TQM Chapter 1 2.docx

Chapter 1: **OPERATION, PRODUCTIVITY and INTRODUCTION TO TOTAL QUALITY MANAGEMENT** 1. What is operation management? 2. Organizing to produce good and services 3. The supply chain 4. Why study OM? 5. What Operation Managers do? 6. What is TQM and its Dimension 7. Quality Costs **PRODU...

Chapter 1: **OPERATION, PRODUCTIVITY and INTRODUCTION TO TOTAL QUALITY MANAGEMENT** 1. What is operation management? 2. Organizing to produce good and services 3. The supply chain 4. Why study OM? 5. What Operation Managers do? 6. What is TQM and its Dimension 7. Quality Costs **PRODUCTION** - Refers to the creation of *Products*. - *Product* refers to either of the following: - [Goods] -- Tangible Product. - In manufacturing firms, the production activities that create goods are usually obvious. - [Services] -- Intangible products. - In an organization firms that produces services, the production activities are less obvious - The services may be hidden from the public and even from the customers. - Regardless of the end product is a good or services, the production activities that go on in the organization are often referred to as OPERATIONS or *operations management* **OPERATION MANAGEMENT (OM)** - It is the set of activities that creates value in the form of Products by transforming inputs into outputs. - The techniques of OM apply throughout the world virtually all productive enterprises. - It doesn't matter if the application is in an office, hospital, restaurant, a department store or a factory \-\-\-- the production of goods and services requires OM. - The Efficient production of goods and services requires effective applications of the concepts, tools and techniques of OM. **ORGANIZING TO PRODUCE GOODS AND SERVICES** - To create goods and services, all organizations performs three functions. - These three functions are necessary ingredient not only for the production but for an organization's survival. - They are: - Marketing - Which generates the demand, or at least takes the order for a product. - Production / Operation - Which creates the product - Finance / Accounting - Which tracks how well the organizations is doing, pays bills and collect the money. **THE SUPPLY CHAIN** - A global network of organizations and activities that supplies a firm with good and services. - Through the three functions \-\-- marketing, operations and finance \-\-- value is created, however the firms seldom create this value by themselves. - Instead, they rely on a variety of suppliers who provides everything from Raw materials to accounting services. - When members of the supply chain collaborates to achieve high levels of customer satisfaction, we have a tremendous force of efficiency and competitive advantage. **WHY STUDY OM?** 1. To learn how people organize themselves for productive enterprises 2. To learn how goods and services are produced. 3. To understand what operation managers do 4. Because OM is a costly part of an organization. WHAT OPERATIONS MANAGERS DO? - All goods managers performs the basic function of the management process. 1. Planning 2. Organizing 3. Staffing 4. Leading 5. Controlling - Operation Managers apply this management process to decision they make in the OM function. - Strategic OM Design 1. Design of goods and services 2. Managing quality 3. Process and capacity design 4. Location strategy 5. Human resources 6. Supply-chain management 7. Scheduling 8. Maintenance \-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-- **TOTAL QUALITY MANAGEMENT (TQM)** - Is customer oriented management philosophy and strategy. - It is centered on *QUALITY as to result in CUSTOMER DELIGHT*. - "Total" \-\-- implies that all members of the organization make consistent efforts to achieve the objective of the customer delight through systematic efforts for improvement of the organization. - It addresses the concepts of product quality, process control, quality assurance and quality improvement, all of which are aimed at customer's delight. **QUALITY** - Defined as "Fitness for use" - "The totality of features and characteristics of a product or service, that bear on its ability to satisfy a given or implied nee" (ISO 9000\*) - \*International Organization for Standardization (ISO) \-\-- the world body for standard formulation, founded 1946, with its headquarters in Geneva, Switzerland. **CHAIN REACTION** - Quality improvement results in improved productivity, by eliminating defects, non-value adding activities and rework, additional resources capacity is created. **DIMENSIONS OF QUALITY** **PRODUCT QUALITY** - *Functionalit*y - A set of attributes the bear on the existence of a set of functions and their specified properties. - The functions are those that satisfy stated or implied needs. - *Reliability* - This is an indicator of durability of the products. - *Usability* - A product should be easily usable - The customer should be able to use the product easily without the help of experts. - *Maintainability* - Refers to the ease with which a product can be maintained in the original condition. - It should be repairable so as to retain the original quality of the product at the lowest cost at the earliest time. - *Efficiency* - It's the ratio of output to inputs. - *Portability* - Defined as set of attributes that bear the ability of a software to be transferred from one environment to another. **SERVICE QUALITY** - Services are made to order, the customer interacts more with the service provider, the quality of service depends to an large extent on understanding the correct requirements of the customer through such interaction - Features of Service Quality - *[Quality Of Customer Service]* - In service industry, meeting customers and finding out their requirements is more challenging. Therefore, ability to satisfy customer depends on the quality of service. - This includes. - How well the customer is received? - How well the implied requirements are elucidated? - How well the customer is treated/handled/satisfied? - *[Quality Of Service Design]* - Since services are usually made to orders, it is important that the service is designed as per requirement of the specific customer. - *[Quality Of Delivery]* - Defects on delivery should be zero to satisfy the customer. - Additional Features of Quality - *Timeliness* - No customer likes waiting - Any anticipated delays in schedules should be communicated to customer well in advance. - *Aesthetics* - A product should not only perform well but also appear attractive. - It include the appearance of the products, color and other feature that is attributable to appearance of the product. - *Regulatory Requirement* - Regulatory requirements as stipulated by the local and national governments should be fulfilled. - *Requirements of the society* - A product cannot be built in such a way as to violate the requirements of society of safe and healthy product. - Conformance to standards - Product should conform to the stated and implied requirement of customers and the national and international standards. **QUALITY CONTROL (QC)** - It is the inspection or appraisal of products and services to ensure that the stated requirements are fulfilled. - Steps of QC - Evaluate actual operating performance - Compare actual performance to goals - Act on difference - It was found that QC is essential but not sufficient so Quality Assurance techniques are developed. **QUALITY ASSURANCE (QA)** - All planned and systematic activities implemented within the quality system, and demonstrated as needed, to provide adequate confidence that an entity will fulfill the requirement for quality. - Building Quality Requires the following: - Quality design - It refers to how well the product has been designed to meet the current and future requirement of customers and add value to all stakeholders. - Stakeholders \-\-- anyone who has a say or concern about a certain entity - Customers - Employees - Suppliers - Owners - Society - It involves all activities that will result in a successful design. It necessarily includes finding out the customer's requirements. - Quality of conformance - This indicates the consistency in delivering the designed product. - It involves all activities that will insure the conformance of the products to its requirements consistently. - Quality of performance - It is an indicator of the performance of the end product. - This in turn depends on the quality of design and quality of conformance. - Quality of service - Involves all activities that will enable the customer to procure and use the product without any hassle. - QA is much more involved activity than mere inspection (QC) \-\-- QC is one of the activities under QA. **QUALITY PLANNING (QP)** - Refers to the activities that establish the objectives and requirements for quality. - It involves planning for the following: - Quality objectives to be met - Specific of QA/QC practice's - Resources needed - Sequence of QA/QC activities. - Quality has to be planned for every product or service and documented in the form of a quality plan. **QUALITY IMPROVEMENT** - This process aims at attaining unprecedented levels of performance, which are significantly better that the past level. **STRATEGIC PLANNING** - It involves making plans for the following: - Business value - Investment in machinery and equipment - Manpower to be hired - Budget - Product diversification - Market to be served - It is carried out generally at annual intervals and is carried out using formal structured approach. - Usually organization treat strategic planning and quality planning as separate and isolated activities, but some calls for the integration of both. - It means that quality planning and improvement planning should be carried out as part of strategic planning. - The quality improvement planning should focus on the needs of current and future customers and support the strategic and business goals of the organization. **QUALITY MANAGEMENT** - All activities of the overall management function that determine the quality policy, objectives and responsibilities and implement them by means such as quality planning, quality control, quality assurance, and quality improvement within the quality system. (ISO 9000) - The quality system consists of the organizational structure, procedures, processes and resources needed to implement quality management. Evolution of Quality **JUST-IN-TIME (JIT)** - This means that at no stage of manufacturing nobody or nothing waits for anything. - This is to ensure that there is no wastage of machinery, materials and manpower. - It focuses on right scheduling so as to keep inventory as low as possible. - This requires perfect partnership between the supplier and customer. TQM is was evolved to satisfy customers in the most economical way. Quality mean cost effectiveness. It means reducing expenditures by eliminating wastes through systematic quality management approach. Therefore it is important to compute expenditure incurred on account of poor quality and prevent it. **COST OF QUALITY (COQ)** - It is the sum of costs incurred by an organization in preventing poor quality? - Three types: 1. *Prevention cost* - Are the planned cost incurred by an organization to ensure that no defects occur in any of the stages such as design, development, production, and delivery of product. - They incurred to reduce the inspection as well as failure cost. - Includes: - Education and training o employees, - Process improvement efforts. - Process control - Market research - Product qualification - Field testing - Preventive maintenance - Calibration of instruments - Etc. - Reduction - Every preventive activity should have been pre-planned to avoid wasted\\s during the process. - Preparation of quality manual and set of procedures 2. Appraisal cost - Are incurred in verifying, checking or evaluating product or service at various stages during manufacturing or delivering. - They are incurred due to lack of confidence in the quality of the product or service either due to the incoming material or due to process. - Includes: - Incoming inspection - Internal product audit - Supplier evaluation and audit - Inspection during process and final inspection. - Etc. - Reduction - The organization should try to make best use of the data available within the organization in the form of inspection records to improve quality and reduce the need for inspection 3. Failure cost - Are incurred by an organization because the product or service did not meet the expected requirements and the product had to be fixed or replaced or the service had to be repeated. - The failure costs are due to the incurred failure of the organization to control defects in the products. - Reduction - Everything should be done right the first time and every time. - *Defective products in the markets can lead to the loss of reputation and customer loyalty. One dissatisfied customer will tell 100 others, which means the loss of both present of future customers. It will also affect the brand image, leading to loss of good will and customer loyalty.* PAF Model [Classification of Failure Cost] **Internal failure cost** - Includes cost every failure that takes place before the product is delivered to the customers. - It accrues due to defective process. - Includes: - Rejected material, supplier by vendors - Rejected pieces of sub-assemblies - Rejected products at final inspection - Scrap on accounts of poor workmanship - Overtime due to non-conforming products. **External failure cost** - These are on cost of failure of the product after its delivery to the customers. - Includes - Warranty costs - Free replacement given due to failure of item supplied. - Cost incurred to travel to customer's site for repair - Cost of product returned - Cost of customer complaints administration - Cost of customer follow up and field service department. HIDDEN COST - Includes customer-incurred cost, lost reputation costs and customer dissatisfaction costs. - These costs can vary and sometime affect business. - It can be eliminated by eliminating external failures.