MIS302 Ch. 6: Managing Quality

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Quality and Strategy
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Managing quality helps build successful strategies of differentiation, low cost, and response – improving quality helps firms increase sales and reduce costs, both of which can increase profitability
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Achieving Total Quality Management (TQM)
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(1) begins with an organizational culture that fosters equality (2) understanding of the principles of quality (3) engaging employees in the necessary activities to implement quality *An operations manager’s objective is to build a total quality management system that identifies and satisfies customer needs*
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quality
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the totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs
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Quality (User based definition)
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quality “lies in the eyes of the beholder” – liked by customers and marketers – higher quality means better performance, nicer features, and other (sometimes costly) improvements
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Quality (Manufacturing Based)
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means conforming to standards and “making it right the first time” – liked by production managers
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Quality (product based)
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a precise and measurable variable Ex: really good ice cream has high butter fat levels
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Three (other) reasons why quality is important
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(1) Company reputation: an organization can expect its reputation for quality-be it good or bad-to follow it (2) Product liability: Courts increasingly hold organizations that design, produce, or distribute faulty products or services liable for damages or injuries resulting from their use (3) Global Implications: for a company and a country to compete effectively in the global economy, products must meet global quality, design, and price expectations
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Malcolm Baldrige National Quality Award
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Annual award given by the U.S. government to recognize quality achievements in U.S. companies Purpose: to stimulate efforts to improve quality; to recognize quality achievements and to publicize successful programs
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ISO9000 International Quality Standards
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quality standard with international recognition – focus is to enhance the success through eight quality management principles: (1) top management leadership (2) customer focus (3) continual improvement (4) involvement of people (5) process approach (6) system approach to management (7) use of a factual approach to decision making (8) mutually beneficial supplier relationships ISO 9004: 2009, emphasized how an organization can use quality management approach to achieve sustained success – encourages organizations to plan for their economic survival through continuing and systematic improvement in performance, efficiency, and effectiveness
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Cost of Quality
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the costs associated with avoiding poor quality of those incurred as a result of poor quality Four major categories (1) Prevention Costs (2) Appraisal costs (3) Internal failure costs (4) External failure costs
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Prevention costs – cost of quality
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costs associated with reducing the potential for defective parts or services Ex: training, quality improvement programs
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Appraisal costs – cost of quality
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costs related to evaluating products, processes, parts, and services Ex: testing, labs, inspectors
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Internal failure costs – cost of quality
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costs that result from production of defective parts or services before delivery to consumers Ex: rework, scrap, downtime
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External failure costs – cost of quality
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costs that occur after delivery of defective parts or services Ex: rework, returned goods, liabilities, lost goodwill, costs to society *very hard to quantify*
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Consequences of poor quality
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– Loss of business – Liability – Productivity – Costs
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Total Quality Management (TQM)
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refers to a quality emphasis that encompasses the entire organization, from supplier to customer – stresses a commitment by management to have a continuing companywide drive toward excellence in all aspects of products and services that are important to the customer
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Seven concepts of an effective TQM program
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(1) continuous improvement (2) Six Sigma (3) Employee empowerment (4) benchmarking (5) just-in-time (JIT) (6) Taguchi concepts (7) knowledge of TQM tools
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continuous improvement – effective TQM program
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____ requires a never-ending process of continuous improvement that covers people, equipment, suppliers, materials, and procedures Plan – Do – Check – Act by Walter Shewhart used to depict continuous improvement (1) Plan – identify problem and make a plan (2) Do – test the plan (3) Check – Is the plan working? (4) Act – Implement the plan and document
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(2) Six Sigma – effective TQM program
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Statistical sense: describes a process, product, or service with an extremely high capability (99.9997% accuracy) – results in 3.4 errors/million Program definition: a program designed to reduce defects to help lower costs, save time, and improve customer satisfaction *Strategy because it focuses on total customer satisfaction* *Discipline because it follows the formal ________ Improvement model known as DMAIC DMAIC: (1) Define: identify customer’s and their priorities (2) Measure: determine how to measure the process and how it is performing (3) Analysis: determine the most likely causes of defects (4) Improve: identify means to remove the causes of defects (5) Control: Determine how to maintain the improvements
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Six Sigma DPMO (Defects Per Million Opportunities)
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(Number of defects/(Number of opportunities for error)(Number of Units)) x 1,000,000
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(3) Employee Empowerment – effective TQM program
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means involving employees in every step of the production process Techniques for building employee empowerment: (1) building communication networks that include employees (2) developing open, supportive supervisors (3) moving responsibility from both managers and staff to production employees (4) building high-morale organizations (5) creating such formal organization structures as teams and quality circles *Quality circles: a group of employees who meet regularly to solve work related problems*
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(4) Benchmarking – effective TQM program
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involves selecting a demonstrated standard of products, services, costs or practices that represent the very best performance for processes or activities very similar to your own Steps for developing benchmarks: (1) Determine what to benchmark (2) Form a benchmark team (3) Identify benchmarking partners (4) Collect and analyze benchmarking information (5) Take action to match or exceed the benchmark *often take the form of best practices found in other firms and in other divisions* Internal benchmark: used when an organization is large enough to have many divisions or business units
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(5) Just-in-time (JIT) – effective TQM program
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designed to produce or deliver goods just as they are needed relates to quality in three ways: (1) cuts the cost of quality (less inventory on hand) (2) improves quality (keeps evidence of errors fresh and limits the number of potential sources of error) (3) better quality means less inventory and a better, easier-to-employ JIT system
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(6) Taguchi Concepts – effective TQM program
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(1) Quality robustness: products that can be produced uniformly and consistently in adverse manufacturing and environmental conditions – remove the effects of adverse conditions instead of removing causes (cheaper and more effective) (2) Quality loss function: identifies all costs connected with poor quality and shows how these costs increase as the product moves away from being exactly what the customer wants – includes customer dissatisfaction, warranty and service costs, internal inspection, repair, and scrap costs, costs to society L = D^2C L – loss to society D^2 – square of distance from the target value C – cost of the deviation at the specification limit *the smaller the loss the more desirable the product* (3) Target-oriented quality: strives to keep the product at the desired specification, producing more (and better) units near the target
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(7) Knowledge of TQM tools – effective TQM program
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to empower employees and implement TQM as a continuing effort, everyone in the organization must be trained in the techniques of TQM
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Tools of TQM
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(1) Check Sheets (2) Scatter Diagrams (3) Cause-and-effect diagrams (4) Pareto charts (5) flowcharts (6) histograms (7) Control Chart
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(1) Check sheet – TQM tool
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any kind of form that is designed for recording data – help analysts find the facts or patterns that may aid in subsequent analysis Ex: a drawing that shows a tally of the areas where defects are occurring or a check sheet showing the type of customer complaints
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(2) Scatter Diagrams – TQM tool
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show the relationship between two measurements – if the two items are closely related, the data points will form a tight band Ex: the positive relationship between the length of a service call and the number of trips a repair person makes back to the truck for parts
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(3) Cause-and-effect diagrams – TQM tool
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Also known as the fish-bone chart – each bone represents a possible source for error Starts with four categories (*causes*): 1 – Material 2 – Machinery/equipment 3 – manpower 4 – methods Individual causes associated with each category are tied in as separate bones along that branch, often through a brainstorming process
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(4) Pareto Charts – TQM tool
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a method of organizing errors, problems, or defects to help focus on problem-solving efforts (remember 80/20 rule: 80% of a firms problems are a result of only 20% of the causes) – indicates which problems may yield the greatest payoff
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(5) Flow charts – TQM tool
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graphically present a process or system using annotated boxes and interconnected lines
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(6) Histograms – TQM tool
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show the range of values of a measurement and the frequency with which each value occurs – show the most frequently occurring readings as well as the variations in the measurements
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(7) Control Chart – TQM tool
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graphic presentations of data over time that show upper and lower limits for the process we want to control Statistical Process Control: monitors standards, makes measurements, and takes corrective action as a product or service is being produced – if outputs fall outside certain specific ranges, the process stops and is deemed out of control
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Inspection
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involves measurement, tasting, touching, weighing, or testing of the product – goal is to detect a bad process immediately *only finds deficiencies and defects; does NOT correct them* – expensive and do not add value Problems with inspection – workers become bored and tired – inspection equipment has variability (measurement error) *good processes, employee empowerment, and source control are a better solution* Source Inspection: doing the job properly with the operator ensuring that this is so (no inspection is needed) – consistent with employee empowerment where workers check their own work
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Attribute Inspection
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classifies items as being either good or defective – does not address the degree of failure
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Variable inspection
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measures such dimensions as weight, speed, size, or strength to see if an items falls within an acceptable range
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TWM in Services
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the personal component of services is more difficult to measure that the quality of the tangible component (goods) Service quality perceptions depend on: (1) intangible differences between products (2) the intangible expectations customers have of those products Operations Manager must recognize: – the tangible component of many services is important – the service process is important – the service is judged against the customer’s expectations (service quality is judged on the basis of whether it meets expectations) – exceptions will occur (quality control system must have a set of alternative plans for less-than-optimal operating conditions)

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