Quality and Strategy

Quality and Strategy

• Managing quality supports differentiation, low cost, and response strategies
  • Differentiation: Quality allows companies to offer superior products/services, like Apple with high-quality design
  • Low Cost: Higher quality reduces production costs through lean manufacturing and Six Sigma
  • Response Strategy: Enhances responsiveness to market demands with a high-quality supply chain
• Quality increases sales and reduces costs
  • Sales Growth: High-quality products/services boost reputation, loyalty, and pricing
  • Cost Reduction: Investing in quality upfront (TQM, Six Sigma) cuts long-term costs from rework and warranties
• Quality impacts the entire organization
  • Supply Chain: Ensures quality from suppliers to delivery impacting customer satisfaction and brand
  • Product Design: Embeds quality in the design phase to prevent defects
  • Manufacturing & Service Operations: Ensures quality through standardized processes and automation
  • Customer Service & Maintenance: High-quality support retains customers and reduces after-sales costs
• Building a quality organization requires effort
  • Requires Leadership Commitment: Management must instill a culture of quality
  • Employee Involvement: Engages employees in continuous improvement
  • Use of Quality Tools & Methodologies: TQM, ISO 9000, Six Sigma, and SPC ensure quality improvements are made
  • Customer-Centric Approach: Defines quality by customer expectations with feedback loops

Defining Quality

• Quality includes the features and characteristics that can satisfy stated/implied customer needs (ASQ Definition)
• Quality includes meeting/exceeding customer expectations
• Operations managers must develop a Total Quality Management (TQM) system that:
  • Identifies customer needs
  • Ensures products/services meet or exceed expectations
  • Drives continuous improvement
• Different views of quality
  • User-Based: Subjective, based on customer expectations
  • Manufacturing-Based: Objective, focusing on defect-free production
  • Product-Based: Measurable, based on durability, reliability, and features
• Quality provides a competitive advantage, reduces costs, and increases customer satisfaction

Implications of Quality

• Quality impacts customer trust, costs, and competitiveness.
• Poor quality can lead to defects, rework, lawsuits, and brand damage.
• Quality affects product innovation, workforce management, supplier performance, and global competitiveness.
• Company perception of new products
  • Quality shapes innovation approach
  • High standards produce better designs
  • Good quality reputations allow premium pricing
• Employment practices
  • Requires a quality-focused, well-trained culture
  • Invests in continuous improvement training (TQM, Six Sigma, Lean)
  • Utilizes motivated employees for consistent service and production quality
• Supplier relations
  • High-quality suppliers are crucial to maintain production standards
  • Good supplier relationships boost reliability and efficiency
  • Poor supplier quality increases delays, defects, and costs
• Product liability and risk reduction
  • Legal and financial risks from poor quality
  • Product recalls damage reputation and profits
  • Regulatory compliance ensures safety and reduces liability
• Global implications
  • High-quality standards are needed for international markets
  • Poor quality leads to loss of export opportunities
  • Quality certification enhances global credibility
• Improved ability to compete
  • Strong quality reputations provide a competitive edge
  • Quality cuts costs by reducing defects and waste
  • Customer satisfaction increases with brand loyalty

Malcolm Baldrige National Quality Award

• Established in 1988 to promote TQM
• Recent winners include PricewaterhouseCoopers, Lockheed Martin, and Nestle Purina.
• Applicants are evaluated on:
  • Leadership (120 points)
  • Strategic Planning (85 points)
  • Customer Focus (85 points)
  • Measurement, Analysis, and Knowledge Management (90 points)
  • Workforce Focus (85 points)
  • Operations Focus (85 points)
  • Results (450 points)

ISO 9000 International Quality Standards

• Provides international recognition
• Encourages documentation, work instructions, and recordkeeping
• Revision in 2018 to enhance sustained success
• It has over 1.6 million certifications in 201 countries, including about 30,000 in the U.S.
• Critical for global business
• Management principles include top management leadership, customer satisfaction, and continual improvement.
• Other management principles:
  • Involvement of people
  • Process analysis
  • Data-driven decision making
  • A systems approach to management
  • Mutually beneficial supplier relationships

Costs of Quality

• Prevention costs reduce the potential for defects
• Appraisal costs evaluate products and services
• Internal failure costs come from defective parts before delivery
• External failure costs are defects discovered after delivery

Takumi

• Takumi is a Japanese concept representing mastery, craftsmanship, and excellence.
• It is about continuous improvement, and achieving the highest level of craftsmanship
• Emphasizes pride, attention to detail, and a pursuit of excellence

Pioneers in Quality

• W. Edwards Deming: Management must accept responsibility for building good systems utilizing Deming's 14 points
• Joseph M. Juran: Top-management commitment is key, focusing on customer needs and defining quality as fitness for use
• Armand Feigenbaum: Outlined 40 steps to quality, emphasizing cross-functional teamwork
• Philip B. Crosby: Argued the cost of poor quality, coined "zero defects"

Ethics and Quality Management

• Operations managers must deliver safe and high-quality products/services.
• Ethical quality management ensures trust, compliance, and long-term success.
• Preventing quality failures saves costs.
• Ethical approaches establish customer loyalty and this is essential.
• Safe and quality products
  • Prioritize customer safety in companies
  • Ethical manufacturing prevents potential defects that can cause harm
  • Johnson & Johnson's 1982 Tylenol recall shows a responsible decision
• Consequences of poor quality
  • Defective products can harm consumers
  • Legal action if companies fail to meet safety standards
  • Government enforces standard quality and safety
• Ethical responses to quality problems
  • Companies must be transparent about problems
  • Dishonesty leads to public distrust
  • Toyota’s 2009 recall initially downplayed acceleration issues, later faced fines
• Considering all stakeholders
  • Customers, employees, suppliers, shareholders, and society

Total Quality Management (TQM)

• TQM is an organization-wide approach to continuous improvement in quality
• It extends from suppliers to customers
• Creates a culture of quality
• TQM is a company wide philosophy (not just a program)
• Companies use TQM to drive long-term success
• Key to TQM is continuous improvement, employee involvement, and customer focus
• Organization-Wide Commitment: TQM involves everyone and prioritizes quality
• Customer-Focused Approach: Quality is defined by customer feedback
• Continuous Improvement: TQM requires Techniques like Six Sigma and this will contribute to higher quality
• Supplier Involvement: Quality starts with suppliers
• Strong partnerships ensure reliability
• Employee Involvement & Training: Quality control is a shared part of employees

Deming’s Fourteen Points

• W. Edwards Deming, a pioneer in quality management, developed 14 key principles
• The principles emphasize continuous improvement and a customer-focused approach
• Forms the foundation of TQM
• Create Constancy of Purpose
• Adopt the New Philosophy
• Cease Dependence on Inspection
• End the Practice of Awarding Business Based on Price Alone
• Improve Constantly and Forever
• Institute Training on the Job
• Adopt and Institute Leadership
• Drive Out Fear and encourage open communication
• Break Down Barriers between departments
• Eliminate Slogans and Targets
• Eliminate Quotas and Numerical Targets
• Take Action to Accomplish Transformation
• Remove Barriers to Pride in Workmanship
• Encourage Education and Self-Improvement

Seven Concepts of TQM

• Continuous improvement
• Six Sigma
• Employee empowerment
• Benchmarking
• Just-in-time (JIT)
• Taguchi concepts
• Knowledge of TQM tools

Continuous Improvement

• Continuous improvement is an infinite process
• Covers people, equipment, procedures, materials, and suppliers
• Every operation can be improved in some way
• The end goal is perfection
• Kaizen describes the ongoing improvement
• Commonly used terms for continuous improvement: TQM and zero defects
• PDCA Model:
  • (Plan) Identify problems and make plans
  • (Do) Test them
  • (Check) Check if they are working
  • (Act) Document and implement the plan

Six Sigma

• There are two meanings. In a statistical sense, it has very high capability. It is also the label for a program designed to reduce defects
• A system is achieving and sustaining business success through this
• Originally developed by Motorola, and improved by Honeywell and GE
• Improve customer satisfaction, save time and lower costs
• Highly structured
• DMAIC (define, measure, analyze, improve, control) is the strategy used
• There are defined tools

Employee Empowerment

• Engage employees in product and process improvements
• 85% of quality problems are due to process
• Techniques to use:
  • Build networks for communication with employees
  • Develop supervisors who act supportively
  • Move some responsibility over to employees
  • Build an high morale organization
  • Generate teams and quality circles
• Quality Circles are employee groups who meet regularly to solve problems via group planning. They are effective when supported by a facilitator.

Benchmarking

• Selecting best practices in order to create a standard
• Steps:
  • Determine what must be benchmarked
  • Form a benchmark team
  • Gather benchmarking information to analyze
  • Form partnerships with other organization to benchmark
  • Take any actions that are necessary to match or exceed any prior benchmarks
• Resolving customer complaints
  • Make it easy for the clients to complain (free research)
  • Respond quickly (adds Loyalty)
  • Isolate and resolve immediately (reduces costs)
  • Utilize computers to determine where to align them (discover trends)
  • Recruit the necessary jobs
• Internal Benchmarking
  • When large enough
  • More accessible data
  • Should be established in areas

Just in Time (JIT)

• A "Pull" system of production, including supply management
  • Production when signaled only
• Allows for reduced amounts of inventory
  • Inventory is expensive and also hides potential material problems
• Encourages improved quality in product

Taguchi Concepts

• Engineering and experimental design methods
  • Find variables for components, leading to variation
• Taguchi Concepts:
  • Quality robustness
  • Target-oriented quality
  • Quality loss function

Quality Robustness

• Produce uniformly in adverse manufacturing and environmental conditions
  • Remove effects (adverse)
  • Variations (small) in processes and quality do not destroy original quality.

Quality Loss Function

• Costs increase when customer specifications not met
• Costs include customer dissatisfaction, repair, warranty, and service.
• Traditional specifications are too simplistic

TQM Tools

• Tools for Generating Ideas
  • Check Sheet
  • Scatter Diagram
  • Cause-and-Effect Diagram
• Tools to Organize the Data
  • Pareto Chart
  • Flowchart (Process Diagram)
• Tools for Identifying Problems
  • Histogram
  • Statistical Process Control Chart
• Statistical Process Control (SPC)
  • Uses data and graphs
  • To monitor process and ensure more stability
• Check sheets organize information from issues in process
• Statistical process control charts monitor process stability.
• Cause-and-effect diagrams organize relationships
• Pareto charts show problems based on frequency
• Flowcharts identify bottlenecks.
• Histograms identify specific problems

Inspection

• Examining items to identify the good and defective products
• Ineffective and costly
• Issues include when and where in the process to inspect
• It is ideal to inspect at the supplier, before costly processes, during production, before delivery, or at the point of customer contact
• Alternatives
  • Design and empower employees
  • Total Quality Management (TQM), helps improve and fix issues
  • Prevention focuses on defect reduction while source aims on detection

Source Inspection

• Source control is a focus on any potential defects in production
• Shifts focus from the detection to prevention
• Checklists assist worker

Service Industry Inspections

• Alaska Airlines inspects last bag on carousel and airplane door opened.
• Jones Law Offices inspect receptionist performance, billing, and attorney promptness.
• Hard Rock Hotel inspects reception desk, doorkeeper, rooms, and minibar.
• Arnold Palmer Hospital watches for prescription accuracy as they inspect the pharmacy as well as Chart updates.
• Olive Garden busser services are inspected.
• Nordstrom stock is on Rotation, cleanliness, in addition to providing knowledgeable service

Attributes Versus Variables

• Attributes: There is is a specific pass/fail state that the product must be in
• Variables: A measurements with range i.e speed, length, height, etc.
• Each type has different techniques of statistics

TQM in Services

• Service quality is harder to quantify due to intangible experiences
• Service quality is determined during the customer experience.
• Services depend on customer, and provider
  • It will influence quality
• Customer compares expectations and reality
  • Affects the quality
• Must recognize how to improve service quality
• Consider best practices, tangibles, service process, and expectations
• Managers need a plan for service failure using routine:
• Marriott's LEARN (listen, empathize, apologize, react, notify)
• SERVQUAL models measure perceptions by comparing them
  • It identifies differences in what customer expects and help businesses improve
  • Dimensions include reliability, assurance, tangibles, empathy, and responsiveness

Toyota

• Toyota uses a top quality management system within the automotive industry
• TQM, Kaizen, and Lean manufacturing allows this to take hold
• This is done through: High Quality, Low Cost, and Quick adaptation to demand
• Toyota has long lasting cars and models
• By utilizing a human touch it lowers defects earlier then cutting costs
• Toyota is a global leader ensuring Suppliers all utilize high components
• QFD is incorporated in design (customer first, ANDON system to stop production)
• Has Extensive after-sales to gain retention
• Toyota has a quality first strategy utilizing TQM and others that leads them towards top quality.