Quality

Improvement
Chapter 2- Lean
Enterprise
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 Outline
 Introduction
 Historical Review
 Lean Fundamentals
 Value Stream Map
 Implementing Lean
 Benefits to Lean Enterprise
 Additional Comments

2
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
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 Learning Objectives
When you complete this chapter, you
should:
 Know the definitions of value added and
non-value added activities.
 Be able to describe the lean fundamentals.
 Be able to construct a value stream map.
 Understand how to implement lean.
 Be able to list five benefits to lean.

3
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 Historical Review
 Ford Motor Company –1920.
 Gilbreth’s concept of motion
efficiency.
 Taylor’s principals of scientific
management.
 Shingo’s one minute die change.
 Toyota visits Detroit
 Toyota Production System

4
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
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 Lean Fundamentals
 Types of waste
 Categories of waste
 Workplace organization
 Concept of flow
 Inventory control
 Visual management
 Kaizen
 Value stream
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 Types of Waste
 Non-value added and unnecessary
for the system to function.
 Non-value added and necessary
for the system to function.
 Non-value added due to variation in
quality, cost, or delivery.
 Non-value added due to overstressing
people, equipment, or system.
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 Categories of Waste
 Overproduction—Producing more, earlier, or
faster then required by the next process.
 Waiting—Any idle time or delay waiting for
materials.
 Transportation—Any movement of material.
 Defects—Products or services that do not
conform to specifications.
 Inventory—Any inventory in the value
stream.
 Motion—Any motion of a person’s body.
 Extra Processing—Processing that does not
add value. 7
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 Workplace Organization—
5S’s
 Sort—Divide items into three piles:
necessary, belong to another process, and
unknown.
 Straighten—Arrange remaining items to
reduce or eliminate motion.
 Shine—Practice good housekeeping.
 Standardize—Document the process.
 Sustain—Maintain by charts, checklists,
and audits.
 Sometimes Safety

8
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 Concept of Flow
 Continuous with a minimum of variation.
 This utopian situation requires one-piece flow. It
 Reduces time between order and delivery,
 Prevents wait time and delays,
 Reduces labor & space to store and move mat’l,
 Reveals any defects & problems early in the
process,
 Reduces damage,
 Provides production flexibility,
 Reveals non-value activity.

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 Concept of Flow (Continued)
 Forces employees to concentrate
on the process.
 Equipment needs to be flexible &
make changeovers quickly.
 Cell technology is applicable.

10
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 Inventory Control
 JIT—Right material arrives at the right
time in the right amount.
 Items are pulled through the system be
the internal or external customer.
 Kanban is used as a signal to replenish
items.
 Taki (beat) time, which is the rate of
production based on customer demand.
 IT system controls the entire logistics
from raw mat’l to consumer purchase.

11
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 Visual Management
 A picture is worth a thousand
words.
 Visual displays are used to inform
people about customers, projects,
performance, goals, etc.
 Signals are used to alert people
about problems.

12
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
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 Kaizen
 Management encourages the continual
activity of small process improvements
by operators.
 Example--Black to white weld booth.
 Kaizen Blitz is a highly focused action-
oriented 3-5 day improvement
workshop by a multifunction team to
improve a specific process.
 Example—Managers, lawyers,
regulators, technicians, & end users are
tasked to reduce time for coal mining
permits.
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 Value Stream
 The specific flow of activities
required to design, order, produce,
and deliver a product or service to
customer(s).
 May be more than one value stream
in an organization.
 Ideally it will only include value-
added activities.

14
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 Value Stream (Continued)
 All operations are:
 Capable of meeting quality requirements.
 Available with no downtime.
 Efficient to eliminate unnecessary use of
energy and materials.
 Able to meet customer demand.

15
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 Value Stream Map (VSM)
 VSM graphically describes the sequence
and movement of the activities.
 First develop map of current state.
 Next develop map of ideal state with only
value-added activities.
 Difference provides opportunties for
improvement.
 VMS in next slide and icons in following one.
 Theory of constraints (TOC)—one operation
limits the throughput of the system at any
one time.
16
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 17
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
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Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
Dale H. Besterfield Upper Saddle River, New Jersey 07458 • All Rights Reserved
 Implementing Lean
1. Establish cross-function team.
2. Train in lean fundamentals.
3. Construct VSM for current and ideal.
4. Analyze maps for best place to start.
5. Train people in lean and simple SPC
tools.
6. Apply SS and Kaizen.
7. Use Kaizen blitz where appropriate.
8. Expand to other areas.
9. Standardize the improvements.
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 Benefits
 Tyco Flow Control: On time delivery—94%;
Lead time—150 days to 56 days;
Movement reduced by 68%; Machining
capacity increased by 200%; Cycle time
balanced; Incoming inspection reduced
from 16 days to 1.
 Toyota success.
 Veridan Homes: Drafting time reduced by
one hour; Inspection time by 50%; Cycle
time 32 to 15 days

20
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 Benefits (Continued)
 U of Scranton students: Reduced
inquiry response time from 13 days
to one; Eliminate faculty
involvement; Reduce application
time from 88 days to less than one
day.
 Marion IL Medial enter passed an
accreditation audit.

21
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 Additional Information
 The following slides on TQM are
from the eighth edition. Some
instructors may wish to use them.

22
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
Dale H. Besterfield Upper Saddle River, New Jersey 07458 • All Rights Reserved
 Introduction
Total Quality Management (TQM) is
the application of quantitative
methods and human resources to
improve all the processes within an
organization and exceed customer
needs now and in the future.

23
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 TQM
 The purpose of TQM is to provide a
quality product to customers, which will,
in turn, increase the productivity and
lower cost
 TQM allows the organization to achieve
the business objectives of profit and
growth
 Job Security. TQM creates a satisfying
place to work

24
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
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 TQM
 A company will not begin the transformation
to TQM until it is aware that the quality of
the product or service must be improved
 TQM requires a cultural change
 TQM is mandated by the customer
 TQM is better way to run a business and
compete in domestic and word markets
 Quality is first among equal cost and service
 Improvements in quality lead directly to
increased productivity

25
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 TQM
Basic Approach:
1. A committed and involved
management to provide long-term top-
to-bottom organizational support
2. An unwavering focus on the customer
3. Effective involvement and utilization of
the entire work force

26
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
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 TQM
Basic Approach cont’d:
4. Continuous improvement of the
business and production processes
5. Treating suppliers as partners
6. Establishing performance measures
for the processes

27
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 TQM
The Road to Business Growth
Business Growth
Continuous Improvement
Supplier Partnering

Employee Involvement
Focus on Quality

Process Orientation
Leadership

Customer Satisfaction
Quality Improvement, 9e Clear Vision 28
© 2013, 2008 by Pearson Higher Education, Inc
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 TQM
Quality Previous State TQM
Element
Definition Product- Customer-
Oriented oriented
Priorities Second to First among
service and cost service and cost
Decisions Short-term Long-term
Emphasis Detection Prevention
Errors Operations System
Responsibility Quality Control Everyone
Prob. Solving Managers Teams
Procurement Price Life-cycle costs
Manager’s Role Plan, enforce etc Delegate,
Table2.1 New and Old Cultures
facilitate 29
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 TQM
 Quality involves the design of the
product and the process
 TQM is not something that will occur
overnight, it takes a long time to build
the appropriate emphasis and
techniques into the culture

30
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 Leadership
 The ability to positively influence people
and systems to have a meaningful
impact and achieve results

31
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
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 Leadership
 Recognize that the quality function is no
more responsible for product
quality….Quality is the responsibility of
everyone in the organization
 Commitment to quality becomes part of
the corporation’s business strategy and
leads to enhanced profit and an
improved competitive position

32
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
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 Leadership
Leadership System:
 Refers to how decisions are made,
communicated, and carried out at all levels;
mechanisms for leadership development,
self-examination, and improvement
 Effectiveness of leadership system depends
in part on its organizational structure

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Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
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 Leadership
Leadership Characteristics:
1. Give priority attention to external and internal
customers and their needs
2. Empower, rather than control, subordinates
3. Emphasize improvement rather than
maintenance
4. Emphasize prevention
5. Encourage collaboration rather than competition

34
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
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 Leadership
Leadership Characteristics Cont’d:
6. Train and coach, rather than direct and supervise
7. Learn from problem
8. Improve communications
9. Demonstrate their commitment to quality
10.Choose suppliers on the basis of quality, not price

35
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
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 Leadership
Leadership Characteristics Cont’d:
11. Establish organizational systems to
support the quality effort
12. Encourage and recognize team effort

Leadership is essential during every phase of

the implementation process and particular
at the start!!!!!

36
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
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 TQM Implementation
 Begins with the Senior Management’s and the
CEO’s commitment
 Involvement is required
 Requires the education of Senior Management
in TQM concepts
 Timing of the implementation process can be
very important
 Formation of the Quality Council
 Development of Core Values, Vision Statement,
Mission Statement, Quality Policy Statement

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Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
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 TQM Implementation
Quality Council:
 Composed of: CEO, the Senior Managers
of the functional areas, such as design,
marketing, finance, production, and
quality; and a coordinator or consultant
 The coordinator will ensure that the
team members are empowered and
know their responsibilities

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 TQM Implementation
Quality Council Duties:
1. Develop the core values, vision, mission,
and quality policy statements
2. Develop the strategic long-term plan with
goals and the annual quality improvement
program with objectives
3. Create the total education and training
plan
4. Determine and continually monitor the
cost of poor quality
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Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
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 TQM Implementation
Quality Council Duties:
5. Determine the performance measures for
the organization
6. Determine projects that improve the
processes
7. Establish multifunctional project and
departmental or work group team
8. Establish or revise the recognition and
reward system
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 TQM Implementation
 Core Values for the Malcolm Baldrige
National Quality Award:
 Visionary Leadership
 Customer-driven Excellence
 Organizational & Personal Learning
 Valuing Employees & Partners

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 TQM Implementation
Core Values for the Malcolm Baldrige
National Quality Award Cont’d:
Agility
Focus on the Future
Management for Innovation
Management by Fact

42
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 TQM Implementation
Core Values for the Malcolm Baldrige
National Quality Award Cont’d:
 Social Responsibility
 Focus on Results and Creating Value
 Systems Perspective

43
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 TQM Implementation
Quality Statements:
 Include the Vision Statement, Mission
Statement, and Quality Policy Statement
 They are part of the strategy planning
process, which includes goals and
objectives
 Develop with input from all personnel

44
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 TQM Implementation
Seven Steps to Strategy Planning:
 Customer Needs
 Customer Positioning
 Predict the Future
 Gap Analysis
 Closing the Gap
 Alignment
 Implementation

45
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 Customer Satisfaction
Who is the Customer?
External Customer -- those who receive the final
products. Occurs normally at the organizational
level
Internal Customers -- occur at the process and
cross-departmental levels within the company
Identifying Customers:
 What parts or products are produced?
 Who uses our parts or products?
 Who do we call, correspond/interact with?
 Who supplied the inputs to the process?
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Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
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 Customer Satisfaction –
Cont’d.
Checklist to improve satisfaction:
1. Who are my customers?
2. What do they need?
3. What are their measures and expectations?
4. How is my product or service?
5. Does my product or service exceed
expectations?
6. How do I satisfy those needs?
7. What corrective action is necessary?
8. Are customers included on teams?
47
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
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 Customer Satisfaction –
Cont’d.
Customer Feedback:
1. Comment cards and formal
surveys
2. Focus groups
3. Direct customer contacts
4. Field Intelligence
5. Study complaints
6. Monitoring the Internet

48
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
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 Customer Satisfaction –
Cont’d.
Customer Complaints:
 Dissatisfied customers rarely complain
 Opportunity for quality improvement
 Procedure for customer complaints, such
as:
 Accept complaints
 Feedback complaint information to all
people
 Analyze complaints by doing effective
work
49
 Eliminate the root cause
Quality Improvement, 9e
Dale H. Besterfield
© 2013, 2008 by Pearson Higher Education, Inc
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 Customer Satisfaction –
Cont’d.
Basic Elements of Service Quality:
 Organization
 Customer
 Communication
 Front-Line People
 Leadership

50
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 Employee Involvement
……. any activity by which employees
participate in work-related decisions and
improvement activities, with the objectives
of tapping the creative energies of all
employees and improving their motivation

51
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
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 Employee Involvement –
Cont’d.
Education and Training:
 The cost of education and training for all
personnel is enormous and the time to
achieve it is lengthy
 Educational needs vary by function area,
department and job
 Quality Council may want to establish a
project team for the planning of the
program
52
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 Continuous Process
Improvement
The Goal is to achieve perfection:
 View work as a process
 Make all processes effective, efficient,
and adaptable
 Anticipate changing customer needs
 Control in-process perfromance using
measures such as scrap reduction…
 Maintain constructive dissatisfaction with
the present level of performance
53
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 Continuous Process
Improvement
The Goal is to achieve perfection:
 Eliminate waste and rework
 Investigate non-value added activities
 Eliminate nonconformities
 Use benchmarking to stay competitive
 Hold gains
 Lessons learned
 Use tools such as SPC, design of
experiments etc.
54
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 Continuous Process Improvement

FEEDBACK

PROCESS OUTPUT
INPUT People Information
Materials Equipment Data OUTCOMES
Money Method
Product
Procedures
Information Environment Service, etc.
Data, etc Materials

CONDITIONS

Figure 2-3 Input/output process model

55
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 Continuous Process
Improvement
Problem-Solving Method:
1. Identify the opportunity
2. Analyze the current process
3. Develop the optimal solution(s)
4. Implement changes
5. Study the results
6. Standardize the solution
7. Plan for the future

56
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 Continuous Process
Improvement
Problem-Solving Method – Phase I:
 Identify the opportunity

Identify and prioritize opportunities for

improvement
1. Is the problem important and not
superficial and why?
2. Will the problem solution contribute to
the attainment of goals?
3. Can be problem be defined clearly
using numbers? 57
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 Continuous Process
Improvement
Problem-Solving Method – Phase I:
 Form a team

Select the team leader and determine

goals and deadlines
 Define the Scope

Develop a good problem statement that

states the facts, focuses on what is
known and emphasizes the impact on
the customer.
58
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 Continuous Process
Improvement
Problem-Solving Method – Phase I:
 Develop a comprehensive charter
that specifies
 Authority
 Objective and scope
 Composition
 Direction and control
 General

59
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 Continuous Process
Improvement
Problem-Solving Method – Phase II:
 Analyze the current process
 Develop a process flow
 Define the target performance
measures
 Collect all available data and
information
 Determine the root cause

60
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 Continuous Process
Improvement
Problem-Solving Method – Phase III:
 Develop the optimal solution
 Determine possible solutions
 Judge possible solutions for greatest

potential for success

 Categorize solutions as short range

or long range

61
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 Continuous Process
Improvement
Problem-Solving Method – Phase IV:
 Implement Changes
 Prepare the implementation plan
 Obtain approval for the plan
 Develop implementation plan report

62
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 Continuous Process
Improvement
Problem-Solving Method – Phase V:
 Study the results
 Take measurements
 Evaluate results
 Identify unforeseen problems as a
result of the changes

63
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 Continuous Process
Improvement
Problem-Solving Method – Phase VI:
 Standardize the Solution
 Institutionalize the change
 Certify the quality peripherals
 Certify operators
 Cross-training

64
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 Continuous Process
Improvement
Problem-Solving Method – Phase VII:
 Plan for the Future
 Conduct regular scheduled reviews
 Establish systems to identify areas for
future improvement
 Incorporate process measurement and
team problem solving in all work
activities
 Reduce complexity, variation and out-
of-control processes
Quality Improvement, 9e
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© 2013, 2008 by Pearson Higher Education, Inc
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 Supplier Partnership
On average 40% or more of product or
service cost is due to procurement. The
supplier should be treated as an extension
of the process.
This requires:
Long term relationship with
supplier(s)
Good supplier management

66
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 Supplier Partnership
Supplier Selection Criteria:
 Quality of parts/raw materials
Certified?
 On-time delivery
 100% delivery
 Technology

67
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 Performance Measurements
Service
Billing Errors
Sales per square feet
Activity time
Production
Yield
Inventory turns
On-time delivery

68
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 Performance Measurements
Cost of Poor Quality:
 Prevention Costs:
 Costs of minimizing failure and
appraisal costs
 Appraisal Costs:
 Costs of determining the degree of
conformance to quality
requirements

69
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 Performance Measurements
Cost of Poor Quality:
 Internal Failure Costs:
 Costs resulting from defects found before
the customer receives the product or service
 External Failure Costs:
 Costs resulting from defects found after the
customer receives the product or service

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Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
Dale H. Besterfield Upper Saddle River, New Jersey 07458 • All Rights Reserved
 Performance Measurements
Optimum Cost of Poor Quality
 Total Quality Costs = Internal and External
Failure Costs + Prevention and Appraisal Costs
 Poor quality usually is a result of low investment
in prevention and appraisal
 This results in an increase in the failure costs

71
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
Dale H. Besterfield Upper Saddle River, New Jersey 07458 • All Rights Reserved
 Performance Measurements
Optimum Cost of Poor Quality
 As more money/effort is invested in
prevention and appraisal, the quality
improves which in turn drives the failure
costs down.
 The total costs of poor quality is at its
lowest when the failure costs are non
existent.

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Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
Dale H. Besterfield Upper Saddle River, New Jersey 07458 • All Rights Reserved
 Performance Measurements
Malcolm Baldrige National Quality
Award
The Baldrige Award is given by the
President of the United States to
businesses —manufacturing and service,
small and large —and to education and
health care organizations that apply and
are judged to be outstanding in seven
areas

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Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
Dale H. Besterfield Upper Saddle River, New Jersey 07458 • All Rights Reserved
 Performance Measurements
Malcolm Baldrige National Quality
Award
Core Values/Concepts
 Visionary leadership
 Customer-driven excellence
 Org. and personal learning
 Valuing employees and partners
 Agility
 Focus on the future
74
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
Dale H. Besterfield Upper Saddle River, New Jersey 07458 • All Rights Reserved
 Performance Measurements

Malcolm Baldrige National Quality

Award
Core Values/Concepts
 Managing for innovation
 Management by fact
 Social Responsibility
 Focus on results and creating value
 Systems perspective

75
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
Dale H. Besterfield Upper Saddle River, New Jersey 07458 • All Rights Reserved
 Taguchi’s Loss Function
High loss L = D2 C
Unacceptable where
Loss (to
producing L = loss to
organization Poor society
, customer,
Good D=
and society) distance from
Best target value
Low loss C=
Target-oriented cost of
qualitydeviation
yields more
product in the “best”
category
Target-oriented
quality brings
product toward the
Frequency target value
Conformance-oriented
quality keeps products
within 3 standard
deviations
Lower Target Upper
Specification
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Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
Dale H. Besterfield Upper Saddle River, New Jersey 07458 • All Rights Reserved
 Deming’s 14 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

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Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
Dale H. Besterfield Upper Saddle River, New Jersey 07458 • All Rights Reserved
 Deming’s 14 Points
6. Start training
7. Emphasize leadership
8. Drive out fear
9. Break down barriers between
departments
10. Stop haranguing workers

78
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
Dale H. Besterfield Upper Saddle River, New Jersey 07458 • All Rights Reserved
 Deming’s 14 Points
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

79
Quality Improvement, 9e © 2013, 2008 by Pearson Higher Education, Inc
Dale H. Besterfield Upper Saddle River, New Jersey 07458 • All Rights Reserved