purchasing and supply management by w. c. benton chapter eleven total quality management (tqm) and...
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Purchasing and Supply Management by W. C. Benton
Purchasing and Supply Management by W. C. Benton
Chapter Eleven
Total Quality Management (TQM) and Purchasing
Copyright ©2007 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin
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1. To identify purchasing’s functional role in a firm in light of an overall quality assurance program.
2. To determine the various costs associated with quality and why it is difficult to measure these costs.
3. To define what is meant by total quality management (TQM).
4. To show how quality specifications and targets are determined.
Learning Objectives
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Learning Objectives5. To identify the advantages of statistical process
control (SPC).
6. To show the advantages of six sigma implementation.
7. To identify the advantages of the Taguchi method.
8. To learn the mechanics of acceptance sampling for commodity purchasing.
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TOTAL QUALITY MANAGEMENT (TQM)
Total quality management (TQM) is still one of the hottest topics in the business world today.
The Japanese have captured more than 30 percent of the American automobile and electronics markets by offering high-value products at lower costs.
In response to the boom in competition, _______________________________________________________________________________________________________________.
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TQM and Continuous Improvement Effective TQM requires the integration of production planning,
marketing, engineering distribution, and field service.
TQM is a____________________________.
TQM reaches much wider than the traditional quality view of
incoming inspection and process control—__________________________________________________________________________________________________________________________.
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TQM is an innovative way of thinking that affects the culture, the strategy, ___________________________.
Implementing TQM requires the following:____________________.
____________________.
TQM and Innovation
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EFFECTIVE TQM
__________________________.
Negotiating customer requirements.
Developing a “supplier specification” ________________________________.
Determining the necessary activities required to fulfill those requirements and expectations.
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Purchasing is a critical process _____________________________________________________________________________.
Without high-quality raw materials or component parts from suppliers, ______________________________________.
Therefore, any firm that wishes to achieve a high
level of total quality management must carefully examine its ________________.
PURCHASING AND TQM
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PURCHASING AND TQM Traditionally, U.S. firms prefer to use an arm’s-length
purchasing strategy, that is, the best bid usually gets the business.
A healthy long-term relationship between suppliers and manufacturers is ________________________________________________.
For example, Honda does not inspect the incoming materials from its suppliers.
Honda works closely with its suppliers to improve the ___________________________________________ defects that eventually affect Honda’s production.
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One of the potential problems in establishing long-term relationships with a few key suppliers is that a supplier may have increasing power in the supply chain and may ask for more than the market price.
________________________________________________________________________________.
The backup suppliers usually get a _______________________ and do not have a close working relationship with the manufacturer.
KEY SUPPLIERS
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Quality Assurance Expectations
The suppliers’ quality assurance systems ______________________________________________________.
Thus, the stated targets and expectations of the customer must meet the minimum level of performance.
In cases where the quality target expectation __________________________________________________________________________________________________________________.
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Quality Target Commitment
Each buying firm must specify in detail the agreed-upon quality targets. As an example, at a minimum, the following four issues should be addressed in any purchasing contract:
1. PPM (parts per million) target agreement. The PPM ______________________________________________________________________________________________.
2. Field failure and reliability requirements. Field failures can be devastating for most firms. It is difficult to precisely quantify a field failure. ___________________________________________.
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1. Warranty agreement. In the unlikely case of a field failure, there should be a warranty agreement that covers _____________________________________________________________________________________________________.
2. Urgency to solve problems. The speed to solution of any quality variance is vital. ____________________________________________________________________________________________________________________________________________.
Quality Target Commitment
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Preventive Quality• Strategic components are the most critical parts in a project or platform
and require more extensive quality assurance requirements. Strategic components generally meet one or more of the following criteria:
1.___________________________________________.
2.______________________________________.
3.An expensive component part.
4.___________________________________________.
5.Component parts that require extensive testing.
6.____________________________________
7._________________________________.
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Preventive Quality
The new or modified part agreement between the buying and the selling firm is usually complete after an acceptable final test sample has been generated and verified
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Statistical Process Control and Six Sigma
• The traditional approach to manufacturing process control is to select production samples and compare the attributes of the sample to the specifications.
• _______________________________________________________________________________.
• Statistical process control (SPC) can resolve this manufacturing process control issue.
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Statistical Process Control and Six Sigma• SPC uses two control charts to ensure quality in
manufacturing: the sample mean (X-bar) chart and the sample range (R) chart.
• The control chart limits are _______________________________________________________________________________.
• In most cases, _________________________________________________________________________
The specification is a description of the required output, including specific characteristics such as weights and measurements that enable the product to work in a manner acceptable to the consumer.
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SPC Control Charts
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SPC Control Charts
The upper control limit (UCL) is the highest fill level without limit (LCL) is the lowest fill level without causing an error. _________________________________________________________________________________________________.
_________________________________________________________________________________________________.
The dividing line between the UCL and the LCL is the mean. In most cases, the products produced should fall close to the mean. Of course, the normal distribution is assumed when implementing traditional SPC.
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SPC Control Charts
The standard deviation is actually the average distance a normal point is from the mean. _____________________________________________________________________________________.
Given the normal curve, 68 percent of the values fall between plus and minus one standard deviation, ______________________________________________.
The control limits are actually set by customer specifications, and the specifications remain constant. __________________________________________. SPC is then used to detect when the process is (becoming) out of control. See the following slide.
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As can be seen from the examples, six sigma requires a near elimination of production process variance.
Six sigma will result in variances of 3.4 defects out of every one million parts produced. _____________________________________________________________________________________________________________________________________________________.
Six Sigma
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Six Sigma
If the buying firm has implemented six sigma, the strategic suppliers also should also apply six sigma. Six-sigma standards can be applied to both manufacturing and service firms using the same methodology. SPC provides input to the six-sigma approach.
____________________________________________________________________________________________________________________________________________________________________.
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Six Sigma and the Supplier
Six sigma is a way to measure supplier quality. Supplying firms that follow the core philosophy of six sigma will make excellent strategic partners.
Six-sigma suppliers focus on ______________________________________________________________________________________________________________________________________.
If there is a pattern not consistent with the normal distribution, corrective action could be taken. There are a number six-sigma implementation approaches. _______________________________________________________________________________.
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The Taguchi Method
The Taguchi method (TM) nicely complements many of the advantages of SPC. Nevertheless, TM has some problems.
First, although the basic ideas of TM are simple, the statistical procedures are complex and can be difficult to implement _______________________________________________________________________________________.
Even with high-speed computers and statistical techniques for simplifying analysis, __________________________________________________________________________________________.
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Commodity Components
Commodity-based components are those components not defined as strategic components.
Intensive price _________________________________ have led to the implementation of a reverse auction procurement approach for commodity components.
_______________________________________________________________________________________.
Acceptance sampling is a methodology used to determine whether to accept or ___________________________________________.
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QUALITY AWARDS
There are major quality awards that ensure that suppliers are TQM effective.
The most universally known quality awards are the _____________________________________________________________________________________________________.
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The Deming Award
Dr. W. Edwards Deming is known as the father of the Japanese post-war industrial revival and was regarded by many as the leading quality guru in the United States.
Dr. Deming is ______________________________________________________.
Deming also suggests a 14 point system for successful quality management.
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The Malcolm Baldridge National Quality Award
In 1987 Congress established the Malcolm Baldridge National Quality Award. It was initiated as a result of foreign firms increasingly dominating American markets.
The Malcolm Baldridge Award is much more than an award; it is equivalent to a mini revolution in the business world. ________________________________________________.
The Malcolm Baldridge Award has led to a national quality campaign __________________________________________________________________________________________________________________________________.
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In order to qualify for the award, applicantsMust address the following categories: 1. Leadership
2. _________________
3. Strategic quality planning
4. ________________________________________
5. ________________________________________
6. Quality and operational results
7. ____________________________________
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Continuous Improvement and the Supplier
In most industrial settings there is aggressive ___________________________________________________________________.
In order to successfully achieve a zero defect target, _____________________________________________________________________________________________.
Fundamental to remaining competitive in the Automotive industry, is a well developed program to pursue Continuous Improvement (CI) in all areas of business. ____________________________________________________________________________________________________________________________________.
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Continuous Improvement and the Supplier Although the actual details will vary from supplier to
supplier, the following list details the basic elements of a CI system:
1. __________________________________________2. __________________________________________
3. Data Driven Improvement Based On Key Measures (Using a QOS / MOS format)
4. ________________________________________
5. ________________________________________
Improvements to be embodied in the normal operating procedures of the business.
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ISO 9000 ISO 9000 is a set of standards that document
the implementation of a quality program.
Most companies require their supplier ______________________________________________________________________________________
In order to be certified, suppliers need to provide documentation to an external examiner that they meet the ISO 9000 requirements.
Once a firm is certified, _____________________________________________.
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Quality Function Deployment (QFD)
Quality Function Deployment (QFD) focuses on how businesses develop high quality products for its customers. QFD is driven by cross functional market research.
_______________________________________________________________________________________________________________________________________________________________________________________________________________________________________.
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Quality Function Deployment (QFD) Customer expectations include 1) function, 2)
appearance, 3) maintainability, and 4) reliability. It is impossible to consistently design products which will
attract customers unless businesses understand what customers want.
_________________________________________________________________.
_____________________is a methodology for collecting customer information to drive product development.
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Supplier Evaluations
The buyer’s evaluation of the supplier’s performance is a catalyst for the supplier development activities. There are two main categories for the supplier evaluation: __________________________________________________________________________.
The performance-based evaluation is an assessment of the supplier’s actual performance on a variety of criteria, such as delivery reliability, cost, quality defect rate, etc.
It is a more tactical assessment and measures the day-to-day actual performance of the supplying firm; hence it is an after-the-fact evaluation. ________________________________________________________________________________________________.
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Supplier Evaluations
Once completed, the evaluation can be compared to either the buying firm’s stated goals or benchmarked to the performance evaluations of the supplier’s competitors.
The buying firm chooses whether to communicate the evaluation to the supplier.
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Taguchi Method The Taguchi method (TM) addresses design and engineering
(offline) as well as manufacturing (online) quality.
This fundamentally differentiates __________________________________.
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LOSS FUNCTION The heart of the Taguchi philosophy is
__________________________________________________________________________________.
• This definition sets the Taguchi method apart from the traditional SPC approach to quality, which defines the cost of poor quality chiefly as the cost of scrap, rework, and warranty repair. Any deviation from target reduces the value of the product to society.
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Acceptance Sampling One of the key techniques in purchasing is
acceptance sampling. __________________________________________________________________________
Acceptance sampling is a methodology used to determine whether to accept or reject a batch of components or items.
Customers must never be dissatisfied with the expected quality of products or services
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Acceptance Sampling
The most severe penalty for poor quality expectations is the loss of sales. If the quality of the inputs to the productive system is inferior, the final product will be inferior.
Acceptance plans must be developed to determine the disposition of a lot of raw materials on component parts. ____________________________________________________________________________________________.
Setting the acceptance criteria is usually based on either predetermined standards or basic statistics.
Examples of predetermined attributes ________________________________________________.
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OPERATING CHARACTERISTIC (OC) CURVE
An OC curve is used __________________________________________________________.
The curve shows ________________________________________________.
As can be seen in the figure, a lot with 1 percent of defects would have a probability of about .90 of being accepted or .10 (1.00 – .90 = .10) chance of being rejected.
The .10 percent is the producer’s risk. At the same time, if a lot contains 6 percent defects, the probability of acceptance drops to .10. The .10 is the consumer’s risk.
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Acceptance sampling plans can be classified as ________, _______, or ___________.
With multiple samples, if a clear-cut decision cannot be made after the first sample, additional samples are taken
until the choice is clear.
Acceptance Sampling
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Acceptance Sampling
The single sampling plan requires the inspector to compare the number of defective items from a single sample with an acceptance number.
Double sampling is similar to multiple sampling, except that no more than two samples are taken.