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Managing Quality INTEGRATING THE SUPPLY CHAIN

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F i f t h E d i t i o n

Managing Quality INTEGRATING THE SUPPLY CHAIN

S. Thomas Foster Brigham Young University

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Library of Congress Cataloging-in-Publication Data

Foster, S. Thomas. Managing quality: integrating the supply chain / S. Thomas Foster.—5th ed. p. cm. ISBN-13: 978-0-13-273798-2 ISBN-10: 0-13-273798-1 1. Quality of products. 2. Quality control. I. Title. HF5415.157.F67 2013 658.4!013—dc23 2012020545

10 9 8 7 6 5 4 3 2 1

ISBN 10: 0-13-273798-1 ISBN 13: 978-0-13-273798-2

To Camilleo: I owe you one.

BRIEF CONTENTS

PART 1 Understanding Quality Concepts 1 Chapter 1 Differing Perspectives on Quality 2 Chapter 2 Quality Theory 25 Chapter 3 Global Supply Chain Quality and International

Quality Standards 51

PART 2 Designing and Assuring Quality 85 Chapter 4 Strategic Quality Planning 86 Chapter 5 The Voice of the Customer 111 Chapter 6 The Voice of the Market 135 Chapter 7 Quality and Innovation in Product and

Process Design 158 Chapter 8 Designing Quality Services 187 Chapter 9 Managing Supplier Quality in the Supply Chain 219

PART 3 Implementing Quality 237 Chapter 10 The Tools of Quality 238 Chapter 11 Statistically Based Quality Improvement

for Variables 276 Chapter 12 Statistically Based Quality Improvement

for Attributes 314 Chapter 13 Six Sigma Management and Lean Tools 337

PART 4 Forever Improving the Quality System 371 Chapter 14 Managing Quality Improvement Teams

and Projects 372 Chapter 15 Implementing and Validating the

Quality System 401

Appendix 422 Glossary 425 Index 440

vi

CONTENTS

Preface xviii

Part 1 Understanding Quality Concepts 1

Chapter 1 DIFFERING PERSPECTIVES ON QUALITY 2 Recognizing Different Perspectives on Quality 2

! A CLOSER LOOK AT QUALITY 1-1: What’s in an Airport? 3 What Is Quality? 3

Product Quality Dimensions 3 Service Quality Dimensions 5 Why Does It Matter That Different Definitions of Quality Exist? 6

Differing Functional Perspectives on Quality 7 A Supply Chain Perspective 7 An Engineering Perspective 8 An Operations Perspective 9 A Strategic Management Perspective 10 ! QUALITY HIGHLIGHT 1-1: Quality Strategy at GE 12 A Marketing Perspective 13 A Financial Perspective 14 The Human Resources Perspective 16 Is Quality Management Its Own Functional Discipline? 17

Three Spheres of Quality 17 ! QUALITY HIGHLIGHT 1-2: Federal Express Corporation 19

Other Perspectives on Quality 19 The Value-Added Perspective on Quality 19 Cultural Perspectives on Quality 20

Arriving at a Common Understanding of Quality Using a Contingency Perspective of Quality 20

Summary 20 Key Terms 21 Discussion Questions 21

" CASE 1-1: FedEx: Managing Quality Day and Night 22 " CASE 1-2: Granite Rock Company: Achieving Quality through Employees 23

Chapter 2 QUALITY THEORY 25 What Is Theory? 25

Is There a Theory of Quality Management? 27 ! A CLOSER LOOK AT QUALITY 2-1: Quality and Management Fads 27

History of Quality Management 28 Leading Contributors to Quality Theory: W. Edwards Deming 28

Deming’s 14 Points for Management 30

vii

viii Contents

Leading Contributors to Quality Theory: Joseph M. Juran 33 The Juran Trilogy 33 Control versus Breakthrough 34 Project-by-Project Improvement 34 ! A CLOSER LOOK AT QUALITY 2-2: Juran on the Past Century of Quality 35 Pareto Analysis 36

Leading Contributors to Quality Theory: Kaoru Ishikawa 36 Basic Tools of Quality 36 Ishikawa’s Quality Philosophy 36

Leading Contributors to Quality Theory: Armand Feigenbaum 37 The 19 Steps of TQC 38

Leading Contributors to Quality Theory: Philip Crosby 38 Leading Contributors to Quality Theory: Genichi Taguchi 39

Definition of Quality 40 Quality Loss Function 40 Robust Design 40

Leading Contributors to Quality Theory: The Rest of the Pack 40 Robert C. Camp 40 Stephen R. Covey’s “8” Habits 41 Tom Peters 41 Michael Hammer and James Champy 42 ! A CLOSER LOOK AT QUALITY 2-3: Selling Quality Fads 42

Viewing Quality Theory from a Contingency Perspective 43 Resolving the Differences in Quality Approaches: An Integrative View 43

Leadership 45 Employee Improvement 45 Quality Assurance 45 Customer Focus 45 Quality Philosophy 45 Information Analysis 45 Strategic Planning 45 Environment or Infrastructure 46 Team Approach 46 Focus of the Quality Department 46 Breakthrough 47

Theoretical Framework for Quality Management 47 Summary 47 Key Terms 47 Discussion Questions 47

" CASE 2-1: Rheaco, Inc.: Making a Quality Turnabout by Asking for Advice 48 " CASE 2-2: Has Disney Developed a Theory of Quality Guest Services

Management? 49

Chapter 3 GLOBAL SUPPLY CHAIN QUALITY AND INTERNATIONAL QUALITY STANDARDS 51 Managing Quality for the Multinational Firm (MNF) 52

! QUALITY HIGHLIGHT 3-1: Supply Chain Quality in the Global Context 55 Quality Improvement: The American Way 56 The Malcolm Baldrige Award 56

! A CLOSER LOOK AT QUALITY 3-1: Who Was Malcolm Baldrige? 61 The Baldrige Process 62 Baldrige Scoring 65 ! QUALITY HIGHLIGHT 3-2: Honeywell Federal Manufacturing & Technologies 65 Being a Baldrige Examiner 66 State Awards 66

Quality Improvement: The Japanese Way 67 Deming Prize 67 Other Japanese Contributions to Quality Thought 68 Lean Production 68 ! QUALITY HIGHLIGHT 3-3: The Humbling of Toyota 68 Japanese Total Quality Control (TQC) 69

Quality Improvement: The European Way 71 European Quality Award 71 ISO 9000:2008 72 Quality Management Principles Underlying ISO 9000:2008 74 Selecting a Registrar 75 The ISO 9000:2008 Process 75 ISO 14000 76

Quality Improvement: The Chinese Way 78 Does Chinese Quality Management Exist? 78 ! A CLOSER LOOK AT QUALITY 3-2: Outsourcing Woes 79

Are Quality Approaches Influenced by Culture? 80 Summary 81 Key Terms 81 Discussion Questions 81

" CASE 3-1: Denver International Airport Becomes ISO 14001 Certified 82 " CASE 3-2: Wainwright Industries: An Entirely New Philosophy of Business

Based on Customer Satisfaction and Quality 83

Part 2 Designing and Assuring Quality 85

Chapter 4 STRATEGIC QUALITY PLANNING 86 Strategy Content 86 The Importance of Time in Quality Improvement 86

! A CLOSER LOOK AT QUALITY 4-1: Problems with Measuring Educational Performance 88

Leadership for Quality 88 Leadership Dimensions 89

Contents ix

! QUALITY HIGHLIGHT 4-1: Solectron Corporation 91 Quality and Ethics 92 Quality as a Strategy 92

Costs of Quality 92 PAF Paradigm 93 Accounting for Quality-Related Costs 94 Lundvall-Juran Quality Cost Model 95 Differentiation through Quality 96 Focus through Quality 96 Order Winners 97 Quality as a Core Competency 98

Quality Strategy Process 98 Forced-Choice Model 98

Deploying Quality (Hoshin Kanri) 99 ! A CLOSER LOOK AT QUALITY 4-2: A Mature Strategic Planning Process 99

Does Quality Lead to Better Business Results? 101 Quality and Price 102 Quality and Cost 102 Quality and Productivity 102 Quality and Profitability 103 Quality and Sustainability 103

Supply Chain Strategy 104 Summary 105 Key Terms 106 Discussion Questions 106 Problems 106

" CASE 4-1: Ames Rubber Corporation: Realizing Multiple Benefits through Improved Quality 108

" CASE 4-2: Midway USA 109

Chapter 5 THE VOICE OF THE CUSTOMER 111 Customer-Driven Quality 112

! A CLOSER LOOK AT QUALITY 5-1: Online Review of Merchandise 112 The Pitfalls of Reactive Customer-Driven Quality 113

Customer-Relationship Management 114 Complaint Resolution 114 Feedback 115 Guarantees 115 Corrective Action 116

The “Gaps” Approach to Service Design 116 Segmenting Customers and Markets 118 Strategic Supply Chain Alliances between Customers and Suppliers 119

The Role of the Customer in the Supply Chain 120

x Contents

Communicating Downstream 121 Actively Solicited Customer-Feedback Approaches 122

Telephone Contact 122 Focus Groups 122 Customer Service Surveys 123 ! A CLOSER LOOK AT QUALITY 5-2: Misusing Surveys 123

Passively Solicited Customer-Feedback Approaches 126 Customer Research Cards 127 Customer Response Lines 127 Web Site Inquiries 127

Managing Customer Retention and Loyalty 128 Customer-Relationship Management Systems 128 A Word on Excellent Design 130

Summary 130 Key Terms 131 Discussion Questions 131 Problems 132

" CASE 5-1: Customer Quality Feedback at Apple Computer 132 " CASE 5-2: Chaparral Steel: Achieving High Quality through a Commitment to

Both External and Internal Customers 133

Chapter 6 THE VOICE OF THE MARKET 135 What Do We Mean by the Voice of the Market? 135 Gaining Insight through Benchmarking 136

Process Benchmarking 137 Financial Benchmarking 137 Performance Benchmarking 137 Product Benchmarking 138 Strategic Benchmarking 138 ! QUALITY HIGHLIGHT 6-1: Pal’s Sudden Service 138 Functional Benchmarking 139

Purposes of Benchmarking 139 Difficulties in Monitoring and Measuring Performance 140 Commonly Benchmarked Performance Measures 142

Why Collect All These Measures? 144 Key Business Factors 144

Business Process Benchmarking 144 Robert Camp’s Business Process Benchmarking Process 145

Leading and Managing the Benchmarking Effort 147 ! A CLOSER LOOK AT QUALITY 6-1: Benchmarking at Intuit 147 Training 148 ! A CLOSER LOOK AT QUALITY 6-2: The Legal Environment of

Benchmarking 148

Baselining and Reengineering 150

Contents xi

Problems with Benchmarking 150 Summary 151 Key Terms 151 Discussion Questions 151 Problems 152

" CASE 6-1: Amgen Corporation: Using Benchmarking as a Means of Coping with Rapid Growth 155

" CASE 6-2: AT&T Teleholdings: Making Benchmarking a Part of the Process Improvement Tool Kit 156

Chapter 7 QUALITY AND INNOVATION IN PRODUCT AND PROCESS DESIGN 158 Designing Products for Quality 158 The Design Process 159

! QUALITY HIGHLIGHT 7-1: A Turnaround at Kellogg’s Cereals: Driven by Design 161

Quality Function Deployment (QFD) 163 Technology in Design 167 Other Design Methodologies 170

Organizing the Design Team 170 The Product Life Cycle 171 ! A CLOSER LOOK AT QUALITY 7-1: Ski Design 171 Product Families and the Product Life Cycle 172 Complementary Products 172 Designing Products That Work 172 ! A CLOSER LOOK AT QUALITY 7-2: It Takes a Scientist to Design a Winter

Coat 173

Design for Manufacture Method 174 Design for Maintainability 175

Designing for Reliability 176 ! QUALITY HIGHLIGHT 7-2: Designing Reliable Luxury at Vuitton 176 Reliability Analysis Tools 177 Failure Modes and Effects Analysis 177 How FMEA Works 178 Fault-Tree Analysis 178 Failure Modes, Effects, and Criticality Analysis 180 Product Traceability and Recall Procedures 180

Environmental Considerations in Design 181 Summary 182 Key Terms 182 Discussion Questions 182 Problems 183

" CASE 7-1: Keeping Apple’s iPhone Competitive 185 " CASE 7-2: Nucor Corporation: Producing Quality Steel by Stressing Sound

Management Practices 186

xii Contents

Chapter 8 DESIGNING QUALITY SERVICES 187 Differences between Services and Manufacturing 188

Internal versus External Services 189 Voluntary versus Involuntary Services 189 How Are Service Quality Issues Different from Those of Manufacturing? 189 ! A CLOSER LOOK AT QUALITY 8-1: Service Warranties: Profitable or a

Rip-off—You Decide 190

How Are Service Quality Issues Similar to Manufacturing? 191 What Do Services Customers Want? 191

! QUALITY HIGHLIGHT 8-1: Ritz-Carlton Hotels 192 SERVQUAL 193

Expectations 193 Perceptions 195 Gap Analysis 196 Assessing Differences in Expectations and Perceptions by Using the Differencing Technique 197

Designing and Improving the Services Transaction 200 Services Blueprinting 200 Moments of Truth 201 ! A CLOSER LOOK AT QUALITY 8-2: Quality in Health Care 202 Poka-yoke 203

The Customer Benefits Package 204 Service Transaction Analysis 205 Improving Customer Service in Government 208

! A CLOSER LOOK AT QUALITY 8-3: Government Service Quality: A Stop-and-Go Process 208

Quality in Health Care 209 Supply Chain Quality in Services 210 A Theory for Service Quality Management 210

Summary 211 Key Terms 212 Discussion Questions 212 Problems 213

" CASE 8-1: Yahoo! Designs Quality Services with Customers in Mind 216 " CASE 8-2: UPS: Delivering the Total Package in Customer Service 217

Chapter 9 MANAGING SUPPLIER QUALITY IN THE SUPPLY CHAIN 219 The Value Chain 219

The Chain of Customers 220 Managing the Supply Chain 220

Supplier Alliances 220 ! A CLOSER LOOK AT QUALITY 9-1: Supply Chains and Terrorism 223

Contents xiii

Single-Sourcing Examples 224 ! QUALITY HIGHLIGHT 9-1: A Bumpy Ride at Boeing 224

Supplier Development 226 ! QUALITY HIGHLIGHT 9-2: Integrating Forward along the Supply Chain:

3M Dental Products Division 226

Supplier Awards 228 Supplier Relationship Management Systems (SRMSs) 228

Applying the Contingency Perspective to Supplier Partnering 228 A Supplier Development Program: ISO/TS 16949:2009 228

ISO/TS 16949 228 Quality Management System 230 Management Responsibility 230 Resource Management 230 Product Realization 230 Measurement, Analysis, and Improvement 230

Acceptance Sampling and Statistical Sampling Techniques 230 Is Acceptance Sampling Needed? 230 ! A CLOSER LOOK AT QUALITY 9-2: For RFID to Take Hold, Reliability

Needs to Improve 231

Building an Understanding of Supply Chain Quality Management 232

Summary 232 Key Terms 233 Discussion Questions 233

" CASE 9-1: AT&T: Setting High Standards for Suppliers and Rewarding Supplier Performance 233

" CASE 9-2: Managing the Supply Chain at Honeywell 234

Part 3 Implementing Quality 237

Chapter 10 THE TOOLS OF QUALITY 238 Improving the System 238 Ishikawa’s Basic Seven Tools of Quality 239

Process Maps 240 ! A CLOSER LOOK AT QUALITY 10-1: Extended Value Stream Mapping of

Supply Chains 244

Check Sheets 246 Histograms 247 Scatter Diagrams 248 Control Charts 250 Cause-and-Effect (Ishikawa) Diagrams 250 Pareto Charts 252

The Seven New Tools for Improvement 255 The Affinity Diagram 257

xiv Contents

The Interrelationship Digraph 259 Tree Diagrams 260 Prioritization Grid 262 Matrix Diagram 264 Process Decision Program Chart 265 Activity Network Diagram 265 Reflections on the Managerial N7 Tools 267

Other Tools for Performance Measurement 267 Spider Charts 267 Balanced Scorecards 267 Dashboards 269

Summary 269 Key Terms 269 Discussion Questions 269 Problems 270

" CASE 10-1: Corporate Universities: Teaching the Tools of Quality 273 " CASE 10-2: Lanier: Achieving Maximum Performance by Supporting Quality

Products with Quality Services 274

Chapter 11 STATISTICALLY BASED QUALITY IMPROVEMENT FOR VARIABLES 276 Statistical Fundamentals 276

What Is Statistical Thinking? 276 ! QUALITY HIGHLIGHT 11-1: Statistical Tools in Action 277 Why Do Statistics Sometimes Fail in the Workplace? 278 Understanding Process Variation 278 Process Stability 280 Sampling Methods 280 Random Samples 280 Systematic Samples 280 Sampling by Rational Subgroups 280 Planning for Inspection 281 Control Plans 281

Process Control Charts 281 Variables and Attributes Control Charts 281 A Generalized Procedure for Developing Process Charts 283 Understanding Process Charts 283 x _ and R Charts 285

Interpreting Control Charts 286 Using Excel to Draw x

_ and R Charts 290

X and Moving Range ( MR ) Charts for Population Data 291 Using Excel to Draw X and MR Charts 294 Median Charts 294

Contents xv

Using Excel to Draw Median Charts 296 x _ and s Charts 296

Using Excel to Draw s and x _ Charts 298

Other Control Charts 298 Moving Average Chart 298 Cusum Chart 299

Some Control Chart Concepts for Variables 299 Choosing the Correct Variables Control Chart 299 Corrective Action 301 How Do We Use Control Charts to Continuously Improve? 301 Tampering with the Process 301

Process Capability for Variables 301 ! A CLOSER LOOK AT QUALITY 11-1: A Justification for Meeting Standards in

Software Quality 302

Population versus Sampling Distributions 302 Capability Studies 304 Ppk 306 The Difference between Capability and Stability 306

Other Statistical Techniques in Quality Management 306 Summary 307 Key Terms 308 Discussion Questions 308 Problems 308

" CASE 11-1: Ore-Ida Fries 312

Chapter 12 STATISTICALLY BASED QUALITY IMPROVEMENT FOR ATTRIBUTES 314 Generic Process for Developing Attributes Charts 315 Understanding Attributes Charts 315

p Charts for Proportion Defective 315 Using Excel to Draw p Charts 317 np Charts 318 Using Excel to Draw np Charts 320 c and u Charts 320 Using Excel to Draw c and u Charts 322

Attributes Charts Summary 323 Choosing the Right Attributes Chart 323 Reliability Models 325

Series Reliability 325 Parallel Reliability 326 Measuring Reliability 327 Mean Time to Failure (MTTF) 328 ! A CLOSER LOOK AT QUALITY 12-1: Is Quality on the Decline? 328

xvi Contents

System Availability 329 Summary 330 Key Terms 330 Discussion Questions 330 Problems 331

" CASE 12-1: Decision Sciences Institute National Conference 334

Chapter 13 SIX SIGMA MANAGEMENT AND LEAN TOOLS 337 What Is Six Sigma? 337 Organizing Lean-Six Sigma 339

Packaging Lean with Six Sigma 341 DMAIC Overview 341

! A CLOSER LOOK AT QUALITY 13-1: DMAIC in Action 342 Define Phase 343

Developing the Business Case 343 Project Evaluation 344 Pareto Analysis 347 Problem Definition 347

Measure Phase 347 Selecting Process Outcomes 347 FMEA 351 Verifying Measurements 351 Gauge R&R 352 Using Excel to Perform Gauge R&R Analysis 355

Analyze Phase 355 Defining Objectives 355 Identifying X s 355 Analyzing Sources of Variation 355

Improve Phase 356 Control Phase 356 Taguchi Design of Experiments 357

Robust Design 357 Background of the Taguchi Method 358

Taguchi Definition of Quality 358 Quality Loss Function 358

The Taguchi Process 360 Using Excel to Solve Taguchi Experiments 362

Design for Six Sigma 364 Lean-Six Sigma from a Contingency Perspective 364

Summary 364 Key Terms 365 Discussion Questions 365 Problems 365

" CASE 13-1: The Neiman-Marcus Cookie 370

Contents xvii

Part 4 Forever Improving the Quality System 371

Chapter 14 MANAGING QUALITY IMPROVEMENT TEAMS AND PROJECTS 372

Why Employees Enjoy teams 373 Leading Teams for Quality Improvement 373

Employee Empowerment and Involvement 373 ! A CLOSER LOOK AT QUALITY 14-1: Empowerment in Action 374 Flattening Hierarchies for Improved Effectiveness 375 Team Leader Roles and Responsibilities 375 Team Roles and Responsibilities 376 Team Formation and Evolution 377 Team Rules 378

Types of Teams 378 Process Improvement Teams 379 Cross-Functional Teams 379 Tiger Teams 379 Natural Work Groups 379 Self-Directed Work Teams 379 Virtual Teams 380 ! A CLOSER LOOK AT QUALITY 14-2: Lessons from Effective Teams outside the

Business World 380

Implementing Teams 381 Meeting Management 381 Conflict Resolution in Teams 382 Saving Quality Teams from Failure: Diagnosing Problems and Intervening Before It Is Too Late 385

Managing and Controlling Projects 385 Qualifying Projects 386 Project Charters 387

Force-Field Analysis 388 Work Breakdown Structure (WBS) 389 Identifying Precedence Relationships 389 Identifying Outcome Measures 389 Identifying Task Times 390 Activity Network Diagrams 391 Arrow Gantt Charts 394 Managing Multiple Projects 394

Summary 395 Key Terms 396 Discussion Questions 396 Problems 397

" CASE 14-1: Whole Foods Market: Using Teamwork as a Recipe for Success 399

xviii Contents

Chapter 15 IMPLEMENTING AND VALIDATING THE QUALITY SYSTEM 401 Building Blocks for the system of Quality Improvement 402

People 402 Organizational Learning and Knowledge 403 Culture 404 Closeness to Customers 404 Information and Finance 405 The Three Spheres of Quality 405 The Integrative Approach 405 Alignment between the Quality System and Strategy 406 ! QUALITY HIGHLIGHT 15-1: Back to Basics at Ford 406

Internal Validation: Documenting and Assessing the Quality System 406 ! A CLOSER LOOK AT QUALITY 15-1: A Simple Self-Assessment Tool 409

Quality Audits 412 Quality Audit Process 413 Types of Audits 413 Operational Audits 414 Performance Audits 414 ! A CLOSER LOOK AT QUALITY 15-2: Quality Audits in Action 416 Qualitative and Quantitative Elements in Audits 416

Validating the Quality System 417 Summary 418 Key Terms 418 Discussion Questions 419 Problems 419

" CASE 15-1: Setting Priorities Using the Baldrige Criteria 419

Appendix 422

Glossary 425

Index 440

Contents xix

PREFACE

Welcome to the fifth edition of Managing Quality: Integrating the Supply Chain . We are using the theme of supply chain management as a unifying theme for quality improvement. Previous adopters of Managing Quality will note that the coverage of quality topics is just as comprehen- sive as ever. We simply adopt the unifying theme of the supply chain to enhance our emphasis on the integration of systems with customers, suppliers, technology, and people. This is in response to changes in the marketplace and our customers—you! We think you will find that your custom- ers—the students—will find this change makes your quality management course ever more rel- evant and interesting. Of course, the new edition of the text has been updated with many changes to keep our coverage of quality topics on the cutting edge.

NEW TO THIS EDITION • You will notice more color in this edition of the text. This is because of you, our readers

and instructors who have made this book a best seller world wide. • Supply chain quality issues related to outsourcing have come to the forefront in recent

years, making this book even more relevant. With this, we have increased the coverage of outsourcing issues such as managing supplier alliances.