September 28, 2024

Pareto Analysis sets priorities for action based on the assumption that roughly 80 percent of problems typically result from 20? percent of the possible caus

Pareto Analysis sets priorities for action based on the assumption that roughly 80 percent of problems typically result from 20

percent of the possible causes. Thus, not all possible causes of problems are equally important. Pareto analysis identifies the

most critical causes of problems so that improvement efforts can be focused where the investment of time, effort, and money will

yield the largest return.

1. How would you identify categories about which to collect information from your customers. For example, specify, categories

that describe possible causes or types of defects?

2. How will you gather data and calculate the frequency of observations in each category for an appropriate time period?

3. How will you sort your categories in descending order based on your percentages?

4. Present your data graphically and identify the vital few categories that account for most of the variation.

5. 8 – 10 slides excluding cover and reference page

6. Two outside sources

7. MLA format

*I WANT TO USE THE BEATS ARTICLE DATA IF POSSIBLE.

https://recordingnow.com/blog/beats-studio-buds-review

prior written consent of McGraw-Hill Education.

Chapter 6

Managing Quality

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Learning Objectives

6-1 Explain what the concepts of product quality and quality management entail.

6-2 Explain the roles that operations and other functional managers play in determining product quality.

6-3 Apply the core values and typical practices associated with quality management.

6-4 Perform a cost of quality analysis.

6-5 Apply the Six Sigma DMAIC approach to quality improvement.

6-6 Compare and contrast various quality standards and certification programs.

prior written consent of McGraw-Hill Education.6-3

Learning Objective 6-1

Brand Turnaround at Hyundai—What Hyundai Did

1. Increased the number of workers on the quality control team from 100 to more than 850.

2. Instituted mandatory seminars for all workers on the importance of quality.

3. Invoked the direct involvement of its CEO in twice- monthly meetings comparing Hyundai quality with that of its rivals.

4. Made capital investments in problem areas, including $30 million invested in a computer center to test electronic systems.

prior written consent of McGraw-Hill Education.6-4

Learning Objective 6-1

Brand Turnaround at Hyundai—Results of Changes

1. Brand loyalty for Hyundai surpassed that of Honda and Toyota to take the No. 1 spot.

2. Five Hyundai cars among Cars.com’s “Best Bets” for safety, reliability, and fuel efficiency.

3. Sonata and Genesis models made Hyundai a strong competitor in the luxury market, where excellent quality is imperative.

4. In 2018 Hyundai and its sister company Kia averaged 122 and 124 problems per 100 vehicles, which placed them in the top 10 for car quality.

prior written consent of McGraw-Hill Education.6-5

Learning Objective 6-1

Quality Definitions

• Product Quality: fitness for consumption in meeting customers’ needs and desires

• Design Quality: match between designed features and customer requirements

• Conformance Quality: meeting design specifications

• Quality Management: organizationwide quality focus

prior written consent of McGraw-Hill Education.6-6

Learning Objective 6-1

Dimensions of Quality for Goods and Services

• Quality

– Performance

– Features

– Reliability

– Durability

– Conformance

– Aesthetics

– Support/responsiveness

– Perceived quality

prior written consent of McGraw-Hill Education.6-7

Learning Objective 6-2

Functional Influences on Product Quality (1 of 3)

Table 6-2 Functional Influences on Product Quality

Functional Personnel Decisions and Activities with Potential Impact on Product

Quality

Marketing managers

Choices of market to pursue and product features to offer

Design of advertising and other programs that communicate product attribute to customers

Development of new product testing programs

Sales managers

Setting of sales targets

Interactions with customers

Interpretations of customers’ needs and desires

Product engineers

Design of product specifications, service elements, dimensional tolerances, etc.

Design of product prototyping procedures

Process engineers

Design of manufacturing and service processes

Choices of technology and associated capabilities and capacity limits

Design of quality assurance tests and procedures

prior written consent of McGraw-Hill Education.6-8

Learning Objective 6-2

Functional Influences on Product Quality (2 of 3)

Table 6-2 Functional Influences on Product Quality

Functional Personnel Decisions and Activities with Potential Impact on Product

Quality

Finance and accounting managers

Setting of restrictions for equipment purchases

Establishing goals for utilization of facilities and working capital

Design of measures used to assess efficiency and productivity

Human resources managers

Design of hiring criteria and training and development programs

Setting of compensation schemes and incentives

Manufacturing and service operations managers

Design and execution of processing procedures

Design of work policies

Interactions with customers

Management of facilities and equipment

Scheduling of work

prior written consent of McGraw-Hill Education.6-9

Learning Objective 6-2

Functional Influences on Product Quality (3 of 3)

Table 6-2 Functional Influences on Product Quality

Functional Personnel Decisions and Activities with Potential Impact on

Product Quality

Supply managers

Description of purchase requirements

Selection of suppliers

Establishment of contracts and associated incentives and penalties

Management of and interactions with suppliers

Logistics managers

Selection of transportation providers

Development of tracking and other information systems

Design of packaging, storage, and material handling processes

Management of and interaction with transportation providers

prior written consent of McGraw-Hill Education.6-10

Learning Objective 6-2

Student Activity (1 of 3)

Ask a marketing professor, a supply chain operations professor, a finance professor, and an engineering professor to give you their definitions of product quality. Compare and contrast the definitions you receive.

prior written consent of McGraw-Hill Education.6-11

Learning Objective 6-3

Quality Thought Leaders (1 of 2)

• Deming

– Holistic view of responsibility for quality

– Variability as source of most problems

– Importance of customer

• Juran

– Broadened definition of quality

– Focus on change management

– Cost of quality analysis

prior written consent of McGraw-Hill Education.6-12

Learning Objective 6-3

Quality Thought Leaders (2 of 2)

• Crosby

– Quality is free

– Zero defects

– Focus on incremental change

• Imai

– Kaizen system of continuous improvement

– Intense process-oriented view

– Heavy dependence on frontline worker insights

– Emphasis on worker training and development

prior written consent of McGraw-Hill Education.6-13

TQM: A “Total” View of Quality

Total Quality Management (TQM): an integrated business management strategy aimed at embedding awareness of quality. The word total has important connotations:

1. A product’s quality is determined by customer’s acceptance and use

2. Quality management is a total, organizationwide activity, rather than a technical task

3. Quality improvement requires a total commitment from all employees

Learning Objective 6-3

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Learning Objective 6-4

Cost of Quality (COQ)

• Prevention Costs

– Costs associated with preventing defects and limiting failure and appraisal costs (e.g., training, improvement projects, data gathering, analysis)

• Appraisal Costs

– Costs associated with inspection to assess quality levels (e.g., staff, tools, training, etc.)

• Internal Failure Costs

– Costs from defects found before delivery to the customer (e.g., rework, scrap, etc.)

• External Failure Costs

– Costs associated with defects found after delivery to customer (e.g., warranty, recall, etc.)

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Learning Objective 6-4

Inverted View of Management

Figure 6-1 Traditional versus Quality Management View of Organizational Structure

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Learning Objective 6-4

TQM Values and Success Factors

Table 6-4 TQM Values and Success Factors

Values that Characterize TQM Factors Affecting the Success of TQM

Holistic view of product quality and its impacts Strong, charismatic leadership

Emphasis on customer requirements

Trust between labor and management

Extended process view of operations

Crisis situation or compelling reason for change

Emphasis on prevention rather than inspection

Adequate resourcing of training and improvement projects

Disdain for variability Clear, well communicated, uncomplicated change process

Data-based decision making (not opinion-based)

Unquestionable success of early efforts

Employee empowerment

Top management support

Supplier involvement

Continuous improvement

prior written consent of McGraw-Hill Education.6-17

Quality Goes Digital

• Walmart is using the Internet of Things and blockchain to provide visibility of food quality

• Digital developments are changing the cost of quality by raising the cost of external failures

• Using social media, one can post experiences to be read by many viewers

Learning Objective 6-4

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Student Activity (2 of 3)

Search various social media sites and see if you can find posts that address the four different costs included in the cost of quality framework. What is interesting about these postings? How would these postings affect you as a potential customer?

Learning Objective 6-4

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Learning Objective 6-5

Guiding Methodologies: PDCA

Figure 6-2 PDCA in Action

Plan: identify problem and actions for improvement

Do: implement formulated plan

Check: monitor results

Act: take corrective action and institutionalize changes

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Learning Objective 6-5

Guiding Methodologies: Six Sigma (1 of 3)

• Six Sigma: quality improvement through elimination of defects and variation

• Standard Deviation: statistical measure of variation

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Learning Objective 6-5

Guiding Methodologies: Six Sigma (2 of 3)

Table 6-5 How Quality Relates to Sigma

Sigma Level Defects per Million

Units

2σ 308,770

3σ 66,810

4σ 6,209

5σ 233

6σ 3.4

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Learning Objective 6-5

Guiding Methodologies: Six Sigma (3 of 3)

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Student Activity (3 of 3)

For a candy such as M&Ms, identify the important critical-to-quality characteristics. How would you measure these characteristics objectively? Which of these measures pertain to the physical product itself? Which of these measures relate to the packaging or the services surrounding the good?

Learning Objective 6-5

prior written consent of McGraw-Hill Education.6-24

Learning Objective 6-5

Guiding Methodologies: DMAIC

DMAIC example: See the cough drop production DMAIC example in your text

• Define: determine critical-to-quality (CTQ) characteristics from customer’s perspective

• Measure: gather data on CTQ processes

• Analyze: determine cause of defects

• Improve: modify processes

• Control: ensure improvements are maintained

prior written consent of McGraw-Hill Education.6-25

Learning Objective 6-6

Guiding Methodologies: ISO 9000

• ISO 9000: internationally accepted standards for business quality management systems

• ISO 9000 requires:

– fulfilling the customer’s quality requirements, and

– meeting applicable regulatory requirements, while

– enhancing customer satisfaction, and

– achieving continuous improvement of its performance in pursuit of these objectives

http://www.iso.org

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Learning Objective 6-6

The ISO 9001: 2015 Certification Structure (1 of 3)

Table 6-6 The ISO 9001: 2015 Certification Structure

Section Focus/Description

4 Context of the organization

4.1 Understanding the organization and its context.

4.2 Understanding the needs and expectations of interested parties.

4.3 Determining the scope of the quality management system.

4.4 Quality management system and its processes.

5 Leadership

5.1 Leadership and commitment.

5.2 Policy.

5.3 Organizational roles, responsibilities, and opportunities.

6 Planning

6.1 Actions to address risks and opportunities.

6.2 Quality objectives and planning to achieve them.

6.3 Planning of changes.

prior written consent of McGraw-Hill Education.6-27

Learning Objective 6-6

The ISO 9001: 2015 Certification Structure (2 of 3)

Table 6-6 The ISO 9001: 2015 Certification Structure

Section Focus/Description

7 Support

7.1 Resources.

7.2 Competence.

7.3 Awareness.

7.4 Communication.

7.5 Documented information.

8 Operation

8.1 Operational planning and control.

8.2 Requirements for products and services.

8.3 Design and development of products and services.

8.4 Control of externally provided processes, products, and services.

8.5 Production and service provision.

8.6 Release of products and services.

8.7 Control nonconforming outputs.

prior written consent of McGraw-Hill Education.6-28

Learning Objective 6-6

The ISO 9001: 2015 Certification Structure (3 of 3)

Table 6-6 The ISO 9001: 2015 Certification Structure

Section Focus/Description

9 Performance evaluation

9.1 Monitoring, measurement analysis, and evaluation.

9.2 Internal audit.

9.3 Management review.

10 Improvement

10.1 General

10.2 Nonconformity and corrective action.

10.3 Continual improvement.

prior written consent of McGraw-Hill Education.6-29

Managing Quality Summary

1. Quality management strives to achieve superior quality.

2. It is important to integrate quality management into the firm’s strategic activities.

3. Formal certifications confirm that a firm’s major processes have been documented and followed.

4. Many firms use award guidelines to assess the performance of their quality management systems.

5. Service quality management must take into consideration the interpersonal interactions of service providers and customers.

6. Core TQM values are the critical aspects to make quality improvement a success.

prior written consent of McGraw-Hill Education.

Chapter 7

Managing Inventories

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Learning Objectives

7-1 Define the different types and roles of inventory in the supply chain.

7-2 Explain the financial impact of inventory on firm performance.

7-3 Explain and compute asset productivity and customer service–related measures of inventory performance.

7-4 Calculate inventory policy parameters to minimize total acquisition cost in continuous review, periodic review, and single period models.

7-5 Determine the cost of a company’s service level policy.

7-6 Explain the advantages and disadvantages of different inventory location strategies.

7-7 Describe practical techniques for inventory planning and management.

prior written consent of McGraw-Hill Education.7-3

Learning Objective 7-1

Inventory at PolyCorp

Inventory:

• When do I order?

• How much do I order?

• Where do I deploy the inventory?

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Learning Objective 7-1

Types of Inventory

• Raw materials and component parts: items that are bought from suppliers to use in the production of a product

• Work in process inventory: inventory that is in the production process

• Finished goods inventory: items that are ready for sale to customers

• MRO inventory: maintenance, repair, and operating supplies

prior written consent of McGraw-Hill Education.7-5

Learning Objective 7-1

Roles of Inventory

• Balancing supply and demand: decouples differences in supply and demand requirements

• Buffers against uncertainties: variation in supply and demand are managed with buffer (safety) stock

• Enabling economies of buying: price discounts or reduced shipping costs

• Enabling geographic specialization: supply and demand locations vary

prior written consent of McGraw-Hill Education.7-6

Types of Stock

• Cycle Stocks: inventory repeatedly produced/ordered and used to fill demand

• Seasonal Stocks: additional inventories produced in advance of seasonal peak demands or held after seasonal peak supplies

• Buffer (or Safety) Stock: extra inventory held to guard against uncertainty in demand or supply

• Speculative Stock: stock purchased or produced to hedge against future price increases or shortages

Learning Objective 7-1

prior written consent of McGraw-Hill Education.7-7

Learning Objective 7-1

Student Activity (1 of 6)

Each of the uses of inventory described has a particular cause. For example, safety stock is needed because managers are uncertain about demand or supply. For each inventory type, list the cause(s) and how each cause could be reduced or eliminated, thereby reducing the need for inventory.

prior written consent of McGraw-Hill Education.7-8

Learning Objective 7-2

Financial Impact of Inventory

Carrying (Holding) Costs Ordering and Setup

Costs Stockout Costs

• Opportunity cost (including cost of capital)

• Storage and warehouse management

• Taxes and insurance • Obsolescence, spoilage, and

shrinkage • Materials handling, tracking,

and management

• Purchased items: placing and receiving orders

• Made items: change- over between items

• Lost sales or customer loyalty

• Expediting • Schedule disruption

prior written consent of McGraw-Hill Education.7-9

Learning Objective 7-2

Student Activity (2 of 6)

Using your library’s electronic databases or a Web browser, find three articles that describe specific companies and their efforts to reduce inventory. Summarize the different reasons given for the desire to reduce inventory.

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Pareto Analysis sets priorities for action based on the assumption that roughly 80 percent of problems typically result from 20? percent of the possible caus

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