Managing Quality

1
Operations Management
Chapter 6 Managing Quality
PowerPoint presentation to accompany
Heizer/Render Principles of Operations
Management, 7e Operations Management, 9e
Extensive chages have been made to this slide set
by Ömer Yagiz.
2
Outline

• Global Company Profile Arnold Palmer Hospital
• Quality and Strategy
• Defining Quality
• Implications of Quality
• Malcolm Baldrige National Quality Award
• Cost of Quality (COQ)
• Ethics and Quality Management

3
Outline Continued

• International Quality Standards
• ISO 9000
• ISO14000

4
Outline Continued

• Total Quality Management
• Continuous Improvement
• Six Sigma
• Employee Empowerment
• Benchmarking
• Just-in-Time (JIT)
• Taguchi Concepts
• Knowledge of TQM Tools

5
Outline Continued

• Tools of TQM
• Check Sheets
• Scatter Diagrams
• Cause-and-Effect Diagrams
• Pareto Charts
• Flowcharts
• Histograms
• Statistical Process Control (SPC)

6
Outline Continued

• The Role of Inspection
• When and Where to Inspect
• Source Inspection
• Service Industry Inspection
• Inspection of Attributes versus Variables
• TQM in Services

7
Learning Objectives

• When you complete this chapter you should be able
  to

• Define quality and TQM
• Describe the ISO international quality standards
• Explain Six Sigma
• Explain how benchmarking is used
• Explain quality robust products and Taguchi
  concepts
• Use the seven tools of TQM

8
Managing Quality Provides a Competitive Advantage
Arnold Palmer Hospital

• Deliver over 13,000 babies annually
• Virtually every type of quality tool is employed
• Continuous improvement
• Employee empowerment
• Benchmarking
• Just-in-time
• Quality tools

9
To Make the Quality Focus Work

• Motorola
• Aggressively began a worldwide education program
  to be sure that employees understood quality and
  statistical process control
• Established goals
• stretch goal - a goal which is very ambitious
• Established extensive employee participation and
  employee teams
• originator of the six-sigma approach to quality
• winner of the Baldrige national quality award

10
What is a stretch goal ?

• A stretch goal is an ambitious goal. Sometimes
  it is called a breakthrough objective. Stretch
  goals force an organization to think radically
  different to encourage major improvements, as
  well as incremental ones. Stretch goals can be
  set for all areas of the company, including
  manufacturing, sales, accounting, product design,
  etc.

11
MOTOROLA Co. --A famous illustration of stretch
goal

• Six Sigma Quality concept of Motorola
• Motorola set the following stretch goal in 1987.
• Improve product and services quality ten times
  by 1989, and at least one hundred fold by 1991.
  Achieve six sigma capability by 1992. With a deep
  sense of urgency, spread dedication to quality to
  every facet of the corporation, and achieve a
  culture of continuous improvement to assure total
  customer satisfaction. There is only one ultimate
  goal zero defects--in everything we do.

12
MOTOROLA Co. --A famous illustration of stretch
goal

• Concept of six-sigma quality
• Shrinking process variation (as indicated by 6
  sigma) to half of the design tolerance so that
  only 3.4 parts out of 1 million are defective.
• At Motorola, six sigma became part of the common
  language of all employees. To them it meant near
  perfection, even if some did not understand the
  statistical details.

13
Quality and Strategy

• Managing quality supports differentiation, low
  cost, and response strategies
• Quality helps firms increase sales and reduce
  costs
• Building a quality organization is a demanding
  task

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Two Ways Quality Improves Profitability
Figure 6.1
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The Flow of Activities to achieve TQM
Organizational Practices Leadership, Mission
statement, Effective operating procedures, Staff
support, Training Yields What is important and
what is to be accomplished
Figure 6.2
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Defining Quality
The totality of features and characteristics of a
product or service that bears on its ability to
satisfy stated or implied needs
ASQ - American Society for Quality
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Other Definitions of Quality

• QUALITY MEANS FITNESS FOR USE.
• QUALITY IS MEETING OR EXCEEDING CUSTOMER
  EXPECTATIONS.
• QUALITY IS INVERSELY PROPORTIONAL TO VARIABILITY.
  What does this mean?

18
Different Views of Quality

• Depending on who/where you are..
• User-based better performance, more features
• fitness for intended use, or how well the
  product/service performs its intended function

19
Different Views of Quality

• Manufacturing-based conformance to
  standards, making it right the first time
• quality is conformance to specifications.
  Specifications are targets and tolerances
  determined by designers of products and services.
  This is a key definition of quality for the
  technical aspects of quality planning and control.

20
Different Views of Quality

• Product-based specific and measurable
  attributes of the product
• quality is a function of a specific, measurable
  variable and differences in the quality reflect
  differences in quantity of some product attribute
  ( number of knots on carpets, number of cylinders
  in an auto engine, percentage of silk in a shirt
  or blouse).

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Implications of Quality

• Company reputation
• Perception of new products
• Employment practices
• Supplier relations
• Product liability
• Reduce risk of faulty products or services
• Global implications
• Improved ability to compete

22
Key Dimensions of Quality for goods

• Performance
• Features
• Reliability
• Conformance

• Durability
• Serviceability
• Aesthetics
• Perceived quality
• Value

23
Key Dimensions of Quality for goods

• Performance A products primary operating
  characteristics. Will the product do the intended
  job? (Car example -- acceleration, braking
  distance, steering, maneuverability.)
• Performans, birincil (temel) islevler

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Key Dimensions of Quality for goods

• Features Characteristics of secondary importance
  for the functioning of a product. In other words,
  the bells and whistles of a product. ( Power
  steering, antilock brakes, tape/CD deck, A/C,
  reclining seats.)
• Ikincil özellikler

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Key Dimensions of Quality for goods

• Reliability probability of a products surviving
  over a specified period of time under stated
  conditions of use. Consistency of performance
  over time. How often does the product fail?
  (Ability to start on cold days, frequency of
  failure of various components).
• Güvenilirlik

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Key Dimensions of Quality for goods

• Conformance Degree to which physical and
  performance characteristics of a product match
  preestablished standards. Is the product made
  exactly as the designer intended? (fit and
  finish, aerodynamic properties-drag coefficient,
  freedom from noise, fuel consumption.)
• Uygunluk (spesifikasyonlara)

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Key Dimensions of Quality for goods

• Durability Amount of use one gets from a product
  before it physically deteriorates or until
  replacement is preferable. How long does the
  product last ? (Corrosion resistance, wear of
  seat cover material, wiper blades motor, AC
  compressor, etc.)
• Dayaniklilik

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Key Dimensions of Quality for goods

• Serviceability The speed, courtesy, and
  competence of maintenance and repair. How easy is
  it to service and repair the product? (Access to
  spare parts, the number of kilometers between
  major maintenance service, ease and expense of
  service.)
• Bakim / onarim kolayligi

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Key Dimensions of Quality for goods

• Aesthetics How a product looks, feels, sounds,
  tastes, or smells. What does the product look
  like? (Color, instrument panel design, placement
  of controls, and feel of the road.)
• Estetik özellikler

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Key Dimensions of Quality for goods

• Perceived Quality Subjective assessment of
  quality resulting from image, advertising, or
  brand names. What is the reputation of the
  company or its product? (Brand image of car,
  repair history reported by trade magazines or
  friends.)
• Tüketici tarafindan algilanan kalite

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Service Quality Attributes
Under-standing
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Malcom Baldrige National Quality Award

• Established in 1988 by the U.S. government
• Designed to promote TQM practices
• Recent winners
• Premier Inc., MESA Products, Sunny Fresh Foods,
  Park Place Lexus, North Mississippi Medical
  Center, The Bama Companies, Richland College,
  Texas Nameplate Company, Inc.

Click
33
Baldrige Criteria
Applicants are evaluated on
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Baldrige Excellence Model
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Other well-known awards

• European Foundation for Quality Management (EFQM)
  (established in 1988 by the European Commission)
• Deming Prize (established in 1951 in honor of
  Deming, the quality guru who helped Japan
  establish its famous quality system)

36
Other well-known awards

• KALDER Quality Award (established in 1991 by
  Turkish Quality Association Kalite Dernegi
• Has been very successful in Turkeys bid for
  quality excellence

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EFQM Quality Model
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Takumi

• A Japanese character that symbolizes a broader
  dimension than quality, a deeper process than
  education, and a more perfect method than
  persistence

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Costs of Quality

• Prevention costs - reducing the potential for
  defects (training, quality improvement programs)
• Appraisal costs - evaluating products, parts, and
  services (testing, labs, inspectors)
• Internal failure - producing defective parts or
  service before delivery (scrap, rework, downtime
  of machinery)
• External costs - defects discovered after
  delivery to customer (returned product,
  liabilities, loss of goodwill, warranty repair,
  costs to society)

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Costs of Quality
41
Leaders in Quality
W. Edwards Deming 14 Points for Management Joseph
M. Juran Top management commitment, fitness for
use Armand Feigenbaum Total Quality
Control Philip B. Crosby Quality is Free, zero
defects
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History of Development of TQM

• PLEASE REFER TO SLIDE SET TITLED
• HISTORY OF DEVELOPMENT OF TQM

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Ethics and Quality Management

• Operations managers must deliver healthy, safe,
  quality products and services
• Poor quality risks injuries, lawsuits, recalls,
  and regulation
• Organizations are judged by how they respond to
  problems
• All stakeholders much be considered

44
International Quality Standards

• ISO 9000 series (Europe/EC)
• Common quality standards for products sold in
  Europe (even if made in U.S.)
• 2000 update places greater emphasis on leadership
  and customer satisfaction
• ISO 14000 series (Europe/EC)

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ISO 14000Environmental Standard

• Core Elements

• Environmental management
• Auditing
• Performance evaluation
• Labeling
• Life cycle assessment

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TQM

• Encompasses entire organization, from supplier to
  customer
• Stresses a commitment by management to have a
  continuing, companywide drive toward excellence
  in all aspects of products and services that are
  important to the customer

47
Demings Fourteen Points

1. Create consistency of purpose
2. Lead to promote change
3. Build quality into the product stop depending on
   inspection
4. Build long-term relationships based on
   performance, not price
5. Continuously improve product, quality, and
   service
6. Start training
7. Emphasize leadership

Table 6.1
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Demings Fourteen Points

1. Drive out fear
2. Break down barriers between departments
3. Stop haranguing workers
4. Support, help, improve
5. Remove barriers to pride in work
6. Institute a vigorous program of education and
   self-improvement
7. Put everybody in the company to work on the
   transformation

Table 6.1
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Seven Concepts of TQM

• Continuous improvement
• Six Sigma
• Employee empowerment
• Benchmarking
• Just-in-time (JIT)
• Taguchi concepts
• Knowledge of TQM tools

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Continuous Improvement

• Represents continual improvement of all processes
  
• Involves all operations and work centers
  including suppliers and customers
• People, Equipment, Materials, Procedures

51
Continuous ImprovementKAIZEN

• PLEASE REFER TO SLIDE SET TITLED
• CONTINUOUS IMPROVEMENT (KAIZEN)

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Shewharts PDCA Model
Figure 6.3
53
Six Sigma

• Two meanings
• Statistical definition of a process that is
  99.9997 capable, 3.4 defects per million
  opportunities (DPMO)
• A program designed to reduce defects, lower
  costs, and improve customer satisfaction

54
Six Sigma

• Two meanings
• Statistical definition of a process that is
  99.9997 capable, 3.4 defects per million
  opportunities (DPMO)
• A program designed to reduce defects, lower
  costs, and improve customer satisfaction

Figure 6.4
55
Six Sigma Program

• Originally developed by Motorola, adopted and
  enhanced by Honeywell and GE
• Highly structured approach to process improvement
• A strategy
• A discipline - DMAIC

56
Six Sigma
DMAIC Approach
57
Six Sigma Implementation

• Emphasize defects per million opportunities as a
  standard metric
• Provide extensive training
• Focus on corporate sponsor support (Champions)
• Create qualified process improvement experts
  (Black Belts, Green Belts, etc.)
• Set stretch objectives

This cannot be accomplished without a major
commitment from top level management
58
Employee Empowerment

• Getting employees involved in product and process
  improvements
• 85 of quality problems are due to process and
  material
• Techniques
• Build communication networks that include
  employees
• Develop open, supportive supervisors
• Move responsibility to employees
• Build a high-morale organization
• Create formal team structures

59
Quality Circles

• Group of employees who meet regularly to solve
  problems
• Trained in planning, problem solving, and
  statistical methods
• Often led by a facilitator
• Very effective when done properly

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Benchmarking
Selecting best practices to use as a standard for
performance
Use internal benchmarking if youre big enough

• Determine what to benchmark
• Form a benchmark team
• Identify benchmarking partners
• Collect and analyze benchmarking information
• Take action to match or exceed the benchmark

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Benchmarking Factors for Web Sites
Use of meta tags Yes 70, No 30
Meaningful homepage title Yes 97, No 3
Unique domain name Yes 91, No 9
Search engine registration Above 96
Average loading speed 28K 19.31, 56K 10.88, T1 2.59
Average number of spelling errors 0.16
Visibility of contact information Yes 74, No 26
Presence of search engine Yes 59, No 41
Translation to multiple languages Yes 11, No 89
Table 6.3
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Best Practices for Resolving Customer Complaints

• Make it easy for clients to complain
• Respond quickly to complaints
• Resolve complaints on first contact
• Use computers to manage complaints
• Recruit the best for customer service jobs

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Just-in-Time (JIT)

• Relationship to quality

• JIT cuts the cost of quality
• JIT improves quality
• Better quality means less inventory and better,
  easier-to-employ JIT system

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Just-in-Time (JIT)

• Pull system of production scheduling including
  supply management
• Production only when signaled
• Allows reduced inventory levels
• Inventory costs money and hides process and
  material problems
• Encourages improved process and product quality

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Just-In-Time (JIT) Example
Work in process inventory level(hides problems)
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Just-In-Time (JIT) Example
Reducing inventory revealsproblems so they can
be solved
Unreliable Vendors
Capacity Imbalances
Scrap
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Taguchi Concepts

• Engineering and experimental design methods to
  improve product and process design
• Identify key component and process variables
  affecting product variation
• Taguchi Concepts
• Quality robustness
• Quality loss function
• Target-oriented quality

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Quality Robustness

• Ability to produce products uniformly in adverse
  manufacturing and environmental conditions
• Remove the effects of adverse conditions
• Small variations in materials and process do not
  destroy product quality

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Quality Loss Function

• Shows that costs increase as the product moves
  away from what the customer wants
• Costs include customer dissatisfaction, warranty
  and service, internal scrap and repair, and
  costs to society
• Traditional conformance specifications are too
  simplistic

Target-oriented quality
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Quality Loss Function
Figure 6.5
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Tools of TQM

• Tools for Generating Ideas
• Check sheets
• Scatter diagrams
• Cause-and-effect diagrams
• Tools to Organize the Data
• Pareto charts
• Flowcharts
• Tools for Identifying Problems
• Histogram
• Statistical process control chart

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Seven Tools of TQM
(a) Check Sheet An organized method of recording
data
/ /
/ / /// / // ///
// ////
/// // /
Hour Defect 1 2 3 4 5 6 7 8 A B C
/ / //
/
Figure 6.6
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Seven Tools of TQM
(b) Scatter Diagram A graph of the value of one
variable vs. another variable
Figure 6.6
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Seven Tools of TQM
(c) Cause-and-Effect Diagram A tool that
identifies process elements (causes) that might
effect an outcome
Figure 6.6
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Seven Tools of TQM
(d) Pareto Chart A graph to identify and plot
problems or defects in descending order of
frequency
Figure 6.6
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Seven Tools of TQM
(e) Flowchart (Process Diagram) A chart that
describes the steps in a process
Figure 6.6
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Seven Tools of TQM
(f) Histogram A distribution showing the
frequency of occurrences of a variable
Figure 6.6
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Seven Tools of TQM
(g) Statistical Process Control Chart A chart
with time on the horizontal axis to plot values
of a statistic
Figure 6.6
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Cause-and-Effect Diagrams
Figure 6.7
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Pareto Charts
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Flow Charts
MRI Flowchart

1. Physician schedules MRI
2. Patient taken to MRI
3. Patient signs in
4. Patient is prepped
5. Technician carries out MRI
6. Technician inspects film

1. If unsatisfactory, repeat
2. Patient taken back to room
3. MRI read by radiologist
4. MRI report transferred to physician
5. Patient and physician discuss

82
Statistical Process Control (SPC)

• Uses statistics and control charts to tell when
  to take corrective action
• Drives process improvement
• Four key steps
• Measure the process
• When a change is indicated, find the assignable
  cause
• Eliminate or incorporate the cause
• Restart the revised process

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An SPC Chart
Figure 6.8
84
Inspection

• Involves examining items to see if an item is
  good or defective
• Detect a defective product
• Does not correct deficiencies in process or
  product
• It is expensive
• Issues
• When to inspect
• Where in process to inspect

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When and Where to Inspect

1. At the suppliers plant while the supplier is
   producing
2. At your facility upon receipt of goods from the
   supplier
3. Before costly or irreversible processes
4. During the step-by-step production process
5. When production or service is complete
6. Before delivery to your customer
7. At the point of customer contact

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Inspection

• Many problems
• Worker fatigue
• Measurement error
• Process variability
• Cannot inspect quality into a product
• Robust design, empowered employees, and sound
  processes are better solutions

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Source Inspection

• Also known as source control
• The next step in the process is your customer
• Ensure perfect product to your customer

Poka-yoke is the concept of foolproof devices or
techniques designed to pass only acceptable
product
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Service Industry Inspection
Organization What is Inspected Standard
Jones Law Office Receptionist performance Billing Attorney Is phone answered by the second ring Accurate, timely, and correct format Promptness in returning calls
Table 6.5
89
Service Industry Inspection
Organization What is Inspected Standard
Hard Rock Hotel Reception desk Doorman Room Minibar Use customers name Greet guest in less than 30 seconds All lights working, spotless bathroom Restocked and charges accurately posted to bill
Table 6.5
90
Service Industry Inspection
Organization What is Inspected Standard
Arnold Palmer Hospital Billing Pharmacy Lab Nurses Admissions Accurate, timely, and correct format Prescription accuracy, inventory accuracy Audit for lab-test accuracy Charts immediately updated Data entered correctly and completely
Table 6.5
91
Service Industry Inspection
Organization What is Inspected Standard
Olive Garden Restaurant Busboy Busboy Waiter Serves water and bread within 1 minute Clears all entrée items and crumbs prior to dessert Knows and suggest specials, desserts
Table 6.5
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Service Industry Inspection
Organization What is Inspected Standard
Nordstrom Department Store Display areas Stockrooms Salesclerks Attractive, well-organized, stocked, good lighting Rotation of goods, organized, clean Neat, courteous, very knowledgeable
Table 6.5
93
Attributes Versus Variables

• Attributes
• Items are either good or bad, acceptable or
  unacceptable
• Does not address degree of failure
• Variables
• Measures dimensions such as weight, speed,
  height, or strength
• Falls within an acceptable range
• Use different statistical techniques

94
TQM In Services

• Service quality is more difficult to measure than
  the quality of goods
• Service quality perceptions depend on
• Intangible differences between products
• Intangible expectations customers have of those
  products

95
Service Quality
The Operations Manager must recognize

1. The tangible component of services is important
2. The service process is important
3. The service is judged against the customers
   expectations
4. Exceptions will occur

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ServiceSpecificationsat UPS
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Determinants of Service Quality

• Reliability
• Responsiveness
• Competence
• Access
• Courtesy
• Communication

• Credibility
• Security
• Understanding/ knowing the customer
• Tangibles

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Service Recovery Strategy

• Managers should have a plan for when services
  fail
• Marriotts LEARN routine
• Listen
• Empathize
• Apologize
• React
• Notify