Operations Management For Competitive Advantage ninth edition 1

CHASE AQUILANO JACOBS

Operations Management
For Competitive Advantage
Chapter 7

Quality Management
CHASE AQUILANO JACOBS ninth edition
©The McGraw-Hill Companies, Inc., 2001
Operations Management For Competitive Advantage ninth edition 2

Chapter 7
Quality Management
• Total Quality Management Defined
• Malcolm Baldrige National Quality Award
• Quality Specifications
• Costs of Quality
• Continuous Improvement
• SPC Tools
• Benchmarking
• Fail-safing
• ISO 9000

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Total Quality Management (TQM)

Defined

• Total quality management is defined as

managing the entire organization so that it

excels on all dimensions of products and

services that are important to the customer.

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1999 Malcolm Baldrige National

Quality Award
• 1.0 Leadership (125 points)
• 2.0 Strategic Planning (85 points)
• 3.0 Customer and Market Focus (85
points)
• 4.0 Information and Analysis (85 points)
• 5.0 Human Resource Focus (85 Points)
• 6.0 Process Management (85 points)
• 7.0 Business Results (450 points)
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Categories for the Baldrige Award

• Manufacturing companies or subsidiaries that
– produce and sell manufactured products or
manufacturing processes or
– produce agricultural, mining, or construction products.
• Service companies or subsidiaries that sell service
• Small businesses
• Health care organizations
• Educational institutions

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Characteristics of a Baldrige Award

Winner
• The companies formulated a vision of what they
thought quality was and how they would
achieve it.
• Senior management was actively involved.
• Companies carefully planned and organized
their quality effort to be sure it would be
effectively initiated.
• They vigorously controlled the overall process.
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Quality Specifications
• Design quality: Inherent value of the
product in the marketplace

– Dimensions include: Performance, Features,

Reliability, Durability, Serviceability, Response,
Aesthetics, and Reputation.

• Conformance quality: Degree to which the

product or service design specifications are
met
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Costs of Quality

Appraisal Costs

Costs of
External Failure Prevention Costs
Quality
Costs

Internal Failure
Costs

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Continuous Improvement (CI)

• Management's view of performance
standards of the organization
– performance level of the firm as something to be
"continuously challenged and incrementally
upgraded."

• The way management views the contribution

and role of its workforce
– believe employee involvement and team efforts
are the key to improvement
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CI Methodology: PDCA Cycle (Deming

Wheel)
1. Plan a change
4. Institutionalize
aimed at
the change or
improvement.
abandon or
do it again.
4. Act 1. Plan

3. Check 2. Do

3. Study the results; 2. Execute the

did it work? change.
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TOOLS OF QUALITY MANAGEMENT

• PROCESS FLOW CHARTING/ANALYSIS

• PARETO ANALYSIS
• RUN/PROCESS CONTROL CHART
• HISTOGRAMS
• SCATTER DIAGRAMS
• CHECK SHEETS
• CAUSE AND EFFECT DIAGRAMS

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Example: Process Flow Chart

Material No,
Inspect
Received
Material for Continue…
from
Defects Defects
Supplier
found?

Yes

Can be used to find Return to

quality problems. Supplier for
Credit

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Example: Pareto Analysis

Can be used 80%

to find when
80% of the
problems Frequency
may be
attributed to
20% of the
causes.

Design Assy. Purch. Training Other

Instruct.

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Example: Run Chart

Can be used to identify

when equipment or
processes are not behaving
Diameter

0.58 according to specifications.

0.56
0.54
0.52
0.5
0.48
0.46
0.44
1 2 3 4 5 6 7 8 9 10 11 12
Time (Hours)
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Example: Histogram
Can be used to identify the frequency of quality
Number of Lots

defect occurrence and display quality performance.

0 1 2 3 4 Defects
Data Ranges in lot

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Example: Scatter Diagram

Can be used to illustrate the

12 relationships between quality
behavior and training.
10
Defects

8
6
4
2
0
0 10 20 30
Hours of Training

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Example: Checksheet
Can be used to keep track of
defects or used to make sure
people collect data in a correct
Monday manner.
Billing Errors

Wrong Account

Wrong Amount

A/R Errors

Wrong Account

Wrong Amount

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Example: Cause & Effect Diagram

Possible causes: The results

or effect.
Machine Man

Environment Effect

Method Material

Can be used to systematically track backwards to find

a possible cause of a quality problem (or effect).

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Example: Control Charts

Can be used to monitor ongoing production process quality
and quality conformance to stated standards of quality.

1020
UCL
1010
1000
990
980
LCL

970
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

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Benchmarking
1. Identify those processes needing
improvement.

2. Identify a firm that is the world leader in

performing the process.

3. Contact the managers of that company and

make a personal visit to interview managers
and workers.

4. Analyze data.
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The Shingo System: Fail-Safe Design

• Shingo’s argument:
– SQC methods do not prevent defects
– Defects arise when people make errors
– Defects can be prevented by providing workers
with feedback on errors

• Poka-Yoke includes:
– Checklists
– Special tooling that prevents workers from
making errors

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ISO 9000
• Series of standards agreed upon by the
International Organization for
Standardization (ISO)
• Adopted in 1987
• More than 100 countries
• A prerequisite for global competition?
• ISO 9000 directs you to "document what you
do and then do as you documented."
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Three Forms of ISO Certification

First party: A firm audits itself against ISO
9000 standards.

Second party: A customer audits its supplier.

Third party: A "qualified" national or

international standards or certifying agency
serves as auditor.

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ISO 9000 versus the Baldrige Award

• Which should we pursue first?

• What are the differences between the two?

• Do you have to be ISO 9000 certified before

going for the Baldrige Award?

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