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1 6 Managing Quality SCM 352

2 Outline Global Company Profile: Arnold Palmer Hospital Quality and Strategy Defining Quality Malcolm Baldrige National Quality Award Cost of Quality International Quality Standards ISO 9000, ISO Ethics and Quality Management Total Quality Management Six Sigma Quality TQM Tools

3 Arnold Palmer Hospital Deliver over 16,000 babies annually Virtually every type of quality management technique is employed Continuous improvement Employee empowerment Benchmarking Just-in-time Quality tools

4 Quality and Strategy An operations manager s objective is to build a total quality management system that identifies and satisfies customer needs Managing quality supports differentiation, low cost, and response strategies Quality helps firms increase sales and reduce costs Building a quality organization is a demanding task

5 Quality Improves Productivity Improved Quality Sales Gains Improved response Higher Prices Improved reputation Reduced Costs Increased productivity Lower rework and scrap costs Lower warranty costs Increased Profits Figure 6.1

6 Dimensions of Quality for Goods Performance Serviceability Aesthetics Quality Features Reliability Perceived quality Durability Value Conformance

7 Importance of Perceived Quality The issue of public perception is coming into sharper focus now because experts say the Big Three, after years of concentrating on trucks and all but ignoring cars, have markedly improved the quality and look of their sedans and compacts. If they think it s an American car, the perception of the vehicle falls dramatically, said Art Spinella, VP of CNW Market Research, Detroit gets a bum rap in the US. Those negative impressions are now souring efforts by Ford Motor Co., General Motors Corp. and Chrysler LLC to halt their long slide in US market share. And for these Detroit auto makers, persuading import buyers to even consider a US car is becoming a new battleground. (Neal Boudette, Detroit Auto Makers Try Some New Tricks, Wall Street Journal, Sep 14, 2007)

8 Service Quality Dimensions Tangibles Understanding Security Reliability Responsiveness Competence Access Courtesy 1995 Corel Corp. Credibility Communication

9 Malcolm Baldrige National Quality Award Established in 1988 by the U.S. government Designed to promote performance excellence Seven criteria Leadership; strategic planning; customer and market focus; measurement, analysis and knowledge management; human resource focus; process management; business results Past winners Motorola; Xerox; Ritz-Carlton Hotels; Cadillac; Los Alamos National Bank Similar award in Japan - Deming Prize

10 Cost of Quality 4 Categories Prevention costs reducing the potential for defective parts or service (training, quality improvement programs, vendor certification) Appraisal costs evaluating products, processes & services (testing, labs, inspectors) Internal failure production of defective parts or service before delivery to customers (rework, scrap, downtime) External costs occur after delivery of defective products or service (warranty, lost goodwill, liabilities, costs to society)

11 Costs of Quality Total Cost External Failure Total Cost Internal Failure Prevention Appraisal Quality Improvement

12 International Standards ISO 9000 international quality standards ANSI/ASQ Q9000 series - US ISO international environmental management standards These procedures say nothing about the actual quality of the product they deal entirely with standards to be followed

13 Ethics and Quality Management Operations managers must deliver healthy, safe, quality products and services Poor quality risks injuries, lawsuits, recalls, and regulation recent Mattel China toy recall Organizations are judged by how they respond to problems All stakeholders much be considered

14 Deming s Fourteen Points Create consistency of purpose Lead to promote change Build quality into the products; stop depending on inspections to catch problems Build long term relationships based on performance instead of awarding business based on price Continuously improve product, quality, and service Start training

15 Deming s 14 Points - continued Emphasize leadership Drive out fear Break down barriers between departments Stop haranguing workers Support, help, improve Remove barriers to pride in work Institute a vigorous program of education and self-improvement Put everybody in the company to work on the transformation

16 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. Continuous Improvement, Employee Empowerment, Benchmarking, Just-in-Time (JIT), Taguchi Concepts, Knowledge of TQM tools

17 Continuous Improvement Represents continual improvement of process & customer satisfaction Involves all operations & work units Other names Kaizen (Japanese) Zero-defects Six sigma

18 Six Sigma Quality Originally developed by Motorola, Six Sigma refers to an extremely high measure of process capability A Six Sigma capable process will return no more than 3.4 defects per million operations (DPMO) Highly structured approach to process improvement

19 Six Sigma Lower limits Two meanings 2,700 defects/million Upper limits Statistical definition of a process that 3.4 defects/million is % capable, 3.4 defects per million opportunities (DPMO) A program designed to reduce defects, lower costs, Mean and improve customer satisfaction ±3σ ±6σ

20 Employee Empowerment Getting employees involved in product & process improvements 85% of quality problems are due to process & material Techniques Support workers Let workers make decisions Build teams & quality circles 1995 Corel Corp.

21 Seven Tools of TQM Table 6.6

22 Thank You Questions??

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