SCM – 302 OPERATIONS MANAGEMENT 06 – Quality Management SCM 302 - Quality & SPC Ratcliffe 2 Learning Objectives 1. Explain different definitions of quality. 2. Describe two ways that quality improves profitability. 3. What are 4 types of quality-associated costs and the relationship between them? 4. Discuss examples of how firms applied PDCA cycle and utilized various TQM tools to improve their processes. 5. What are the 7 concepts of Total Quality Management? 6. What is Six Sigma? 7. Describe how to use the 7 TQM tools to analyze a quality problem. 8. Explain unique challenges for managing quality in services. A. Construct 푥 -charts, 푅-charts, p-charts B. Explain five steps for building control charts C. Compute 퐶푝 and 퐶푝푘 and explain process capability SCM 302 - Quality & SPC Ratcliffe 3 SCM 302 - Quality & SPC Ratcliffe 4 Toyota Issues Sweeping Global Recall Over Fire Hazard • Toyota recalled 7.4 million vehicles to repair faulty power- window switches that pose a fire risk. • Toyota’s largest recall for a single part • Set back its efforts to recover from previous safety issues and Japan tsunami. • In 2009-2010, Toyota recalled more than 11 million vehicles worldwide to replace floor mats and sticky accelerator pedals. • The automaker has been seeking to reassure consumers about the quality of its vehicles since then. • Toyota’s report to National Highway Traffic Safety Association • Originally wanted to conduct a “customer satisfaction campaign” but decided to pursue the recall after discussions with the agency. • Voluntary recall, but federal regulations require a manufacturer learns to notify NHTSA of plans for a recall within 5 business days • Notify owners by mail. Technicians will inspect & repair switch free of charge. • What are the negative impacts of poor “quality” for Toyota? • What are the costs associated with a recall? • What is Toyota doing to rebuild its image as a quality leader? SCM 302 - Quality & SPC Ratcliffe 5 Test Your IQ. What is Quality? • If you plan to buy a car, what is your key criterion? • Speed/acceleration • Design/appearance • Reliability • Others • How would you measure the quality of the vehicle? SCM 302 - Quality & SPC Ratcliffe 6 What is Quality? A high-performance or e.g. high-end product like a Rolls Royce luxury product ? • But is a Toyota or Honda not high quality? Conformance to i.e. does the product do what it was designed to do Specification ? • But what if the design was bad? Conformance to Customer i.e. does the product do what the customer wants it to do Needs ? • In other words does it meet the customer’s needs SCM 302 - Quality & SPC Ratcliffe 7 What is Quality? • “Consistently meeting customers’ expectations” 3M Corporation • “Providing our external and internal customers with innovative products and services that fully satisfy their requirements” Xerox Corporation • “100% customer satisfaction, by performing 100% to our standards, as perceived by the customer” Federal Express • “Meeting the requirements of our customers for defect-free products and services” IBM • “Performance leadership in meeting customer requirements by doing the right things right the first time” Westinghouse Electric Corporation • “The unyielding and continually improving effort by everyone in an organization to understand, meet, and exceed the expectations of customers” Procter and Gamble SCM 302 - Quality & SPC Ratcliffe 8 What is Quality? 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 • 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 SCM 302 - Quality & SPC Ratcliffe 9 Why is Quality Important? Managing quality supports all three strategies Sales Gains via • Differentiation • Improved response • Lower costs • Flexible pricing • Improved response • Improved reputation Improved Increased Other reasons quality is important: Quality Profits 1. Company reputation Reduced Costs via • Perception of new products, Employment practices, Supplier relations • Increased productivity 2. Product liability • Lower rework and scrap costs • Reduce risk • Lower warranty costs 3. Global implications • Improved ability to compete 4. Company Ethics • Must deliver healthy, safe, quality products and services • Poor quality risks injuries, lawsuits, recalls, and regulation • All stakeholders much be considered SCM 302 - Quality & SPC Ratcliffe 10 Quality Awards & Standards • Malcom Baldrige National Quality Award • Established in 1988 by the U.S. government • Designed to promote TQM practices • Recent winners include: Lockheed Martin Missiles and Fire Control, North Mississippi Health Services, City of Irving, Concordia Publishing House, Nestlé Purina PetCare Co. • Deming Prize in Japan • ISO 9000 • Set of quality standards developed by International Organization for Standardization • Encourages quality management procedures, detailed documentation, work instructions, and recordkeeping • Over one million certifications in 178 countries • Critical for global business SCM 302 - Quality & SPC Ratcliffe 11 Four Classes of Quality Associated Costs Prevention Appraisal • Costs of process of • Costs of process of preventing poor UNCOVERING quality defects • Planning, training, • Inspections, tests, Total Total Cost upfront design etc. audits etc. Cost External Failure Internal Failure External Failure Internal Failure • Costs of discovering • Costs of product poor product quality quality problems that before it reaches the occur AFTER product Prevention customer reaches customer • Rework (fixing • Recall logistics, Appraisal defect), scrap, Repair, Brand loyalty, equipment downtime Litigation Quality Improvement etc. SCM 302 - Quality & SPC Ratcliffe 12 Quality Involves Some Trade-Offs A Traditional View Cost Total Costs Prevention and Appraisal Costs Internal and External Failure Costs Quality The cost of high quality may be as high as low quality. There is an optimal quality level. Good quality management programs figure out how to reduce the cost of achieving quality and then transfer this knowledge through the company SCM 302 - Quality & SPC Ratcliffe 13 The Progression of Quality Management (1952-1954) Joseph Juran (1961) Arnold Feigenbaum invited to Japan Total Quality Control • Top-management support • 40 steps to quality and involvement in quality improvement processes. Motorola developed effort. • Quality not set of tools but Six Sigma, extending World War I: • Teams continually seek to total field that integrates the concept of quality quality inspection raise quality standards. company processes management from was introduced to • Customer focused - define • Learn from each other’s product level to minimize failures quality as fitness for use, successes, cross-functional business process and due to quality. not written specifications. teamwork. organizational level 1920s 1950s 1980s W. Edwards (1929). (1950) Deming trains hundreds The U.S. companies Deming meets Walter of engineers, managers, were threaten by the (1979) Phillip Crosby A. Shewhart. Inspired scholars, and chief executives superior quality of Quality Is Free by his ideas of statistical on quality control Japanese products and • Cost of poor quality process control, control • Management accept TQM received great understated compared to cost chart, Shewhart Cycle responsibility for building attention. of improving quality. good systems. • Should include everything • The quality the process is involved in not doing job capable of producing limits right the first time. the employee • Coined term zero defects • 14 points for implementing • “There is absolutely no reason quality improvement for having errors or defects in any product or service.” SCM 302 - Quality & SPC Ratcliffe 14 Total Quality Management • Management of entire organization so that it excels in all aspects of products and services important to the customer • Continuous companywide drive • Seven Key Concepts 1. Continuous improvement TQM did not invent any 2. Six Sigma revolutionary quality techniques 3. Employee empowerment (i.e. the basic building blocks) 4. Benchmarking but rather packaged quality management as a strategic 5. Just-in-time (JIT) imperative 6. Taguchi concepts • Some companies had great 7. Knowledge of TQM tools success and others failed SCM 302 - Quality & SPC Ratcliffe 15 TQM Concept #1: Continuous Improvement PDCA Cycle • Kaizen: never-ending process of continual 4. Act 1. Plan Implement Identify the improvement the plan, pattern and • Covers people, document make a plan equipment, materials, procedures 3. Check 2. Do Is the plan Test the working? plan SCM 302 - Quality & SPC Ratcliffe 16 TQM Concept #2: Six Sigma • Two meanings: 2,700 defects/million 1. Process 99.9997% capable, 3.4 defects per million 3.4 defects/million 2. Program designed to reduce defects, lower costs, save time, and improve customer satisfaction Mean • Key Concepts ±3 • Customer perception of quality is not just driven by ±6 average quality but by variation in quality from interaction with the firm • Processes need to be designed to minimize variability, deliver what customer wants • Cannot be accomplished without a major commitment from top level management • Implementing • Emphasize defects per million as standard metric • Provide extensive training • Create qualified process improvement experts (Black Belts, Green Belts, etc.) • Set stretch