Operations Management Final Study Guide Add to Midterm study guide Chapter 5 Quality and Performance Quality and performance should be everyone s concern because without the best of both the customer may not be please with their order or service you always want the best customer satisfaction video on BP oil spill mess up Challenger space shuttle disaster and Toyota recall problem Does not mean companies should have 100 satisfaction of ALL customers and potential customers This is because not everyone is the right customer you always want to 100 satisfy ALL current customers and the right potential customers To do this you have to decide who the right customers are also for services customer service leads to a lot of the customer satisfaction Positive Customer experience Stick the dismount in class example the telephone help desk employee conclusion best to end on a positive note because the customer will typically remember what happens last Get the bad news out of the way first During distract segment the pleasure combine the pain let customer control processes and give people clear choices even if none are particularly desirable know values and norms of customer in class example dental hygienist teeth cleaning guy in pain but still some left ask Costs of Quality Quality a term used by customers to describe their general satisfaction with a service or product graph quality loss function difficult to measure accurately but should still measure Defect any instance when a process fails to satisfy its customer want to determine process gaps reflect potential dissatisfied customers and additional costs of quality 20 30 of gross sales 4 categories of cost that are associated with process performance gaps Prevention costs costs associated with preventing defects before they happen cheapest costs ex Redesigning the process to remove the cause of poor performance make processes simpler must invest additional time effort and money to do this ex Training design and quality systems Appraisal costs costs incurred when the firm assesses the performance level of its processes prevention costs increase appraisal costs decrease because fewer resources need quality inspection ex Inspection testing inventory counts Internal Failure costs costs resulting from defects that are discovered during the production of a product or service ex Process downtime disposal costs from 2 categories Rework if some aspect of a service must be performed again or if a defective item must be rerouted to some previous operation s to correct the defect Scrap if defective item is unfit for processing waste External Failure cost costs that arise when a defect is discovered after the customer receives the product or service highest cost area of failures customer may complain to friends family about bad service and spread it decreases market share and profits costly for company to correct defects Also include warranty and litigation costs Warranty a written guarantee that the producer will replace or repair defective parts or perform the service to the customer s satisfaction ex 90 days it costs more and more for prevention and appraisal costs when aiming for 100 good quality products so the most optimal solution is for prevention and appraisal costs to about equal internal and failure costs Ethics and Quality Balancing the traditional measures of quality performance and the overall benefits to society ex Heart surgeon wants to aim for zero complications in every surgery but if it comes at a cost of turning down high risk patients is society being served in the right way Ethical considerations deciding how you want to handle your products and services in a way that is fair for your customers Identify deceptive business practices 3 elements 1 The conduct of the provider is intentional motivated by a desire to exploit the customer 2 The provider conceals the truth based on what is actually known to the provider 3 The transaction is intended to generate a disproportionate economic benefit to the provider at the expense of the customer These behaviors are unethical diminish the quality of a customer s experience and may impose a substantial threat on society Also if these behaviors happen the customer with unfavorably asses the company and is unlikely to return Companies should develop a culture around ethics and train employees to understand how ethics interfaces with jobs to avoid ethical problems in the future The message companies that engage in unethical behaviors send is that the company s product cant compete so they must deceive to make their company profitable Total Quality Management a philosophy that stresses 3 principles for achieving high levels of process performance and quality also includes other important elements Customer Satisfaction customers internal or external are satisfied when their expectations regarding a service or product have been met or exceeded often use the term quality to describe their level of satisfaction with a product or service good quality higher profits has multiple dimensions Conformance to specifications ability to meet certain advertised or implied performance standards ex on time deliver delivery speed Fitness for use assessing how well product or service performs Psychological impressions atmosphere image or aesthetics ex Nicely dressed Value how well the service product serves its intended purpose at a price customers are willing to pay Support provided by the company Employee Involvement changing org culture and encouraging teamwork Culture change one of the main challenges in developing the proper culture is to define customer for each employee External people firms who buy the service or product Internal employees in the firm who rely on the output of other employees Must do a good job at serving their internal customers if they want their external customers to be satisfied Quality at the Source a philosophy whereby defects are caught and corrected where they were created Teams small groups of people who have a common purpose set own performance goals and approaches and hold selves accountable for success Employee Empowerment moves responsibility for decisions further down the organizational chart to the level of the employee actually doing the job 3 approaches Quality Circles problem solving teams small groups of supervisors and employees who meet to identify analyze and solve process and quality problems die out if management fails to implement any of their suggestions