Republic of the Philippines

BATANGAS STATE UNIVERSITY

COLLEGE OF ACCOUNTANCY BUSINESS ECONOMICS AND
INTERNATIONAL HOSPITALITY MANAGEMENT

GRADUATE STUDIES DEPARTMENT

CITE Building, Pablo Borbon Main 1, Rizal Avenue, Batangas City

WRITTEN REPORT

BA-506: OPERATIONS MANAGEMENT

Dr. MICHAEL C. GODOY

Associate Professor II

Topic: “QUALITY MANAGEMENT, INTERNATIONAL STANDARDS AND

STATISTICAL PROCESS CONTROL”

By:

Queenie Marie A. Castillo

19-56606

MBAN-1303
OBJECTIVES

This report aims to enlighten audience about quality which is a very broad topic to
discuss on. Quality seems as simple as people think about it but there are many things to consider
and to learn about it. First, this report aims to introduce the word quality to the audience, the
concepts, philosophies, people and issues behind it. Next is the advantages and disadvantages of
good and poor quality products and the certifications or standards that is being applied in quality
management. Another thing is for the audience to learn how firms effectively manage the quality
of the product and service they deliver. Lastly, this topic would rely some quality control process
that is being used by firms nowadays.

INTRODUCTION TO QUALITY

For a decade or so, quality was an important focal point in business. But after a while, the
emphasis on quality began to fade, and quality took a backseat to other concerns. However, there
has been an upsurge recently in the need for attention to quality. Much of this has been driven by
recent experience with costs and adverse publicity associated with wide-ranging recalls that have
included automobiles, ground meat, toys, produce, dog food, and pharmaceuticals.

We define quality as the ability of a product or service to consistently meet or exceed

customer expectations. It is the totality of features and characteristics of a product or services
that bears on its ability to satisfy stated or implied needs. Every customer has their own
perception of the word quality, some have high standards and others don’t care that much as long
as the product is working. It is a big challenge for the firm to meet those standards set by
different customers and maintaining the image they want to portray for their products.

As we go on the discussion, the audience will be enlightened about the benefits of proper
management of quality among products and services and this would be a big help for them to
know if the product/service they acquire is really worth it or not.

THE EVOLUTION OF QUALITY MANAGEMENT

It is important to tackle how management of quality have evolve since it serves us

principles on how to effectively administer the quality of products/services today.

There are people who is responsible for upbringing morals of quality management like
Frederick Winslow Taylor (“Father of Scientific Management”) who gave new emphasis to
quality by including product inspection and gauging in his list of fundamental areas of
manufacturing management. His contribution involves quality considerations early in the product
design stage and making connections among high quality, increased productivity, and lower
costs.

In the 1940s, quality became more statistical in nature. Statistical sampling techniques
were used to evaluate quality, and quality control charts were used to monitor the production

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process. In the 1960s, the concept took on a broader meaning. Quality began to be viewed as
something that encompassed the entire organization, not only the production process. The
meaning of quality for businesses changed dramatically in the late 1970s. Before then quality
was still viewed as something that needed to be inspected and corrected. However, in the 1970s
and 1980s, many U.S. industries lost market share to foreign competition. In the auto industry,
manufacturers such as Toyota and Honda became major players. In the consumer goods market,
companies such as Toshiba and Sony led the way. These foreign competitors were producing
lower-priced products with considerably higher quality.

Today, businesses understand that in order to give satisfaction to their customers they
must conform to the quality of products and services they offer. Quality and profits are more
closely linked. This approach also places greater emphasis on customer satisfaction, and it
involves all levels of management as well as workers in a continuing effort to increase quality.

QUALITY GURUS

Quality gurus shaped the thinking about quality today, the following are some of them
and their major contributions:

 Walter Shewhart – pioneer in the field of quality control, and he became known as the
“father of statistical quality control.” He developed control charts for analyzing the
output of processes to determine when corrective action was necessary.
 W. Edwards Deming – compiled a famous list of 14 points he believed were the
prescription needed to achieve quality in an organization. His message was that the cause
of inefficiency and poor quality is the system, not the employees.
 Joseph M. Juran – his concepts basically involves: quality planning is necessary to
establish processes that are capable of meeting quality standards; quality control is
necessary in order to know when corrective action is needed; and quality improvement
will help to find better ways of doing things. A key element of his philosophy is the
commitment of management to continual improvement.
 Armand Feigenbaum – he introduces the “cost of nonconformance” approach as a
reason for management to commit to quality. He recognized that quality was not simply a
collection of tools and techniques, but a “total field.”
 Philip B. Crosby – Crosby developed the concept of zero defects and popularized the
phrase “Do it right the first time.” He stressed prevention, and he argued against the idea
that “there will always be some level of defectives.”
 Kauru Ishikawa – Among his key contributions were the development of the cause-and-
effect diagram for problem solving and the implementation of quality circles, which
involve workers in quality improvement.
 Genichi Taguchi – best known for the Taguchi loss function, which involves a formula
for determining the cost of poor quality. An important part of his philosophy is the cost to
society of poor quality.

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 Those quality gurus created a big impact on how businesses run today, because of them we
are able to give attention to the importance of incorporating quality management on products and
services.
THE DIMENSIONS OF QUALITY

One way to think about quality is the degree to which performance of a product or service
meets or exceeds customer expectations. The difference between these two, that is Performance
— Expectations, is of great interest. If these two measures are equal, the difference is zero, and
expectations have been met. If the difference is negative, expectations have not been met,
whereas if the difference is positive, performance has exceeded customer expectations.

Customer expectations can be broken down into a number of categories, or dimensions,

that customers use to judge the quality of a product or service. Understanding these helps
organizations in their efforts to meet or exceed customer expectations. The dimensions used for
goods are somewhat different from those used for services.

What we need to know is there are different dimensions of quality between a products
and services. It is really tough to be able to foresee what customers want for the products or
services you offer. It’s different for every customer, it is significant move for the business to look
or to pay attention to what their customers are looking for and being able to meet those. Another
essential tip is to be mindful about the feedbacks of customer so you can improve the quality of
product or service you offer.

It should also be noted that in most instances, some quality dimensions of a product or
service will be more important than others, so it is important to identify customer priorities,
especially when it is likely that trade-off decisions will be made at various points in design and
production.

THE DETERMINANTS OF QUALITY

How can we say if a product or a service successfully satisfies its intended purpose? The
following are the determinants of quality:

1. Quality of design – this refers to the intention of designers to include or exclude

certain features in a product or service. Though customers have various stands about a
design for a product, so the firm must make adjustments according to what the target
market wants. Design decisions must take into account customer wants, production or
service capabilities, safety and liability (both during production and after delivery), costs,
and other similar considerations.
2. Quality of conformance – this is affected by factors such as the capability of
equipment used; the skills, training, and motivation of workers; the extent to which the
design lends itself to production; the monitoring process to assess conformance; and the
taking of corrective action when necessary.
3. Ease of use – the determination of quality does not stop once the product or service
has been sold or delivered. Customers nowadays looks for convenience and safety while

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 purchasing products. The management must be careful on putting labels, warnings and
instructions on their packaging in order for the customers to easily use the products.
4. Service after delivery – for a variety of reasons, products do not always perform as
expected, and services do not always yield the desired results. Whatever the reason, it is
important from a quality standpoint to remedy the situation—through recall and repair of
the product, adjustment, replacement or buyback, or reevaluation of a service—and do
whatever is necessary to bring the product or service up to standard.

BENEFITS OF GOOD QUALITY

It is a great advantage for the firm if their product or service have good quality, among
them are enhanced reputation to the public, being able to command for premium prices, increase
in market share, greater customer loyalty, lower liability cost, lower production cost, and of
course, the most important part is being able to gain higher profits.

CONSEQUENCES OF POOR QUALITY

If your product/service have good quality it gave your company a lot of benefits but you
should also be mindful about the consequences if the quality of your product is not good. The
following are some consequences of poor quality:

1. Loss of business. Poor designs or defective products or services can result in loss of
business. Failure to devote adequate attention to quality can damage a profit-oriented
organization’s reputation and lead to a decreased share of the market, or it can lead to
increased criticism and/or controls for a government agency or nonprofit organization.
Dissatisfied customers do tend to voice their dissatisfaction to friends and relatives,
which can have negative implications for customer perceptions and future business.
2. Liability due to damages. Damages or injuries resulting from either faulty design or
poor workmanship often lead to a liability of the firm. This applies to both products and
services. Example: A poorly designed steering arm on a car might cause the driver to lose
control of the car, but so could improper assembly of the steering arm.
3. Productivity. Poor quality can adversely affect productivity during the manufacturing
process if parts are defective and have to be reworked or if an assembler has to try a
number of parts before finding one that fits properly. Also, poor quality in tools and
equipment can lead to injuries and defective output, which must be reworked or scrapped,
thereby reducing the amount of usable output for a given amount of input. Similarly, poor
service can mean having to redo the service and reduce service productivity.
4. Cost of quality. Poorly done products comes with a big cost especially when you have to
rework or repeat the process. The earlier a problem is identified in the process, the
cheaper the cost to fix it. This is the cost incurred in achieving a quality product or
services. These may be prevention cost, appraisal cost, internal failure cost, external
failure cost, the cost of exceeding customer's requirement and the cost of lost
opportunities.

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ETHICS AND QUALITY MANAGEMENT

Ethics is important in quality management for the reason that your company’s reputation
is what at stake. All members of an organization have an obligation to perform their duties in an
ethical manner. Ethical behavior comes into play in many situations that involve quality. If a
business acts unethically, it may create a big impact on their reputation. The management should
act in accordance with some ethical principles such as the virtue principle, common good
principle, utilitarian principle etc. in order to have a good business standing.

QUALITY AWARDS

In recognition for the effort of some firms to properly manage the quality of their
products and services, here are some awards that they can get, these awards are establish not only
to reward companies for their good work but also to be able to help firms on how they should
manage quality.

1. Baldridge Award.
This award focuses on customer satisfaction or “customer-driven quality,” it views
quality as defined by customers. This award promotes competitiveness through total
quality management which is usually categorize into seven main areas:
 Leadership
 Information and Analysis
 Strategic Planning
 Human Resource Management
 Customer and Market focus
 Process Management
 Business Results
2. European Quality Award
It focuses on organizational excellence. This sits at the top of regional and national
quality awards.
3. Deming Prize
This award promotes quality through statistical techniques and it focuses on
“conformance to specifications,” it views quality as defined by producers and this is often
concern in productivity, delivery, safety and environment.

INTERNATIONAL ORGANIZATION FOR STANDARDIZATION (ISO)

The International Organization for Standardization (ISO) promotes worldwide standards

for the improvement of quality, productivity, and operating efficiency through a series of
standards and guidelines. Used by industrial and business organizations, regulatory agencies,
governments, and trade organizations, the standards have important economic and social

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benefits. Not only are they tremendously important for designers, manufacturers, suppliers,
service providers, and customers, but the standards make a tremendous contribution to society in
general.

Both ISO 9000 and ISO 14000 relate to an organization’s processes rather than its
products and services, and both stress continual improvement. Moreover, the standards are meant
to be generic; no matter what the organization’s business, if it wants to establish a quality
management system or an environmental management system, the system must have the
essential elements contained in ISO 9000 or in ISO 14000.

Being ISO certified makes an organization looks credible since the standards established
by ISO are widely recognized. This creates a big impact on customers if they learn that a
business was complying with all sorts of Quality Management Fundamentals founded by ISO.
The standardization set by ISO Increase the levels of quality and reliability, productivity, and
safety, while making products and services affordable, help facilitate international trade, provide
governments with a basis for health, safety, and environmental legislation and aid in transferring
technology to developing countries.

QUALITY AND SUPPLY CHAIN

Supply chain quality management can benefit from a collaborative relationship with
suppliers that includes helping suppliers with quality assurance efforts as well as information
sharing on quality-related matters. Ideally, improving supply chain quality can become part of an
organization’s continuous improvement efforts. It is important that quality is observe in all
members of the supply chain most especially from the first in line which are the suppliers of raw
materials. Acquiring raw materials with good quality minimizes the risk of a defective product so
companies must ensure that they get the right quality from the start.

TOTAL QUALITY MANAGEMENT

Total Quality Management (TQM) is an organizational process that actively involves

every function and every employee in satisfying customer needs, both internal and external.
TQM works by continuously improving all aspect of work through structured control,
improvement and planning activities that are carried out in concern with guiding ideology that
focuses on Quality and Customer Satisfaction as the top priorities. This incorporates different
concepts like continuous improvement, competitive benchmarking, quality at source, team
approach, and employee empowerment.

PLAN DO STUDY ACT CYCLE

The plan-do-study-act (PDSA) cycle, also referred to as either the Shewhart cycle or the
Deming wheel, is the conceptual basis for problem-solving activities. There are four basic steps
in this cycle:

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 1. Plan. Begin by studying the current process. Document that process. Then collect data on
the process or problem. Next, analyze the data and develop a plan for improvement.
Specify measures for evaluating the plan.
2. Do. Implement the plan, on a small scale if possible. Document any changes made during
this phase. Collect data systematically for evaluation.
3. Study. Evaluate the data collection during the do phase. Check how closely the results
match the original goals of the plan phase.
4. Act. If the results are successful, standardize the new method and communicate the new
method to all people associated with the process. Implement training for the new method.
If the results are unsuccessful, revise the plan and repeat the process or cease this project.

Basically, problem solving starts into recognizing, defining, analyzing and determining
the possible causes of a problem in which is like the planning phase in the PDSA Cycle. After
that you do implement solutions and then study if you successfully apply the solution you made.
Lastly you will always find room for improvement for the process so you have to act and search
for ways to further develop a process in order to avoid the same mistake you made from the
previous one.

THE SIX SIGMA

Conceptually, Six Sigma is defined as a business process for improving quality, reducing
costs, and increasing customer satisfaction. Statistically, Six Sigma means having no more than
3.4 defects per million opportunities in any process, product, or service.

The appropriate application of Six Sigma methodology gives many benefit to a business.
One thing is it will improve customer satisfaction, a business will implement upgraded processes
and improved quality control with Six Sigma methodologies. This results in an improved
finished product. That, leads to higher customer satisfaction. Next one is acquiring customer
loyalty, happy customers are loyal customers to a brand and they come back to make future
purchases. To achieve a loyal customer, the product should remain consistent in its quality. Six
sigma could also reduce cycle time of production since it is incorporating advance technology on
the process. Lastly, you could have employee satisfaction, one of the benefits of Six Sigma is
how it can direct employees to a common cause. Six Sigma offers leaders a chance to clarify and
rationalize the message. Also, improved results can create a sense of companionship. It leads to
better results.

QUALITY TOOLS

There are a number of tools that an organization can use for problem solving and process
improvement. The tools aid in data collection and interpretation, and provide the basis for
decision making. The following are some of the tools usually use by organizations:

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 1. Flowcharts. A flowchart is a visual representation of a process. As a problem-solving
tool, a flowchart can help investigators in identifying possible points in a process
where problems occur.
2. Check sheets. A check sheet is a simple tool frequently used for problem
identification. Check sheets provide a format that enables users to record and
organize data in a way that facilitates collection and analysis.
3. Histograms. A histogram can be useful in getting a sense of the distribution of
observed values. Among other things, one can see if the distribution is symmetrical,
what the range of values is, and if there are any unusual values.
4. Pareto charts. This charts are use for classifying problem areas according to degree
of importance, and focusing on the most important.
5. Scatter Diagrams. A scatter diagram can be useful in deciding if there is a
correlation between the values of two variables. A correlation may point to a cause of
a problem.
6. Control Charts. A control chart can be used to monitor a process to see if the
process output is random. It can help detect the presence of correctable causes of
variation.
7. Cause-and-Effect Diagrams. A cause-and-effect diagram offers a structured
approach to the search for the possible cause(s) of a problem.
8. Run Charts. A run chart can be used to track the values of a variable over time. This
can aid in identifying trends or other patterns that may be occurring.

To sum up, this tools can help employees identify the common problems which are
occurring repeatedly and also their root causes. This tools would provide convenience for the
firms to easily solve whatever problems they might encounter in the process.

QUALITY CONTROL

This figure would help to conceptualize what is quality control all about.

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 First, we should define quality control. Quality control (QC) is a process through which
a business seeks to ensure that product quality is maintained or improved. A major aspect of
quality control is the establishment of well-defined controls. These controls help standardize
both production and reactions to quality issues. This basically involves appraisal of the whole
process and prevention of upcoming conflicts in the process.
Inspection is the main concern in the appraisal of the whole process. It is an activity that
compares goods or services to a standard. Inspection is a vital but often unappreciated aspect of
quality control. Although for well-designed processes little inspection is necessary, inspection
cannot be completely eliminated. Inspection can be used as part of an effort to improve process
yield. One measure of process yield is the ratio of output of good product to the total output.
Inspection at key points can help guide process improvement efforts to reduce the scrap rate and
improve the overall process yield, and reduce or eliminate the need for inspection.
Another aspect of quality control is prevention. It is important to prevent errors before it
became a big problem that is hard to solve. Statistical Process Control (SPC) is one way of
preventive actions of a firm. SPC is used to evaluate process output to decide if a process is “in
control” or if corrective action is needed.

STATISTICAL PROCESS CONTROL

Taking advantage of statistical process control in a business makes it much easier to
monitor product quality in real time and spot variations before you have large production
problems that are costly to fix. Seeing improvements in the productivity of your business's
manufacturing processes is one of the key benefits of statistical process control. Control chart
and run tests are important tools used in SPC.

Control Charts
This is a time-ordered plot of sample statistics. It is used to distinguish between random
variability and nonrandom variability. It has upper and lower limits, called control limits, that
define the range of acceptable (i.e., random) variation for the sample statistic. It provides a
picture of the process variable over time and tells you the type of variation you are dealing with
as you move forward with continuous improvement. There are four commonly used control

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charts. Two are used for variables (data measured), and two are used for attributes (data
counted).
Control Chart for Variables:
 Mean (X-bar) chart is used to monitor the central tendency of a process. This chart
use averages to determine at what points does a process is performing well and to see
where the process is out of control.
 Range control charts (R-charts) are used to monitor process dispersion; they are
sensitive to changes in process dispersion. It enables users to see the pattern of
distribution within the process.
Control Chart for Attributes:
 P-chart is used to monitor the proportion of defective items generated by process.
It is used when observations are placed in either of two groups. It is appropriate
when both the number of defectives measured and the size of the total sample can
be counted. A proportion can then be computed and used as the statistic of
measurement.
 C-charts count the actual number of defects. Users can easily identify the number
of defects per unit using this chart.

Run Tests
Analysts often supplement control charts with a run test, which checks for patterns in a
sequence of observations. It is useful in process control in distinguishing chance variability from
patterns of runs. You can see if there’s a nonrandom pattern in the process. This enables
production manager to do a better job of detecting abnormalities in a process and provides
insights into correcting a process that is out of control.

SUMMARY
Quality is essential for satisfying your customers and gaining their loyalty so they
continue to patronize your products. Quality products and services contributes to long-term
revenue and profitability. This also enable you to allot and maintain higher prices.
Clearly defined standards and requirements make it easier for companies to meet
perceived “quality” by consumers and they improve the overall vision of what the company
should do in the future. This is where quality management systems come into play.
In addition, quality control forms the basis of an efficient business that minimizes waste
and operates at high levels of productivity. Some benefits of proper control of quality are:
strengthened competitive position, adaptability to changing or emerging market and other
government regulations, higher productivity, enhanced market image, elimination of defects and

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waste, reduced costs and better cost management, higher profitability, improved customer focus,
and customer and employee satisfaction.
It is important to know different aspects about quality management in order for the firm
to meet customer expectations and demands. Since customer’s definition of quality is broad,
firms should continue to improve their process in order to catch up with the standards set by their
customers. By doing so, they can successfully manage to gain more customers and at the same
time build good reputation. Effective management of quality will create a big impact on the
production process of a business since it will reduce cost and increase productivity.

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