Quality Management


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Quality Management

  1. 1. Quality Management Chapter 15 “ Operations Management: Goods, Services, and Value Chains”, by D. A. Collier and J. R. Evans
  2. 2. <ul><li>Although Hyundai Motor Co. dominated the Korean car market, it had a poor reputation for quality overseas, with doors that didn’t fit properly, frames that rattled, and engines that delivered poor acceleration. In addition, the company was losing money. </li></ul>
  3. 3. <ul><li>When Chung Mong Koo became CEO in 1999, he visited Hyundai’s plant at Ulsan. To the shock of his employees, who hardly ever see a CEO, Chung walked onto the factory floor and looked under the hood of a Sonata sedan. </li></ul>
  4. 4. <ul><li>He didn’t like what he saw: loose wires, tangled hoses, bolts painted four different colors—the kind of sloppiness that would never be seen in a Japanese car. </li></ul>
  5. 5. <ul><li>On the spot, he instructed the plant chief to paint all bolts and screws black and ordered workers not to release a car unless all was orderly under the hood. “You’ve got to get back to basics. The only way we can survive is to raise our quality to Toyota’s level” he fumed. </li></ul>
  6. 6. <ul><li>The next year, U.S. sales rose by 42 percent, and in 2004, Hyundai tied with Honda as the second-best carmaker on the J.D. Powers Initial Quality ranking. </li></ul>
  7. 7. Definitions <ul><li>Quality Management : systematic policies, methods, and procedures used to ensure that goods and services are produced with appropriate levels of quality meeting customer needs </li></ul><ul><li>Quality : Fitness for use - the ability of a good or service to meet customer needs </li></ul>
  8. 8. History of Quality Management <ul><li>Surely quality was always a priority in production and trade </li></ul><ul><ul><li>1450 B.C. Egyptians used measuring devices to ensure high quality during pyramid construction </li></ul></ul><ul><li>Early 20th Century </li></ul><ul><ul><li>Mass Production creates the need for quality inspection of batches </li></ul></ul><ul><ul><li>Interchangeable parts </li></ul></ul><ul><ul><li>Specialization in Production </li></ul></ul><ul><ul><li>Problem : Organization of production required that workers deal with quality and managers with supervision </li></ul></ul>
  9. 9. History of Quality Management <ul><li>1940-50 </li></ul><ul><ul><li>During World War II the need for production efficiency required the dissemination of statistical quality control techniques </li></ul></ul><ul><ul><li>Gradually quality control migrated to manufacturing industries </li></ul></ul><ul><ul><li>Two US consultants, J. Juran and W. Edwards Deming, introduce statistical quality control to Japanese (importantly their target audience was executives) </li></ul></ul><ul><li>1970-90 </li></ul><ul><ul><li>Japanese electronics and automobiles have world class quality and make fast inroads to US market. </li></ul></ul><ul><ul><li>Total Quality Management (TQM) </li></ul></ul>
  10. 10. History of Quality Management <ul><li>1990-2000 </li></ul><ul><ul><li>Quality Costing </li></ul></ul><ul><ul><li>Market-Driven Strategy </li></ul></ul><ul><li>2000-present </li></ul><ul><ul><li>Quality an important priority among US car manufacturers and in US Health Care Industry </li></ul></ul><ul><ul><li>Six-sigma </li></ul></ul>
  11. 11. Understanding Quality <ul><li>Multiple Definitions for Quality </li></ul><ul><ul><li>perfection </li></ul></ul><ul><ul><li>consistency </li></ul></ul><ul><ul><li>eliminating waste </li></ul></ul><ul><ul><li>speed of delivery </li></ul></ul><ul><ul><li>compliance with policies and procedures </li></ul></ul><ul><ul><li>providing a good, usable product </li></ul></ul><ul><ul><li>doing it right the first time </li></ul></ul><ul><ul><li>delighting or pleasing customers </li></ul></ul><ul><ul><li>total customer service and satisfaction </li></ul></ul>
  12. 12. GAP Model
  13. 13. Quality in Operations <ul><li>Conformance Quality </li></ul><ul><ul><li>Meet specifications </li></ul></ul><ul><ul><li>Quality Control </li></ul></ul><ul><li>Service Quality </li></ul><ul><ul><li>External Focus: Customer Expectations </li></ul></ul><ul><ul><li>Internal Focus: Delivery Process Criteria </li></ul></ul><ul><li>TQM Principles </li></ul><ul><ul><li>Focus on customers / stakeholders </li></ul></ul><ul><ul><li>Process focus: continuous improvement / learning </li></ul></ul><ul><ul><li>Teamwork: Quality is everyone’s business </li></ul></ul>
  14. 14. Continuous Improvement Process
  15. 15. Quality & Business Results <ul><li>Improved employee skills </li></ul><ul><li>Improved productivity </li></ul><ul><li>Improved customer satisfaction </li></ul><ul><li>(Hendricks & Singhal, 1997) study </li></ul><ul><ul><li>Growth in operating income </li></ul></ul><ul><ul><li>8% improvement in return to sales </li></ul></ul><ul><ul><li>9% improvement in return to assets </li></ul></ul><ul><ul><li>Quality Performers beat SP500 by 34% in 5 years </li></ul></ul>
  16. 16. Quality Guru: W. Edwards Deming <ul><li>Prof. of Quality Control </li></ul><ul><li>Taught QC in effort to revive world economy after WWII in many countries including Japan </li></ul><ul><li>Quality cannot be the responsibility of specialists only </li></ul><ul><li>Executives should understand quality </li></ul><ul><li>Quality defects can be our friends if used to spot and fix root causes of bad quality </li></ul><ul><li>Drive out fear: facilitate problem finding </li></ul>
  17. 17. Quality Guru: Joseph Juran <ul><li>Not an academic, many years of experience with Western Electric </li></ul><ul><li>Also taught QC after WWII in Japan </li></ul><ul><li>Quality is “fitness for use” </li></ul><ul><li>Like Deming advocated Continuous Improvement </li></ul><ul><li>Cost of Poor Quality </li></ul>
  18. 18. Quality Management Programs <ul><li>ISO 9000 </li></ul><ul><ul><li>Standardizes Quality Management Practices </li></ul></ul><ul><ul><li>Self assessment based </li></ul></ul><ul><li>Six Sigma </li></ul><ul><ul><li>Requires all critical processes to conform to 6-sigma standard (3.4 defects / million) </li></ul></ul><ul><ul><li>Pioneered by Motorola in 1980s </li></ul></ul><ul><ul><li>Results Oriented </li></ul></ul>
  19. 19. Six Sigma (Not Exactly) <ul><li>6  Defect Level : 3.4 / million </li></ul><ul><li>Probability Theory : 2 / billion </li></ul>
  20. 20. Six Sigma DMAIC approach <ul><li>Define (D) </li></ul><ul><ul><li>Identify customers and their priorities. </li></ul></ul><ul><ul><li>Identify a project suitable for Six Sigma efforts. </li></ul></ul><ul><ul><li>Identify CTQs (critical to quality characteristics). </li></ul></ul><ul><li>Measure (M) </li></ul><ul><ul><li>Determine how to measure the process and how is it performing. </li></ul></ul><ul><ul><li>Identify the key internal processes that influence CTQs. </li></ul></ul><ul><li>Analyze (A) </li></ul><ul><ul><li>Determine the most likely causes of defects. </li></ul></ul><ul><ul><li>Understand why defects are generated </li></ul></ul><ul><li>Improve (I) </li></ul><ul><ul><li>Remove causes of the defects. </li></ul></ul><ul><ul><li>Confirm the key variables and quantify CTQ effects. </li></ul></ul><ul><ul><li>Identify maximum acceptable ranges. </li></ul></ul><ul><ul><li>Modify the process to stay within the acceptable range. </li></ul></ul><ul><li>Control (C) </li></ul><ul><ul><li>Maintain the improvements. </li></ul></ul><ul><ul><li>Ensure key variables remain within ranges </li></ul></ul>
  21. 21. Six Sigma Education <ul><li>Champions </li></ul><ul><ul><li>Senior Level Managers - Rainmakers </li></ul></ul><ul><li>Master Black Belts </li></ul><ul><ul><li>Major Initiatives - Strategy - Mentoring </li></ul></ul><ul><li>Black Belts </li></ul><ul><ul><li>Lead Major Projects - Mentoring </li></ul></ul><ul><li>Green Belts </li></ul><ul><ul><li>Lead Small Projects - Support Black Belts </li></ul></ul><ul><li>Team Members </li></ul>
  22. 22. Quality Cost Classification <ul><li>Prevention Costs </li></ul><ul><li>Appraisal Costs </li></ul><ul><li>Internal-Failure costs </li></ul><ul><li>External-Failure </li></ul>Example
  23. 23. The “Seven QC Tools” <ul><li>Flowcharts </li></ul><ul><li>Control charts </li></ul><ul><li>Checksheets </li></ul><ul><li>Histograms </li></ul><ul><li>Pareto analysis </li></ul><ul><li>Cause-and-effect (fishbone) diagrams </li></ul><ul><li>Scatter diagrams </li></ul>
  24. 24. Check Sheet
  25. 25. Control Chart
  26. 26. Pareto Diagrams
  27. 27. Cause-and-effect Diagram
  28. 28. The Deming Cycle
  29. 29. Six Sigma Applications in Services <ul><li>Reducing the average and variation of days outstanding of accounts receivable </li></ul><ul><li>Closing the books faster </li></ul><ul><li>Improving the accuracy and speed of the audit process </li></ul><ul><li>Reducing variation in cash flow </li></ul><ul><li>Improving the accuracy of journal entry (most businesses have a 3–4 percent error rate) </li></ul><ul><li>Improving the accuracy and cycle time of standard financial reports </li></ul>
  30. 30. Quality Guru: Philip B. Crosby <ul><li>Learned quality at International Telephone and Telegraph (ITT) </li></ul><ul><li>Quality is free </li></ul><ul><li>Quality: conformance to requirements not elegance </li></ul><ul><li>Doing the job right the first time </li></ul><ul><li>QM target: Zero Defects </li></ul><ul><li>http://www.pages.drexel.edu/~isp22/pom300/ch15.ppt#18 </li></ul>