• Quality standards should always be the reflection of customer expectations.
• Managing quality helps build successful strategies of differentiation , low cost , and
response.
• High-quality products and services are the most profitable. Improvements in quality
help firms increase sales and reduce costs, both of which can increase profitability.
• Quality is a long term game to realise profitability.
• 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.
Learning Objective 6.1 - Define quality and TQM
• The operations manager’s objective is to build a total quality management system that
identifies and satisfies customer needs .
• Quality : “The totality of features and characteristics of a product or service that
bears on its ability to satisfy stated or implied needs.” It is the ability of a product or
service to meet customer needs.
• Some definitions are user based. Here higher quality means better performance, nicer
features, and other (sometimes costly) improvements.
• To production managers, quality is manufacturing based . They believe that quality
means conforming to standards and “making it right the first time.”
• Yet a third approach is product based , which views quality as a precise and
measurable variable. In this view, for example, really good ice cream has high
butterfat levels.
• Best approach is to combine all three of these definitions. The characteristics that
connote quality must first be identified through research (a user-based approach to
quality). These characteristics are then translated into specific product attributes (a
product-based approach to quality). Then, the manufacturing process is organized to
ensure that products are made precisely to specifications (a manufacturing-based
approach to quality).
• Here are three other reasons why quality is important:
1. Company reputation. Self-promotion is not a substitute for quality products.
2. Product Liability. 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.
3. Global Implications. For both a company and a country to compete
effectively in the global economy, products must meet global quality, design,
and price expectations
Learning Objective 6.2 - Describe the ISO international
quality standards
• The move toward global supply chains has placed so much emphasis on quality that
the world has united around a single quality standard, ISO 9000
• Its 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
8. mutually beneficial supplier relationships.
• The ISO standard encourages establishment of quality management procedures,
detailed documentation, work instructions, and recordkeeping.
• ISO certified organizations must be reaudited every three years.
• Four major categories of costs are associated with quality. Called the cost of quality
(COQ) , they are:
1. Prevention costs: costs associated with reducing the potential for defective
parts or services (e.g., training, quality improvement programs).
2. Appraisal costs: costs related to evaluating products, processes, parts, and
services (e.g., testing, labs, inspectors).
3. Internal failure costs: costs that result from production of defective parts or
services before delivery to customers (e.g., rework, scrap, downtime).
4. External failure costs: costs that occur after delivery of defective parts or
services (e.g., rework, returned goods, liabilities, lost goodwill, costs to
society).
• The first three costs can be reasonably estimated, but external costs are very hard to
quantify.
• 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.
Total Quality Management (TQM) -
1. Total quality management (TQM) refers to a quality emphasis that encompasses the
entire organization, from supplier to customer. It is practiced through management of
an entire organization so that it excels in all aspects of products and services that are
important to the customer.
2. Seven concepts for an effective TQM program:
1. Continuous Improvement - Total quality management requires a never-
ending process of continuous improvement that covers people, equipment,
suppliers, materials, and procedures.
▪ The end goal is perfection, which is never achieved but always sought.
▪ Plan - Do - Check - Act (PDCA) is a circular model for continuous
improvement.The Japanese use the word kaizen to describe this
ongoing process of unending improvement
▪
2. Six Sigma ( Learning Objective 6.3 ) - This term has two meanings -
▪ In a statistical sense, it describes a process, product, or service with an
extremely high capability (99.9997% accuracy).
▪ The second TQM definition of Six Sigma is a program designed to
reduce defects to help lower costs, save time, and improve customer
satisfaction
▪ Six Sigma is a comprehensive system— a strategy, a discipline, and a
set of tools—for achieving and sustaining business success
▪ It is a set of seven tools that we introduce shortly in this chapter: check
sheets, scatter diagrams, cause-and-effect diagrams, Pareto charts,
flowcharts, histograms, and statistical process control.
▪ Implementing Six Sigma is a big commitment.
3. Employee empowerment - Enlarging employee jobs so that the added
responsibility and authority is moved to the lowest level possible in the
organization
▪ Employee empowerment means involving employees in every step of
the production process.
▪ The task is to design equipment and processes that produce the desired
quality. This is best done with a high degree of involvement by those
who understand the shortcomings of the system.
▪ When nonconformance occurs, the worker is seldom at fault. Although
the employee may be able to help solve the problem, the employee
rarely causes it.
▪ Techniques for building employee empowerment include
▪ building communication
▪ developing open, supportive supervisors
▪ moving responsibility from both managers and staff to
production employees
▪ building highmorale organizations
▪ creating such formal organization structures as teams and
quality circles.
▪ Quality Circle: A group of employees meeting regularly with a
facilitator to solve work-related problems in their work area. Facilitator
, usually helps train the members and keeps the meetings running
smoothly
4. Benchmarking (Learning Objective 6.4) - 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.
▪ 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.
▪ 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
▪ Benchmarks often take the form of “best practices” found in other
firms or in other divisions.
▪ When an organization is large enough to have many divisions or
business units, a natural approach is the internal benchmark.
Typically, one internal unit has superior performance worth learning
from.
5. Just In Time (JIT) - The philosophy behind just-in-time (JIT) is one of
continuing improvement and enforced problem solving. They are designed to
produce or deliver goods just as they are needed.
▪ JIT is related to quality in three ways:
0. JIT cuts the cost of quality: Because there is less inventory on
hand with JIT, costs are lower. In addition, inventory hides bad
quality, whereas JIT immediately exposes bad quality.
1. JIT improves quality: It creates an early warning system for
quality problems, both within the firm and with vendors.
2. Better quality means less inventory and a better, easier-to-
employ JIT system: If consistent quality exists, JIT allows firms
to reduce all the costs associated with inventory.
6. Taguchi Concepts (Learning Objective 6.5) - Genichi Taguchi has provided
us with three concepts aimed at improving both product and process quality:
quality robustness , target-oriented quality, and the quality loss function.
▪ Quality robust: Products that are consistently built to meet customer
needs despite adverse conditions in the production process.
Consistency is an added feature.
▪ Idea is to remove the effects of adverse conditions instead of
removing the causes. (Cheaper & more effective approach).
▪ Even though components made close to the boundaries of the
specification limits may technically be acceptable, they may
still create problems. For example, TV screens produced near
their diameter’s lower spec limit may provide a loose fit with
screen frames produced near their upper spec limit, and vice
versa.
▪ Target-oriented quality - A philosophy of continuous improvement to
bring a product exactly on target.
▪ Quality loss function (QLF) - A mathematical function that identifies
all costs connected with poor quality and shows how these costs
increase as output moves away 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.
▪ 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. (Its shape is of simple quadratic equation - see fig)
7. TQM Tools (Discussed in next section)
Learning Objective 6.6 - Use the seven tools of TQM
• These tools will prove useful in many of your courses and throughout your career.
• Seven tools that are particularly helpful in the TQM effort -
1. Check Sheets- A check sheet is any kind of a form that is designed for
recording data.
▪ In many cases, the recording is done so the patterns are easily seen
while the data are being taken
2. Scatter Diagrams - They 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.
▪
3. Cause-and-Effect Diagrams - Also known as an Ishikawa diagram or a
fish-bone chart . It is a schematic technique used to discover possible
locations of quality problems.
▪
▪ Each “bone” represents a possible source of error.
▪ The operations manager starts with four categories: material,
machinery/equipment, manpower, and methods. These four M s are the
“causes.”
▪ Individual causes associated with each category are tied in as separate
bones along that branch, often through a brainstorming process.
▪ It highlights possible points of problem if developed systematically.
4. Paretto Chart - A graphic way of classifying problems by their level of
importance, often referred to as the 80–20 rule.
▪ We can immediately spot the top problems and prepare a plan to
address them. They will yield the greatest payoff.
▪
5. Flow Charts - Block diagrams that graphically describe a process or system.
They 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.
▪ Flowcharting any process is an excellent way to understand and then
try to improve that process.
6. Histograms - They show the range of values of a measurement and the
frequency with which each value occurs.
▪ Descriptive statistics, such as the average and standard deviation, may
be calculated to describe the distribution. However, the data should
always be plotted so the shape of the distribution can be “seen.”
▪
7. 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.
▪ Control charts are graphic presentations of data over time that show
upper and lower limits for the process we want to control
▪ 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.
Role of Inspection -
• Inspection - A means of ensuring that an operation is producing at the quality level
expected.
• inspection must often be performed to ensure that processes are performing to
standard. It can involve measurement, tasting, touching, weighing, or testing of the
product.
• Inspection only finds deficiencies and defects. Moreover, inspections are expensive
and do not add value to the product.
• Deciding when and where to inspect depends on the type of process and the value
added at each stage. 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.
• There is variability in the inspection process. Not all defected items are guaranteed to
be spotted during inspection.
• Even with 100% inspection, inspectors cannot guarantee perfection. You cannot
inspect quality into the product.
• Source inspection - Controlling or monitoring at the point of production or
purchase— at the source. 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.”
• Poka-yoke - Literally translated, “mistake proofing”; it has come to mean a device or
technique that ensures the production of a good unit every time.
• Checklists are a type of poka-yoke to help ensure consistency and completeness in
carrying out a task.
• Attribute inspection - An inspection that classifies items as being either good or
defective. It does not address the degree of failure. Variable inspection -
Classifications of inspected items as falling on a continuum scale, such as dimension
or strength.
• Generally, the user of a service, like the user of a good, has features in mind that form
a basis for comparison among alternatives. This approach to product comparison
differs little between goods and services.
• However, what is very different about the selection of services is the poor definition
of the
1. intangible differences between products
2. the intangible expectations customers have of those products .
• Major aspects of service quality -
1. The tangible component of many services is important . How well the service
is designed and produced does make a difference.
2. Another aspect of service and service quality is the process.
3. Third, the operations manager should realize that the customer’s expectations
are the standard against which the service is judged. Don't promise more than
you can deliver to set justified expectations.
4. Quality control system must recognize and have a set of alternative plans for
less-than-optimal operating conditions .
• Service recovery - Training and empowering frontline workers to solve a problem
immediately.
