Operations Management For Competitive Advantage 1

Quality ManagementQuality Management

Operations ManagementFor Competitive Advantage

Chapter 7

Operations Management For Competitive Advantage 2

Chapter 7

Quality Management Total Quality Management Defined Malcolm Baldrige National Quality Award Quality Specifications Costs of Quality Continuous Improvement SPC Tools Benchmarking Fail-safing ISO 9000

Operations Management For Competitive Advantage 3

Total Quality Management (TQM)Defined

Total quality management is defined as

managing the entire organization so that it

excels on all dimensions of products and

services that are important to the customer.

Operations Management For Competitive Advantage 4

1.0 Leadership (125 points) 2.0 Strategic Planning (85 points) 3.0 Customer and Market Focus (85

points) 4.0 Information and Analysis (85 points) 5.0 Human Resource Focus (85 Points) 6.0 Process Management (85 points) 7.0 Business Results (450 points)

1999 Malcolm Baldrige National Quality Award

Operations Management For Competitive Advantage 5

Categories for the Baldrige Award

Manufacturing companies or subsidiaries that– produce and sell manufactured products or

manufacturing processes or– produce agricultural, mining, or construction products.

Service companies or subsidiaries that sell service Small businesses Health care organizations Educational institutions

Operations Management For Competitive Advantage 6

Characteristics of a Baldrige Award Winner The companies formulated a vision of what they

thought quality was and how they would achieve it.

Senior management was actively involved.

Companies carefully planned and organized their quality effort to be sure it would be effectively initiated.

They vigorously controlled the overall process.

Operations Management For Competitive Advantage 7

Quality Specifications

Design quality: Inherent value of the product in the marketplace

– Dimensions include: Performance, Features, Reliability, Durability, Serviceability, Response, Aesthetics, and Reputation.

Conformance quality: Degree to which the product or service design specifications are met

Operations Management For Competitive Advantage 8

Costs of Quality

External Failure Costs

Appraisal Costs

Prevention Costs

Internal FailureCosts

Costs ofQuality

Operations Management For Competitive Advantage 9

Continuous Improvement (CI)

Management's view of performance standards of the organization– performance level of the firm as something to be

"continuously challenged and incrementally upgraded."

The way management views the contribution and role of its workforce– believe employee involvement and team efforts

are the key to improvement

Operations Management For Competitive Advantage 10

CI Methodology: PDCA Cycle (Deming Wheel)

1. Plan a change aimed at improvement.

1. Plan

2. Execute the change.

2. Do

3. Study the results; did it work?

3. Check

4. Institutionalize the change or abandon or do it again.

4. Act

Operations Management For Competitive Advantage 11

Example: Process Flow Chart

No, Continue…

Material Received

from Supplier

Inspect Material for

Defects Defects found?

Return to Supplier for

Credit

Yes

Can be used to find quality problems.

Can be used to find quality problems.

Operations Management For Competitive Advantage 12

Example: Pareto Analysis

Can be used to find when 80% of the problems may be attributed to 20% of thecauses.

Can be used to find when 80% of the problems may be attributed to 20% of thecauses.

Assy.

Instruct.

Fre

quen

cy

Design Purch.Training

Other

80%

Operations Management For Competitive Advantage 13

Example: Run Chart

0.440.460.48

0.50.520.540.560.58

1 2 3 4 5 6 7 8 9 10 11 12Time (Hours)

Dia

me

ter

Can be used to identify when equipment or processes are not behaving according to specifications.

Can be used to identify when equipment or processes are not behaving according to specifications.

Operations Management For Competitive Advantage 14

Example: HistogramN

um

be

r o

f Lo

ts

Data RangesDefects in lot

0 1 2 3 4

Can be used to identify the frequency of quality defect occurrence and display quality performance.

Can be used to identify the frequency of quality defect occurrence and display quality performance.

Operations Management For Competitive Advantage 15

Example: Scatter Diagram

02468

1012

0 10 20 30

Hours of Training

De

fect

s

Can be used to illustrate the relationships between quality behavior and training.

Can be used to illustrate the relationships between quality behavior and training.

Operations Management For Competitive Advantage 16

Example: Checksheet

Billing Errors

Wrong Account

Wrong Amount

A/R Errors

Wrong Account

Wrong Amount

Monday

Can be used to keep track of defects or used to make sure people collect data in a correct manner.

Can be used to keep track of defects or used to make sure people collect data in a correct manner.

Operations Management For Competitive Advantage 17

Example: Cause & Effect Diagram

Effect

ManMachine

MaterialMethod

Environment

Possible causes:Possible causes: The results or effect.

The results or effect.

Can be used to systematically track backwards to find a possible cause of a quality problem (or effect).

Can be used to systematically track backwards to find a possible cause of a quality problem (or effect).

Operations Management For Competitive Advantage 18

Example: Control Charts

970

980

990

1000

1010

1020

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

LCL

UCL

Can be used to monitor ongoing production process quality and quality conformance to stated standards of quality.

Can be used to monitor ongoing production process quality and quality conformance to stated standards of quality.

Operations Management For Competitive Advantage 19

Benchmarking

1. Identify those processes needing improvement.

2. Identify a firm that is the world leader in performing the process.

3. Contact the managers of that company and make a personal visit to interview managers and workers.

4. Analyze data.

Operations Management For Competitive Advantage 20

The Shingo System: Fail-Safe Design

Shingo’s argument:– SQC methods do not prevent defects– Defects arise when people make errors– Defects can be prevented by providing workers

with feedback on errors

Poka-Yoke includes:– Checklists– Special tooling that prevents workers from

making errors

Operations Management For Competitive Advantage 21

ISO 9000

Series of standards agreed upon by the International Organization for Standardization (ISO)

Adopted in 1987

More than 100 countries

A prerequisite for global competition?

ISO 9000 directs you to "document what you do and then do as you documented."

Operations Management For Competitive Advantage 22

Three Forms of ISO Certification

First party: A firm audits itself against ISO 9000 standards.

Second party: A customer audits its supplier.

Third party: A "qualified" national or international standards or certifying agency serves as auditor.

Operations Management For Competitive Advantage 23

ISO 9000 versus the Baldrige Award

Which should we pursue first?

What are the differences between the two?

Do you have to be ISO 9000 certified before going for the Baldrige Award?