Lecture 6 MBF2213 Operations Management Prepared by Dr Khairul Anuar L6: Quality Management
Capacity planning and control Operations strategy Design Improvement Quality management Planning and control The market requires consistent quality of products and services The operation supplies the consistent delivery of products and services at specification or above 2
Key operations questions Quality planning and control Slack et al. identify the following key questions: What is quality and why is it so important? How can quality problems be diagnosed? What steps lead towards conformance to specification? What is Total Quality Management (TQM)? 3
Introduction to Quality Management During the past twenty years, there has been a revolution in quality. Improvements have occurred not only in product quality, but also in leadership quality and project management quality. The changing views of quality appear in Table 20 1. The push for higher levels of quality appears to be customer driven. Customers are now demanding: Higher performance requirements Faster product development Higher technology levels Materials and processes pushed to the limit Lower contractor profit margins Fewer defects/rejects 4
Introduction to Quality Management 5
Introduction to Quality Management One of the critical factors that can affect quality is market expectations. The variables that affect market expectations include: Salability: the balance between quality and cost Produceability: the ability to produce the product with available technology and workers, and at an acceptable cost Social acceptability: the degree of conflict between the product or process and the values of society (i.e., safety, environment) Operability: the degree to which a product can be operated safely Availability: the probability that the product, when used under given conditions, will perform satisfactorily when called upon Reliability: the probability of the product performing without failure under given conditions and for a set period of time Maintainability: the ability of the product to be retained in or restored to a performance level when prescribed maintenance is performed 6
Definition of Quality Mature organizations readily admit that they cannot accurately define quality. The reason is that quality is defined by the customer. The Kodak definition of quality is those products and services that are perceived to meet or exceed the needs and expectations of the customer at a cost that represents outstanding value. The ISO 9000 definition is the totality of feature and characteristics of a product or service that bears on its ability to satisfy stated or implied needs. 7
Definition of Quality Terms such as fitness for use, customer satisfaction, and zero defects are goals rather than definitions. Most organizations view quality more as a process than a product. To be more specific, it is a continuously improving process where lessons learned are used to enhance future products and services in order to Retain existing customers Win back lost customers Win new customers 8
Definition of Quality Therefore, companies are developing quality improvement processes. Figure 20 1 shows the five quality principles that support Kodak s quality policy. Figure 20 2 shows a more detailed quality improvement process. These two figures seem to illustrate that organizations are placing more emphasis on the quality process than on the quality product and, therefore, are actively pursuing quality improvements through a continuous cycle. 9
2. Definition of Quality Figure 20 1 shows the five quality principles that support Kodak s quality policy. 10
Definition of Quality Figure 20 2 shows a more detailed quality improvement process. 11
Image up Price competition down High quality puts costs down and revenue up Sales volume up Service costs down Scale economies up Quality up Inspection and test costs down Rework and scrap costs down Complaint and warranty costs down Productivity up Inventory down Processing time down Capital costs down Revenue up Profits up Operation costs down 12
Perceived quality is governed by the gap between customers expectations and their perceptions of the product or service Customers expectations for the product or service Gap Customers perceptions of the product or service Customers expectations for the product or service Customers perceptions of the product or service Gap Customers expectations for the product or service Customers perceptions of the product or service Expectations > perceptions Perceived quality is poor Expectations = perceptions Perceived quality is acceptable Expectations < perceptions Perceived quality is good 13
A Gap model of Quality Previous Experience Word of mouth communications Image of product or service The customer s domain Management s concept of the product or service Gap 2 Customers expectations concerning a product or service Customers own specification of quality Gap 1 Organization s specification of quality Is there a Gap? Customers perceptions concerning the product or service The actual product or service Gap 3 The operation s domain Gap 4 14
The perception expectation gap Gap Gap 1 Gap 2 Gap 3 Gap 4 Action required to ensure high perceived quality Ensure consistency between internal quality specification and the expectations of customers Ensure internal specification meets its intended concept of design Ensure actual product or service conforms to internally specified quality level Ensure that promises made to customers concerning the product or service can really be delivered Main organizational responsibility Marketing, operations, product/service development Marketing, operations, product/service development Operations Marketing 15
Quality characteristics of goods and services Functionality how well the product or service does the job for which it was intended. Appearance aesthetic appeal, look, feel, sound and smell of the product or service. Reliability consistency of product or services performance over time. Durability the total useful life of the product or service. Recovery the ease with which problems with the product or service can be rectified or resolved. Contact the nature of the person-to-person contacts that take place. 16
Attribute and variable measures of quality Attributes Defective or not defective? Variables Measured on a continuous scale Light bulb works or does not work? Light emission of bulb Number of defects in a turbine. Length of blade blade 17
Aspects of quality Quality Quality fitness for purpose Reliability ability to continue working at accepted quality level Quality of Design degree to which design achieves purpose Quality of Conformance faithfulness with which the operation agrees with design Variables things you can measure Attributes things you can assess accept/reject 18
Total Quality Management What does Total Quality Management include? Includes all parts of the organization Includes all staff of the organization Includes consideration of all costs Includes every opportunity to get things right Includes all the systems that affect quality And it never stops! 19
Total quality management can be viewed as a natural extension of earlier approaches to quality management Makes quality central and strategic in the organization Broadens the organizational responsibility for quality Solves the root cause of quality problems Statistics Process analysis Quality standards Quality is strategic Teamwork Staff empowerment Involves customers and suppliers Quality systems Quality costing Problem solving Quality planning Prevents out of specification products and services reaching market Error detection Rectification Inspection Quality control Quality assurance Total Quality Management 20
The internal customer supplier concept involves understanding the relationship between processes Process 3 External supplier Process 1 Process 2 Process 5 Process 6 External customer Process 4
Costs The traditional cost of quality model Optimum amount of quality effort Amount of quality effort Cost of errors = costs of prevention and appraisal Total cost of quality Cost of quality provision = costs of internal and external failure 22
Costs The traditional cost of quality model with adjustments to reflect TQM criticisms Optimum amount of quality effort Amount of quality effort Cost of errors = costs of prevention and appraisal Total cost of quality Cost of quality provision = costs of internal and external failure 23
Cost to rectify error The cost of rectifying errors becomes increasingly expensive the longer the errors remain uncorrected in the development and launch process 10, 000 1000 100 10 1 Concept Design Prototype Pilot production Stage in the development and launch process Market use 24
Costs of quality Increasing the effort spent on preventing errors occurring in the first place brings a more than equivalent reduction in other cost categories Appraisal Total cost of quality Internal failure Appraisal Prevention Time 25
Effectiveness of the TQM initiative The pattern of some TQM programmes which run out of enthusiasm Introduction Learning and understanding Growth Increasing enthusiasm Levelling off Starting to hit the more difficult problems Disillusionment Waning enthusiasm Repackaging Attempts to revitalize the programme 26
Cost of Quality To verify that a product or service meets the customer s requirements requires the measurement of the costs of quality. For simplicity s sake, the costs can be classified as the cost of conformance and the cost of non-conformance. Conformance costs include items such as training, indoctrination, verification, validation, testing, maintenance, calibration, and audits. Nonconforming costs include items such as scrap, rework, warranty repairs, product recalls, and complaint handling. 27
Cost of Quality Trying to save a few project dollars by reducing conformance costs could prove disastrous. For example, an American company won a contract as a supplier of Japanese parts. The initial contract called for the delivery of 10,000 parts. During inspection and testing at the customer s (i.e., Japanese) facility, two rejects were discovered. The Japanese returned all 10,000 components to the American supplier stating that this batch was not acceptable. In this example, the nonconformance cost could easily be an order of magnitude greater than the conformance cost. The moral is clear: Build it right the first time. 28
Cost of Quality Another common method to classify costs includes the following: Prevention costs are the up-front costs oriented toward the satisfaction of customer s requirements with the first and all succeeding units of product produced without defects. Included in this are typically such costs as design review, training, quality planning, surveys of vendors, suppliers, and subcontractors, process studies, and related preventive activities. Appraisal costs are costs associated with evaluation of product or process to ascertain how well all of the requirements of the customer have been met. Included in this are typically such costs as inspection of product, lab test, vendor control, in-process testing, and internal external design reviews. (refer to Table 20.6) 29
Cost of Quality Internal failure costs are those costs associated with the failure of the processes to make products acceptable to the customer, before leaving the control of the organization. Included in this area are scrap, rework, repair, downtime, defect evaluation, evaluation of scrap, and corrective actions for these internal failures. External failure costs are those costs associated with the determination by the customer that his requirements have not been satisfied. Included are customer returns and allowances, evaluation of customer complaints, inspection at the customer, and customer visits to resolve quality complaints and necessary corrective action. Figure 20 6 shows the expected results of the total quality management system on quality costs. Prevention costs are expected to actually rise as more time is spent in prevention activities throughout the organisation. 30
Cost of Quality FIGURE 20 6. Total quality cost. 31