Quality and time

Quality and time

1. Dimensions of quality

   • Design quality: The extent to which designed specifications address clients' expectation
     • Customer-focused
     • Designing to create waste
   • Conformance quality: Evaluates the extent to which the actual characteristics of the product match design specifications
     • Product-focused

2. Managing time to create value

   • Time is a competitive factor
   • Outsourcing can reduce development time
   • Extend focus on reducing manufacturing cycle time and the internal focus of reducing order to delivery time to include 'need to satisfaction' time of customer
     • Customer experience begins before an order is placed and ends after receipt of products
       • Firm must ensure product info on website is up-to-date to assist customer purchasing decisions
       • Minimal steps in online ordering to reduce time taken to order, improving customer satisfaction
       • Early delivery can be negative so focus on on-time delivery

3. Introduction

   • Two value propositions desired by customers
   • Traditionally seen as in opposition to each other
     • Increasingly recognised as mutually necessary and reinforcing
       • Time requiring and improving quality
       • Quality requiring and improving successful time management
     • Haste makes waste

4. Total Quality Management (TQM)

   • Originated in Japan
   • Permanent and integrated efforts across organisation to excel in all customer-relevant quality dimensions
     • Employees must do everything right first time, everytime
     • Focus is customer satisfaction
       • Delivering both dimensions of quality
   • Rust et al
     • A certain level of lack of quality may product higher return
       • Costs of some quality improvement initiatives may exceed expected benefits
         • Quality is not free
         • Optimal point where total cost of quality reaches the minimum
   • Cost of quality report provides the necessary level of transparency of activity costs
     • Shows % of sales to account for size, providing visibility as to whether they are incurring the desired type of cost
       • Can compare to previous periods and other organisations
   • Categories of quality costs
     • Conformance costs
       • Incurred to ensure conformity with specifications
       • Prevention costs
         • Prevent production of products that don't conform
         • e.g. quality planning, training
         • If these increase, other costs should decrease with the savings more than offsetting the increase in prevention costs
         • Cheapest, most beneficial results in minimising total quality costs
       • Appraisal costs
         • Incurred to ensure materials and products meet standards
         • e.g. costs of inspecting
     • Non-conformance costs
       • Incurred when there is a failure to meet specifications
       • Internal failure costs
         • Associated with materials and products that fail to meet quality standards before being dispatched to customers
         • e.g. repair, cost of scrap
       • External failure costs
         • Incurred when products fail to conform after being delivered
         • Most expensive
           • Reputation affected
           • Opportunity costs from loss of sales / contribution
         • e.g. cost of handling complaints, reputation, warranty
   • Plan-do-check-act (PDCA) cycle
     • Systematic, interactive approach to continuous improvement and problem-soling based on facts
     • Plan: team examines facts to determine cause of problem and propose solution
     • Do: Solution is tested
     • Check: Results examined
     • Act: + result = solution implemented, - result = return to plan
   • Zero-defects policy
     • Necessary if things are to be done right first time
     • More effective if success of policy is measured using ppm
   • Statistical quality control charts
     • Monitor quality targets
     • Graph of a series of successive observations of operations taken at regular intervals to test whether a batch of items is within the pre-set tolerance limits
     • Control limits set 2sd from mean; investigate if over this
     • Estimated population mean and sd using past observations of a process when it was working effectively
   • Non-financial quality measures
     • More appropriate than financial measures in measuring quality improvements
     • Number of employees trained
     • Number of late deliveries
     • Number of defective products

5. Just-in-time (JIT)

   • Integrates activities to obtain high-volume production while removing inventories, reducing waste
     • Only producing required items at the required quantity and time
   • Pull system: responds to demand so no longer stock up to prepare for demand
     • Production commences when there is demand
   • Elimination of non-value-added activities
     • Manufacturing time shortened
     • Only process time adds value
       • Process time less than 10% of manufacturing time so lead time needs to equal process time
         • Adopt JIT manufacturing
           • Cellular approach
           • Reorganise production process in a product flowline instead of batch production layout
             • U-shaped flow line layout to enable operatives to access several machines
               • Higher visibility behind ensures smooth running
               • Can undertake routine preventative maintenance
           • Products grouped into families or similar products, manufactured in a well-define production cell to reduce moving time and manufacturing time
           • Any worker can stop production line if fault occurs
             • Employee empowerment
             • Prevent production of defective products early
           • Visibility signalling system kanban implements pull system
             • Empty containers indicate need for production
   • Batch size of one
     • Reduces set-up times so there is no advantage of producing batches
     • Firm can adapt to market demand and respond to customer requests
   • JIT purchasing
     • More frequent deliveries because they do not carry stocks of raw materials
       • Eliminate cost of inspection
       • Substantial reduction in raw material stocks to save factory space
       • Increased labour productivity
     • Place LT purchase orders to convince suppliers to guarantee quality, providing assurance
       • Reduction in paperwork if LT purchase orders placed
   • JIT manufacturing + purchasing + TQM (to emphasise quality and reduce waste) + respect for people = JIT philosophy
   • Limitations (not an overnight process)
     • Culture change: emphasis on continuous improvement and elimination of non-value-added activities
     • Employee empowerment some employers aren't comfortable with
     • Organisation relies on suppliers delivering as and when required; must be reliable
   • Price variance may be redundant because LT orders may be in place, so prices are agreed before start of period
     • Standard price = actual price

6. Environmental cost management

   • Increasingly important, with large costs for some industrial sectors
   • Huge fines for non-compliance have increased
   • Environmental costs traditionally hidden within OHs and not allocated to cost objects
     • Lack of visibility and inaccurate
   • 4 categories of environmental costs
     • Prevention: preventing production of waste that could cause environmental damage
     • Detection: incurred to ensure conformance to regulatory laws
     • Internal failure: reduce waste before discharged
     • External failure: activities performed after discharging waste
   • Environmental cost report directs attention on these costs and identifies areas for potential cost-reduction
   • Limitation: doesn't include costs caused by externalities e.g. caused by firm but borne by society