BUSNEMBA 653 Operations Management

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BUSN/EMBA 653 Operations Management

• Week 3 -- Total Quality

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Lesson Objectives

• Apply Scriptural wisdom to organizational
  management issues.
• Explain how to evaluate quality in both goods and
  services and develop procedures and processes to
  improve or maintain high quality.
• Define the various elements that comprise the
  costs of quality.

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The Quality Movement

• Process control charts -- 1920s
• Statistics to measure quality of wartime
  production
• Post-WW II in Japan
• If Japan can, why cant we? NBC documentary
• U.S. fighting back -- Taurus versus Accord

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So, why the change?

• Korean workers work 56 hours a week for an
  average 1.75 an hour and produce higher quality
  goods at lower prices. They can take away
  business from U.S. firms, in the United States
  and abroad, and eliminate U.S. jobs and companies
  in the process. There is nothing that clears the
  mind as quickly as fear. Schein (p. 282)

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QC versus Total Quality

• Defensive function
• Emphasis on QC
• The business of specialists
• Reliance on inspection
• Rework or scrap
• Believed that higher quality must be more costly

• Competitive weapon
• Emphasis on prevention
• Everybodys business
• Quality included in all company processes
• Quality, not only saves money, but increases
  market share

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New Quality Dimensions

• Recognition that quality can be defined in many
  ways and that companies can use quality as a
  competitive advantage.
• The focus shifts from inside the business to
  listening to, understanding, and pleasing the
  customer outside.

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Total Quality Management

• A program to focus all organizational activities
  on enhancing quality for customers by redirecting
  the corporate culture and implementing management
  and statistical tools.

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Key Concepts

• Customer satisfaction
• The need for continuous improvement
• The cost of quality
• Quality as a management process
• Instilling a quality culture
• Managing total quality

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Customer Satisfaction

• Customer satisfaction begins with a clear
  identification of constituency and with the
  desire to understand and speak the customers
  language.
• Specifications requirements expectations
• Customer expectations are met by doing the right
  things the right way the first time and 100
  percent of the time at a cost that represents
  value to the customer.

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The Need for Continuous Improvement

• Quality is a process not a program
• No error is too small to ignore
• Defects measured in parts per
• 10,000 100,000 1,000,000
• Constant change is challenging, requires
  calculated risk, no status quo

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The Cost of Quality

• The cost of making mistakes duplication missed,
  late, and wrong delivery scrap and repairs.
• The cost of inspection to locate errors
• The cost of preventing errors creating error
  free designs, training programs.
• Estimated at 20-30 percent of sales.
• Some include inventories as quality costs.

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Quality as a Management System

• For some companies, quality has been integrated
  into all management systems with performance
  indicators covering all functions and results.
  The principal goal of quality improvement is the
  improvement of the organization. The quality
  management system is the key to long-term
  survival and profitability.

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Instilling a Quality Culture

• Ideally, the goals of the quality effort and the
  supporting practices become the daily norm and
  are embedded in the line organization.
• Quality is everyones business.
• Empowerment, the team is the organization of
  choice.
• A culture of trust and courtesy.

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Managing Total Quality

• Variety of quality implementations
• One executive versus a team of 120 (Westinghouse)
• Diffusion is varied.
• Dedication of senior management beyond public
  announcements.
• Leadership fashions the environment for change.

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TQM Organizational Structure

Operating Employees
Supervisors
Direction of Support
Middle Managers
Top Managers
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Process Management

• Focus is on the process, not the specific product
  or service.
• Characterized by ownership and accountability,
  measurement and objectives and informed
  employees.
• Designated process owners

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The Benefits of TQM

• Motorola is now approaching its goal of 60
  defects or less per 1 billion units of its
  products.
• In ten years, HP went from 4 defects per 1000
  soldered computer components to 2 per million
  soldiered components.
• Xerox, HP and Stanley Tools have targeted a new
  goal of no defects in design, manufacturing or
  delivery.

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Standards of Quality

• Formerly managers determined levels of quality
• Increased awareness of quality has inspired
• ISO 9000 standards internationally established
  set of standards.
• Malcolm Baldrige National Quality Award