Chapter Six

Philip Crosby stated that quality is free

"What costs money are the unquality things—all the actions that involve not doing it right the first time."

Benchmarks often take the form of

"best practices" found in other firms or in other divisions

Techniques for building employee empowerment include

(1) building communication networks that include employees; (2) developing open, supportive supervisors; (3) moving responsibility from both managers and staff to production employees; (4) building high-morale organizations; (5) creating such formal organization structures as teams and quality circles.

best practices for resolving customer complaints.

(1) make it easy for clients to complain (2) Respond quickly to complaints (3) Resolve complaints on the first contact (4) Use computers to manage complaints (5) Recruit the best for customer service jobs

ISO 9000 focus is to enhance success through eight quality management principles:

(1) top management leadership, (2) customer satisfaction, (3) continual improvement, (4) involvement of people, (5) process analysis, (6) use of data-driven decision making, (7) a systems approach to management, and (8) mutually beneficial supplier relationships.

Operations managers need to know critical points in the system:

(1) when to inspect and (2) where to inspect. depends on the type of process and the value added at each stag The seven tools of TQM discussed in the previous section aid in this "when and where to inspect" decision

Inspections can take place at any of the following points:

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

three other reasons why quality is important:

1. Company reputation 2. Product liability 3. global implications

Deming's 14 Points for Implementing Quality Improvement

1. Create consistency of purpose. 2. Lead to promote change. 3. Build quality into the product; stop depending on inspections to catch problems. 4. Build long-term relationships based on performance instead of awarding business on the basis of price. 5. Continuously improve product, quality, and service. 6. Start training. 7. Emphasize leadership. 8. Drive out fear. 9. Break down barriers between departments. 10. Stop haranguing workers. 11. Support, help, and 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.

The steps for developing benchmarks are:

1. Determine what to benchmark 2. Form a benchmark team 3. Identify benchmarking partners 4. Collect and analyze benchmarking information 5. Take action to match or exceed the benchmark

Six Sigma is a comprehensive system—a strategy, a discipline, and a set of tools—for achieving and sustaining business success:

1. It is a strategy because it focuses on total customer satisfaction. 2. It is a discipline because it follows the formal Six Sigma Improvement Model known as DMAIC 3. It is a set of seven tools

JIT is related to quality in three ways:

1. JIT cuts the costs of quality; 2. JIT improves quality; 3. better quality means less inventory and a better, easier-to-employ JIT system

Process of quality

1. The characteristics that connote quality must first be identified through research (a user-based approach to quality). 2. These characteristics are then translated into specific product attributes (a product-based approach to quality). 3. Then, the manufacturing process is organized to ensure that products are made precisely to specifications (a manufacturing-based approach to quality).

Quality definition can have categories

1. User-based: They propose that quality "lies in the eyes of the beholder." -marketing and customers -better performance, nicer features, and other (sometimes costly) improvements 2. manufacturing based: They believe that quality means conforming to standards and "making it right the first time." -production managers 3. product based: which views quality as a precise and measurable variable.

Seven Tools of TQM

1. check sheets 2. scatter diagrams 3. cause-and-effect diagrams 4. Pareto charts 5. flowchart 6. histograms 7. statistical process control (SPC)

Genichi Taguchi has provided us with three concepts aimed at improving both product and process quality

1. quality robustness, 2. target-oriented quality, and 3. the quality loss function.

The operations manager plays a significant role in addressing several major aspects of service quality

1. the tangible component of many services is important. 2. determinants of service quality are related to the service process 3. customer's expectations are the standard against which the service is judged 4. the manager must expect exceptions

The latest modification of the standard, ISO 9001

2015, follows a structure that makes it more compatible with other management systems. This version gives greater emphasis to risk-based thinking, attempting to prevent undesirable outcomes.

Joseph M. Juran popularized Pareto's work when he suggested that

80% of a firm's problems are a result of only 20% of the causes.

quality loss function (QLF)

A mathematical function that identifies all cost connected with poor quality and shows how these costs increase as product quality moves from what the customer wants. attempts to estimate the cost of deviating from the target value. Even though the item is produced within specification limits, the variation in quality can be expected to increase costs as the item output moves away from its target value. takes the general form of a simple quadratic equation

Inspection

A means of ensuring that an operation is producing at the quality level expected can involve measurement, tasting, touching, weighing, or testing of the product (sometimes even destroying it when doing so).

Joseph M. Juran

A pioneer in teaching the Japanese how to improve quality, Juran believed strongly in top-management commitment, support, and involvement in the quality effort. He was also a believer in teams that continually seek to raise quality standards. Juran varies from Deming somewhat in focusing on the customer and defining quality as fitness for use, not necessarily the written specifications.

The Flow of Activities Necessary to Achieve Total Quality Management

A successful quality strategy begins with an organizational culture that fosters quality, followed by an understanding of the principles of quality, and then engaging employees in the necessary activities to implement quality. When these things are done well, the organization typically satisfies its customers and obtains a competitive advantage. The ultimate goal is to win customers.

Company reputation

An organization can expect its reputation for quality—be it good or bad—to follow it. Quality will show up in perceptions about the firm's new products, employment practices, and supplier relations. Self-promotion is not a substitute for quality products.

JIT improves quality

As JIT shrinks lead time, it keeps evidence of errors fresh and limits the number of potential sources of error. JIT creates, in effect, an early warning system for quality problems, both within the firm and with vendors.

Four major categories of costs are associated with quality

Called the cost of quality (COQ)

Leaders in Quality

Crosby, Deming, Feigenbaum, and Juran

customer's expectations are the standard against which the service is judged

Customers' perceptions of service quality result from a comparison of their "before-service expectations" with their "actual-service experience." service quality is judged on the basis of whether it meets expectations. The manager may be able to influence both the quality of the service and the expectation

W. Edwards Deming

Deming insisted management accept responsibility for building good systems. The employee cannot produce products that on average exceed the quality of what the process is capable of producing. His 14 points for implementing quality improvement

Employee empowerment

Enlarging employees jobs so that the added responsibility and authority is moved to the lowest level possible in the organization involving employees in every step of the production process

Armand Feigenbaum

His 1961 book Total Quality Control laid out 40 steps to quality improvement processes. He viewed quality not as a set of tools but as a total field that integrated the processes of a company. His work in how people learn from each other's successes led to the field of cross-functional teamwork.

the tangible component of many services is important.

How well the service is designed and produced does make a difference

Unlike the Baldrige Awards, the assessment includes

ISO certified organizations must be reaudited every 3 years.

global implications

In this technological age, quality is an international, as well as OM, concern. For both a company and a country to compete effectively in the global economy, products must meet global quality, design, and price expectations. Inferior products harm a firm's profitability and a nation's balance of payments.

better quality means less inventory and a better, easier-to-employ JIT system

Often the purpose of keeping inventory is to protect against poor production performance resulting from unreliable quality. If consistent quality exists, JIT allows firms to reduce all the costs associated with inventory.

Scatter Diagrams

Provide a visual way to examine possible relationships between two variables show the relationship between two measurements If the two items are closely related, the data points will form a tight band. If a random pattern results, the items are unrelated.

Philip B. Crosby

Quality Is Free was Crosby's attention-getting book published in 1979. Crosby believed that in the traditional trade-off between the cost of improving quality and the cost of poor quality, the cost of poor quality is understated. The cost of poor quality should include all of the things that are involved in not doing the job right the first time. Crosby coined the term zero defects and stated, "There is absolutely no reason for having errors or defects in any product or service."

TQM in Services

Service quality is more difficult to measure than the quality of goods Service quality perceptions depend on 1. Intangible differences between products 2. Intangible expectations customers have of those products

Managers of service firms may find

Servqual useful when evaluating performance.

continuous improvement

TQM requires a never-ending process of continuous improvement that covers people, equipment, suppliers, materials, and procedures. The basis of the philosophy is that every aspect of an operation can be improved. The end goal is perfection, which is never achieved but always sought.

Product liability

The courts increasingly hold organizations that design, produce, or distribute faulty products or services liable for damages or injuries resulting from their use. Legislation such as the Consumer Product Safety Act sets and enforces product standards by banning products that do not reach those standards. Impure foods that cause illness, nightgowns that burn, tires that fall apart, or auto fuel tanks that explode on impact can all lead to huge legal expenses, large settlements or losses, and terrible publicity.

the manager must expect exceptions

There is a standard quality level at which the regular service is delivered, However, there are "exceptions" or "problems" initiated by the customer or by less-than-optimal operating conditions. This implies that the quality control system must recognize and have a set of alternative plans for less-than-optimal operating conditions.

JIT cuts the costs of quality

This occurs because scrap, rework, inventory investment, and damage costs are directly related to inventory on hand. Because there is less inventory on hand with JIT, costs are lower. In addition, inventory hides bad quality, whereas JIT immediately exposes bad quality.

TQM 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.

Plan-Do-Check-Act (PDCA)

a continuous improvement model of plan, do, check, act -by Plan-Do-Check-Act -also called a Deming circle or a Shewhart circle Plan: identify the problem Do: Test the plan Check: Is the plan working? Act: Implement the plan, document

Flowcharts

a drawing used to analyze movement of people or material graphically present a process or system using annotated boxes and interconnected lines. They are a simple but great tool for trying to make sense of a process or explain a process.

Pareto Charts

a graphic way of classifying problems by their level of importance, often referred to as the 80-20 rule -based on the work of Vilfredo Pareto, a 19th-century economist. method of organizing errors, problems, or defects to help focus on problem-solving efforts

Quality circle

a group of employees meeting regularly with a facilitator to solve work-related problems in their work area A specially trained team member, called the facilitator, usually helps train the members and keeps the meetings running smoothly.

When an organization is large enough to have many divisions or business units

a natural approach is the internal benchmark. Data are usually much more accessible than from outside firms. Typically, one internal unit has superior performance worth learning from.

target-oriented quality

a philosophy of continuous improvement to bring a product exactly on target

Statistical Process Control (SPC)

a process used to monitor standards, make measurements, and take corrective action as a product or service is being produced Samples of process outputs are examined; if they are within acceptable limits, the process is permitted to continue. If they fall outside certain specific ranges, the process is stopped and, typically, the assignable cause located and removed. 1. Control Charts

Six Sigma

a program to save time, improve quality, and lower costs -popularized by Motorola, Honeywell, and General Electric (GE), has two meanings in TQM 1. statistical sense 2. three-sigma program (more common)

inspection is not a substitute for

a robust product produced by well-trained employees in a good process

Cause-and-Effect Diagrams

a schematic technique used to discover possible locations of quality problems -also known as an Ishikawa diagram or a fish-bone chart Each "bone" represents a possible source of error.

Check Sheet

a tool for recording and organizing data to identify a problem help analysts find the facts or patterns that may aid subsequent analysis

Checklists

a type of poka-yoke that lists the steps needed to ensure consistency and completeness in a task

Benchmarks can and should be established in

a variety of areas. Total quality management requires no less.

Inspection should be thought of as

a vehicle for improving the system.

Malcolm Baldrige National Quality Award

an award given by the President of the United States to organizations judged to be outstanding in specific managerial tasks that lead to improved quality for both products and services -Recent winners include such organizations as Price waterhouse Coopers, Lockheed Martin, Nestle Purina, Honeywell, and the City of Fort Collins, Colorado. The Japanese have a similar award, the Deming Prize, named after an American, Dr. W. Edwards Deming.

attribute inspection

an inspection that classifies items as being either good or defective It does not address the degree of failure

The operations manager's objective is to

build a total quality management system that identifies and satisfies customer needs. Total quality management takes care of the customer.

set of seven tools

check sheets, scatter diagrams, cause-and-effect diagrams, Pareto charts, flowcharts, histograms, and statistical process control.

Variable inspection

classifications of inspected items as falling on a continuum scale, such as dimension or strength measures such dimensions as weight, speed, size, or strength to see if an item falls within an acceptable range

find one or more similar organizations that are leaders in the particular areas you want to study

compare yourself (benchmark yourself) against them. The company need not be in your industry

with large, expensive purchases, many companies perform a

comprehensive and demanding customer acceptance review.

responsiveness

concerns the willingness or readiness of employees to provide service. It involves timeliness of service.

reliability

consistency of performance and dependability. It means that the firm performs the service right the first time and that the firm honors its promises.

In the U.S., TQM and zero defects are also used to describe

continuous improvement efforts.

To make sure a system is producing as expected

control of the process is needed. The best processes have little variation from the standard expected

source inspection (or source control)

controlling or monitoring at the point of production or purchase-at the source consistent with the concept of employee empowerment, where individual employees self-check their own work. The idea is that each supplier, process, and employee treats the next step in the process as the customer, ensuring perfect product to the next "customer."

Inspection does not

correct deficiencies in the system or defects in the products, nor does it change a product or increase its value. Inspection only finds deficiencies and defects. Moreover, inspections are expensive and do not add value to the product.

Prevention costs

costs associated with reducing the potential for defective parts or services (e.g., training, quality improvement programs).

Appraisal costs

costs related to evaluating products, processes, parts, and services (e.g., testing, labs, inspectors).

External failure costs

costs that occur after delivery of defective parts or services (e.g., rework, returned goods, liabilities, lost goodwill, costs to society).

Internal failure costs

costs that result from production of defective parts or services before delivery to customers (e.g., rework, scrap, downtime).

improved quality allows

costs to drop as firms increase productivity and lower rework, scrap, and warranty costs.

For operations managers, one of the most important jobs is to

deliver healthy, safe, and quality products and services to customers.

statistical sense

describes a process, product, or service with an extremely high capability (99.9997% accuracy)

just-in-time (JIT)

designed to produce or deliver goods just as they are needed

Inspection goal

detect a bad process immediately

Managing quality helps build successful strategies of

differentiation, low cost, and response

When inspections take place, quality characteristics may be measured as

either attributes or variables

If a firm believes that it has introduced a questionable product

ethical conduct must dictate the responsible action. A manufacturer must accept responsibility for any poor-quality product released to the public.

To empower employees and implement TQM as a continuing effort

everyone in the organization must be trained in the techniques of TQM.

DMAIC

five-step process improvement model (1) Defines the project's purpose, scope, and outputs and then identifies the required process information, keeping in mind the customer's definition of quality; (2) Measures the process and collects data; (3) Analyzes the data, ensuring repeatability (the results can be duplicated) and reproducibility (others get the same result); (4) Improves, by modifying or redesigning, existing processes and procedures; and (5) Controls the new process to make sure performance levels are maintained.

Control Charts

graphic presentations of process data over time, with predetermined control limits -show upper and lower limits for the process we want to control take samples of the process output and plot the average of each of these samples on a chart that has the limits on it. The upper and lower limits in a control chart can be in units of temperature, pressure, weight, length, and so on.

As a matter of ethics, management must ask

if any of these stakeholders are being wronged. Every company needs to develop core values that become day-to-day guidelines for everyone from the CEO to production-line employees.

Tangibles

include the physical evidence of the service.

improvements in quality help firms

increase sales and reduce costs, both of which can increase profitability.

W. Edwards Deming 14 points

indicate how he implemented TQM. We develop these into seven concepts for an effective TQM program: (1) continuous improvement, (2) Six Sigma, (3) employee empowerment, (4) benchmarking, (5) just-in-time (JIT), (6) Taguchi concepts, (7) knowledge of TQM tools.

The operations manager's challenge is to build such systems

inspection must often be performed to ensure that processes are performing to standard.

Service Industry Inspection

inspection points can be assigned at a wide range of locations the operations manager must decide where inspections are justified and may find the seven tools of TQM useful when making these judgments.

there is variability in the inspection process

inspectors are only human: They become bored, they become tired, and the inspection equipment itself has variability. Even with 100% inspection, inspectors cannot guarantee perfection. Therefore, good processes, employee empowerment, and source control are a better solution than trying to find defects by inspection. You cannot inspect quality into the product.

access

involves approachability and ease of contact.

Understanding/knowing the customer

involves making the effort to understand the customer's needs.

courtesy

involves politeness, respect, consideration, and friendliness of contact personnel (including receptionists, telephone operators, etc.).

credibility

involves trustworthiness, believability, and honesty. It involves having the customer's best interests at heart.

To do business globally

it is critical for a firm to be certified and listed in the ISO directory.

Total quality management (TQM)

managing the entire organization so that it excels on all dimensions of products and services that are important to the customer refers to a quality emphasis that encompasses the entire organization

The operations manager starts with four categories:

material, machinery/equipment, manpower, and method. These four Ms are the "causes." They provide a good checklist for initial analysis. Individual causes associated with each category are tied in as separate bones along that branch, often through a brainstorming process

research suggests that some 85% of quality problems have to do with

materials and processes, not with employee performance. Therefore, the task is to design equipment and processes that produce the desired quality.

A process that produces closer to the actual target value

may be more expensive, but it may yield a more valuable product. The QLF is the tool that helps the manager determine if this added cost is worthwhile.

even though components made close to the boundaries of the specification limits

may technically be acceptable, they may still create problems.

Pareto analysis indicates which problems

may yield the greatest payoff.

communication

means keeping customers informed in language they can understand and listening to them. It may mean that the company has to adjust its language for different consumers—increasing the level of sophistication with a well-educated customer and speaking simply and plainly with a novice.

poka-yoke (mistake-proofing)

means paying careful attention to every activity in a process to place checks and problem prevention measures at each step. Mistake proofing can be thought of as an extension of FMEA. Whereas FMEA helps in the prediction and prevention of problems, mistake proofing emphasizes the detection and correction of mistakes before they become defects delivered to customers. puts special attention on human error.

The development of poor-quality products, because of inadequate design and production processes

not only results in higher production costs but also leads to injuries, lawsuits, and increased government regulation.

Observers of quality management believe that

on balance, the cost of quality products is only a fraction of the benefits. They think the real losers are organizations that fail to work aggressively at quality

Typical performance measures used in benchmarking include

percentage of defects, cost per unit or per order, processing time per unit, service response time, return on investment, customer satisfaction rates, and customer retention rates.

When a fish-bone chart is systematically developed

possible quality problems and inspection points are highlighted.

quality robust

products that are consistently built to meet customer needs in spite of adverse conditions in the production process remove the effects of adverse conditions instead of removing the causes

three-sigma program

program designed to reduce defects to help lower costs, save time, and improve customer satisfaction.

ISO standard encourages establishment of

quality management procedures, detailed documentation, work instructions, and record keeping.

determinants of service quality

reliability, responsiveness, access, courtesy, communication, credibility, security, Understanding/knowing the customer, Tangibles

Implementing Six Sigma

require a major time commitment, especially from top management. These leaders have to formulate the plan, communicate their buy-in and the firm's objectives, and take a visible role in setting the example for others.

Benchmarking

selecting a demonstrated standard of performance that represents the very best performance for a process or an activity The idea is to develop a target at which to shoot and then to develop a standard or benchmark against which to compare your performance.

Like the Baldrige Awards, the assessment includes

self-appraisal and problem identification

Well-run companies have

service recovery strategies

Histograms

show the range of values of a measurement and the frequency with which each value occurs. They show the most frequently occurring readings as well as the variations in the measurements. the data should always be plotted so the shape of the distribution can be "seen." A visual presentation of the distribution may also provide insight into the cause of the variation.

Increases in sales often occur as firms

speed response, increase or lower selling prices, and improve their reputation for quality products

stakeholders involved in the production and marketing of poor-quality products

stockholders, employees, customers, suppliers, distributors, and creditors

cost of quality (COQ)

the cost of doing things wrong - that is, the price of nonconformance 1. Prevention costs 2. Appraisal costs 3. Internal failure costs 4. External failure costs The first three costs can be reasonably estimated, but external costs are very hard to quantify.

Quality, or the lack of quality, affects

the entire organization from supplier to customer and from product design to maintenance

security

the freedom from danger, risk, or doubt.

When the samples fall within the upper and lower control limits and no discernible pattern is present

the process is said to be in control with only natural variation present. Otherwise, the process is out of control or out of adjustment.

ISO 9000

the quality standard with international recognition The move toward global supply chains has placed so much emphasis on quality that the world has united around a single quality standard

Successful Six Sigma projects are clearly related to

the strategic direction of a company. It is a management-directed, team-based, and expert-led approach.

Quality definition

the totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs the ability of a product or service to meet customer needs

source inspection may be assisted by

the use of checklists and controls such as a fail-safe device called a poka-yoke, a name borrowed from the Japanese.

When nonconformance occurs

the worker is seldom at fault. Either the product was designed wrong, the process that makes the product was designed wrong, or the employee was improperly trained. Although the employee may be able to help solve the problem, the employee rarely causes it.

if variation were completely eliminated

there would be no need for inspection because there would be no defects.

The best inspection can be thought of as no inspection at all

this "inspection" is always done at the source—it is just doing the job properly with the operator ensuring that this is so

The Japanese use the word kaizen to describe

this ongoing process of unending improvement—the setting and achieving of ever-higher goals

service recovery

training and empowering frontline workers to solve a problem immediately

SERVQUAL

widely used instrument that provides direct comparisons between customer service expectations and the actual service provided. focuses on the gaps between the customer service expectations and the service provided on 10 service quality determinants.