One of britain's largest children's hospitals working with a ferrari racing team is an example of:

Six Sigma

The term Six Sigma , popularized by Motorola, Honeywell, and General Electric, has two meanings in TQM. In a statistical sense, it describes a process, product, or service with an extremely high capability (99.9997% accuracy). For example, if 1 million passengers pass through the St. Louis Airport with checked baggage each month, a Six Sigma program for baggage handling will result in only 3.4 passengers with misplaced luggage. The more common three-sigma program (which we address in the supplement to this chapter) would result in 2,700 passengers with misplaced bags every month. See Figure 6.4 .

Six Sigma

A program to save time, improve quality, and lower costs.

The second TQM definition of Six Sigma is a program designed to reduce defects to help lower costs, save time, and improve customer satisfaction. Six Sigma is a comprehensive system—a strategy, a discipline, and a set of tools—for achieving and sustaining business success:

1. LO 6.3Explain Six Sigma

· It is a strategy because it focuses on total customer satisfaction.

· It is a discipline because it follows the formal Six Sigma Improvement Model known as DMAIC. This five-step process improvement model (1) Defines the project’s purpose, scope, and outputs and then identifies the required process information, keeping in mind the customer’s definition of quality; (2) Measures the process and collects data; (3) Analyzes the data, ensuring repeatability (the results can be duplicated) and reproducibility (others get the same result); (4) Improves, by modifying or redesigning, existing processes and procedures; and (5) Controls the new process to make sure performance levels are maintained.

· It is a set of seven tools that we introduce shortly in this chapter: check sheets, scatter diagrams, cause-and-effect diagrams, Pareto charts, flowcharts, histograms, and statistical process control.

Motorola developed Six Sigma in the 1980s, in response to customer complaints about its products and in response to stiff competition. The company first set a goal of reducing defects by 90%. Within one year, it had achieved such impressive results—through benchmarking competitors, soliciting new ideas from employees, changing reward plans, adding training, and revamping critical processes—that it documented the procedures into what it called Six Sigma. Although the concept was rooted in manufacturing, GE later expanded Six Sigma into services, including human resources, sales, customer services, and financial/credit services. The concept of wiping out defects turns out to be the same in both manufacturing and services.

Figure 6.4 Defects per Million for ±3σ vs. ±6σ

Implementing Six Sigma

Implementing Six Sigma is a big commitment. Indeed, successful Six Sigma programs in every firm, from GE to Motorola to DuPont to Texas Instruments, require a major time commitment, especially from top management. These leaders have to formulate the plan, communicate their buy-in and the firm’s objectives, and take a visible role in setting the example for others.

Student Tip

Recall that ±3σ provides 99.73% accuracy, while ±6σ is 99.9997%.

Successful Six Sigma projects are clearly related to the strategic direction of a company. It is a management-directed, team-based, and expert-led approach. 2

Employee Empowerment

Employee empowerment means involving employees in every step of the production process. Consistently, research suggests that some 85% of quality problems have to do with materials and processes, not with employee performance. Therefore, the task is to design equipment and processes that produce the desired quality. This is best done with a high degree of involvement by those who understand the shortcomings of the system. Those dealing with the system on a daily basis understand it better than anyone else. One study indicated that TQM programs that delegate responsibility for quality to shop-floor employees tend to be twice as likely to succeed as those implemented with “top-down” directives. 3

Employee empowerment

Enlarging employee jobs so that the added responsibility and authority is moved to the lowest level possible in the organization.

When nonconformance occurs, the worker is seldom at fault. Either the product was designed wrong, the process that makes the product was designed wrong, or the employee was improperly trained. Although the employee may be able to help solve the problem, the employee rarely causes it.

Techniques for building employee empowerment include (1) building communication networks that include employees; (2) developing open, supportive supervisors; (3) moving responsibility from both managers and staff to production employees; (4) building high- morale organizations; and (5) creating such formal organization structures as teams and quality circles.

Teams can be built to address a variety of issues. One popular focus of teams is quality. Such teams are often known as quality circles. A quality circle is a group of employees who meet regularly to solve work-related problems. The members receive training in group planning, problem solving, and statistical quality control. They generally meet once a week (usually after work but sometimes on company time). Although the members are not rewarded financially, they do receive recognition from the firm. A specially trained team member, called the facilitator, usually helps train the members and keeps the meetings running smoothly. Teams with a quality focus have proven to be a cost-effective way to increase productivity as well as quality.

Quality circle

A group of employees meeting regularly with a facilitator to solve work-related problems in their work area.

Benchmarking

Benchmarking is another ingredient in an organization’s TQM program. Benchmarking involves selecting a demonstrated standard of products, services, costs, or practices that represent the very best performance for processes or activities very similar to your own. The idea is to develop a target at which to shoot and then to develop a standard or benchmark against which to compare your performance. The steps for developing benchmarks are:

Benchmarking

Selecting a demonstrated standard of performance that represents the very best performance for a process or an activity.

Workers at this TRW airbag manufacturing plant in Marshall, Illinois, are their own inspectors. Empowerment is an essential part of TQM. This man is checking the quality of a crash sensor he built.

TRW Automotive/General Manley Ford

Table 6.3 Best Practices for Resolving Customer Complaints

Source: Based on Canadian Government Guide on Complaint Mechanism.

Best Practice

Justification

Make it easy for clients to complain.

It is free market research.

Respond quickly to complaints.

It adds customers and loyalty.

Resolve complaints on the first contact.

It reduces cost.

Use computers to manage complaints.

Discover trends, share them, and align your services.

Recruit the best for customer service jobs.

It should be part of formal training and career advancement.

1. Determine what to benchmark.

2. Form a benchmark team.

3. Identify benchmarking partners.

4. Collect and analyze benchmarking information.

5. Take action to match or exceed the benchmark.

Typical performance measures used in benchmarking include percentage of defects, cost per unit or per order, processing time per unit, service response time, return on investment, customer satisfaction rates, and customer retention rates.

1. LO 6.4Explain how benchmarking is used in TQM

In the ideal situation, you find one or more similar organizations that are leaders in the particular areas you want to study. Then you compare yourself (benchmark yourself) against them. The company need not be in your industry. Indeed, to establish world-class standards, it may be best to look outside your industry. If one industry has learned how to compete via rapid product development while yours has not, it does no good to study your industry.

This is exactly what Xerox and Mercedes-Benz did when they went to L.L. Bean for order-filling and warehousing benchmarks. Xerox noticed that L.L. Bean was able to “pick” orders three times faster. After benchmarking, Xerox was immediately able to pare warehouse costs by 10%. Mercedes-Benz observed that L.L. Bean warehouse employees used flowcharts to spot wasted motions. The auto giant followed suit and now relies more on problem solving at the worker level.

Benchmarks often take the form of “best practices” found in other firms or in other divisions. Table 6.3 illustrates best practices for resolving customer complaints.

Likewise, Britain’s Great Ormond Street Hospital benchmarked the Ferrari Racing Team’s pit stops to improve one aspect of medical care. (See the OM in Action box “A Hospital Benchmarks Against the Ferrari Racing Team?”)

Internal Benchmarking

When an organization is large enough to have many divisions or business units, a natural approach is the internal benchmark. Data are usually much more accessible than from outside firms. Typically, one internal unit has superior performance worth learning from.

Xerox’s almost religious belief in benchmarking has paid off not only by looking outward to L.L. Bean but by examining the operations of its various country divisions. For example, Xerox Europe, a $6 billion subsidiary of Xerox Corp., formed teams to see how better sales could result through internal benchmarking. Somehow, France sold five times as many color copiers as did other divisions in Europe. By copying France’s approach, namely, better sales training and use of dealer channels to supplement direct sales, Norway increased sales by 152%, Holland by 300%, and Switzerland by 328%!

Benchmarks can and should be established in a variety of areas. Total quality management requires no less.

OM in Action A Hospital Benchmarks Against the Ferrari Racing Team?

After surgeons successfully completed a 6-hour operation to fix a hole in a 3-year-old boy’s heart, Dr. Angus McEwan supervised one of the most dangerous phases of the procedure: the boy’s transfer from surgery to the intensive care unit.

Thousands of such “handoffs” occur in hospitals every day, and devastating mistakes can happen during them. In fact, at least 35% of preventable hospital mishaps take place because of handoff problems. Risks come from many Sources: using temporary nursing staff, frequent shift changes for interns, surgeons working in larger teams, and an ever-growing tangle of wires and tubes connected to patients.

Using an unlikely benchmark, Britain’s largest children’s hospital turned to Italy’s Formula One Ferrari racing team for help in revamping patient handoff techniques. Armed with videos and slides, the racing team described how they analyze pit crew performance. It also explained how its system for recording errors stressed the small ones that go unnoticed in pit-stop handoffs.

Oliver Multhaup/AP Images

To move forward, Ferrari invited a team of doctors to attend practice sessions at the British Grand Prix in order to get closer looks at pit stops. Ferrari’s technical director, Nigel Stepney, then watched a video of a hospital handoff. Stepney was not impressed. “In fact, he was amazed at how clumsy, chaotic, and informal the process appeared,” said one hospital official. At that meeting, Stepney described how each Ferrari crew member is required to do a specific job, in a specific sequence, and in silence. The hospital handoff, in contrast, had several conversations going on at once, while different members of its team disconnected or reconnected patient equipment, but in no particular order.

Results of the benchmarking process: handoff errors fell over 40%, with a bonus of faster handoff time.

Sources: The Wall Street Journal (December 3, 2007) and (November 14, 2006).

Just-in-Time (JIT)

The philosophy behind just-in-time (JIT) is one of continuing improvement and enforced problem solving. JIT systems are designed to produce or deliver goods just as they are needed. JIT is related to quality in three ways:

· JIT cuts the cost of quality: This occurs because scrap, rework, inventory investment, and damage costs are directly related to inventory on hand. Because there is less inventory on hand with JIT, costs are lower. In addition, inventory hides bad quality, whereas JIT immediately exposes bad quality.

· JIT improves quality: As JIT shrinks lead time, it keeps evidence of errors fresh and limits the number of potential sources of error. JIT creates, in effect, an early warning system for quality problems, both within the firm and with vendors.

· Better quality means less inventory and a better, easier-to-employ JIT system: Often the purpose of keeping inventory is to protect against poor production performance resulting from unreliable quality. If consistent quality exists, JIT allows firms to reduce all the costs associated with inventory.

Taguchi Concepts

Most quality problems are the result of poor product and process design. Genichi Taguchi has provided us with three concepts aimed at improving both product and process quality: quality robustness, target-oriented quality, and the quality loss function.

Quality robust products are products that can be produced uniformly and consistently in adverse manufacturing and environmental conditions. Taguchi’s idea is to remove the effects of adverse conditions instead of removing the causes. Taguchi suggests that removing the effects is often cheaper than removing the causes and more effective in producing a robust product. In this way, small variations in materials and process do not destroy product quality.

Quality robust

Products that are consistently built to meet customer needs despite adverse conditions in the production process.

Figure 6.5 (a) Distribution of Products Produced and (b) Quality Loss Function

Taguchi aims for the target because products produced near the upper and lower acceptable specifications result in a higher quality loss.

A study found that U.S. consumers preferred Sony TVs made in Japan to Sony TVs made in the U.S., even though both factories used the exact same designs and specifications. The difference in approaches to quality generated the difference in consumer preferences. In particular, the U.S. factory was conformance-oriented, accepting all components that were produced within specification limits. On the other hand, the Japanese factory strove to produce as many components as close to the actual target as possible (see Figure 6.5 (a)).

This suggests that even though components made close to the boundaries of the specification limits may technically be acceptable, they may still create problems. For example, TV screens produced near their diameter’s lower spec limit may provide a loose fit with screen frames produced near their upper spec limit, and vice versa. This implies that a final product containing many parts produced near their specification boundaries may contain numerous loose and tight fits, which could cause assembly, performance, or aesthetic concerns. Customers may be dissatisfied, resulting in possible returns, service work, or decreased future demand.

Taguchi introduced the concept of target-oriented quality as a philosophy of continuous improvement to bring the product exactly on target. As a measure, Taguchi’s quality loss function (QLF) attempts to estimate the cost of deviating from the target value. Even though the item is produced within specification limits, the variation in quality can be expected to increase costs as the item output moves away from its target value. (These quality-related costs are estimates of the average cost over many such units produced.)

Target-oriented quality

A philosophy of continuous improvement to bring a product exactly on target.

1. LO 6.5Explain quality robust products and Taguchi concepts

Quality loss function (QLF)

A mathematical function that identifies all costs connected with poor quality and shows how these costs increase as output moves away from the target value.

The QLF is an excellent way to estimate quality costs of different processes. A process that produces closer to the actual target value may be more expensive, but it may yield a more valuable product. The QLF is the tool that helps the manager determine if this added cost is worthwhile. The QLF takes the general form of a simple quadratic equation (see Figure 6.5 (b)).

Knowledge of TQM Tools

To empower employees and implement TQM as a continuing effort, everyone in the organization must be trained in the techniques of TQM. In the following section, we focus on some of the diverse and expanding tools that are used in the TQM crusade.

Figure 6.6 Seven Tools of TQM

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