6 - 1. 6 - 2© 2011 pearson education, inc. publishing as prentice hall the flow of activities...

6 - 2© 2011 Pearson Education, Inc. publishing as Prentice Hall

The Flow of ActivitiesThe Flow of Activities

Organizational PracticesLeadership, Mission statement, Effective operating procedures, Staff support, TrainingYields: What is important and what is to be

accomplished

Quality PrinciplesCustomer focus, Continuous improvement, Benchmarking, Just-in-time, Tools of TQMYields: How to do what is important and to be

accomplished

Employee FulfillmentEmpowerment, Organizational commitmentYields: Employee attitudes that can accomplish

what is importantCustomer SatisfactionWinning orders, Repeat customersYields: An effective organization with

a competitive advantage

Figure 6.2


Service Industry InspectionService Industry Inspection

Organization What is Inspected Standard

Jones Law Office Receptionist performance

Billing

Attorney

Is phone answered by the second ring

Accurate, timely, and correct format

Promptness in returning calls

Table 6.4




Hard Rock Hotel Reception desk

Doorman

Room

Minibar

Use customer’s name

Greet guest in less than 30 seconds

All lights working, spotless bathroom

Restocked and charges accurately posted to bill

Table 6.4




Arnold Palmer Hospital

Billing

Pharmacy

Lab

Nurses

Admissions

Accurate, timely, and correct format

Prescription accuracy, inventory accuracy

Audit for lab-test accuracy

Charts immediately updated

Data entered correctly and completely

Table 6.4




Olive Garden Restaurant

Busboy

Busboy

Waiter

Serves water and bread within 1 minute

Clears all entrée items and crumbs prior to dessert

Knows and suggest specials, desserts

Table 6.4




Nordstrom Department Store

Display areas

Stockrooms

Salesclerks

Attractive, well-organized, stocked, good lighting

Rotation of goods, organized, clean

Neat, courteous, very knowledgeable

Table 6.4


ServiceServiceSpecificationsSpecifications

at UPSat UPS


Determinants of Service Determinants of Service QualityQuality

Reliability Consistency of performance and dependability

Responsiveness Willingness or readiness of employees

Competence Required skills and knowledge

Access Approachability and ease of contact

Courtesy Politeness, respect, consideration, friendliness

Communication Keeping customers informed

Credibility Trustworthiness, believability, honesty

Security Freedom from danger, risk, or doubt

Understanding/ knowing the customer Understand the customer’s needs

Tangibles Physical evidence of the service

Table 6.5


Service Recovery StrategyService Recovery Strategy

Managers should have a plan for when services fail

Marriott’s LEARN routine Listen

Empathize

Apologize

React

Notify

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 11

Chapter 14: Improving Service Quality and Productivity


Questions When Developing Strategies to Improve Service Productivity

How to transform inputs into outputs efficiently? Will improving productivity hurt quality? Will improving quality hurt productivity? Are employees or technology the key to productivity? Can customers contribute to higher productivity?


Long Waiting Times May Indicate Need for Service Process Redesign (Fig 14.8)

3-15Copyright 2009, John Wiley & Sons, Inc.Copyright 2009, John Wiley & Sons, Inc.

Total Quality ManagementTotal Quality Management

Commitment to quality throughout organizationCommitment to quality throughout organization

Principles of TQMPrinciples of TQM Customer-orientedCustomer-oriented LeadershipLeadership Strategic planningStrategic planning Employee responsibilityEmployee responsibility Continuous improvementContinuous improvement CooperationCooperation Statistical methodsStatistical methods Training and educationTraining and education


Cost of QualityCost of Quality

Cost of Achieving Good QualityCost of Achieving Good Quality Prevention costsPrevention costs

costs incurred during product designcosts incurred during product design Appraisal costsAppraisal costs

costs of measuring, testing, and analyzingcosts of measuring, testing, and analyzing Cost of Poor QualityCost of Poor Quality

Internal failure costsInternal failure costs include scrap, rework, process failure, downtime, include scrap, rework, process failure, downtime,

and price reductionsand price reductions External failure costsExternal failure costs

include complaints, returns, warranty claims, include complaints, returns, warranty claims, liability, and lost salesliability, and lost sales


Prevention CostsPrevention Costs

Quality planning costsQuality planning costs costs of developing and costs of developing and

implementing quality implementing quality management programmanagement program

Product-design costsProduct-design costs costs of designing costs of designing

products with quality products with quality characteristicscharacteristics

Process costsProcess costs costs expended to make costs expended to make

sure productive process sure productive process conforms to quality conforms to quality specificationsspecifications

Training costsTraining costs costs of developing and costs of developing and

putting on quality training putting on quality training programs for employees programs for employees and managementand management

Information costsInformation costs costs of acquiring and costs of acquiring and

maintaining data related maintaining data related to quality, and to quality, and development of reports on development of reports on quality performancequality performance


Appraisal CostsAppraisal Costs

Inspection and testingInspection and testing costs of testing and inspecting materials, parts, and costs of testing and inspecting materials, parts, and

product at various stages and at the end of a product at various stages and at the end of a processprocess

Test equipment costsTest equipment costs costs of maintaining equipment used in testing costs of maintaining equipment used in testing

quality characteristics of productsquality characteristics of products Operator costsOperator costs

costs of time spent by operators to gar data for costs of time spent by operators to gar data for testing product quality, to make equipment testing product quality, to make equipment adjustments to maintain quality, and to stop work to adjustments to maintain quality, and to stop work to assess qualityassess quality


Internal Failure CostsInternal Failure Costs

Scrap costsScrap costs costs of poor-quality costs of poor-quality

products that must be products that must be discarded, including labor, discarded, including labor, material, and indirect costsmaterial, and indirect costs

Rework costsRework costs costs of fixing defective costs of fixing defective

products to conform to products to conform to quality specificationsquality specifications

Process failure costsProcess failure costs costs of determining why costs of determining why

production process is production process is producing poor-quality producing poor-quality productsproducts

Process downtime costsProcess downtime costs costs of shutting down costs of shutting down

productive process to fix productive process to fix problemproblem

Price-downgrading costsPrice-downgrading costs costs of discounting poor-costs of discounting poor-

quality products—that is, quality products—that is, selling products as selling products as “seconds”“seconds”


External Failure CostsExternal Failure Costs

Customer complaint costsCustomer complaint costs costs of investigating and costs of investigating and

satisfactorily responding to a satisfactorily responding to a customer complaint resulting customer complaint resulting from a poor-quality productfrom a poor-quality product

Product return costsProduct return costs costs of handling and replacing costs of handling and replacing

poor-quality products returned poor-quality products returned by customerby customer

Warranty claims costsWarranty claims costs costs of complying with costs of complying with

product warrantiesproduct warranties

Product liability costsProduct liability costs litigation costs litigation costs

resulting from product resulting from product liability and customer liability and customer injuryinjury

Lost sales costsLost sales costs costs incurred costs incurred

because customers because customers are dissatisfied with are dissatisfied with poor quality products poor quality products and do not make and do not make additional purchasesadditional purchases

Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin22

16.1 Managing for Productivity

WHAT IS PRODUCTIVITY?

Productivity is defined as outputs divided by inputs

where: outputs are the goods and services produced, and inputs are labor, capital, materials, and energyProductivity is important because it determines whether a company will make a profit and affects a country’s standard of livingMaintaining productivity depends on control


16.1 Managing for Productivity

Figure 16.1: Managing for Productivity and Results


16.2 Control: When Managers Monitor Performance

WHY IS CONTROL IMPORTANT?

Control is making something happen the way it was planned to happen, while controlling is monitoring performance, comparing it with goals, and taking corrective action as needed Recall that:-planning is setting goals and deciding how to achieve them-organizing is arranging tasks, people, and other resources to accomplish the work-leading is motivating people to work hard to achieve the organization’s goals-controlling is making sure performance meets objectives



Figure 16.2: Controlling for Productivity



There are six reasons why control is needed:1. To adapt to change & uncertainty - organizations need to be able to deal with change and uncertainty in the environment2. To discover irregularities and errors - without checks and balances, companies might not survive3. To reduce costs, increase productivity, or add value - control systems can reduce costs, increase output, and add value to a product



4. To detect opportunities - controls can help firms identify opportunities that might otherwise go unnoticed5. To deal with complexity - controls help firms deal with the complexities of multiple product lines, customer bases, and so on6. To decentralize decision making & facilitate teamwork - controls allow top managers to decentralize control to lower levels and encourage teamwork



There are four steps in the control process:

1. Establish Standards The desired performance level for a given goal is a control standard, or performance standardStandards can be broad or narrow

2. Measure PerformancePerformance is measured using three sources: written reports, oral reports, and personal observation



3. Compare Performance To StandardsMeasured performance is compared to established standardsThe amount of deviation acceptable depends on the predetermined range of variationSome firms follow management by exception where managers are informed of a situation only if data show a significant deviation from standards 4. Take Corrective Action, If NecessaryFirms can make no changes to the current situation, recognize and reinforce positive performance, or take action to correct negative performance



Figure 16.4: Steps in the Control Process


16.6 Total Quality Management

HOW CAN QUALITY BE IMPROVED?

Total quality management (TQM) is a comprehensive approach, led by top manager and supported throughout the organization, dedicated to continuous quality improvement, training, and customer satisfaction The two core principles of TQM are people orientation (everyone involved in the organization should focus on delivering value to customers), and improvement orientation (everyone should work on continuously improving work processes) There are several techniques for improving quality including employee involvement, benchmarking, outsourcing, reduced cycle time, and statistical process control


16.7 Managing Control Effectively

HOW CAN CONTROL BE MANAGED SUCCESSFULLY?

Successful control systems are:

1. Strategic & results oriented – they support strategic plans and focus on activities that will make a real difference to the firm

2. Timely, accurate, & objective

3. Realistic, positive, & understandable & encourage self-control

4. Flexible - so that they can be modified as needed

Total Quality ManagementTotal Quality Management

CII Institute of Logistics Total Quality Management

3-34

Meaning of Quality:Meaning of Quality:Consumer’s PerspectiveConsumer’s Perspective

Fitness for use how well product or

service does what it is supposed to

Quality of design designing quality

characteristics into a product or service

A Mercedes and a Ford are equally “fit for use,” but with different design dimensions


Dimensions of Quality:Dimensions of Quality:Manufactured ProductsManufactured Products

Performance basic operating characteristics of a product; how

well a car is handled or its gas mileage Features

“extra” items added to basic features, such as a stereo CD or a leather interior in a car

Reliability probability that a product will operate properly

within an expected time frame; that is, a TV will work without repair for about seven years


Conformance degree to which a product meets pre–established

standards Durability

how long product lasts before replacement Serviceability

ease of getting repairs, speed of repairs, courtesy and competence of repair person

Dimensions of Quality:Dimensions of Quality:Manufactured Products (cont.)Manufactured Products (cont.)


Aesthetics how a product looks, feels, sounds, smells, or

tastes Safety

assurance that customer will not suffer injury or harm from a product; an especially important consideration for automobiles

Perceptions subjective perceptions based on brand name,

advertising, and the like

Dimensions of Quality:Dimensions of Quality:Manufactured Products (cont.)Manufactured Products (cont.)


Dimensions of Quality:Dimensions of Quality:ServiceService

Time and Timeliness How long must a customer wait for service,

and is it completed on time? Is an overnight package delivered overnight?

Completeness: Is everything customer asked for provided? Is a mail order from a catalogue company

complete when delivered?


Dimensions of Quality:Dimensions of Quality:Service (cont.)Service (cont.)

Courtesy: How are customers treated by employees? Are catalogue phone operators nice and are

their voices pleasant? Consistency

Is the same level of service provided to each customer each time?

Is your newspaper delivered on time every morning?


Accessibility and convenience How easy is it to obtain service? Does a service representative answer you calls quickly?

Accuracy Is the service performed right every time? Is your bank or credit card statement correct every month?

Responsiveness How well does the company react to unusual situations? How well is a telephone operator able to respond to a customer’s

questions?

Dimensions of Quality:Dimensions of Quality:Service (cont.)Service (cont.)


Meaning of Quality:Meaning of Quality:Producer’s PerspectiveProducer’s Perspective

Quality of Conformance Making sure a product or service is

produced according to design if new tires do not conform to

specifications, they wobble if a hotel room is not clean when a

guest checks in, the hotel is not functioning according to specifications of its design


Another way to put itAnother way to put itAnother way to put itAnother way to put it At it’s simplest, TQM is all managers

leading and facilitating all contributors in everyone’s two main objectives:

(1) total client satisfaction through quality products and services; and

(2) continuous improvements to processes, systems, people, suppliers, processes, systems, people, suppliers, partners, products, and services.partners, products, and services.


Quality ThroughoutQuality Throughout “A Customer’s impression of quality begins

with the initial contact with the company and continues through the life of the product.”• Customers look to the total package - sales,

service during the sale, packaging, deliver, and service after the sale.

• Quality extends to how the receptionist answers the phone, how managers treat subordinates, how courteous sales and repair people are, and how the product is serviced after the sale.

“All departments of the company must strive to improve the quality of their operations.”


Value-based ApproachValue-based Approach Manufacturing

Dimensions• Performance• Features• Reliability• Conformance• Durability• Serviceability• Aesthetics• Perceived quality

Service Dimensions• Reliability• Responsiveness• Assurance• Empathy• Tangibles


Quality GurusQuality Gurus Walter Shewart

• In 1920s, developed control charts• Introduced the term “quality assurance”

W. Edwards Deming • Developed courses during World War II to teach

statistical quality-control techniques to engineers and executives of companies that were military suppliers

• After the war, began teaching statistical quality control to Japanese companies

Joseph M. Juran• Followed Deming to Japan in 1954• Focused on strategic quality planning


Armand V. Feigenbaum In 1951, introduced concepts of total quality

control and continuous quality improvement Philip Crosby

In 1979, emphasized that costs of poor quality far outweigh the cost of preventing poor quality

In 1984, defined absolutes of quality management—conformance to requirements, prevention, and “zero defects”

Kaoru Ishikawa Promoted use of quality circles Developed “fishbone” diagram Emphasized importance of internal customer

Quality Gurus (cont.)Quality Gurus (cont.)


Strategic Implications of Strategic Implications of TQMTQM

Strong leadership Goals, vision, or mission Operational plans and policies Mechanism for feedback


© 2007 Pearson Education

How Process Performance and Quality fits the Operations Management

Philosophy

Operations As a Competitive Weapon

Operations StrategyProject Management Process Strategy

Process AnalysisProcess Performance and Quality

Constraint ManagementProcess LayoutLean Systems

Supply Chain StrategyLocation

Inventory ManagementForecasting

Sales and Operations PlanningResource Planning

Scheduling


Quality and Productivity

Improved:•Performance•Reliability•Features•etc.

Improved reputation for quality

Increased Market share

Experience-based scale economies

Higher PricesIncreased Profits

I. Market Gains


Quality and Productivity

Improved reliability or conformance

Increasedproductivity Lower

manufacturing costs

Lower service costs

Lower warranty and product liability costs

Increased Profits

II. Cost Savings

Lower rework and scrap costs


Costs of Poor Process Performance

Defects: Any instance when a process fails to satisfy its customer.

Prevention costs are associated with preventing defects before they happen.

Appraisal costs are incurred when the firm assesses the performance level of its processes.

Internal failure costs result from defects that are discovered during production of services or products.

External failure costs arise when a defect is discovered after the customer receives the service or product.


Hidden costs of poor Quality

The 9 Dimensions of Quality

Performance Features Conformance ----------------------------- Reliability Durability Service ----------------------------- Response- of Dealer/ Mfgr. to

Customer Aesthetics – of product Reputation- of Mfgr./Dealer

Service Features

Performance

Cost

Effects of poor Quality

Low customer satisfaction Low productivity, sales & profit Low morale of workforce More re-work, material & labour costs High inspection costs Delay in shipping High repair costs Higher inventory costs Greater waste of material

Five ways to Improve a Process

Reduce resources Reduce errors Meet or exceed expectations of

internal/external customers Make the process safer Make the process more satisfying to the

person doing it.

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