BUSMGT 3230 Operations Management Final Exam Study Guide Chapter 5 Quality and Performance Quality a term used by customers to describe their general satisfaction with a service or product Defect any instance when a process fails to satisfy its customer 2 categories 1 Rework some aspect must be performed again for somehow corrected 2 Scrap unfit for further processing Costs of Quality Prevention costs costs associated with preventing defects before they happen Appraisal costs costs incurred when a firm assess performance level of processes Internal failure costs costs resulting from defects discovered during the production of a service or product External failure costs costs that arise when a defect is discovered after the customer receives the service or product o Erode market share and profits Warranty a written guarantee that the producer will replace or repair defective parts or preform the service to the customer s satisfaction Ethics and Quality o 3 elements Balancing the traditional measures of quality performance and the overall benefits to society Identifying deceptive business practices 1 Conduct of provider is intentional and motivated by desire to exploit customer 2 Provider conceals truth based on what is actually known to the provider 3 Transaction is intended to generate a disproportionate economic benefit to the provider at expense of customer o Behavior is unethical diminished quality of experience for the employees and imposes costs on society o Employees in unethical firms are less likely to create true value for customers and they are less likely to be motivated Developing a culture around ethics Training employees to understand how ethics interfaces with their jobs Total Quality Management TQM a philosophy that stresses principles for achieving high levels of process performance and quality 3 principles a Quality 1 Customer satisfaction satisfied when expectations are met or exceeded i Conformance to specifications related to consistent quality on time delivery or ii Value iii Fitness for use convenience mechanical features appearance style durability delivery speed reliability etc iv Support good support once sale is made can decrease consequences of quality failures 1 v Psychological impressions atmosphere image or aesthetics 2 Employee involvement give employees control of their jobs a Cultural change i Quality at the source defects are caught and corrected where they are created ii Define customer for each employee iii b Teams Internal external i Employee empowerment responsibility for decisions moved to employees doing job ii Problem solving teams quality circles small groups of employees and managers who meet to discuss improve process and quality problems iii Special purpose teams addresses issues of main concern iv Self managed teams small group of employees who produce a major portion or sometimes all of a service or product 3 Continuous improvement in performance get rid of processes that don t add value the goal is to reduce waste and not wait until it is too late to act a Kaizen Japanese principle of continually seeking ways to improve processes i Anything can be improved employees most closely related are in best position to do it b Problem solving tools give tools to employees so they can help identify changes improvements and a sense of ownership of the process c PDSA cycle plan do study act also known as Deming wheel i Four steps 1 Plan quantifiable measures for improvements 2 Do 3 Study 4 Act Six Sigma a comprehensive and flexible system for achieving sustaining and maximizing business success by minimizing defects and variability in processes driven by understanding of customer needs use of facts data stats and attention to managing improving and reinventing business processes Improvement model DMAIC Define Measure Analyze Improve Control Six Sigma certification Master black belts full time teachers to black belts Black belts highest level spends all time teaching and leading Green belts first level spends some time teaching and helping others Acceptance Sampling the application of statistical techniques to determine if a quantity of material from a supplier should be accepted or reject based on the inspection or test of one or more samples Limits buyers risk of rejecting good quality materials or accepting bad quality materials Acceptance Quality Level AQL a statement of the proportion of defective items that the buyer will accept in a shipment Risk the sample may not be representative of the entire lot of goods 2 Statistical Process Control SPC the application of statistical techniques to determine whether a process is delivering what the customer wants using things such as control charts Performance Measures Variables characteristics that can be measured able to quantify miss on performance specifications Attributes characteristics that can be counted yes no decisions less effort and fewer resources needed Sampling Plan good when inspection costs are high Size of the sample randomly selected Time between successive samples Decision rules that determine when action should be taken Complete inspection inspect each product at each stage costs of passing on defects outweigh inspection costs Sample mean sum of the observations divided by the total observations Sample range difference between the largest and smallest observation in a sample Standard deviation the square root of the variance of a distribution Common cause variation that is random unidentifiable and unavoidable Assignable cause special causes variation that can be identified and eliminated Sampling Statistics Types of Variation Control charts Time ordered diagram used to determine whether observed variations are abnormal o Mean nominal value central line upper control limit UCL lower control limit LCL Steps for a control chart o Random sample o Plot statistics o Eliminate the cause incorporate improvements o Repeat the procedure Control Chart Errors Type I error concluding that a process is out of control when it is in control Type II error concluding that a process is in control when it is out of control Control Chart Types Variable control charts Attribute control charts measured Steps for x bar and R charts o R chart measures the variability of the process o X bar chart measures whether the process is generating output consistent with a target value o P chart measures the proportion of defective services or products in a process counted rather than o C chart measures the