, clean  Variables
Salesclerks Neat, courteous, very  Measures dimensions such as weight,
knowledgeable speed, height, or strength
 Falls within an acceptable range
 Use different statistical techniques
Table 6.5

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TQM In Services Service Quality

 Service quality is more difficult to The Operations Manager must
measure than the quality of goods recognize:
 Service quality perceptions depend 1. The tangible component of
on services is important
 Intangible differences between 2. The service process is important
products 3. The service is judged against the
 Intangible expectations customers customer’s expectations
have of those products 4. Exceptions will occur

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Service Determinants of Service

Specifications Quality
at UPS
 Reliability  Credibility
 Responsiveness  Security
 Competence  Understanding/
 Access knowing the
customer
 Courtesy
 Tangibles
 Communication

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