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anos Kouvelis Manufacturing Management 20 PONC estimates COMPANY YEAR PONC as percentage of sales IBM 1980 1540 Motorola 1986 13 Heinz 1989 ($350400 Million) Motorola 1989 8 ($800 Million) Olin School of Business Washington University Panos Kouvelis Manufacturing Management 21 General electric estimates STAGE Cost per defect per product Supplier inspection cost $ Ining inspection cost $ Fabrication inspection cost $ Subproduct test cost $ Final product test cost $ Product service cost $ Olin School of Business Washington University Panos Kouvelis Manufacturing Management 22 Traditional processes Cost Conformance Quality 0% 100% Total cost PONC POC Olin School of Business Washington University Panos Kouvelis Manufacturing Management 23 Emerging processes Cost Conformance Quality 0% 100% Total cost PONC POC Olin School of Business Washington University Panos Kouvelis Manufacturing Management 24 Quality and productivity Productivity = Output Input ? Common roots: Design for manufacturability Simplicity Improved equipment Better maintenance Less downtime Worker motivation Olin School of Business Washington University Panos Kouvelis Manufacturing Management 25 Quality and profitability ? Profit = Revenue Cost = (Price) (Sales) Cost Olin School of Business Washington University Panos Kouvelis Manufacturing Management 26 Quality and profitability 1) Market Gains Higher Quality Garvin Improved Reputation Higher Market Share Experiencebased economies Higher Prices Higher Profits Olin School of Business Washington University Panos Kouvelis Manufacturing Management 27 Quality and Profitability (cont.) 2) Cost Higher Quality Lower per unit Cost Olin School of Business Washington University Panos Kouvelis Manufacturing Management 28 What is total quality management? Olin School of Business Washington University Panos Kouvelis Manufacturing Management 29 The total quality management triangle Bedrock principles Managerial methods Improvement tools T Q M Olin School of Business Washington University Panos Kouvelis Manufacturing Management 30 Bedrock principles ? Customer focus ? Continuous improvement ? Total employee involvement Olin School of Business Washington University Panos Kouvelis Manufacturing Management 31 Customer focus “ A customer is the most important person even in the office … in person or by mail. A customer is not an interruption of our work … he is the purpose of it.” L. L. Bean Olin School of Business Washington University Panos Kouvelis Manufacturing Management 32 Customer focus ? Know thy customers ? Who they are ? What their requirements are ? Only the customer can define customer satisfaction – Qua