Chapter 7

Quality Management
OBJECTIVES

 Total Quality Management Defined

 Quality Specifications and Costs

 Six Sigma Quality and Tools

 External Benchmarking

 ISO 9000
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
TQM has two goals:
1. Careful design of the product or services
2. Ensuring that the organization’s systems can
consistently produce the design
To achieve outstanding quality requires quality
leadership from senior management, a
customer focus, total involvement of the
workforce, and continuous improvement
based upon rigorous analysis of processes
 Quality Specifications

 Design quality: Inherent value of the

product in the marketplace

– Dimensions include: Performance, Features,

Reliability/Durability, Serviceability,
Aesthetics, and Perceived Quality.

 Conformance quality: Degree to which

the product or service design
specifications are met
 Quality Specifications
Quality at the source means that the
person who does the work takes
responsibility for making sure that
his or her outputs meet
specifications
Both quality of design and quality of
conformance should provide
products that meet the customer’s
objectives for those products. This
is termed the product fitness for
use.
 Cost of Quality
There are three basic assumptions
which justify an analysis of the
costs of quality
1. Failures are caused

2. Prevention is cheaper, and

3. Performance can be measured

 Costs of Quality

Appraisal Costs
Inspection and testing

External Failure Costs of

Costs Quality Prevention Costs

Internal Failure
Costs
 8

Cost of Quality – 4
Categories

Early detection/prevention is less costly

(Maybe by a factor of 10)
8
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
 Six Sigma Quality
 Six Sigma is a highly disciplined process
that help us focus on developing near-
perfect products and services
 To produce Six Sigma Quality, a process
must produce no more than 3.4 defects
per million opportunities
 Six Sigma refers to the philosophy and
methods companies use to eliminate
defects in their products and processes.
 Six Sigma seek to reduce the variation in
the process that lead to the defects
 Six Sigma illustration
Companies with Six Sigma processes
insist that a process making a part
be capable of operating so that the
design specification limits are six
standard deviations away from the
process.
 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)

Number of defects
DPMO  x 1,000,000
 Number of 
 opportunities 
 for error per  x No. of units
 unit 
 
 Six Sigma Quality (Continued)
Example of Defects Per Million So, for every one
Opportunities (DPMO) calculation. million letters
delivered this
Suppose we observe 200 letters city’s postal
delivered incorrectly to the wrong managers can
addresses in a small city during a expect to have
single day when a total of 200,000 1,000 letters
letters were delivered. What is the incorrectly sent
to the wrong
DPMO in this situation? address.

200
DPMO  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 Quality: DMAIC Cycle
 Define, Measure, Analyze, Improve, and
Control (DMAIC)
 Developed by General Electric as a
means of focusing effort on quality
using a methodological approach
 Overall focus of the methodology is to
understand and achieve what the
customer wants
 A 6-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
(Continued)
1. Define (D) Customers and their priorities

2. Measure (M) Process and its performance

3. Analyze (A) Causes of defects

4. Improve (I) Remove causes of defects

5. Control (C) Maintain quality

Example to illustrate the
process…
 We are the maker of a cereal which
sell in boxes of 16 ounces each.
Consumer reports have just
published an article that shows
that we frequently have less than
16 ounces of cereal in a box.
 What should we do?
 Step 1 - 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.
 2 - Measure
 How would we measure to evaluate
the extent of the problem?
 What are acceptable limits on this
measure?
2 – Measure (continued)
 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
2. Measure (continued)

 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?
 Process
Lower Tolerance Mean = 15.875 Upper Tolerance
= 15.2 Std. Dev. = .529 = 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

NORMSDIST(Z) = NORMSDIST(-1.276) = .100978

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 – How good is
good enough?
Motorola’s “Six Sigma”
– 6s minimum from process center
to nearest spec
12s

6s

3 2 1 0 1 2 3
 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 analytical tools of Six Sigma have been
used for many years in traditional quality
improvement programs, and they include
1. Flow charts

2. Run charts

3. Pareto charts

4. Checksheets

5. Cause-and-effect diagrams

6. Opportunity flow diagrams

7. Control charts
 Analytical Tools for Six Sigma and
Continuous Improvement: Flow Chart
Material
No,
Received Continue…
Inspect
from
Material for Defects
Supplier
Defects found?

Yes

Can be used to
find quality Return to
problems Supplier
for Credit
 Analytical Tools for Six Sigma and
Continuous Improvement: Run Chart
Can be used to identify
when equipment or
processes are not
behaving according to
Diameter

specifications
0.58
0.56
0.54
0.52
0.5
0.48
0.46
0.44
1 2 3 4 5 6 7 8 9 10 11 12
Time (Hours)
 Analytical Tools for Six Sigma and Continuous
Improvement: Pareto Analysis

Can be used 80%

to find when
80% of the
problems Frequency
may be
attributed to
20% of the
causes

Design Assy. Purch. Training

Instruct.
 Analytical Tools for Six Sigma and
Continuous Improvement: Checksheet
Can be used to keep track of
defects or used to make sure
people collect data in a
Monday correct manner
Billing Errors

Wrong Account

Wrong Amount

A/R Errors

Wrong Account

Wrong Amount
 Analytical Tools for Six Sigma and
Continuous Improvement: Histogram
Can be used to identify the frequency of quality
Number of Lots

defect occurrence and display quality

performance

0 1 2 3 4 Defects
Data Ranges in lot
 Analytical Tools for Six Sigma and
Continuous Improvement: Cause &
Effect Diagram

Possible causes: The results

or effect
Machine Man

Environment Effect

Method Material

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
UCL
1010
1000
990
980
LCL

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
(FMEA) is a structured approach
to identify, estimate, prioritize, and
evaluate risk of possible failures
at each stage in the process
 Other Six Sigma Tools
 Design of Experiments (DOE) a statistical
test to determine cause-and-effect
relationships between process variables
and output
 In contrast to standard statistical tests,
which require changing each individual
variable to determine the most influential
one, DOE permits experimentation with
many variables simultaneously through
carefully selecting a subset of them
 Six Sigma Roles and
Responsibilities
1. Executive leaders must
champion the process of
improvement
2. Corporation-wide training in Six
Sigma concepts and tools
3. Setting objectives for
improvement
4. Continuous reinforcement and
rewards
 The 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

 Poka-Yoke includes:
– Checklists
– Special tooling that prevents workers from
making errors
– Gives rapid feedback of abnormalities in the
process to the worker in time to correct
 The Shingo System
The Shingo fail-safe system calls for:
1. Successive checks

2. Self-check

3. Source inspection
 ISO 9000

 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"
 ISO 9000
These standards ask a company to first document
and implement its system for quality management,
and then to verify, by means of an audit conducted
by an independent accredited third party the
compliance of those systems to the requirements
of the standards
These standards can be grouped into two:
1. Requirements standards – these mandatory
standards dictate what a company shall do, they
are:
ISO 9001 – model for quality assurance: design,
development, production, installation and servicing
ISO 9002 - model for quality assurance: production,
installation and servicing
 ISO 9000
ISO 9003 - model for quality assurance: final
inspection and testing
ISO 10012 – requirements for measuring equipment
2. Guidelines – these assist a company to interpret the
requirements standards suggesting what a
company should do
ISO 8402 – Quality management and quality
assurance
ISO 9000 – Guidelines for selection and use
ISO 9004 – Quality management and quality systems
elements
ISO 10011 – Guidelines for auditing quality systems
ISO 10013 – Guidelines for quality manuals
 Three Forms of ISO
Certification

1. First party: A firm audits itself against

ISO 9000 standards

2. Second party: A customer audits its

supplier

3. Third party: A "qualified" national or

international standards or certifying
agency serves as auditor
 ISO 9000 Certification
ISO 9001 is the most comprehensive
and much work and expense may be
needed to be accredited at the highest
level of ISO 9001.
Once passed by the third party audit, a
firm is certified and may be registered
and recorded as having achieved ISO
9000 status, and it becomes part of a
registry of certified companies.
External Benchmarking Steps
External benchmarking goes outside of a
firm to examine what industry competitors
and excellent performers outside of the
industry are doing
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
Statistical Quality Control (SQC)
SQC is a number of different techniques
designed to evaluate quality from a
conformance view.
Using SQC techniques usually involves
periodic sampling of a process and analysis
of these data using statistically derived
performance criteria
Variation that is caused by caused by factors
can be clearly identified and possibly even
managed is called assignable variation
Variation that is inherent in the process is
called common variation
 SQC cont.
Statistically the mean is

The standard deviation is

The purpose of sampling is to find when the

process has changed in some non-random way
so that the reason for the change can be quickly
determined
 Process Control Procedures
Process control is concerned with
monitoring quality while the product or
services is produced.
Statistical process control (SPC) involves
testing a random sample of outputs from
a process to determine whether the
process is producing items within a
preselected range
Attributes are quality characteristics that
are classified as either conforming or not
conforming to specifications
 SPC – P-Charts
Measurement by attributes means
taking samples and using a single
decision – the item is good or bad
We can use simple statistics to create
p-charts with UCL and LCL
We can draw these control limits on a
graph then plot the fraction
defective of each individual sample
tested.
 SPC – P-Charts
So

Z = 3 for 99.73% confidence

Z = 2.58 for 99% confidence
End of Chapter 8