Busm 361

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Busm 361

• Managing Quality

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1st Operations Decision

• What level of quality do we produce?
• Determined by competitive strategy
• differentiation
• Low cost
• Response

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What is Quality?

• To meet or exceed customers expectations

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Importance of Quality

• Costs market share

• Companys reputation
• Product liability
• International implications

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150 room hotel _at_ 60 occupancy
1.5 day average stay
1 out of 7 guests have a problem
3129
40
60
Did not ask for help
Asked for help
1252
1877
30
70
No attempt to help
Attempted to help
563
1314
30
70
Resolved
Not resolved
394
920
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Conclusion

• 2209 guests with unresolved problems
• _at_ 60 ADR 1.5 day stay 90/guest
• 2209 X 90 198,810 in possible lost revenue

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Ritz-Carlton

• 275 X 2 days 550 room
• 100 X 2 days 200 food
• 50 misc.
• 800 average stay

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Lifetime value

• 18 stays / year
• 10 year loyalty
• 800 X 18 X 10 144,000

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Internal customers

• Turnover
• new hires / average work force
• 150 to 200
• Severance pay
• Unemployment insurance
• Record keeping
• Overtime

• Advertisements
• Agency fees
• Interviewing / checking
• Training
• Lost productivity
• 3,000 / hire

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Conclusion

• 300 room hotel
• 450 employees
• 675 new hires X 3,000 2 million cost
• 144,000 X 60 check ins 8,640,000 customer
  portfolio
• The cost of poor quality is VERY high!

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How to determine expectations?

• Scripting
• survey / marketing
• benchmarking

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TQM is a trendy acronym

• What does it mean?
• What is total quality mgt?

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TQM

• A management philosophy that stresses a
  commitment to have a continuing company-wide
  drive toward excellence in all aspects of
  products and services that are important to the
  customer.

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Demings Fourteen Points

• Create consistency of purpose
• Lead to promote change
• Build quality into the products
• Build long term relationships
• Continuously improve product, quality, and
  service
• Start training
• Emphasize leadership

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Demings Points - continued

• Drive out fear
• Break down barriers between departments
• Stop haranguing workers
• Support, help, improve
• Remove barriers to pride in work
• Institute a vigorous program of education and
  self-improvement
• Put everybody in the company to work on the
  transformation

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Concepts of TQM

• Continuous improvement
• Employee empowerment
• Benchmarking
• Just-in-time (JIT)
• Knowledge of tools

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Tools of TQM
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Taguchi Techniques

• Taguchi Concepts
• Quality robustness
• Quality that is statistically most likely to
  occur given uncontrollable variables.
• Robust Design not sensitive to variations.

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Taguchi Variables

• Mean Performance
• Standard Deviation Consistency
• S/N Value mean/stdev
• High S/N robust
• best combination of performance and insensitivity
  to uncontrollable variables

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Taguchi Airplanes
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Quality Loss Function

• Shows cost () of deviation from target value
• Assumptions
• Most measurable quality characteristics (e.g.,
  length, weight) have a target value
• Deviations from target value are undesirable
• Equation L D2 C
• L Loss () D Deviation C Cost

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Quality Loss Function Graph
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Target Specification Example
A study found U.S. consumers preferred Sony TVs
made in Japan to those made in the U.S. Both
factories used the same designs specifications.
The difference in quality goals made the
difference in consumer preferences.
Japanese factory (Target-oriented)
U.S. factory (Conformance-oriented)
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Pareto Analysis of Wine Glass Defects
Frequency (number)
5
16
4
3
72
Causes, by percent of total defects
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Process Chart
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Process Chart
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Cause and Effect Diagram Example
Problem
Too many defects
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Cause and Effect Diagram Example
Method
Manpower
Main Cause
Too many defects
Material
Machinery
Main Cause
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Cause and Effect Diagram Example
Method
Manpower
Drill
Over
Time
Too many defects
Wood
Steel
Lathe
Material
Machinery
Sub-Cause
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Cause and Effect Diagram Example
Method
Manpower
Tired
Drill
Over
Slow
Time
Old
Wood
Steel
Lathe
Material
Machinery
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Tools for TQM

• Taguchi technique
• Pareto charts
• Process charts
• Cause-and-effect diagrams
• Statistical process control