Operations Management

Transcription

1 Operations Management Managing Quality Chapter 6 Some additions and deletions to this slide set have been made by Ömer Yağız. 6-1

2 Outline Global Company Profile: Motorola Quality and Strategy Defining Quality Implications of Quality Malcolm Baldrige National Quality Award Cost of Quality International Quality Standards Total Quality Management Continuous Improvement Employee Empowerment Benchmarking Just-in-Time (JIT) Taguchi Concepts Knowledge of TQM Tools 6-2

3 Outline Tools of TQM Check sheets Scatter Diagrams Cause-and-Effect Diagram Pareto Charts Process Charts Histogram The Role of Inspection When and where to Inspect Source Inspection Service Industry Inspection Inspection of Attributes vs Variables TQM in Services 6-3

4 Learning Objectives When you complete this chapter, you should be able to : Identify or Define: Quality Malcolm Baldrige National Quality Award Demings, Juran, and Crosby Taguchi Concepts 6-4

5 Learning Objectives - continued When you complete this chapter, you should be able to : Explain: Why quality is important Total Quality Management (TQM) Pareto charts Process charts Quality robust products Inspection 6-5

6 To Make the Quality Focus Work Motorola: Aggressively began a worldwide education program to be sure that employees understood quality and statistical process control Established goals stretch goal - a goal which is very ambitious Established extensive employee participation and employee teams originator of the six-sigma approach to quality winner of the Baldrige national quality award 6-6

7 What is a stretch goal? A stretch goal is an ambitious goal. Sometimes it is called a breakthrough objective. Stretch goals force an organization to think radically different to encourage major improvements, as well as incremental ones. Stretch goals can be set for all areas of the company, including manufacturing, sales, accounting, product design, etc. 6-7

8 MOTOROLA Co. --A A famous illustration of stretch goal Six Sigma Quality concept of Motorola: Motorola set the following stretch goal in Improve product and services quality ten times by 1989, and at least one hundred fold by Achieve six sigma capability by With a deep sense of urgency, spread dedication to quality to every facet of the corporation, and achieve a culture of continuous improvement to assure total customer satisfaction. There is only one ultimate goal: zero defects--in everything we do. 6-8

9 MOTOROLA Co. --A A famous illustration of stretch goal contd... Concept of six-sigma quality: Shrinking process variation (as indicated by 6 sigma) to half of the design tolerance so that only 3.4 parts out of 1 million are defective. At Motorola, six sigma became part of the common language of all employees. To them it meant near perfection, even if some did not understand the statistical details. 6-9

10 Ways in Which Quality Can Improve Profitability Improved Quality Sales Gains Improved response Higher Prices Improved reputation Reduced Costs Increased productivity Lower rework and scrap costs Lower warranty costs Increased Profits 6-10

11 Flow of Activities Necessary to Achieve Total Quality Management Organizational Practices Quality Principles Employee Fulfillment Customer Satisfaction 6-11

12 Organizational Practices Leadership Mission statement Effective operating procedures Staff support Training Yields: What is important and what is to be accomplished 6-12

13 Quality Principles Customer focus Continuous improvement Employee empowerment Benchmarking Just-in-time Tools of TQM Yields: How to do what is important and what is to be accomplished 6-13

14 Employment Fulfillment Empowerment Organizational commitment Yields: Employee attitudes that they can accomplish what is important and what is to be accomplished 6-14

15 Customer Satisfaction Winning orders Repeat customers Yields: An effective organization with a competitive advantage 6-15

16 Definitions of Quality ASQ: the totality of features and characteristics of a product or service that bear on its ability to satisfy needs User-Based: What consumer says it is Manufacturing-Based: Degree to which a product conforms to design specification Product-Based: Level of measurable product characteristic 6-16

17 DAVID GARVIN S S DEFINITIONS OF QUALITY Transcendent definition : quality is absolute and universally recognizable; as such it can not be defined precisely. Used by lay people. Not useful for operational purposes. (Mercedes vs. Şahin) Mükemmellik-temelli tanım 6-17

18 Product-based definition: quality is a function of a specific, measurable variable and differences in the quality reflect differences in quantity of some product attribute ( number of knots on carpets, number of cylinders in an auto engine, percentage of silk in a shirt or blouse). CAUTION: Quality is mistakenly related to cost..the higher the cost, the higher the quality. NOT ALWAYS TRUE. A product need not be expensive to be considered a quality product. Ürün-temelli tanım 6-18

19 User -Based Definition: This is a customerbased definition. Quality is determined by what the customer wants. Quality is defined as fitness for intended use, or how well the product/service performs its intended function. Concepts of internal and external customer important. Kullanıcı-temelli tanım 6-19

20 Manufacturing-Based Definition: Quality is an outcome of engineering and manufacturing practice. Therefore; quality is conformance to specifications. Specifications are targets and tolerances determined by designers of products and services. This is a key definition of quality for the technical aspects of quality planning and control. Üretim-temelli tanım 6-20

21 Value-Based Definition: Quality is defined in terms of costs and prices: A quality product is one that provides performance at an acceptable price or conformance at an acceptable cost. From this perspective, a quality product is one that is as useful as competing products and is sold at a lower price or one that offers greater usefulness or satisfaction at a comparable price. ( A noname PC vs. an IBM brand; a Nissan vs. Volvo.) Değer-temelli tanım 6-21

22 SOME QUALITY DEFINITIONS QUALITY MEANS FITNESS FOR USE. QUALITY IS MEETING OR EXCEEDING CUSTOMER EXPECTATIONS. QUALITY IS INVERSELY PROPORTIONAL TO VARIABILITY. QUALITY IS THE TOTALITY OF FEATURES AND CHARACTERISTICS OF A PRODUCT OR SERVICE THAT BEAR ON ITS ABILITY TO SATISFY NEEDS (ANSI/ASQ DEFINITION) 6-22

23 Eight Principle Dimensions of Quality for Goods Performance (operation) Features Reliability Durability Conformance Serviceability Aesthetics Perceived quality Quality 6-23

24 Eight Principle Dimensions of Quality for Goods Performance: A product s primary operating characteristics. Will the product do the intended job? (Car example -- acceleration, braking distance, steering, maneuverability.) Performans, birincil (temel) işlevler 6-24

25 Eight Principle Dimensions of Quality for Goods Features: Characteristics of secondary importance for the functioning of a product. In other words, the bells and whistles of a product. ( Power steering, antilock brakes, tape/cd deck, A/C, reclining seats.) İkincil özellikler 6-25

26 Eight Principle Dimensions of Quality for Goods Reliability: probability of a product s surviving over a specified period of time under stated conditions of use. Consistency of performance over time. How often does the product fail? (Ability to start on cold days, frequency of failure of various components). Güvenilirlik 6-26

27 Eight Principle Dimensions of Quality for Goods Durability: Amount of use one gets from a product before it physically deteriorates or until replacement is preferable. How long does the product last? (Corrosion resistance, wear of seat cover material, wiper blades motor, AC compressor, etc.) Dayanıklılık 6-27

28 Eight Principle Dimensions of Quality for Goods Conformance: Degree to which physical and performance characteristics of a product match preestablished standards. Is the product made exactly as the designer intended? (fit and finish, aerodynamic properties-drag coefficient, freedom from noise, fuel consumption.) Uygunluk (spesifikasyonlara) 6-28

29 Eight Principle Dimensions of Quality for Goods Serviceability: The speed, courtesy, and competence of maintenance and repair. How easy is it to service and repair the product? (Access to spare parts, the number of kilometers between major maintenance service, ease and expense of service.) Bakım / onarım kolaylığı 6-29

30 Eight Principle Dimensions of Quality for Goods Aesthetics: How a product looks, feels, sounds, tastes, or smells. What does the product look like? (Color, instrument panel design, placement of controls, and feel of the road.) Estetik özellikler 6-30

31 Eight Principle Dimensions of Quality for Goods Perceived Quality: Subjective assessment of quality resulting from image, advertising, or brand names. What is the reputation of the company or its product? (Brand image of car, repair history reported by trade magazines or friends.) Tüketici tarafından algılanan kalite 6-31

32 Service Quality Attributes Tangibles Understanding Reliability Responsiveness Competence Access Security Credibility 1995 Corel Corp. Courtesy Communication 6-32

33 Importance of Quality Costs & market share Company s reputation Product liability International implications Improved Quality Market Gains Reputation Volume Price Lower Costs Productivity Rework/Scrap Warranty Increased Profits 6-33

34 Malcolm Baldrige National Quality Award Established in 1988 by the U.S. government Designed to promote TQM practices Some criteria Senior executive leadership; strategic p lanning; management. of process quality Quality results; customer satisfaction Past winners Motorola;Corning Inc.; Ritz-Carlton Hotels; AT&T; Eastman Chemical. 6-34

35 Other Well-known Awards Deming Prize (Japan) Established in 1951 in honor of Deming, the quality guru who helped Japan achieve its famous quality level European Foundation for Quality Management (EFQM) Established in 1988 by the European Commission 6-35

36 Costs of Quality Prevention costs - reducing the potential for defects(training, quality improvement programs) Appraisal costs - evaluating products (testing, labs, inspectors) Internal failure - of producing defective parts or service before delivery to customers (scrap, rework, downtime of machinery) External costs - occur after delivery (returned product, liabilities, loss of goodwill, warranty repair, costs to society) 6-36

37 International Quality Standards ISO 9000 series (Europe/EU) Common quality standards for products sold in Europe (even if made in U.S. or elsewhere) ISO series (Europe/EU) Environmental management standard standards for recycling, labeling etc. ANSI/ASQC Q90 series (ISO 9000 in the U.S.) 6-37

38 EC Environmental Standard ISO Core Elements: Environmental management Auditing Performance evaluation Labeling Life-cycle assessment 6-38

39 Traditional Quality Process (Manufacturing) Customer Marketing Engineering Operations Specifies Need Interprets Need Designs Product Produces Product Quality is customer driven! Defines Quality Plans Quality Monitors Quality 6-39

40 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. 6-40

41 Achieving Total Quality Management Effective Business Employee Fulfillment Quality Principles Organizational Practices Customer Satisfaction Attitudes (e.g., Commitment) How to Do What to Do 6-41

42 Deming s s Fourteen Points 1. Create constancy of purpose 2. Adopt philosophy of prevention 3. Cease mass inspection 4. Select a few suppliers based on quality 5. Constantly improve system and workers 6. Institute worker training in SPC 6-42

43 Deming s s Fourteen Points 7. Instill leadership among supervisors 8. Eliminate fear among employees 9. Eliminate barriers between departments 10. Eliminate slogans 11. Remove numerical quotas 12. Enhance worker pride 13. Institute vigorous education programs on quality improvement 14. Implement these 13 points (Just do it!) 6-43

44 Concepts For an Effective TQM Program Continuous improvement Improvement Model : PDCA Employee empowerment Benchmarking Just-in-time (JIT) Taguchi concepts Knowledge and use of TQM tools 6-44

45 Continuous Improvement Represents continual improvement of process & customer satisfaction Involves all operations & work units Other names Kaizen (Japanese) Zero-defects Six sigma T/Maker Co.

46 A never-ending journey CONTINUOUS IMPROVEMENT Dr. Ömer Yağız Department of Business Administration Eastern Mediterranean University Prepared for MGMT Total Quality Management 6-46

47 UNLESS YOU CHANGE THE PROCESS, WHY WOULD YOU EXPECT THE RESULTS TO CHANGE? The President of Texas Instruments Defense Systems and Electronic Group 6-47

48 IMPROVE CONSTANTLY AND FOREVER THE SYSTEM OF PRODUCTION AND SERVICE. IMPROVEMENT IS NOT A ONE- TIME EFFORT. MANAGEMENT IS OBLIGATED TO CONTINUALLY LOOK FOR WAYS TO REDUCE WASTE AND IMPROVE QUALITY. W. Edwards Deming 6-48

49 KAIZEN STRATEGY IS THE SINGLE MOST IMPORTANT CONCEPT IN JAPANESE MANAGEMENT--THE KEY TO JAPANESE COMPETITIVE SUCCESS. KAIZEN MEANS ON-GOING IMPROVEMENT INVOLVING EVERYONE--TOP MANAGEMENT, MANAGERS, AND WORKERS. Masaaki Imai 6-49

50 THE STARTING POINT FOR IMPROVEMENT IS TO RECOGNIZE THE NEED. THIS COMES FROM RECOGNITION OF A PROBLEM. IF NO PROBLEM IS RECOGNIZED, THERE IS NO RECOGNITION OF THE NEED FOR IMPROVEMENT. COMPLACENCY IS THE ARCH-ENEMY OF KAIZEN. THEREFORE, KAIZEN EMPHASIZES PROBLEM- AWARENESS AND PROVIDES CLUES FOR IDENTIFYING PROBLEMS. Masaaki Imai 6-50

51 PROCESS MANAGEMENT What is a process? A sequence of activities that is intended to achieve some result, typically to create added value for a customer. Two types of processes: core processes (those that drive the creation of goods and services) support processes (those that are critical to production and delivery) 6-51

52 Process Management contd... To apply process management techniques, processes must be 1. repeatable - process must recur over time 2. measurable - information can be obtained by measurement 6-52

53 CONTINUOUS IMPROVEMENT (KAIZEN) Kaizen is the name given by the Japanese to continuous improvement. Continuous improvement really means continuous incremental improvement. Kai change zen good Kaizen means making changes for the better on a continual, never-ending basis. 6-53

54 Continuous Improvement Kaizen refers to improvement of both processes and people. In fact Kaizen philosophy aims at improving all aspects of an organization all the time. Good is never good enough; kaizen is a never-ending journey to excellence. 6-54

55 Two Elements of Kaizen There are two elements that construct KAIZEN, improvement/change for the better and ongoing/continuity. Lacking one of those elements would not be considered KAIZEN. For instance, the expression of "business as usual" contains the element of continuity without improvement. On the other hand, the expression of "breakthrough" contains the element of change or improvement without continuity. KAIZEN should contain both elements. 6-55

56 Overview of the concept of Kaizen (Imai) 1. Kaizen value system --- continual improvement of all things, at all levels, all the time, forever. 2. Role of top management --- top management is responsible for establishing Kaizen as the overriding corporate strategy and communicating this commitment to all levels of the organization and allocating the resources necessary for Kaizen to work. 6-56

57 Overview of the concept of Kaizen (Imai) contd Role of middle management --- responsible for implementing the Kaizen policies established by top management; establishing, maintaining and improving work standards; ensuring that employees receive the training necessary to understand and implement Kaizen, and ensuring that employees learn how to use problem solving and improvement tools. 6-57

58 Overview of the concept of Kaizen (Imai) contd Role of supervisors --- responsible for applying the Kaizen approach in their functional roles; developing plans for carrying out the Kaizen approach at the functional level; improving communication at the workplace; maintaining morale; providing coaching for teamwork activities; soliciting Kaizen suggestions from employees and making Kaizen suggestions. 6-58

59 Overview of the concept of Kaizen (Imai) contd Role of employees --- responsible for participating in Kaizen through teamwork activities, making Kaizen suggestions, engaging in continuous self-improvement activities, continually enhancing job skills through education and training, and continually broadening job skills through cross-functional training. 6-59

60 Overview of the concept of Kaizen (Imai) contd Kaizen and quality --- In a TQM environment quality is defined by customers. Regardless of how customers define quality, it can always be improved and it should be, continually. 6-60

61 KAIZEN The following excerpt is taken from the Kaizen Institute website ( It sums up the philosophy and approach of KAIZEN. "Not a day should go without some kind of improvement being made somewhere in the company. When KAIZEN is adapted in organizations and management perspectives, however, it is easier to talk about it than to implement it. 6-61

62 KAIZEN It is very natural that people will propose some kind of change in their own work place, when they become unsatisfied with their present conditions. Some of the improvements could be carried out right away. Perhaps, the boss won't even notice them. However, when approval is required, several kinds of responses from the boss could have taken place. The ideal situation is that the boss encourages their subordinates to carry out their ideas. The boss then appreciates the efforts or gives recognition. That's what people expect when they propose something. The positive response given by the boss will then develop trust with the subordinates and stimulate other improvements. Cumulatively, this will create momentum for continuing improvement. 6-62

63 The Wet Blanket List However, life in the organization is not as easy. The boss could ask you a silly question like: "it is not broken, why should we change it" or "the procedure is fine with me, why should we change it?". From your perspective, you know that if you change it, the boss will blame you. The boss just did not want to give you a try, with a lot of reasons and/or no reasons. You could not do anything anymore, "the boss is always right like the saying goes. There are so many bosses like that. The book KAIZEN talks about the list called "The Wet Blanket List". The bosses should encourage their subordinates, but in a real life, the wet blankets put out the "fire" of improvement suggestions. Here is the list of wet blankets: 6-63

64 THE WET BLANKET LIST 1. I am too busy to study it 2. It's a good idea, but the timing is premature 3. It is not in the budget 4. Theory is different from practice 5. Isn't there something else for you to do? 6. I think it doesn't match corporate policy 7. It isn't our business; let someone else think about it 8. Are you dissatisfied with your work? 9. It's not improvement, it's common sense 10. I know the result, even if we don't do it 11. I will not be held accountable for it 12. Can't you think of a better idea? 6-64

65 THE WET BLANKET LIST Yes, I heard them from my boss, you may say; however, reflect on yourself before you blame your boss. Your subordinates may also hear them from you frequently. In an inefficient organization, everybody tends to throw wet blankets everywhere. You could also add more wet blankets from your own vocabulary, the list could be endless. 6-65

66 Ten Basic Tips for KAIZEN Activities As you know by now, it is not easy to implement the KAIZEN philosophy to where the culture is not solid to adopt it. KAIZEN Institute can help to change the way of thinking of your people and the culture and make a difference. Here is the first advice from us for you to start with, the list of basic tips for KAIZEN to have the first step of KAIZEN implementation. - KAIZEN INSTITUTE 6-66

67 Basic Tips for Kaizen Activities 1. Discard conventional fixed ideas. 2. Think of how to do it, not why it cannot be done. 3. Do not make excuses. Start by questioning current practices. 4. Do not seek perfection. Do it right away even if for only 50% of target. 5. Correct it right away, if you make a mistake. 6. Do not spend money for KAIZEN, use your wisdom. 7. Wisdom is brought out when faced with hardship. 8. Ask 'WHY?" five times and seek root causes. 9. Seek the wisdom of ten people rather than the knowledge of one. 10. KAIZEN ideas are infinite." 6-67

68 Concept of Gembakaizen In manufacturing industry, there are three major activities directly related to earning money: developing, producing and selling products. Without these activities, the company cannot exist. Therefore, in a broad sense, GEMBA means the sites of these three major activities. In a narrower context, however, GEMBA means the place where the products are made. The word is usually used in this narrower context, since production sites have been one of the business arenas most neglected by management. 6-68

69 Concept of Gembakaizen Managers seem to write production off as only a secondary means to earn money, and usually place far more emphasis on such sectors as financial management, marketing and sales, and product development. When GEMBA or production sites do become a focus of management attention, though, they can be turned into a utopia capable of making the company far more successful and profitable. 6-69

70 Concept of Gembakaizen In the service industries, GEMBA is where the customers come into contact with the services offered. In the hotel business, for instance, GEMBA is everywhere: the lobby, the dining room, guest rooms, the receptionist's desk, check-in counters, and the concierge station. At banks, tellers are working in GEMBA, as are loan officers receiving applicants. The same goes for employee's working desks in offices and for telephone operators sitting in front of switchboards. Thus, GEMBA spans a multitude of offices and administrative functions. 6-70

71 Concept of Gembakaizen Now you have a good understanding of the words, KAIZEN and GEMBA. GEMBAKAIZEN is KAIZEN activities that take place in GEMBA. GEMBAKAIZEN is to make continuous improvement at the real place, where the action is going on, and that can make your organization better. (Source: Kaizen Institute Web Page) 6-71

72 Kaizen Checklists Kaizen is about continual improvement of people, processes, procedures, and any other factors that affect quality. An effective way to identify problems that represent opportunities for improvement is to use a checklist that draws attention to those factors that are most likely in need of improvement. The factors ---next

73 Kaizen Checklists contd... HOW CAN THIS BE IMPROVED? Factors which may need improvement: 1. personnel 9. software 2. work techniques 10. tools 3. work methods 11. materials 4. work procedures 12. plant layout 5. time 13. production levels 6. facilities 14. inventory 7. equipment 15. paradigms 8. systems 16. paradigms (mindset) 6-73

74 EFQM QUALITY EXCELLENCE MODEL 6-74

75 FIVE W s W s and ONE H Using the five W s and One H encourages employees to look at a process and ask questions. WHO WHO WHAT WHAT WHERE WHEN WHEN WHY WHY HOW HOW 6-75

76 FIVE W s W s and ONE H contd.. Who ---Who is doing it? Who should be doing it? What --- What is being done? What should be done? Where --- Where is it being done? Where should it be done? When --- When is it being done? When should it be done? Why --- Why is it being done? Why do it that way? How --- How is it being done? How should it be done? 6-76

77 Five - M Checklist Man (Operator) Machines Material Methods Measurement The Five-M Checklist is an approach that focuses attention on Management, the 6E (Heizer five & Render) key factors which 6-77 are present in any process.

78 BOOKS ABOUT KAIZEN & GEMBA KAIZEN 6-78

79 Concepts for an Effective TQM Program CONTINUED FROM SLIDE 44 Continuous improvement Improvement Model : PDCA Employee empowerment (Quality Circles) Benchmarking Just-in-time (JIT) Taguchi concepts Knowledge and use of TQM tools 6-79

80 Shewhart s PDCA Model 4.Act Implement the plan 3.Check Is the plan working 1.Plan Identify the improvement and make a plan 2.Do Test the plan 6-80

81 PDCA Cycle (Deming Wheel) PUKÖ DÖNGÜSÜ PDCA Cycle (Deming Wheel) 4. Institutionalize the change or abandon or do it again. Önlem al 4. Act 1. Plan 1. Plan a change aimed at improvement. Planla Kontrol et 3. Study the results; did it work? 3. Check Do Uygula 2. Execute the change.

82 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. 6-82

83 Quality Circles Group of 6-12 employees from same work area Meet regularly to solve work-related problems 4 hours/month Facilitator trains & helps with meetings 1995 Corel Corp. 6-83

84 Benchmarking Selecting best practices to use as a standard for performance Determine what to benchmark Form a benchmark team Identify benchmarking partners Collect and analyze benchmarking information Take action to match or exceed the benchmark XEROX Corp. example. 6-84

85 Resolving Customer Complaints Best Practices Make it easy for clients to complain Respond quickly to complaints Resolve complaints on the first contact Use computers to manage complaints Recruit the best people for customer service jobs 6-85

86 Just-in in-time (JIT) Relationship to quality: JIT cuts cost of quality (scrap, rework costs decrease) JIT improves quality (errors caught earlier) Better quality means less inventory and better, easier-to-employ JIT system (safety stocks decreased) 6-86

87 Just-in in-time (JIT) Pull system of production/purchasing Customer starts production with an order Involves vendor partnership programs to improve quality of purchased items Reduces all inventory levels Inventory hides process & material problems Improves process & product quality 6-87

88 Just-In In-Time (JIT) Example Work in process inventory level (hides problems) Unreliable Vendors Scrap Capacity Imbalances 6-88

89 Just-In In-Time (JIT) Example Reducing inventory reveals problems so they can be solved. Unreliable Vendors Scrap Capacity Imbalances 6-89

90 Taguchi Concepts Most quality problems are the result of poor product and process design. Experimental design methods to improve product & process design Identify key component & process variables affecting product variation Taguchi Concepts Quality robustness (can be produced uniformly and consistently under adverse unfavorable-manufacturing and environmental conditions) Quality loss function (a mathematical function that identifies all costs related to poor quality) Target-oriented quality specifications (produce parts and products at the target dimension or characteristic) 6-90

91 Quality Robustness Ability to produce products uniformly regardless of manufacturing conditions Put robustness in House of Quality matrices besides functionality 1995 Corel Corp T/Maker Co. 6-91

92 Quality Loss Function Shows social cost ($) of deviation from target value, i.e. poor quality customer dissatisfaction, warranty and service costs, internal inspection, repair and scrap costs all are called COSTS TO SOCIETY Assumptions Most measurable quality characteristics (e.g., length, weight) have a target value Deviations from target value are undesirable 6-92

93 Quality Loss Function Equation: L = D 2 C L = Loss to society ($) D 2 = Deviation (actual target) 2 C = Cost of the deviation at the specification limit 6-93

94 Quality Loss Function Graph Loss = (Actual X - Target) 2 (Cost of Deviation) Loss Greater deviation, more people are dissatisfied, higher cost LSL Target USL X Lower (upper) specification limit Measurement 6-94

95 Quality Loss Function Example The specifications for the diameter of a gear are ± 0.25 mm. If the diameter is out of specification, the gear must be scrapped at a cost of $4.00. What is the loss function? T/Maker Co. 6-95

96 Quality Loss Function Solution L = D 2 C = (X - Target) 2 C L = Loss ($); D = Deviation; C = Cost; X= Actual dimension 4.00 = ( ) 2 C Item scrapped if greater than (USL = ) with a cost of $4.00 C = 4.00 / ( ) 2 = 64 L = D 2 64 = (X ) 2 64 Enter various X values to obtain Loss & plot 6-96

97 Target value Tolerance specification limits cm cost to repair during warranty period = $50 L= (X - T) 2 C C=50/.0004 = 125,000 LOSS TAGUCHI LOSS FUNCTION DEMO X T D = X - T D 2 C LOSS ,5 312, ,5 112, ,5 0 12,5 0,45 0,46 0,47 0,48 0,49 0,5 0,51 0,52 0,53 0,54 0,55 LOSS 6-97

98 Target Specification Example A study found U.S. consumers preferred Sony TV s made in Japan to those made in the U.S. Both factories used the same designs & specifications. The difference in quality goals made the difference in consumer preferences. Japanese factory (Target-oriented) U.S. factory (Conformanceoriented) 6-98

99 Quality Loss Function; Distribution of Products Produced High loss Loss (to producing organization, customer, and society) Low loss Frequency Unacceptable Poor Fair Good Best Lower Target Upper Specification 6-99 Quality Loss Function (a) Target-oriented quality yields more product in the best category Target-oriented quality brings products toward the target value Conformance-oriented quality keeps product within three standard deviations Distribution of specifications for product produced (b)

100 Tools of TQM Tools for generating ideas Check sheet Scatter diagram Cause and effect diagram Tools to organize data Pareto charts Flow charts Tools for identifying problems Histograms Statistical process control chart 6-100