F O U R T H E D I T I O N

Quality Management

© The McGraw-Hill Companies, Inc., 2003

chapter 6

DAVIS

AQUILANO

CHASE

PowerPointPresentation

byCharlieCook

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–2

Chapter ObjectivesChapter ObjectivesChapter ObjectivesChapter Objectives

• Introduce those individuals, often referred to as quality gurus, who have played a significant role in the evolution of quality management, and describe their specific contributions.

• Identify the different dimensions of quality as they relate to both good and services.

• Define the various elements that comprise the cost of quality.

• Describe the more successful management quality initiatives such as total quality management (TQM) and Six Sigma.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–3

Chapter Objectives (cont’d)Chapter Objectives (cont’d)Chapter Objectives (cont’d)Chapter Objectives (cont’d)

• Present the various quality awards and recognition that promote and encourage firms to provide high quality goods and services.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–4

Managerial IssuesManagerial IssuesManagerial IssuesManagerial Issues

• Defining quality from the customer’s perspective.• Constant increases in the level of quality of today’s

goods and services.• Difficulties encountered in managing service quality.• Identifying quality dimensions that are most important

to customers.• Avoiding the costs of poor quality products and

services.• Customer loyalty that is increasingly based on quality.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–5

The Quality GurusThe Quality GurusThe Quality GurusThe Quality Gurus

• Quality Gurus–Individuals who have been identified as making

a significant contribution to improving the quality of goods and services.• Walter A. Shewhart

• W. Edwards Deming

• Joseph M. Juran

• Armand Feigenbaum

• Philip Crosby

• Genichi Taguchi

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–6

The Quality Gurus (cont’d)The Quality Gurus (cont’d)The Quality Gurus (cont’d)The Quality Gurus (cont’d)

• Walter A. Shewhart–Statistician at Bell Laboratories

• Developed statistical control process methods to distinguish between random and nonrandom variation in industrial processes to keep processes under control.

• Developed the “plan-do-check-act” (PDCA) cycle that emphasizes the need for continuous improvement.

• Strongly influenced Deming and Juran.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–7

Shewhart’s Plan-Do-Check-Act (PDCA) Shewhart’s Plan-Do-Check-Act (PDCA) CycleCycle

Shewhart’s Plan-Do-Check-Act (PDCA) Shewhart’s Plan-Do-Check-Act (PDCA) CycleCycle

Exhibit 6.2Exhibit 6.2Source: Mary Walton, Deming Management at Work (New York: Perigree Books, 1991), p. 22.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–8

The Quality Gurus (cont’d)The Quality Gurus (cont’d)The Quality Gurus (cont’d)The Quality Gurus (cont’d)

• W. Edwards Deming–Advocated Statistical Process Control (SPC)

• Methods which signal shifts in a process that will likely lead to products and/or services not meeting customer requirements.

• Emphasized an overall organizational approach to managing quality.

• Demonstrated that quality products are less costly than poor quality products.

• Identified 14 points critical for improving quality.

–The Deming Prize• Highest award for industrial excellence in Japan.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–9

Deming’s 14-Point Program for Improving Deming’s 14-Point Program for Improving QualityQuality

Deming’s 14-Point Program for Improving Deming’s 14-Point Program for Improving QualityQuality

Exhibit 6.3Exhibit 6.3Source: Mary Walton, Deming Management at Work (New York: Perigree Books, 1991), pp. 17–18.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–10

The Quality Gurus (cont’d)The Quality Gurus (cont’d)The Quality Gurus (cont’d)The Quality Gurus (cont’d)

• Joseph M. Juran–Emphasized the importance of producing quality

products through an approach focused on quality planning, control, and improvement.

–Defined product quality as “fitness for use” as viewed by the customer in:• Quality of design • Quality of conformance

• Availability • Safety • Field use

–Categorized the cost of quality as:• Cost of prevention

• Cost of detection/appraisal

• Cost of failure

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–11

The Quality Gurus (cont’d)The Quality Gurus (cont’d)The Quality Gurus (cont’d)The Quality Gurus (cont’d)

• Armand Feigenbaum–Proposed the concept of “total quality control,”

making quality everyone’s responsibility.• Stressed interdepartmental communication.

• Philip Crosby–Preached that “quality is free.”

• Genichi Taguchi–Emphasizes the minimization of variation.

• Concerned with the cost of quality to society.

• Extended Juran’s concept of external failure.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–12

Three of the Quality Gurus ComparedThree of the Quality Gurus ComparedThree of the Quality Gurus ComparedThree of the Quality Gurus Compared

Exhibit 6.1aExhibit 6.1aSource: Modified from John S. Oakland, Total Quality Management (London: Heinemann Profession Publishing Ltd., 1989), pp. 291–92.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–13

Three of the Quality Gurus Compared Three of the Quality Gurus Compared (cont’d)(cont’d)

Three of the Quality Gurus Compared Three of the Quality Gurus Compared (cont’d)(cont’d)

Exhibit 6.1bExhibit 6.1bSource: Modified from John S. Oakland, Total Quality Management (London: Heinemann Profession Publishing Ltd., 1989), pp. 291–92.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–14

Defining QualityDefining QualityDefining QualityDefining Quality

• Quality in Goods–Performance–Features–Reliability–Durability–Conformance–Serviceability–Aesthetics–Perceived quality

• Quality in Services–Tangibles–Reliability–Responsiveness–Competence–Courtesy–Credibility–Security–Access–Communication–Understanding the

customer

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–15

Additional Views of Quality in Additional Views of Quality in ServicesServices

Additional Views of Quality in Additional Views of Quality in ServicesServices

• Technical Quality versus Functional Quality–Technical quality—the core element of the good

or service.–Functional quality—customer perception of how

the good functions or the service is delivered.

• Expectations and Perceptions–Customers’ prior expectations (generalized and

specific service experiences) and perception of service performance affect their satisfaction with a service.• Satisfaction = (Perception of Performance) – (Expectation)

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–16

The Cost of QualityThe Cost of QualityThe Cost of QualityThe Cost of Quality

• Cost of Quality–Framework for identifying quality components

that are related to producing both high quality products and low quality components, with the goal of minimizing the total cost of quality.

–Costs of poor quality:• Detection/appraisal costs

• Internal failure costs

• External failure costs

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–17

Typical Quality Cost RatiosTypical Quality Cost RatiosTypical Quality Cost RatiosTypical Quality Cost Ratios

Exhibit 6.4Exhibit 6.4Source: A. V. Feigenbaum, Total Quality Control, 3rd ed. (New York: McGraw-Hill, 1983), p. 112; and Joseph M. Juran and F.M. Gryna, Quality Planning and Analysis (New York: McGraw-Hill, 1970), p. 60.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–18

Two Views of the Cost of Improved Quality Two Views of the Cost of Improved Quality Two Views of the Cost of Improved Quality Two Views of the Cost of Improved Quality

Exhibit 6.5Exhibit 6.5Source: Eric W. Skopec, Strategic Visions Inc. (used by permission).

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–19

The Cost of Quality (Juran’s Model)The Cost of Quality (Juran’s Model)The Cost of Quality (Juran’s Model)The Cost of Quality (Juran’s Model)

Cost Category

Cost of prevention Costs associated with the development of programs to prevent defectives from occurring in the first place

Cost of detection/ appraisal

Costs associated with the test and inspection of subassemblies and products after they have been made.

Cost of failure Costs associated with the failure of a defective product.

Internal failure costs—producing defective products that are identified before shipment.

External failure costs—producing defective products that are delivered to the customer.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–20

Service GuaranteesService GuaranteesService GuaranteesService Guarantees

• Effective Service Guarantees–Unconditional–Easy to understand–Meaningful–Easy and painless to invoke–Easy and quick to collect on

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–21

Organization-wide Quality InitiativesOrganization-wide Quality InitiativesOrganization-wide Quality InitiativesOrganization-wide Quality Initiatives

• Total Quality Management (TQM)–An approach for integrating quality at all levels

of an organization• Organization-wide initiative encompassing all

functional areas and levels within the organization.

• Focuses on producing high quality goods and services.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–22

Elements of TQMElements of TQMElements of TQMElements of TQM

• Leadership–Top management vision, planning and support

• Employee involvement–All employees assume responsibility for

inspecting the quality of their work.

• Product/Process Excellence–Involves product design quality and monitoring

the process for continuous improvement.• Poka-yokes are devices that prevent defects from

being produced.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–23

Elements of TQM (cont’d)Elements of TQM (cont’d)Elements of TQM (cont’d)Elements of TQM (cont’d)

• Continuous Improvement–A concept that recognizes that quality

improvement is a journey with no end and that there is a need for continually looking for new approaches for improving quality.

• Customer Focus on “Fitness for Use”–Design quality

• Specific characteristics of a product that determine its value in the marketplace.

–Conformance quality• The degree to which a product meets its design

specifications.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–24

Implementing TQMImplementing TQMImplementing TQMImplementing TQM

• Successful Implementation of TQM–Requires total integration of TQM into day-to-

day operations.

• Causes of TQM Implementation Failures–Lack of focus on strategic planning and core

competencies–Obsolete, outdated organizational cultures.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–25

Obstacles to Implementing TQMObstacles to Implementing TQMObstacles to Implementing TQMObstacles to Implementing TQM

• Lack of a company-wide definition of quality.

• Lack of a formalized strategic plan for change.

• Lack of a customer focus.

• Poor inter-organizational communication.

• Lack of real employee empowerment.

• Lack of employee trust in senior management.

• View of the quality program as a quick fix.

• Drive for short-term financial results.

• Politics and turf issues.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–26

Three Schools of Three Schools of Quality Management ProgramsQuality Management Programs

Three Schools of Three Schools of Quality Management ProgramsQuality Management Programs

Exhibit 6.6aExhibit 6.6aSource: Eric W. Skopec, Strategic Visions Inc. (used by permission).

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–27

Three Schools of Three Schools of Quality Management ProgramsQuality Management Programs

Three Schools of Three Schools of Quality Management ProgramsQuality Management Programs

Exhibit 6.6bExhibit 6.6bSource: Eric W. Skopec, Strategic Visions Inc. (used by permission).

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–28

Six SigmaSix SigmaSix SigmaSix Sigma

• Goals of Six Sigma–To reduce process variation to the point where

only 3.4 defects per million are produced by a process that involves a high volume of manufactured units or service transactions on a continuous basis.

–Provide a framework and methodologies to analyze and evaluate business processes and reduce waste.

• Successful Implementation–Training and selection of the workforce–Impressive cost savings of program

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–29

Quality Performance LevelsQuality Performance Levelsfor Various Processesfor Various Processes

Quality Performance LevelsQuality Performance Levelsfor Various Processesfor Various Processes

Exhibit 6.7Exhibit 6.7Source: Dave Harold, “Designing for Six Sigma Capability,” Control Engineering, January, 1999.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–30

Recognizing and Rewarding QualityRecognizing and Rewarding QualityRecognizing and Rewarding QualityRecognizing and Rewarding Quality

• Promotion of High Quality Goods and Services–Deming Prize (Japan)–European Quality Award (European Union)–Malcolm Baldrige National Quality Award

(MBNQA) (United States)–ISO9000 certification

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–31

Malcolm Baldrige National Quality Malcolm Baldrige National Quality AwardAward

Malcolm Baldrige National Quality Malcolm Baldrige National Quality AwardAward

• Background–Established in 1987 to recognize total quality

management in American industry.

• Purpose–Stimulate U.S. companies to improve quality and

productivity.–Establish guidelines and criteria to evaluate

quality.–Recognize those firms that improve their quality.–Provide guidance in how to achieve quality.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–32

Malcolm BaldrigeMalcolm Baldrige National Quality Award Winners National Quality Award Winners

Malcolm BaldrigeMalcolm Baldrige National Quality Award Winners National Quality Award Winners

Exhibit 6.8aExhibit 6.8aSource: National Institute of Science and Technology (NIST) website: www.quality.nist.gov

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–33

Malcolm BaldrigeMalcolm Baldrige National Quality Award Winners National Quality Award Winners

Malcolm BaldrigeMalcolm Baldrige National Quality Award Winners National Quality Award Winners

Exhibit 6.8bExhibit 6.8bSource: National Institute of Science and Technology (NIST) website: www.quality.nist.gov

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–34

The Integrated FrameworkThe Integrated Frameworkof the Baldrige Award Criteriaof the Baldrige Award CriteriaThe Integrated FrameworkThe Integrated Framework

of the Baldrige Award Criteriaof the Baldrige Award Criteria

Exhibit 6.9Exhibit 6.9Source: 1997 Criteria for Performance Excellence, U.S. Dept. of Commerce, National Institute of Standards and Technology.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–35

2001 Award Criteria2001 Award Criteria—Item Listing—Item Listing2001 Award Criteria2001 Award Criteria—Item Listing—Item Listing

Exhibit 6.10Exhibit 6.10Source: 2001 Criteria for Performance Excellence, U.S. Dept. of Commerce, National Institute of Standards and Technology.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–36

Benefits of the Baldrige Quality Benefits of the Baldrige Quality CriteriaCriteria

Benefits of the Baldrige Quality Benefits of the Baldrige Quality CriteriaCriteria

• Baldrige guidelines can be used to:–Help define and design a total quality system.–Evaluate ongoing internal relationships among

department, divisions, and functional units within an organization.

–Assess and assist outside suppliers of goods and services to a company.

–Assess customer satisfaction.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–37

ISO 9000ISO 9000ISO 9000ISO 9000

• The International Organization for Standardization (ISO)

• ISO 9000 Series of Quality Standards–An international set of standards for

documenting the processes that an organization uses to produce its goods and services.

ISO 9001:2000 Quality Management Systems: Requirements

ISO 9004:2000

Quality Management Systems: Guidelines for Performance Improvement

ISO 9000:2000 Quality Management Systems: Fundamentals and Standards

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–38

ISO 9000 (cont’d)ISO 9000 (cont’d)ISO 9000 (cont’d)ISO 9000 (cont’d)

• ISO 9000 Certification–First party certification—A firm audits itself.–Second party certification—Customers audit

their suppliers.–Third party assessment—Company is assessed

by outside registrars from ASQ’s Registration Accreditation Board (RAB).

–ISO 9000/Q90 Registration Process• Application to registrar

• Preliminary assessment

• Full audit

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–39

European Quality Award (EQA)European Quality Award (EQA)European Quality Award (EQA)European Quality Award (EQA)

• European Foundation for Quality Management (EFQM)–Stimulate and assist European organizations in

quality improvement activities.–Support managers in the adoption of TQM.

• EFQM Excellence Model–A non-prescriptive frame work based on nine

criteria that recognizes that there are many approaches to achieving sustainable excellence.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–40

Overview of the EFQM Excellence ModelOverview of the EFQM Excellence ModelOverview of the EFQM Excellence ModelOverview of the EFQM Excellence Model

Exhibit 6.11Exhibit 6.11

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–41

Recent Winners of the European Quality Recent Winners of the European Quality AwardAward

Recent Winners of the European Quality Recent Winners of the European Quality AwardAward

Exhibit 6.12Exhibit 6.12

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 6–42

The Deming PrizeThe Deming PrizeThe Deming PrizeThe Deming Prize

• Deming Prize–Initiated by Japan in 1951 to recognize the

importance of high quality products.–Name after W. Edwards Deming–Categories of the Deming Prize:

• The Deming Prize for Individuals

• The Deming Application Prize

• The Quality Control Award for Operations/ Business Units