Productivity and Quality Management Lecture 20.
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Transcript of Productivity and Quality Management Lecture 20.
Productivity and Quality Management
Lecture 20
THE PHILOSOPHIES OF QUALITYLAST LECTURE
Summary
• The Quality Management Philosophies• Deming’s System of Profound Knowledge
– Appreciation for a system– Understanding variation– Theory of knowledge– Psychology
• Perspectives on Profound Knowledge
W. Edward Deming
• Received a Ph.D. in physics and trained as a statistician• Was trained as statistician and worked for Western
Electric during its pioneering era of statistical quality control development in the 1920s and 1930s.
• After World War II helped Japan implement his statistical quality control
• Credited with having the greatest influence on quality management
• Quality philosophy focused on reducing uncertainty and variability
Deming Chain Reaction
Improve quality
Costs decrease because of less rework and mistakes
Productivity improves
Capture market with better quality and lower price
Stay in business and provide more jobs
9
Deming’s System of Profound Knowledge
• Appreciation for a system• Understanding variation• Theory of knowledge• Psychology
THE QUALITY GURUS
Slide 3.2
Leaders in the Quality Revolution
• W. Edwards Deming• Joseph M. Juran• Philip B. Crosby• Shingo • Ishikawa• Genichi Taguchi• Peter Drucker• Tom Peters
Deming’s Background
• Main architect for introducing Total Quality into Japan
• Born 1900• Graduated in Electrical Engineering• PhD in mathematical physics• Became statistician for US govt.• Sent by US govt. to Japan after WWII to advise
on Japanese census.
Deming’s Philosophy
• Quality is about people, not products• Suggested quality concept for designing product• Management need to understand nature of
variation and how to interpret statistical data• Promoted importance of leadership• 85% of production faults responsibility of
management, not workers• Enumerated a 14-point management philosophy
Product Development Cycle
1. Design the product.2. Make it.3. Try to sell it.4. Do consumer research and test the product’s
uses.5. Redesign – start the cycle all over again.
Achieving Quality
• Companies should direct efforts towards:– Innovation of products– Innovation of processes– Improvement of existing products– Improvement of existing processes
Quality Approach in Context
Quality
Costs
Prices
Productivity
Market Share
Stay in business
Attributes of a Leader
• Coaches – not judges• Strives to understand variation and its causes• Strives to remove obstacles within the
organization• Responds to all customer forces• Adopts consistency of purpose• Places and emphasis on improving processes
Attributes of a Leader
• Recognizes that people are not ‘assets’; they are ‘jewels’
• Strives to recognize those who need help and the gives help
• Creates and atmosphere of trust• Knows the work he supervises• Does not place an over-reliance on figures• Encourages education and continuous
improvement of each person
Analysis Vs Synthesis
• Analysis has been the essence of classical science.
• The scientific method assumes that the whole is nothing but the sum of the parts, and thus understanding the structure is both necessary and sufficient to understanding the whole.
Analysis Vs Synthesis
• Synthesis has been the main instrument of the functional approach.
• By defining a system by its outcome, synthesis puts the subject in the context of the larger system of which it is a part, and then studies the effects it produces in its environment.
Deming’s 14-point Management Philosophy
1. Create constancy of purpose for continual improvement of products– Create constancy of purpose for improvement of
systems, products and services, with the aim to become excellent, satisfy customers, and provide jobs. Reduced defects and cost of development.
Deming’s 14-point Management Philosophy
2. Adopt a commitment to seek continual improvements
• Constantly and forever improve the system development processes, to improve quality and productivity, and thus constantly decrease the time and cost of systems. Improving quality is not a one time effort.
Deming’s 14-point Management Philosophy
3. Switch from defect detection to defect prevention
• Cease dependencies on mass inspection (especially testing) to achieve quality. Reduce the need for inspection on a mass basis by building quality into the system in the first place. Inspection is not the answer. It is too late and unreliable – it does not produce quality.
Deming’s 14-point Management Philosophy
4. In dealing with suppliers one should end the practice of awarding business on price. Move towards quality of product, reliability of delivery and willingness to cooperate and improve. Build partnerships.
• Minimize total cost. Move towards a single supplier for any one item or service, making them a partner in a long-term relationship of loyalty and trust.
Deming’s 14-point Management Philosophy
5. Improvement is not confined to products and their direct processes but to all supporting services and activities
• All functions in an organization need to become quality conscious to deliver a quality product.
Deming’s 14-point Management Philosophy
6. Train a modern way.• Institute training on the job. Everyone
must be trained, as knowledge is essential for improvement.
Deming’s 14-point Management Philosophy
7. Supervision must change from chasing, to coaching and support.
• Institute leadership. It is a manger’s job to help their people and their systems do a better job.
Deming’s 14-point Management Philosophy
8. Drive out fear and encourage two-way communication.
• Drive out fear, so that everyone may work effectively. Management should be held responsible for the faults of the organization and environment.
Deming’s 14-point Management Philosophy
9. Remove barriers between departments• Break down barriers between areas. People
must work as a team. They must foresee and prevent problems during systems development and use.
Deming’s 14-point Management Philosophy
10. Do not have unrealistic targets• Set realistic targets. Do not place people under
unnecessary pressure by asking them to do things which are not achievable. Eliminate slogans, exhortations, and targets that ask for zero defects, and new levels of productivity. Slogans do not build quality systems.
Deming’s 14-point Management Philosophy
11.Eliminate quotas and numerical targets• Eliminate numerical quotas and goals.
Substitute it with leadership. Quotas and goals (such as schedule) address numbers - not quality and methods.
Deming’s 14-point Management Philosophy
12.Remove barriers that prevent employees having pride in the work that they perform
• Remove barriers to pride of workmanship. The responsibility of project managers must change from schedules to quality.
Deming’s 14-point Management Philosophy
13. Encourage education and self-improvement for everyone
• Institute and vigorous program of education and self-improvement for everyone. There must be a continuing commitment to training and educating software managers and professional staff.
Deming’s 14-point Management Philosophy
14.Publish top management’s permanent commitment to continuous improvement of quality and productivity
Slide 3.15
Deming Prize
• Instituted 1951 by Union of Japanese Scientists and Engineers (JUSE) in Japan
• Several categories including prizes for individuals, factories, small companies, and Deming application prize
• American company winners– Florida Power & Light (first U.S. winner)
Deming Quotes
• •“94% of the outcome of any organization comes from the processes used, not the people”.
• •“A fault in the interpretation of observations, seen everywhere, is to suppose that every event is attributable to someone (usually the one closest at hand), or is related to some special event. The fact is that most troubles with service and production lie in the system and not the people”.
Juran
Joseph Juran
• Industrial Engineer• Joined Western Electric in the 1920s• Authored The Quality Control Handbook
which often referred to as the quality bible• Believed quality improvement should be
achieved through projects• Focused on three major quality processes,
called the Quality Trilogy
Slide 3.16
Slide 3.17
Juran’s Quality Trilogy
• Quality planning– Preparing to meet quality goals
• Quality control– Meeting quality goals during operations
• Quality improvement– Reaching unprecedented levels of performance
Q.P
Q.C. Q.I.
Key Idea
• Juran proposed a simple definition of quality: “fitness for use.”
• This definition of quality suggests that it should be viewed from both external and internal perspectives; that is, quality is related to
(1) product performance that results in customer satisfaction;
(2) freedom from product deficiencies, which avoids customer dissatisfaction.”
Juran’s 10-point Program1. Identify customers2. Determine customer needs3. Translate4. Establishment units of measurement 5. Establish measurements6. Develop product7. Optimize product design8. Develop process9. Optimize process capability10. Transfer
Cost of Poor Quality
Cost of Poor Quality 43 .PPT
Managers and workers speak the language of things but Senior leaders speak the language of money...
…COPQ allows us to translate the things into money.
Cost of Poor Quality 44 .PPT
Cost of Poor Quality
Prevention
Cost of Attaining Quality
Appraisal: Prediction Audit
Appraisal: Detection
Cost of Poor Quality Failure: Internal
External
Cost of Poor Quality 45 .PPT
Components
Non-Conformance
$Conformance
$
$
Quality Costs
Cost of Poor Quality 46 .PPT
I want my money back!
I want my money back!
Cost of Quality (COQ)Cost of Quality (COQ)
PreventionPrevention AppraisalAppraisal Internal FailureInternal Failure
ExternalFailureExternalFailure
$$
Total Quality Cost
COPQ OverviewDefinitions
All activities and processes that do not meet agreed performance and/or expected outcomes
Costs that would disappear if every task were always performed without deficiency
Actual Cost - Minimum Cost = COPQ
Traditional Cost of Poor Quality(4-5% of Sales)
When quality costs are initially determined, the categories included are the visible ones as depicted in the iceberg
below.Waste
Testing Costs
Rework
Customer Returns
Inspection CostsRejects
Recalls
Cost of Poor QualityAs an organization gains a broader definition of poor quality,the hidden portion of the iceberg becomes apparent.
Late Paperwork High CostsPricing orBilling Errors
Excessive FieldServices Expenses
Incorrectly CompletedSales OrderLack of Follow-up
on Current ProgramsExcessiveEmployee Turnover Planning Delays Excess Inventory
ExcessiveSystem CostsOverdue Receivables
ComplaintHandling
Unused Capacity
Time withDissatisfied Customer
Excessive Overtime
Waste
Testing Costs
Rework
Customer Returns
Inspection CostsRejects
Recalls
Development Cost of Failed Product Hidden COPQ: The costs incurred to deal with these chronic problems
Premium Freight Costs
Customer Allowances
COPQ rangesfrom 15-25% of Sales
Sigma
6 sigma
5 sigma
4 sigma
3 sigma
2 sigma
Cost
<10% of sales
10-15% of sales
15-20% of sales
20-30% of sales
30-40% of sales
Quantifying the Potential Benefit
The ratio of the individual category costs to total costs varies widely. Many companies exhibit ratios which look like the following:
Quality Cost Category Percent of Total
Internal Failure 25 to 40
External Failure 25 to 40
Appraisal 10 to 50
Prevention .05 to 5
What's Wrong With This Picture?
What Does Reality Look Like?
Cost of Poor Quality 52 .PPT
Examples of Prevention Expense Quality Planning Training and Education Process Definition Customer Surveys Preproduction Reviews Technical Manuals Detailed Product Engineering Early Approval of Product Specifications
Purchase Cost Targets Process Capability Studies Preventive Maintenance Supplier Qualification Job Descriptions Housekeeping Zero-Defect Program
Cost of Poor Quality 53 .PPT
Supplier Certification Employee Surveys Security Checks Safety Checks Reviews:– Operating Expenditures– Product Costs– Financial Reports– Capital Expenditures
Examples of Appraisal Expense Test Inspection Process Controls Train QA Personnel Product Audits Quality Systems Audits Customer Satisfaction Surveys and Audits Prototype Inspection Accumulating Cost Data
Cost of Poor Quality 54 .PPT
Supplier Problems– Scrap and rework– Late deliveries– Excess inventory
Equipment Downtime Accidents, Injuries Absenteeism Unused Reports Missed Schedule Cost Lost Sales (any cause)
Examples of Internal Failure Costs Substandard Product Scrap or Rework Re-inspection Redesign/Engineering Change Process Modifications Payroll Errors All Expediting Costs Off-Spec/Waiver Abandoned Programs
Cost of Poor Quality 55 .PPT
Examples of External Failure Costs Product Recall Handling Complaints Customer Service
Caused by Errors Products Returned Analysis of Returns Evaluation of Field Stock Late Payments and
Bad Debts
Lawsuits Reports– Sales and service– Returns and allowances– Failure
Lost Sales Because of Customer Dissatisfaction!
Cost of Poor Quality 56 .PPT
Non-value Added Work
• Common activities that provide no benefit to customers.– Some result from internal or external failure– Some are unnecessary inspection
Examples
– Rarely used information systems
– Memos never read
– Financial reports not used
– Irrelevant procedures
– Meetings with no objectives or outcomes
Definition
Cost of Poor Quality 57 .PPT
The Hidden Organization
“Theoretical Cycle Time: The back-to-back process timerequired for a single unit to complete all stages of a taskwithout waiting, stopping, or setups.”
ProductStep1
Step2
Floor SpaceFloor Space Floor SpaceFloor Space
Floor SpaceFloor Space
Value AddedNon-Value Added
Philip R. Thomas, Competitiveness Through Total Cycle Time. McGraw-Hill (1990)
The Hidden Factory
Analyze
Fix
Test
Analyze
Fix
Test
Cost of Poor Quality 58 .PPT
Why Cost of Poor Quality?• Reporting Tool
– Comparisons– Trends
• Analytical Tool– Priorities– Tradeoffs
• Investment Tool– ROI
Cost of Poor Quality 59 .PPT
Focus of COPQ Efforts
Identify and Quantify Quality Costs Expose the “Hidden Factory”
Ongoing Measurement System Breakthrough Improvement
Cost of Poor Quality 60 .PPT
Advantages of Using Quality Costs for Management• Advantages
Reducing the cost of poor quality is one of the best ways to increase a company's profit.
Provides manageable entity and a single overview of quality.
Aligns quality and goals.
Prioritizes problems and provides a means to measure change/improvement.
Provides a means to correctly distribute controllable quality cost for maximum profits.
Promotes the effective use of resources.
Provides incentives for doing the job right every time.
Summary
• Quality Gurus– Deming Philosophy
• Product development cycle• Deming’s 14 points
– Juran’s Quality Trilogy• Cost of poor quality
Improving Productivity
