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Chapter 7

QUALITY MANAGEMENT

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Evolution of Quality Management


Prior to the 1980s, the gurus of quality influenced corporate disciples These disciples in turn influenced corporate philosophies that increased the importance of quality management The corporate philosophy has essentially driven the selection of a management system
In the 1980s TQM was favored In the 1990s the focus shifted to Six Sigma

Today, quality has become a hygiene factor


Quality capability has evolved to the point where it has become engrained and expected

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Evolution of Quality Management


Deming Total Quality Management Six Sigma Continuous Improvement Zero Defects Quality Mgt System
Figure is not in text
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Tools and Methodologies


Pareto analysis

Taguchi

Imai

Juran

Crosby

cause and effect diagrams quality function deployment histograms brainstorming process charts process diagrams flow charts control charts run charts benchmarking affinity diagrams moments of truth interrelationship digraphs matrix diagrams matrix data analysis process decision chart Deming cycle costs of quality analysis statistical process control quality circles etc.

Six Sigma
A broad and comprehensive system for building and sustaining business performance, success, and leadership The key focus is on processes Measurement of both processes and products is critical to Six Sigma success
Statistical six sigma goal is near-perfection 3.4 defects per million opportunities (DPMO)

The lofty goal is used as a driver of organizational change


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Sigma Quality Levels and Corresponding Yields


Figure 7-2

Sigma Corresponding Yield 1 30.9 % 2 69.2% 3 93.3% 4 99.4% 5 99.98% 6 99.9997%


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DPMO 690,000 308,000 66,800 6,210 320 3.4

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Six Sigma Measurement Benefits


Six Sigma starts with the customer Six Sigma provides a consistent metric Six Sigma links the effort to an ambitious goal

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Six Sigma
DMAIC Cycle
Define, Measure, Analyze, Improve, and Control

Six Sigma Design Six Sigma Blackbelts


At GE, blackbelts receive three weeks of training, with follow-up exams and continued learning through conference and other forums A Greenbelt at GE is the lowest commitment, which is training for a minimum of two weeks in Six Sigma At GE, every management employee is required to at least become a Greenbelt in Six Sigma

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Cause and Effect Diagram


Method Sequence Handling No Training
Scratched

Manpower

Other Material

Broken Conveyer Poor Maintenance Management Machinery

Glass

To get to root cause: Ask Why 5 (or more ) Times


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Costs of Quality Categories


Prevention costs
Costs to prevent poor quality in products or services Examples: maintenance, process capability evaluations, quality improvement team meetings, quality education

Appraisal costs
Costs associated with assuring conformance Examples: inspections, tests, service audits, calibration of test equipment

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Costs of Quality Categories


Failure costs
Result from products or services not conforming to requirements of customer Two categories are internal and external Internal examples: scrap, disposing of scrap, rework, redoing inspection, redoing testing, material review, and down grading External examples: processing customer complaints, customer returns, warranty claims, and product recalls

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Traditional Cost of Quality Model


Total Costs

Cost

Failures

Prevention & Appraisal

t1 t2 t3

Quality
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100% Quality

Note: the figure is for presenting the COQ concept. It is not dimensionally correct
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Comparison of Quality and Capability

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Statistical Process Control (SPC)


Statistical technique used to ensure process is making product to standard All process are subject to variability
Natural causes: Random variations Assignable causes: Correctable problems
Machine wear, unskilled workers, poor material

Objective: Identify assignable causes Uses process control charts

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Control Charts

Plot of Sample Data Over Time


Sample Value 80 60 40 20 0 1
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Sample Value UCL Average LCL

13 17 21 Time

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Interpreting Patterns in Control Charts


General rules for examining a process to determine if it is in control:
No points are outside control limits The number of points above and below the center line is about the same The points seem to fall randomly above and below the center line Most points, but not all, are near the center line, and only a few are close to the control limits

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Supplier Quality Analysis


Proposal Analysis
What is the firm's basic quality policy What is the general attitude toward quality? Does the prospective supplier use statistical methods? What is the supplier's ability with this type of work? Is the production equipment capable? Exactly how is the firm organized to control quality? What specific quality measurement techniques and test equipment does the prospective supplier employ? Is statistical process control utilized effectively?

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Supplier Development
Certification
Qualification Education The certification performance process

Qualification Education The Certification Performance Process

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7-18 McGraw-Hill/Irwin World Class Supply ManagementSM, ISBN 0-07-229070-6, CopyrightCopyright The McGraw-Hill Companies, Inc. All Inc. All rights reserved. 2003 by 2003 by The McGraw-Hill Companies, rights reserved.

Key Concepts
Evolution of quality management
Many pathways, same destination

Philosophies of the gurus



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Edward Deming Philip Crosby Masaaki Imai Genechi Taguchi Joseph Juran Total Quality Management Continuous improvement Six Sigma Quality Management System

Management approaches

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Key Concepts
Tools and methodologies
Common tools Costs of quality Loss to society Process capability analysis Statistical process control

Quality movement support


Organizations Standards Awards

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Key Concepts
Supply management issues
Requirements development Supplier quality analysis Inspection dependence Supplier development Supplier certification

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Quality and WCSM


Supply professionals that plan to guide their organization and chain to World Class Supply ManagementSM must understand how to evaluate the management of quality both within their own facilities and those of their suppliers. Evaluation of the underlying philosophy, management system, facilitating tools and methodologies of a supplier is the first step; however, World Class Supply ManagementSM calls for going beyond mere evaluation to aiding in the development and improvement of supplier quality.
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Philosophies of the Gurus


Many people have impacted quality over the years, of particular note are the following individuals:
Edward Deming Philip Crosby Masaaki Imai Genechi Taguchi Joseph Juran

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Demings Fourteen Points


Point 1: Create constancy of purpose for continual improvement of product and service Point 2: Adopt the new philosophy for economic stability Point 3: Cease dependence on inspection to achieve quality Point 4: End the practice of awarding business on price tag alone

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Demings Fourteen Points


Point 5: Improve constantly and forever the system of production and service Point 6: Institute training on the job Point 7: Adopt and institute modern methods of supervision and leadership Point 8: Drive out fear Point 9: Break down barriers between departments and individuals

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Demings Fourteen Points


Point 10: Eliminate the use of slogans, posters and exhortations Point 11: Eliminate work standards and numerical quotas Point 12: Remove barriers that rob the hourly worker of the right to pride in workmanship Point 13: Institute a vigorous program of education and retraining Point 14: Define top managements permanent commitment to ever-improving quality and productivity
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Philip Crosby
Quality is Free Quality without Tears Zero Defects
Do it right the first time.

The Goalpost Philosophy

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Masaaki Imai
Author of Kaizen
Continuous Improvement Calls for everyone to work for constant and gradual improvement in every process

Strong supporter of just in time philosophy Kaizen and Supply Management


Focus is on becoming flexible to meet fluctuating demand by reducing and even eliminating waste

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Philosophies of the Gurus


Genechi Taguchi
Believes the goalpost philosophy underestimates the costs of poor quality Advocates a Loss to Society model
Quadratic loss function is a more accurate model As the level of conformance moves out towards the upper and lower limits, there is a quadratic increase in costs

Focus should be on robust designs


Identifying target values for design parameters and producing robust designs using statistical experimentation

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Philosophies of the Gurus


Joseph Juran
Quality Control Handbook Results focused formula
1. 2. 3. 4. Establish specific goals to be reached Establish plans for reaching goals Assign clear responsibility Base the rewards on results achieved

Approach received widespread acceptance due to the clear setting of responsibility and detailed focus on planning

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Management Approaches
Total Quality Management Zero Defects Continuous Improvement Six Sigma Quality Management System

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Total Quality Management Key Elements


Recognition that quality is everyone's responsibility Commitment by everyone in the organization Active participation by everyone in the organization Continuous improvement of quality Satisfaction of the customer

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Total Quality Management


Step 1: Establish TQM Management and Cultural Environment Step 2: Define Mission of Each Component of the Organization Step 3: Set Performance Improvement Opportunities, Goals and Priorities Step 4: Establish Improvement Projects Step 5: Implement Projects Using Improved Methodologies Step 6: Evaluate Step 7: Review and Recycle
Based on Figure 7-2
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Continuous Improvement
Kaizen is synonymous with continuous improvement Continuous improvement is often discussed within a just-in-time implementation framework Just-in-times Two major tenets:
1. Respect for people 2. Elimination of waste
Wasteful activities do not add value to fulfilling the needs of the customer

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Value Added
Generally companies have three categories:
Unnecessary and not value added Necessary, but not value added Value added

Two primary approaches are:


Value Analysis/Value Engineering
What design features add value?

Process Value Analysis


What process steps add value?

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Characteristics of JIT Suppliers


Few, nearby suppliers Long-term contract agreements Steady supply rate Frequent deliveries in small lots Buying firm helps suppliers meet quality Suppliers use process control charts Buying firm schedules inbound freight

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Seven Wastes
1. 2. 3. 4. 5. 6. 7. Overproduction Unneeded motion Unneeded transportation Needless processing Needless machine time Holding excessive inventory Defects

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Plan, Do, Check, Act Cycle


P-D-C-A describes the basic logic for data-driven continuous process improvement
Plan
Review current performance Identify and target root causes of problems. Devise possible solutions and plan implementation

Do
Pilot the planned solution

Check (or study)


Measure the results of the test

Act
Refine and expand the solution to make it permanent

Restart cycle with next highest yield problem


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Six Sigma Themes


Theme 1: Genuine Focus on the Customer Theme 2: Data- and Fact-Driven Theme 3: Process Focus Theme 4: Proactive Management Theme 5: Boundaryless Collaboration Theme 6: Drive for Perfection

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Quality Management System (QMS) Principles


Customer focus Leadership Involvement of people Process approach System approach to management Continual improvement Factual approach to decision making Mutually beneficial supplier relationships

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Tools and Methodologies


The term tool emerged from the use of the methodologies in small group improvement efforts, such as quality circles, wherein the group would focus on solving a problem by using a mix of the methodologies.

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Common Tools
Pareto Charts Cause and Effect Diagrams Process Flow Charts Run Plots Frequency Histograms Scatter Diagrams Control Charts

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Cause and Effect Diagram


Used to find problem sources/solutions Other names

Fish-bone diagram, Ishikawa diagram

Steps
Identify problem to correct Draw main causes for problem as bones

Ask What could have caused problems in these areas?

Develop branches to get to root cause Develop additional diagrams as needed

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Process Flow Chart


Shows sequence of events in process Depicts activity relationships Has many uses
Identify data collection points Find problem sources Identify places for improvement Identify where travel distances can be reduced

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Control Charts
Most common form is Statistical Process Control or SPC charts Idea is to tell when to adjust process Developed by Shewhart in 1920s Involves
Creating standards (upper & lower limits) Measuring sample output (e.g. mean wgt.) Taking corrective action (if necessary)

Used while product is being produced

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Control Charts have Three Basic Applications


To establish a state of statistical control To monitor a process and signal when the process is about to go out of control (note!) To determine process capability

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Example Using the Tools


Consider a supplier who has recently installed a new production process that is producing failures
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
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Map the process stages using a flow chart Gather data at each of the inspection points Estimate the costs of the failures (costs of quality) Use a Pareto chart to identify greatest problem Use a fishbone diagram to identify root causes Identify primary root cause (using Pareto again) as maintenance levels being too low Increase/improve maintenance levels To prevent the problem from occurring in the future, implement statistical process control Document the changes Evaluate results of the changes at a predetermined date

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Loss to Society
Suppose a certain quality characteristic has a specification of .05 + .02 An analysis of company records reveals that if the value of the quality characteristic exceeds the target of .05 by the tolerance of .02 on either side, the product is likely to fail during the warranty period and costs $50 for repair In other words, $50 is the cost to society when the actual output of the process is either exactly at y = .03 or y = .07
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Loss to Society
Based on this information, the loss function is calculated as follows:
L(y)= k(y - T)2 $50 = k(.03 - .05)2 next, solve for k to get k = 50/0.0004 = 125,000

Therefore, the loss function for a future measure is


L(y) = 125,000(y - T)2

Thus, if the actual output is .040, then the estimated loss is


125,000(.0400 - .0500)2 = $12.50 per unit
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Process Capability Analysis


Every process possesses some natural variability Common causes produce random variations Over time, this natural variability will produce a distribution around the mean quality level.

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Process Capability Analysis


In many cases this distribution approximates the normal distribution The difference between the two extremes of the curve is the natural tolerance range As long as the process is properly adjusted and is not affected by any outside nonrandom forces - the distribution it produces is predictable

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Implications for Supply Management


When the buying firms required quality range is narrower than the natural capability range of the process, the process is incapable In the case of a nonstandard item, a supply manager must determine:
Whether the potential supplier in fact knows the natural capability range for its production process If so, whether the buyers desired range of quality is compatible with the suppliers natural capability range And how the supplier plans to monitor the process to ensure that the process stays in control

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Process Capability Index


A way of expressing a processs capability relative to a buyers specific design requirement Cp = buyers absolute design tolerance natural capability range of the process 1.005 - 0.995 = 0.01 1.004 - 0.996 = 1.25 .008

Cp (a) =

Cp (b) =

1.003 - 0.997 = 0.006 = 0.75 1.004 - 0.996 0.008

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Cpk Index for Uncentered Process Means

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Cpk Index for Uncentered Process Means


Cpk = Cp(1-k) where k = (buyers target value - process mean) (buyers absolute design tolerance 2) k = 1.000 - 0.999 = 0.001 = 0.2 (1.005 - 0.995)/2 0.005 Cpk = 1.25(1 - 0.2) = 1.25 X 0.8 = 1.0

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Quality Movement Support


Organizations
American Society for Quality

Standards
International Organization for Standardization
ISO 9000:2000 ISO 9001:2000 ISO 9004:2000

Additional ISO Standards Impact on Supply Managers

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Quality Movement Support


Awards
Malcolm Baldrige Award
1. Large manufacturing companies or subsidiaries 2. Large service companies 3. Small manufacturing or service companies

European Quality Award Deming Prize

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Supply Management Issues


Four factors determine the long-run quality level of a firms purchased materials
1. Complete and appropriate specifications 2. Selection of suppliers 3. Realistic understanding of quality requirements 4. Monitoring of suppliers' performance

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Requirements Development
Quality can be defined in three ways:
1. In absolute terms 2. Relative to a perceived need 3. As conformance with stated requirements

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Requirements Development
Investigations with respect to quality:
Study the quality requirements Ensure that they are completely and unambiguously stated Investigate their reasonableness, relative to cost Ensure that specifications are written in a manner that permits competi-tion among potential suppliers. Determine whether existing suppliers can build the desired quality Ensure the feasibility of the inspections and tests required to assure quality
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Supplier Quality Analysis


Product Testing Objectives
Determine potential supplier's quality level Compare quality levels of several suppliers

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Inspection Dependence
Receiving and Inspection Procedure
Best situation is for inspection to not be needed If inspection is needed and a rejection occurs, the options are:
Return the material to the supplier Keep some of the acceptable material and return the rest Keep all the material and rework it

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Technical Inspection
Acceptance sampling is the most common form of inspection for incoming materials or finished goods Single sampling procedure
1. Take one or more samples at random from a lot 2. Inspect each of the items in the sample 3. Decide whether to reject the whole lot based on the inspection results
The decision is usually based on a specific percentage of the failed units in the lot

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What Is an Acceptance Plan?


Set of procedures for inspecting incoming materials or finished goods Identifies
Type of sample Sample size (n) Criteria (c) used to reject or accept a lot

Common Sampling Plan Types


Single Double Sequential
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Double Sampling
Let c1 = 10%, c2 = 25%, n = 50 units Sample 50 units, and find 10 (20%) are defective
Random sample of n1 pieces
Number of defects falling between c1 and c2

For our 2nd sample 4/50, are defects. Which means 14/100, or 14% is the total!

Number of defects < c1

Inspect a second sample of n2 pieces


Total defects

Number of defects > c2 Reject the lot

Accept the lot

< c2

> c2

SEQUENTIAL SAMPLING: extends this methodology with a different termination criteria for the second and subsequent samples
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Sequential Sampling
Sequential sampling continues the sample taking until the lot is either:
Fully inspected, Rejected, or Accepted
If the number of defects falls between c1 and c2 , take another sample

Accept the lot

Total defects

< c1

> c2

Reject the lot

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Traditional Inspection Points


At the suppliers plant In the receiving area Step-by-step in the production process Before a costly process Finished goods Before shipment to the customer

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Three Basic Problems with Inspection


Duplication of inspection activity Very large number of items are inspected Defective items are found only after they are finished

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Common Truths About Inspection


Does not correct system deficiencies Does not correct product deficiencies Does not change product Does not add value Does add cost

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Defect Detection vs. Prevention Systems


Defect detection concept

Defect prevention concept

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Defect Detection System

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Defect Prevention Systems

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Concluding Remarks
To contribute most effectively to the organizational effort, supply managements role in the quality program should include:
(1) participation in the development of specifications (2) participation in the selection of appropriate quality control, inspection, and test requirements (3) active involvement in analysis and development of proactive prevention measures at the suppliers facility (4) the selection and motivation of qualified suppliers (5) the subsequent monitoring and nurturing of the ongoing relationships between the buying and supplying firms

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Concluding Remarks
Quality management is a major component of supply managements responsibility Supply management should participate creatively in the corporate quality management program and in the firms critical supplier quality efforts A WCSM firm views its quality system and the supplier's quality system as two parts of a single integrated system
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