OM 301 Ch 6 Quality Management

Failure costs

Categories of Quality Costs a) Prevention costs b) Appraisal costs c) Failure costs (after work is done) Costs caused by defective parts or products, or by faulty service Internal .....costs = costs of producing defective component parts or providing poor service to internal customers. External ......costs = costs that occur after delivery of product or service to the customer. ..... costs also include loss of good will.

Prevention costs

Categories of Quality Costs a) Prevention costs b) Appraisal costs c) Failure costs (before work is done) Costs associated with "eliminate" poor quality expended before a product or service is produced. Costs of reducing the potential for defects All quality training, quality planning, customer assessment, process control, and quality improvement costs to "avoid" defects from occurring. Are monetary costs accounting for both lost materials (scrap) and labor.

Appraisal costs

Categories of Quality Costs a) Prevention costs b) Appraisal costs c) Failure costs (while work is done) Costs that are incurred for inspection and testing to determine the condition of the product during and after it is produced but before it is released to the customer. Costs of inspecting and evaluating products. All product and/or service inspection, evaluation, and assessment costs. Quality control. Quality assurance. Are monetary costs accounting for both lost materials (scrap) and labor.

Internal failure costs

Categories of Quality Costs --> Failure costs a) Internal failure costs b) External failure costs costs of producing defective component parts or providing poor service to internal customers.

External failure costs

Categories of Quality Costs --> Failure costs a) Internal failure costs b) External failure costs costs that occur after delivery of product or service to the customer.

Unconditional

Criteria for Service Guarantees a) Unconditional b) East to understand and communicate c) Meaningful d) Easy to invoke e) Easy to collect Complete satisfaction, with no strings attached. Can be very expensive to provider unless sure that the service is quality.

Easy to invoke

Criteria for Service Guarantees a) Unconditional b) East to understand and communicate c) Meaningful d) Easy to invoke e) Easy to collect Easy to redeem (few conditions, like having sales receipt or proof of purchase.

Meaningful

Criteria for Service Guarantees a) Unconditional b) East to understand and communicate c) Meaningful d) Easy to invoke e) Easy to collect Promise

Easy to collect

Criteria for Service Guarantees a) Unconditional b) East to understand and communicate c) Meaningful d) Easy to invoke e) Easy to collect Quick turn around for payout.

East to understand and communicate

Criteria for Service Guarantees a) Unconditional b) East to understand and communicate c) Meaningful d) Easy to invoke e) Easy to collect Simple, without legal jargon.

Gap 2. The wrong service quality standards.

Customer satisfaction is the difference between the customers' perceptions of performance and their expectations. These lead to the following "gaps." "Gaps" of Service Quality a) Gap 1. Not knowing what customers expect. b) Gap 2. The wrong service quality standards. c) Gap 3. Service performance gap. d) Gap 4. When promises do not match delivery. e) Gap 5. Expected vs. perceived service. Differences between what managers think customers want and the service they designed and delivered. According to the actual specifications they established for service delivery. Inadequate commitment to quality. Inadequate standardization. inadequate conformance to standards.

Gap 4. When promises do not match delivery.

Customer satisfaction is the difference between the customers' perceptions of performance and their expectations. These lead to the following "gaps." "Gaps" of Service Quality a) Gap 1. Not knowing what customers expect. b) Gap 2. The wrong service quality standards. c) Gap 3. Service performance gap. d) Gap 4. When promises do not match delivery. e) Gap 5. Expected vs. perceived service. Differences between promised service and the service actually delivered. (president's promises) Lack of communication between all parties. Exaggeration of claimed performance.

Gap 3. Service performance gap.

Customer satisfaction is the difference between the customers' perceptions of performance and their expectations. These lead to the following "gaps." "Gaps" of Service Quality a) Gap 1. Not knowing what customers expect. b) Gap 2. The wrong service quality standards. c) Gap 3. Service performance gap. d) Gap 4. When promises do not match delivery. e) Gap 5. Expected vs. perceived service. Differences between service specifications and the actual service delivered. Created when employees are unable and/or unwilling to perform service at the desired level. Role ambiguity and conflict. Misfit between employee and/or technology and the job. Wrong person pr wrong tools for the job. Disincentives and lack of motivation.

Gap 5. Expected vs. perceived service.

Customer satisfaction is the difference between the customers' perceptions of performance and their expectations. These lead to the following "gaps." "Gaps" of Service Quality a) Gap 1. Not knowing what customers expect. b) Gap 2. The wrong service quality standards. c) Gap 3. Service performance gap. d) Gap 4. When promises do not match delivery. e) Gap 5. Expected vs. perceived service. Differences between what a customer expected and what he thinks he got. Depends on subjectivity of customer. Most important gap. If perception falls below expectation, the customer is disappointed and dissatisfied. If perception exceeds expectation, the customer is not only satisfied but is delighted.

Gap 1. Not knowing what customers expect.

Customer satisfaction is the difference between the customers' perceptions of performance and their expectations. These lead to the following "gaps." "Gaps" of Service Quality a) Gap 1. Not knowing what customers expect. b) Gap 2. The wrong service quality standards. c) Gap 3. Service performance gap. d) Gap 4. When promises do not match delivery. e) Gap 5. Expected vs. perceived service. Differences between what customers want and what managers think customers want. Lack or insufficient market research. Lack or insufficient interaction between customer and management. Harvey sends out his syllabus before class starts so that students can expect what the class will cover.

Assignable (special) causes

Defect Causes a) Assignable (special) causes b) Common causes Can be identified and corrected

Common causes

Defect Causes a) Assignable (special) causes b) Common causes Occur randomly. Cannot be changed unless process is redesigned.

Design Conformity to design Ease of use Service after delivery

Determinants of Quality The degree to which a product or service successfully satisfies its intended purpose has the following 4 rating criteria or "determinants:"

Tangibles

Dimensions of Service Quality a) Reliability b) Responsiveness c) Assurance d) Empathy e) Tangibles Physical evidence of the service. Facilities. Appearance of service providers. Physical presentation of the service.

Assurance

Dimensions of Service Quality a) Reliability b) Responsiveness c) Assurance d) Empathy e) Tangibles Ability of service provider to convey trust and confidence. (CPA's are trusted) Through the knowledge, competence, & courtesy of servers.

Reliability

Dimensions of Service Quality a) Reliability b) Responsiveness c) Assurance d) Empathy e) Tangibles Ability to perform the promised service dependably and accurately. Do it right the first time. Honor all promises.

Empathy

Dimensions of Service Quality a) Reliability b) Responsiveness c) Assurance d) Empathy e) Tangibles Caring and individualized service. Approachability and ease of contact. (doctor cares about you) Understanding the customer and their needs + listen to them.

Responsiveness

Dimensions of Service Quality a) Reliability b) Responsiveness c) Assurance d) Empathy e) Tangibles Willingness and/or readiness to provide service when demanded. Timeliness and promptness

Empowerment

Employment Fulfillment a) Empowerment b) Organizational commitment. Give employees responsibility. Offer employees rewards and penalties. Make employees full stakeholders. Results: Employees feel that they can do what is important and what has to be accomplished

Organizational commitment.

Employment Fulfillment a) Empowerment b) Organizational commitment. Management has to make employees feel that they share and have a stake in the success of the enterprise. How? Usually, financial rewards. E.g., bonuses, ESOP, merit awards, etc. Results: Employees feel that they can do what is important and what has to be accomplished.

Total Quality Management (TQM)

Encompasses entire organization, from supplier to customer. Stresses a commitment by management to have a continuing company-wide drive toward excellence in all aspects of products and services that are important to the customer.

Reliability

General Dimensions of Quality a) Performance b) Aesthetics c) Special features d) Conformance e) Safety f) Reliability g) Durability h) Perceived quality i) Serviceability Consistency of performance.

Special features

General Dimensions of Quality a) Performance b) Aesthetics c) Special features d) Conformance e) Safety f) Reliability g) Durability h) Perceived quality i) Serviceability Extra characteristics. (car with cup holders, heated seating)

Conformance

General Dimensions of Quality a) Performance b) Aesthetics c) Special features d) Conformance e) Safety f) Reliability g) Durability h) Perceived quality i) Serviceability How well product/service conforms to customer's expectations.

Perceived quality

General Dimensions of Quality a) Performance b) Aesthetics c) Special features d) Conformance e) Safety f) Reliability g) Durability h) Perceived quality i) Serviceability Indirect evaluation of quality (e.g. reputation).

Performance

General Dimensions of Quality a) Performance b) Aesthetics c) Special features d) Conformance e) Safety f) Reliability g) Durability h) Perceived quality i) Serviceability Main characteristics of the product/service.

Safety

General Dimensions of Quality a) Performance b) Aesthetics c) Special features d) Conformance e) Safety f) Reliability g) Durability h) Perceived quality i) Serviceability Risk of injury.

Serviceability

General Dimensions of Quality a) Performance b) Aesthetics c) Special features d) Conformance e) Safety f) Reliability g) Durability h) Perceived quality i) Serviceability Service after sale. Handling of customer complaints or checking on customer satisfaction

Aesthetics

General Dimensions of Quality a) Performance b) Aesthetics c) Special features d) Conformance e) Safety f) Reliability g) Durability h) Perceived quality i) Serviceability Subjective traits of appearance, feel, smell, taste, etc

Durability

General Dimensions of Quality a) Performance b) Aesthetics c) Special features d) Conformance e) Safety f) Reliability g) Durability h) Perceived quality i) Serviceability Useful life of the product or service.

Recovery options

Methods of Reinforcing Service Quality a) Recovery options b) Service guarantees Do it right the second time. Lessons learned: Fix the problem so it does not happen again. Fix the design, encounter, and/or delivery of the service. Make the service provider responsible to fix a service failure.

Service guarantees

Methods of Reinforcing Service Quality a) Recovery options b) Service guarantees Make the service provider a stakeholder in poor service right up front with financial consequences. Make the service provider financially responsible. E.g., financial consequences like money back guarantees.

Industrial Standard Z8101-1981

Other Quality Standards a) Industrial Standard Z8101-1981 b) ASQC Q90 series c) MILSTD (Japan) Specification for TQM.

MILSTD

Other Quality Standards a) Industrial Standard Z8101-1981 b) ASQC Q90 series c) MILSTD U.S. Military standards. Promulgated by U.S. Dept. of Defense (DoD).

ASQC Q90 series

Other Quality Standards a) Industrial Standard Z8101-1981 b) ASQC Q90 series c) MILSTD U.S. Promulgated by the American Society of Quality Control.

EFQM Excellence Award

Quality Awards and Certifications National awards to encourage and promote quality. For national interest and national security. Awards: a) Malcolm Baldrige National Quality Award (MBNQA). b) The Deming Prize c) EFQM Excellence Award European Foundation for Quality Management Stimulate and assist European organizations in quality improvement activities. Support managers in the adoption of TQM. EFQM Excellence Model. A non-prescriptive frame work based on nine criteria that recognizes that there are many approaches to achieving sustainable excellence

The Deming Prize

Quality Awards and Certifications National awards to encourage and promote quality. For national interest and national security. Awards: a) Malcolm Baldrige National Quality Award (MBNQA). b) The Deming Prize c) EFQM Excellence Award Honoring W. Edwards ....... U.S. statistician and quality expert specializing in statistical process control. He established quality management in Japan in the 1950's in the re-industrialization of Japan following WW II. Japan's highly coveted award. Meant for Japanese companies. But Florida Power and Light won in 1989. Main focus on statistical quality control. 3 after they won that prize, they can apply to get the .....Quality Medal

Malcolm Baldrige National Quality Award (MBNQA).

Quality Awards and Certifications National awards to encourage and promote quality. For national interest and national security. Awards: a) Malcolm Baldrige National Quality Award (MBNQA). b) The Deming Prize c) EFQM Excellence Award In the U.S. Established in 1988 by the U.S. Dept. of Commerce. Administered and judged by the National Institute of Standards and Technology (NIST). Designed to promote TQM practices. Some criteria: Senior executive leadership; strategic planning; management of process quality. Quality results; customer satisfaction.

ISO 9000

Quality Certifications Certifications (standards) to encourage and promote quality. ISO* Certifications: ISO = International Organization of Standardization. a) ISO 9000 b) ISO 14000 Set of international standards on quality management and quality assurance, critical to international business. ISO ...... series standards, briefly, require firms to document their quality-control systems at every step (incoming raw materials, product design, in-process monitoring and so forth) so that they'll be able to identify those areas that are causing quality problems and correct them. ISO ....... requires companies to document everything they do that affects the quality of products and services. Hierarchical approach to documentation of the Quality Management System. Documentation according to ISO ...... does ensure quality. The idea is that by writing everything down: Everything is open and transparent. At least within the business. There is a written history of events. For reference. Without trusting to memory. There is an audit trail. To retrace how and why decisions were made. Physical evidence of quality control. Lessons learned. After-action analyses.

ISO 14000

Quality Certifications Certifications (standards) to encourage and promote quality. ISO* Certifications: ISO = International Organization of Standardization. a) ISO 9000 b) ISO 14000 ISO ....... - A set of international standards for assessing a company's environmental performance. Standards for recycling, labeling etc. Standards in three major areas: Management systems. Operations. Environmental systems.

W. Edward Deming

Quality Gurus a) W. Edward Deming b) Joseph M. Juran c) Philip Crosby d) Kaoru Ishikawa e) Genichi Taguchi 14 points. Special and common causes of variation.

Kaoru Ishikawa

Quality Gurus a) W. Edward Deming b) Joseph M. Juran c) Philip Crosby d) Kaoru Ishikawa e) Genichi Taguchi Cause and effect (CE) diagrams. Quality circles.

Genichi Taguchi

Quality Gurus a) W. Edward Deming b) Joseph M. Juran c) Philip Crosby d) Kaoru Ishikawa e) Genichi Taguchi Methodology for determining the cost of poor quality.

Joseph M. Juran

Quality Gurus a) W. Edward Deming b) Joseph M. Juran c) Philip Crosby d) Kaoru Ishikawa e) Genichi Taguchi Quality is fitness for use. Quality "trilogy."

Philip Crosby

Quality Gurus a) W. Edward Deming b) Joseph M. Juran c) Philip Crosby d) Kaoru Ishikawa e) Genichi Taguchi Quality is free. Prevention of problems. Zero defects (do it right the first time).

User-Based

Types of Quality a) Transcendent b) User-Based c) Manufacturing-Based d) Product-Based e) Value-Based Consumer's perception of quality

Manufacturing-Based

Types of Quality a) Transcendent b) User-Based c) Manufacturing-Based d) Product-Based e) Value-Based Degree to which a product conforms to the design specifications

Product-Based

Types of Quality a) Transcendent b) User-Based c) Manufacturing-Based d) Product-Based e) Value-Based Level of measurable product characteristics, features, and functionalities.

Value-Based

Types of Quality a) Transcendent b) User-Based c) Manufacturing-Based d) Product-Based e) Value-Based Level of value for the price.

Transcendent

Types of Quality a) Transcendent (alles übersteigend) b) User-Based c) Manufacturing-Based d) Product-Based e) Value-Based Product or service characteristics and features that affect customer satisfaction

Technical quality.

Types of Service Quality a) Technical quality. b) Functional quality Related to the core element of service.

Functional quality

Types of Service Quality a) Technical quality. b) Functional quality Relates to the customers' perception of how the service is delivered.

Flow charts

a) Check sheets b) Bar Chart c) Pareto charts d) Scatter diagrams e) Flow charts f) Histogram g) Cause and effect diagrams h) Statistical process control chart A chart that describes the directed sequence of steps in a process. Also referred to as process diagrams.

Cause and effect diagrams

a) Check sheets b) Bar Chart c) Pareto charts d) Scatter diagrams e) Flow charts f) Histogram g) Cause and effect diagrams h) Statistical process control chart A chart that shows how process elements (causes) contribute to and might effect an outcome (effect).

Histogram

a) Check sheets b) Bar Chart c) Pareto charts d) Scatter diagrams e) Flow charts f) Histogram g) Cause and effect diagrams h) Statistical process control chart A distribution showing the frequency of occurrence of a variable.

Scatter diagrams

a) Check sheets b) Bar Chart c) Pareto charts d) Scatter diagrams e) Flow charts f) Histogram g) Cause and effect diagrams h) Statistical process control chart A graph of the value of one variable vs. another variable.

Bar Chart

a) Check sheets b) Bar Chart c) Pareto charts d) Scatter diagrams e) Flow charts f) Histogram g) Cause and effect diagrams h) Statistical process control chart A graph plotting some variable according to its categorical frequency or proportion.

Pareto charts

a) Check sheets b) Bar Chart c) Pareto charts d) Scatter diagrams e) Flow charts f) Histogram g) Cause and effect diagrams h) Statistical process control chart A graph to identify and plot problems or defects in descending order of frequency or proportion.

Check sheets

a) Check sheets b) Bar Chart c) Pareto charts d) Scatter diagrams e) Flow charts f) Histogram g) Cause and effect diagrams h) Statistical process control chart An organized method of recording attribute data.

Statistical process control chart (SPC Chart)

a) Check sheets b) Bar Chart c) Pareto charts d) Scatter diagrams e) Flow charts f) Histogram g) Cause and effect diagrams h) Statistical process control chart (SPC Chart) A chart with time on the horizontal axis to plot values of a statistic.

Quality Assurance

a) Inspection b) Monitoring c) Source Inspection d) Quality Control QC e) Quality Assurance .......refers to planned and systematic production processes that provide confidence in a product's or service's suitability for its intended purpose as it is being produced. It covers all activities from design, development, production, installation, servicing and documentation. It includes the regulation of the quality of raw materials, assemblies, products and components; services related to production; and management, production, and inspection processes.

Quality Control QC

a) Inspection b) Monitoring c) Source Inspection d) Quality Control QC e) Quality Assurance ....is involved in developing systems to ensure products or services are designed and produced to meet or exceed customer requirements before they reach the customer. Controlled after the product is made or after the service is performed. Control is exercised at a single time, after the good made or after the service is performed. End-point use of inspection, monitoring, and/or review.

Source Inspection

a) Inspection b) Monitoring c) Source Inspection d) Quality Control QC e) Quality Assurance Also known as source control. The next step in the process is your customer. Ensure perfect product to your customer.

Monitoring

a) Inspection b) Monitoring c) Source Inspection d) Quality Control QC e) Quality Assurance ...............is observing the service as it is being provided or the manufacture of the good as it is being made.

Inspection

a) Inspection b) Monitoring c) Source Inspection d) Quality Control QC e) Quality Assurance ............is examining items after they are produced to see if an item is quality or defective

Working Definition of Quality

a) Quality Defined b) Working Definition of Quality c) Service Quality d) Importance of Quality Quality is the ability of a product or service to consistently meet or exceed customer expectations. Customers do not know what they need but they do know what they want. They are not always right. They want to be surprised. You have to exceed their expectations so they keep coming back to you.

Quality Defined

a) Quality Defined b) Working Definition of Quality c) Service Quality d) Importance of Quality Quality is the conformance to the service's specifications as valued by the customer. At the very least, customers want what they are paying for. Quality consistent with price. And vice versa. "High-quality" is not high prices with lots of extras and lots of attentiveness. "Cut-rate" service could be high quality if customers valued it and it conformed to specifications. E.g., Discount stock broker like Charles Schwabb vs. full service brokerage house like Alex Brown & Sons.

Service Quality

a) Quality Defined b) Working Definition of Quality c) Service Quality d) Importance of Quality Customer focus. Quality is the ability of the service to consistently meet or exceed customer expectations. Customer expectations: Friendliness of service. Ease of access to service. Knowledge of the server. Speed of service. Length and comfort of the wait for service. Empathy The Operations Manager must recognize: The tangible component of ..... is important. The ..... process is important. The design and delivery of the ..... affect quality. The ..... is judged against the customer's expectations. Expectations will change over time and from customer to customer. The individual customer is the final judge of quality. Exceptions will occur. Problems may occur.

Importance of Quality/ Ways in Which Quality Can Improve Productivity

a) Quality Defined b) Working Definition of Quality c) Service Quality d) Importance of Quality/ Ways in Which Quality Can Improve Productivity Lower costs. Market share. Revenue and profitability. Company's reputation. Product liability. National and international implications. Productivity. Meaningful guarantees. Improved Quality leads to: 1) Sales Gains Improved response Higher prices Improved reputation New work vs. rework 2) Lower Costs Increased productivity Lower rework and scrap costs Lower warranty costs This leads to Increased Profits