CHAPTER 8: QUALITY & OPERATION / PRODUCTION
MANAGEMENT
Quality - It refers to the perception of the degree to
which the product or service meets the customer's
expectations.
Total Quality Management (TQM) - Total quality
management (TQM) is a structured approach to overall
organizational management.
Total System Approach- The total systems approach is
referred to as a “holistic, integrated approach” whereby
all the business processes involving demand planning,
purchasing, production, transportation, warehousing,
and marketing are coordinated to make the best
tradeoffs within them so as to achieve the optimal
outcome for the whole system.
Why is QUALITY so important to us nowadays?
 Meet or Exceed Industry Standards
 Manage Costs Effectively
 Meet Customer Expectations
 Establish Your Company’s Reputation
Concepts of Effective Total Quality Management
 Continuous improvement of quality
 Focus on the customer
 Operations improvement
 TQM leadership
 Human resources
Determinants of Product Quality
1. Quality of Design- Intention of designers to include
or exclude features in a product or service
2. Quality of Conformance- The degree to which
goods or services conform to the intent of the
designers
3. Quality of Ease of Use- Ease of use and instructions
to use increase the chances but do not guarantee
that a product will be used for intended purpose
and function properly and safely
4. Quality of Service after Delivery- The degree to
which goods or services can be recalled and
repaired, adjustment, replacement or buyback or
reevaluation of service all come under this category
COST OF QUALITY
Cost of Good Quality
 Appraisal Costs
 Prevention Costs
Cost of Poor Quality
 Internal Failure Costs
 External Failure Costs
COST OF GOOD QUALITY
1. Prevention costs are incurred to prevent or avoid
quality problems. These costs are associated with
the design, implementation, and maintenance of
the quality management system. They are planned
and incurred before actual operation. It includes the
following:
 Product or service requirements: Establishment
of specifications for incoming materials,
processes, finished products, and services
 Quality planning: Creation of plans for quality,
reliability, operations, production, and
inspection
 Quality assurance: Creation and maintenance
of the quality system
 Training: Development, preparation, and
maintenance of programs
2. Appraisal costs are associated with measuring and
monitoring activities related to quality. These costs
are associated with the suppliers’ and customers’
evaluation of purchased materials, processes,
products, and services to ensure that they conform
to specifications. They could include:
 Verification: Checking of incoming material,
process setup, and products against agreed
specifications
 Quality audits: Confirmation that the quality
system is functioning correctly
 Supplier rating: Assessment and approval of
suppliers of products and services
COST OF POOR QUALITY
1. Internal failure costs are incurred to remedy
defects discovered before the product or service is
delivered to the customer. These costs occur when
the results of work fail to reach design quality
standards and are detected before they are
transferred to the customer. They could include:
 Waste: Performance of unnecessary work or
holding of stock as a result of errors, poor
organization, or communication.
 Scrap: Defective product or material that
cannot be repaired, used, or sold.
 Rework or rectification: Correction of defective
material or errors.
 Failure analysis: Activity required establishing
the causes of internal product or service failure
2. External failure costs are incurred to remedy
defects discovered by customers. These costs occur
when products or services that fail to reach design
quality standards are not detected until after
transfer to the customer. They could include:
  Repairs and servicing: Of both returned
products and those in the field
 Warranty claims: Failed products that are
replaced or services that are re-performed
under a guarantee
 Complaints: All work and costs associated with
handling and servicing customers’ complaints
 Returns: Handling and investigation of rejected
or recalled products, including transport costs

PROCESS CONTROL
 Definition
 Elements
 Importance

Process Control- is used in continuous production in

industry to automatically control and monitor the
conditions in which a product is made while maintaining
quality and improving performance.

ELEMENTS OF PROCESS CONTROL

1. Define. The first step is to define in sufficient detail
what is to be controlled.
2. Measure. Only those characteristics that can be
counted or measured are candidates for control. It
is important to consider how measurement will be
accomplished.
3. Compare. There must be a standard of comparison
that can be used to evaluate the measurements.
This will relate to the level of quality being sought.
4. Evaluate. Management must establish a definition
of out of control. The main task of quality control is
to distinguish random from nonrandom variability,
because nonrandom variability means that a
process is out of control.
5. Correct. When a process is judged to be out of
control, corrective action must be taken. This
involves uncovering the cause of nonrandom
variability and correcting it.
6. Monitor results. To ensure that corrective action is
effective, the output of a process must be
monitored for a sufficient period of time to verify
that the problem has been eliminated.

IMPORTANCE OF PROCESS CONTROL

 Process control enables automation.
 It is a common process.
 When used properly, process control ensures
safety.
 Process control is energy efficient.
 It is used across a variety of industries.