Managing quality integrating the supply chain 5th edition pdf

Exceptional Proff

Managing Quality INTEGRATING THE SUPPLY CHAIN

This page intentionally left blank

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

Managing Quality INTEGRATING THE SUPPLY CHAIN

S. Thomas Foster Brigham Young University

Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Montreal Paris Toronto

Delhi Hong Kong Mexico City São Paulo Seoul Singapore Sydney Taipei Tokyo

Editorial Director: Sally Yagan Editor in Chief: Donna Battista Senior Acquisitions Editor: Chuck Synovec Editorial Project Manager: Mary Kate Murray Editorial Assistant: Ashlee Bradbury Director of Marketing: Maggie Moylan Senior Marketing Manager: Jami Minard Production Project Manager: Clara Bartunek Creative Art Director: Jayne Conte Cover Designer: Bruce Kenselaar Image Lead Manager: Mike Lackey

Photo Researcher: Jason Perkins Manager, Rights and Permissions: Brooks Hill-Whilton Cover Art: Shutterstock Media Project Manager: John Cassar Media Editor: James Bateman Full-Service Project Management: Munesh Kumar/ Aptara®, Inc. Printer/Binder: Edwards Brothers Cover Printer: Lehigh / Phoenix, Hagerstown Text Font: Times Roman

Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on the appropriate page within text.

Microsoft and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published as part of the services for any purpose. All such documents and related graphics are provided “as is” without warranty of any kind. Microsoft and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all warranties and conditions of merchantability, whether express, implied or statutory, fitness for a particular purpose, title and non-infringement. In no event shall Microsoft and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from the services.

The documents and related graphics contained herein could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Microsoft and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time. Partial screen shots may be viewed in full within the software version specified.

Microsoft® and Windows® are registered trademarks of the Microsoft Corporation in the U.S.A. and other countries. This book is not sponsored or endorsed by or affiliated with the Microsoft Corporation.

Copyright © 2013, 2010, 2007, 2004, 2001 by Pearson Education, Inc., publishing as Prentice Hall. All rights reserved. Manufactured in the United States of America. This publication is protected by Copyright, and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. To obtain permission(s) to use material from this work, please submit a written request to Pearson Education, Inc., Permissions Department, One Lake Street, Upper Saddle River, New Jersey 07458, or you may fax your request to 201-236-3290.

Many of the designations by manufacturers and sellers to distinguish their products are claimed as trademarks. Where those designations appear in this book, and the publisher was aware of a trademark claim, the designations have been printed in initial caps or all caps.

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.

• We have turned a special eye towards updating vignettes such as the “Quality Highlights” and “Closer Looks at Quality,” with many updates including recent problems with Toyota, outsourcing to China, and Boeing. This provides a basis for discussing the causes of these problems.

• Many references have been updated to reflect the state of the art in research. • This book includes the ISO 9000:2008 standard and the most recent Baldrige criteria avail-

able at the time of publication. • We have increased the emphasis on emerging topics such as lean and sustainability. • There are many other recent topics added such as remote monitoring of product performance. • Many other changes, too numerous to mention, have been incorporated into this section of

the book. Look for the new problems on Service Transaction Analysis. However, while adding new content, we have not added to the bulk of the book. This allowed us to keep our focus on a lean and mean book that will hold the interest of students.

MAJOR THEMES

Supply Chain as a Unifying Theme Today’s firms are evermore focused on improving supply chain performance. Key to this improve- ment is quality management. As we look upstream, we need to develop our suppliers. Down- stream, we focus on customer service and after-sales service. Implicit in this process is service design. In your classes, you can drive these concepts home by emphasizing the systems view implicit in supply chain management. This unifying theme provides a linkage between the roots of quality management (Shewhart and Deming) with new developments such as Six Sigma and service quality. For clarification, this is not a supply chain management text. This is a quality management text that utilizes supply chain management as a unifying theme .

Integrative Approach Workers and managers in organizations are somewhat limited by their particular functional prep- aration and specialization (going back to their educational training). This narrow presentation filter is how they analyze and cognitively interpret information. However, quality management

xx

Preface xxi

has emerged as a discipline that is not owned by any of the functional areas such as operations management, supply chain management, human resources, or marketing. We all have to work together to satisfy customers.

Contingency Approach This is a concept we have emphasized for a long time that is gaining traction in the research and practitioner literature. We passionately believe that the future of quality management will involve learning the contingencies associated with managing quality. There is no “one way” or “magic pill” that companies can implement to improve quality. Therefore, the contingency approach is used to instruct students how to assess the current position of the firm and identify an effective strategy for improvement based on a profound understanding of their company, market, custom- ers, and so on. Thus improvement is based on the contingent variables that are operative in the firm as it exists. This contingency approach is introduced in Chapter 1 and permeates the rest of the text.

The author and over 300 universities around the world have successfully taught quality management using this contingency approach. This approach coupled with the unifying theme of the supply chain makes this pedagogically even more powerful. To manage quality effectively, a few conditions must be present: Students must understand their businesses, understand the qual- ity body of knowledge, understand the available tools, and have a method for planning quality based on this knowledge. This text provides a basis for accomplishing this—when combined with an instructor’s insight.

SUPPORT FOR THIS EDITION

Active Models There are interactive Excel spreadsheets located at www.pearsonhighered.com/foster that cor- respond to examples in Chapters 12 and 13 and allow the student to explore and better under- stand important quantitative concepts. Students or instructors can adjust inputs to the model and, in effect, they can answer a whole series of “what if” questions that are provided (e.g., What if variation in the process changes? What if the process indicates changes are needed? What if we change the sample size?). These Active Models are great for classroom presentation and/or homework.

FOR THE STUDENT

Companion Web Site By visiting www.pearsonhighered.com/foster , students will be able to find the following resources by chapter: online quizzes, direct links to company Web sites, quality tools, and knowledge base topics. The following features are also available:

• Online Chapter 9 Appendix —this online appendix covers acceptance sampling fundamentals. • Excel Files —for examples in Chapters 11 , 12 , and 13 . • Active Models —for selected textbook examples. • Video Clips —selected video clips (one to two minutes in length) that illustrate chapter-related

topics. • Excel Quality —plug-in files for selected examples in the text.

http://www.pearsonhighered.com/foster
http://www.pearsonhighered.com/foster
FOR THE INSTRUCTOR Besides the changes and additions to the text, we’ve made substantial revisions to the support materials for this book.

Instructor’s Resource Center A password-protected site at www.pearsonhighered.com/foster gives instructors access to the following resources:

• Instructor’s Manual —This manual includes solutions to practice problems, case study questions, sample syllabi, and teaching tips.

• PowerPoint Presentations —A set of PowerPoint presentations is available for each chapter. • Test Item File —The Test Item File contains a variety of true/false, multiple-choice, fill-in-

the-blank, short-answer, and problem-solving questions for each chapter. • TestGen-EQ Software — Pearson Education’s test-generating software is available from

www.pearsonhighered.com/irc . The software is PC/MAC compatible and preloaded with all of the Test Item File questions. You can manually or randomly view test questions and drag and drop to create a test. You can add or modify test-bank questions as needed. Our TestGens are converted for use in BlackBoard and WebCT. These conversions can be found in the Instructor’s Resource Center. Conversions to D2L or Angel can be requested through your local Pearson Sales Representative.

xxii Preface

http://www.pearsonhighered.com/foster
http://www.pearsonhighered.com/irc
ACKNOWLEDGMENTS

I wish to first thank my family for putting up with the fences left unmended, the mountains not explored, the rivers not rafted, the snow unskied, the music not played, and the many hours spent in front of a computer screen over the last years writing and updating this book. It has truly been a labor of love for me. I believe that these concepts are important for the future of the world.

I would like to thank my parents, who always emphasized the importance of education as a means of achieving a happy life. I thank Everett E. Adam Jr., for mentoring me. I would like to acknowledge my colleagues at Brigham Young University for providing encouragement for this project. Thanks to all of my students and those individuals who have hired me as a consultant. These people have helped me pursue lifelong learning.

I also wish to thank the following reviewers for their thoughtful comments: Susan Gary Bragar of Bloomfield College, Dennis Krumwiede Idaho State University, Jay Mabe of York Technical College, Steven F. Marsh of Clarkson University, Renae Neace of Hazard Community and Technical College, Dr. Floyd Olson of Utah Valley University, Samia M. Siha of Kennesaw State University, and Jim Vail of Elizabethtown Community and Technical College.

Chuck Synovec, my editor at Pearson, deserves recognition for the great encouragement he has given to me. Finally, I am thankful for my faith, which keeps me progressing eternally.

xxiii

ABOUT THE AUTHOR

Dr. Tom Foster is a professor, researcher, and consultant in the field of quality management. Among Dr. Foster’s areas of exper- tise are strategic quality planning, service quality, Six Sigma, government quality, and the role of technology in improving quality. Tom is the Donald L. Staheli Professor of quality and supply chain management in the Marriott School of Manage- ment at Brigham Young University. He has also taught at Pennsylvania State University and Boise State University. He received his Ph.D. from the University of Missouri-Columbia.

Dr. Foster has professional experience in manufacturing, financial services operations, and international oil exploration. He has consulted for over 30 companies, including Trus Joist MacMillan, the U.S. Department of Energy, Hewlett-Packard, Heinz Frozen Food, and Cutler Hammer/Eaton Corporation. Dr. Foster currently serves on the 12-person Board of Overseers for the Malcolm Bald-

rige Award and has served as a judge for state awards. Tom is on the editorial boards of the Journal of Operations Management, the Quality Man-

agement Journal, and Decision Sciences . He has published over 60 quality-related research arti- cles in journals such as The Journal of Operations Management, Decision Sciences , the International Journal of Production Research , the Quality Management Journal , and Quality Progress . He is listed in Who’s Who in America and Who’s Who in the World . Dr. Foster is founder of www.freequality.org , was awarded the ASBSU Outstanding Faculty Award, and served as guest editor for the Journal of Operations Management and Quality Management Journal special issue on supply chain quality. In addition, he was winner of the 2002 Decision Sciences Institute Innovative Education Award.

Tom has ten children, 8 grandchildren, and is married to the former Camille Curtis. In his spare time, he skis, enjoys the Rocky Mountains, and plays his Fender Stratocaster.

xxiv

http://www.freequality.org
P A R T O N E

Understanding Quality Concepts

To understand quality in the supply chain, we need a common language. In the general public, the language of quality is imprecise and inconsistent. The language of quality professionals is much more precise and consistent.

To understand the advanced concepts in the later chapters, in Chapters 1 through 3 we build a conceptual foundation of quality theory. This forms the basis of the contingency approach. To apply quality improvement on a contingent basis, you need to understand the foundation that has been laid by leaders in the quality movement such as W. Edwards Deming, Joseph Juran, Philip Crosby, Kaoru Ishikawa, and others. These people have made huge contributions to the well-being of the world, and a knowledge of their teachings and ideas is necessary for quality application.

In Chapter 3 we consider important frameworks, such as ISO 9000:2008, the Deming Prize, and the Baldrige criteria. These provide models for improvement that are being used in many countries around the world.

Those who are victorious plan effectively and change decisively. They are like a great river that maintains its course but adjusts its flow.

—Sun Tzu

C H A P T E R 1

Differing Perspectives on Quality

2

RECOGNIZING DIFFERENT PERSPECTIVES ON QUALITY

Quality management involves flows. There are process flows, information flows, material flows, and flows of funds. Each of these flows has to operate effectively, efficiently, and with outstand- ing quality. Like a river, we refer to upstream flows and downstream flows. The sums of these flows comprise the supply chain.

Considering the supply chain causes us to think about quality differently. One of the prob- lems with quality efforts has been that they tend to be too internally oriented. The supply chain causes us to expand our vision as we externalize processes that had previously been internalized. These include upstream processes relating to our dealing with suppliers—negotiating, selecting, and improving supplier performance—and downstream processes—delivering products and services and serving customers.

The supply chain encompasses many differing functions and processes. It includes all of the core activities from the raw materials stage to after-sale service. To execute all of these pro- cesses correctly involves integrating differing functions, expertise, and dimensions of quality. This need for integration increases the requirement for flexible, cross-functional problem solving and employees who can adapt to rapidly changing markets.

There are many different definitions and dimensions of quality in the supply chain. We present several of these definitions and dimensions in this chapter. For the present, you can view quality as a measure of goodness that is inherent to a product or service. Employees working for the same firm often view quality differently. Think of the different functions involved in creat- ing products and services. These include design engineering, marketing, operations, cost accounting, financial management, and others throughout the supply chain. A product design engineer might feel that customer satisfaction is mostly influenced by product design and prod- uct attributes and take great pains to design a product that satisfies the customer. However, the product also needs to satisfy marketing’s need for quick design cycle times and accounting’s

Chapter 1 • Differing Perspectives on Quality 3

need for low-cost products. So perceptions differ on a variety of levels, including what our goals for the product or service are. A Closer Look at Quality 1-1 illustrates this point by com- paring people’s perceptions concerning service in airports.

Perceptions affect every aspect of our world—including the business world. To communi- cate effectively about quality, managers need to recognize that differences in perceptions of qual- ity exist. Although this observation may not seem too startling, many managers have strong opinions about what quality is. Sometimes these opinions can be at variance with the beliefs of the majority of their customers. This may hurt the competitiveness of a firm. For that reason, in this chapter we study quality from a variety of perspectives. Later we provide a means for recog- nizing and resolving differences in perception. Finally, we introduce the contingency view of quality management that we emphasize throughout this book.

WHAT IS QUALITY?

If you ask 10 people to define quality, you probably will get 10 definitions.

Product Quality Dimensions

There are several definitions of quality, or quality dimensions. One of the most respected col- lections of quality dimensions was compiled by David Garvin 2 of the Harvard Business School. Garvin found that most definitions of quality were either transcendent, product-based, user- based, manufacturing-based, or value-based. What does each of these terms mean?

Transcendent: Quality is something that is intuitively understood but nearly impossible to communicate, such as beauty or love.

Product-based: Quality is found in the components and attributes of a product. User-based: If the customer is satisfied, the product has good quality.

2 Garvin, D., “What Does ‘Product Quality’ Really Mean?” Sloan Management Review (Fall 1984): 25–43.

A CLOSER LOOK AT QUALITY 1-1 What’s in an Airport? 1

All airports serve the same purpose: a place for planes to land and take off and for passengers to board and unload. Yet, with this similar purpose, Asian airports rank among the best in the world and U.S. airports lag behind. In the annual Airport Service Quality Survey, four of the five top spots were awarded to airports in Asia. The difference in U.S. and Asian quality rankings lies within the perception of the passengers. In the United States, airports are perceived as public facilities, a means to an end. In Asia, airports are service-oriented businesses. The ex-COO of Seoul’s airport remarked, “Our focus is to make airports convenient, attractive, and pleasant, even at fairly high costs.” This difference in passenger perception drives quality standards.

The commitment to service and quality begins before a new Asian airports opens. Task forces benchmark some of the world’s best airports and management spends to provide amenities. Once the airport is operating, this process continues as opportunities for enhancing service are identified and the necessary expenditures for upgrades are made. These efforts to provide a world class airport have paid off, and in the case of Seoul, the airport’s success has benefited multiple industries.

Customer perception can influence quality. As firms compete on quality, customers win. As U.S. passengers travel abroad, their perception of what an airport can and should be changes. These changes will be felt at home.

1 Based on Moon, I., “Why Asia Has the World’s Best Airports,” Business Week , 3 March 2009: 18.

4 Part 1 • Understanding Quality Concepts

Manufacturing-based: If the product conforms to design specifications, it has good quality. Value-based: If the product is perceived as providing good value for the price, it has good quality.

Using these five definitions of quality, Garvin developed a list of eight quality dimensions (see Table 1-1 ). These dimensions describe product quality specifically in the following paragraphs.

Performance refers to the efficiency with which a product achieves its intended purpose. This might be the return on a mutual fund investment, the fuel efficiency of an automobile, or the acoustic range of a pair of stereo speakers. Generally, better performance is synonymous with better quality.

Features are attributes of a product that supplement the product’s basic performance. These include many of the “bells and whistles” contained in products. A visit to any television or computer retail store will reveal that features, such as surround sound, HDTV capability, 3-D, and size, are powerful marketing tools for which customers will pay a premium. A full-line tele- vision retail store may carry televisions priced from $200 to $12,000. This range represents a 6,000% price premium for additional features!

Reliability refers to the propensity for a product to perform consistently over its useful design life. A subfield in quality management has emerged, called reliability management , based on the application of probability theory to quality. A product is considered reliable if the chance that it will fail during its designed life is very low. For example, if a refrigerator has a 2% chance of failure in a useful life of 10 years, we say that it is 98% reliable.

Conformance is perhaps the most traditional dimension of quality. When a product is designed, certain numeric dimensions for the product’s performance are established, such as capacity, speed, size, durability, or the like. These numeric product dimensions are referred to as specifications. The number of ounces of pulp allowed in a half-gallon container of “pulp-free” orange juice is one example. Specifications typically are allowed to vary a small amount called tolerance. If a particular dimension of a product is within the allowable range of tolerance of the specification, it conforms.

The advantage of the conformance definition of quality for products is that it is easily quantified. However, it is often difficult for a service to conform to numeric specifications. For example, imagine trying to measure the quality of a counselor’s work versus that of a carmaker. Because counseling is intangible, it is almost impossible to measure.

Durability is the degree to which a product tolerates stress or trauma without failing. An example of a product that is not very durable is a lightbulb. Lightbulbs are damaged easily and cannot be repaired. In contrast, a trash can is a very durable product that can be subjected to much wear and tear.

TABLE 1-1 Garvin’s Product Quality Dimensions Performance Features Reliability Conformance Durability Serviceability Aesthetics Perceived quality

Adapted from Garvin, D., “What Does ‘Product Quality’ Really Mean?” MIT Sloan Management Review , Fall 1984, by permission of publisher. Copyright 1984 by Sloan Management Association. All rights reserved.

Chapter 1 • Differing Perspectives on Quality 5

TABLE 1-2 PZ&B’s Service Quality Dimensions Tangibles Service reliability Responsiveness Assurance Empathy

Adapted from Parasuraman, A., Zeithamel, V., and Berry, L., “A Conceptual Model of Service Quality” (Report No. 84–106), Marketing Science Institute, 1984.

Serviceability is the ease of repair for a product. A product is very serviceable if it can be repaired easily and cheaply. Many products require service by a technician, such as the techni- cian who repairs your personal computer. If this service is rapid, courteous, easy to acquire, and competent, then the product generally is considered to have good serviceability. Note that differ- ent dimensions of quality are not mutually exclusive.

Aesthetics are subjective sensory characteristics such as taste, feel, sound, look, and smell. Although vinyl interiors in automobiles require less maintenance, are less expensive, and are more durable, leather interiors generally are considered more aesthetically pleasing. We measure aesthetic quality as the degree to which product attributes are matched to consumer preferences.

Perceived quality is based on customer opinion. As we said in the beginning of this chap- ter, quality is as the customer perceives it. Customers imbue products and services with their understanding of their goodness. This is perceived quality. We can witness an example of the effect of perceived quality every year in college football polls that rank teams. In many cases, the rankings are based on past records, team recognition, tradition of the university, and other factors that are generally poor indicators of team quality on a given Saturday. In the same way that these factors affect sportswriters’ perceptions, factors such as brand image, brand recognition, amount of advertising, and word of mouth can affect consumers’ perceptions of quality.