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Module - 4 Chapter 8 Quality Management : Focus on Six Sigma

Road Map
Total Quality Management Defined Quality Specifications and Costs Six Sigma Quality and Tools External Benchmarking ISO 9000 Service Quality Measurement


Total Quality Management (TQM)
Total quality management is defined as managing the entire organization so that it excels on all dimensions of products and services that are important to the customer. Two goals: Careful designing of the product or service Ensuring that the organization’s system can

Quality Specifications
Design quality refers to the Inherent value of the product in the marketplace Example – Performance, features, reliability, perceived quality etc… Conformance Quality : The degree to which the product or service design specifications are met. Quality at source : Person who does the work takes the responsibility for making sure that his or her output meets the specifications.


consistently produce the design.



Cost of Quality – Joseph Juran
Cost of quality means all the cost attributable to the production of quality that is not 100 percent perfect. Three basic assumptions justify an analysis of the cost of quality: – Failures are caused – Prevention is cheaper – Performance can be measured. The cost of quality are generally classified into four types:

Costs of Quality
Appraisal Costs

External Failure Costs

Costs of Quality

Prevention Costs

Internal Failure Costs



Appraisal cost: – Costs of the inspection, testing & other tasks to ensure that the product or process is acceptable. Prevention cost: – The sum of all the costs to prevent defects such as the cost to identify the case of the defect to implement corrective actions to eliminate the cause, to train personnel, to redesign the product or system to purchase new equipment or make modifications. Internal Failure cost :
– Cost for defects incurred within the system : Scrap, rework, repair.

Functions of the QC department
Manufacturing QC department has variety of functions to perform: – Testing designs for their reliability in the lab & the field. – Gathering performance data on product in the field & resolving quality problems in the field. – Planning & budgeting the QC program in the plant – Designing & overseeing quality control system & inspection procedures & actually carrying out inspection activities requiring special technical knowledge to accomplish.

External failure cost :
– Costs for defects that pass through the system : customer warranty, replacements, loss of customers or goodwill etc.



Six Sigma Quality
Six sigma is a philosophy & method companies such as general electric & Motorola used to eliminate defects in their products & processes. A defect is a component that does not fall within the customer’s specification limits. A process that is in six-sigma control will produce no more that two defects out of every billon units. Six-sigma allows managers to readily describe the performance of a process in terms of its variability & to compare different processes using a common metric. This metric is Defect per million opportunities (DPMO)

Six Sigma Quality
A philosophy and set of methods companies use to eliminate defects in their products and processes Seeks to reduce variation in the processes that lead to product defects The name, “six sigma” refers to the variation that exists within plus or minus three standard deviations of the process outputs



Six Sigma Quality (Continued)
Six Sigma allows managers to readily describe process performance using a common metric: Defects Per Million Opportunities (DPMO)

Six Sigma Quality (Continued)
Example of Defects Per Million Opportunities (DPMO) calculation. Suppose we observe 200 letters delivered incorrectly to the wrong addresses in a small city during a single day when a total of 200,000 letters were delivered. What is the DPMO in this situation?
So, for every one million letters delivered this city’s postal managers can expect to have 1,000 letters incorrectly sent to the wrong address.


Number of defects  Number of   opportunities   for error per  x No. of units  unit   

x 1,000,000



x 1,000,000 = 1, 000

[ 1 ] x 200,000
Cost of Quality: What might that DPMO mean in terms of over-time employment to correct the errors?



Six-Sigma Methodology
The standard approach to six-sigma project is the DMAIC methodology developed by General Electric Define, Measure, Analyze, Improve, and Control (DMAIC) Overall focus of the methodology is to understand and achieve what the customer wants A Six-sigma program seeks to reduce the variation in the processes that lead to these defects DMAIC consists of five steps….

Six Sigma Quality: DMAIC Cycle
Refer pg 347
1. Define (D) 2. Measure (M) 3. Analyze (A) 4. Improve (I) 5. Control (C) Customers and their priorities Process and its performance Causes of defects Remove causes of defects Maintain quality



We are the maker of this cereal. Consumer reports has just published an article that shows that we frequently have less than 16 ounces of cereal in a box. What should we do? Define: What is the critical-to-quality characteristic? The CTQ (critical-to-quality) characteristic in this case is the weight of the cereal in the box. Measure: How would we measure to evaluate the extent of the problem? What are acceptable limits on this measure?

Let’s assume that the government says that we must be within ± 5 percent of the weight advertised on the box. Upper Tolerance Limit = 16 + .05(16) = 16.8 ounces Lower Tolerance Limit = 16 – .05(16) = 15.2 ounces We go out and buy 1,000 boxes of cereal and find that they weight an average of 15.875 ounces with a standard deviation of .529 ounces. What percentage of boxes are outside the tolerance limits?



Lower Tolerance = 15.2

Process Mean = 15.875 Std. Dev. = .529

Upper Tolerance = 16.8

What percentage of boxes are defective (i.e. less than 15.2 oz)? Z = (x – Mean)/Std. Dev. = (15.2 – 15.875)/.529 = 1.276 Approximately, 10 percent of the boxes have less than 15.2 Ounces of cereal in them!

Step 3 - Analyze How can we improve the capability of our cereal box filling process? - Decrease Variation - Center Process - Increase Specifications Step 4 – Improve Step 5 – Control - Statistical Process Control (SPC) - Use data from the actual process - Estimate distributions - Look at capability - is good quality possible - Statistically monitor the process over time


Analytical Tools for Six Sigma The tool common to all quality efforts including sixsigma are : Flowcharts, pareto Charts, Histograms, Check sheets, cause & effect diagrams & control charts.

A flowchart It is a diagram of a job operation or process. It enables everyone involved in identifying & solving quality problems to have a clear picture of how a specific operations work & a common frame of reference.




Run charts: They depict trends in data overtime & thereby help to understand the magnitude of a problem at the define stage. They plot the median of a process.

Pareto Charts: These charts help to break down a problem into relative contributions of its components. It is a method of identifying the cause of poor quality. Devised by Joseph Juran.



Check Sheets & Histograms: Is a list of causes of quality problems with the number of defects resulting from each cause used to develop a bar chart called histogram. Cause-and-effect diagram: A chart showing the different categories of problem causes.

Analytical Tools for Six Sigma and Continuous Improvement: Check sheet
Can be used to keep track of defects or used to make sure people collect data in a correct manner

Billing Errors Wrong Account Wrong Amount A/R Errors

Wrong Account Wrong Amount



Analytical Tools for Six Sigma and Continuous Improvement: Histogram
Number of Lots
Can be used to identify the frequency of quality defect occurrence and display quality performance

Analytical Tools for Six Sigma and Continuous Improvement: Cause & Effect Diagram
Possible causes: The results or effect

Machine Environment Method


Effect Material





Data Ranges

4 Defects in lot

Can be used to systematically track backwards to find a possible cause of a quality problem (or effect)



Analytical Tools for Six Sigma and Continuous Improvement: Control Charts
Can be used to monitor ongoing production process quality and quality conformance to stated standards of quality
1020 1010 1000 990 980 970 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Other Six Sigma Tools
Failure Mode and Effect Analysis (DMEA) is a structured approach to identify, estimate, prioritize, and evaluate risk of possible failures at each stage in the process



Design of Experiments (DOE) a statistical test to determine cause-and-effect relationships between process variables and output


Six Sigma Roles and Responsibilities 1. Executive leaders must champion the process of improvement – to identify problems earlier in the project & make certain that the improvement efforts focus on business results. 2. Corporation-wide training in Six Sigma concepts and tools
• Black belts – Coach or who lead a six-sigma improvement team. • Master black belt – Who receive in-debt training on statistical tools & process improvement. • Green belts – Who are employees and have received training.
3. 4.

FailThe Shingo System: Fail-Safe Design
Shingo’s argument: – SQC methods do not prevent defects – Defects arise when people make errors – Defects can be prevented by providing workers with feedback on errors Feedback & action requires inspection which should be done on 100 % of the items produced. This inspections can be one of the 3 types:
– Successive check – performed by next person in the process – Self-Check – individual worker it self. – Source inspection – individual worker checks for errors that caused the defect.


Setting stretch objectives for improvement Continuous reinforcement and rewards


FailThe Shingo System: Fail-Safe Design
All three type of inspection rely on controls consisting of devise called Poka-Yoke it includes: – Checklists – Special tooling that prevents workers from making errors 1. Prevents the worker from making an error that leads to a defect before starting a process 2. Gives him a rapid feedback of abnormalities in the process to the worker in time to correct them.

ISO 9000
The ISO 9000 family of standards relate to quality management systems and are designed to help organizations ensure they meet the needs of customers and other stakeholders The standards are published by ISO, the International Organization for Standardization and available through National standards bodies. Series of standards agreed upon by the International Organization for Standardization (ISO) Adopted in 1987, More than 100 countries, A prerequisite for global competition. ISO 9000 directs you to "document what you do and then do as you documented"




Three Forms of ISO Certification

External Benchmarking Steps
1. Identify those processes needing improvement 2. Identify a firm that is the world leader in performing the process 3. Contact the managers of that company and make a personal visit to interview managers and workers 4. Analyze data

First party: A firm audits itself against ISO 9000 standards Second party: A customer audits its supplier


3. Third party: A "qualified" national or international standards or certifying agency serves as auditor



A standard approach to making this determination is to measure the gap between what customers expected & their perceptions of the service provided in a service encounter. The size of the gap indicates where improvements should be made . The measurement is done by having customers fill out the SERVQUAL questionnaire. .

Service Quality Measurement: SERVQUAL
A perceived service quality questionnaire survey methodology Examines “Dimensions of Service Quality” including: Reliability, Responsiveness, Assurance, Empathy, and Tangibles (e.g., appearance of physical facilities, equipment, etc.)

“e-Service Quality”
dealing service on the Internet


Discuss the contributions of Deming, Juran & Crosby in the field of quality. What do you mean by Six-sigma? Explain various analytical tools associated with six-sigma. Explain six sigma methodology - DMAIC Cycle Define: – Total quality management – Conformance Quality – Quality at source – Defect per million opportunities (DPMO) – ISO – External Benchmarking – SERVQUAL, e-SERVQUAL


New version of this methodology is called “e-Service Quality” It has been developed to evaluate service on the internet. It is defined as the extend to which a web site facilities & effective shopping, purchasing & delivery is done. Dimensions of Service Quality on the e-Service methodology include: Reliability, Responsiveness, Access, Flexibility, Ease of Navigation, Efficiency, Assurance/Trust, Security/Privacy, Price Knowledge, Site Aesthetics, and Customization/Personalization