Chapter 6 – Page 5 – The OM Blog by Heizer, Render, & Munson

OM in the News: Pink Slime and Lean Hospitals

The public is continually subjected to health-related scares, from food packaging to water bottles that contain BPA, a chemical that has been linked to cancer. The media also highlights food additives that are not really harmful, but just sound unappetizing, such as “pink slime” in ground beef and the use of dried insects to color beverages at Starbucks. Yet, according to The Reporter (May 10, 2012), our nation’s hospitals are the one place where people actually have the most reasons to be scared and to demand change.

Studies estimate that 100,000 Americans die each year from preventable medical errors and another 100,000 die as the result of hospital-acquired infections. This health-care safety problem can be tackled with the OM tools of lean and TQM. We see this in one of our text’s most popular video case studies, “The Culture of Quality at Arnold Palmer Hospital”– worth showing when teaching Chapter 6.

The good news is that a growing number of hospitals are dramatically reducing different types of preventable errors, including patient falls, bedsores, wrong-site surgeries and medication mistakes, using the principles of lean (Chapter 16). Dr. Richard Shannon helped his Pittsburgh hospital achieve, in just 90 days, a 95 percent reduction in deaths caused by central-line-associated blood-stream infections–through improved teamwork and making sure the correct supplies are always readily available. Because these improvements do not rely on expensive technology or years of specialized training, they can be replicated in any hospital.

A 2010 survey, however, shows the bad news–that most hospitals are not devoting time or resources to prevent central-line infections, which claim 30,000 lives annually. And these hospital-acquired infections cost the U.S. about $30 billion a year in unnecessary medical expenses.

Discussion questions:

1. What OM tools in Chapter 6 can be applied to help prevent infections in hospitals?

2. After watching the video, what does Arnold Palmer Hospital do to maintain quality?

OM in the News: Building a Reputation for Quality No Easy Task for Chrysler

As we discuss in Chapter 6, quality can take on a wide range of attributes. For auto makers, and their customers, these attributes range from safety, to the choice of interior materials, to the way parts fit together—all of which affect perceptions of a brand. The Wall Street Journal (May 10, 2012) reports the bad news for Chrysler–that through bailouts and bankruptcy, there is one liability that the automaker hasn’t yet managed to shed: its reputation for lousy quality. “You can lose your reputation in a year, but it takes five to 10 years to rebuild it,” says the director of the Consumer Reports.

Despite surging sales, the auto maker remains dogged by a long trail of recalls, customer complaints and poor ratings on quality surveys. In 2008, the London Times proclaimed Chrysler’s now-discontinued Sebring “almost certainly the worst car in the entire world.” The Journal quotes Chrysler’s quality chief, Doug Betts, as saying: “We were building cars that were functional, and other than that, they were boxes you got into that hopefully kept the rain off your head.”

But today, dealers, customers and independent reviewers say Chrysler’s efforts are starting to pay off, with better finishes and higher quality scores on new models such as the Jeep Grand Cherokee SUV and 300 sedan. Last year, the brands earned their highest ratings in years in Consumer Reports’ annual reliability survey, rising from the bottom of the pack to the middle. That year, Betts used his new authority to delay a restyled Chrysler 300 after inspection of a prototype found a right rear tail light that wasn’t flush with the body. The one-millimeter projection was hardly visible, Betts said, but it was enough to “catch a rag if someone was hand-washing” the car.

Discussion questions:

1. Why is a quality reputation easy to lose, but hard to gain?

2. What caused Chrysler’s reputation to drop?

OM in the News: Infection Rates and the Outsourcing of Hospital Cleaning

The Vancouver Sun (May 7,2012) has just reported another outbreak of infection rates at Canadian hospitals. The article states that health authorities have been warned for 10 years or more that the outsourcing of hospital cleaners – key personnel in any infection prevention and control program – was a misguided attempt to save money and would put patients at risk. In 2004, incidents at Surrey Memorial Hospital concluded that infection prevention had completely broken down. An auditor-general’s 2007 review found that the ministry of health had failed to implement systems for the prevention and control of infection.

Things heated up in 2009 when Vancouver released reports from its Centre for Disease Control (CDC) on a persistent and lethal infection out-break at Nanaimo Regional General Hospital, the third in four years. The CDC found that: “There were insufficient numbers of cleaning staff to meet the basic daily needs of the facility and they were not adequately trained in appropriate cleaning procedures for a health care facility. They were not able to meet the increased demand for environmental cleaning that is required to control an outbreak.”

Best practices in infection prevention programs highlight the vital role of hospital cleaning: adequate staffing and training, proper equipment and supplies, and real communication and cooperation among hospital personnel at all levels. None of these factors are included in the government-ordered cleaning audits (which were confined to visual inspections only) that report hospitals passing with flying colors even while infection outbreaks were raging.

Scotland banned the outsourcing of hospital housekeeping in 2008 and brought cleaning back in house. The result? Infection cases have dropped dramatically. Reviews of Ontario’s devastating 2003 SARS outbreak named hospital cleanliness as a critical component in preventing and containing infections, and hospital cleaners’ involvement essential.

Discussion questions:

1. Why are janitorial services successfully outsourced in most organizations, but not here?

2. What OM tools are available to address this quality issue?

OM in the News: Quality and the Dreamliner

When we discuss quality in Chapter 6, we note that there are 3 views of the term. The 1st is user-based — quality “lies the eyes of the beholder.” The 2nd is manufacturing-based–conforming to standards. And the 3rd is product-based–quality is a “precise and measurable variable”. The Wall Street Journal’s article ( Feb.16,2012), “How Dreamy is the Dreamliner”, covers all three in analyzing Boeing’s new 787, which is now in its 4th month of service and flying daily from Tokyo to Frankfurt for All Nippon Airways.

To passengers (users), the plane approaches a revolution in air travel with better cabin climate, less airsickness, reduced jet lag, and fewer headaches. The humidity level is a more breathable 10-15%, vs. 4-7% for existing planes. The cabin pressurizes at 6,000 feet vs. 8,000 feet on others. Overhead bins are 2 inches larger. Big windows help reduce motion sickness, and a new stability system makes for a smoother ride in turbulence. Cabin attendants even claim the atmosphere is much better for their skin.

From a manufacturing perspective, the body of the plane, constructed from super-strong plastics — carbon fibre composite materials — instead of aluminum, makes the plane lighter and more fuel-efficient. And the number of holes drilled in the fuselage (under 10,000 vs. 1 million in a 747) means better aerodynamics.

The products-based view of quality can claim a plane that flies at Mach .85, compared to Mach .785 for a Boeing 737. Fuel efficiency and emissions are 20% better than on a similar-sized 767.

Discussion questions:

1. Did Boeing’s continuing supply chain problems on the 787 impact the plane’s quality?

2. Which aspect of quality is most important to Boeing? To the airline buying the 787? To the passenger?

OM in the News: The Fall and Rise of Quality in American Cars

An interesting perspective on the quality (or lack thereof) of American-made autos comes from the Fort Worth Star-Telegram (Feb.10,2012). For decades we have bemoaned quality problems in the industry, but until recently the situation was simply considered normal. It goes back to around 1915, when GM’s chief production guy told a reporter that his new model “would boast massive improvements.” When queried for details, he replied that Chevys would now have a mesh screen under the motor that “would catch all the screws and parts that came loose while driving.” Even as late as 1949, it was common knowledge that a Ford could not be taken through a car wash without its occupants being drenched.

And surprisingly, when MIT did its famous 5-year study of the auto industry, which was published as The Machine That Changed the World, it was pointed out that Mercedes put more man-hours into fixing vehicles after production than Lexus needed to build one of its flagship sedans–which had zero problems leaving the assembly line. Of course, it was the auto workers who would take most of the blame for the lack of quality in their cars. But for the most part, it was mediocre engineering –not just in vehicle design, but in factory layout as well. How else can you explain how Buicks occasionally ended up with Chevy dashboards installed–and that GM would refuse to replace them when the errors were discovered at the dealer showroom.

Perhaps the greatest untold automotive story this decade is that no company builds a bad car anymore. Thanks to the integration of Japanese design and production techniques, we will never see a car produced whose A/C compressor falls off or whose fenders come in different colors. Just as Mercedes had to compare itself to Lexus, GM and Ford had to measure up to Honda and Toyota–and to accept the principles of Japanese engineering.

Discussion questions:

1. Why is poor quality accepted in any product?

2. Has US auto manufacturing reached quality levels equal to Japan and Germany?

OM in the News: How Alaska and Delta Airlines Reengineered Quality Control

If you fly a lot, you will want to read this article in The Wall Street Journal (Jan.5, 2012) and use it in class when you cover the topic of Managing Quality (Ch.6). It begins by dealing with American Airlines, which ranked dead last (again) in customer service in the Journal’s annual analysis of major air carriers. The score card ranks airlines on on-time arrivals, delays, cancelled flights, missing bags, bumped passengers , and complaints filed with the DOT.

Alaska Airlines, which overhauled its operations in 2007 after several dismal years of reliability came in 1st in 4 of the 7 key operational areas. What did it do to change? For one thing, Alaska has set 50 internal quality checkpoint standards on a timeline for each departure. Flight attendants have to be on board 45 min. before departure; agents must board the 1st passenger 40 min. before departure; 90% of passengers need to be boarded 10 min. before departure; the cargo door must be opened 3 min. after arrival; the 1st bag has to be on the conveyor belt within 15 min. of arrival; and so on with 45 other measures for which data are collected on every flight.

Similarly, Delta engineered a major operational turnaround last year after coming in 2nd worst in punctuality and baggage handling and worst in cancelled flights and customer complaints. It has opened maintenance operations in 9 new cities to keep more its fleet ready to fly. It has also invested in a new baggage system and new technology in its operations control center. “There are a lot of side benefits of running a good, clean operation”, says Delta’s VP-Operations.

Discussion questions:

1. Why do some airlines, like Jet Blue, have a terrible problems with delayed flights, while others, like Alaska, do not?

2. What quality measures would students select to monitor besides the ones mentioned here?

OM in the News: Harada–How America Can Fight Against Low-Cost Labor in China

Norman Bodek has visited Japan 78 times to study the Japanese continuous-improvement philosophy. On his most recent trip Bodek met with Takashi Harada, who has developed the ultimate recipe for competing against low-cost labor in China and India. The Harada Method, reported in IndustryWeek (Oct.25,2011), is one part monozukuri (or product excellence) and one part hitozukuri (or people excellence), and is steeped in respect for people. The Harada Method is designed to help shop-floor workers develop their skills and capabilities–on their own.

The key, says Bodek, is “self-reliance”, where “you, the worker can make a decision for yourself and your company and for your customer that is right. This is missing in so many American corporations. You call a company and the first thing you get is ‘ This call is being recorded’ . Why are they recording it? They don’t trust their people, and they don’t empower them to be trusted”.

The Harada Method, already taught to 55,000 managers at 380 companies in Japan, is enormously popular there because Japan (like the US) is struggling to compete with low-cost labor in China and other emerging economies.

Through the method, workers are encouraged to pick a skill that they’d like to master, and to set goals to help them accomplish it. Employees write down their goals, create a step-by-step plan to attain them, measure themselves against their goals and receive feedback and guidance. To achieve hitozukuri, managers provide lifelong training and mentoring of employees. “What I’m trying to do is get American mangers to focus on their people — recognizing that developing people doesn’t even cost you anything. It doesn’t”, says Bodek.

Discussion questions:

1. Compare the Harada Method to some of the quality improvement philosophies used in the US.

2. How can ordinary people become heroes in their own lives, and how does this apply to the factory floor?

OM in the News: Service Quality at MGM Grand–the World’s Largest Hotel

The Wall Street Journal’s (Sept.22, 2011) headline, “When 12,000 Guests Spend the Night”, makes a great lead-in for teaching quality in Chapter 6. With 5,043 guest rooms in towers overlooking the famous Las Vegas strip and an occupancy rate of 96.8%, how can such a mega property counter perceptions that it’s just too big to give good service? The strategy, at every point–from parking lots to check-ins to housekeeping–is to make its operations feel small. It’s not easy to do with a driveway entrance that’s 14 lanes wide, where the lobby has 100’s of people waiting to check-in,where 70,000 people enter the doors every day (for the hotel, casino, restaurants, shows, meetings)–all in an aging 18 year-old hotel building.

One of MGM’s techniques for service quality is to judge execs on how well their staff meet quality standards. Room service must be delivered within 30 minutes of an order (and there are 1,000 orders/day!), maintenance calls must be answered in 15 minutes (by a staff of 186 engineering employees with mobile carts), a car must be retrieved by a valet in 8 minutes (not easy when the parking lot holds 9,487 cars!), and the 370 housekeepers must clean each room in 30 minutes.

To cut the perception that check-in queues are too long (for years guests stood in 2 long snaking lines), the MGM now has 36 small lines, one in front of each front-desk worker. “There’s the perception”, says the front desk manager,” that they’re going to get through quickly”. This makes a nice teaching point in Module D (Waiting Line Models), since it contradicts the mathematics of a single queue with multiple servers.

To cut lines further, lobby greeters with iPads abound, giving directions and doing check-outs. New ID scanners download names and addresses from drivers licenses and passports so employees don’t have to type in the data–shaving time off each check-in.

Discussion questions:

1. How does the hotel help a guest who can’t find his car in the parking lot?

2. What other technologies can be used to make the MGM operations more efficient?

OM in the News: Disney Service Quality Spreads to Medicine

Disney has been long respected for excellent customer service and for treating its “guests” with the personal touch that improves the theme park visit. Disney’s “on-stage” and “off-stage” approach to separating public and private areas is well-known, with “cast members” (employees) always maintaining a magic image to the public. The Orlando Sentinel (July 16, 2011) now reports that Disney has designed a program for health-care professionals to assure that patients are as satisfied with a trip to the hospital or doctor’s office as they are with a trip to the theme park.

For $3,500 each, health-care workers spend 3 1/2 days at Disney, learning to pay closer attention to the patient experience. “Oftentimes in health care, the patient in the bed is almost secondary”, says a consultant. “Everyone comes in looking at their task instead of the patient”.

When Disney worked with Florida Hospital to open a new children’s pavilion a few months ago, the plan includes simplified name tags, new uniforms, a ban on cell phones, greeting patients with a smile, and kneeling down to talk to children at eye level. (Our Table 6.5 in the Managing Quality chapter relates to these “determinants of service quality”).

“By exceeding expectations, doctors can attract new clients through referrals from satisfied patients”, says Dr. Chris Smith, a S. Carolina family doctor who attended the Disney program. At Smith’s office, the receptionist is now a “greeter”. And he has established off-stage private break rooms for staff to relax, vent, or do things a patient should not see. Just like other industries, doctors are learning that every service activity matters.

Discussion questions:

1. Ask students to describe a positive and a negative medical service experience.

2. What other quality tools can medical professionals employ from non-medical fields?

Good OM Reading: What Really Happened to Toyota?

Consumers in the US were surprised in Oct., 2009, by the 1st of a series of highly publicized recalls of Toyota vehicles. It began with 3.8 million cars brought back for uncontrolled acceleration. Over the next 4 months, 3.4 million more recalls followed for gas pedal and software glitches. Then from Feb.-Aug., 2010, 13 more recalls followed. Just as things seemed to be settling down, 2 more recalls were announced in Jan.-Feb., 2011. The total had now reached 20 million vehicles!

How could this happen to the company that shaped the modern approach to quality improvement, asks UC-Berkeley Prof. Robert Cole in his excellent article in MIT Sloan Management Review (Summer, 2011). Had auto execs all over the world “been chasing after the wrong manufacturing model”? And to what extent did the problems originate with product design and assembly and to what extent to Toyota’s manufacturing systems?

One factor Cole found was a “reverse halo effect”. Toyota buyers in 2010 had heard a barrage of negative news and became far less forgiving about minor quality flaws than previous owners. A 2nd factor was that competitors’ products were improving to the point that Toyota didn’t look as outstanding by comparison as it had in the past.

Cole’s analysis found 2 root causes for Toyota’s problems: (1)management’s ambitious plans for rapid growth (which did not focus on quality issues already arising), and (2) the increasing complexity of the actual auto product.

I think this is an article that you will enjoy reading and that you will be able to use in your OM class.

Teaching Tip: What Can You Expect From Your Hotel?

When you are teaching TQM in services (Ch.6), you might ask your students to consider how they would rate the quality of hotels they have stayed at. We write in the chapter about the intangible differences between products (hotels) and the intangible expectations customers have of these products. Certainly, we all have lower expectations of service quality when we stay at a Motel 8 versus when we are guests at a Ritz Carlton or Four Seasons. (See in our video case study “Quality at the Ritz”).

I bring this up because my family and I just returned from our big vacation of the summer– a 3-night stay at what some claim to be the premier resort hotel in the Caribbean. The “product” was really on the expensive side, so our expectations ran high. World class facilities, food, service, and activities were all on the list. The people/services were extraordinary. Every single employee we came in contact with was gracious, smiling, helpful, and courteous.

But one of the reasons we came in contact with so many hotel staffers was that so many things went wrong with the tangibles. My wife counted over a dozen repair people (all warm and friendly) in our rooms during the 3 days– yet the problems kept coming. First the broken shower head was replaced. Then a deadbolt that locked my 13-year-old in and us out (which had to be drilled out). Then no sound on the TV, as well as a missing remote. To boot, the sink was dirty (brown) when we arrived. But the real issue was the unflushable toilet! After 4 visits to first replace the insides, then to repair it over and over, the toilet still ran all night long. I worked on it myself a few times, then gave up and put 4 towels and a bathrobe over it to mask the noise.

How did the manager handle service recovery? The LEARN routine was followed perfectly, and a discount was even applied. But would we return to a hotel that had such problems? Very doubtful.

Teaching Tip: Why Did the Chevy Steering Wheel Fall Off?

Imagine speeding along the roadway in your brand new 2011 Chevy Cruze, turning your car’s steering wheel, and the wheel breaks off from the steering column! It’s an interesting story (in The Wall Street Journal, April 10,2011) that certainly ties in with our discussion of quality in Chapter 6.

Of course, it’s every driver’s nightmare, but in particular to the person who it happened to a few weeks ago. As a result, GM is recalling 2,100 new cars and facing an unwelcome development while it rides high on the compact Cruz’s sales success.

According to the NHTSA (Nat’l Highway Transportation Safety Admin.), the wrong wheel was put in this particular car, then replaced later with the correct one. But the new wheel was not attached properly.

This raises some good issues to discuss in teaching quality in class. First, how did the wrong wheel end up on the assembly line? (JIT delivery gone awry? What was the root cause of this defect?)

Second, why was it that a wrong wheel could fit on the column? (No poka-yoke system in place?)

Third, was there no Andon call signal to alert supervisors that such a problem had popped up? (Could it have happened before and no one pointed it out? Had it happened at a different plant? Is there a struggle to change from the old Detroit mentality that the line should never be stopped?)

Chevrolet says “it has changed the production process to make sure the machine used to attach the steering wheel can accommodate only the correct one”. I like this story because it raises several teachable issues.

Good OM Reading: Safe Patients, Smart Hospitals

After reviewing The Checklist Manifesto for our blog a few months ago, I wondered how Dr. Peter Pronovost’s book, Safe Patients, Smart Hospitals would add to the important role OM plays in hospital quality. Simple and avoidable errors in hospitals around the world are made each day that cost the lives of patients. Inspired by 2 tragic medical mistakes — his father’s misdiagnosed cancer and sloppiness that killed an 18-month old child at Johns Hopkins– Pronovost has made it his mission, often swimming upstream against the medical culture, to improve patient safety and prevent deaths.

He began by developing a basic 5-step checklist (see Ch.6) to reduce catheter infections. Inserted into veins in the groin, neck, or chest to administer fluids and medicines, catheters can save lives. But every year, 80,000 Americans get infections from the central lines and 30,000-60,000 of these patients die. Pronovost’s checklist has dropped infection rates at hospitals that use it down to zero, saving 1,000’s of lives and tens of millions of dollars.

His steps for doctors and nurses are simple: (1) wash your hands, (2) use sterile gloves, masks, and drapes, (3) use antiseptic on the area being opened for the catheter, (4) avoid veins in the arms and legs, and (5) take the catheter out as soon as possible. He also created a “central line cart”, where all supplies needed for the procedure are stored.

Provonost believes many hospital errors are due to lack of standardization, poor communications, and a non-collaborative culture that is “antiquated and toxic”. Whereas safety in the airline industry is a science, and where every crew member works as part of the team, he writes: “doctors think they are infallible”.

This is an inspiring book which shows how one person, with small changes, can make a huge difference in patient care. Your students in the health care areas will appreciate the OM insights provided. An interview with Dr. Pronovost appears in The Wall Street Journal (March 28,2011).

Video Tip: Darden Restaurant’s Quality “From Farm to Fork”

What I really like about this 12 min. video on Darden Restaurants (Olive Garden and Red Lobster) is that the VP-Quality comes right out and says “we use SPC charts, Pareto charts, process flow diagrams, fishbone charts, and scatter charts”. When you are teaching Ch. 6 and Supp. 6, it’s good for your students to hear that a real company is employing all the tools they see in the text (as in Figure 6.6).

Darden calls its quality program “From Farm to Fork”, since the inspection process begins at the food source (be it farm or pond), continues with inspections throughout the supply chain, and ends with a final check by the chef and server before the customer is served. Fifty scientists and health specialists work in QA throughout the world, most close to the food source outside the US. With 50 million pounds of seafood coming into the US for Darden each year, it is clear that quality cannot be considered just at the end of the supply chain.

The video presents real data in the form of x-bar and R-charts and capability histograms and shows what happens when specs are not met on products like steaks, salmon fillets, and chicken breasts.

Before showing the film, you may want to ask students where they think inspections are taking place on a fish that is caught in Thailand and served 48 hours later in say, Dubuque, Iowa.

OM in the News: Quality Tales– Dogfish Beer and Zappos

If you are looking for a few interesting examples of companies choosing quality of service over quick money, here are two firms that I discovered in the news today: Dogfish Head Beer and Zappos.

The Delmarva Daily Times (March 15,2011) reports that Dogfish, a well-known Delaware brewery, just decided to stop its explosive growth by pulling out of markets in four states. Sales of “off-centered beers for off-centered people” had grown into 30 states in the past 9 years. Founder Sam Calagione, a Discovery Channel minor celebrity, decided that Dogfish ramped up production too far, too fast, to guarantee quality. The expansion even resulted in shortages in the firm’s home state. Fans may be frustrated in Tennessee, Rhode Island, Indiana, and Wisconsin, but the company’s reputation for quality will be preserved.

Meanwhile, Next Montreal (March 16,2011) is reporting, very unhappily, that Zappos is shutting down completely in Canada. Here is the message that the shoe e-tailer has just posted on its website:

We have made the difficult decision to shut down the canada.zappos.com site and stop shipping to Canada. One of our core values is to “deliver WOW through service”. That means the best selection of brands and products that can meet just about every individual’s needs as well as fast, free shipping and free returns, all at competitive pricing. Our Canadian customers know that we have not lived up to these service levels.

Zappos has struggled with uncertainty and unpredictability of delivering orders to Canada, given customs and other constraints. Considered by many to be one of the best on-line retailers, it was not willing to risk its reputation for quality in a market where it could not meet its own standards.

In today’s economy, it is indeed unusual to see firms cede market share in order to maintain such high quality.

Discussion questions:

1. Refer to Table 6.5, Determinants of Service Quality, and relate Zappos’ decision to the 10 items.

2. What did Dogfish view as the danger of rapid expansion?