Chapter 8

Improving Production Quality and Efficiency

Improving Production Quality and Efficiency

Learning Objectives: Importance of quality Show how (reasons) total quality management (TQM) can be applied to monitor and enhance the quality of the products and services produced. Tools for TQM Identify the key methods used to improve production efficiency.

Importance of quality
1. Companys reputation. Quality will show up in perceptions about the firms new products, employment practices and supplier relations. 2. Product liability Low quality products can lead to huge legal expenses, large settlement or losses and terrible publicity. 3. Global implication Product must meet global quality, design and price expectations.

Total Quality Management (TQM)

Total quality management: program which improves production quality and efficiency by allowing employees to take more responsibility in the entire process.

Steps:
Specify desired quality level. Achieve desired quality level. Control quality level.

Total Quality Management (TQM)

Specify the desired quality level: Define quality. Determine resources needed. Assess demand for products. Determine quality level.

Total Quality Management (TQM)

To achieve the desired quality level: Organize employee teams. Use higher-quality raw materials. Train employees to achieve quality.

Total Quality Management (TQM)

Control the quality level by: Computers it can determine whether each component of a product meet specific quality standard. Employees - eg. Use a quality control circle (a group of employees who assess the quality of a product and offer suggestions for improvement) Sampling - select some of the product produced and testing them Monitoring complaints happen after product has sold or when customers use the products Surveys

Total Quality Management (TQM)

TQMs key guidelines are: 1. provide mangers and other employees with the education and training to excel in their jobs. 2. encourage employees to take responsibility and to provide leadership. 3. encourage all employees to search for ways to improve the production process.

Tools of quality
Tools of TQM Check Sheets Scatter Diagrams Cause-and-Effect Diagrams Pareto Charts Flowcharts Histograms Statistical Process Control (SPC)

 Tools for Generating Ideas Check sheets Scatter diagrams Cause-and-effect diagrams

Tools to Organize the Data Pareto charts Flowcharts

Tools for Identifying Problems Histogram Statistical process control chart

Seven Tools of TQM

(a) Check Sheet: An organized method of recording data

Defect A B C

1 /// // /

2 / / //

3 /

Hour 4 5 / / /

6 /

7 /// // //

8 / /// ////

Figure 6.6

Seven Tools of TQM

(b) Scatter Diagram: A graph of the value of one variable vs. another variable

Productivity

Absenteeism
Figure 6.6

Seven Tools of TQM

(c) Cause-and-Effect Diagram: A tool that identifies process elements (causes) that might effect an outcome
Cause

Materials

Methods
Effect

Manpower

Machinery
Figure 6.6

Cause-and-Effect Diagrams
Material (ball)
Grain/Feel (grip) Size of ball Air pressure Hand position Lopsidedness Follow-through

Method (shooting process)

Aiming point Bend knees Balance

Training Conditioning Consistency Concentration Motivation Rim alignment

Rim size

Missed free-throws
Rim height

Backboard stability

Manpower (shooter)

Machine (hoop & backboard)

Figure 6.7

Seven Tools of TQM

(d) Pareto Chart: A graph to identify and plot problems or defects in descending order of frequency

Frequency

E
Figure 6.6

Percent

Pareto Charts
Data for October
70 Frequency (number) 60 50 40 30 20 10 0 Room svc 72% Check-in Pool hours 16% 5% Number of occurrences 100 93 88 72 Cumulative percent

54

12 4 3
Minibar 4%

2
Misc. 3%

Causes and percent of the total

Seven Tools of TQM

(e) Flowchart (Process Diagram): A chart that describes the steps in a process

Figure 6.6

Flow Charts
MRI Flowchart
1. 2. 3. 4. 5. 6. Physician schedules MRI Patient taken to MRI Patient signs in Patient is prepped Technician carries out MRI Technician inspects film 7. 8. 9. 10. If unsatisfactory, repeat Patient taken back to room MRI read by radiologist MRI report transferred to physician 11. Patient and physician discuss

8 1 2 3 4 5 6 7 80% 9 20% 10 11

Seven Tools of TQM

(f) Histogram: A distribution showing the frequency of occurrences of a variable
Distribution Frequency

Repair time (minutes)

Figure 6.6

Seven Tools of TQM

(g) Statistical Process Control Chart: A chart with time on the horizontal axis to plot values of a statistic

Upper control limit Target value Lower control limit

Time
Figure 6.6

An SPC Chart
Plots the percent of free throws missed
20%

Upper control limit

10%

Coachs target value

0%

| 1

| 2

| 3

| 4

| 5

| 6

| 7

| 8

| 9

Lower control limit

Game number
Figure 6.8

Improving Production Efficiency

Production efficiency reflect a lower cost (use of people and resources) for a given amount of output and a given level of quality. Managers search for ways to manage human and other resources to improve production efficiency. Method that been widely used in production efficiency is: Benchmarking: evaluating performance by comparison to some specified level (benchmark). Stretch targets: efficiency goals that cannot be achieved under present conditions, and usually stretched beyond the ordinary. It is implemented due to a decline in the firms market share or performance.

Methods to Improve Efficiency

Methods: Technology Economies of scale Restructuring

Technology
Technology can include: Computer automation

Communications Industry-specific technology

Technology
Production efficiency can be improved by adopting a new technology. New technology can perform task more quickly. Production process become automation: tasks are completed by machines without the use of employees. Guide lines for effective automation 1. Plan 2. Use automation where the benefits are greatest 3. Train 4. Evaluate costs and benefits over time

Economies of Scale
Economies of scale: achieving lower average cost from producing a larger volume. Different costs: Fixed costs Operating expenses that do not change with the volume produced Variable costs Operating expenses that vary directly with the volume produced

Efficiency Methods: Economies of Scale

Break even point: the volume at which total revenue equals total cost.
100 75 50 25 0 0 10 20 30 40 50 60 70 Fixed cost Production Volume Break even is 30 Total cost Total revenue

Restructuring
Restructuring: revision of the production process in an attempt to improve efficiency.

Types of restructuring: Reengineering Downsizing

Efficiency Methods: Restructuring

Reengineering: redesign of a firms organizational structure and operations.
Manufacturing Company President

Vice-President Marketing

Vice-President Manufacturing

Vice-President Finance

Manager Plant 1

Manager Plant 2

Manager Plant 3

Efficiency Methods: Restructuring

Downsizing: reducing the number of employees.
Manufacturing Company President

Vice-President Marketing

Vice-President Manufacturing

Vice-President Finance

Manager Plant 1

Manager Plant 2

Manager Plant 3