Supply Chain Test 3

Quality (ASQ definition)

The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs

Is the highest quality always the goal?

No. Quality level is a strategy CHOICE (e.g., Chick-fil-A vs. other fast food)

Managing quality supports which three strategies?

Differentiation, low cost, and response

Quality affects what part of the organization?

The entire organization: from supplier to customer, and from product design to maintenance

Two ways improved quality increases profits

1) Sales gains 2) Reduced costs

Sales gains from improved quality come via…

Improved response, flexible pricing, improved reputation

Reduced costs from improved quality come via…

Increased productivity, lower rework and scrap costs, lower warranty costs

Which is NOT a reduced-cost benefit of quality: flexible pricing, increased productivity, lower rework/scrap, lower warranty costs?

Flexible pricing (it is a SALES GAIN, not a cost reduction)

Three views of quality

User-based, manufacturing-based, product-based

User-based view of quality

(Perceived) performance and features that meet the user's needs. Ex: a student prefers a lightweight, easy-to-use, affordable phone

Manufacturing-based view of quality

Conformance to standards; making it right the first time. Ex: a phone assembled with no defective buttons or screen flaws

Product-based view of quality

Measurable (technical) attributes of the product. Ex: brighter screen, longer battery life, faster processor

ISO 9000

Set of international quality standards from the International Organization for Standardization; encourages quality management procedures, documentation, work instructions, and recordkeeping

ISO 9001

The core ISO standard; specifies the requirements for a quality management system. Certification builds customer confidence and a competitive edge

Why is ISO 9000 critical for global business?

It has international recognition (1.6M+ certifications in 201 countries) and gives buyers confidence that a supplier can consistently produce quality

Does ISO 9001 certification guarantee a supplier's products meet your quality expectations?

No. It shows the supplier has an established quality management system, but buyers should still verify certification and evaluate samples and performance

Ways to gain confidence in an unfamiliar overseas supplier

Customer reviews, references from other buyers, product samples, reputation, past performance, third-party certifications (e.g., ISO)

Four costs of quality

Prevention, appraisal, internal failure, external failure

Prevention costs

Costs of reducing the potential for defects. Ex: training baristas to make customized drinks correctly

Appraisal costs

Costs of evaluating products, processes, parts, and services. Ex: checking drink temperature before handing it to the customer

Internal failure costs

Costs of producing defective parts or services BEFORE delivery. Ex: remaking an incorrect drink before the customer receives it

External failure costs

Costs of defects discovered AFTER delivery; hard to quantify. Ex: refunding a customer who received the wrong drink

Which cost of quality is hardest to quantify?

External failure costs

Ethical responsibilities in quality management

Deliver healthy, safe, quality products; poor quality risks injuries, lawsuits, recalls, regulation; ethical conduct must guide responses to problems; consider all stakeholders

Total Quality Management (TQM)

A broad philosophy aimed at high quality and customer satisfaction by involving everyone in the organization in continuous improvement, from supplier to customer, with management commitment to company-wide excellence

Six concepts of TQM

Continuous improvement, Six Sigma, employee empowerment, benchmarking, JIT, knowledge of TQM tools

Key message: Continuous improvement / Kaizen

Quality improvement never ends

Key message: Six Sigma

Use a disciplined, data-driven process to reduce defects

Key message: Employee empowerment

Employees closest to the process help improve it

Key message: Benchmarking

Learn from organizations or units that perform better

Key message: JIT

Low inventory exposes quality and process problems

Key message: TQM tools

Collect and analyze evidence to improve quality

Continuous improvement

Never-ending improvement of people, equipment, suppliers, materials, and procedures; every operation can be improved; perfection is always sought but never achieved

Shewhart's PDCA cycle

Plan (identify problem, make plan) > Do (test the plan) > Check (is it working?) > Act (implement, document)

Kaizen

Japanese term for the ongoing process of unending improvement; TQM and zero defects are also used to describe continuous improvement

Six Sigma: two meanings

1) Statistical: a process with extremely high capability (3.4 defects per million opportunities) 2) A program/comprehensive system to reduce defects, lower costs, save time, and improve customer satisfaction

Six Sigma defect rate

3.4 defects per million opportunities

Who developed Six Sigma?

Motorola; adopted and enhanced by Honeywell and GE

Six Sigma is a strategy, a discipline, and a…

Set of 7 tools. The discipline is DMAIC

DMAIC stands for

Define, Measure, Analyze, Improve, Control

DMAIC: Define

Define the project's purpose, scope, and outputs; identify required process info with the customer's definition of quality in mind

DMAIC: Measure

Measure the process and collect data

DMAIC: Analyze

Analyze the data, ensuring repeatability and reproducibility

DMAIC: Improve

Improve by modifying or redesigning existing processes and procedures

DMAIC: Control

Control the new process to make sure performance levels are maintained

Keys to implementing Six Sigma

Big commitment from top management; leaders formulate the plan, show buy-in, and set the example; projects tied to strategic direction; management-directed, team-based, expert-led

Employee empowerment

Getting employees involved in product and process improvements. Note: ~85% of quality problems are due to materials and process

Techniques for employee empowerment

Build communication networks including employees; open, supportive supervisors; move responsibility to employees; build a high-morale organization; formal structures like teams and quality circles

Quality circle

A group of employees who meet regularly to solve problems; trained in group planning, problem solving, and statistical quality control; often led by a facilitator; a direct form of employee empowerment

Benchmarking

Selecting best practices to use as a standard for performance

Steps of benchmarking

1) Determine what to benchmark 2) Form a benchmark team 3) Identify benchmarking partners 4) Collect and analyze information 5) Take action to match or exceed the benchmark

Internal benchmarking

Benchmarking within a large organization; data is more accessible. Ex: comparing Xerox's French division sales to other European divisions

Just-in-Time (JIT)

Minimizes waste by producing goods only as needed; a 'pull' system (production only when signaled) that reduces inventory

How does JIT relate to quality?

Inventory hides process and material problems (a cushion). Low inventory exposes them, forcing fixes. JIT requires high quality to function; quality management solves the problems JIT exposes

JIT vs. quality management in one line

JIT exposes problems; quality management solves them

True/False: Kaizen is similar to TQM in that both focus on continuous improvement

True

Seven tools of TQM

Check sheet, scatter diagram, cause-and-effect (fishbone) diagram, Pareto chart, flowchart, histogram, statistical process control (SPC) chart

TQM tools for generating ideas

Check sheet, scatter diagram, cause-and-effect (fishbone) diagram

TQM tools to organize the data

Pareto chart, flowchart (process diagram)

TQM tools for identifying problems

Histogram, statistical process control chart

Check sheet

An organized method of recording data. Answers: What problems are occurring, and how frequently?

Scatter diagram

A graph of the value of one variable vs. another variable. Answers: Are two variables related?

Cause-and-effect (fishbone) diagram

Identifies process elements (causes) that may affect an outcome. Answers: What might be causing the problem?

Four typical fishbone categories (4 Ms)

Materials, Methods, Manpower, Machinery

Pareto chart

A graph that plots problems/defects in descending order of frequency. Answers: Which problems deserve priority?

Flowchart (process diagram)

A chart that describes the steps in a process. Answers: Where in the process might things go wrong?

Histogram

A distribution showing the frequency of occurrences of a variable. Answers: How are quality problems distributed?

Statistical process control (SPC) chart

Chart with time on the horizontal axis plotting values of a statistic, with a target and upper/lower control limits; tells when to take corrective action. Answers: Is the process stable or showing unusual variation?

Attribute vs. variable data

Attributes: items are good/bad, acceptable/unacceptable (no degree of failure). Variables: measure dimensions like weight, speed, height, strength; fall within an acceptable range. They use different statistical techniques

Tool used by a manager who finds 70% of defects come from raw material impurities, 15% human error, 10% machines, 5% other

Pareto chart

Tool used to organize complaints into a small number of potential causes or factors

Cause-and-effect (fishbone) diagram

Tool used to understand the sequence of events a product travels through

Flowchart

Pareto charts are used to…

Organize data such as errors, problems, or defects (the histogram shows the range of values and their frequency)

Starbucks complaints example: which tool prioritizes the biggest complaint categories?

Pareto chart. Top three (mobile orders late 36, incorrect customization 25, missing item 18) = 79% of complaints; investigate late mobile orders first

Possible causes of late mobile orders (fishbone)

Understaffing at peak hours, unrealistic pickup-time estimates, poor coordination between mobile and walk-in orders, unavailable ingredients

Inspection

Examining items to see if they are good or defective; detects defects but does not correct deficiencies in the process or product; expensive

Two key inspection issues

When to inspect and where in the process to inspect

When and where to inspect

At the supplier's plant during production; at your facility on receipt of goods; before costly or irreversible processes; during step-by-step production; when production/service is complete; before delivery to the customer; at the point of customer contact

When should inspection typically NOT take place?

After a costly or irreversible process (inspect BEFORE it)

Why is inspection a poor substitute for quality?

Worker fatigue, measurement error, process variability; you cannot inspect quality into a product. Better: robust design, empowered employees, sound processes

Source inspection (source control)

Doing the job properly at the source; the operator self-checks their own work. 'The best inspection is no inspection'; consistent with employee empowerment

Poka-yoke

Foolproof devices or techniques that pass only acceptable products and give quick feedback on errors. Ex: diesel nozzle won't fit an unleaded gas tank

True/False: Attribute inspection classifies items as either good or defective

True

Why is service quality harder to measure than goods quality?

Perceptions depend on intangible differences between products and intangible customer expectations

10 determinants of service quality

Reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding/knowing the customer, tangibles

Determinant: Reliability

Consistency of performance and dependability, from the first time to the last

Determinant: Responsiveness

Willingness or readiness of employees to provide service

Determinant: Competence

Possessing the required skills and knowledge to perform the service

Determinant: Access

Approachability and ease of contact

Determinant: Courtesy

Politeness, respect, consideration, friendliness

Determinant: Communication

Keeping customers informed and listening to them

Determinant: Credibility

Trustworthiness, believability, honesty

Determinant: Security

Freedom from danger, risk, or doubt

Determinant: Understanding/knowing the customer

Making the effort to understand the customer's needs

Determinant: Tangibles

The physical evidence of the service

SERVQUAL

Popular service quality scale comparing customer expectations with actual performance/perceptions; focuses on gaps. Originally 10 determinants, later reduced to 5 dimensions

5 SERVQUAL dimensions (RATER)

Reliability, Assurance, Tangibles, Empathy, Responsiveness

SERVQUAL: Reliability

Deliver the promised service correctly and consistently. Ex: drink made correctly and ready when promised

SERVQUAL: Assurance

Employees inspire trust and confidence. Ex: baristas knowledgeable about ingredients

SERVQUAL: Tangibles

Physical appearance of facilities, equipment, employees. Ex: clean store, attractive seating