Transcript Chapter 19 Quality Management and the Operations Process In the Spotlight:

Chapter 19
Quality Management and
the Operations Process
In the Spotlight:
Carmelo’s Italian Restaurant
Small Business Management, 11th edition
Longenecker, Moore, and Petty
© 2000
South-Western College Publishing
19-1
Learning Objectives: Chapter 19
1. Explain the key elements of total quality
management (TQM) programs.
2. Discuss the nature of the operations process for
both products and services.
3. Explain how reengineering and other methods of
work improvement can increase productivity and
make a firm more competitive.
4. Discuss the importance of purchasing and the
nature of key purchasing policies.
5. Describe ways to control inventory and minimize
inventory costs.
Small Business Management, 11th edition
Longenecker, Moore, and Petty
© 2000
South-Western College Publishing
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A Definition of Quality
The American Society for Quality defines quality
as “the totality of features and characteristics of a
product or service that bears on its ability to satisfy
stated or implied needs.”
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© 2000
South-Western College Publishing
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Essential Elements of Successful
Quality Management
Appropriate
Tools and
Techniques
Successful
Quality
Management
Supportive
Organizational
Culture
Focus on
Customers
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© 2000
South-Western College Publishing
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Tools and Techniques of Total
Quality Management
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Work teams
Empowerment of employees
Quality circle
Attribute inspection
Variable inspection
Acceptance sampling
Statistical process control
Control chart
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© 2000
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Factors That Positively Influence
Customers’ Perceptions of Service Quality
1. Being on target. Set and meet the customer’s expectations.
2. Care and concern. Be empathetic.
3. Spontaneity. Empower service providers to think and
respond quickly.
4. Problem solving. Train and encourage service providers to
be problem solvers.
5. Follow-up. Follow-up captures customers’ attention.
6. Recovery. Making things right quickly is a powerful factor
in creating an enduring image of high-quality service.
Source: Ken Myers and Jim Buckman, “Beyond the Smile: Improving Service Quality at the Roots,” Quality Progress, Vol. 25, No. 12 (December 1992), p. 57.
Small Business Management, 11th edition
Longenecker, Moore, and Petty
© 2000
South-Western College Publishing
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A Definition of ISO 9000
The standards governing international
certification of a firm’s quality
management procedures.
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© 2000
South-Western College Publishing
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The Operations Process
Inputs
Money
Raw Materials
Labor
Equipment
Information
Energy
Operations
Designing
Fabricating
Processing
Refining
Treating
Assembling
Storing
Shipping
Advising
Instructing
Outputs
Products
Examples:
Clothing
Baked goods
Paint
Small Business Management, 11th edition
Longenecker, Moore, and Petty
© 2000
South-Western College Publishing
Services
Examples:
Dry cleaning
Appliance repair
Automobile painting
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Types of Manufacturing Operations
1. Job shops
2. Repetitive manufacturing
3. Batch manufacturing
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Longenecker, Moore, and Petty
© 2000
South-Western College Publishing
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Two Types of Maintenance
Preventive Maintenance
• Involves inspection of equipment, cleaning
and lubricating, and replacing worn parts
• Sustains production
• Minimizes corrective maintenance
Corrective Maintenance
• Involves major repairs and
minor repairs
• Disrupts production
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© 2000
South-Western College Publishing
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The Nature of Reengineering
• Emphasizes restructuring rather than fine tuning.
• Examines basic processes.
• Questions all traditional patterns.
• Directs attention to activities that create value
for the customer.
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© 2000
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Make-or-Buy Trade-Offs
Make
Buy
1.
2.
3.
4.
1. Use supplier’s
know-how.
2. Avoid additional hiring
and borrowing.
3. Use present
management.
4. Provide production
flexibility.
5. Concentrate on
specialty.
6. Reduce risk of
equipment
obsolescence.
Use idle capacity.
Assure supply.
Protect secret design.
Save transportation
expense.
5. Permit close control
of production.
6. Assure high quality.
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© 2000
South-Western College Publishing
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Kinds of Activities Outsourced
Activity
Percentage of Respondents
Taxes/accounting/auditing
Equipment maintenance/janitorial services
Payroll/benefits administration
Manufacturing/processing/assembling
Marketing or sales
50%
44%
37%
29%
6%
Note: Respondents were allowed to check more than one activity.
Source: “Poll Results: Reader’s Views on Outsourcing,” Nation’s Business, Vol. 84, No. 5 (May 1996), p. 85.
Small Business Management, 11th edition
Longenecker, Moore, and Petty
© 2000
South-Western College Publishing
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Considerations in Selecting a Supplier
Quality
Price
Reliability
Location
Other services
(credit, repair)
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South-Western College Publishing
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Ways to Build Good Supplier
Relationships
• Pay bills promptly.
• Give sales representatives a prompt, courteous
hearing.
• Avoid abrupt cancellation of orders.
• Avoid attempts to browbeat the supplier into
special concessions.
• Make suggestions for product improvement and/or
cost reduction, whenever possible.
• Provide explanations when rejecting bids.
• Make fair adjustments in the case of disputes.
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Longenecker, Moore, and Petty
© 2000
South-Western College Publishing
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Objectives of Inventory Management
Ensuring
Continuous
Operations
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South-Western College Publishing
Maximizing
Sales
Protecting
Assets
Minimizing
Inventory
Investment
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Graphic Portrayal of Economic
Order Quantity (EOQ)
EOQ
Total Costs
Cost ($)
Carrying
Costs
Order Costs
Order Quantity (Units)
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South-Western College Publishing
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Just-in-Time Inventory System
Purchase in small quantities, only when needed. For best reliability,
work with one supplier.
Pros:
• Lower carrying costs
• Less warehouse space needed
• Risk shifted to suppliers
Small Business Management, 11th edition
Longenecker, Moore, and Petty
© 2000
South-Western College Publishing
Cons:
• Risk of stockouts
• Loss of quantity discounts
• Higher paperwork costs
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