COMMERCE 4OB3 Chapter Notes - Chapter 6: Iso 9000, Flowchart

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Operations Management 3QC3 February 6th, 2014
Chapter 6: Managing Quality
Arnold Palmer Hospital – scores in the top 10% of national benchmark studies in terms of patient
satisfaction.
Quality and Strategy
Managing quality helps build successful strategies of differentiation, low cost, and response.
Quality affects an entire organization. Improvements in quality help firms increase sales and
reduce costs, thus increase profitability. Companies with the highest quality were five times as
productive as companies with the poorest quality.
High quality products and services are the most profitable.
Improved quality  sales gains via: improved response, flexible pricing, improved reputation 
increased profits
Improved quality  reduced costs via: increased productivity, lower rework and scrap costs, lower
warranty costs  increased profits
Defining Quality
An OM’s objective is to build a total quality management system that identifies and satisfies
customer needs.
Quality: the ability of a product or service to meet customer needs. Term adopted by he
American Society for Quality (ASQ).
Some definitions of quality are user based, that it ‘lies in the eyes of the beholder. Marketing
people and customers like this approach.
To production managers, quality is manufacturing based, do it right the first time and conform to
standards.
A third approach is product based, which views quality as a precise and measurable variable.
Implications of Quality
3 other reasons quality is important:
1. Company reputation
2. Product liability
3. Global implications
National Quality Awards
National Quality Institute in Canada, promotes and recognizes quality in both public and private
firms. The US has established the Malcolm Aldridge National Quality Award for quality
achievement. Named after formed secretary of commerce Malcolm Baldridge. In Japan, the
Deming Price, named after an American.
Cost of Quality (COQ)
Cost of quality: The cost of doing things wrong – that is, the price of nonconformance:
Prevention costs – costs associated with reducing the potential for defective parts or
services.
Appraisal costs – costs related to evaluating products, processes, parts, and services
Internal failure – costs that result from production of defective parts or services before
delivery to customers
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External costs – costs that occur after delivery of defective parts or services
The first 3 can be reasonably estimated.
Leaders in the Field of Quality Management
W. Edwards Deming – insisted management accept responsibility for building good systems
Joseph M. Juran – Taught the Japanese how to improve quality, believed strongly in top
management commitment, support and involvement in the quality effort. Also a believer in
teams. He varies from Deming by focusing on the customer and defining quality as fitness for
use, not written specifications.
Armand Feigenbaum – Viewed quality not as a set of tools but as a total field that integrated the
processes of a company
Philip B. Crosby – Quality is free was Crosby’s attention-getting book. Believed that in the
traditional trade-off between the cost of improving quality and cost of poor quality, the cost of
poor quality is understated. Coined the term zero defects.
International Quality Standards
ISO 9000: a set of quality standards developed by the International Organization for
Standardization (ISO). It is the only quality standard with international recognition. The focus of
the standards is to establish quality management procedures through leadership, detailed
documentation, work instruction and record keeping. It says nothing about the actual quality of
the product, but deals entirely with standards to be followed.
To become certified, organizations go through a 9-18 month process.
ISO 14000: a series of environmental management standards established by the ISO that
contains 5 core elements: 1) environmental management, 2) auditing, 3) performance evaluation,
4) labeling, 5) life cycle assessment
The new standard could have several advantages:
Positive public image and reduced exposure to liability
Good systematic approach to pollution prevention through the minimization of ecological
impact of products and activities
Compliance with regulatory requirements and opportunities for competitive advantage
Reduction in need to multiple audits
This is being accepted worldwide.
Total Quality Management
Total quality management: management of an entire organization so that it excels in all aspects
of products and services that are important to the customer.
7 concepts for an effective TQM program: continuous improvement, six sigma, employee
empowerment, benchmarking, just in time, Taguchi concepts, and knowledge of TQM tools
Continuous Improvement
PDCA – Plan, do, check, act  a continuous improvement model
The Japanese use the word kaizen to describe this ongoing process of unending improvement –
the setting and achieving of ever higher goals. TQM, zero defects, PDCA and kaizen are all
terms to describe continuous improvement efforts.
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