LESSON 8: Measuring and Controlling Quality

o Measurement for Quality Control

 Measurement is the act of collecting data to quantify the values of product, service,
process, and other business metrics.
 Measures and indicators refer to the numerical results obtained from measurement.
 The term indicator is often used for measurements that are not a direct or
exclusive measure of performance.
 Many organizations use the acronym SMART to characterize a good measurement:
simple, measurable, actionable, related (to customer and operational requirements), and
timely.
 Measurements should be easy and cost – effective to obtain. A measurement should be
clear and unambiguous. They should be taken at critical points in a process where value –
adding activities occur.
 Measures should clearly relate to what is important to customers – both external and
internal – for running the business.
 Measurements need to be made available and communicated to workers and managers
when they need them.
 Many organizations use dashboards which typically consist of a small set of measures
(five or six) that provide a quick summary of process performance.

o Common Quality Measurements

 Product and service quality measures focus on the outcomes of manufacturing and
service processes.
 A unit of work is the output of a process or an individual process step.
 A unit of work might be a completed product ready to ship to a customer, a
subassembly, an individual part produced on a machine, or a package to be
delivered to a customer.
 A nonconformance is any defect or error associated with a unit of work.
 In manufacturing we often use the term defect, and in service applications, we
generally use the term error to describe nonconformance.
 A nonconforming unit of work is one that has one or more defects or errors.
 Measures used in quality control fall into one of two categories.
1. Attribute measurement – characterizes the presence or absence of nonconformance in
a unit of work, or the number of nonconformances in a unit of work.
 Attribute measurements often are collected by visual inspection and expressed
as proportions and counts.
2. Variable measurement – apply to dimensional quantities such as length, weight, and
time, or any value on a part.
  Variable measurements are generally with statistical measures such as
averages and standard deviations.

Quality Measurements in Service Organizations

Organization Quality Measure

Hospital  Lab test accuracy
 Insurance claim accuracy
 On – time delivery of means and medication
Bank  Check – processing accuracy
Insurance company  Claims – processing response time
 Billing accuracy
Post office  Sorting accuracy
 Time of delivery
 Percentage of express mail delivered on time
Ambulance  Response time
Police department  Incidence of crime in a precinct
 Number of traffic citations
Hotel  Proportion of rooms satisfactorily cleaned
 Checkout time
 Number of complaints received
Transportation  Proportion of freight cars correctly routed
 Dollar amount of damage per claim
Auto service  Percentage of time work completed as promised
 Number of parts out of stock

o Cost of Quality Measures

 The concept of cost of quality (COQ) emerged in the 1950s.
 Traditionally, the reporting of quality – related costs had been limited to
inspection and testing; other costs were accumulated in overhead accounts.
 Juran noted that workers and supervisors speak in the “language of things” – units,
defects and so on.
 Unfortunately, quality problems expressed as the number of defects typically
have little impact on top managers who are generally more concerned with
financial performance.
 Quality cost information serves a variety of other purposes too.
 It helps management evaluate the relative importance of quality problems and
thus identify major opportunities for cost reduction.
 It can aid in budgeting and cost control activities.
 It can serve as a scoreboard to evaluate the organization’s success in achieving
quality objectives.
  To establish a cost of quality approach, one must identify the activities that generate cost,
measure them, report them in a way that is meaningful to managers, and analyze them to
identify areas of improvement.
 Quality costs can be organized into four major categories:
1. Prevention costs – are investments made to keep nonconforming products occurring
and reaching the customer, including the following specific costs:
a. Quality planning costs – such as salaries of individuals associated with quality
planning and problem – solving teams, the development of new procedures, new
equipment design and reliability studies.
b. Process control costs – which includes costs spent on analyzing production
processes and implementing process control plans.
c. Information systems costs – expended to develop data requirements and
measurements.
d. Training and general management costs – including internal and external training
programs, clerical staff expenses, and miscellaneous supplies.
2. Appraisal costs – are those associated with efforts to ensure conformance to
requirements, generally through measurement and analysis of data to detect
conformances. Categories of appraisal costs include the following:
a. Test and inspection costs – associated with incoming materials, work – in -
process and finished goods, including equipment costs and salaries.
b. Instrument maintenance costs – due to calibration and repair of measuring
instruments.
c. Process measurement and control costs – which involve the time spent by
workers to gather and analyze quality measurements.
3. Internal failure costs – are incurred as a result of unsatisfactory quality before the
delivery of a product to the customer; some examples include the following:
a. Scrap and rework costs – including material, labor and overhead.
b. Costs of corrective action – arising from time spent determining the causes of
failure and correcting production problems.
c. Downgrading costs – such as revenue lost when selling a product at a lower price
because it does not meet specifications.
d. Process failures – such as unplanned machine downtime or unplanned equipment
repair.
4. External failure costs – occur after poor quality products reach the customer,
specifically:
a. Costs due to customer complaints and returns – including rework on returned
items, cancelled orders, and freight premiums.
b. Product recall costs and warranty claims – including the cost of repair or
replacement as well as associated and administrative costs.
c. Product liability costs – resulting from legal actions and settlements.

o Metrology
 It is the science of measurement and is defined broadly as the collection of people,
equipment, facilities, methods, and procedures used to assure the correctness or adequacy
of measurements.
 Measurements must be both accurate and precise.
 Accuracy – is defined as the difference between the true value and the observed
average of a measurement.
 Accuracy is measured as the amount of error in a measurement in
proportion to the total size of the measurement.
 The lack of accuracy reflects a systematic bias in the measurement such as
a gage that is not properly calibrated of repeated measurements to each
other.
 Precision – is defined as the closeness of repeated measurements to each other.
 Precision relates to the variance of repeated measurements.
 Low precision is the result of random variation that is built into the
instrument.