© 2008 prentice hall, inc.6 – 1 operations management lecture 4 – managing quality powerpoint...

© 2008 Prentice Hall, Inc. 6 – 1

Operations ManagementOperations ManagementLecture 4 – Lecture 4 – Managing QualityManaging Quality

• PowerPoint presentation to accompany PowerPoint presentation to accompany Heizer/Render Heizer/Render Principles of Operations Management, 7ePrinciples of Operations Management, 7eOperations Management, 9e Operations Management, 9e • CASE MaterialCASE Material

ReferenceReference


RecapRecap

• CompetitivenessCompetitiveness

• Dimension of CompetitivenessDimension of Competitiveness

• Basic ConceptsBasic Concepts

• StrategyStrategy

• Elements of StrategyElements of Strategy

• Competitive advantageCompetitive advantage

• OM contribution to strategyOM contribution to strategy

• Operations StrategyOperations Strategy


Lecture OutlineLecture Outline Defining QualityDefining Quality

What is QualityWhat is Quality

Basic Quality functionBasic Quality function

Quality Assessment Criteria Quality Assessment Criteria

Principles dimensions of qualityPrinciples dimensions of quality

Quality and StrategyQuality and Strategy

Implications of QualityImplications of Quality

Quality Control, assurance Quality Control, assurance and Managementand Management


Outline – ContinuedOutline – Continued

Cost of QualityCost of Quality

Leaders in QualityLeaders in Quality

Ethics and Quality ManagementEthics and Quality Management

International Quality StandardsInternational Quality Standards ISO 9000ISO 9000

ISO14000ISO14000


Learning ObjectivesLearning Objectives

When you complete this chapter you When you complete this chapter you should be able to:should be able to:

Define quality and DimensionsDefine quality and Dimensions

Assessing quality-criteriaAssessing quality-criteria


Implications of cost of qualityImplications of cost of quality

Describe the ISO international Describe the ISO international quality standardsquality standards


INTRODUCTION TO INTRODUCTION TO QUALITYQUALITY

• Productivity, Cost of Operations & Productivity, Cost of Operations & Quality all contribute to ProfitabilityQuality all contribute to Profitability

• Most important determinant of a Most important determinant of a company’s long-term success or failure company’s long-term success or failure is is QUALITYQUALITY


What is Quality?What is Quality?

• ““The totality of characteristics of The totality of characteristics of an entity that bear on its ability to an entity that bear on its ability to satisfy stated & implied needs.”satisfy stated & implied needs.”

• Meeting or exceeding customer Meeting or exceeding customer satisfactionsatisfaction


Basic Quality FunctionBasic Quality Function

1. DEFECTS / REJECTS

2. COMPLAINTS

3. CONSISTENCY

4. PRECISION

5. ACCURACY

6. VARIATION


Quality Assessment CriteriaQuality Assessment Criteria

• Judgmental CriteriaJudgmental Criteria

• Product based criteriaProduct based criteria

• Manufacturing based criteriaManufacturing based criteria

• Value based criteriaValue based criteria


PRINCIPAL QUALITY PRINCIPAL QUALITY DIMENSIONSDIMENSIONS

1.1. PerformancePerformance

2.2. FeaturesFeatures

3.3. ReliabilityReliability

4.4. ConformanceConformance

5.5. DurabilityDurability

6.6. ServiceabilityServiceability

7.7. AestheticsAesthetics

8.8. Perceived qualityPerceived quality



• Performance: primary operating Performance: primary operating characteristics. Example: A car’s characteristics. Example: A car’s acceleration, braking distance, acceleration, braking distance, steering and handlingsteering and handling



• Features: the “bells and whistles” Features: the “bells and whistles” of a product. A car may have power of a product. A car may have power options, a tape or CD deck, antilock options, a tape or CD deck, antilock brakes, and reclining seatsbrakes, and reclining seats



• Reliability: the probability of a Reliability: the probability of a product’s consistent performance. product’s consistent performance. A car’s ability to start on cold days A car’s ability to start on cold days and frequency of failures are and frequency of failures are reliability factorsreliability factors



• Conformance: the degree to which Conformance: the degree to which physical and performance physical and performance characteristics of a product match characteristics of a product match pre-established standards. pre-established standards.

• car’s fit/finish, freedom from noises car’s fit/finish, freedom from noises can reflect this. can reflect this.



• Durability: the amount of use one Durability: the amount of use one gets from a product before it gets from a product before it physically deteriorates or until physically deteriorates or until replacement is preferable. replacement is preferable.

• For car - corrosion resistance & For car - corrosion resistance & long wear of upholstery fabriclong wear of upholstery fabric



• Serviceability:Serviceability:

• speed, courtesy, competence of speed, courtesy, competence of repair work. repair work.

• auto owner -access to spare parts.auto owner -access to spare parts.



• Aesthetics:Aesthetics:

• how a product looks, feels, how a product looks, feels, sounds, tastes, or smells. sounds, tastes, or smells.

• car’s color, instrument panel design car’s color, instrument panel design and “feel of road” –and “feel of road” –

• make aesthetically pleasingmake aesthetically pleasing



• Perceived quality:Perceived quality:

• Subjective assessment of quality Subjective assessment of quality resulting from image, advertising, resulting from image, advertising, or brand names. or brand names.

• car, - shaped by magazine reviews-car, - shaped by magazine reviews-manufacturers’ brochuresmanufacturers’ brochures


Quality and StrategyQuality and Strategy

Managing quality supports Managing quality supports differentiation, low cost, and differentiation, low cost, and response strategiesresponse strategies

Quality helps firms increase sales Quality helps firms increase sales and reduce costsand reduce costs

Building a quality organization is Building a quality organization is a demanding taska demanding task


Two Ways Quality Two Ways Quality Improves ProfitabilityImproves Profitability

Improved Improved QualityQuality

Increased Increased ProfitsProfits

Increased productivity

Lower rework and scrap costs

Lower warranty costs

Reduced Costs via

Improved response

Flexible pricing

Improved reputation

Sales Gains via

Figure 6.1Figure 6.1



1.1. Company reputationCompany reputation Perception of new productsPerception of new products

Improved productivity and profitsImproved productivity and profits

Employment practicesEmployment practices

Supplier relationsSupplier relations

2.2. Product liabilityProduct liability Reduce riskReduce risk

3.3. Global implicationsGlobal implications Improved ability to competeImproved ability to compete


Quality ControlQuality Control

• Quality Control include efforts to ensure Quality Control include efforts to ensure quality through inspection by quality through inspection by acceptance or rejectionacceptance or rejection

• Review quality of all factors involved in Review quality of all factors involved in productionproduction


Quality AssuranceQuality Assurance

““Quality assurance includes “all planned Quality assurance includes “all planned & systematic activities implemented within & systematic activities implemented within the quality system, & demonstrated as the quality system, & demonstrated as needed, to provide adequate confidence needed, to provide adequate confidence that an entity will fulfill requirements for that an entity will fulfill requirements for quality”.quality”.

Confidence level of Operations Manager Confidence level of Operations Manager that quality products are produced. that quality products are produced.


Quality ManagementQuality Management

• All activities of the overall management All activities of the overall management function that determine the quality policy, function that determine the quality policy, objectives and responsibilities and objectives and responsibilities and implement planning, quality control, implement planning, quality control, quality assurance and quality quality assurance and quality improvement within the quality system” improvement within the quality system” (ISO 840)(ISO 840)


What is Cost of What is Cost of Quality??????Quality??????

““Quality is measured by the cost of Quality is measured by the cost of quality which is the expense of of non quality which is the expense of of non

conformance– the cost of conformance– the cost of

doing things wrong.doing things wrong.””

VsVs


These Two Main Areas Can Be Split Further As These Two Main Areas Can Be Split Further As Shown Below: Shown Below:


four segments of quality costs: four segments of quality costs:

A. A. PREVENTIONPREVENTION. covers avoiding defects planning, . covers avoiding defects planning, Quality training, Quality circles, training, preventative Quality training, Quality circles, training, preventative maintenance & evaluation. maintenance & evaluation.

B. B. APPRAISALAPPRAISAL. area covers finding defects by . area covers finding defects by inspection, audit, test & measurement. inspection, audit, test & measurement.

C. C. INTERNAL FAILUREINTERNAL FAILURE. Cost incurred prior to the . Cost incurred prior to the shipment of the product or the delivery of the service. shipment of the product or the delivery of the service. These costs are associated with defects that are found These costs are associated with defects that are found prior to customer delivery. covers costs borne by prior to customer delivery. covers costs borne by organization itself such as scrap, rework, redesign,. organization itself such as scrap, rework, redesign,.

D. D. EXTERNAL FAILUREEXTERNAL FAILURE. These are the costs of . These are the costs of discovered defects after product shipment or service discovered defects after product shipment or service delivery. covers costs borne by customer such as delivery. covers costs borne by customer such as warranty, administrative cost in dealing with failure & warranty, administrative cost in dealing with failure & loss of goodwill.loss of goodwill.


Cost of QualityCost of Quality

• Prevention costsPrevention costs– build it right the first timebuild it right the first time

• Appraisal costsAppraisal costs– inspection and testinginspection and testing

• Internal failure costsInternal failure costs– scrap and reworkscrap and rework

• External failure costsExternal failure costs– warranty claims, recalls, lost businesswarranty claims, recalls, lost business


Total cost of qualityTotal cost of quality

Total Quality cost, is a combination of Total Quality cost, is a combination of prevention, appraisal & failureprevention, appraisal & failure. Reducing . Reducing any of these reduces total. key to minimum any of these reduces total. key to minimum cost, is striking correct balance b/w three. cost, is striking correct balance b/w three.

• Clearly Clearly prevention reduces both appraisal prevention reduces both appraisal and failure costsand failure costs, -eventually cost of , -eventually cost of prevention itself starts to increase total cost prevention itself starts to increase total cost & so must be controlled & set at an & so must be controlled & set at an effective level. effective level.


$$Most Most costlycostly

The customer The customer finds defects finds defects in delivered in delivered parts/ servicesparts/ services

$$LessLess costlycostly

The manufacturerThe manufacturerOr service org. Or service org. Finds & corrects Finds & corrects defects internallydefects internally

$$Least Least costlycostly

The company’s quality The company’s quality management system ismanagement system is designated, planned, designated, planned, & organized for& organized for defect prevention &defect prevention & continuous qualitycontinuous quality improvement. improvement.

COMPARATIVE COST OF QUALITYCOMPARATIVE COST OF QUALITY


A Manager Who Fails To Provide A Manager Who Fails To Provide Resources And Time For Resources And Time For

Prevention Activities Is Practicing Prevention Activities Is Practicing False EconomyFalse Economy

Concentrate on Prevention, Not CorrectionConcentrate on Prevention, Not Correction

Prevention has more leverage when improving quality

Prevention

Correction

Quality


Leaders in QualityLeaders in Quality

W. Edwards DemingW. Edwards Deming 14 Points for 14 Points for ManagementManagement

Joseph M. JuranJoseph M. Juran Top management Top management commitment, commitment, fitness for usefitness for use

Armand FeigenbaumArmand Feigenbaum Total Quality Total Quality ControlControl

Philip B. CrosbyPhilip B. Crosby zero defectszero defects


Ethics and Quality Ethics and Quality ManagementManagement

Operations managers must deliver Operations managers must deliver healthy, safe, quality products and healthy, safe, quality products and servicesservices

Poor quality risks injuries, lawsuits, Poor quality risks injuries, lawsuits, recalls, and regulationrecalls, and regulation

Organizations are judged by how Organizations are judged by how they respond to problemsthey respond to problems

All stakeholders must be consideredAll stakeholders must be considered


International Quality International Quality StandardsStandards

ISO 9000 series ISO 9000 series Common quality standards for products Common quality standards for products

2000 update places greater emphasis on 2000 update places greater emphasis on leadership and customer satisfactionleadership and customer satisfaction

ISO 14000 seriesISO 14000 series


ISO 14000ISO 14000Environmental StandardEnvironmental Standard

Core Elements:Core Elements:

Environmental managementEnvironmental management

AuditingAuditing

Minimizing how their operations Minimizing how their operations negatively effect the environmentnegatively effect the environment


Forthcoming lecture- Managing Quality (TQM, Deming 14 points, Quality Tools, Quality in Service)

© 2008 prentice hall, inc.6 – 1 operations management lecture 4 – managing quality powerpoint...

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