2 * After WW2 Mid-1960 s USA: Huge domestic market, high capacity Price for competitive advantage Oversupply. Europe, Japan: Can t match US productivity & economies of scale Quality for competitive advantage Increased productivity
3 *Quality Management It s not necessary to change; survival is not mandatory - Deming
4 *Importance Of Quality * More than 90% of Dissatisfied Customers NEVER Again Do Business with the Offending Organization * The Average Customer who has a Problem Tells Nine Others * Attracting a New Customer Costs Five to Six Times as Much as Keeping the Current Customer 4
5 *Defining Quality * Quality: the ability of a product (a good or a service) to consistently meet or exceed customer expectations * Ability: the competence, either native or acquired, that enables one to do something well * Consistently: refers to a reliable or steady pattern of performance * Expectations: a state of anticipation about a future outcome
6 * *1. Goods Tangible Products. Quality relates to specifications, features, functions, etc. *2. Services Intangible goods = Intangible Factors
7 *Quality of Goods 1. Performance - operating characteristics 2. Features bells and whistles 3. Reliability time until/between breakdowns 4. Durability - needs replacement when? 5. Conformance characteristics meet established standards 6. Serviceability - ease of maintenance 7. Aesthetics - overall appearance/appeal 8. Perceived Quality - perceptions/reputation
8 *Quality of Services Unique Issues: * 1. Tangibles Ambiance, beauty, etc. * 2. Responsiveness How quickly customer needs are met * 3. Assurance Confidence in service provider * 4. Empathy Ability to recognize specific needs of customer
9 *Different Types of Quality Customer satisfaction Quality of design Quality of conformance Availability Field service Quality of market research Quality of concept Quality of specification Technology Employees Management Reliability Maintainability Logistical support Promptness Competence Integrity
10 * Costs to obtain good quality Costs resulting from poor quality Prevention Appraisal Internal Failure External Failure design training inspection testing scrap rework warranty costs loss of goodwill
11 Cost * Time Prevention Appraisal Internal Failure External Failure Note: the closer a failure is to the customer the more expensive it is!!
12 * Importance to the Bottom Line Profit = Revenue Cost Revenue is a function of quality Quality Demand elasticity Prices Revenue Quality Perceived value Market share Revenue Cost is a function of quality Quality Productivity Costs
13 * How Quality Contributes to Profitability QUALITY (Design and conformance) Reduced waste Greater productivity Greater Value Lower Costs Increased market share Improved asset utilization Improved margins Revenue growth IMPROVED PROFITABILITY
14 *Why is Process Improvement Important? *North American Automakers PRODUCED 15 million Vehicles in and RECALLED 25 million. 2014: Toyota 6.4 million in April and 2.7 in June Chevy 13.8 million by May 14
15 *What is a Quality Process? *Quality Process *A Process that Produces Error-free Products *Because of Variation, No Process Produces Errorfree Products. So, What Percentage of Defects is Acceptable? 10 %? 5 %? 1 %? 15
16 *When 99.9% Quality is Not Enough *Two million documents would be lost by IRS each year *22,000 checks would be deducted from the wrong bank account in the U.S. *1,314 phone calls in the U.S. would be misrouted each day *12 babies would be given to the wrong parents each day
17 *How Much Quality is Enough? *1999: 98,000 deaths from medical errors in the U.S., 7000 from medication errors. *Hospitals commit 400,000 preventable drug errors each year.1 Average is 1 per patient per day. *3 to 8 percent of prescriptions are filled incorrectly in U.S.2
18 *How Much Quality is Enough? *Only 80 percent of hospitals in the U.S. have procedures in place to avoid operating on the wrong body parts. (i.e. 20 percent do not!) *IRS agents give bad or no information 43 percent of the time (in 2002 study by Dept. of Treasury). Guess who is responsible if you use the bad information?
19 *Is 99% Correct Good Enough? *20,000 Wrong Prescriptions Each Year *15,000 Babies Dropped by Doctors Each Year *2 Short or Long Landings at Airports Daily *500 Incorrect Surgeries Weekly *2,000 Lost Pieces of Mail Each Hour! *GE, Motorola, and Others Want to be Correct ~ % of the Time --- Thus, only 3.4 Defects per 1 Million Opportunities *This Is a Six Sigma Standard! 19
20 *Overview Total Quality Management Quality What is it?
21 *Overview Total Quality Management Quality What is it? Dimensions Cost / Importance Quality Gurus Continuous improvement
22 *Managing Quality * 1. Total Quality Management (TQM) * A. Term for quality management system that addresses all areas of an organization * B. Emphasizes customer satisfaction and uses continuous improvement tools and techniques. *2. Elements of TQM *A. Employee participation *B. Customer focus *C. Management by fact *D. Continuous improvement
23 *Total Quality Management (TQM) * Total : integrated into all business functions * Quality : meeting or exceeding customer expectations * Management : improving business systems/processes Managing the entire organization so that it excels on all dimensions of products and services that are important to the customer.
24 *Quickly Count the F s Count the F's in the sentence below. Count them ONLY ONCE. Do not go back and count them again FINISHED FILES ARE THE RESULT OF YEARS OF SCIENTIFIC STUDY COMBINED WITH THE EXPERIENCE OF YEARS.
26 *Quickly Count the F s FINISHED FILES ARE THE RESULT OF YEARS OF SCIENTIFIC STUDY COMBINED WITH THE EXPERIENCE OF YEARS. Average # of F s found is 3. There are actually 6
27 *Root Causes of Quality Problems * most quality problems are caused by poor systems, not by the workers. *Deming: 90 percent of quality problems are caused by management. *J.D. Power: at least 2/3 of the long-term quality problems in autos are engineering and design problems.
28 *Managing Quality *1. Malcolm Baldridge National Quality Award (MBNQA) Premiere award recognizing quality in the United States
29 *Managing Quality *W. Edwards Deming (b d.1993) *1. Known as father of quality management *2. Developed 14 Points *3. Highlights of 14 Points *A. (3) Cease dependence on inspection *B. (4) Reduce cost by reducing variation *C. (6) Training *D. (8) Drive out fear *E. (10) Eliminate slogans
30 *Dimensions of Quality The Abilities Quality of Conformance QUALITY Field Service Quality of Design
31 Who is 42? 8-31
32 Who is 4?
33 *The Deming Wheel: Institutionalize the change (or abandon/repeat) Plan a change aimed at improvement. 4. Act 1. Plan Study the results. Did it work? 3. Check 2. Do Execute the change.
34 *The Quality Cycle Concurrent engineering team (QFD) Needs CUSTOMER Specifies quality needs Product MARKETING Interprets customer needs Works with customer to design product to fit operations Interpretation of needs ENGINEERING Defines design concept Prepares specifications Define quality characteristics Specifications OPERATIONS Produces the product or services QUALITY CONTROL Plans and monitors quality
35 * Implementation of quality improvement through the quality cycle 1. Define quality attributes on the basis of customer needs 2. Decide how to measure each attribute 3. Set quality standards 4. Establish appropriate tests for each standards 5. Find and correct causes of poor quality 6. Continue to make improvements
36 *Even with proactive planning problems can still come up. That s OK, as long as we address them by stepping in the right direction toward total quality.
37 *Continuous Improvement 1. Small changes in processes to improve long run quality 2. Requires worker involvement & process monitoring
38 *Continuous Improvement *Seven Tools *1. Process flow charts *2. Cause and effect diagrams *3. Control charts *4. Histograms *5. Check sheet *6. Pareto charts *7. Scatter diagrams (and run charts)
39 *Process Flow Chart *1. Traces flow and sequence of operations in a process *2. Helpful to identify non-value adding activities
40 *Cause and Effect Diagram *1. Illustrates range of possible causes that lead to an outcome (a.k.a. Fishbone or Ishikawa diagram)
41 *Control Charts *1. Used to show process trends
42 *Histogram (of Hole Diameters) Shows frequency and distribution of data
43 * Checksheet for Recording Complaints
44 *Checksheet for Group Sizes in a Restaurant
45 Frequency * Pareto Analysis Ranking of causes from most to least significant 80% of of the problems may be be attributed to to 20% of of the causes. Design Mfg Purch Mktg Other
46 *Pareto Charts to Set Priorities 9-46
47 * Pareto Chart of Factors in an Emergency Room
48 *Scatter Diagram *1. Identify Relationships Between 2 Variables
49 * Scatterplot of Customer Satisfaction and Waiting Time in an Upscale Restaurant
50 *Example *Main office of a large bank *500 customer calls/day *Caller irritation if phone rings 5x before answer *Telephone reception importance: *First impression of a business *Company slogan Don t make customers wait *Company wide campaign to be more friendly
51 *Why Customers Wait *Example
52 *Cause and Effect Diagram *Example
53 *Checksheet Analysis *
54 *Example *Solutions? *How to Reduce Number of Waiting Callers? *1. Ensure more than one operator on duty *Rolling lunch shifts *2. Simplify operator duties *Notify operator if employee away from desk *Compile directory of employees
55 The solution Number of waiting callers before and after Quality Program Effects of Quality Program (Pareto Diagram)
56 * *The SERVQUAL system is one method used to measure quality in services. It has five dimensions: *Tangibles *Reliability *Responsiveness *Assurance *Empathy
57 *ISO 9000 *Guidelines for designing, manufacturing, selling, and servicing products. *Selecting an ISO 9000 certified supplier provides some assurance that supplier follows accepted business practices in areas covered by the standard. *Required by many companies, esp. in Europe, before one can be a supplier. *
58 ISO 9000 Audit Document what you do Do what you say you do.
59 Turkish bottled water served on a Dutch airline
61 Saudi cookies are ISO 9000 certified
62 Airports can be ISO 9000 certified
63 Hotels can be ISO 9000 certified
64 *The ISO 9000 Audit Document what you do Do what you say you do.
65 *ISO 9000 Document what you do Do what you say you do.
66 *ISO *Series of standards covering environmental management systems, environmental auditing, evaluation of environmental performance, environmental labeling, and life-cycle assessment. *Intent is to help organizations improve their environmental performance through documentation control, operational control, control of records, training, statistical techniques, and corrective and preventive actions.
67 ISO is an environmental certification
68 *Quality is not a new Idea The label on the bottles reads: Brewed according to the German Purity Regulations of 1516
69 *Summary *What is quality? *How may increased quality result in higher revenues or reduced costs? *What are the standards or quality for goods versus services? *What standard (99%?) is used in quality control? *Steps important in quality improvement *Tools to assist in continuous improvement *Goal of ISO 9000/9001 *Goal of ISO 14000/140001
Topic 12 Total Quality Management From Control to Management 1 Inspection Error detection of finished goods Rectification Reading guide: Chapter 20 (Slack et al, 2004) and MGT326 Slides/Handout 1 2 Quality
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