Heizer Om12 Ch06 Accessible

Operations Management: Sustainability
and Supply Chain Management

Twelfth Edition
Chapter 6
Managing Quality
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Managing Quality Provides a Competitive
Advantage
Arnold Palmer Hospital
• Delivers over 12,000 babies annually
• Virtually every type of quality tool is employed
– Continuous improvement
– Employee empowerment
– Benchmarking
– Just-in-time
– Quality tools
Outline
• Global Company Profile:
Arnold Palmer Hospital
• Quality and Strategy
• Defining Quality
• Total Quality Management
• Tools of TQM
• The Role of Inspection
• TQM in Services
Learning Objectives
6.1 Define quality and TQM
6.2 Describe the ISO international quality
standards
6.3 Explain Six Sigma
6.4 Explain how benchmarking is used in T QM
6.5 Explain quality robust products and Taguchi
concepts
6.6 Use the seven tools of TQM
Quality and Strategy
• 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
Two Ways Quality Improves Profitability
Figure 6.1 Ways Quality Improves Profitability
The Flow of Activities
Figure 6.2 The Flow of Activities Necessary to Achieve Total Quality
Management
Defining Quality (1 of 2)
An operations manager’s objective is to build
a total quality management system that
identifies and satisfies customer needs
Defining Quality (2 of 2)
The totality of features and characteristics of a
product or service that bears on its ability to satisfy
stated or implied needs
American Society for Quality
Different Views
• User based: better performance, more features
• Manufacturing based: conformance to
standards, making it right the first time
• Product based: specific and measurable
attributes of the product
Implications of Quality
1. Company reputation
– Perception of new products
– Employment practices
– Supplier relations
2. Product liability
– Reduce risk
3. Global implications
– Improved ability to compete
Malcolm Baldrige National Quality Award
• Established in 1988 by the U.S. government
• Designed to promote TQM practices
• Recent winners include
MidwayUSA, Charter School of San Diego, Mid-
America Transplant Services, Hill Country
Memorial, PricewaterhouseCoopers Public Sector
Practice, Elevations Credit Union, Lockheed Martin
Missiles and Fire Control, M ESA Products Inc.
Baldrige Criteria
Applicants are evaluated on:
Categories Points
Leadership 120
Strategic Planning 85
Customer Focus 85
Measurement, Analysis, and Knowledge 90
Management
Workforce Focus 85
Operations Focus 85
Results 450
ISO 9000 International Quality
Standards (1 of 2)
• International recognition
• Encourages quality management procedures,
detailed documentation, work instructions, and
recordkeeping
• 2015 revision gives greater emphasis to risk-
based thinking
• Over one million certifications in 206 countries
• Critical for global business
ISO 9000 International Quality Standards
(2 of 2)
• 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
Costs of Quality (1 of 2)
• Prevention costs - reducing the potential for
defects
• Appraisal costs - evaluating products, parts, and
services
• Internal failure costs - producing defective
parts or service before delivery
• External failure costs - defects discovered after
delivery
Costs of Quality (2 of 2)
Takumi
A Japanese character that
symbolizes a broader
dimension than quality, a
deeper process than
education, and a more
perfect method than
persistence
Leaders in Quality (1 of 2)
Table 6.1 Leaders in the Field of Quality Management
Leader Philosophy/Contribution
W. Edwards Deming Deming insisted management accept responsibility for building
good systems. The employee cannot produce products that on
average exceed the quality of what the process is capable of
producing. His 14 points for implementing quality improvement
are presented in this chapter.
Joseph M. Juran A pioneer in teaching the Japanese how to improve quality,

Juran believed strongly in top-management commitment,
support, and involvement in the quality effort. He was also a
believer in teams that continually seek to raise quality standards.
Juran varies from Deming somewhat in focusing on the
customer and defining quality as fitness for use, not necessarily
the written specifications.
Leaders in Quality (2 of 2)
Table 6.1 [continued]
Leader Philosophy/Contribution
Armand Feigenbaum His 1961 book Total Quality Control laid out 40 steps to quality
improvement processes. He viewed quality not as a set of tools
but as a total field that integrated the processes of a company.
His work in how people learn from each other’s successes led to
the field of cross-functional teamwork.
Philip B. Crosby Quality Is Free was Crosby’s attention-getting book published in
1979. Crosby believed that in the traditional trade-off between
the cost of improving quality and the cost of poor quality, the cost
of poor quality is understated. The cost of poor quality should
include all of the things that are involved in not doing the job right
the first time. Crosby coined the term zero defects and stated,
“There is absolutely no reason for having errors or defects in any
product or service.”
Ethics and Quality Management
• Operations managers must deliver healthy, safe,
quality products and services
• Poor quality risks injuries, lawsuits, recalls, and
regulation
• Ethical conduct must dictate response to problems
• All stakeholders must be considered
Total Quality Management
• Encompasses entire organization from supplier to
customer
• Stresses a commitment by management to have a
continuing companywide drive toward excellence
in all aspects of products and services that are
important to the customer
Deming's Fourteen Points (1 of 2)
Table 6.2 Deming's 14 Points for Implementing Quality
Improvement
1. Create consistency of purpose
2. Lead to promote change
3. Build quality into the product; stop depending on inspections to
catch problems
4. Build long-term relationships based on performance instead of
awarding business on price
5. Continuously improve product, quality, and service
6. Start training
7. Emphasize leadership
Deming's Fourteen Points (2 of 2)
Table 6.2 [Continued]
8. Drive out fear

9. Break down barriers between departments
10. Stop haranguing workers
11. Support, help, and improve
12. Remove barriers to pride in work
13. Institute a vigorous program of education and self-improvement
14. Put everyone in the company to work on the transformation
Seven Concepts of TQM
1) Continuous improvement
2) Six Sigma
3) Employee empowerment
4) Benchmarking
5) Just-in-time (JIT)
6) Taguchi concepts
7) Knowledge of TQM tools
Continuous Improvement (1 of 2)
• Never-ending process of continuous improvement
• Covers people, equipment, suppliers, materials,
procedures
• Every operation can be improved
Shewhart's PDCA Model
Figure 6.3 PDCA Cycle
Continuous Improvement (2 of 2)
• Kaizen describes the ongoing process of
unending improvement
• TQM and zero defects also used to describe
continuous improvement
Six Sigma (1 of 3)
• Two meanings
– Statistical definition of a process that is
99.9997% capable, 3.4 defects per million
opportunities (DPMO)
– A program designed to reduce defects, lower
costs, save time, and improve customer
satisfaction
• A comprehensive system for achieving and
sustaining business success
Six Sigma (2 of 3)
Figure 6.4 Defects per Million for 3 vs. 6
Six Sigma Program
• Originally developed by Motorola, adopted and
enhanced by Honeywell and G E
• Highly structured approach to process
improvement
– A strategy
– A discipline – DMAIC
– A set of 7 tools
Six Sigma (3 of 3)
1. Defines the project’s purpose,
scope, and outputs, then identifies
the required process information
keeping in mind the customer’s
definition of quality
2. Measures the process and collects
data
3. Analyzes the data ensuring
repeatability and reproducibility
4. Improves by modifying or
redesigning existing processes and
procedures
5. Controls the new process to make
sure performance levels
Copyright are2014, 2011 Pearson Education, Inc. All Rights Reserved
© 2017,
Implementing Six Sigma (1 of 2)
• Emphasize defects per million opportunities as a
standard metric
• Provide extensive training
• Focus on top management leadership (Champion)
• Create qualified process improvement experts
(Black Belts, Green Belts, etc.)
• Set stretch objectives
Implementing Six Sigma (2 of 2)
This cannot be accomplished without a major commitment
from top level management
Employee Empowerment
• Getting employees involved in
product and process improvements
– 85% of quality problems are due
to materials and process
Employee Empowerment
• Techniques
1. Build communication networks that include

employees
2. Develop open, supportive supervisors
3. Move responsibility to employees
4. Build a high-morale organization
5. Create formal team structures
Quality Circles
• Group of employees who meet regularly to solve
problems
• Trained in planning, problem solving, and
statistical methods
• Often led by a facilitator
• Very effective when done properly
Benchmarking
Selecting best practices to use as a standard for
performance
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
Best Practices for Resolving Customer
Complaints
Table 6.3
Best Practice Justification
Make it easy for clients to complain It is free market research
Respond quickly to complaints It adds customers and loyalty
Resolve complaints on first contact It reduces cost
Use computers to manage complaints Discover trends, share them, and align
your services
Recruit the best for customer service It should be part of formal training and
jobs career advancement
Internal Benchmarking
• When the organization is large enough
• Data more accessible
• Can and should be established in a variety of
areas
Just-In-Time (JIT) (1 of 2)
• ‘Pull’ system of production scheduling including
supply management
– Production only when signaled
• Allows reduced inventory levels
– Inventory costs money and hides process and
material problems
• Encourages improved process and product quality
Just-In-Time (JIT) (2 of 2)
Relationship to quality:
• JIT cuts the cost of quality
• JIT improves quality
• Better quality means less inventory and better,
easier-to-employ JIT system
Taguchi Concepts
• Engineering and experimental design methods to
improve product and process design
– Identify key component and process variables
affecting product variation
• Taguchi Concepts
– Quality robustness
– Target-oriented quality
– Quality loss function
Quality Robustness
• Ability to produce products uniformly in adverse
manufacturing and environmental conditions
– Remove the effects of adverse conditions
– Small variations in materials and process do
not destroy product quality
Quality Loss Function (1 of 2)
Target-oriented quality
• Shows that costs increase as the product moves
away from what the customer wants
• Costs include customer dissatisfaction, warranty
and service, internal
scrap and repair, and costs to society
• Traditional conformance specifications are too
simplistic
Quality Loss Function (2 of 2)
Figure 6.5 (a) Distribution of Products Produced and (b) Quality Loss
Function
TQM Tools (1 of 2)
• Tools for Generating Ideas
– Check Sheet
– Scatter Diagram
– Cause-and-Effect Diagram
• Tools to Organize the Data
– Pareto Chart
– Flowchart (Process Diagram)
TQM Tools (2 of 2)
• Tools for Identifying Problems
– Histogram
– Statistical Process Control Chart
Seven Tools of TQM (1 of 7)
Figure 6.6 (a) Check Sheet: An organized method of recording data
Figure 6.6 (b) Scatter Diagram: A graph of the value of one variable
vs. another variable
Figure 6.6 (c) Cause-and-Effect Diagram: A tool that identifies
process elements (causes) that may effect an outcome
Figure 6.6 (d) Pareto Chart: A graph to identify and plot problems or
defects in descending order of frequency
Figure 6.6 (e) Flowchart (Process Diagram): A chart that describes
the steps in a process
Figure 6.6 (f) Histogram: A distribution showing the frequency of
occurrences of a variable
Figure 6.6 (g) Statistical Process Control Chart: A chart with time on
the horizontal axis to plot values of a statistic
Cause-And-Effect Diagrams
Figure 6.7 Fish-Bone Chart (or Cause-and-Effect Diagram) for
Problems with Missed Free-Throws
Pareto Charts
Flow Charts
MRI Flowchart
7. If unsatisfactory, repeat
1. Physician schedules MRI
8. Patient taken back to room
2. Patient taken to MRI
9. MRI read by radiologist
3. Patient signs in
10. MRI report transferred to
4. Patient is prepped
physician
5. Technician carries out M
11. Patient and physician
RI
discuss
6. Technician inspects film
Statistical Process Control (SPC)
• Uses statistics and control charts to tell when to
take corrective action
• Drives process improvement
• Four key steps
– Measure the process
– When a change is indicated, find the
assignable cause
– Eliminate or incorporate the cause
– Restart the revised process
Control Charts
Figure 6.8 Control Chart for Percentage of Free-throws Missed by the
Orlando Magic in Their First Nine Games of the New Season
Inspection (1 of 2)
• Involves examining items to see if an item is good
or defective
• Detect a defective product
– Does not correct deficiencies in process or
product
– It is expensive
• Issues
– When to inspect
– Where in process to inspect
When and Where to Inspect
1. At the 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
Inspection (2 of 2)
• Many problems
– Worker fatigue
– Measurement error
– Process variability
• Cannot inspect quality into a product
• Robust design, empowered employees, and sound
processes are better solutions
Source Inspection (1 of 2)
• Also known as source
control
• The next step in the
process is your customer
• Ensure perfect product to
your
customer
Source Inspection (2 of 2)
• Poka-yoke is the concept
of foolproof devices or
techniques designed to
pass only acceptable
products
• Checklists ensure
consistency and
completeness
Service Industry Inspection (1 of 3)
Table 6.4 Examples of Inspection in Services
Organization What Is Inspected Standard
Alaska Airlines Last bag on carousel Less than 20 minutes after arrival at
Airplane door opened the gate
Less than 2 minutes after arrival at
the gate
Jones Law Office Receptionist performance Phone answered by the second ring
Billing Accurate, timely, and correct format
Attorney Promptness in returning calls
Hard Rock Hotel Reception desk Use customer’s name
Doorman Greet guest in less than 30 seconds
Room All lights working, spotless bathroom
Minibar Restocked and charges accurately
posted to bill

Arnold Palmer Hospital Billing Accurate, timely, and correct
Pharmacy format
Lab Prescription accuracy,
inventory accuracy
Nurses
Audit for lab-test accuracy
Admissions
Charts immediately updated
Data entered correctly and
completely
Olive Garden Busboy Serves water and bread within
Restaurant Busboy 1 minute
Waiter Clears all entrée items and
crumbs prior to dessert
Knows and suggest specials,
desserts
Nordstrom Department Display areas Attractive, well-organized,
Store Stockrooms stocked, good lighting
Salesclerks Rotation of goods, organized,
clean
Neat, courteous, very
knowledgeable
Attributes Versus Variables
• Attributes
– Items are either good or bad, acceptable or
unacceptable
– Does not address degree of failure
• Variables
– Measures dimensions such as weight, speed,
height, or strength
– Falls within an acceptable range
• Use different statistical techniques
TQM In Services
• Service quality is more difficult to measure than
the quality of goods
• Service quality perceptions depend on
1. Intangible differences between products

2. Intangible expectations customers have of
those products
Service Quality
The operations manager must recognize:
• The tangible component of services is important
• The service process is important
• The service is judged against the customer’s
expectations
• Exceptions will occur
Service Specifications
Determinants of Service Quality (1 of 2)
Table 6.5
Reliability involves consistency of performance and

dependability
Responsiveness concerns the willingness or readiness of
employees to provide service
Competence means possession of the required skills and
knowledge to perform the service
Access involves approachability and ease of contact
Courtesy involves politeness, respect, consideration, and
friendliness
Determinants of Service Quality (2 of 2)
Communication means keeping customers informed and
listening to them
Credibility involves trustworthiness, believability, and
honesty
Security is the freedom from danger, risk, or doubt
Understanding/knowing the customer involves making
the effort to understand the customer's needs
Tangibles include the physical evidence of the service
Service Recovery Strategy
• Managers should have a plan for when services

fail
• Marriott's Learn routine
– Listen
– Empathize
– Apologize
– React
– Notify
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Operations Management: Sustainability

and Supply Chain Management

Joseph M. Juran A pioneer in teaching the Japanese how to improve quality,

8. Drive out fear

1. Build communication networks that include

Make it easy for clients to complain It is free market research

Respond quickly to complaints It adds customers and loyalty

Resolve complaints on first contact It reduces cost

Table 6.4 [continued]

1. Intangible differences between products

Reliability involves consistency of performance and

• Managers should have a plan for when services

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