ENG209: ENGINEERING MANAGEMENT (Elective Course for EEE Students) (2016 Fall, Week 2) Prof. Dr. Mete Gündoğan Slides Preparation Res. Asst. Cihat Öztürk (IE PhD Candidate) Res. Asst. Melda K. Akgün (IE MSc Candidate)
SECTION 1 QUALITY MANAGEMENT Lesson Content: Introduction To Quality Standardization Total Quality Concept Building And Sustaining Total Quality in Organizations
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What is Quality? Quality is perfection, comparative degree” (Webster’s ve
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Oxford Dictionary) In the society, quality is perceived as, the presence of superiority among similar products and services. "The totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs“ (ISO) Complying with the requirements specified by the client “Delivery of reliable information within an agreed span of time under agreed conditions, at agreed costs, and with necessary aftercare"
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Why Quality? Reasons for quality becoming a cardinal priority for most organizations: Competition – Today’s market demand high quality products at low cost. Having `high quality’ reputation is not enough! Internal cost of maintaining the reputation should be less. Changing customer – The new customer is not only commanding priority based on volume but is more demanding about the “quality system.” Changing product mix – The shift from low volume, high price to high volume, low price have resulted in a need to reduce the internal cost of poor quality. 4
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Why Quality? Product complexity – As systems have become more
complex, the reliability requirements for suppliers of components have become more stringent. Higher levels of customer satisfaction – Higher customers expectations are getting spawned by increasing competition. Relatively simpler approaches to quality viz. product inspection for quality control and incorporation of internal cost of poor quality into the selling price, might not work for today’s complex market environment. 5
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Dimensions of Quality
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Dimension
Meaning
Performance
Primary product characteristics
Features
Added features
Conformance
Meeting standards
Reliability
Consistency of performance
Durability
Useful life
Service
Resolution of complaints
Response
Human to human interface
Aesthetics
Sensory characteristics
Reputation
Past performance
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Quality Perspectives 7
Everyone defines Quality based on their own perspective of it. Typical responses about the definition of quality would include: Perfection Consistency Eliminating waste Speed of delivery Compliance with policies and procedures Doing it right the first time Delighting or pleasing customers Total customer satisfaction and service
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Quality Perspectives Judgmental perspective “goodness of a product.” Shewhart’s transcendental definition of quality – “absolute and universally recognizable, a mark of uncompromising standards and high achievement.” Examples of products attributing to this image: Rolex watches, Lexus cars. Product-based perspective “function of a specific, measurable variable and that differences in quality reflect differences in quantity of some product attributes.” Example: Quality and price perceived relationship. 8
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Quality Perspectives User-based perspective “fitness for intended use.” Individuals have different needs and wants, and hence different quality standards. Example – Nissan offering ‘dud’ models in US markets under the brand name Datson which the US customer didn’t prefer. Value-based perspective “quality product is the one that is as useful as competing products and is sold at a lesser price.” US auto market – Incentives offered by the Big Three are perceived to be compensation for lower quality. 9
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Quality Perspectives Manufacturing-based perspective “the desirable outcome of a engineering and manufacturing practice, or conformance to specification.” Engineering specifications are the key! Example: Coca-cola – “quality is about manufacturing a product that people can depend on every time they reach for it.”
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Quality Perspectives
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Quality levels At organizational level, Which products and services meet your expectations? Which products and services you need that you are not currently receiving?
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At process level, What products and services are most important to the external customer? What processes produce those products and services? What are the key inputs to those processes? Which processes have most significant effects on the organization’s performance standards?
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Quality levels At the individual job level, What is required by the customer? How can the requirements be measured? What is the specific standard for each measure?
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Cost of Quality Quality affects all aspects of the organization and has dramatic cost implications:
Quality Control Costs Prevention Costs Appraisal Costs
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Quality Failure Costs Internal Failure Costs External Failure Costs
Quality Control Costs ď‚— Prevention Costs : Costs incurred in the process of preventing poor
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quality from occurring. o Quality planning costs o Product-design costs o Process costs o Training costs o Information costs ď‚— Appraisal Costs : Costs incurred in the process of uncovering defects. o Inspection and testing o Test equipment costs o Operator costs ENG209 Week_02
Quality Failure Costs ď‚— Internal Failure Costs: Costs associated with discovering poor
product quality before the product reaches the customer. o Scrap costs o Rework costs o Process failure costs o Process downtime costs o Price-downgrading costs
ď‚— External Failure Costs : Costs associated with quality problems
that occur at the customer site. o Customer complaint costs o Product return costs o Warranty claims costs o Product liability costs o Lost sales costs
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Cost of Quality ďƒź
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The earlier defects are found, the less costly they are to correct.
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Evolution of Total Quality Management
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Deming’s 14 Points (Quality Guru) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 19
Create constancy of purpose Adopt philosophy of prevention Cease mass inspection Select a few suppliers based on quality Constantly improve system and workers Institute worker training Instil leadership among supervisors Eliminate fear among employees Eliminate barriers between departments Eliminate slogans Remove numerical quotas Enhance worker pride Institute vigorous training and education programs Develop a commitment from top management to implement above 13 points
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What Is Total Quality Management (TQM) ISO Definition: ď‚— The management approach of an organization, centered on quality, based on the participation of all its members and aiming at long term success through customer satisfaction and benefits to all members of the organization and to society Dennis S. Tachiki : ď‚— Total Quality Management is a structured system for delighting internal and external customers by integrating the business environment, continuous improvement, & employee Participation 20
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Why TQM? Strengthened competitive position Adaptability to changing or emerging market conditions and to environmental and other 21
government regulations Higher productivity Enhanced market image Elimination of defects and waste Reduced costs and better cost management Higher profitability Improved customer focus and satisfaction Increased customer loyalty and retention Increased job security Improved employee morale Enhanced shareholder and stakeholder value Improved and innovative processes
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Culture changes for TQM
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Quality element
OLD CULTURE
TQM CULTURE
Definition
Product oriented
Customer oriented
Priorities
Second to service and cost
Equal to service and cost
Decisions
Short term
Long term
Emphasis
Detection
Prevention
Errors
Operations
System
Responsibility
Quality Control
Everyone
Problem Solving
Managers
Teams
Procurement
Price
Life cycle costs, Partnership
Manager’s Role
Plan, assign, control, enforce
Delegate, coach, facilitate, mentor
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TQM Philosophy TQM Focuses on identifying quality problem root causes Encompasses the entire organization Involves the technical as well as people
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TQM Philosophy Customer focus: Goal is to first identify and then meet customer needs TQM recognizes that a perfectly produced product has little value if it is not what the customer wants Quality is customer driven
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TQM Philosophy Continuous improvement : A philosophy of never-ending improvement The Plan–Do–Study–Act Cycle Benchmarking
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TQM Philosophy Employee empowerment : to seek out quality problems and correct them Employees are rewarded for uncovering quality problems, not punished External customers : those that purchase the company’s goods and services Internal customers : employees of the organization who receive goods or services from others in the company Team Approach Two heads are better than one Using techniques such as brainstorming, discussion, and quality control tools, teams work regularly to correct problems. The contributions of teams are considered vital to the success of the company. Quality Circle. 26
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TQM Philosophy Use of quality tools : Employees need to identify and correct quality problems so they
need proper training They need to understand how to assess quality by using a variety of
quality control tools, how to interpret findings, and how to correct problems Seven Tools of Quality Control (flow charts, control diagrams etc.)
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Total Quality Control Philosophy Product design : Quality Function Deployment
A tool used to translate the preferences of the customer into specific technical requirements QFD encompasses Customer requirements Competitive evaluation Product characteristics Relationship matrix Trade-off matrix Setting Targets 28
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TQM Philosophy and Reliability Product design : Reliability The probability that a product, service, or part will perform as intended. No product is 100% certain to function properly Reliability is a probability function dependent on sub-parts or components Reliability of a system is the product of component reliabilities RS = (R1) (R2)... (Rn) RS = reliability of the product or system R1 = reliability of the components
Increase reliability by placing components in parallel Parallel components allow system to operate if one or the other fails RS = R1 + (R2* Probability of needing 2nd component)
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Reliability Example: Suppose a room has two lamps, but to have adequate light both lamps must work (success) when turned on. Here the product is the lighting system that has two component lamps. One lamp has a probability of working of .90, and the other has a probability of working of .80. The probability that both will work is .90 Ă— .80 = .72. This lighting system can be represented by the following diagram where the two components are connected in series:
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Reliability ď‚— Even though the individual components of a series system
(product) might have high reliability, the series system (product) as a whole can have considerably less reliability because all its components must function (i.e., the system is dependent on each of its components). ď‚— As the number of components in a series system (product) increases, the system (product) reliability decreases. For example, a series system (product) that has eight components, each with a reliability of .99, has a reliability of only .99^8 = .923. 31
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Reliability Example: There are two lamps in a room. When turned on, one has probability of working of .90 and the other has probability of working of .80. Only a single lamp is needed to light the room for success (note that the threshold for success is different in this example). Then, probability of success Ps = 1 – (1 – .90)(1 – .80) = .98. Conceptually, we can think of this system as a lamp with a backup. If the first lamp fails to light when turned on, the backup lamp is turned on. The probability of success Ps is probability that the first lamp operates plus probability that the first lamp fails and the backup lamp operates, i.e., .90 + (1 − .90) × .80 = .98. 32
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Reliability ď‚— This backup system can be represented by the following
diagram.
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TQM Philosophy Process management : Quality products come from quality sources Quality must be built into the process Quality at the source a belief that it is better to uncover source of quality problems and correct it TQM extends to quality of product from company’s
suppliers
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TQM Philosophy Managing supplier quality : ď‚— An inspection performed to check the quality of
materials that has arrived is viewed as a practice contributing to poor quality and wasted time and cost. ď‚— TQM extends the concept of quality to suppliers and ensures that they engage in the same quality practices.
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Characteristics of TQM A small Quality First-Not short term Profit Customer Orientation - Not Producer Orientation Next Process is Customer Statistical Methods Thoroughgoing
Standardization/ Continuous Systematic
Improvement Management that Respect for Humanity Cross Functional Management
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Key Elements of TQM
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Challenges of TQM TQM is not a device, but it’s a matter of culture that takes
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time to adopt TQM is for long run, not short term profit Lack of leadership, commitment of the top management Lack of effective measurement of quality improvement Resistance of the workforce Lack of proper training/ Inadequate Human Resource Development
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Why TQM Fails? Top management is not concerned for its staff Top management is not committed to the TQM program The company loses interest in the program after six
months The workforce and the management do not agree on what needs to happen TQM is imposed on the workforce, which does not inwardly accept it Processes and progresses are not analyzed (measured), systems are weak. 39
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Characteristics of Successful TQM Comp. Strive for owner/customer satisfaction and employee satisfaction Strive for accident-free workplace Recognize the need for measurement and fact-based decision
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making Arrange for employees to become involved in helping the company improve Train extensively Place a strong emphasis on the right kind of leadership Strive for continuous improvement
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How to start TQM?
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How to start TQM?
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Tips for Successful Implementation of TQM Start with a great BIG BANG, with bulletins, leaflet
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(emphasis on pictorial notice) etc. Whatever the situation is, ensure regular meeting of the QCCs Attend at the QCC meetings randomly, without notice and guide as necessary Motivate & follow up regularly No alternative of rewards and recognitions
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Obstacles to TQM 1. 2. 3. 4. 5. 6. 7. 8. 9. 44
Lack of management commitment Inability to change organization culture Improper planning Lack of continuous training and education Incompatible Org structure & isolated departments and individuals Ineffective measurement techniques Paying inadequate attention to customers Inadequate use of empowerment and teamwork Failure to continually improve ENG209 Week_02
Benefits of TQM Improve quality Employee participation and satisfaction Teamwork and Working relationships Customer satisfaction Productivity Communication Profitability and Market Share
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Quality Awards and Standards Philippine Quality Award Malcolm Baldrige National Quality Award (MBNQA) The Deming Prize ISO 9000 Certification ISO 14000 Standards
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Philippine Quality Award Sets a standard of excellence to help Filipino organizations
achieve world-class performance and serves as a “template” for competitiveness based on the principles of Total Quality Management (TQM). A national quality award comparable with the Malcolm Baldrige National Quality Award (MBNQA) of the US and those in Europe and Asia.
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Malcolm Baldrige National Quality Award (MBNQA) Award named after the former Secretary of Commerce –
Regan Administration Intended to reward and stimulate quality initiatives Given to no more that two companies in each of three categories; manufacturing, service, and small business Past winners; Motorola Corp., Xerox, FedEx, 3M, IBM, Ritz-Carlton
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The Deming Prize Given by the Union of Japanese Scientists and Engineers
since 1951 Named after W. Edwards Deming who worked to improve Japanese quality after WWII Not open to foreign companies until 1984 Florida P & L was first US company winner
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TÜSİAD-KalDer National Quality Awards Given by the Turkish Industrialists' and Businessmen's
Association in three category since 1993. Business Categories Public Sector Categories Civil Society Organizations Categories
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STANDARDIZATION ď‚— Refers to the development and application of a standard for a
particular product or type of component or range of products or components or a given procedure.
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Importance of Standardization
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Benefits of standardization Improvement in universal technical communication and mutual 53
understanding; Facilitation of international exchange of goods and services; Removal of technical barriers to trade; Transfer of technology. Uniform terminology is created Sizes and dimensions are co-ordinated and adapted Variety is reduced Function requirements and characteristics are specified Unambiguous testing methods are established ENG209 Week_02
Benefits of standardization For product standards it allows: variety reduction Interchangeability availability. The effects of variety reduction can be assessed in terms of hard cash, taking
due account of the additional cost reduction effects on associated parts and operations. Interchangeability leads to higher productivity and lower manufacturing costs as a result of increased competition. Easy availability implies that shorter lead times and less capital tied up on the user side. 54
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Work Standardization A detailed and documented system in which production
workers both develop and follow a repeatable sequence of tasks within a work assignment. The standardized work sequence represents the best practices for the operator to follow in the completion of his/her job. Elements of Work Standardization: Takt time – Demand Rate Cycle Time – Production Time Work Sequence 55
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Process Standardization “The degree to which work rules, policies, and operating
procedures are formalized and followed.” Objective: to make process activities transparent and achieve uniformity of process activities across the value chain and across firm boundaries.
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Why Process Standardization?
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Reduces costs: Lowers salary costs due to collaboration between different units (employees can fill in for each other) Lowers overhead costs due to sharing documentation and training materials across the organization Reduces materials costs (ordering larger quantities of standard parts and materials provides purchasing leverage where buyers can benefit from suppliers economies-of-scale and arrange more frequent deliveries, to support just-in-time operations) Reduces inventory levels (aggregating demand for parts and supplies enables the safety stock and inventory levels to be reduced) Reduces material overhead (time spent to procure standard parts and materials, which are more common, more readily available, and have more sources) Lowers IT costs due to supporting similar information systems across the organization (no “one off” applications being used) ENG209 Week_02
Why Process Standardization?
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Increases quality: Reduces variability in product / service quality, as all employees perform the process in a similar manner Achieves more consistent results and outcomes, driving world-class performance Improves product / service quality, as employees make fewer errors when they understand how to do their jobs Improves product / service quality through the use of continuous improvement and sharing of best practices ENG209 Week_02
Why Process Standardization? Reduces cycle time: ď‚— Reduces rework and inefficiency - less work at business unit level as processes are developed once instead of ten times ď‚— Improves average cycle time through risk pooling (aggregating demand for parts and supplies across locations means that high demand from one area can be offset by lower demands from other areas, leveling the demand and reducing the risk of running out of parts)
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Why Process Standardization? Improves organizational management: • Facilitates early identification and proactive management of risks • Improves accuracy of estimates • Improves external relations, as the company presents a single face to its suppliers and customers • Provides a stronger foundation for any organizational restructuring, as processes are similar across similar job functions • Improves knowledge management (more opportunities to leverage and reuse knowledge) • Facilitates knowledge sharing and applied learning across organizational boundaries • Facilitates various organizational reviews (e.g., SOX reviews) • Increases organizational flexibility, as resources such as people and assets can be reassigned according to market requirements • Improves employee retention, as people understand their jobs and what’s expected of them • Enables implementation of process control methods (collecting similar metrics and reporting on them) 60
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Product Standardization
The process of setting generally uniform characteristic for a particular good or service. Product standardization among the goods provided by different businesses operating in technology-based industries can be useful for consumers since it permits competition among the various suppliers.
Although there is increasing demand for local variety as economic growth
takes place and as anti-globalization sentiment spreads, global products and brands are usually standardized in some ways.
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Advantages of Standardization? Cost Reduction o o
Scale economies (input and process) Scope economies (synergy, brand equity)
Improved Quality (reliability) o Better equipment, more experience
Enhanced Customer Preference (no surprises) Global Customers (mobility) Global Segments (convergence) Time to Market o Centralized R & D 62
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Disadvantages of Standardization? Lack of Uniqueness Vulnerability to Trade Barriers
- More barriers, less standardization Strong Local Competitors
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Optimal Level Of Standardization
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ISO 9000 Standards Certification developed by International Organization for
Standardization Set of internationally recognized quality standards Companies are periodically audited & certified
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ISO 9000 Standards ISO 9000:2000 QMS
- Fundamentals and Standards Provides the terminology and definitions used in the standards. It is the starting point for understanding the system of standards.
ISO 9001:2000 QMS
- Requirements This is the standard used for the certification of a firm’s quality
management system. It is used to demonstrate the conformity of quality management systems to meet customer requirements. 66
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ISO 9000 Standards ISO 9004:2000 QMS
- Guidelines for Performance Provides guidelines for establishing a quality management system. It focuses not only on meeting customer requirements but also on
improving performance.
More than 40,000 companies have been certified
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ISO 14000 Standards Focuses on a company’s environmental responsibility.
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