INSE 6300

Quality Assurance in Supply Chain Management

Concordia University, QC, Canada

Fall2019
Lecture 2.

Arash Mohammadi
Office: S-EV 9187
Email: arashmoh@encs.Concordia.ac
Homepage: http://users.encs.concordia.ca/~arashmoh/

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 Outline of this Class
Objectives:
• Achieving Strategic Fit in Supply Chain.
• Supply Chain Drivers and Metrics

References:

Check the following materials:

• [TB-1] Ch2 and Ch3
• Hand out General (HO-1)

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 Achieving
Strategic Fit in
Supply Chain

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 Competitive and Supply Chain Strategies
• Competitive Strategy defines the set of customer needs that it seeks to satisfy through its
products and services.

• Example 1 - Walmart vs. McMaster-Carr:

• Walmart’s competitive strategy is built around low price and product availability.
• McMaster-Carr’s competitive strategy is built around providing the customer with
convenience, availability, and responsiveness.
• Example 2 - Blue Nile vs Zales:
• Blue Nile’s competitive strategy is built around low cost and availability of variety
products (lengthy wait time and inability of the costumer to see the product).
• Zales’s competitive strategy is built around responsiveness.

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 Competitive and Supply Chain Strategies
• Firm’s competitive strategy will be defined
based on its customers’ priorities.
• Competitive Strategy is defined based on:
1. Product cost;
2. Delivery time;
3. Variety;
4. Quality.
• Example 1 - Walmart vs. McMaster-Carr:
• A Walmart customer places greater emphasis on cost.
• A McMaster-Carr customer places greater emphasis on product variety and response
time than on cost.
• Example 2 - Blue Nile vs Zales:
• A Blue Nile customer places great emphasis on product variety and cost.
• A customer purchasing jewelry at Zales is most concerned
with fast response time and help in product selection.

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 Value Chain
• Value Chain, consists of core processes/functions that must be performed for a successful sale
• To execute a company’s competitive strategy, all these functions play a role, and each must
develop its own strategy, i.e., what each process or function will try to do particularly well.
• Product Development Strategy
• Marketing and sales strategy
• Supply chain Strategy determines the nature of material procurement, transportation of
materials, manufacture of product or creation of service, distribution of product, follow-up
service, whether processes will be in-house or outsourced
• All functional strategies must support one another and the competitive strategy

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 Supply Chain Strategy
• Supply chain strategy includes a specification of the broad structure of the supply chain and
what many traditionally call
• Supplier strategy,
• Operations strategy
• Logistics strategy.
• Example: The following define the broad structure of each supply chain and are part of SCS
• Dell’s initial decision to sell direct, its 2007 decision to start selling PCs through resellers,
• Cisco’s decision to use contract manufacturers includes a specification of the broads.
• Supply chain strategy also includes decisions regarding
• Inventory,
• Transportation,
• Operating facilities,
• Information flow.
• Example:
• Amazon’s decisions to build warehouses to stock some products and to continue using
distributors as a source of other products
• Toyota’s decision to have production facilities in each of its major markets.

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 Strategic Fit
• Strategic Fit: Competitive and supply chain strategies have aligned goals.

• It refers to consistency between the customer priorities that the

competitive strategy hopes to satisfy and the supply chain capabilities
that the supply chain strategy aims to build.

• A company may fail because of a lack of strategic fit or because its overall
supply chain design, processes, and resources do not provide the capabilities
to support the desired strategy

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 Achieving Strategic Fit

1. The competitive strategy and all functional strategies must fit

together to form a coordinated overall strategy. Each
functional strategy must support other functional strategies
and help a firm reach its competitive strategy goal.
2. The different functions in a company must appropriately
structure their processes and resources to be able to execute
these strategies successfully.
3. The design of the overall supply chain and the role of each
stage must be aligned to support the supply chain strategy.

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 How Is Strategic Fit Achieved?
• Q? What does a company need to do to achieve that all-important strategic fit between the
supply chain and competitive strategies?
• There are three basic steps to achieve strategic fit:
1. Understanding the customer and supply chain uncertainty: First, a company must
understand the customer needs for each targeted segment and the uncertainty these needs
impose on the supply chain. These needs help the company define the desired cost and
service requirements. The supply chain uncertainty helps the company identify the extent of
the unpredictability of demand and supply that the supply chain must be prepared for.
2. Understanding the supply chain capabilities: Each of the many types of supply chains is
designed to perform different tasks well. A company must understand what its supply chain is
designed to do well.
3. Achieving strategic fit: If a mismatch exists between what the supply chain does particularly
well and the desired customer needs, the company will either need to restructure the supply
chain to support the competitive strategy or alter its competitive strategy.

Example: Seven-Eleven Japan vs. a discounter such as Sam’s Club

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 How Is Strategic Fit Achieved?
Understanding the Customer and Supply Chain Uncertainty
• Costumer Segmentation, is the practice of dividing a customer base into groups of
individuals that are similar in some aspects.
– Relies on identifying key differentiators that divide customers into groups.
– Differentiators are: Demographics (age, race, religion, gender, family size, ethnicity,
income, education level); Geography (where they live and work); Psychographic (social
class, lifestyle and personality characteristics), and; Behavioral (spending, consumption,
usage and desired benefits)

• In general, customer demand from different segments varies along several attributes:
– Quantity of product needed in each lot
– Response time customers are willing to tolerate
– Variety of products needed
– Service level required
– Price of the product
– Desired rate of innovation in the product

• Each customer in a particular segment will tend to have similar needs.

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 How Is Strategic Fit Achieved?
• Demand Uncertainty – uncertainty of customer demand for a product.

• Implied Demand uncertainty – resulting uncertainty for only the portion of the demand that
the supply chain plans to satisfy based on the attributes the customer desires.
– One key measure for combining all aforementioned attributes.

Customer Need Causes Implied Demand Uncertainty to …

Range of quantity required increases
Lead time decreases
Variety of products required increases
Required service level increases
Rate of innovation increases
Number of channels through which
product may be acquired increases
Increase because a wider range of the quantity required implies
greater variance in demand
Increase because there is less time in which to react to orders
Increase because demand per product becomes less predictable
Increase because the firm now has to handle unusual surges in
demand
Increase because new products tend to have more uncertain
demand
Increase because the total customer demand per channel
becomes less predictable

• Lead Time, in a supply chain management context is the time from the moment the customer
places an order to the moment it is ready for delivery.
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 Implied Demand Uncertainty
1. Products with uncertain demand are often less mature and have less direct competition. As a
result, margins tend to be high.

2. Forecasting is more accurate when demand has less uncertainty.

3. Increased implied demand uncertainty leads to increased difficulty in matching supply with
demand. For a given product, this dynamic can lead to either a Stockout or an oversupply
situation (resulting in Markdowns).

4. Markdowns are high for products with greater implied demand uncertainty because
oversupply often results.
Product Margin, the profit margin per product, which shows the amount the product sells for
above the cost of manufacturing the product.
Blank Low Implied High Implied
Uncertainty Uncertainty
Product margin Low High
Average forecast error 10% 40% to 100%
Average stockout rate 1% to 2% 10% to 40%
Average forced season-end markdown 0% 10% to 25%
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 Supply Uncertainty
Supply Uncertainty, uncertainty resulting from the capability of the supply chain.
• Supply uncertainty is strongly affected by the life-cycle position of the product
– High Supply Chain Uncertainty- when a new component is introduced in
the consumer electronics industry
– Low Supply Chain Uncertainty- when production technology matures
• We can create a spectrum of uncertainty by combining the demand and supply
uncertainty.
– A company introducing a brand-new cell phone based on entirely new
components and technology faces high implied demand uncertainty and
high supply uncertainty.
– In contrast, a supermarket selling salt faces low implied demand
uncertainty and low levels of supply uncertainty.
– Many agricultural products, such as coffee, are examples of supply chains
facing low levels of implied demand uncertainty but significant supply
uncertainty based on weather.
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 Implied Uncertainty (Demand and Supply) Spectrum

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 Understanding Supply Chain Capabilities
Q? How does the firm best meet demand in such an uncertain
environment?
• Creating strategic fit is all about designing a supply chain whose
responsiveness aligns with the implied uncertainty it faces.
• Supply Chain Responsiveness is the ability to
– Respond to wide ranges of quantities demanded
– Meet short lead times
– Handle a large variety of products
– Build highly innovative products
– Meet a high service level
– Handle supply uncertainty

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 Understanding Supply Chain Capabilities
• Responsiveness comes at a cost.
• Supply Chain Efficiency is the inverse to the cost of making and delivering the
product to the customer.
• The cost-responsiveness efficient frontier curve shows the lowest possible cost for
a given level of responsiveness.

• Example: For example, Sam’s Club

sells a limited variety of products
in large package sizes.
Focus is clearly on efficiency.

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 Responsiveness Spectrum

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 Efficient and Responsive Supply Chains
Comparison of Efficient and Responsive Supply Chains
Blank Efficient Supply Chains
Primary goal Supply demand at the lowest cost
Maximize performance at a
Product design strategy
minimum product cost
Lower margins because price is a
Pricing strategy
prime customer driver
Manufacturing strategy Lower costs through high utilization
Inventory strategy Minimize inventory to lower cost
Reduce, but not at the expense of
Lead-time strategy
costs
Supplier strategy Select based on cost and quality
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Responsive Supply Chains
Respond quickly to demand
Create modularity to allow postponement
of product differentiation
Higher margins because price is not a
prime customer driver
Maintain capacity flexibility to buffer
against demand/supply uncertainty
Maintain buffer inventory to deal with
demand/supply uncertainty
Reduce aggressively, even if the costs are
significant
Select based on speed, flexibility, reliability,
and quality
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 Supply Chain Levers
• Five basic levers to deal with uncertainty
– Capacity, combination of excess capacity and flexible capacity
– Inventory, one of the most common levers used in practice to deal with
uncertainty
– Time, combination of speedy supply and the willingness of customers to wait
– Information, appropriate information can help a supply chain reduce
uncertainty
– Price, prices of products and services that vary over time

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 Supply Chain
Drivers and
Metrics

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 Supply Chain Performance
• Q? What is the relationship/link between Financial Measures of a Firm and SC performance?

• Supply Chain Performance refers to the extended supply chain's activities in meeting end-
customer requirements, including product availability, on-time delivery, and all the necessary
inventory and capacity in the supply chain to deliver that performance in a responsive manner

• To determine the performance of any supply chain:

– We discuss what are the SC drivers and how they are used in the design, planning, and
operation of the supply chain.
– We define several metrics that can be used to evaluate the performance of each driver and
its impact on financial performance.
• We introduce the three logistical drivers: • The three cross-functional drivers:
1. Facilities, 1. Information,
2. Inventory, 2. Sourcing,
3. Pricing
3. Transportation

• Finally supply chain drivers and associated metrics can be linked to the various financial
measures.
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 Financial Measures of a Firm

The key financial metrics of firm performance include:

1. Return on Equity (ROE);

2. Return on Assets (ROA);
3. Profit Margin;
4. Asset Turnover Ratio (ATR);
5. Accounts Payable Turnover;
6. Cash-to-cash cycle;
7. Property, plant, and equipment (PP&E) turns;

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 Financial Measures of Performance
• Two measures that are not part of financial statements

– Markdowns: discounts required to convince customers to buy excess

inventory
– Lost sales: represent customer sales that did not materialize because of the
absence of products the customer wanted to buy.

• Markdowns and lost sales are two important financial measures of supply chain
performance that are not recorded in financial statements.

• Better matching of supply and demand reduces markdowns and lost sales

• Both markdowns and lost sales reduce net income and arguably represent the
biggest impact of supply chain performance on the financial performance of a firm.

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 1. Financial Measures: ROE

Return on equity (ROE), is a measure of the profitability of a business in relation to

the equity.

Equity: is the difference between the value of the assets and the value of the liabilities
of something owned.

Net Income: is the residual amount of earnings after all expenses have been deducted
from sales.

• ROE is a measure of how well a company uses investments to generate earnings

growth.

• ROE measures the return on investment made by a firm’s shareholders

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 2. Financial Measures: ROA
Return on Assets (ROA), measures the return earned on each dollar invested by the
firm in assets

Earnings before interest: is a measure of a firm's profit that includes all incomes and
expenses (operating and non-operating) except interest expenses.

Asset: is a resource with economic value that an individual, corporation or country

owns or controls with the expectation that it will provide a future benefit.

ROA can be written as the product of two ratios - Profit Margin and Asset Turnover,

Sales Revenue: is the amount realized by a business from the sale of goods or services.
This figure is used to define the size of a business.

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 3,4. Financial Measures: ATO and Product Margin

• Asset turnover (ATO), measures the efficiency of a company's use of its assets in
generating sales revenue or sales income to the company.

• Profit Margin is one of the commonly used profitability ratios to gauge the degree
to which a company or a business activity makes money. It represents what
percentage of sales has turned into profits.

• How many cents of profit the business has generated for each dollar of sale

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 5. Financial Measures: APT, C2C, and PP&E

• Accounts Payable Turnover (APT), is a short-term liquidity measure used to

quantify the rate at which a company pays off its suppliers.

• Accounts Payables are short-term debt that a company owes to its suppliers and
creditors. The accounts payable turnover ratio shows how efficient a company is
at paying its suppliers and short-term debts.

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 6,7. Financial Measures: APT, C2C, and PP&E

• Cash-to-cash (C2C) Cycle, which roughly measures the average amount of time
from when cash enters the process as cost to when it returns as collected revenue.

• Property, Plant, and Equipment (PP & E), is a fixed, tangible asset. It is a tangible
asset because property, plant, and equipment are physical items with a clear purchase
value.
• It is a fixed asset because PP&E cannot easily be sold or turned into cash and is
expected to add value to a business for over a long period of time.

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 Drivers of Supply Chain Performance

1. Facilities
– The physical locations in the supply chain network where
product is stored, assembled, or fabricated
2. Inventory
– All raw materials, work in process, and finished goods
within a supply chain
3. Transportation
– Moving inventory from point to point in the supply chain

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 Drivers of Supply Chain Performance

4. Information
– Data and analysis concerning facilities, inventory,
transportation, costs, prices, and customers throughout the
supply chain
5. Sourcing
– Who will perform a particular supply chain activity
6. Pricing
– How much a firm will charge for the goods and services
that it makes available in the supply chain

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 1. Facilities
• Role in the supply chain
– Production sites and storage sites
– Increase responsiveness by increasing the number of facilities, making
them more flexible, or increasing capacity

– Tradeoffs between facility, inventory, and transportation costs

 Increasing number of facilities increases facility and inventory
costs, decreases transportation costs and reduces response time
 Increasing the flexibility or capacity of a facility increases facility
costs but decreases inventory costs and response time

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 1. Facilities
• Components of facilities decisions
– Capability
 Flexible, dedicated, or a combination of the two
 Product focus or a functional focus
– Location
 Where a company will locate its facilities
 Centralize for economies of scale, decentralize for responsiveness
 Consider macroeconomic factors, quality of workers, cost of workers and facility,
availability of infrastructure, proximity to customers, location of other facilities, tax
effects
– Capacity
 A facility’s capacity to perform its intended function or functions
 Excess capacity – responsive, costly
 Little excess capacity – more efficient, less responsive
– Demand Allocation
 Markets each facility will serve
 Revisited as conditions change
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 1. Facilities

– Facility-Related Metrics
 Capacity
 Utilization
 Processing/setup/down/idle time
 Quality losses
 Production cost per unit
 Theoretical flow/cycle time of production
 Actual average flow/cycle time
 Product variety

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 2. Inventory
• Role in the supply chain
– Mismatch between supply and demand
– Exploit economies of scale
– Reduce costs
– Improve product availability
– Affects assets, costs, responsiveness, material flow time

• Overall Trade-Off
– Increasing inventory generally makes the supply chain more responsive
– A higher level of inventory facilitates a reduction in production and
transportation costs because of improved economies of scale
– Inventory holding costs increase
– Material flow time, the time that elapses between the point at which
material enters the supply chain to the point at which it exits
– Throughput, the rate at which sales occur

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 2. Inventories
Components of Inventory Decisions
• Cycle Inventory
– Average amount of inventory used to satisfy demand between
supplier shipments
– Function of lot size decisions
• Safety Inventory
– Inventory held in case demand exceeds expectations
– Costs of carrying too much inventory versus cost of losing sales
• Seasonal Inventory
– Inventory built up to counter predictable variability in demand
– Cost of carrying additional inventory versus cost of flexible
production
• Level of Product Availability
– The fraction of demand that is served on time from product held in
inventory
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 2. Inventories

– Inventory-Related Metrics
 C2C cycle time
 Average inventory
 Inventory turns
 Average replenishment batch size
 Average safety inventory
 Seasonal inventory

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 3. Transportation

• Role in the Supply Chain

– Moves inventory between stages in the supply chain
– Affects responsiveness and efficiency
– Faster transportation allows greater responsiveness but lower
efficiency
– Also affects inventory and facilities
– Allows a firm to adjust the location of its facilities and inventory
to find the right balance between responsiveness and efficiency

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 3. Transportation
• Components of Transportation Decisions
– Design of transportation network
 Modes, locations, and routes
 Direct or with intermediate consolidation points
 One or multiple supply or demand points in a single run

– Choice of transportation mode

 Air, truck, rail, sea, and pipeline
 Information goods via the Internet
 Different speed, size of shipments, cost of shipping, and
flexibility

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 3. Transportation
– Transportation-Related Metrics
 Average inbound transportation cost
 Average income shipment size
 Average inbound transportation cost per shipment
 Average outbound transportation cost
 Average outbound shipment size
 Average outbound transportation cost per shipment

• Overall Trade-off: Responsiveness Versus Efficiency

– The cost of transporting a given product (efficiency) and the speed with
which that product is transported (responsiveness)
– Using fast modes of transport raises responsiveness and transportation
cost but lowers the inventory holding cost

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 4. Information
• Role in the Supply Chain
– Improve the utilization of supply chain assets and the coordination of
supply chain flows to increase responsiveness and reduce cost
– Information is a key driver that can be used to provide higher
responsiveness while simultaneously improving efficiency

• Role in the Competitive Strategy

– Improves visibility of transactions and coordination of decisions across
the supply chain
– Right information can help a supply chain better meet customer needs
at lower cost
– More information increases complexity and cost of both infrastructure
and analysis exponentially while marginal value diminishes
– Share the minimum amount of information required to achieve
coordination

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 4. Information
• Components of Information Decisions
• Demand Planning
– Best estimate of future demand
– Include estimation of forecast error
• Coordination and Information Sharing
– Supply chain coordination, all stages of a supply chain work toward
the objective of maximizing total supply chain profitability based on
shared information
– Critical for success
• Sales and Operations Planning (S & O P)
– The process of creating an overall supply plan (production and
inventories) to meet the anticipated level of demand (sales)
– Can be used to plan supply chain needs and project revenues and
profits

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 4. Information

• Information-Related Metrics
– Forecast horizon
– Frequency of update
– Forecast error

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 5. Sourcing

• Role in the Supply Chain

– Set of business processes required to purchase goods and services
– Will tasks be performed by a source internal to the company or a third
party
– Should increase the size of the total surplus to be shared across the
supply chain

• Role in the Competitive Strategy

– Sourcing decisions are crucial because they affect the level of
efficiency and responsiveness in a supply chain
– Outsource to responsive third parties if it is too expensive to develop
their own
– Keep responsive process in-house to maintain control

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 5. Sourcing
• Components of Information Decisions
• In-House or Outsource
– Perform a task in-house or outsource it to a third party
– Outsource if it raises the supply chain surplus more than the firm can
on its own
– Keep function in-house if the third party cannot increase the supply
chain surplus or if the outsourcing risk is significant
• Supplier Selection
– Number of suppliers, criteria for evaluation and selection
• Procurement
– Obtain goods and service within a supply chain
– Goal is to decrease total cost of ownership and increase supply chain
surplus

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 5. Sourcing

• Sourcing-Related Metrics
– Days payable outstanding
– Range of purchase price
– Average purchase quantity
– Supply quality
– Supply lead time
– Percentage of on-time deliveries
– Supplier reliability

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 6. Pricing

• Role in the Supply Chain

– Pricing determines the amount to charge customers for
goods and services
– Affects the supply chain level of responsiveness required
and the demand profile the supply chain attempts to serve
– Pricing strategies can be used to match demand and supply
– Objective should be to increase firm profit

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 6. Pricing
Components of Pricing Decisions

• Pricing and Economies of Scale

– The provider of the activity must decide how to price it appropriately to
reflect economies of scale
• Everyday Low Pricing Versus High-Low Pricing
– Different pricing strategies lead to different demand profiles that the
supply chain must serve

• Fixed Price Versus Menu Pricing

– If marginal supply chain costs or the value to the customer vary
significantly along some attribute, it is often effective to have a pricing
menu
– Can lead to customer behavior that has a negative impact on profits

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 6. Pricing

• Pricing-Related Metrics
– Profit margin
– Days sales outstanding
– Average sale price
– Average order size
– Range of sale price

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 Quality Theory

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 Quality Theory- What is Theory?
 A “coherent group of general propositions used as principles of explanation for a
class of phenomena.”
Random House Webster’s College Dictionary 2011
 A Theoretical Model Relating Quality Improvement to Worker Morale

 For a theory to be complete it must have 4 elements:

 What? Involves which variables or factors are included in the Model.

 How? The nature, direction and extent of the relationship among the variables.

 Why? The Theoretical glue that holds the model together.

 Who - Where – When? Place contextual bounds on the model.

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 Quality Theory- What is Theory?
A Theories are established in one of two ways:
 Induction
 Generated by observation and description
 Deduction
 Most commonly used
 Researchers propose a model based on prior research and design an experiment to test
the theoretical model

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 Leading Contributors to Quality Theory

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 • Walter Shewhart, a pioneering statistician
who developed statistical process control in
the Bell Laboratories in the US during the
1930's.

• He introduced the concept of “Plan-Do-

Check-Act”. It is often referred to as “the
Shewhart Cycle”.

• It was taken up and promoted very

effectively from the 1950s on by the famous
Quality Management authority, W. Edwards
Deming, and is consequently known by
many as “the Deming Wheel”.

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 THE SHEWART CYCLE - PDCA

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 W. Edwards Deming
• Taught engineering, physics in the
1920s, finished PhD in 1928

• During WWII, he worked with

US defense contractors,
deploying statistical methods

• Sent to Japan after WWII to

work on the census

• Japanese adopted many aspects of

Deming’s management
philosophy

• Deming stressed “continual

never-ending improvement”
7

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 DEMING’S 14 POINTS
1. Create constancy of purpose toward improvement of product
and service with the aim to become competitive, stay in
business and provide jobs.
2. Adopt a new philosophy, recognize that we are in a time of
change, a new economic age
3. Cease reliance on mass inspection to improve quality
4. End the practice of awarding business on the basis of price
alone. Instead minimize the total cost.
5. Improve constantly and forever the system of production and
service, to improve quality and productivity, and thus
constantly decrease cost.
6. Institute training on the job
7. Improve leadership, recognize that the aim of supervision is
help people and equipment to do a better job.

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 DEMING’S 14 POINTS
8. Drive out fear so that everyone can work effectively for the company
9. Break down barriers between departments – parallel processing in focused
teams instead of sequential or departmental approach.
10. Eliminate slogans, exhortations, and targets for the workforce that ask for
zero defects and new levels of productivity
11. Eliminate work standards on the factory floor.
12. Remove barriers that rob workers of their right to pride in the quality of their
work
13. Institute a vigorous program of education and self-improvement
14. Put everyone to work to accomplish the transformation

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 JOSEPH M JURAN

• Born in Romania (1904), Immigrated to the US

• Worked at Western Electric, influenced by

Walter Shewhart

• Emphasizes a more strategic and planning

oriented approach to quality than does Deming

• Juran Institute is still an active organization

promoting the Juran philosophy and quality
improvement practices

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 JOSEPH M JURAN
The Juran Trilogy
 Planning: Provide the operating forces with the means of
producing products that meet the customers needs.

 Control: Control vs. Breakthrough

 Improvement: Project by project improvement

Juran

Pareto’s Law or the 80/20 rule

The majority of quality problems are

the result of relatively few causes.
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 KAORU ISHIKAWA
• A pioneer in quality control activities in Japan.

• In 1943, he developed the “cause-and-effect diagram”.

• Publisher of
• What Is Total Quality Control?, The Japanese Way;
• Quality Control Circles at Work, and;
• Guide to Quality Control.

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 ARMAND V FEIGENBAUM
• Armand V Feigenbaum is an American
quality control expert and businessman.
• He devised the concept of “Total Quality
Control”, later known as “Total Quality
Management (TQM)”.
Three step process to improve quality
 Leadership
 Quality technology
 Organizational commitment

Major impediments to improving quality

 Hothouse quality
 Wishful thinking
 Producing overseas
 Confining quality to the factory

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 Crosby and Taguchi
Crosby
 Zero Defects approach
 Emphasizes the behavior and motivational aspects of quality
improvement
 Human resource approach

Taguchi
The Taguchi method provides
 A basis for determining the functional relationship between controllable product
or service design factors and the outcomes of a process.
 A method for adjusting the mean of a process by optimizing controllable variables.
 A procedure for examining the relationship between random noise in the process
and product or service variability.
Unique aspects of Taguchi method
 Definition of quality
 Quality loss function (QLF)
 Robust design
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 Quality Theory
Viewing Quality Theory from a Contingency Perspective

There is a mass of contradictory information… it is

best to focus on fundamental Questions:

• What are our strengths?

• What are our competencies?
• In what areas do we need to improve?
• What are our competitors doing to improve?
• What is our organizational structure?

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 Quality Theory
Resolving the Differences in Quality Approaches: An Integrated View
Core Variables
 Leadership  Role of Quality Department
 Information Analysis  Environmental
 Strategic Planning characteristics and
 Employee constraints
Improvement  Philosophy Driven
 Quality Assurance of  Quality Breakthrough
products and services  Project/team-based
 Customer role in improvement
Quality

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 Quality Theory
Resolving the Differences in Quality Approaches: An Integrated View

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 Quality Theory
Theoretical Framework for Quality Management

• Quality management begins with

leadership

• Leadership, quality assurance,

philosophy, and employees are
encompassed by a focus on the
customer

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