Operations Management

BU 385

Roadmap

Last Class

Today

Capacity Planning part 2 (Chapter 5)

Management of Quality (Chapter 9)

Next class

Statistical Quality Control (Chapter 10)

Agenda

Introduction to Quality
Quality of Goods and Service
Dimensions and Determinants of Quality
Costs of Quality
Different Approaches to Quality

Certification
Requirements for food industry
Awards
Total Quality Management (TQM): Concepts

Basic Quality Tools

Koh said the company's investigation found that a

battery cell made by one of its two battery suppliers
caused the phone to catch fire. He refused to name
the battery supplier.

"There was a tiny problem in the manufacturing

What is Quality?

QUALITY is the ability of a product or service to

consistently meet or exceed customer expectations.

The American Society for Quality defines quality as

the totality of features and characteristics of a
product or service that bears on its ability satisfy
stated or implied needs of the customer.

Quality assurance is providing confidence in a

products quality by preventing defects before they
occur.

Quality control is monitoring, testing, and correcting

quality problems after they occur.

Evolution of Quality Management

Different Views of Quality

User-based: better performance, more

features
Manufacturing-based: conformance to
standards, making it right the first time
Product-based: specific and measurable
attributes of the product

Quality of Goods

Quality of Services

Service Specifications at UPS

Determinants of Quality

Benefits of Good Quality

Consequences of Poor Quality

Loss of Customers

Liability (due to damage and/or injury)

Productivity Problems

Costs

Costs of Quality
Internal

Costs incurred to fix problems that are detected

before delivery to the customer.

External

Failure Costs
Failure Costs

Costs incurred to fix problems that are detected

after delivery to the customer.

Appraisal

Costs

All product and/or service inspection costs.

Prevention

Costs

Costs of preventing defects (Training, Quality

Planning, Process control, Quality Improvement)

Hidden Costs of Quality

Failure Costs Increase Over Time

Approaches to Quality

Certification: ISO 9001

Hazard Analysis Critical Control Point
(HACCP)
Awards: Canada Awards for Excellence
(CAE)
Total Quality Management (TQM)
Six Sigma

Quality Certification

ISO 9001

Set of international standards on quality

management and quality assurance, critical to
international business

Standards Council of Canada

> 100 countries and 180 technical committees
Documentation and assessment process takes 12 18 months for
certification

Re-register every 3 years

ISO 9001 Elements & Activities

Source: www.iso.org/iso/iso_9000_selection_and_use-2009.pdf

ISO 14000
ISO 14000 is a family of standards related to environmental
management

Hazard Analysis Critical Control

Point (HACCP)

A quality control system, similar to ISO

9001, designed for food processors

Deals with food safety (biological, chemical,

and physical hazards)

Main steps:

1.
2.
3.

Hazard Analysis
Determination of the Critical Control Points
Creation of the HACCP Plan

National Quality Institute (NQI)

Source: http://www.nqi.ca/Certification/PEP/Overview.aspx

Canada Awards for Excellence (CAE)

Administered by National
Quality Institute
(NQI)

Source: http://www.nqi.ca/Certification/PEP/Overview.aspx

Total Quality Management (TQM)

A philosophy that
involves everyone
in an organization in a
continual effort to
improve quality and
achieve customer
satisfaction

The TQM Approach

The PDSA Cycle

Plan

Act

Do

Study

Comparing the cultures of TQM

and traditional organizations
Aspect

Traditional

TQM

Overall mission

Maximize return on
investment
Emphasis on short term
Not always open; at times
inconsistent objectives
Issue orders; enforce
Not highest priority; may
be unclear
Assign blame; punish
Not systematic; individuals

Meet or exceed customer expectations

Erratic
Adversarial
Narrow, specialized; much
individual effort
Product-oriented

Continuous
Partners
Broad, more general; much team effort

Objectives
Management
Role of manager
Customer
Requirements
Problems
Problem solving
Improvement
Supplier relations
Jobs
Focus

Balance of long term and short term

Open; encourages employee input;
consistent objectives
Coach, remove barriers, build trust
Highest priority; important to identify
and understand
Identify and resolve
Systematic; teams

Process-oriented

What is Six Sigma?

The name six sigma refers to the

variation that exists within plus or minus
six standard deviations of the process
outputs

Statistical definition of a process that is

99.9997% capable, 3.4 defects per million
opportunities (DPMO)

Seeks to reduce variation in the

processes that lead to product defects
A philosophy and set of methods
companies use to eliminate defects in
their products and processes

Six Sigma
Lower limits

Upper limits

2,700 defects/million

3.4 defects/million

Mean

3
6

Why Six Sigma?

Is 99% quality not good enough?

If it is, then.

22,000 cheques will be deducted from the

wrong bank accounts in the next 60 minutes.

20,000 incorrect drug prescriptions will be

written in the next 12 months.

12 babies will be given to the wrong parents

each day.

But. Is Six Sigma Realistic?

IRS Tax Advice (phone-in)

Defects Per Million Opportunities (DPMO)

100K

(66810 ppm)

10K

Average
Company
1K

Restaurant Bills
Doctor Prescription Writing

Payroll Processing
Order Write-up
Journal Vouchers
Wire Transfers
Air Line Baggage Handling

Purchased Material
Lot Reject Rate

100

(233 ppm)

10

Best in Class

Domestic Airline

Flight Fatality Rate

(3.4 ppm)

4
SIGMA

(0.43 ppm)

Six Sigma Process

6 DMAIC

7. Basic Tools of Quality

Tools for generating ideas

Tools to organize data

A. Check sheets
B. Scatter diagrams
C. Cause-and-effect diagrams
D. Pareto charts
E. Flow charts

Tools for identifying problems

F. Histogram
G. Statistical process control charts
H. Run chart

Check Sheet Example 1

Billing Errors

Wrong Account

Wrong Amount

A/R Errors

Wrong Account

Wrong Amount

Monday

Check Sheet example 2

E.g. cleanliness below standards (red

circles)

Scatter Diagram
A graph of the value of one variable
versus the other which helps you see the
relationship which in turn helps in idea
generation. [Diapers and beer]

Productivity

Absenteeism

Cause-and-Effect Diagram
Methods

Materials
Cause

Cause
Cause
Cause
Cause

Cause

Environment

Effect
Cause

Cause
Cause

Cause
Cause

People

Cause

Equipment

Also called fish bone diagram

Cause-and-Effect Example

Basketball: game analysis for a player

Material

Method

(ball)

(shooting process)
Grain/Feel (grip)

Aiming point

Size of ball

Bend knees

Air pressure
Hand position

Balance
Lopsidedness
Follow-through

Missed
Training

Conditioning

Rim height

Motivation

Rim alignment

Consistency
Concentration

Manpower
(shooter)

free-throws

Rim size

Machine
(hoop &
backboard)

Backboard stability

Pareto Analysis
A pareto chart is a graph to identify and plot problems or

80% of the problems

may be attributed to
20% of the
causes.

Number of defects

defects in descending order of frequency

Off

Smeared

Missing

center

print

label

Loose

Other

Flowchart

A flowchart(process diagram) describes

the steps in a process using specific
shapes.
MRI Flowchart
1.
2.
3.
4.
5.
6.

7. If unsatisfactory, repeat
8. Patient taken back to room
9. MRI read by radiologist
10. MRI report transferred to physician
11. Patient and physician discuss

Physician schedules MRI

Patient taken to MRI
Patient signs in
Patient is prepped
Technician carries out MRI
Technician inspects film

8
80%
1

11
9

20%

10

Histogram
Histogram is a chart that shows the
distribution of frequency of occurrence
of a variable
Distribution

Frequency

Repair time (minutes)

Control Chart
Statistical Process Control Chart: A chart with time on the
horizontal axis to plot values of a statistic

Plots the percent of

20%

free throws missed

Upper control limit

10%

Coachs target value

0%
|

Lower control limit

Game number

Diameter

Run Chart
0.58
0.56
0.54
0.52
0.5
0.48
0.46
0.44
1

Time (Ho urs )

Time (Hours)

10 11 12

Methods for Generating Ideas

Brainstorming

Quality Circles

Technique for identifying problems and collecting

information

Benchmarking

Groups of workers who meet to discuss ways of improving

products or processes

Interviewing

Technique for generating a free flow of ideas in a group of

people

Process of measuring performance against the best in the

same or another industry

The 5W2H Approach

A method of asking questions about a process/problem

that include what, why, where, who, how, and how much

Reaching Consensus

Next Class

Statistical Quality Control (Ch 10)