GMS401 MIDTERM 2

Quality

Quality

the ability of a product or service to meet customer needs

4 Categories of Cost of Quality

1. Prevention costs

2. Appraisal costs

3. Internal failure

4. External costs

Prevention costs

reducing the potential for defects (training)

Appraisal costs

evaluating products, parts and services (testing, inspection)

Internal failure

producing defective parts or service before delivery (rework, scrap, downtime)

External costs

costs that occur after delivery of defective parts or services (returned goods, liability, costs to society)

ISO 9000

A set of quality standards developed by the International Organization for Standardization (ISO). Focus is to establish quality management procedures through leadership, detailed documentation, work instructions and record keeping.

ISO 14000

A series of environmental management standards that contain 5 core elements: environment management, auditing, performance evaluation, labelling and life cycle assessment

Total Quality Management (TQM)

management of an entire organization so that it excels in all aspects of products and services that are important to the customer

Deming's 14 points for implementing quality improvement

1. create consistency of purpose

2. lead to promote change

3. build quality into the product

4. build long-term relationships based on performance

5. continuously improve product, quality and service

6. start training

7. emphasize leadership

8. drive out fear

9. break down barriers between departments

10. stop haranguing (lecture) workers

11. support, help, improve

12. remove barriers to pride in work

13. institute a vigorous program of education and self-improvement

14. put everybody in the company to work on the transformation

7 Concepts of TQM

1. continuous improvement

2. six stigma

3. employee empowerment

4. benchmarking

5. just-in-time (JIT)

6. taguchi concepts

7. knowledge of TQM tools

PDCA

a continuous improvement model that involves 4 stages: plan, do, check, act

Six Stigma

a program to save time, improve quality and lower cots (process with 99.9997% capability). Developed by Motorola in 1980s

DMAIC

Six stigma improvement model:

1. define (critical outputs and identify gaps for improvement)

2. measure (the work and collect process data)

3. analyze (the data)

4. improve (the process)

5. control (the new processes to make sure new performance is maintained)

Employee Empowerment

enlarging employee jobs so that the added responsibility and authority is moved to the lowers level possible in the organization

Quality circle

a group of employees meeting regularly with a facilitator to solve work-related problems in their work area

Benchmarking

selecting demonstrated standard of performance that represents the very best performance for a process or an activity

Steps to 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

3 ways JIT is related to quality

1. JIT cuts the cost of quality

2. JIT improves quality

3. better quality means less inventory and a better, easier-to-employ JIT system

Taguchi concepts

3 concepts aimed at improving both product and process quality: -quality robust -quality loss function (QLF) -target-oriented quality

Quality Robust

products that are consistently built to meet customer needs in spite of adverse conditions in the production process

Quality Loss function (QLF)

a mathematical function that identifies all costs connected with poor quality and shows how these costs increase as product quality moves from what the customer wants

Target-oriented quality

a philosophy of continuous improvement to bring a product exactly on target

TQM Tools for generating ideas

-check sheets -scatter diagrams -cause-and-effect diagram

TQM Tools for organizing data

-Pareto charts -flowcharts

TQM Tools for identifying problems

-histogram -statistical process control chart

Check sheet

an organized method of collecting data

Scatter diagrams

a graph of the value of one variable vs. another

cause-and-effect diagram

tool that identifies process elements (cause) that might effect an outcome (fish-bone diagram)

Pareto chart

a graph to identify and plot problems or defects in descending order of frequency

Flowchart

a chart that describes the steps in a process

Histograms

a distribution showing the frequency of occurrences of a variable

Statistical Process Control (SPC)

a process used to monitor standards, make measurements, and take corrective actions as product or service is being produced

Control Charts

graphic presentations of process data over time, with predetermined control limits (distinguish between natural variations and assignable variations)

Inspection

a means of ensuring that an operation is producing at a quality level expected

Inspection Issues

-when to inspect -where in process to inspect -worker fatigue -measurement error -process variability -cannot inspect quality into a product -robust design, empowered employees and sound processes are better solutions

When & Where to inspect

1. at the supplier's plant while the supplier is producing

2. at your facility upon receipt of goods from supplier

3. before costly or irreversible processes

4. during the step-by-step production process

5. when production or service is complete

6. before delivery to your customer

7. at the point of customer contact

Source Inspection

controlling or monitoring at the point of production or purchase- at the source

poka-yoke

foolproof devices or techniques designed to pass only acceptable product

Attribute inspection

an inspection that classifies items as being either good or defective

Variable inspection

classifications of inspected items as falling on a continuum scale, such as dimension or strength

Reliability

determinant of service quality: consistency of performance and dependability

Responsiveness

determinant of service quality: willingness or readiness of employees

Competence

determinant of service quality: required skills and knowledge

Access

determinant of service quality: approachability and ease of contact

Courtesy

determinant of service quality: politeness, respect, consideration, friendliness

Communication

determinant of service quality: keeping customers informed

Credibility

determinant of service quality: trustworthiness, believability, honesty

Security

determinant of service quality: freedom from danger, risk or doubt

understanding/knowing customer

determinant of service quality: understand customer's needs

tangible

determinant of service quality: physical evidence of a service

Marriot Hotel Service Recovery Strategy: LEARN

Listen Emphasize Apologize React Notify (system so it wont happen again)

Natural variation

variability that affects every production process to some degree and is to be expected (common cause)

Assignable variation

variation in a production process that can be traced to specific cause

x-chart

a quality control chart for variables that indicates when changes occur in the central tendency of a production process

R-chart

a control chart that tracks the "range" within a sample; it indicates that a gain or loss in uniformity has occurred in dispersion of a production process

3 Types of Process Outputs

1. in statistical control and capable of producing within control limits

2. in statistical control but not capable of producing within control limits

3. out of control

Central Limit Theorem

regardless of the distribution of the population, the distribution of sample means drawn from the population will tend to follow a normal curve

Central Limit Theorem 2 points

1. the mean of the sampling distribution will be the same as the population mean

2. The standard deviation of the sampling distribution will equal the population deviation divided by the square root of the sample size

p-chart

a quality control chart that is used to control attributes - measure the percent defective

variables

characteristics that can take any real value, whole or fractions

attributes

defect-related characteristics, classify products as either good or bad, categorical variables

c-chart

a quality control chart used to control the number of defects per unit of output

C-chart, p-chart vs x-chart, R-chart

X-chart & R-chart: variable data (length or width)

C-chart: observations are attributes (defects per unit of output can be counted)

P-chart: observations are attributes (categorized into 2 states...good/bad, pass/fail)

Managerial Issues and Control Charts

1. select points in the processes that need SPC

2. determine the appropriate charting technique

3. set clear policies and procedures

Run test

a test used to examine the points in a control chart to see if nonrandom variation is present

Process Capability

the ability to meet design specifications

Process Capability ratio

ratio for determining whether a process meets design specifications; a ratio of the specification to the process variation (capable process has ratio of at least 1)

Process Capability Index

a proportion of variation between the centre of the process and the nearest specification limit (capable process must have at least 1)

acceptance sampling

form of quality testing used for incoming materials or finished goods (takes samples at random from a lot , decide whether to accept whole lot based on sample)

Operating characteristic curve

shows how well a sampling plan discriminates between goods and bad lots

Acceptable Quality Level (AQL)

poorest level of quality we are willing to accept

Lot Tolerance Percentage Defective (LTPD)

quality level that company considers bad

Average Outgoing Quality (AOQ)

average percent defective, can be computed if: -a sampling plan replaces all defectives -we know the incoming percent defective for the lot

Average Outgoing Quality Level (AOQL)

the maximum AOQ, the highest percentage defective or the lowest average quality

Inventory Management Objective

to strike a balance between inventory investment and customer service

Functions of Inventory

1. to decouple/separate various parts of the production process

2. to decouple the firm from fluctuations in demand and provide a stock of goods that will provide a selection for customers

3. to take advantage of quantity discounts

4. to hedge against inflation (oil)

4 Types of Inventory

1. Raw material (not processed)

2. Work-in-process (WIP, change but not complete)

3. Maintenance, Repair, Operation (MRO)

4. Finished goods (complete, waiting shipment)

ABC analysis

a method for dividing on-hand inventory into 3 classifications based on annual dollar value

Cycle Counting

items are counted and records updated on a periodic basis

Cycle Counting Advantages

-eliminates shutdowns and interruptions -eliminates annual inventory adjustments -trained personnel audit accuracy of inventory -allows causes of errors to be identified and corrected -maintains accurate inventory records

shrinkage

retail inventory that is unaccounted for between receipt and sale

pilferage

a small amount of theft

Control of service inventories techniques

1. good personnel selection training and discipline

2. tight control on incoming shipments

3. effective control on all goods leaving facility

Independent demand

the demand for an item is independent of the demand for any other item in the inventory

dependent demand

the demand for item is dependent upon the demand for some other item in the inventory (mostly complimentary goods)

holding costs

the cost to keep or carry inventory in stock (obsolescence, storage)

ordering costs

the cost of the order process (forms, order processing)

setup costs

the cost to prepare a machine or process for production (time and labour to clean/change tools)

setup time

the time required to prepare a machine or process for production

3 Inventory Models for Independent Demand

1. Basic Economic order quantity (EOQ) model

2. Production order quantity model (POQ)

3. Quantity discount model

Basic Economic Order Quantity (EOQ) Model

an inventory-control technique that minimizes the total ordering and holding costs (robust)

EOQ Assumptions

1.demand is known, constant, independent 2. lead time is known and constant 3. receipt of inventory is instantaneous and complete 4. quantity discounts are not possible 5. only variable costs are setup and holding 6. stockouts (shortages) can be completely avoided

robust

giving satisfactory answers even with substantial variation in the parameters

Lead time

in purchasing systems, the time between placing an order and receiving it; in production systems, the wait, move queue, setup and run times for each component produced

Reorder Points (ROP)

the inventory level (point) at which action is taken to replenish the stocked item

safety stock

extra stock to allow for uneven demand (a buffer)

Production Order Quantity model (POQ)

an economic order quantity technique applied to production orders, used when inventory builds up over a period of time after an order is placed

Quantity Discount Model

a reduced price for items purchased in large quantities

Probabilistic model

a statistical model applicable when product demand or any other variable is not known but can be specified by means of a probability distribution