The Discipline of Quality Planning - Term Paper Example

The Discipline of Quality Planning Table of Contents I.Introduction……………………………………………………………2 II. The Woodshed Six Sigma………………………………………………………..3 Human Capital…………………………………………………..5 Benchmarking…………………………………………………...6 Seven Tools………………………………………………...........6 III. A Study in Taking AIM Why the Improvement Project Started for Vytra Health Plans….7 Using a New Tool to Discover New Knowledge……………….8 Finding Cost Opportunities in Poor Quality…………………….9 The Bottom Line………………………………………………..10 IV. In Summation……………………………………………………….10 V. Works Cited………………………………………………………....11 Introduction A close study of the Taguchi Quality Loss Function shows forth that quality planning management is an exercise in fuzzy logic. Fuzzy logic is a mathematical technique for dealing with imprecise data and problems that have many solutions rather than one. Fuzzy logic is used for solving problems with expert systems and realtime systems that must react to an imperfect environment of highly variable, volatile, or unpredictable conditions, and necessarily solves problems in a way that resembles actual human logic. It “smoothes the edges” and circumvents abrupt changes in operation that could result from relying on traditional either-or and all-or-nothing logic (Answers.com). “Human beings invented logic and use it every day. However, most important decisions rely on something more than the rigorous logic taught in math and rhetoric classes. We are required to make decisions in a world full of partial information and imperfect data. This requires a logic that takes into account information expressed by imperfect human beings concerning events about which they have less than complete knowledge” (Anderson, 383). Quality planning in business requires fuzzy logic, for this is what allows leadership to comprehend and describe complex processes “in concepts and terms which are intuitively understandable , and then to represent that description in a small number of very flexible rules. The knowledge in an approximate reasoning system is carried both in its rules and in its descriptive fuzzy sets, which give us general descriptions of the properties of the process and the events, the phenomena and the objects going into it” (Carlsson, Fuller, and Fedrizi, 21). But, the devil is in the details. How is fuzzy logic to be implemented in a business? The Woodshed Six Sigma The six sigma principle is the core of quality planning for many top companies. It describes the continuous effort of furthering constant improvement in all aspects of production and delivery (Hime, 2002: 14-15). The six sigma principle, when applied to sales and marketing, allows a company to “focus on increasing profitability by driving the top line of the business (revenue), rather than just driving down expenses. As revenues increase, the productivity and cost-to-revenue ratios of the sales force will improve by definition” (Hesselschwerdt). There are many facets to the six sigma principle. Quality function deployment (QFD) is a system and set of procedures to identify, communicate, and prioritize customer requirements. With QFD, teams can more effectively focus on the activities that mean the most to the customer, beat the competition, and align with the mission of the organization. QFD concepts originated with the Japanese ship building and automobile industries in the late 1960s. QFD was first used in the U.S. in the auto industry in 1983. The cause and effect (C&E) matrix is a tool that helps teams select, prioritize, and analyze the data they collect over the course of a project to identify problems with that process. The C&E matrix is particularly useful for obtaining team consensus on the potential relationships between factors that affect a process and the output of that process. The failure modes and effects analysis (FMEA) is used by teams before implementing new products, processes, or services in order to identify ways their new introductions might fail, and then develop preventative measures targeted at the failure scenarios. An effective FMEA identifies corrective actions required to prevent failures from reaching the customer and will improve performance, quality, and reliability. FMEA was encouraged in the 1960s for space product development and served well for getting a man on the moon. The t-test is used to determine the statistical difference between two groups, not just a difference due to random chance. Teams might use it to determine if a plan for a comparative analysis of patient blood pressures, before and after they receive a drug, is likely to provide reliable results. Guinness Brewery is the work environment that led to W.S. Gossett’s creation of the t-test. While an executive at the brewery in Dublin, Gossett created the t-test to help select the best barley for Guinness beer. Control Charts are a simple but highly effective tool for monitoring and improving process performance over time because they help teams to observe and analyze variation. The three basic components of any control chart are a centerline, upper and lower statistically determined control limits, and performance data plotted over time. Design of experiments (DOE) is a statistical technique that encompasses the planning, design, data collection, analysis, and interpretation strategy used by Six Sigma professionals. Teams use DOE to determine the relationship between factors (Xs) affecting a process and the output of that process (Y). DOE was based on work from the 1920s by Sir Ronald A. Fisher, who designed the technique to use in field trials comparing fertilizers and seed varieties, among other things (Motorola University). Human Capital A well-organized human resources department contributes to quality planning by “enlarging employee jobs so that the added responsibility and authority is moved to the lowest level possible in the organization” (Heizer and Render, 175). Management consultants have a favourite phrase for what results when employees see that their individual roles dovetail with the corporate mission: human capital branding. While most companies define their brand by the products and services they offer, the truth is that firms are truly defined by the productivity, quality, and service of their human capital; namely, their employees. Consistent performance by those employees is what truly drives brand differentiation and profits (Mullich). Tony Rucci, executive vice president and chief administrative officer for Cardinal Health, Inc., a $51 billion health-care products and services firm in Dublin, Ohio, uses a straightforward formula for measuring and improving the value of a firm’s human capital. If a company treats its employees the right way, then it will treat customers better and will enjoy higher profits and a better return for shareholders. Empirical data he has collected shows that employee-satisfaction and customer-satisfaction metrics are leading indicators of profit and shareholder return. There is more than just a strong correlation; company profits start with employee satisfaction (Mullich). Benchmarking Benchmarking, on the other hand, emphasizes 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 (Heizer and Render, 176).” A favourite example cited by Heizer and Render (2001) considers Xerox deciding to find a way to improve its order filing, and management selected L.L. Bean to be its benchmark-company. Although the two companies’ products and services have nothing in common, Robert Camp, Xerox’s benchmarking manager at the time, remarked that both companies handle products of various sizes and data showed that Bean had “outpicked” Xerox three times. Its decision to compare and contrast itself with L.L. Bean resulted in Xerox reducing its warehousing costs by ten percent. DaimlerChrysler likewise analyzed and followed Bean’s warehousing strategy ( Inger, 1993) Seven Tools Ishikawa’s seven tools focus on collecting measurable data that can be used as the basis for analytically solutions to quality-related problems (Slack et al.). The tools comprise integrating the use of record files or check sheets, plotting a scatter diagram and histograms that identify the value of one variable related to quality activity to another variable, designing flowcharts and cause and effect diagrams (the “fish bone charts”), and drawing up Pareto charts which organize errors according to priority. Utilizing Pareto charts, Custom Wine Glasses of Leadville, Colorado realized that 72% of the defects in its products were a result of merely one minor area in production. Pareto’s work suggests that the bulk of a company’s problems in production result from only 20% of the possible causes. Focusing on pre-production methods is will sharpen the focus on systemic quality work in any company (Slack, Chambers, and Johnston). A Study in Taking AIM AIM (Activity Information Modeling) models cost and quality metrics so managers thoroughly understand their causes and can easily solve complex problems. It was developed by Gary Meyer, President of Orient Point Consulting LLC, and is used by more than 400 organizations in the US, Canada, Europe, and Latin America to model service operations including call centers. Why the Improvement Project Started for Vytra Health Plans   “One of the biggest obstacles to implementing Six Sigma is determining the cost of quality,” says Jim Karagiorgis, Chief Transformation Officer for Vytra Health Plans, a New York HMO. “Especially when you’re trying to determine the costs resulting from not doing something correctly and then re-doing it.”   “This is critical to Vytra, because we are a ‘customer- intimate’ company, providing value-added services rather than being the lowest-cost provider.”  According to Karagiorgis, “Vytra must provide excellent service to keep our customers. We have to balance adding value to customers’ experiences with the Six Sigma philosophy of not increasing costs.  Under that system, every cost improvement must generate more than enough savings to justify the initial expense.”  The CTO’s focus was the “voice of the customer”—call center handling of customer inquiries and problems. “Some of the issues that made cost and quality calculations impossible were the result of multiple variations of plans issued under Vytra’s basic lines of business. While Vytra has about 30 basic lines, its hundreds of employer clients have created literally hundreds of variations of health benefit programs. The total number of different combinations and permutations is staggering.” Using A New Tool to Discover New Knowledge AIM provided the needed answers. It collected over 60,000 data points in four weeks. It only required Customer Service (call center) personnel to answer three brief questions per hour that randomly appeared on their computer screens. Says Karagiorgis, “Our result was a clear picture of costs per call by call type, product, line of business, and customer types. The time to complete the project was extremely short and the cost was minimal. We determined that AIM delivered its information at plus 99% confidence level.” Finding Cost Opportunities In Poor Quality As Director of Member Services, Kerry Edwards’ experience focused on customer service, mostly in the call center. Customer service is constantly going through change, with the most successful organization being the one that adapts best. AIM was implemented in the Member Service Call Center because it is the largest part of customer service. According to Edwards, “There was a great need to understand the costs of incoming calls and what caused those costs. We were relying on an average cost per call, and that was misleading us. We knew, for instance, that costs for claims calls had to be larger than benefits inquiries because of the relative length of the calls. This was very important to determine because 50% of the calls from our single largest group was for claim issues. We knew that quality problems raise costs so finding and understanding our quality problems was critical to finding our cost opportunities.” The Bottom Line Karagiorgis confirms the project’s effectiveness. “Before, we had no way at all of knowing our costs for inquiries or claims for all of our different services, line of business, type of calls or by customer types. Now, because of AIM we know our costs for those down to the cent and we know what we can do to reduce them. Having the exact costs also means that we can align our pricing by customer and product segment, which we're doing now. Plus, by saving FTE expense on incoming calls, those resources are being used for outgoing calls to support the customer intimate/high value-added effort to create high customer loyalty.” Adds Edwards, “Vytra now prices its services to accurately reflect what they really cost. We have been able to pinpoint training and support issues that have cut costs and improved service” (Chiodo, 2002). In Summation Planning for quality is a prerequisite for producing it. Quality must be perceived as a process before it can become an end result. The discipline of quality planning as outlined enables a business to produce quality in both internal operations and the external offerings provided to its consumers. Through a disciplined process of planning and production, all of a business’ activities become funded with an intrinsic high value of quality which inevitably shows up in the bottom line and the market place. Works Cited Anderson, Patrick L. Business, Economic, and Financial Modeling with Matlab, GIS, and Simulation Models. 2005: Chapman and Hall/CRC Press: Boca Raton, FL. Carlsson, Christer; Fuller, Robert; and Fedrizzi, Mario. Fuzzy Logic in Management. 2004: Kluwer Academic Publishers Group: Dordrecht, The Netherlands. Chiodo, Andrew. “Can A Service Call Center Simultaneously Improve Its Customer Service Quality and Reduce Its Costs?” The Direct Marketing Association. Retrieved Dec. 10, 2005. . “Fuzzy Logic”. Answers.com. Retrieved Dec. 9, 2005. . Heizer, J. & Render, B. Operations Management. 2001: New Jersey: Prentice Hall. Hesselschwerdt, P. “Guidelines in Making Lean Six Sigma Work in Sales”. Retrieved Dec. 4, 2005. < http://www.isixsigma.com/library/content/c051128a.asp.>. Hime, J.K. International Standards and Local Standards: An Analysis of Quality Planning in Local Products. 2002: Davao City: Midtown Press. Inger, Morton. “Benchmarking In Education: Tech Prep, A Case In Point”. IEE Brief. Retrieved Dec. 10, 2005. . Mullich, Joe. “Human Resources' Goals Work Best When They're Tied to Company Success”. Workforce Management: Dec. 2003. . “Six Tools Every Six Sigma Blackbelt Loves”. Motorola University. Retrieved Dec. 10, 2005. . Slack, N., Chambers S, Johnston R. Operations Management, 4th Edition. 2004: Pitman Publishing. Slack, N. et al. “Notes on ‘Operations Management’”. Source: course notes by Roland Mate. Read More