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Lecture Outline

• Meaning of Quality
Quality Management • Total Quality Management
• Quality Improvement and Role of
Employees
• Strategic Implications of TQM
• Six Sigma

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Lecture Outline (cont.) Meaning of Quality

• TQM in Service Companies § Webster’s Dictionary

• Cost of Quality § degree of excellence of a thing
• Quality Management and Productivity § American Society for Quality
§ totality of features and characteristics
• Identifying Quality Problems and that satisfy needs
Causes § Consumer’s and Producer’s
• Quality Awards and Setting Quality Perspective
Standards
• ISO 9000 3-3 3-4

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Meaning of Quality: Dimensions of Quality:

Consumer’s Perspective Manufactured Products

§ Fitness for use § Performance

§ how well product or § basic operating characteristics of a product; how
service does what it is well a car is handled or its gas mileage
supposed to § Features
§ Quality of design § “extra” items added to basic features, such as a
§ designing quality stereo CD or a leather interior in a car
characteristics into a § Reliability
product or service § probability that a product will operate properly
§ A Mercedes and a Ford are within an expected time frame; that is, a TV will
equally “fit for use,” but with work without repair for about seven years
different design dimensions

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Dimensions of Quality: Dimensions of Quality:

Manufactured Products (cont.) Manufactured Products (cont.)

§ Aesthetics
§ Conformance
§ how a product looks, feels, sounds,
§ degree to which a product meets pre–established smells, or tastes
standards
§ Safety
§ Durability
§ assurance that customer will not suffer
§ how long product lasts before replacement injury or harm from a product; an
§ Serviceability especially important consideration for
§ ease of getting repairs, speed of repairs, courtesy automobiles
and competence of repair person § Perceptions
§ subjective perceptions based on brand
name, advertising, and the like

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Dimensions of Quality: Dimensions of Quality:

Service Service (cont.)

§ Time and Timeliness § Courtesy:

§ How long must a customer wait for service, § How are customers treated by employees?
and is it completed on time? § Are catalogue phone operators nice and are
§ Is an overnight package delivered overnight? their voices pleasant?
§ Consistency
§ Completeness:
§ Is the same level of service provided to each
§ Is everything customer asked for provided? customer each time?
§ Is a mail order from a catalogue company § Is your newspaper delivered on time every
complete when delivered? morning?

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Dimensions of Quality: Meaning of Quality:

Service (cont.) Producer’s Perspective

§ Accessibility and convenience § Quality of Conformance

§ How easy is it to obtain service?
§ Does a service representative answer you calls quickly?
§ Accuracy
§ Is the service performed right every time?
§ Is your bank or credit card statement correct every month?
§ Responsiveness
§ How well does the company react to unusual situations?
§ How well is a telephone operator able to respond to a customer’s
questions?
§ Making sure a product or service is
produced according to design
§ if new tires do not conform to specifications, they
wobble
§ if a hotel room is not clean when a guest checks
in, the hotel is not functioning according to
specifications of its design

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Meaning of Quality:
Meaning of Quality
A Final Perspective

Meaning of Quality

§ Consumer’s and producer’s

perspectives depend on each other
Producer’s Perspective Consumer’s Perspective

§ Consumer’s perspective: PRICE

Quality of Conformance Quality of Design
§ Producer’s perspective: COST
Production • Conformance to Marketing
§ Consumer’s view must dominate specifications
• Cost
• Quality characteristics
• Price

Fitness for
Consumer Use
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Total Quality Management Quality Gurus

• Walter Shewart
• Commitment to quality throughout organization – In 1920s, developed control charts
– Introduced the term “quality assurance”
• Principles of TQM • W. Edwards Deming
– Customer-oriented – Developed courses during World War II to teach
– Leadership statistical quality-control techniques to engineers and
executives of companies that were military suppliers
– Strategic planning
– After the war, began teaching statistical quality control
– Employee responsibility to Japanese companies
– Continuous improvement • Joseph M. Juran
– Cooperation – Followed Deming to Japan in 1954
– Statistical methods – Focused on strategic quality planning
– Training and education
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Quality Gurus (cont.) Deming’s 14 Points

§ Armand V. Feigenbaum 1. Create constancy of purpose

§ In 1951, introduced concepts of total quality control
and continuous quality improvement 2. Adopt philosophy of prevention
§ Philip Crosby 3. Cease mass inspection
§ In 1979, emphasized that costs of poor quality far
outweigh the cost of preventing poor quality
§ In 1984, defined absolutes of quality management— 4. Select a few suppliers based on
conformance to requirements, prevention, and “zero quality
defects”
§ Kaoru Ishikawa 5. Constantly improve system and
§ Promoted use of quality circles
§ Developed “fishbone” diagram workers
§ Emphasized importance of internal customer
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Deming’s 14 Points (cont.) Deming’s 14 Points (cont.)

6. Institute worker training 11. Remove numerical quotas

7. Instill leadership among 12. Enhance worker pride
supervisors 13. Institute vigorous training and
8. Eliminate fear among employees education programs
9. Eliminate barriers between 14. Develop a commitment from top
departments management to implement
10. Eliminate slogans above 13 points
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Deming Wheel: PDCA Cycle TQM and…

• … Partnering
1. Plan
– a relationship between a company and
4. Act
Institutionalize Identify its supplier based on mutual quality
improvement;
continue
problem and
develop plan
standards
cycle. for
improvement. • … Customers
– system must measure customer
satisfaction
3. Study/Check
Assess plan; is it
2. Do
Implement • … Information Technology
working? plan on a test
basis. – infrastructure of hardware, networks,
and software necessary to support a
quality program

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Quality Improvement
Quality Circle
and Role of Employees

Organization
• Participative 8-10 members
Same area
problem solving Supervisor/moderator

Training
– employees involved in Presentation Group processes
Implementation
quality management Monitoring
Data collection
Problem analysis
– every employee has
undergone extensive
training to provide quality Problem
Solution Identification
service to Disney’s guests Problem results List alternatives
Consensus
Problem Brainstorming
Analysis
Cause and effect
Data collection
and analysis

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Strategic Implications of TQM Six Sigma

• A process for developing and delivering

• Strong leadership near perfect products and services
• Goals, vision, or mission • Measure of how much a process
deviates from perfection
• Operational plans and policies
• 3.4 defects per million opportunities
• Mechanism for feedback • Champion
– an executive responsible for project success

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Black Belts and Green Belts Six Sigma: DMAIC

DEFINE MEASURE ANALYZE IMPROVE CONTROL

• Black Belt
– project leader
• Master Black Belt
– a teacher and mentor
for Black Belts
• Green Belts
– project team
members 67,000 DPMO
cost = 25% of
sales 3.4 DPMO
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TQM in Service Companies Quality Attributes in Service

• Principles of TQM apply equally well to

services and manufacturing • Benchmark
– “best” level of quality
• Services and manufacturing companies
achievement one
have similar inputs but different processes
company or
and outputs companies seek to
• Services tend to be labor intensive achieve
• Service defects are not always easy to • Timeliness
measure because service output is not – how quickly a service
usually a tangible item is provided “quickest, friendliest,
most accurate service
available.”
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Cost of Quality Prevention Costs

• Cost of Achieving Good Quality • Quality planning costs • Training costs

– Prevention costs – costs of developing and – costs of developing and
• costs incurred during product design implementing quality putting on quality training
management program programs for employees
– Appraisal costs • Product-design costs and management
• costs of measuring, testing, and analyzing
– costs of designing products • Information costs
• Cost of Poor Quality with quality characteristics
– costs of acquiring and
– Internal failure costs • Process costs maintaining data related to
• include scrap, rework, process failure, downtime, – costs expended to make quality, and development of
and price reductions sure productive process reports on quality
– External failure costs conforms to quality performance
specifications
• include complaints, returns, warranty claims,
liability, and lost sales
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Appraisal Costs Internal Failure Costs

• Inspection and testing • Scrap costs • Process downtime costs

– costs of testing and inspecting materials, parts, and – costs of poor-quality – costs of shutting down
product at various stages and at the end of a products that must be productive process to fix
process discarded, including labor,
material, and indirect costs problem
• Test equipment costs • Rework costs • Price-downgrading costs
– costs of maintaining equipment used in testing – costs of fixing defective
quality characteristics of products – costs of discounting poor-
products to conform to quality products—that is,
• Operator costs quality specifications
selling products as
– costs of time spent by operators to gar data for • Process failure costs
testing product quality, to make equipment “seconds”
– costs of determining why
adjustments to maintain quality, and to stop work to production process is
assess quality producing poor-quality
products
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External Failure Costs Measuring and Reporting Quality Costs

• Customer complaint costs • Product liability costs • Index numbers

– costs of investigating and – litigation costs – ratios that measure quality costs against a
satisfactorily responding to a resulting from product base value
customer complaint resulting liability and customer
from a poor-quality product injury
– labor index
• Product return costs • ratio of quality cost to labor hours
• Lost sales costs – cost index
– costs of handling and replacing
poor-quality products returned – costs incurred • ratio of quality cost to manufacturing cost
by customer because customers
are dissatisfied with – sales index
• Warranty claims costs poor quality products • ratio of quality cost to sales
– costs of complying with and do not make – production index
product warranties additional purchases • ratio of quality cost to units of final product

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Quality–Cost Relationship Seven Quality Control Tools

• Pareto Analysis • Scatter Diagram

• Flow Chart • SPC Chart
• Check Sheet • Cause-and-Effect
• Histogram Diagram

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Pareto Analysis Pareto Chart

70 (64)

Percent from each cause

NUMBER OF 60
CAUSE DEFECTS PERCENTAGE
50
Poor design 80 64 % 40
Wrong part dimensions 16 13
Defective parts 12 10 30
Incorrect machine calibration 7 6 20
Operator errors 4 3 (13)
(10)
10 (6)
Defective material 3 2 (3) (2) (2)
Surface abrasions 3 2 0

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Causes of poor quality
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Flow Chart Check Sheet

COMPONENTS REPLACED BY LAB

Start/ TIME PERIOD: 22 Feb to 27 Feb 2002
Operation Operation Decision Operation
Finish
REPAIR TECHNICIAN: Bob

TV SET MODEL 1013

Operation Operation Integrated Circuits ||||
Capacitors |||| |||| |||| |||| |||| ||
Resistors ||
Transformers ||||
Commands
Decision Start/
Finish CRT |

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Histogram Scatter Diagram

Y
20

15

10

0
1 2 6 13 10 16 19 17 12 16 2017 13 5 6 2 1 X
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Control Chart Cause-and-Effect Diagram

24 Measurement Human Machines

UCL = 23.35 Faulty
21 testing equipment Poor supervision Out of adjustment

Number of defects 18 c = 12.67 Incorrect specifications Lack of concentration Tooling problems

Improper methods Inadequate training Old / worn

15
Quality
12 Inaccurate Problem
temperature
9 control Defective from vendor Poor process design
Ineffective quality
Not to specifications management
6 Dust and Dirt Material- Deficiencies
3 LCL = 1.99 handling problems in product design

2 4 6 8 10 12 14 16
Environment Materials Process
Sample number
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Baldrige Award Other Awards for Quality

• Created in 1987 to stimulate growth of • National individual • International awards

quality management in the United States awards – European Quality Award
• Categories – Armand V. Feigenbaum – Canadian Quality Award
– Leadership Medal – Australian Business
– Information and analysis – Deming Medal Excellence Award
– Strategic planning – E. Jack Lancaster Medal – Deming Prize from Japan
– Human resource – Edwards Medal
– Focus – Shewart Medal
– Process management – Ishikawa Medal
– Business results
– Customer and market focus
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American Customer Satisfaction Index

ISO 9000
(ACSI)

• A set of procedures and • ISO 9001:2000

• Measures customer satisfaction policies for international
quality certification of
• Established in 1994 suppliers
• Web site: www.acsi.org • Standards
– ISO 9000:2000
– Examples (in 2003)
• Quality Management
Systems—Fundamentals
• Amazon.com scored 88 (highest in service) and Vocabulary
• Dell scored of 78 (highest in computer industry) • defines fundamental
terms and definitions
• Cadillac scored 87 (highest in car industry) used in ISO 9000 family
– Quality Management
Systems—Requirements
– standard to assess ability to
achieve customer satisfaction
• ISO 9004:2000
– Quality Management
Systems—Guidelines for
Performance Improvements
– guidance to a company for
continual improvement of its
quality-management system

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Implications of ISO 9000

for U.S. Companies

• Many overseas companies

will not do business with a
supplier unless it has ISO
9000 certification
• ISO 9000 accreditation
• ISO registrars
• A total commitment to quality
is required throughout an
organization

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