Quality Management

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Quality Management

• Chapter 15
• Operations Management Goods, Services, and
  Value Chains, by D. A. Collier and J. R. Evans

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• Although Hyundai Motor Co. dominated the Korean
  car market, it had a poor reputation for quality
  overseas, with doors that didnt fit properly,
  frames that rattled, and engines that delivered
  poor acceleration. In addition, the company was
  losing money.
• When Chung Mong Koo became CEO in 1999, he
  visited Hyundais 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. He didnt like what
  he saw loose wires, tangled hoses, bolts painted
  four different colorsthe kind of sloppiness that
  would never be seen in a Japanese car.
• 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. Youve got to get back
  to basics. The only way we can survive is to
  raise our quality to Toyotas level he fumed.
• 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.

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Definitions

• Quality Management systematic policies, methods,
  and procedures used to ensure that goods and
  services are produced with appropriate levels of
  quality meeting customer needs
• Quality Fitness for use - the ability of a good
  or service to meet customer needs

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History of Quality Management

• Surely quality was always a priority in
  production and trade
• 1450 B.C. Egyptians used measuring devices to
  ensure high quality during pyramid construction
• Early 20th Century
• Mass Production creates the need for quality
  inspection of batches
• Interchangeable parts
• Specialization in Production
• Problem Organization of production required that
  workers deal with quality and managers with
  supervision

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History of Quality Management

• 1940-50
• During World War II the need for production
  efficiency required the dissemination of
  statistical quality control techniques
• Gradually quality control migrated to
  manufacturing industries
• Two US consultants, J. Juran and W. Edwards
  Deming, introduce statistical quality control to
  Japanese (importantly their target audience was
  executives)
• 1970-90
• Japanese electronics and automobiles have world
  class quality and make fast inroads to US market.
• Total Quality Management (TQM)

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History of Quality Management

• 1990-2000
• Quality Costing
• Market-Driven Strategy
• 2000-present
• Quality an important priority among US car
  manufacturers and in US Health Care Industry
• Six-sigma

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Understanding Quality

• Multiple Definitions for Quality
• perfection
• consistency
• eliminating waste
• speed of delivery
• compliance with policies and procedures
• providing a good, usable product
• doing it right the first time
• delighting or pleasing customers
• total customer service and satisfaction

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GAP Model
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Quality in Operations

• Conformance Quality
• Meet specifications
• Quality Control
• Service Quality
• External Focus Customer Expectations
• Internal Focus Delivery Process Criteria
• TQM Principles
• Focus on customers / stakeholders
• Process focus continuous improvement / learning
• Teamwork Quality is everyones business

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Continuous Improvement Process
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Quality Business Results

• Improved employee skills
• Improved productivity
• Improved customer satisfaction
• (Hendricks Singhal, 1997) study
• Growth in operating income
• 8 improvement in return to sales
• 9 improvement in return to assets
• Quality Performers beat SP500 by 34 in 5 years

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Quality Guru W. Edwards Deming

• Prof. of Quality Control
• Taught QC in effort to revive world economy after
  WWII in many countries including Japan
• Quality cannot be the responsibility of
  specialists only
• Executives should understand quality
• Quality defects can be our friends if used to
  spot and fix root causes of bad quality
• Drive out fear facilitate problem finding

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Quality GuruJoseph Juran

• Not an academic, many years of experience with
  Western Electric
• Also taught QC after WWII in Japan
• Quality is fitness for use
• Like Deming advocated Continuous Improvement
• Cost of Poor Quality

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Quality Management Programs

• ISO 9000
• Standardizes Quality Management Practices
• Self assessment based
• Six Sigma
• Requires all critical processes to conform to
  6-sigma standard (3.4 defects / million)
• Pioneered by Motorola in 1980s
• Results Oriented

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Six Sigma (Not Exactly)

• 6? Defect Level 3.4 / million
• Probability Theory 2 / billion

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Six SigmaDMAIC approach

• Define (D)
• Identify customers and their priorities.
• Identify a project suitable for Six Sigma
  efforts.
• Identify CTQs (critical to quality
  characteristics).
• Measure (M)
• Determine how to measure the process and how is
  it performing.
• Identify the key internal processes that
  influence CTQs.
• Analyze (A)
• Determine the most likely causes of defects.
• Understand why defects are generated
• Improve (I)
• Remove causes of the defects.
• Confirm the key variables and quantify CTQ
  effects.
• Identify maximum acceptable ranges.
• Modify the process to stay within the acceptable
  range.
• Control (C)
• Maintain the improvements.
• Ensure key variables remain within ranges

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Six Sigma Education

• Champions
• Senior Level Managers - Rainmakers
• Master Black Belts
• Major Initiatives - Strategy - Mentoring
• Black Belts
• Lead Major Projects - Mentoring
• Green Belts
• Lead Small Projects - Support Black Belts
• Team Members

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Quality Cost Classification

• Prevention Costs
• Appraisal Costs
• Internal-Failure costs
• External-Failure

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The Seven QC Tools

• Flowcharts
• Control charts
• Checksheets
• Histograms
• Pareto analysis
• Cause-and-effect (fishbone) diagrams
• Scatter diagrams

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Check Sheet
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Control Chart
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Pareto Diagrams
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Cause-and-effect Diagram
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The Deming Cycle
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Six Sigma Applications in Services

• Reducing the average and variation of days
  outstanding of accounts receivable
• Closing the books faster
• Improving the accuracy and speed of the audit
  process
• Reducing variation in cash flow
• Improving the accuracy of journal entry (most
  businesses have a 34 percent error rate)
• Improving the accuracy and cycle time of standard
  financial reports

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Quality GuruPhilip B. Crosby

• Learned quality at International Telephone and
  Telegraph (ITT)
• Quality is free
• Quality conformance to requirements not elegance
• Doing the job right the first time
• QM target Zero Defects