Total Quality Management

TOTAL QUALITY MANAGEMENT
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COURSE DESIGN COMMITTEE
Chief Academic Officer

Dr. Shalini Kalia
NMIMS Global Access – School for Continuing Education
Content Reviewer TOC Reviewer

Mr. Rajagopal Mukundan Mr. Rajagopal Mukundan
Visiting Faculty, NMIMS Global Visiting Faculty, NMIMS Global
Access - School for Continuing Education Access - School for Continuing Education
Specialization: Operations and Quality Specialization: Operations and Quality
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Author : Sanjive Saxena

Reviewed By: Rajagopal Mukundan
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Copyright:
2015 Publisher
ISBN:
978-93-5119-498-9
Address:
4435/7, Ansari Road, Daryaganj, New Delhi–110002
Only for
NMIMS Global Access - School for Continuing Education School Address
V. L. Mehta Road, Vile Parle (W), Mumbai – 400 056, India.
NMIMS Global Access - School for Continuing Education

C O N T E N T S
CHAPTER NO. CHAPTER NAME PAGE NO.
1 Introduction to Total Quality Management 1
2 Cost of Quality and Quality Control 25
3 Statistical Process Control (SPC) 47
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4 IM Process Capability 71
5 Acceptance Sampling 85
6 Quality Function Deployment 101
7 Quality Management Systems 121

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8 Quality Circles 147
9 Customer-Supplier Relationship 159

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10 Performance Measurement 175
11 Case Studies 187

T O TA L Q UA L I T Y M A N A G E M E N T
curriculum
Introduction to Total Quality Management: Concept of Quality, Core Concepts of Total Quality
Management, Learning from Quality Gurus, Total Quality Management Models
Cost of Quality and Quality Control: Cost of Quality, Concept of Quality Control
Statistical Process Control (SPC): Concept of Statistical Process Control, Introduction to Control
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Charts
Process Capability: Concept of Process Capability, Comparison of Process Capability with Design
Specifications
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Acceptance Sampling: Concept of Acceptance Sampling, OC Curve
Quality Function Deployment: Concept of Quality Function Deployment, Taguchi Methods Lead-
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ing to Robust Design, Poka Yoke (Mistake Proofing)
Quality Management Systems: Introduction to Quality Management Systems, Introduction to ISO

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Quality Circles: Concept of Quality Circles, Quality of Work Life (QWL), Organising for Total Qual-
ity Management
Supplier Relationship: Supplier Partnership, Sourcing, Supplier Selection, Supplier Rating, Re-
lationship Development
Performance Measurement: Basic Concepts of Performance Measurement, Strategy Performance

Measure

C H A
1 P T E R
INTRODUCTION TO TOTAL QUALITY MANAGEMENT
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CONTENTS
1.1 Introduction
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1.2
1.2.1
Concept of Quality
Objectives of Quality
1.2.2 Measuring Quality
Self Assessment Questions
Activity
1.3 Core Concepts of Total Quality Management (TQM)
1.3.1 Objectives of Total Quality Management
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1.3.2 Principles of Total Quality Management
1.3.3 Applications of Total Quality Management
Activity
1.4 Learning from Quality Gurus
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1.4.1 W. Edward Deming’s 14 Points for Quality Improvement

1.4.2 Joseph M. Juran’s 10 Steps to Quality Improvement
1.4.3 Philip B. Crosby’s 14 Steps to Quality Improvement
1.4.4 Walter A. Shewhart
1.4.5 Kaoru Ishikawa
1.4.6 Shigeo Shingo
Activity
1.5 Total Quality Management Models
Self-Assessment Questions
Activity
1.6 Summary
1.7 Descriptive Questions
1.8 Answers and Hints
1.9 Suggested Reading for Reference

2 TOTAL QUALITY MANAGEMENT
INTRODUCTORY CASELET
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TQM AT ABC PVT. LTD.
ABC Pvt. Ltd. is a leading ready mix concrete producer in India,

with 400 employees spread across seven different locations. For
the past three months, the organisation is facing problems, such
as increase in overall costs, decrease in sales volume and customer
dissatisfaction. To overcome these problems, ABC Pvt. Ltd man-
agement has decided to implement a Total Quality Management
(TQM) readiness assessment program.
This program has helped the organisation to determine the areas

of customer service improvement and cost reduction. Apart from
training its employees on TQM, the CEO of ABC has conducted a
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meeting with employees to make them aware about the benefits of
TQM.
With TQM implementation, ABC is able to save $2 to $3 million

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TQM. Now, ABC is able to achieve a high level of customer satis-
faction.
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INTRODUCTION TO TOTAL QUALITY MANAGEMENT 3
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LEARNING OBJECTIVES
After studying this chapter, you will be able to:

>> Explain the concept of quality
>> Explain the core concepts of total quality management
>> Explain the theories of the quality gurus
>> Identify and explain the various total quality management
models
1.1 INTRODUCTION
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The goal of any organisation is to maximise its profit. To achieve this,
an organisation adopts approaches to:
Reduce the costs for the same selling price per unit
Fix
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the price of products suitably without implementing any cost
reduction program.
To survive in a competitive market, the products and services offered

by an organisation must have the required quality. Quality is a mea-
sure of how well a product or service conforms to the specified stan-
dards. The quality standards are a combination of attributes, such as:
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Performance
Reliability
Appearance
The quality of a product or service is also affected by many factors,

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such as the availability of resources, manufacturing conditions, total

capital, management policy related to quality level, and production
methods. Hence, quality management is important for an organisation
to reduce costs incurred for rework and scrap, and identify defects in
a product or service before it reaches the customer. To manage quali-
ty, organisations must conduct the Total Quality Management (TQM)
program as a quality assurance initiative.
TQM aims at improving efficiency, flexibility, and competitiveness of

an organisation as a whole. It is based on the principle that quality
management is the responsibility of employees across all levels in an
organisation. TQM is an approach to improve the quality of products
and services through continuous refinements in response to continu-
ous feedback from the customers. It aims to hold all stakeholders ac-
countable who are involved in the production process for the overall
quality of the final product or service.

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The chapter begins by explaining the concept of quality and discusses

the core concepts of TQM in detail. The chapter further elaborates on
the learning from the quality gurus at length and ends with a discus-
sion on the TQM models.
1.2 CONCEPT OF QUALITY

Broadly speaking, quality refers to the ability of a product or service
to meet customers’ requirements. From a customer’s point of view,
quality is associated with a value, which implies how well a product
serves its intended purpose. In other words, it means a measure of
excellence free from defects, deficiencies, and variations. On the other
hand, from an organisation’s perspective, quality is related to confor-
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mance to specifications. As per Juran, quality is “fitness for intended
use”, which means quality is meeting customers’ expectations.
Quality products or services increase an organisation’s sales and mar-
ket share and help it achieve a competitive advantage. On the contrary,
IM low quality products and services incur huge costs for inspection, testing,
scrap, rework, and handling of complaints. Quality is associated with var-
ious dimensions of a product, such as performance, features, reliability,
conformance, durability, serviceability, aesthetics, and perceived quality.
Pioneers of quality management have given different definitions for
the term “Quality”. Here are some of the popular definitions:
W. Edwards Deming: “Quality is a predictable degree of uniformi-
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ty, at low cost and suited to the market.”
Phillip B. Crosby: “Quality is conformance to requirement.”
Genichi Taguchi: “Quality is the minimum loss imparted by a prod-
uct to society from the time the product is shipped.”
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Kaoru Ishikawa: “Quality is a companywide issue and must be an

all-pervasive influence on the way every issue of business is con-
ducted.”
The expectations on quality are based on intensive usage and price of
the product. Quality is quantified as follows:
Q=P/E
Where,
Q = Quality
P = Performance
E = Expectations
For example, if Q is greater than 1.0, then we can assume the cus-
tomer has a good perception about the good or service. As per
ISO 9000:2000, “quality is the degree to which a set of inherent charac-
teristics fulfil requirements.”

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Here, the word “degree” means that quality can be qualified with ad-
jectives like good, poor, and excellent. As in the definition, the term “in-
herent” means that it is an existing and permanent characteristic in the
product or service. “Characteristics” can be quantitative or qualitative.
“Requirements” are a need or expectation of the customer or end user.
1.2.1 OBJECTIVES OF QUALITY
The main objective of ensuring quality in products and services is to

achieve maximum customer satisfaction. Quality also ensures that:
The design of a product looks good.
The product is durable or has a good life-period.
The product is reliable, i.e. well-accepted by customers.
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The product functions properly.
The product operates steadily for a continued length of time.
The product is offered at a competitive price in the market and
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meets customer expectations.
The product conforms to all necessary standards and regulations.
1.2.2 MEASURING QUALITY
Quality has different dimensions that provide in-depth description of

products or services. David Garvin, a Harvard professor, researched
on quality issues and derived eight dimensions. Figure 1.1 shows the
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eight dimensions of quality:
Performance
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Perceived
Features
Quality
Quality
Aesthetics Dimensions Reliability
Serviceability Conformance
Durability
Figure 1.1: Eight Dimensions of Quality

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Let us now explain these dimensions in detail.

Performance: One of the most important dimensions of quality ac-
cording to Garvin. Performance explains why a customer acquires
a particular organisation’s product or service. In other words, per-
formance is related to the basic expectations of a customer from a
product. For example, if a customer purchases a refrigerator, he/
she would expect a proper functioning of the refrigerator and good
aftersales services.
Features: Specific characteristics of a product or service that attract
a customer to avail the product or service. Features define quality
in terms of ability of a product to satisfy a customer’s need. For ex-
ample, a smartphone must have features, such as high mega pixel
camera, efficient operating system, and a long battery backup.
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Reliability: The trustworthiness characteristic of a product or ser-
vice. An organisation must provide reliable products/services to its
customers. Repeated failure leads to customer dissatisfaction and
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Conformance: An organisation’s product must meet the specified
quality standards consistently and must abide by the quality stan-
dards to achieve a high level of customer satisfaction.
Durability: Durability of a product is the product’s life and its
toughness to handle stress without failure. The durability specifi-
cations must be set while deciding the functionality of the product.
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Otherwise, it is difficult to make changes in the features of a fin-
ished product. For example, the use of tubeless tires has increased
the durability of tires. The higher the durability of products, the
higher is the level of customer satisfaction.
Serviceability: One of the most important dimensions for quali-
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ty according to Garvin. A customer prefers products with quality

aftersales services, which include customer support, repair and
maintenance, and installation. Inability to provide proper after-
sales services may have an effect the organisation’s brand reputa-
tion. In addition, serviceability includes delivering product deliv-
ery to customers on time at reasonable rates. For example, while
purchasing a bike, a customer gets repair and maintenance ser-
vices free of cost or paid.
Aesthetics: The appearance of a product in terms of look, feel,
taste, and smell. Generally, organisations have separate depart-
ments that continuously strive to improve the product aesthetics.
Perceived Quality: This term is related to the perception of cus-
tomers about a certain product or service. For example, while pur-
chasing a car, a customer expects quality in terms of high mileage,
advanced design and features. An organisation can understand
product-related customer perceptions through extensive market
research.

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SELF ASSESSMENT QUESTIONS
1. Quality products or services decrease an organisation’s sales

and market share. (True/False)
2. Quality has different dimensions that provide in-depth
description of products or services. (True/False)
3. Which of the following explains the product’s requirement to
meet the specified quality standards?
a. Performance
b. Reliability
c. Durability
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d. Conformance
ACTIVITY
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Assume you are a new member in the quality management team of
a manufacturing organisation. You have been asked by your report-
ing manager to prepare a report on the measurement of quality in
the organisation. How will you do that?
CORE CONCEPTS OF TOTAL QUALITY

1.3
MANAGEMENT (TQM)
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In 1957, Dr. A. V. Feigenbaum came out with the concept of TQM. He

advocated that quality should not be confined to production alone,
rather it should start at the planning and designing level. American
management consultants, such as W. Edwards Deming and Joseph Ju-
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ran, contributed in the field of quality to a large extent. The following

are a few definitions of TQM:
According to Sashkin and Kiser, TQM is, “creating an organisational

culture committed to the continuous improvement of skills, teamwork,
processes, product and service quality, and customer satisfaction.”
ISO defined TQM as “Management approach of an organisation cen-

tred on quality based on participation of all its members and aiming
at long-term success through satisfaction and benefits to all members
of the organisation and the Society.”
TQM is rather a proactive approach used by an organisation to satisfy

the needs and demands of customers. TQM includes three aspects:
Meeting Customer Requirements: Produce standard quality
goods and services to meet the needs of customers.
Continuous Improvement: Continuous modification in product
quality and product standards.

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Employee Involvement: Encourage employees at every level to

participate in quality management.
TQM is applied to every aspect of an organisation, its functions, prod-

ucts and services, customer satisfaction and eventually resulting in
maximisation of products. TQM calls for employee involvement for
quality management. While implementing TQM, an organisation
needs to consider the following points:
Total Commitment of Employees: All employees working at dif-
ferent levels in quality management must be committed for qual-
ity.
Training: The organisation must impart training to the employees
working at both managerial and non-managerial levels to imple-
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ment TQM.
Clear Goals: The management must set clear, measurable, and
realistic goals related to TQM. To implement these goals, the com-
pany must define action plans and measure its performance from
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Customer Oriented: Organisations set the basic goals of TQM as
customer satisfaction. Organisations must make TQM processes
both customer driven and customer focused.
Continuous Improvement: TQM must be an ongoing process
since the requirements and expectations of customers are ever
changing.
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1.3.1 OBJECTIVES OF TOTAL QUALITY MANAGEMENT
TQM was initiated in the early 50’s and has become part of manu-
facturing and service around 1985. The main objective of TQM is to
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increase customer satisfaction. Some of the other objectives of TQM

include:
Improve product quality, design and service
Improve production flow
Enhance employee morale and quality consciousness
Enhance market place acceptance of products
Achieve economic-oriented benefits
Reduce operating costs
Reduce operating losses
Minimise field service costs
Reduce liability exposure

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1.3.2 PRINCIPLES OF TOTAL QUALITY MANAGEMENT
TQM ensures value for money for products that customers purchase.
It also ensures that customers are satisfied with the functions and fea-
tures of the product for the price paid. Based on customer satisfaction,
the principles of TQM are formulated as follows:
Visionary leadership
Customer-driven excellence
Organisational and personal learning
Valuing employees and partners
Agility
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Focus on the future
Managing for innovation
Management by fact
Public
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responsibility
Focus of results and creating values
Systems perspective
1.3.3 APPLICATIONS OF TOTAL QUALITY MANAGEMENT
TQM relies on concepts, such as leadership, commitment, trust, re-

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spect, honesty, integrity, customer satisfaction, continuous improve-
ment, communications, problem-solving, etc. Using these concepts,
TQM can be successfully applied into various sectors, such as:
Higher Education Institutions: Implementation of TQM helps to
improve the student participation levels in academic projects in
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higher education institutions.

Retailing: TQM driven quality management helps to enhance cus-
tomer-retailer relationship as the retail crew can work in a team
efficiently and produce the required output at a faster rate.
Library and Information Science: TQM helps effective evalua-
tion of reference sources using checklist of criteria. It also helps
in conducting effective user surveys online regarding library ser-
vices.
IT Services: TQM evaluation helps enhance the operational capa-
bilities of both the workforce and the IT Company and thus helps
gain sustained competitive advantage over its competitors.
Construction and Manufacturing: TQM processes help in effec-
tively organising materials, workforce, and documentation regard-
ing projects. It also helps to follow standard in project plans, proj-
ect schedules, project billings, etc.

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4. TQM is a __________ approach used by an organisation to

satisfy the needs and demands of customers.
5. TQM calls for employee involvement for quality management.
(True/False)
6. TQM ensures value for __________ products that customers
purchase.
ACTIVITY
List five sectors where TQM can be applied apart from the ones
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mentioned in the chapter. Explain how TQM can be applied in
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1.4 LEARNING FROM THE QUALITY GURUS

Historically, Japan has been a frontrunner in propagating quali-
ty management philosophies and principles. After Japan’s defeat in
World War II, there was an urgent need to reconstruct its crushed
economy. Philosophers, academia, and the government, made qual-
ity a Unique Selling Proposition (USP) for all Japanese products in
the international market. Management philosophers from other coun-
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tries, mainly from the US, contributed to the evolution of TQM and its
implementation in Japan. As a result, the demand for Japanese prod-
ucts soared in the international market and by the 1970s, companies
that adopted these quality strategies, dominated the global market.
This inspired the American and European companies to join the qual-
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ity revolution. The business world developed a new appreciation for

quality management on production and price. Thus, post-World War
II, quality became the USP for all goods and services. Manufacturers
strived to adapt dynamic strategies to address both, mass production
and economic growth.
Some renowned quality gurus across the globe are:

W. Edwards Deming
Joseph M. Juran
Phillip Crosby
Masaki Imai
Armand V. Feigenbaum
Kaoru Ishikawa
Genichi Taguchi

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Shigeo Shingo
Walter A Shewhart
Dr. Deming was instrumental in creating quality awareness in Japan.

He is credited with being a catalyst of Japan’s post-war economic
progress. To enrich quality in the manufacturing sector, he added the
human dimensions framework.
NOTE
Quality management has two basic schools of thought, namely the

Western School of Thought and the Japanese School of Thought.
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1.4.1 W. EDWARD DEMING’S 14 POINTS FOR QUALITY
IMPROVEMENT IM
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According to W. Edwards Deming, “The result of long-term relation-

ships is better and better quality and lower and lower costs.”
The quality revolution started in Japan post World War II, when the
country began to rebuild itself from scratch. To revive its lost glory,
Japan adopted the ideas of W. Edwards Deming, an American who
was credited with Japan’s post-war revival. Although, Deming’s views
were initially ridiculed in the U.S, they were accepted in the 1980s
when the U.S faced a stiff competition with Japanese products in the
international market.
The Deming’s management system was based on the concept of inces-

sant progress toward the perfect quality model. He opined that com-
mitment to quality requires changing the entire organisational mind-
set. Deming propagated 14 Points agenda on Quality Management, to
help companies increase their quality and productivity. The 14 points

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of management philosophy (Revised in January, 1990) have become a

standard reference for quality transformation. These are:
1. Create, publish, and distribute a mission statement of the
objectives and purposes of the company in terms of quality to
all employees. In addition, the management must demonstrate
their commitment to this statement constantly.
2. Everybody across the company hierarchy must learn the new
philosophy.
3. Understand the purpose of inspection, whether for improvement
of processes and reduction of cost.
4. Do away with the practice of awarding business on the basis of
price tags.
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5. Improve the production and service process constantly and
continually.
6. Institute training for employees across all levels.
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8. Create an environment of innovation by driving out fear and
creating trust amongst employees.
9. Optimise the aims and purposes of the company, the efforts of
teams, groups, and staff areas.
10. Eliminate exhortation from the work force.
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11. a. Eliminate numerical quotas for production. Instead, learn
and institute methods for improvement.
b. Eliminate Management by Objectives (MBO). Instead, learn
the capabilities of processes, and how to improve them.
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12. Remove barriers that rob people of pride of workmanship.

13. Encourage education and self-improvement for everyone.
14. Take action to accomplish the transformation.
Deming advocated the transformation of organisational culture. He

stressed on reducing variation in products and processes. According
to Deming, to sustain quality, organisations must create the right en-
vironment for its manpower. Deming opined that each worker has
specific potential, which can be utilised if adequate support, environ-
ment, and training are provided. He also believed that, around 85 per
cent proficiency of a worker is due to the environment and the rest by
his/her skills. Therefore, to sustain quality, organisations must estab-
lish a favourable work environment and practice the principles of the
14 point quality program.

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1.4.2 JOSEPH M. JURAN’S 10 STEPS TO QUALITY

IMPROVEMENT
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Born in 1904, Joseph M. Juran, was an American management con-
sultant, engineer, and a noted author. Because of his contribution to
quality management, Juran is known as the ‘father’ of quality. To en-
rich quality in the manufacturing sector, he added the framework of
human dimensions to plan, organise, control, and manage resources.
Like Deming, Juran introduced steps for quality improvement and
propagated the concept Managing Business Process Quality. Howev-
er, Deming taught manufacturers to assess variations in a production
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process and identify factors affecting products or services whereas,
Juran emphasised on team collaboration to accomplish quality objec-
tives.
Juran’s ten steps for quality improvement are as follows:

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1. Build awareness of opportunity to improve

2. Set goals for improvement
3. Prepare to reach goals
4. Provide training
5. Carry-out projects to solve problems
6. Report progress
7. Give recognition
8. Communicate results
9. Keep score
10. Maintain momentum

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1.4.3 PHILIP B. CROSBY’S 14 STEPS TO QUALITY

IMPROVEMENT
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Philip B. Crosby, another eminent exponent of quality practices, was
IM born in 1926 in Wheeling, West Virginia. A businessman and an author
of management theories, Crosby was also popular as an illustrious
philosopher and a pragmatic practitioner of quality management. His
management theories inspired many management experts to explore
their interests in quality management.
In 1964, Crosby was conferred the Distinguished Civilian Service Med-

al by the Department of the Army for his innovative concept of Zero
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Defects. He served Harold Geneen as Corporate Vice President of
Quality. In 1979, Crosby founded Philip Crosby Associates, Inc. (PCA)
to guide people on setting a preventive culture and completing things
right at the first attempt. During the 1980s, when quality evolved as
a variable career and work environment, his book ‘Quality is Free’
sold more than two million copies worldwide. PCA influenced profes-
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sionals from several esteemed organisations such as, Xerox, Motorola,

General Motors, and many hospitals and helped them understand the
concept of quality management.
Like Deming and Juran, Crosby also gave various steps of quality pro-
gram, which are:
1. Develop commitment towards quality
2. Develop quality improvement
3. Establish quality measurements
4. Evaluate the cost of quality
5. Create quality awareness among top level management of an
organisation
6. Take corrective measures for resolving quality issues
7. Develop zero defects planning
8. Provide adequate training to the supervisors and managers

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9. Hold a ‘Zero Defects’ day to establish the outlook and quality

vision of the organisation
10. Encourage the setting of goals for improvement
11. Report quality related issues to the management
12. Recognise contributors to develop the quality program
13. Establish quality councils to set up action plans for better quality
14. Evaluate the aforesaid steps
Crosby concluded that the cost of quality is negligible when compared

to costs incurred during detection, correction and failure in produc-
tion.
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1.4.4 WALTER A. SHEWHART
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Walter A. Shewhart was born in New Canton, Illinois in 1891. He set a

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pattern on the importance of information distribution among quality

managers and production managers.
When working at Bell Labs, Shewhart revolutionised the production

process there. This helped Bell Labs reduce equipment repair efforts.
He stated the ‘common’ and ‘special’ causes of production issues. He
invented his famed Shewhart charts called control charts to prove his
hypothesis. Walter Shewhart set the statistical foundation upon which
the modern quality industry is based.
Shewhart also created the scientific method for learning through

action and observation. He developed the Shewhart Cycle or PDSA
(plan, do, study, and act) cycle:
1. Plan Phase: If an organisation encounters failures in a given
area, it should brainstorm ideas for improvement. This would be
the ‘plan’ phase of the cycle.
2. Do Phase: Next, the organisation selects a course of action, and
then chases it. This phase would constitute the ‘do’ phase.

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3. Study Phase: In this phase, the organisation observes the results

of its actions and judges its effectiveness. This step serves the
basis for the next and final phase.
4. Act Phase: The organisation evaluates results in this phase.
If the results are favourable, organisation executes the plan in
future to deliver better quality products/services. If the results
are not favourable, the organisation has to go back to the
original brainstorming pool restart and repeat the cycle until the
satisfactory results are achieved.
This plan illustrates the Shewhart’s concept that continuous observa-

tion of management procedures and new ideas are crucial in stream-
lining ‘common causes’ and justifying ‘special causes’ in variation.
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The basic concept behind control chart is the distinction between two
variation categories. A process will either display “controlled varia-
tion (common)” or “uncontrolled variation (special).” Shewhart con-
sidered the control chart as the voice of the process - one can use the
chart to understand how a process is behaving. Given this distinction,
IM the control chart is a technique for detecting the type of variation dis-
played in a given process. The objective is to guide the user in taking
appropriate action — ‘to look for assignable causes’ when the data
displays uncontrolled variation, and ‘to avoid looking for assignable
causes’ when the data displays controlled variation.
1.4.5 KAORU ISHIKAWA

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Kaoru Ishikawa was a professor known for his cause and effect dia-
gram (also known as the fishbone diagram), which is used for indus-
trial process analysis. Kaoru Ishikawa’s contribution in the field of
quality includes:
Fishbone cause and effect diagram
Execution of quality circles
Importance of internal customers
Shared vision with co-workers

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Kaoru Ishikawa worked on the Feigenbaum’s concept of total quality.

He proposed that all employees must have an equal role to play in
quality management. He also stated that an over-dependence on the
quality department would limit the capability of other workers.
Ishikawa opined that organisation- wide participation is needed from

top management to the front-line staff for quality management and
control. Because quality can be affected by all the departments there-
fore, everyone in the organisation should study statistical techniques
so that quality control is exercised by all. He stated that exercising
quality control:
Reduces defects
Develops product quality
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Increases reliability
Reduces costs
Increases productivity
Reduces wastage
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Initiates advanced tools and equipment
Increases sales and market opportunities
Develops an organisation’s reputation
Maintains a free flow of communication among different depart-
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ments
Reduces false and inaccurate data
1.4.6 SHIGEO SHINGO

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Mistake Proofing or Poka-Yoke was initiated and excelled by Shigeo

Shingo in his ‘zero defects model’. Shigeo Shingo defines Poka Yoke
as: Poka - “Inadvertent Mistake That Anyone Can Make”; Yoke - “To
Prevent or Proof”. Poke Yoke is defined as a simple, inexpensive de-
vice that is non-operator dependent, built into the production process

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at the source of operation for preventing safety hazards and quality

defects 100 per cent.
It has many uses for manufacturing environment and office environ-

ment. It is a technique for commencing a mistake proofing idea into a
process to remove imperfection or errors.
Shingo’s improvement techniques greatly reduce the cost of manufac-

turing, resulting in more products to more people. New products, thus
are more innovative with less defects and better quality.
An undisputed leader of change management, Shingo’s some of the

significant concepts in the field of quality management include:
Mistake Proofing (POKA-YOKE)
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Single Minute Exchange of Dies (SMED)
Statistical Quality Control (SQC)
Zero Defects (ZD)
IM Processes & Operations in Value Addition (VA) and non-VA
7. Historically, __________ has been a frontrunner in propagating

quality management philosophies and principles.
M
8. Management philosophers from other countries, mainly from
the __________, contributed to the evolution of TQM and its
implementation in Japan.
9. Philip B. Crosby set a pattern on the importance of information
distribution among quality managers and production
managers. (True/False)
N
10. Cause and effect diagram was also called __________.

11. Mistake proofing is also known as __________.
12. Shingo’s improvement techniques greatly increase the cost
of manufacturing, resulting in more products to more people.
(True/False)
ACTIVITY
Assume you are a junior quality management person in a chemical

organisation and you want to apply Shewhart’s cycle. How will you
do that?

N O T E S
1.5 TOTAL QUALITY MANAGEMENT MODELS

The TQM framework started with the contributions of quality man-
agement gurus like, Shewhart, Deming, Juran, Figenbaum, Ishikawa,
Crosby and Taguchi. They have contributed to the principles, prac-
tices, and tools and techniques for quality management. TQM does
not occur overnight, there are no immediate remedies. Figure 1.2 rep-
resents the TQM framework:
Supplier as partner
Total Total Management
S
Everybody Training Vision
Every way Ownership Mission Success
Quality Everything Specifications Commitment Pride World
Policy Always Systems Leadership Passion class
Visibility Measurements Reinforcement Benchmarketing
Teamwork
IM Review
Correction
Continuous Improvement
Total Customer delight

Customers are internal
and external
Figure 1.2: TQM Framework

M
Source: http://www.qfinance.com/contentFiles/QF02/898/547jY//46I-41762_-4489_20.jpg
TQM is an effective system for integrating quality development, main-

tenance, and improvement efforts of various groups in an organisa-
tion continuously, to enable marketing, engineering, production and
N
service at the most economic levels for customer satisfaction. Figure

1.3 depicts the TQM system:
Improved
Processes
Internal Reduced
Customers Costs
Improved
Quality Improved Improved
Customer
Improvement Value Profitability
Satisfaction
External Improved
Customers Timeliness
Improved
Product
and
Service
Figure 1.3: TQM System

Source: http://www.free-six-sigma.com/images/QualityImprovement.jpg

N O T E S
TQM is applied to many stages of industrial cycle which are listed be-
low:
Marketing
Engineering
Purchasing
Manufacturing
Mechanical
Shipping
Installation and product service, etc.
S
13. The TQM framework started with the contribution of quality

management guru, Shewhart. (True/False)
IM 14. TQM is an effective system for integrating quality development,
maintenance and improvement efforts of various groups in an
organisation continuously, to enable marketing, engineering,
production and service at the most economic levels for
customer satisfaction. (True/False)
ACTIVITY
M
Assume that you are the TQM manager of a shipping organisation.

What TQM model will you implement in the organisation and why?
1.6 SUMMARY
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From a customer’s point of view, quality is associated with a value,

which implies how well a product serves its intended purpose.
The main objective of ensuring quality in products and services is
to achieve maximum customer satisfaction.
Quality has different dimensions that provide in-depth description
of products or services.
TQM applies to every aspect of an organisation, its functions,
products and services, customer satisfaction, and maximisation of
profits.
TQM relies on concepts, such as leadership, commitment, trust,
respect, honesty, integrity, customer satisfaction, continuous im-
provement, communications, problem-solving, etc.
The business world developed a new appreciation for quality man-
agement on production and price.

N O T E S
The TQM framework started with the contributions of quality

management gurus like, Shewhart, Deming, Juran, Figenbaum,
Ishikawa, Crosby and Taguchi.
KEY WORDS
Collaboration: It refers to an individual working with another

person or in a group to produce something, for example, work-
ing on a project.
Conformance: It refers to goods or services meeting all legal
requirements.
Proficiency:It refers to a high level of skill or expertise that is
demonstrated by an individual.
S
Streamlining: It refers to the implementation of certain tech-
niques to simplify a system or make an organisation more effi-
cient and effective.
Transformation:
IM
It refers to a significant change in the nature
or appearance of a person.
1.7 DESCRIPTIVE QUESTIONS

1. Explain the concept of quality.
2. Explain the concept of TQM.
M
3. Elaborate on the principles of TQM.
4. Discuss the applications of TQM.
5. Describe W. Edward Deming’s 14 points for quality improvement.
6. Discuss total quality management models.
N
1.8 ANSWERS AND HINTS

ANSWERS FOR SELF ASSESSMENT QUESTIONS
Topic Q. No. Answers

Concept of Quality 1. False
2. True
3. d. Conformance
Core concepts of Total 4. Proactive
Quality Management
5. True
6. Money
Learning from the 7. Japan
Quality Gurus

N O T E S

8. USA
9. False
10. Fishbone diagram
11. Poka-Yoke
12. False
Total Quality 13. False
Management Models
14. True
HINTS FOR DESCRIPTIVE QUESTIONS
S
1. Quality products or services increase an organisation’s sales and
market share and help it achieve a competitive advantage. Refer
to Section 1.2 Concept of Quality.
IM 2. Total Quality Management (TQM) applies to every aspect of
an organisation, its functions, products and services, customer
satisfaction, and maximisation of profits. Refer to Section
1.3 Core Concepts of Total Quality Management (TQM).
3. TQM ensures value for money for products that customers
purchase. Refer to Section 1.3 Core Concepts of Total Quality
Management (TQM).
M
4. TQM relies on concepts, such as leadership, commitment, trust,
respect, honesty, integrity, customer satisfaction, continuous
improvement, communications, problem-solving, etc. Refer
to Section 1.3 Core Concepts of Total Quality Management
(TQM).
N
5. Deming propagated 14 Points agenda on Quality Management,

to help companies increase their quality and productivity. Refer
to Section 1.4 Learning from the Quality Gurus.
6. The TQM framework started with the contributions of quality
management gurus like, Shewhart, Deming, Juran, Figenbaum,
Ishikawa, Crosby and Taguchi. Refer to Section 1.5 Total Quality
Management Models.
1.9 SUGGESTED READING FOR REFERENCE
SUGGESTED READINGS
Beckford, J. (1998). Quality. London: Routledge.
Charantimath, P. (2011). Total quality management. New Delhi, In-
dia: Dorling KIndersley (India).

N O T E S
Evans, J., & Lindsay, W. (2002). The management and control of

quality. Australia: South-Western.
Gitlow, H. (2001). Quality management systems. Boca Raton, Fla.:
St. Lucie Press.
Hellard, R. (1993). Total quality in construction projects. London: T.
Telford.
Kanji, G. (1995). Total quality management. London: Chapman &
Hall.
Pollitt,
C., & Bouckaert, G. (1995). Quality improvement in Europe-
an public services. London: Sage.
Thorpe, B., Sumner, P., & Thorpe, B. (2004). Quality management
S
in construction. Aldershot, England: Gower.
E-REFERENCES
Anon. (2014). Retrieved 6 October 2014, from http://journal.qu.edu.
IM
az/article_pdf/1024_258.pdf
Anon. (2014). Retrieved 6 October 2014, from http://www.col.org/
forum/pcfpapers/saroja.pdf
Nkoyock.net. (2010). Practical Applications of Total Quality Man-
agement (TQM) – Part I | Dr. Alain NKOYOCK. Retrieved 6 Octo-
ber 2014, from http://nkoyock.net/blog/?p=52
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N

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IM
S
C H A
2 P T E R
COST OF QUALITY AND QUALITY CONTROL
S
CONTENTS
2.1 Introduction
IM
2.2
2.2.1
Cost of Quality
Measuring Cost of Quality
2.2.2 Use of Quality Cost Information
2.2.3 Activity-based Costing
Activity
2.3 Concept of Quality Control
M
2.3.1 Objectives of Quality Control
2.3.2 Benefits of Quality Control
2.3.3 Seven Basic Quality Control Tools
Activity
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2.4 Summary

N O T E S
QUALITY CONTROL IN TOYOTA
S
In the mid-1940s, the concept of total quality management was
introduced by many Japanese manufacturers. The concept of
quality management was introduced by experts like Edwards and
Deming. Toyota was one of the pioneers to introduce quality man-
IM agement in manufacturing. However, over the passage of time the
company has started re-thinking the concept and re-developed
their basic quality control approach.
The company considers quality to be one of its essential objectives.

In order to keep a tab on its customers, the company considers
customer satisfaction as one of the key quality control activities.
Therefore, in order to exceed the expectations of customers, the
company involves all the members ranging from sales, research
M
and development to manufacturing and services to contribute to
the process of quality control.
Considering the changing tastes and preferences of the custom-

ers, Toyota has developed a new quality control approach known
N
as “Companywide Quality Control”.
According to this approach, all the members and stakeholders

have their own roles such that quality assurance is built into their
own job. The primary focus of this approach is that only the best
work gets passed on to the next level of manufacturing.
The prime focus of this approach is to ensure that only the best
work is passed to the next level of manufacturing process. It min-
imises the occurrence of repetitive defects or failures.
The quality control initiative in Toyota aims at preventing the

occurrence of problems through the right inspection and quality
check. In order to do so the company relies on proficiency and
flexibility of its workforce. With innovative initiation of continu-
ous improvement and KAIZENS, the scope of quality control in
Toyota is ever changing and ever adapting.

COST OF QUALITY AND QUALITY CONTROL 27
N O T E S
LEARNING OBJECTIVES

> Describe the concept of cost of quality
> Describe the concept of quality control
> Discuss the seven basic quality control tools
2.1 INTRODUCTION
In the previous chapter, you have studied the concept of quality, core
concepts of total quality management, various concepts derived from
the quality gurus and total quality management models. This chapter
S
will focus on the cost of quality and quality control.
Two important factors: customer satisfaction and quality, should be

kept in mind while manufacturing products. The quality of a prod-
IM
uct influences the cost of a product. One of the most important objec-
tives of companies is to produce the best quality products keeping the
cost at a manageable level. Cost of quality (COQ) refers to a financial
measure that helps an organisation or a manufacturer to identify un-
necessary cost and the defects of a product. This measure is used in
identifying the quality gap so that, corrective measures can be applied
before a product is delivered to the end users.
M
The chapter begins by describing the cost of quality. Next, it explains
the conceptof quality control in detail. Towards the end, it discusses
the seven basic quality control tools.
2.2 COST OF QUALITY

N
Cost of quality is compared with cost of poor quality and good quality
as shown in following Figure 2.1:
Cost of
Quality
Cost of Poor Cost of Good

Quality Quality
Internal External Appraisal Prevention

Failure Costs Failure Costs Costs Costs
Figure 2.1: Cost of Quality Measures

N O T E S
The two words cost and quality has a very close relationship. Natural-
ly, the cost of production of a basic e-book reader is different from the
cost of production of a tablet PC. As a rule of thumb, better the quality
you expect from a product, greater will be the cost of its production.
This is because, in order to produce better quality products, an organ-
isation needs to ensure quality in every field including manpower, ma-
chines, materials etc. is very important. All the cost elements affecting
total cost for controlling and sustaining the quality are summed up as
‘cost of quality’ or ‘quality cost’.
In simple words, when cost is incurred to maintain the desired quality

standard and meet customer’s requirements, it is called quality cost or
costs of quality. For example, the cost of quality for a car manufacturer
would be the amount incurred for the design, look, performance, fuel
S
consumption, mileage, engine, etc. of the car. Naturally, a car requiring
frequent repair cannot satisfy the user’s expectations in terms of quality.
In the mathematical language, cost of quality can be written as:
IM Quality Costs = (Actual cost of providing products or services - Cost of
value-added activities).
NOTE
Earlier, the perception was that delivering higher quality incurs

higher costs as the cost might escalate for better materials and for
skilled manpower. Until 1950, the activities related to prevent the
M
damage, testing, and audits were considered as overheads. How-
ever, during 1950s one of the famous quality gurus Dr. Armand V.
Feigenbaum suggested to focus on the concept of quality costs.
Feigenbaum emphasised on three areas of quality costs such as,
prevention costs, appraisal costs and internal and external failure
N
costs. Later with emergence of TQM implementation in produc-

tion, manufacturing and services, it is believed that, to maintain
the quality of a product you need not incur higher costs all the time.
TQM aims to produce the product keeping in mind the quality stan-
dard set by the organisation. It focuses on various dimensions of qual-
ity like attributes, performance, price, services etc. to meet customer’s
expectations. As a result, the costs and efforts are counted from the
initial level of production. This eventually means that cost also is mea-
sured as much as quality is at the production level. Costs are incurred
keeping in mind the standard of quality as well. Consequently, the re-
quired measures are applied while testing the product performance
along with the cost measure. The costs associated with developing
quality output can be categorised into two parts, which are cost due
to poor quality and cost that is incurred to develop quality. This com-
parison effectively results in maintaining the maximum quality of a
product at an optimum cost. The concept of quality cost is not merely

N O T E S
confined to factory operations but also expanded to support functions

and customer’s expectations.
Analysing and understanding the significance of quality costs in pro-

duction enables an organisation in developing quality conformance in
a competitive business environment.
A number of quality cost programs are adopted by organisations to

determine the magnitude of quality costs and its potential impact on
the business. In addition, the practice of quality cost program also
guides the organisation on how to control and minimise costs involved
in waste, scrap, and rework. This program helps to identify the re-
quirement of quality costs in current business practices. An effective
quality cost program follows the given steps:
S
1. Establishing a quality cost measurement system
2. Building a result-oriented long-range trend analysis
3. Setting an annual development goals for total quality costs
IM
4. Developing short-range trend analysis that aligns quality goals
with organisational goals
5. Comparing the progress with the goals and taking corrective
actions for better quality
2.2.1 MEASURING COST OF QUALITY

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There are four types of costs that help in measuring the cost of quality.
These four types of costs are preventive costs, appraisal costs, internal
failure costs, and external failure costs. Let us discuss these costs as
follows:
Prevention Costs: One of the central objectives of quality is to
N
prevent product defects. Prevention costs are incurred to eradi-

cate these defects. In other words, prevention cost is essentially
planned to support activities that are meant to mitigate the oc-
currence of defects. Considering prevention costs, today compa-
nies apply a number of cost management techniques to safeguard
products from defects.
The technique called Statistical Process Control (SPC) is used to
check whether a process is in or out of quality track. Diagrams
and charts are used in these techniques to represent the stages of
work process. This help in identifying the factors that cause the
defects in the products. In addition, Quality Circles, where a small
number of workplace team discusses on regular basis about qual-
ity improvement.
Appraisal costs: These costs are incurred to identify the defects in
products in the production process. These types of costs are also
known as inspection costs. A manufacturer should essentially as-
sess the actual usefulness of a product before delivering the same

N O T E S
to the customers. Activities, such as testing of tools and equip-

ment, auditing quality system, complying with legal requirements
should also be conducted.
Internal failure costs: These types of costs are incurred in order
to identify the various causes of defects in the rejected products.
Naturally, as you can see the greater the companies indulge in in-
ternal appraisal activities; the higher is the chance of catching the
defects before the products are shipped.
The internal failure costs include costs incurred for scraps, re-ex-
amination and testing, re-welding, re-working of defective prod-
ucts, fault investigation, trouble-shooting, wastage of labour and
energy etc. For example, suppose a company has manufactured
100 mobile phones and out of these 65 were found to be defec-
S
tive and rejected. In order to investigate the causes of these issues,
some additional costs, such as reworking, testing, time , and efforts
are incurred. These all costs constitute internal failure costs.
IM External failure costs: These types of costs are incurred when a
defective product is delivered to a customer and requires repairs,
replacement, and warranty coverage. Such costs are incurred in
almost all types of products. While considering external failure
costs, customers’ complaints are taken as feedback that helps an
organisation to resolve the defects or replace the product. Organ-
isations should take in to account the Service Level Agreement
(SLA) to fulfil its commitment to customers against such external
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failures.
2.2.2 USE OF QUALITY COST INFORMATION
A quality product or service is one that is designed to meet customer

expectations.
N
Here the factors determining qualities can be:

Specifications of the design of the product
Product specifications meeting the needs of the customers.
The Broad categories of quality costs includes

Prevention costs
Appraisal costs
Internal failure costs
External failure costs
Uses of quality cost information is for:

Alerting executives to potential impact
Motivating action to improve quality

N O T E S
Helping to determine types of activities to reduce quality costs

Prioritising quality improvement efforts
2.2.3 ACTIVITY-BASED COSTING
Managing the quality of inventory and keeping inventory manage-

ment costs low are some of the important priorities of organisations.
Activity-Based Costing (ABC) is an important technique of inventory
control and can be applied to almost all aspects of inventory man-
agement, such as purchasing, receiving, inspecting, storing, retrieving
from stores, value analysis, etc. ABC is based on the assumption that
an organisation should not exercise the same degree of control on all
items of inventory. In other words, more rigorous control should be
S
applied for the items that are costly while less control should be ap-
plied for the items that are less expensive.
On the basis of costs, this technique categorises various inventory

items into three classes, such as A, B, and C. The items included in
IM
group A require large amount of investment. Therefore, inventory
control should be made stringent by adopting advanced techniques.
The group C consists of large number of items of inventory, which in-
volve comparatively small investments. The items of group C require
minimum level of control. The investment incurred in items of group
B is moderate, thus, it deserves less attention than A but more atten-
tion than C. It uses the Pareto principle of 80–20, where approximately
M
80% of the store sales or profits are derived from 20% of the products.
The measurement criteria can vary from gross margin, sales value,
sales in units to GMROI.
It should be noted that small number of highest selling or high value

yielding products are put into the A category. The medium selling or
N
medium value yielding products are put into the B category. The re-
mainder, low selling or low value yielding products are put into the C
category.
1. TQM aims to produce the product keeping in mind the quality

standard set by the organisation. (True/False)
2. ________These costs are incurred to identify the defects in
products in the production process.
3. ____________ costs are incurred in order to identify the various
causes of defects in the rejected products.
4. _________costs are incurred when a defective product is
delivered to a customer and it requires repairs, replacement,
and warranty coverage. Such costs are incurred in almost all
types of products.

N O T E S
ACTIVITY
With the help of the Internet, conduct a research on a company that

is known for high quality products. List out the various prevention
costs incurred by the company.
2.3 CONCEPT OF QUALITY CONTROL

According to Bethel, Atwater and Stackman, “Quality control refers
to the systematic control of those variables encountered in a manufac-
turing process which affect the excellence of the end product. Such
variables result from the application of materials, machines and man-
S
ufacturing conditions. Only when these variables are regulated to the
extent that they do not detract unnecessarily from the excellence of
the manufacturing process as reflected in the quality of the finished
product, can the quality said to exist.”
IM From the above definition, it can be said that quality control is a pro-
cess of examining the specific results of output against the desired
standards.
In other words, quality control focuses on monitoring and testing the

final products, on the basis of which, a report is generated to the man-
agement of an organisation. The management makes the final deci-
sion regarding the acceptance or denial of a product release.
M
Some of the most effective quality control techniques are used in the
pharmaceutical industry. This is because in the pharmaceutical com-
panies special precautions and measures are followed to examine the
purity of all chemicals, content, and biological ingredients used for
manufacturing the drugs. A wrong combination of chemical can cause
N
harm (including death) to the patients. Therefore, quality control is

of prime concern for the pharmaceutical organisations. In addition to
medicines, there are many other products like soap, shampoo, cream,
food items etc. where microscopic evaluation of entire process is ob-
served and controlled.
2.3.1 OBJECTIVES OF QUALITY CONTROL
Evaluation of quality related feedback is very essential to improve

quality continuously. However, it is not merely the responsibility of
the quality control department to deliver quality products. However,
all the units of an organisation need to contribute their best to attain
the quality objectives. This is because; the objectives of quality are not
met only during manufacturing a product. Unless a product is well-ac-
cepted by customers in terms of quality, attributes, safety etc. you can-
not be assured that the desired standards of quality is obtained

N O T E S
The following are the key objectives of quality control:

Tocreate value for customers by providing them quality products
and services
To control overall costs by reducing the losses caused by defects
or errors
To maintain an optimum level of quality at a lower cost
To identify and prevent errors during the operational process
To take corrective measures for delivering zero-defects output
One separate department is required to perform all quality control

activities in an organisation. The quality control department of the or-
ganisation is generally headed by a Quality Control Manager or Chief
S
Inspector. In addition, the organisational management, design engi-
neers and manufacturing staffs are also involved in quality control.
They all are responsible for:
Developing
IM
quality-oriented policies
Inspecting and controlling all the raw materials to ensure that they
meet the desired standards of excellence
Monitoring the performance of various equipment
Monitoring and testing the product performances
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2.3.2 BENEFITS OF QUALITY CONTROL
In a highly competitive and rapid changing business environment,

customers have become more quality conscious. Customers are ready
to pay extra price in lieu of better quality goods and services. There-
fore, in such emerging business practices, no manufacturer would
N
think to eliminate quality control function from their business pro-

cess. Today, when you buy a product from market, you can easily iden-
tify the level of contributions made by an organisation to sustain the
quality of its products. One of the examples of such contribution in-
cludes the quality of plastics and other materials used in packaging
of a product. Apart from delivering high class outputs, quality control
also ensures safe uses of the products. You may find that plastic con-
tainers are used in packaging of products instead of containers made
of hazardous materials like tin and iron. In addition, user manuals or
instructions are also provided to the customers for their convenience.
Use of such materials also helps an organisation to attract the atten-
tion of customers.
Therefore, as you can see, in the absence of quality control a num-

ber of defective products would require re-work, which will increase
the wastage of resources of an organisation. Quality control practices
not only improves standards of quality but also increases productivity.
Some of the major benefits of quality control in an organisation are
listed as follows:

N O T E S
Produces quality products, thereby achieves higher level of cus-

tomer satisfaction
Ensures if the raw materials are of the required standards of qual-
ity
Mitigates defects in the final output
Saves time and resources by minimising reworking efforts
Minimises the cost of labour and material as defects are reduced
Attains uniform quality and reliability of the product
Reduces costs of inspection, production
Controls customer complaints
S
Increases quality consciousness among customers and clients
2.3.3 SEVEN BASIC QUALITY CONTROL TOOLS

IM In the year 2009 and 2010, Toyota recalled more than 14 million vehi-
cles all over the world after they were sold to the customers. The recall
was due to a defect in the power window switches of the vehicles and
unwanted acceleration. Similarly, Nokia recalled millions of its certain
AC adapters of mobile phones in the year 2009. Therefore, as you can
see, product defects have huge financial repercussions, which include
cost of liability, damages claimed by the customers, loss of goodwill,
compensation paid by the company, and cost of reverse logistics. In
M
addition, product defects also spoil the image of a brand. Therefore, it
is an utmost priority for organisations to monitor defects and control
quality. There are seven basic quality control tools which help organi-
sations in controlling quality and minimise defects.
TQM tools have changed the sphere of quality management for the
N
past six decades. Corporations across the world have found these
TQM tools helpful in the quality management processes. The tools
and techniques have provided dynamic infrastructure in monitoring
and managing TQM processes. The seven basic tools of quality con-
trol: check sheets, Pareto chart, cause and effect diagram, scatter di-
agram, control charts, flow charts, and histogram came into practice
in the 1960s. Kaoru Ishikawa, the then head of the Japanese Union of
Scientists and Engineers (JUSE) expanded the use of these tools in
Japanese manufacturing industries.
1. Check Sheets: In order to identify quality issues, an organisation
needs to collect a lot of data. For example, if an automobile
manufacture wants to find out the reasons for technical
problems in the phones, it would require collecting data related
to the material used, production processes etc. Next, the data is
analysed for finding out the reasons of the technical problems.
Therefore, as you can see data collection and analysis is an
important part of quality control.

N O T E S
Check sheet is a very effective quality control tool used for data
collection in the organisation. In other words, check sheets are
easy to understand and customised tools that facilitate data
collection to resolve quality issues. Generally, check sheets
are prepared in tabular forms in which frequency of various
phenomenon under observation are recorded. Figure 2.2 shows
a sample check sheet as follows:
Check Item / Defect Day 1 Day 2 Day 3 Day 4 Day 5 Total

Missing Paperwork ||| |||| || |||| |||| || 22
Missing part number/ | || |||| 8
identification
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Damaged packaging |||| |||| 10
Part damage - scratch ||| ||| ||| | || 12
Part damage - dent | 1
Grand Total 53
IM
Figure 2.2: Showing a Sample Check Sheet
The check sheet shows different types of defects in a product in
different days of production. As you can see, check sheets use
tally marks to count the frequency of a phenomenon. In tally
marks, four marks or horizontal lines are drawn to count till
four and then a mark is drawn across four marks to denote five
M
occurrences of a phenomenon. Therefore, in the figure, there
are 3 instances of missing paperwork in day-1 and 5 instances
in day-5. Check sheets are best suited for manual data collection
in an organisation. Data collected is either quantitative or
qualitative. In addition, Data are interpreted by observing the
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number of marks against the instances of defects on the sheet.

Organisations select a sample of products and use check sheets
to record the possible defects in the products. The data collected
through check sheets are further analysed to find useful patterns.
Further enhancement and decisions are made to the product and
organisation based on the analysis.
2. Pareto Chart: A Pareto chart refers to a tool that helps in
prioritising quality issues. A Pareto chart is very often used to
analyse the data collected through check sheets. This chart is
named after Italian Economist named Vilfredo Pareto. A Pareto
chart consists of bars and line graphs. The bars represent
individual values in a descending order. The line graphs are
used to show cumulative frequency. Therefore, bars are used in a
descending order in the chart from left to right. This means that
the values represented on the left are relatively more significant
as compared to those on right.

N O T E S
A Pareto Chart is shown in Figure 2.3 as follows:
100%
45 95% 100%
41 86%
40
75%
35 75%
30 61%
25
41% 20 50%
20
15 14
11 9 25%
10
5
5
0 0%
Cumulated Percentage
Figure 2.3: Pareto Chart
S
The above chart is drawn on the basis of the figures shown in
Table 2.1:
TABLE 2.1: REPORTED DAMAGES IN CARS

IM Reported damages in Cars Percentage of
occurrence
Cumulative
Percentage
Burning out of bulbs 41 41%
Battery discharge 20 61%
Blown fuse 14 75%
Damage in brake pads 11 86%
Flattening of tires 9 95%
M
Others 5 100%
A Pareto chart is based on the Pareto principle (80/20) according
to which 80% problems come from 20% of causes. In simpler
words, the Pareto principle suggests that 80% of the product
defects or other quality issues arise because of 20% reasons. This
N
is to say that instances of defects are measured against the issues.

Therefore, it is useful in identifying those factors that have the
greatest effect on the system. Pareto charts can be generated
by simple spreadsheet programs. Basically, this chart breaks a
big problem into smaller pieces, recognises the most significant
factors, and highlights the areas to be focused more based on the
defect issues. In addition, the chart helps in utilising the limited
resources of the organisations in the most effective manner. For
example, without the help of Pareto chart organisations would
require to investigate each and every reason of product defects
with equal effort. This would involve high level of costs and effort.
However, Pareto charts helps in identifying the most significant
reasons of a product’s defects. Therefore, organisations can put
more effort in resolving the most significant reasons first.
In addition to the product defects, Pareto principles recognises
that:
80% of the customer complaints are related to 20% of the
products or services.

N O T E S
80% of the production delays take place because of 20% of

the possible reasons of delays.
80% of the system glitches happen because of 20% of the
causes. Therefore, as you can see Pareto charts can be used to
analyse different types of quality issues, starting from prod-
uct defects to glitches in the systems ranging from produc-
tion to quality. In addition, service quality and profitability of
services, such as banking, telecommunications, and travel is
done on the basis of Pareto analysis.
3. Cause and Effect Diagram: In an organisation, quality issues
are nothing but a set of causes and effects like any other real-
life problem. Therefore, as you can see finding the causes of the
S
effects like product defects are essential to quality control. In
case of simpler processes, it is easy to identify the causes of the
quality issues. However, in case of organisations manufacturing
highly complex and sophisticated products, such as commercial
aircrafts, it is relatively very difficult to identify the quality issues.
IM
In such cases, sophisticated tools and techniques are required to
identify the causes. The cause and effect diagram was introduced
in 1968 by Kaoru Ishikawa, a Japanese professor and proponent
of quality management practices. Because of this, the cause and
effect diagram is also called as Ishikawa diagram. He introduced
quality management practices in the Kawasaki shipyards and
went on to become of the founding fathers of modern quality
M
management. Cause and effect diagram is one such technique
which helps in identifying the quality issues in an organisation.
The cause and effect diagram was published in his book named,
‘Introduction to Quality Control’. This diagram, as the name
suggests, explores all potential or real causes of quality issues
and arranges them in a hierarchical diagram according to the
N
relative importance of the causes. The diagram is of the structure

of fishbone and it is also known as fishbone diagram. Figure 2.4
shows a cause and effect diagram or fishbone diagram as follows:
Cause Effect
Equipment Process People
Problem
Secondary cause
Primary cause
Materials Environment Management
Figure 2.4: Fishbone Diagram

N O T E S
4. Scatter Diagram: In the previous section, you have studied that

quality issues are mainly effects of various factors or causes.
However, it is not always easy to identify the direct causes of quality
issues. In all such cases, the scatter diagram helps in identifying
the relationship between two variables. Even though scatter
diagrams cannot establish the cause and effect relationships of
two variables, the diagram can indicate whether there is any
relationship between two variables or not. For example, if we
study two variables (let’s say, number of products defects and
price of materials), the scatter diagram would show if there is
any relationship between two variables or not. In other words,
a scatter diagram indicates correlations between variables. For
example, production and cost of a shoe manufacturer, production
would be on x axis and cost would be on the y axis. Correlations
S
may be positive (rising), negative (falling), or null (uncorrelated).
A scatter diagram consists of a horizontal axis containing the
values of one variable and a horizontal axis containing the
IM values of the other variable. After plotting the different values
of variables, a general trend of points going up and to the right
indicates that an increase in one variable corresponds to increase
in the other. In case, the trend is down and to the right, an
increase in one variable corresponds to decrease in the other. If
no trend can be seen, it means the variables are not related. The
scatter diagram provides clues on how to improve the process.
Figure 2.5 demonstrates these different relationships of variables
M
as indicated by scattered diagrams:
Y (a) Y (b)
B
N
A
X X
Positive and Linear Negative and Linear
Y (c) Y (d)
X X
Negetive Non-Linear No Relationship
Figure 2.5: Scatter Diagrams

Let us consider the following illustration to understand how
scatter diagram helps in establishing relationships between two
variables.

N O T E S
5. Control Charts: So far we discussed about the quality control

tools which help in finding out reasons of very quality issues. In
TQM quality improvisation is a continuous process. Let us move
forward and study about control chart that helps in monitoring
quality on a continuous basis. In control charts, data points are
plotted on a line over time to provide a picture of data movement.
These charts were proposed by Walter Shewhart in 1924. They
demonstrate consistency of data or when there are high or low
outliers in the occurrences of data or variation of data over a point
of time. It focuses on monitoring performance over a time by
looking at variation in data. Control charts distinguish between
common cause and special cause variations. These charts are the
backbone of statistical process control for organisations.
S
There are two broad categories of control charts: control charts
for attributes and control charts for variables. Control charts
for attributes measures the presence or absence of attributes or
qualities, for example, number of products not conforming to
IM
specifications. Control charts for variables measure the variations
in variables, such as height, weight, temperature, pressure etc.
On the basis of the number of characteristics of the variable to
be observed, there are mainly two types of control charts for
variables: univariate control chart and multivariate control
chart. In univariate control charts, only a single characteristic of
a variable is considered, whereas in case of a multivariate control
chart, more than one characteristic of a variable is considered.
M
Figure 2.6 shows the theoretical basis for a control chart:
Upper Control Limit

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Variable
Average
Lower Control Limit
Time
Figure 2.6: Theoretical Basis for a Control Chart

Source: http://www.tangram.co.uk/images/Tool08.gif
6. Flow Charts: A flow chart refers to a graphical representation

of processes which is complementary to other process related
diagrams. Processes with various steps are represented by
this diagram with boxes and arrows. In quality control flow

N O T E S
chart depicts the necessary steps to be taken to ensure high

quality of products and services. For example, the graphical
representation of various steps involved in the process of
manufacturing shirts or pant from yarns. Similar to control
chart, Flow charts help in controlling and improving qualities in
an organisation by establishing quality checks and standardising
the reporting system. For example, Da Ming International
Holdings Limited (“Da Ming International”), a Chinese large
scale stainless steel manufacturer uses flow chart to control and
improve the quality of the steel manufactured by the company.
When the warehouse department of the company finds quality
issues in the raw materials, it forwards the quality problem
to the quality control department. The quality problem is
then forwarded to the material supplier. After the settlement
S
with the supplier(s), notices are sent to the sales department,
warehouse department, and production department regarding
the settlement. The company standardises the entire process
across its plants through the following flow chart, as shown in
IM Figure 2.7:
Warehouse Department
Quality Problem
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Quality Control Department
Quality Complaint
Supplying Department
N
Settlement
Quality Control Department
Notice
Production Warehouse Sales

Plan Department Department
Figure 2.7: Showing Quality Control Flow Chart of

Da Ming International
7. Histogram: This is the seventh and the last basic quality control
tool. Histogram is basically used to graphically present data like
the other tools of TQM. This tool was introduced by Karl Pearson

N O T E S
Histogram can be defined as a bar graph depicting the distribution of

data. The bars in a histogram represent the frequency of occurrence
of the different classes of data. Figure 2.8 shows a sample histogram,
as follows:
Number of Defects per Batch

18
16
14
12
10
8
S
6
4
2
0
0-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40
IM
Figure 2.8: Showing a Sample Histogram
As you can see, the histogram depicts the number of defects per batch
in different class intervals in a bar graph. We can clearly identify that
maximum number of defects occur within the 21-25 class interval.
Therefore, as you can see, histogram simplifies presentation of data,
M
which in turn help in identifying the quality issues and in controlling
quality.
Generally, histograms are used in quality control in the following cas-

es:
When numerical data regarding quality issues (such as number of
N
defects) are available

While analysing whether the output of process can meet the cus-
tomers’ requirements or not
While analysing whether a process change occurred in different
points of time
While presenting and communicating distribution of quality data
to others
5. _________is a very effective quality control tool used for data

collection in the organisation.
6. Generally, check sheets are prepared in ________forms in
which frequency of various phenomenon under observation
are recorded.

N O T E S
7. A _____chart is very often used to analyse the data collected

through check sheets.
8. A Pareto chart is based on the Pareto principle according to
which 80% problems come from _________of causes.
9. Pareto charts can be generated by simple spreadsheet
programs. (True/False)
10. The ___________diagram was introduced in 1968 by Kaoru
Ishikawa.
11. Pareto chart is also known as fishbone diagram. (True/False)
12. A scatter diagram indicates correlations between variables.
(True/False)
S
13. In control charts, data points are plotted on a line over time to
provide a picture of ______ movement.
14. There are two broad categories of control charts: control
IM charts for attributes and control charts for________.
ACTIVITY
Make a group of your friends and discuss seven quality control

tools.
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2.4 SUMMARY
The two words cost and quality has a very close relationship.
In simple words, when cost is incurred to maintain the desired
quality standard and meet customer’s requirements, it is called
N
quality cost or costs of quality.

TQM aims to produce the product keeping in mind the quality
standard set by the organisation.
A number of quality costs programs are adopted by organisations
to determine the magnitude of quality costs and its potential im-
pact on the business.
There are four types of costs that help in measuring the cost of
quality. These four types of costs are preventive costs, appraisal
costs, internal failure costs, and external failure costs.
Managing the quality of the inventory and keeping the inventory
management costs low are some of the important priorities of or-
ganisations.

N O T E S
Quality control focuses on monitoring and testing the final prod-

ucts, on the basis of which, a report is generated to the manage-
ment of an organisation.
Evaluation of quality related feedback is very essential to improve
quality continuously.
In the absence of quality control a number of defective products
would require re-work, which will increase the wastage of resourc-
es of an organisation.
The seven basic tools of quality control: check sheets, Pareto chart,
cause and effect diagram, scatter diagram, control charts, flow
charts, and histogram came into practice in the 1960s.
S
KEY WORDS
Costing: A system of computing cost of production or of run-

ning a business, by allocating expenditure to various stages of
IM
production or to different operations of a firm.
Quality Control: An aspect of the quality assurance process that
consists of activities employed in detection and measurement of
the variability in the characteristics of output attributable to the
production system, and includes corrective responses.
Activity Based Costing (ABC): A cost accounting approach
concerned with matching costs with activities (called cost driv-
M
ers) that cause those costs.
Gross Margin Return on Investment (GMROI): An inventory
profitability evaluation ratio that analyses a firm’s ability to turn
inventory into cash above the cost of the inventory.
Process Control: A statistics and engineering discipline that
N
deals with mechanisms and algorithms for maintaining the out-

put of a specific process within a desired range.

1. What do you mean by cost of quality?
2. Mention the steps of an effective cost of quality program.
3. What do you know about the measurement of cost of quality?
4. Explain Activity Based Costing (ABC).
5. What are the objectives of quality control?
6. Describe the meaning of Pareto Chart.

N O T E S

Topic Q.No. Answers

Cost of Quality 1. True
2. Appraisal costs
3. Internal failure
4. External failure
Concept of Quality Control 5. Check sheet
6. Tabular
S
7. Pareto
8. 20%
9. True
IM 10. Cause and effect
11. False
12. True
13. Data
14. Variables
M
1. The two words cost and quality has a very close relationship.
Refer to Section 2.2 Cost of Quality.
2. An effective cost of quality program has a number of steps. Refer
N
to Section 2.2 Cost of Quality.

3. There are four types of costs that help in measuring the cost of
quality. These four types of costs are preventive costs, appraisal
costs, internal failure costs, and external failure costs. Refer to
Section 2.2 Cost of Quality.
4. Activity-Based Costing (ABC) is an important technique of
inventory control and can be applied to almost all aspects
of inventory management, such as purchasing, receiving,
inspecting, storing, retrieving from stores, value analysis, etc.
Refer to Section 2.2 Cost of Quality.
5. Evaluation of quality related feedback is very essential to
improve quality continuously. Refer to Section 2.3 Concept of
Quality Control.
6. A Pareto chart refers to a tool that helps in prioritising quality
issues. A Pareto chart is very often used to analyse the data
collected through check sheets. Refer to Section 2.3 Concept of
Quality Control.

N O T E S
SUGGESTED READINGS
St. Lucie Press.
S
Telford.
Hall.
Pollitt,
IM
E-REFERENCES
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Asq.org (2004). Seven Basic Tools - Quality Management Tools |
ASQ. [online] Retrieved from: http://asq.org/learn-about-quality/
seven-basic-quality-tools/overview/overview.html.
Qualityfoundation.in (2008). SQC7 Basic QC Tools. [online] Re-
trieved from: http://www.qualityfoundation.in/sqc7-basic-qctools.
N
html.
Tutorialspoint.com (2013). Basic Quality Tools. [online] Retrieved
from: http://www.tutorialspoint.com/management_concepts/ba-
sic_quality_tools.htm. Unknown. (n.d.). Untitled. [online] Re-
trieved from: http://HCi. “Pareto Analysis”://www.hci.com.au/
hcisite2/toolkit/paretos.htm.
Unknown. (n.d.). Untitled. [online] Retrieved from: λ http://lean-
man.hubpages.com/hub/Histograms-Bar-Charts-Quality-Tools.

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M
IM
S
C H A
3 P T E R
STATISTICAL PROCESS CONTROL (SPC)
S
CONTENTS
3.1 Introduction
IM
3.2
3.2.1
Concept of Statistical Process Control
Objectives of SPC
3.2.2 Methods of SPC
Activity
3.3 Introduction to Control Charts
3.3.1 Control Charts for Attributes
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3.3.2 Control Charts for Variables
Activity
3.4 Summary
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N O T E S
SPC AT FLIP FLOP INC.
Flip Flop Incorporation is a leading manufacturer of steel pipes

and girders for the last 16 years. However, since the last five years,
the company has been missing its productivity targets. Its cus-
tomers are complaining against the supply of defective parts and
the non-resolution of their complaints. Consequently, the staff is
feeling demotivated due to lowering profits and inadequate salary
increment.
To manage this problem, the executive management of the com-

pany has hired an external consultant who would be able to sug-
gest process improvements and measures to improve the compa-
S
ny’s performance. The consultant has performed the following
functions:
Identified the various fundamental processes, such as:
IM Acquisition
Production
of raw materials
of steel pipes and girders
Selling process of the company
Identified the parameters associated with the fundamental
processes, as shown in Table 3.1:
TABLE 3.1: FUNDAMENTAL PROCESSES AND

M
PARAMETERS OF FLIP FLOP INC.
Processes Parameters
Raw Material zz Order the required and right quantity
Acquisition Process and quality of material
zz Receive the raw material at the lowest
N
price and on time

Production Process zz Prepare the design of product accord-
ing the customer’s requirement
zz Use the required technology and meth-
od for production
zz Produce the minimum number of de-
fective products
Selling Process zz Use the effective tools for marketing
and selling the product
zz Provide proper training to employees
for selling the product
Evaluated the different fundamental processes against vari-
ous important parameters to determine the efficiency of these
processes. Table 3.2 shows the evaluation results:

STATISTICAL PROCESS CONTROL (SPC) 49
N O T E S
TABLE 3.2: PROCESS EVALUATION RESULTS

Processes Parameters Process Evaluation
Results
Raw Material zz Order the required and Flip Flop Inc. is
Acquisition right quantity and qual- receiving the right
Process ity of material quantity and quality
zz Receive the raw mate- of raw materials on
rial at the lowest price time.
and on time
Production zz Prepare the design of Flip Flop Inc. is effec-
Process product according to tively designing the
the customer’s require- product according to
S
ment the customer’s re-
zz Use the required tech- quirement. However,
nology and method for the number of defec-
the production tive products is in-
creasing continuously.
IM
zz Produce the minimum
number of defective
products
This is due to the use
of old technology.
Selling Process zz Use the effective tools Flip Flop Inc. is pro-
for marketing and sell- viding proper training
ing the product to sales employees
zz Provide proper training and applying the most
to employees for selling effective tools for sell-
ing the product.
M
the product
From the evaluation results, the Consultant has determined that

the production process of Flip Flop Inc. is showing variation due
to the use of old technology.
N
The Consultant has suggested the following steps to improve the

production process of Flip Flop Incorporation:
Select the best technology for producing the steel pipes and
girders.
Conduct the pilot test of the new technology by producing
some products.
Provide training to the workers regarding the new technology.
Apply the technology completely for the production of the

products.
Flip Flop Inc. has implemented the suggestions of the Consultant.

In a few years, the company has recovered its losses and is able to
generate good profit.

N O T E S
LEARNING OBJECTIVES

> Explain the concept of Statistical Process Control (SPC), in-
cluding its objectives and methods
> Describe the control charts for attributes and variables
3.1 INTRODUCTION
In the current complex and demanding business environment, spurred
by technological advancements, changing tastes of customers, and
globalisation, organisations need to ensure that they consistently de-
S
livery good quality products on time. This is possible if they employ
efficient monitoring and control techniques for their operations. One
such technique of controlling processes is called the Statistical Pro-
cess Control (SPC).
IM SPC enables organisations to identify, correct, and reduce errors in
product development. It helps to reduce wastes during production
processes and ensure that products are according to the predefined
specifications.
To monitor and control production processes, SPC involves a control

chart. A control chart is used to define upper and lower control limits,
M
which distinguish between the common causes of variation and the
assignable causes of variation. Therefore, a control chart is used to
define the limits of the common range of variation. If the samples of
a process fall outside the control limits, the process is considered to
be out of control. There are two main types of control charts: control
charts for variables and control charts for attributes.
N
This chapter covers the concept of SPC. You will learn about the ob-
jectives and methods of SPC. The chapter also introduces to control
charts. You will be able to differentiate between control charts for at-
tributes and control charts for variables.
CONCEPT OF STATISTICAL
3.2
PROCESS CONTROL
The term ‘statistical’ is used to define the mathematical models and
theories for collecting, analysing, and deducing data. A ‘process’ is a
set of steps that are performed to convert inputs into a desired output.
For example, you want to quickly make a pizza at home. You have ba-
sic ingredients, such as:
1 unbaked pizza crust
1 jar of pizza sauce

N O T E S
Favourite pizza toppings

2 cups of grated mozzarella cheese
Figure 3.1 shows the steps to cook a fast pizza from these basic ingre-
dients:
Spread pizza
Preheat the oven Prepare the
sauce on the
to 400°F (204°C). crust.
crust.
S
Cook the pizza
in the oven
Add the cheese. Add toppings.
for about 20
minutes.
Remove the
IM
pizza from the
oven, cool it for a
few minutes, and
then slice it.
Figure 3.1: Process of Making a Fast Pizza

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This is an example of a process that has inputs (the pizza ingredients)

and an output (the cooked pizza).
The term ‘process control’ means a method to oversee a process to en-

sure that all its operations are performing according to the predefined
N
specifications to produce the required output. For example, when you

drive a car on road, you need to control its speed to avoid any acci-
dents. In this case, you are controlling the process of driving a car.
Similarly, organisations need to control all the process to get the de-
sired output. To control a process, an organisation applies statistical
tools and techniques. This procedure is called Statistical Process Con-
trol (SPC). SPC is a statistical decision-making tool that enables you
to verify whether a process is working at its full potential to produce
the desired product.
3.2.1 OBJECTIVES OF SPC
Variation in products is inherent in a process. The role of SPC is to

control the quantity of defective products. For example, you are work-
ing in an electronics manufacturing company. Here, the role of SPC is
to control the number of defective products, resulting from the assem-
bly line of products.

N O T E S
The main objectives of SPC are to:

Evaluate a process
Enable methods to change the process
Identify the results of improvement made in a process
Identify and reduce the variations in a process
Determine trends in the data of a process
Apply the process data for forecasting
Reduce the need for inspection
Check the quality of the process
S
3.2.2 METHODS OF SPC
The purpose of SPC is to ensure that processes work in tandem to

conform to product requirements. SPC helps in formulating, imple-
IM menting, and controlling business processes effectively.
Figure 3.2 lists some of the major tools of SPC:

M
Control Charts
N
Major Tools
of SPC
Continuous
Design of
Improvement
Experiments
of Processes
Figure 3.2: Major Tools of SPC
Let us discuss these tools in detail as follows:

Control Charts: These charts represent variations in processes
in a graphical manner. They also show the causes for these varia-
tions. Figure 3.3 shows an example of a control chart:

N O T E S
6.4
AC Conler (Pwcitt by Width)
6.3 Upper Specification Limit and Average Based

6.2
6.1 Limit (0.0%) on Specification Values
6.0
5.9
5.8
5.7
5.6
5.5
5.4
5.3
5.2
5.1 Job Mix Formula (5.5%)
5.0
4.9 Lower Specification Limit (0.8%)
4.8
4.7
4.6
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Led Multiplier
S
Figure 3.3: An Example of Control Chart
In Figure 3.3, a straight line depicts a job mix process. The crooked
line depicts the normal variations in the process. The dotted line
IM
depicts the upper and lower specification limits. At the point 6.2
on the y-axis, an abnormal variation has occurred, as the normal
variation has crossed the upper limit of the control chart.
Continuous Improvement of Processes: An organisation contin-
uously tries to improve its processes, services, and products. This
continuous improvement in processes helps the organisation to
maintain and improve their efficiency. Figure 3.4 shows the meth-
M
odology used to implement continuous improvement in organisa-
tions:
Review Policy
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Planning
Evaluation
Implementation
Figure 3.4: Example of Methodology Involved in Continuous

Improvement
Design of Experiments (DOE): It is a common methodology used
in SPC that collects activities in a controlled environment, where
variation is present. For example, a medical researcher wants to

N O T E S
study the effect of a particular drug to treat cancer. So he/she will

apply the drug on the laboratory rats in a controlled environment
for the treatment of cancer and examine the results for analysis.
This process of performing experiments and collecting, analysing,
and interpreting the data is called DOE.
Figure 3.5 displays the DOE process:
DESIGN OF EXPERIMENTS
Noise Factor Matrix 1 2 3 4 Factors: A-G

(Outer Array) E 1 1 2 2 Test cases: I-S 1-4
F 1 2 1 2 Body of matrix
S
G 1 2 2 1 factor level sowings
Design Factor
Matrix (Inner Array) SIN Ratio
A B C D Y1 Y2 Y3 Y4
Z1
1 1 1 1 1
IM 2
3
4
1 2 2 2
1 3 3 3
2 1 2 3

Z2
Z3
Z4
Z5
5 2 2 3 1
Z6
6 2 3 1 2
Z7
7 3 1 3 2
Z8
8 3 2 1 3
Z9
9 3 3 2 1
Performance Characteristic-
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Extereme with Value
Figure 3.5: Design of Experiments

N
1. What is SPC?
2. The role of SPC is to control the quantity of __________
products.
3. The SPC has a role in determine trends in the data of a process
and applying it for forecasting. (True/False)
4. The SPC helps to reduce waste in a process. (True/False)
5. Which is a tool of SPC?
a. Six Sigma
b. Kaizen
c. Fishbone diagram
d. Control chart

N O T E S
6. The process of performing experiments and collecting,

analysing, and interpreting the data is called ___________.
7. What do you mean by a control chart?
8. What is the advantage of continuous improvement of business
processes?
9. Which of the following is not an objective of SPC?
a. Evaluate a process
b. Enable methods to change the process
c. Identify the results of improvement made in a process
d. Increase the need of inspection
S
10. ___________ is a method to oversee a process to ensure that
all its operations are performing according to the predefined
specifications to produce the required output.
ACTIVITY
IM
Research various sources, such as the Internet, magazines, journal,
etc. and find some good examples of how SPC has benefitted qual-
ity control in organisations.
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3.3 INTRODUCTION TO CONTROL CHARTS
A control chart is a SPC tool used to determine whether a process
is stable and predictable or unstable and unpredictable. It is used to
control quality of a process. If a process is stable at an accepted level of
output, then the process quality of process is under control. However,
N
if the process is unstable, then the organisation needs to increase the

level of control on the process.
Control charts were introduced by the quality guru, Walter A. Shew-

art, and therefore are also known as Shewart charts. You can use a
control chart to represent variations in a process in a graphical man-
ner. These charts show variations as well as their causes.
Some of the reasons for using control charts are as follows:

They help to improve productivity of a process
They identify defects in a process
They help to determine the kind of process adjustments required
They help to determine whether a process is under control

N O T E S
Figure 3.6 shows a control chart:
11.0
UCL = 10.860
Quality characteristic
10.0 Center line = 10.058
LCL = 9.256
9.0
3 6 9 12 15
Sample
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Figure 3.6: An Example of Control Chart
IM A control chart is represented by three lines that depict the control
limits, which are:
The Upper Line: known as the Upper Control Limit (UCL)
The Middle Line: known as the center line or average line
The Lower Line: known as the Lower Control Limit (LCL)
The UCL and LCL are used to show the boundaries of a process. The
M
points within these control limits determine the status of the process.
Any point that deviates outside the UCL or LCL is considered to be
an abnormal cause of variation. In Figure 3.6, the control charts has
the three lines: UCL, center line, and LCL. The crooked line along the
center line shows the normal variation pattern in the process. This
pattern does not go out of the UCL and LCL, showing that this is a
N
stable process.
To understand control charts in a real-life context, consider that Figure

3.6 shows the percentage of marks obtained by a student from primary
school to senior secondary school. In the control chart of the student,
the crooked line represents the percentage of marks obtained by the
student throughout his/her school years. UCL represents the student
obtaining the highest marks in a class, whereas LCL represents the
student obtaining the lowest marks in the class. Based on this control
chart, this particular student has been an average performer, scoring
neither the highest marks nor the lowest marks in a class.
TYPES OF CONTROL CHARTS
Control charts are classified according to the data used for analysing
the quality characteristic of a process. Data can be of the following two
types:

N O T E S
Attribute Data: Refers to the data that is used to determine the

presence or absence of quality characteristic. It does not include
any mathematical techniques. Examples of attribute data can be
whether you have passed or failed, whether you have paid your
mobile phone bill? (Yes/No), whether you have checked or crossed
a field in a document, etc.
Variable Data: Refers to the data that can be measured and can be
assigned with a number. This means that a variable has a numeric
value, which is measurable and mathematically applicable. Exam-
ples of variable parameters include the age, weight, and height of
a student.
Control charts can be prepared for both types of data. There are two
S
types of control charts:
Control charts for attributes
Control charts for variables
IM
Let us discuss these two control charts in detail.
3.3.1 CONTROL CHARTS FOR ATTRIBUTES
Control charts for attributes monitor qualitative characteristics of

products that are assessed with the discrete response, such as pass/
fail, yes/no, good/bad, and defective/non-defective. The control charts
used for attributes are p-charts and c-charts.
M
P-CHARTS
p-charts are used to measure the proportion of defective items in a

sample. The center line is the average proportion of defective items in
N
the population.
Assume that p is the population.
P is the average value of population (p) by taking the samples of ob-

servations.
UCL= P +zσp
LCL= P - zσp
Where,
z= Standard normal variable (usually set as 3)
P = Sample proportion defective
n = Sample size
p (1 − p )
σp = Standard deviation of average proportion defective =
n

N O T E S
Example: Suppose you inspect 10 samples of an item of size 50.

Table 3.3 shows the number of defective items in each sample:
TABLE 3.3: DEFECTIVE ITEMS IN SAMPLES

Sample No. No. of Defectives
1 2
2 3
3 2
4 0
5 2
6 3
7 2
S
8 1
9 2
10 3
IM Next, you can calculate the fraction defectives (p) in each sample, as
shown in Table 3.4:
TABLE 3.4: FRACTION DEFECTIVES IN SAMPLES

Sample No. No. of Defective Items Fraction Defectives (p) = No. of
Defectives/ Sample Size
M
1 2 .04
2 3 .06
3 2 .04
4 0 0
5 2 .04
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6 3 .06
7 2 .04
8 1 .02
9 2 .04
10 3 .06
.40
P = .40/10=.04 = central line Then, calculate

Total number of defectives
P can also be calculated as:
Total number of items inspected
= 20/ 500 = .04
UCL = P +zσp= .04 +3 (

.04 1 − .04 ) = .123
50

N O T E S
LCL= P -zσp = .04 -3

(
.04 1 − .04 ) =0
50
Now, you can draw a p-chart using LCL and UCL, as shown in
Figure 3.7:
0.123 UCL
0.06
0.05
0.04
CL
0.03
0.02
S
0.01
0
1 2 3 4 5 6 7 8 9 10 LCL
IM Figure 3.7: p-Chart
C-CHARTS
c-charts count the actual number of defects and not the proportion of
defects. A control chart helps in monitoring the number of defects per
unit.
M
The central line is c , which is calculated by taking the mean of de-
fects per unit.
The UCL and LCL are as follows:

UCL = c + 3 c
N
LCL = c − 3 c
Figure 3.8 shows the c-chart:
15 UCL
10
9
8
7
Value of c
6 CL
5
4
3
2
1
0 LCL
1 2 3 4 5 6 7 8 9 10
Sample
Figure 3.8: c-Chart

N O T E S
3.3.2 CONTROL CHARTS FOR VARIABLES
Control charts for variables monitor quantitative characteristics of

products that can be measured on a continuous scale, such as height,
weight, and volume. For example, a beverage company measures the
amount of liquid in bottles or a candle-making company measures the
height of candles.
Control charts for variables include control charts of averages ( x ) and

ranges (R). These charts are used to examine a scale and measure-
ment.
MEAN ( x ) CHARTS
S
Mean ( x ) charts monitor changes in the mean of a process. Here, you
take different samples (4 to 5 observations) and calculate their mean.
The total average of sample means is calculated as follows:
IM X =
x1 + x2 +…+ xK
K

Where,
K= Number of samples
X = Total average of sample means

M
The UCL and LCL are as follows:
UCL = X + zσ x
N
LCL = X − zσ x
Where,
Z=Standard normal variable
σ
σ x = Standard deviation of the distribution of sample means ( )
√n
= Population (process) standard deviation
n = Sample size (number of observations per sample)
z =3 (used as a standard convention)

N O T E S
Figure 3.9 shows the x chart:
UCL
A
C
X
C
A
LCL
S
Figure 3.9: x Chart
IM
Source: http://en.wikipedia.org/wiki/Western_Electric_rules
Example: A quality control inspector needs to measure the volume of

water in bottles. He has taken 25 samples with four observations. The
center line of control data is 15.95 (mean) and standard deviation is
0.14 ounces. Calculate control limits.
In this case,
M
UCL= X + zσ x = 15.95 + 3 (.14/√4) = 16.16
LCL = X − zσ x =15.95 + 3 (.14/√4) = 15.74
Figure 3.10 shows the x chart for this example:

N
16.20
16.10
16.00
Ounces
15.90
15.80
15.70
15.60
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
LCL CL UCL Sample Mean
Figure 3.10: x chart

N O T E S
There is another method to calculate control limits in x chart. In this

method, you use the simple range, which is the difference between
the largest and smallest values of the sample. The formula for control
limits in this case is as follows:
UCL = X + A2 R
LCL= X − A2 R
Where,
X = Average of the sample means
R = Average range of the samples
Table 3.5 shows control chart coefficients (which include three stan-
S
dard deviations of ranges). Here, A2 = Factor obtained from the table.
TABLE 3.5: CONTROL CHART COEFFICIENTS- FACTORS FOR

THREE-SIGMA CONTROL LIMITS OF X AND R-CHARTS
IM Sample Size n Factors for X Chart Factors for R-Chart
A2 D3 D4
2 1.88 0 3.27
3 1.02 0 2.57
4 0.73 0 2.28
5 0.58 0 2.11
M
6 0.48 0 2.00
7 0.42 0.08 1.92
8 0.37 0.14 1.86
9 0.34 0.18 1.82
10 0.31 0.22 1.78
N
11 0.29 0.26 1.74

12 0.27 0.28 1.72
13 0.25 0.31 1.69
14 0.24 0.33 1.67
15 0.22 0.35 1.65
16 0.21 0.36 1.64
17 0.20 0.38 1.62
18 0.19 0.39 1.61
19 0.19 0.40 1.60
20 0.18 0.41 1.59
21 0.17 0.43 1.58
22 0.17 0.43 1.57
23 0.16 0.44 1.56
24 0.16 0.45 1.55
25 0.15 0.46 1.54

N O T E S
RANGE (R) CHARTS
R charts measure variation or dispersion in a process.
The center line of the R chart is the average range.
CL = R
The formulas to calculate LCL and UCL are as follows:
LCL= D3 R
UCL= D4 R
Where,
S
D3 and D4 are the values obtained from Table 3.5.
Figure 3.11 shows the R chart with UCL and LCL:

IM
UCL
M
CL
N
LCL
Figure 3.11: R Chart
Example: If the average sample range is .29 and n =4, find the UCL
and LCL.
CL = R = .29
n=4
UCL= D4 R = 2.28 (0.29) = 0.6612
LCL= D3 R = 0 (0.29) = 0

N O T E S
Figure 3.12 shows the R chart for this example:
0.70
0.60
0.50
Ounces
0.40
0.30
0.20
0.10
0.00
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
LCL CL UCL Sample Mean
S
IM Figure 3.12: An example of R chart
11. A control chart is used to control ___________.

12. You want a control chart to measure whether candidates in
a particular class has passed or failed. Which control chart
would you use?
a. Control chart for variables
M
b. Control chart for attributes
c. Control chart for parameters
d. Control chart for numerals
13. The p-charts are used to measure the actual number of defects
N
in a sample. (True/False)
14. When is a process out of control?
a. One or multiple points are outside the control limits.
b. The sample points fall between the control limits.
c. There are no major trends forming.
d. The points vary both above and below the crooked center
line.
15. Which control charts monitor changes in the mean of a
process?
a. R-chart
b. x-bar chart
c. p-chart
d. c-chart

N O T E S
16. To calculate control limits in x chart, you cannot use a simple

range, which is the difference between the largest and the
smallest values of the sample. (True/False)
17. What is the formula of the center line in R-chart?
a. D3 R
b. D4 R
c. D3
d. R
18. Which of the following is not a reason for using control charts?
S
a. They help to improve productivity of a process
b. They identify defects in a process
c. They help to determine the sales of an organisation
IM
d. They help to determine whether a process is under control
19. Define p-charts.
20. ________charts count the actual number of defects and not the
proportion of defects.
21. ___________ data is used to determine the presence or absence
of quality characteristic.
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ACTIVITY
Research the Internet for some sample questions on calculating

UCL and LCL on various types of control charts. Solve the ques-
tions related to each type of control chart.
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3.4 SUMMARY
SPC is a statistical decision-making tool that enables you to verify
whether a process is working at its full potential to produce the
desired product.
The main objectives of SPC are to:
Evaluate a process
Enable methods to change the process
Identify the results of improvement made in a process
Identify and reduce the variations in a process
Determine trends in the data of a process

N O T E S
Apply the process data for forecasting

Reduce the need for inspection
Check the quality of the process
There are three main methods/tools of SPC:
Control charts
Continuous improvement of processes
DOE
A control chart is a SPC tool used to determine whether a process

is stable and predictable or unstable and unpredictable. It is used
to control quality of a process.
S
A control chart is represented by three lines that depict the control
limits, which are:
UCL
IM The center line or average line
LCL
There are two types of control charts:

Control charts for attributes: Measure qualitative characteris-
tics of products
M
99 p-Charts: Measure the proportion of defective items in a
sample
99 c-Charts: Measure the actual number of defects in a sample
Control charts for variables: Measure quantitative product

N
characteristics
99 Mean ( x ) charts: Monitor changes in the mean of a process
99 R charts: Measure variation or dispersion in a process
KEY WORDS
Statistical Process Control: Refers to the application of statis-

tical methods to achieve timely identification of special causes
of variation.
Control Chart: Refers to a procedure used to track a process
against time to identify ‘special causes’, or sporadic or chronic
problems in a timely fashion. The control chart has control lim-
its. Special causes are indicated by points plotting outside the
control limits.

N O T E S

1. Explain the concept of statistical process control.
2. What are the objectives of SPC?
3. What are the methods of SPC?
4. Explain the concept of control charts.
5. Explain the p chart.
6. Discuss the n chart.
7. Discuss the control charts for variables.
8. Explain the mean ( x ) charts.
S
9. Discuss the R charts.

IM
Topic Q.No. Answers

Concept of Statistical 1. SPC is a statistical decision-mak-
Process Control ing tool that enables you to verify
whether a process is working at
M
its full potential to produce the
desired output.
2. Defective
3. True
4. True
N
5. d. Control chart

6. Design of Experiments (DOE)
7. Control charts represent varia-
tions in processes in a graphical
manner.
8. Continuous improvement in
processes helps the organisation
to maintain and improve their
efficiency.
9. d. Increase the need of
inspection
10. Process control
Introduction to Control 11. Quality of a process
Charts
12. b. Control chart for attributes

N O T E S
Topic Q.No. Answers

13. False
14. a. One or more multiple points
are outside the control limits.
15. b. x-bar chart
16. True
17. d. R
18. c. They help to determine the
sales of an organisation
19. p-charts is a control chart for attri-
butes that are used to measure the
S
proportion of defective items in a
sample.
20. c
21. Attribute
IM HINTS FOR DESCRIPTIVE QUESTIONS
1. SPC is a statistical decision-making tool that enables you to
verify whether a process is working at its full potential to produce
the desired product. Refer to Section 3.2 Concept of Statistical
Process Control.
M
2. The objective of SPC is to control the quantity of defective
products. Refer to Section 3.2 Concept of Statistical Process
Control.
3. The major tools of SPC are Control charts, Continuous
improvement of processes, and Design of Experiments (DOE).
N
Refer to Section 3.2 Concept of Statistical Process Control.

4. A control chart is a SPC tool used to determine whether a process
is stable and predictable or unstable and unpredictable. Refer to
Section 3.3 Introduction to Control Charts.
5. p-charts are used to measure the proportion of defective items in
a sample. Refer to Section 3.3 Introduction to Control Charts.
6. c-charts count the actual number of defects and not the proportion
of defects. Refer to Section 3.3 Introduction to Control Charts.
7. Control charts for variables monitor quantitative characteristics
of products that can be measured on a continuous scale, such as
height, weight, and volume. Refer to Section 3.3 Introduction to
Control Charts.
8. Mean ( x ) charts monitor changes in the mean of a process. Refer
to Section 3.3 Introduction to Control Charts.
9. R charts measure variation or dispersion in a process. Refer to
Section 3.3 Introduction to Control Charts.

N O T E S
SUGGESTED READINGS
St. Lucie Press.
S
Telford.
Hall.
Pollitt,
IM
E-REFERENCES
M
What is Statistical Process Control (SPC)? Retrieved from http://
www.infinityqs.com/resources/what-is-spc.
Statistical Process Control (SPC). Retrieved from https://www.mo-
resteam.com/toolbox/statistical-process-control-spc.cfm.
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M
IM
S
C H A
4 P T E R
PROCESS CAPABILITY
S
CONTENTS
4.1 Introduction
IM
4.2
4.2.1
Concept of Process Capability
Objectives of Process Capability
4.2.2 Measurement of Process Capability
4.2.3 Process Capability Index
Activity
4.3 Comparison of Process Capability with Design Specifications
M
Activity
4.4 Summary
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N O T E S
PROCESS CAPABILITY AT ABC PVT. LTD.
XYZ Pvt. Ltd. is a US-based Information Technology and Ser-

vices firm that develops software for telecom projects. The head
office of the multinational company is in San Francisco.
The company’s leadership team realises that quality management

in its processes will drive the company towards business growth
and customer satisfaction. With this firm belief in quality, the lead-
ership team has empowered the Quality Assurance department of
the company to evaluate, monitor, and control quality issues in
its processes and outputs. The Quality Assurance department has
evaluated and monitored the following processes in this regard:
S
Management Review Process: The primary objective of man-
agement reviews is to enable the management to bring con-
tinuous improvement of the organisation. The scope, number,
and frequency of reviews depend on the size and complexity
IM of the business. The management team that formulates the
policies, processes, and procedures are in charge of reviewing
them. The management review considers the following ques-
tion, “Is the entire system of organisation working fine? To
find the answer, it includes the following items:
Anxieties of various parties
M
Results of past performance
The degree to which objectives have been met
Defect Review Process: The primary objective of the de-
fect review process is to examine the review process, trends,
source of defects, type of defects, and treatment of defects.
N
The management believes that these defects are responsible

for the increasing costs in production and for the loss of time
in a process. The management is particularly keen on identi-
fying the treatment of these defects from the beginning to the
closure.
Requirements Review Process: The primary objective of the
requirements review process is to verify each requirement in
documents for consistency and effectiveness. The review pro-
cess may involve individuals or the entire department.
Customer Management Process: The primary objective of
the customer management process is to maintain the custom-
er related processes. These processes are designed to generate
new customers, retain existing customers, and provide overall
customer satisfaction.

PROCESS CAPABILITY 73
N O T E S
Table 4.1 shows the data collected by the company with respect to
the management review process and the customer management
process for the last quarter:
TABLE 4.1: DATA WITH RESPECT TO DIFFERENT

BUSINESS PROCESSES OF XYZ PVT. LTD.
Process Management Review Process
Sub Applicable Number Type of Defect Aver- Brief descrip-
process process of defects defect origin age tion of defects
observed/Total stage defect
process closure
time
Quality RM102 12 Fatal Review 40 hrs Time constraints
Process due to frequent
S
travelling by the
Chief Executive
Officer (CEO)
and his team
Busi- PM102 10 Fatal Review 20 hrs Processes re-
ness
Process
IM Process lated to market
expansion were
not started due
to lack of infor-
mation
Process Customer Management Process
Sub Applicable Number Type of Defect Aver- Brief descrip-
process process of defects defect origin age tion of defects
observed/Total stage defect
process closure
M
time
Cus- PM101 45 Major Re- 4 hrs Requirements
tomer quire- not captured
Satis- ment adequately
faction stage
Cus- PM102 43 Major Devel- 5 hrs Queries related
tomer opment to project status
N
queries stage were not com-

municated on
time

N O T E S
LEARNING OBJECTIVES

>> Explain the concept of process capability, including its ob-
jectives, measurement method, and the process capability
index
>> Compare process capability with design specifications
4.1 INTRODUCTION
Sometimes, despite effective and efficient implementation and execu-
tion of processes, an organisation fails to generate the required profit
S
in its processes. It is not enough to create a process-centric environ-
ment. An organisation has to carefully analyse the capability of its pro-
cesses to find if they are able to generate the requisite profits.
IM In an organisation, the capability of its processes drive the business.
The capability of a process is its inherent ability to generate the de-
sired output.
In this chapter, you will learn about the concept of process capabili-
ty. The chapter describes the objectives and measurement of process
capability, as well as the process capability index. You will also learn
about the difference between process capability and design specifica-
M
tions.
4.2 CONCEPT OF PROCESS CAPABILITY

The term ‘process’ defines a logical method of converting a set of in-
N
puts into a desired output. It includes the tools, techniques, and meth-
ods that convert an input into an output.
The term ‘process capability’ is defined as an ability of a process to

achieve its objective within the given constraints or the limitations.
It signifies the likelihood of a product to meet its specifications or ob-
jectives, which are defined by the customer/market. In other words,
process capability is defined as the ability of a process to accomplish
the required output in the given organisational limits to deliver a busi-
ness value.
It should be noted that every process shows a natural variation in the

process execution and sometimes abnormal variation due to some
special causes.
Consider an example of a pizza chain that promises to deliver a pizza

to its customers in 30 minutes; else the pizza will be free of cost. This
objective can be met if the process capability of the pizza chain is ex-
cellent. Here, 30 minutes is the constraint that the pizza chain has to

N O T E S
follow. There may be instances when the pizza chain fails to meet this
commitment due to random or abnormal variations, which reduce or
damage the process capability.
Let us consider another example. You regularly visit a restaurant for

a lunch. You give your order to a waiter, who passes it to the kitchen.
Your lunch is usually served within 15 to 20 minutes. However, lately
you are not happy with the service of your restaurant. Waiters take
their time in getting your order, and the kitchen staff is also late in
serving you the lunch. Despite your complaints to the manager, there
has not been any action to improve the service. Finally, fed up with the
poor service and incapable process of the restaurant, you stop visiting
it. What is the outcome? The restaurant loses a loyal customer, and
within a couple of months closes down due to declining business. This
S
example shows the capability of a process has wide-spread impacts on
the business. If the management had taken some corrective actions
based on the customers’ complaints, then the service of the restaurant
would have been improved, thereby improving the process capability
IM
and saving the restaurant.
4.2.1 OBJECTIVES OF PROCESS CAPABILITY
The main objectives of process capability are as follows:

To make operations system dependent instead of person depen-
dent: Process capability streamlines day-to-day operations and
M
moves their dependency to a system, instead of a person. There-
fore, when an organisation follows a process-based culture, it does
not suffer due to whims and fancies of a person. For example, an
experienced operator in a factory goes on a leave. However, there
are adequate Standard Operational Procedures (SOPs) in the fac-
tory so that another worker can easily replace his place in the as-
N
sembly line. This ensures the continuity of business operations.

To increase productivity: Process capability increases the produc-
tivity of an organisation. Consequently, the organisation can fin-
ish more work within a specified amount of time, as the processes
move in a more systematic manner. The result is large outputs in
less time.
To improve quality of products: Process capability delivers high
quality products or services, which satisfy all requirements speci-
fied by customers. This is because process capability ensures that
an organisation correctly captures the requirements of the cus-
tomers are delivers the products according to the specifications.
To improve communication: Process capability enhances the
communication mechanism within and across an organisation. It
helps the organisation to implement effective and efficient modes
of communication channels.

N O T E S
4.2.2 MEASUREMENT OF PROCESS CAPABILITY
Process capability measurement aims to find the standard deviation of

the individual measurements of products when a process is in control.
You can analyse the capability of a process to find the following ele-
ments:
Its specification tolerance
Whether the process average is centered mid-way between the tol-
erance limits
Measurement of inherent (piece to piece) variability of the process
Measurement of actual variability over a period
S
Causes of differences between inherent and actual variability
To analyse the process capability, you can use a control chart or a fre-
quency distribution method. During this method, make sure of the
IM following conditions:
Use homogeneous material to minimise abnormal material varia-
tion
Do not make any process adjustments during the study
Allow only trained operators to work
The steps involved in the control chart or frequency distribution

M
method is as follows:
1. Take a number of samples over a period, where each sample
consists of consecutively made pieces.
2. Calculate the average mean ) and range (R) of each sample.
N
3. Calculate the total average of sample means . This measures the

center-line of the process.
4. Calculate the Upper Control Limit (UCL) and the Lower Control
Limit (LCL) and plot X and R charts. This measures the stability
of the process, that is, the extent to which it changes with time.
5. Calculate the process capability 6σ = 6R/d2. This measures the
inherent variability of the process.
4.2.3 PROCESS CAPABILITY INDEX
A process capability index is an analytical measure that compares the

performance of a product or a process with its predefined specifica-
tion. This index reduces the complex information about a process into
a single value, which helps an organisation to compare how the pro-
cess fares in the eyes of the customer.

N O T E S
The process capability index helps you to easily evaluate the effect
on a process before and after a change. This index also indicates the
expected future performance of a stable process. The capability of a
process is defined as the ratio of the distance from the center of the
process to the nearest specification limit divided by a measure of the
process variability.
Figure 4.1 shows the histogram of the process output along with the
limits of the specification:
process mean to
nearest specification
limit
S
Lower Specification Limit
Upper Specification Limit

frequency
IM
process
variability
(3 sigma)
M
Observations
Figure 4.1: Graphical Representation of Process Capability

Source: http://xa.yimg.com
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There are two processes capability indicators, which are commonly

used in the optimisation process: Cp and Cpk.
Cp: It is defined as the relation between the specification range and
the process width i.e. the spread of the distribution. The formula
for Cp is as follows:
Cp = S / P
Here S = specification range = U – L = difference between up-
per and lower tolerance
P = process width= 6σ
If Cp = 1, then process capability is fine
If Cp > 1, then process capability is bad
If Cp < 1, then process capability is good

N O T E S
Figure 4.2 indicates the various values of Cp depending upon the

spread or the width of the process i.e. σ:
Cp = 1 Cp = 1.5 Cp = 2
LL UL LL UL LL UL

3 3 4.5 4.5 6 6
Figure 4.2: Different Values of Cp Depending upon the

Spread/Width of the Process
S
Figure 4.3 depicts the practical implications of process capability
IM index Cp:
Target Target Target

Spec. Spec. Spec. Spec. Spec. Spec.
Limit Limit Limit Limit Limit Limit
Figure 4.3: Practical Implications of Process Capability Index C p

M
Cpk: This process capability indicator considers the inconsistencies
that are observed in Cp.
The formula for Cpk is as follows:
Process capability = min(USL-µ/3σ, µ-LSL/3σ)
N
Here,
USL = Upper Specification Limit
LSL = Lower Specification Limit
µ = Process mean
σ = Standard deviation
To understand the difference between Cp and Cpk, consider the exam-

ple of a bowler in a cricket match. If the bowler’s group of deliveries
land on the same spot, for example, outside the off stump of a bats-
man consistently forming a good group, then this is high Cp. Now, the
bowler lightly adjusts his length and line, and bowls his next group of
deliveries on the middle stump and with each delivery he uproots the
stump and takes a wicket. So now the bowler has high Cpk.
Apart from this, there are certain other process capability indices,
which are shown in Table 4.2:

N O T E S
TABLE 4.2: VARIOUS PROCESS CAPABILITY INDICES

Index Equation Definition
Process capability for two-sided speci-
(USL − LSL) fication limits, which does not consider
Cp 6σ where the process is centered (i.e., what
is the process average (X).
µ−X
Cp,n Cpu = Process capability based on the USL.
3σ
S
Cp,l X−µ Process capability based on the LSL.
Cpl =
3σ
Cpk Minimum of Cpu, Cpl Process capability for two-sided speci-

fication limits, which considers where
IM the process is centred.
Among these indices, process capability indicator Cpk is an excellent

measure of process capability and variability because it considers
both the spread and the non-centring of the apparent shift in the pro-
cess variation. In process control, centring a process is much easier
than reducing the spread. Centring requires a relatively simple ad-
justment, whereas reducing the spread requires great amount of plan-
M
ning and redesign.
1. What is process capability?

N
2. Process capability depends only on inherent variability of a

process, and not unnatural variability. (True/False)
3. Process capability makes the operations of a process
dependent on a system instead of a person. (True/False)
4. The process capability measurement aims to find the
______________ of the individual measurements of products
when a process is in control.
ACTIVITY
Analyse any project that is not able to meet its specified objectives
with the help of the Internet. Study the process of the project and
determine how you can meet the defined project objectives by im-
proving process capability.

N O T E S
COMPARISON OF PROCESS CAPABILITY

4.3
WITH DESIGN SPECIFICATIONS
Process capability is the ability of a process to meet design specifi-
cations for a product or services. Design specifications are usually in
the form of a target and a tolerance. They are established according
to customer requirements. They indicate a range of values in which
individual units of output must fall in order to be acceptable.
In process capability analysis, you determine whether the inherent

variability inherent in the output of a process that is in control falls
within the acceptable range of variability allowed by the design spec-
ifications for the process output. If it is within the specifications, the
S
process is said to be ‘capable’. If it is not, you must decide how to cor-
rect the situation.
To give a simple analogy, in process capability you determine what are

the limits of a process that is in control and find if there are any out-
IM lines (voice of the process). Then, you define what the limits are and
see how the data fits into them (voice of the customer). If it does not,
then you change the process till the data fits into it.
Figure 4.4 shows three cases:

Case A: Process capability and output specifications are well
matched. Therefore, almost all the process output can just match
M
the specifications.
Case B: Process variability is well within specifications. Nearly
100% of the output must match the specifications.
Case C: The specifications are tighter than the process capability.
Therefore, even if the process is functioning as expected, a consid-
N
erable percentage of the output will not meet the specifications.

In other words, the process could be in control and still generate
unacceptable output.
Lower Upper Lower Upper Lower Upper

specification specification specification specification specification specification
A. Process variability seems B. Process variability C. Process variability

to just match specifications well within specifications exceeds specifications
Figure 4.4: Process Capability and Specifications
Therefore, you cannot automatically assume that just because a pro-

cess is in control, it will provide the desired output. Instead, you must
specifically verify whether a process is capable of meeting specifica-
tions and not simply set up a control chart to monitor it. A process
should be both in control and within specifications before production
begins.

N O T E S
In Case C shown in Figure 4.4, you might consider the following pos-
sible solutions:
Redesign the process so that it can achieve the desired output.
Use an alternative process that can achieve the desired output.
Retain the current process but try to remove unacceptable output
using 100% inspection.
Examine the specifications to see whether they are mandatory or
could be relaxed without harming customer satisfaction.
To determine whether a process is capable, you can compare ±3

standard deviations (i.e., 6 standard deviations) of the process to the
specifications for the process. For example, suppose the ideal length
S
of time to perform a service is 10 minutes, and an acceptable range of
variation around this time is ±1 minute. If the process has a standard
deviation of .5 minute, it would not be capable because ±3 standard
deviations would be ±1.5 minutes, exceeding the specification of ±1
minute.
IM
5. The ability of a process to meet the design specification for a

product is called ____________.
6. Design specifications are usually in the form of a tolerance.
M
(True/False)
7. To determine whether a process is capable, how many
standard deviations of the process should you compare with
the specifications for the process?
a. ±1 b. ±2
N
c. ±3 d. ±4
ACTIVITY
You want to choose any one of three machines for a job. The follow-
ing table lists the processes and their standard deviations. Deter-
mine which machines are capable if the specifications are 10 mm
and 10.8 mm. Also, calculate the process capability index for each
process.
TABLE: PROCESS AND THEIR STANDARD DEVIATIONS

Process Standard Deviation
1 .13
2 .08
3 .16

N O T E S
4.4 SUMMARY
Process capability is defined as the ability of a process to accom-
plish the required output in the given organisational limits to de-
liver a business value.
Every process shows a natural variation and sometimes abnormal
variations in the process execution.
The main objectives of process capability are:
To make operations system dependent instead of person de-
pendent.
To increase productivity.
S
To improve quality of products.
To improve communication modes within and outside an or-
ganisation,
IM The process capability measurement aims to find the standard de-
viation of the individual measurements of products when a pro-
cess is in control.
To analyse the process capability, you can use a control chart or a
frequency distribution method.
A process capability index is an analytical measure that compares
the performance of a product or a process with its predefined
M
specification.
Cp is the process capability indicator that indicates the relation be-
tween the specification range and the process width i.e. the spread
of the distribution.
N
Cpk is the process capability indicator that considers the inconsis-

tencies observed in Cp.
Process capability is the ability of a process to meet the design
specifications for a product or services. Design specifications are
usually in the form of a target and a tolerance established accord-
ing to customer requirements.
A process should be both in control and within specifications be-
fore production begins.
KEY WORDS
Cp: Refers to the process capability indicator that signifies the

degree to which a process can meet customer requirements. It
is measured against an upper and/or lower specification limit
representing the ‘extremes’ of customer requirements on the
process. Values > 1 indicate a capable process and values < 1
indicate a process that is not meeting customer requirements.

N O T E S
Cpk: Refers to the process capability indicator that takes into ac-
count the inconsistencies observed in Cp.
Process Capability: Refers to the ability of a process to perform
in relation to the tolerance limits set according to customer
specifications.
Process Capability Index: Refers to a statistical measure of
process capability. It is the ability of a process to produce output
within specification limits. The concept of process capability
only holds meaning for processes that are in a state of statistical
control.
Standard Operating Procedure (SOP): Refers to a document
that compiles all procedures, job tasks, scripts of interactions
S
with customers or others, data collection instructions and forms,
and an updated list of resources to be consulted for clarification
of procedures.
IM
1. Explain the objectives of process capability.
2. Illustrate how you can measure process capability.
3. How does process capability compare with design specifications?
Explain.
M

N

Concept of Process 1. Process capability is defined
Capability as the ability of a process to
achieve its objective within
the given constraints or the
limitations.
2. False
3. True
4. Standard deviation
Comparison of Pro- 5. Process capability
cess Capability with
Design Specifications
6. True
7. c. ±3

N O T E S
1. Process capability streamlines the day-to-day operations and

moves their dependency to a system, instead of a person. Refer
to Section 4.2 Concept of Process Capability.
2. The process capability measurement aims to find the standard
deviation of the individual measurements of products when a
process is in control. Refer to Section 4.2 Concept of Process
Capability.
3. In process capability analysis, you determine whether the
inherent variability inherent in the output of a process that is in
control falls within the acceptable range of variability allowed
by the design specifications for the process output. Refer to
S
Section 4.3 Comparison of Process Capability with Design
Specifications.

IM
SUGGESTED READINGS
M
St. Lucie Press.
N
Telford.
Hall.
Pollitt,C., & Bouckaert, G. (1995). Quality improvement in Europe-
E-REFERENCES
What is Process Capability? Retrieved from http://www.itl.nist.

gov/div898/handbook/pmc/section1/pmc16.htm.
Process Capability Statistics: Cp and Cpk, Working Together.
Retrieved from http://blog.minitab.com/blog/statistics-and-qual-
ity-improvement/process-capability-statistics-cp-and-cpk-work-
ing-together.

C H A
5 P T E R
ACCEPTANCE SAMPLING
S
CONTENTS
5.1 Introduction
IM
5.2
5.2.1
Concept of Acceptance Sampling
Reasons for Acceptance Sampling
5.2.2 Basics of Sampling Plans
5.2.3 Producer’s and Consumer’s Risks
Activity
5.3 OC Curve
M
5.3.1 Objectives of OC Curve
5.3.2 Types of OC Curve
5.3.3 Plotting the OC Curve
Activity
N
5.4 Summary

N O T E S
EVALUATION OF TIRES’ SAMPLES AT ABC PVT. LTD.
ABC Pvt. Ltd. is a leading car manufacturer. It purchases differ-

ent parts of the car, such as steering wheel, engine, and tires, from
various vendors and then manufacture a car according to custom-
er’s specifications. The company has been a leading manufactur-
er for hatchback and sedan models, and now wants to enter into
the manufacturing of sports cars.
The company has defined a specific criterion for choosing each

part of the sports car it plans to manufacture. For example, it has
defined the following criteria for evaluating the tires of the sports
cars:
S
The tires should have good dry and wet handling.
The tires should have good tread life.
The tires should be comfortable to ride.
IM The tires should ride without making any noise.
The tires should have good rolling resistance.
ABC has selected three suppliers, X, Y, and Z, to evaluate their

tires’ samples. It has performed the following steps to select the
best tire supplier of the three:
M
1. Select a sample of 10 tires each of X, Y, and Z suppliers.
2. Evaluate the tires collected as the sample based on the
criteria decided for selecting the tire.
3. If the selected samples represent all the tires available with
the three suppliers, then select or reject the tires.
N
Using this process, ABC has found that the supplier Z’s sam-
ple meets all the criteria of selection. Therefore, ABC has given
the contract of supplying sports car tires to the supplier Z. Fi-
nally, ABC is able to successfully manufacture a sports car and
launch it.

Acceptance Sampling 87
N O T E S
LEARNING OBJECTIVES

Explain the concept of acceptance sampling, including its
purpose, basics of sampling plans, and risks to producers and
consumers
Explain the objectives, types, and plotting of the Operating
Characteristic (OC) curve
5.1 INTRODUCTION
With the increasing competition in the global marketplace, businesses
S
are re-assessing their strategies to deliver goods and services in quick
turnaround time to meet the customers’ requirements. A useful mea-
sure that they can adopt is to follow the sampling procedure. Sam-
pling provides long-term benefits for both manufacturers and buyers.
IM
It helps an organisation to choose a random sample from a given lot.
Based on the testing results of the sample, the organisation can decide
whether to accept or reject the entire lot.
For example, you are the owner of a retail store. You receive a package
of biscuits (10 biscuits per pack) from a new confectionery company.
To promote the new biscuits, you display the entire lot on shelves.
A customer comes in and inquires about the new biscuits. To satisfy
M
his curiosity, he asks if he could taste the biscuit before making any
decision to buy it. Unfortunately, the customer does not like the taste
and rejects the product. Now, the entire reputation of the confection-
ary company is doomed because the customer has formed a negative
opinion about its products based on the taste of one sample of its bis-
N
cuit product. Here, the customer determines the quality of the entire
products of the confectionery company based on the sample he tasted.
This is an example of acceptance sampling.
Consider another example of acceptance sampling. A manufacturer

receives a batch of batteries containing 20 cartons. To determine the
product quality, the manufacturer selects two-three cartons to check
the performance of the battery. If the chosen set of batteries perform
well, then the manufacturer will select the entire batch; otherwise it
will reject and return the lot.
This chapter covers the concept of acceptance sampling, including its

reasons, basics of sampling plans, and risks to producers and consum-
ers. You will also learn about the Operating Characteristic (OC) curve,
including its objectives, types, and how to plot it.

N O T E S
5.2 CONCEPT OF ACCEPTANCE SAMPLING

Acceptance sampling is the process of accepting or rejecting a lot based
on a sample drawn from the lot. It is the process where you choose a
sample from a given population or lot of a finished product, evaluate
the sample on predefined parameters, and then decide whether to ac-
cept or reject the lot based on the results from the sample.
Figure 5.1 shows the steps involved in the acceptance sampling pro-
cedure:
Select a sample from a population using various methods,

such as simple random sampling or quota sampling.
S
IM Evaluate the chosen sample on a predefined criterion.
If the sample meets the predefined criterion, accept the

entire lot; otherwise reject it.
Record the results of the acceptance sampling procedure

for future use.
Figure 5.1: Acceptance Sampling Procedure

M
To understand the procedure, consider the following example:

You are the owner of a bakery and has received a consignment of
pastries from a local catering firm. To decide whether the pastries
meet the customer’s criteria of taste and freshness, you choose a
N
sample from the lot.

You test the sample on the predefined criteria of taste and fresh-
ness. You can even ask some customers to test the sample.
Based on the test results, you can accept or reject the entire lot of
pastries.
Acceptance sampling thus aims to help you decide whether to accept

or reject a lot. It should be noted that acceptance sampling does not
include any means to improve the quality of the product. It just acts as
an auditing tool in performing quality control activities.
Acceptance sampling also includes an inherent risk that you decide

to accept or reject a lot based on the choice of a sample. If you do not
correctly select a sample, then you risk accepting a bad lot.
5.2.1 REASONS FOR ACCEPTANCE SAMPLING
Acceptance sampling is a popular method. Some of the reasons of its

popularity are as follows:

N O T E S
It is economical in terms of time and money.

It puts the responsibility of sampling on a specific individual or a
group of individuals.
It helps manufactrers to remove a poor lot, which results in quality
improvement.
It provides accurate results if samples are inspected carefully and
systematically. This reduces the number of errors in products.
It helps manufacturers to identify the real issue of rejection and
focus on product quality.
It ensures that there is minimum damage to the lot, as it examines
only a sample of the entire lot.
S
It provides a stronger motivation for vendor improvement.
5.2.2 BASICS OF SAMPLING PLANS

IM
A sampling plan specifies the parameters of the sampling process for
accepting or rejecting a sample. There are various types of sampling
plans:
Single sampling plan
Double sampling plan
Multiple sampling plan
M
Let’s discuss each plan as follows:
Single Sampling Plan: In this sampling method, you define the
maximum number of defects. Based on this number, you select a
random sample from a lot. You inspect every item of the sample
and label it as good or bad after inspection. Figure 5.2 displays the
N
steps involved in the single sampling plan procedure:
Collect a random sample from a lot for inspection.
Inspect the sample for the required design and quality

characteristics.
If the number of defects in the sample is equal to or less

than the numbers set in parameters, then accept the lot.
If the number of defects in the sample is more than the

number set in parameters, then reject the lot.
Figure 5.2: Single Sampling Plan Method

N O T E S
Double Sampling Plan: If the results of the single sampling are

inconclusive, then you perform a double sampling of the lot. Fig-
ure 5.3 displays the steps involved in the procedure of the double
sampling plan:
Collect a random sample from the lot for inspection.
Inspect the sample for the required quality characteristics.
If the numbers of defects in the sample are equal to or less than the numbers
S
set in parameters (say, C1), then accept the lot.
If the numbers of defects in the sample are more than the numbers set in
parameters (say, R1), then reject the lot.
IM If the total number of defects is more than C1 but less than R1, then select
another sample.
If the total numbers of defects in both the samples are less than the acceptance
number C2, then accept the lot.
M
If the total numbers of defects in both the sames are more than the rejection
number R2, then reject the lot.
Figure 5.3: Double Sampling Plan

Multiple Sampling Plan: This sampling plan is the same as for
N
double sampling except that the number of samples necessary to

make a decision may be more than two. In this plan, smaller sam-
ples are used sequentially until a decision to accept or reject the
lot is made.
When units are randomly chosen from a lot and tested one by one, and
the cumulative number of inspected defects is recorded, the process is
called sequential sampling.
If the cumulative number of defects is more than the Upper Specifica-

tion Limit (USL) specified for that sample, then reject the whole lot.
If the cumulative number of rejects is more less than or equal to the

Lower Specification Limit (LSL), then accept the lot.
If the number of defects falls within these two boundaries, continue to

sample units from the lot.

N O T E S
In conclusion, you can choose a sampling plan depending on the cost

of collecting a sample and testing it. If the cost is high for double or
multiple sampling plans, then you can opt for the single sampling plan.
Selection of the best sampling plan-single, double, or multiple-

depends on the types of products being inspected and their expected
quality level. For example, a low-quality batch of goods can be identi-
fied quickly and more cheaply with sequential sampling. On the other
hand, there are instances when a single sampling plan is easier and
simpler for workers to conduct.
5.2.3 PRODUCER’S AND CONSUMER’S RISKS
In acceptance sampling, two parties are usually involved:
S
The producer of the product
The consumer of the product
IM
When specifying a sampling plan, each party wants to avoid expensive
mistakes in accepting or rejecting a lot.
The producer wants to avoid the mistake of having a good lot rejected
because he/she usually must replace the rejected lot. This is called
producer’s risk. On the other hand, thec consumer or customer wants
to avoid the mistake of accepting a bad lot because defects found in a
lot that has already been accepted are usually the responsibility of the
M
consumer. This is called consumer’s risk.
1. What is true about acceptance sampling?

N
a. You can choose a range of acceptable samples from a lot.

b. It acts as an auditing tool in quality control activities.
c. It enables you to improve the quality of the samples that
fail the specified criterion in order to make them more ac-
ceptable.
d. It is a risk-proof method that ensures selection of the best
samples.
2. In which sampling plan do you record the cumulative number
of defects in smaller sized samples sequentially and continue
to compare then with the USL and LSL specified for that
sample until you make a decision to accept or reject the lot?
a. Single sampling plan b. Double sampling plan
c. Multiple sampling plan d. All of them

N O T E S
3. When should you choose another sample for testing?

a. The number of defects in the sample The number set in
parameters (C1)
b. The number of defects in the sample The number set in
parameters (R1)
c. The number of defects in the sample C1 but < R1
d. The number of defects in the sample is 100
4. The intention of a producer to avoid the mistake of having a
good lot rejected is known as ____________________.
S
ACTIVITY
Identify and compare some industry examples of single, double,

and multiple sampling plans. Use the Internet, articles, research
IM papers, etc. for your study.
5.3 OC CURVE
The Operating Characteristic (OC) curve is a graph used in accep-
tance sampling. It describes how well an acceptance plan distinguish-
es between good and bad lots. A curve is related to a specific plan,
M
which is a combination of a sample size and acceptance level.
Figure 5.4 shows an OC curve:

N
= Producer’s Risk
Probability of the acceptance
of the entire lot
= Consumer’s
AQL risk
LTPD
Percentage of Defectives in the
Figure 5.4: Operating Characteristic (OC) Curve
Here, the x-axis shows the percentage of defectives and the y-axis
shows the probability of acceptance of the entire lot.

N O T E S
There are four parameters of an OC curve:

Producer’s Risk (a): Refers to the probability that a sampling plan
would reject a good lot (non-defective) of products, which forces
the producer to replace the rejected lot. It is also called Type I
error.
Consumer’s Risk (b): Refers to the probability that the consumer
would accept a bad lo, which contains a large number of defects.
Once accepted, the consumer would find it hard to get the bad lot
replaced by the producer. It is also called Type II error.
Acceptable Quality Level (AQL): Refers to the maximum per-
centage of defects that consumers are willing to accept. AQL is
considered the satisfactory quality level and is also called Accep-
S
tance Quality Limit.
Lot Tolerance Percentage Defective (LTPD): Refers to the per-
centage of defects that is higher than AQL and is therefore not
accepted by the consumers. LTPD has low probability of accep-
IM
tance. This is also known as the Limiting Quality Level (LQL). The
LQL is expressed as a proportion of defectives, while the LTPD is
expressed as a percentage.
To understand the concept, let us consider an example of an OC curve

shown in Figure 5.5:
M
Producer’s Risk ( risk)
100%
N= 2000
Probability of Acceptance (Pa)
90%
n = 50
80% C=2
N
70%
60%
50%
40%
30%
20% Consumer’s Risk ( risk)
10%
0%
AQL LQL
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Proportion Nonconforming (% defective items)
Figure 5.5: An Example of an OC Curve
Figure 5.5 shows an OC curve for a sample of 50 items (n) taken from
a batch of 2000 (N) and using a critical acceptance number (c) of 2.
The critical acceptance number (c) of 2 means that the batch will be
accepted if there are two or less defectives in the sample. From the OC

N O T E S
curve, you can see that there is about a 23% probability of accepting a
batch that contains 8% of defective items.
5.3.1 OBJECTIVES OF OC CURVE
The OC Curve refers to a graph of attributes of a sampling plan con-

sidered during project management. It displays the percentage of lots
or batches that are expected to be acceptable under the specified sam-
pling plan and for the specified process quality.
The main objectives of the OC curve are:
To help in the selection of sampling plans.
To help in the selection of plans, which are effective in reducing
S
risks.
To help in lowering the cost of inspection.
5.3.2 TYPES OF OC CURVE

IM There are three types of OC curves:
Type A Curve: Gives the probability of acceptance of an individual
lot coming from finite production. In other words, this curve gives
the probability of acceptance of a defective fraction as a function
of a finite lot. For example, in a lot of 200 items, 0.5 or 1% items are
defective.
M
Type B Curve: Gives the probability of acceptance of lots coming
from a continuous process. In other words, it gives the probability
of acceptance of a lot as a function of the continuous product qual-
ity. These curves are based on the assumption that the size of the
lot is infinite.
N
Type C Curve: Gives the long-run percentage of a product accept-

ed during the sampling phase.
5.3.3 PLOTTING THE OC CURVE
There are two ways to construct an OC curve:

Binomial equation
Poisson distribution
The binomial equation is:
c nl
Pa=∑d = 0 pd(1–p)n-d........................................ (1)
d!(n–d)!
Here,
n = Number of items sampled (called trials)
p = Probability that an x (defect) will occur at any one trial
Pa= Probability of exactly x results in n trials

N O T E S
When the sample size (n) is large and the percent defective (p) is small,
the Poisson distribution can be used as an approximation of the bino-
mial formula. This is useful because binomial equations can become
quite complex, and because cumulative Poisson tables are readily
available.
Now, let’s consider an example to where you will calculate the prob-
ability of acceptance in a single sampling plan and then construct an
OC curve using this probability.
An organisation has submitted a lot of goods having a size of N for

quality inspection. The inspector has taken a sample of 90 items with
the acceptance number 2 and the lot fraction defective as 0.01. Deter-
mine the probability of acceptance of the lot by the inspector.
S
Here, n = 90, c = 2, and p = 0.01
The formula to calculate the probability of acceptance of the lot is as

follows:
Pa=∑d = 0
c nl
IM
d!(n–d)!
pd(1–p)n-d……………………………(1)
90! 90! 90!

= (0.01)0(1-0.01)90+ (0.01)1(1-0.01)89 +
0!(90–0)! 1!(90–1)! 2!(90–2)!
(0.01)2(1-0.01)88
= (0.01)(0.99)90+ 90*(0.01)(0.99)89 + 45*89*(0.01)2(1-0.01)88
M
= 0.9381
If you input the different values of p in equation (1), then you will get
different values of probability of acceptance Pa, which are shown in
Table 5.1:
N
TABLE 5.1: PROBABILITY OF ACCEPTANCE FOR DIFFER-

ENT VALUES OF P
Fraction Defective, p Probability of Acceptance, Pa
0.005 0.989371
0.01 0.938056
0.02 0.731175
0.03 0.491012
0.04 0.296970
0.05 0.166431
0.06 0.087984
0.07 0.044387
0.08 0.021537
0.09 0.010106

N O T E S
Now, you can plot the resultant Pa values on a graph to obtain the re-
quired OC curve, which is shown in Figure 5.6:
1.2
Probability of Acceptance, Pa
1
0.8
0.6
0.4
0.2
S
0
1 2 3 4 5 6 7 8 9 10
Fraction Defective, p
IM Figure 5.6: OC Curve
Therefore, the OC curve distinguishes between the accepted level and

rejected level of fraction defective in a lot. For example, if 100 lots from
a process that manufactures 1% defective products are submitted to
the above sampling plan, then 94 lots will be accepted while 6 lots will
be rejected.
M
5. The OC curve describes how well ________________

distinguishes between __________ and ____________.
N
6. Which parameter represents a Type I error in an OC curve?

a. AQL b. LTPD
c. Consumer’s Risk d. Producer’s Risk
7. Which parameter refers to the maximum percentage of
acceptable defects in a lot?
a. LTPD b. AQL
c. Consumer’s Risk d. Producer’s Risk

N O T E S
ACTIVITY
An importer is going to inspect a shipment of 2000 of portable bat-

tery units for microcomputers. The manufacturer and the importer
have set up a sampling plan in which the producer’s risk is limited
to 5% at an AQL of 2% defective, and the consumer’s risk is set to
10% at LTPD = 7% defective. Construct the OC curve for the plan
of n = 120 sample size and an acceptance level of defectives. Both
the importer and the manufacturer want to know if this plan will
satisfy their quality and risk requirements. Use cumulative Poisson
distribution tables for this exercise. You can refer to these tables
from the Internet.
S
5.4 SUMMARY
Acceptance sampling is the process of accepting or rejecting a lot
based on a sample drawn from the lot.
The
IM
acceptance sampling procedure is as follows:
1. Select a sample from a population.
2. Evaluate the chosen sample on a predefined criterion.
3. If the sample meets the predefined criterion, accept the entire
lot; otherwise reject it.
M
4. Record the results of the acceptance sampling procedure for
future use.
Acceptance sampling acts as an auditing tool in quality control.
Some of the reasons behind the popularity of acceptance sampling
are as follows:
N
It is economical in terms of money and time.

It helps to remove a bad lot, which improves quality of the
product.
It reduces the number of errors in a product.
A sampling plan specifies the parameters of the sampling process
for accepting or rejecting a sample. There are various types of
sampling plans:
Single sampling plan
Double sampling plan
Multiple sampling plan

N O T E S
When specifying a sampling plan, there are risks to the:

Producer of the product who wants to avoid the mistake of hav-
ing a good lot rejected. This is known as producer’s risk.
Consumer of the product who wants to avoid the mistake of
accepting a bad lot. This is known as consumer’s risk.
The OC curve is a graph that describes how well an acceptance
plan distinguishes between good and bad lots.
The four parameters of the OC curve are:
Producer’s risk
Consumer’s risk
S
AQL
LTPD
There are three types of OC curves:

IM Type A, which gives the probability of acceptance of an indi-
vidual from a finite production
Type B, which gives the probability of acceptance of lots from
a continuous process
Type C, which gives the long-run percentage of a product ac-
cepted during the sampling phase
M
To calculate the OC curve, you can use:
c nl
Binomial equation: Pa=∑d = 0 pd(1–p)n-d
d!(n–d)!
Poisson distribution
N
KEY WORDS
Acceptance Sampling: Refers to inspecting a relatively small

number of items from a batch or a lot and then using the results
of this sample to either accept or reject the entire lot.
Acceptable Quality Level (AQL): Refers to the maximum per-
centage of defectives that is acceptable as a long-term average.
Population: Refers to a summation of all the organisms of the
same group or species.
Single Sampling Plan: Refers to a sampling plan specified by
two numbers: The number of items to be sampled (n) and a
pre-specified acceptable number of defects (c).
Double Sampling Plan: Refers to a sampling plan where if the
results of the first sampling prove inconclusive, then you take a
second sample, which is smaller than the one used in a single
sampling plan.

N O T E S
Multiple Sampling Plan: Refers to a sampling plan, which is an

extension of the double sampling plan and where smaller sam-
ples are used sequentially until a clear decision can be made.
OC Curve: Refers to a graph that plots the probability of accept-
ing a batch of items against the quality level of the batch.
Producer’s Risk: Refers to the probability that a batch with
quality equal to, or better than, the AQL will be rejected.
Consumer’s Risk: Refers to the risk that a consumer will accept
a batch of worse quality than the Lot Tolerance Percentage De-
fective (LTPD).
Lot Tolerance Percentage Defective (LTPD): Refers to the
S
percentage of non-conforming items associated with the con-
sumer’s risk.
IM
1. Explain the concept of acceptance sampling, clearly illustrating
the reasons for its widespread use in the industry.
2. Explain the difference between single, double, and multiple
acceptance sampling plans.
3. Describe the OC curve.
M

N

Concept of Accept- 1. b. It acts as an auditing tool
ance Sampling in quality control activities.
2. c. Multiple sampling plan
3. c. The number of defects in
the sample C1 but < R1
4. Producer’s risk
OC Curve 5. Acceptance plan, good lots,
bad lots
6. d. Producer’s risk
7. b. AQL

N O T E S
1. Acceptance sampling is the process of accepting or rejecting

a lot based on a sample drawn from the lot. Refer to Section
5.2 Concept of Acceptance Sampling.
2. If the results of the single sampling are inconclusive, then
you perform a double sampling of the lot. Refer to Section
5.2 Concept of Acceptance Sampling.
3. The Operating Characteristic (OC) curve is a graph used in
acceptance sampling. Refer to Section 5.3 OC Curve.
S
SUGGESTED READINGS

IM Charantimath, P. (2011). Total quality management. New Delhi, In-
St. Lucie Press.
Hellard, R. (1993). Total quality in construction projects. London:
M
T. Telford.
Hall.
Pollitt, C., & Bouckaert, G. (1995). Quality improvement in Europe-
N

E-REFERENCES
What is Acceptance Sampling? Retrieved from http://www.itl.nist.

gov/div898/handbook/pmc/section2/pmc21.htm.
Operating Characteristics curve (O.C curve). Retrieved from http://
www.ustudy.in/node/6007.

C H A
6 P T E R
QUALITY FUNCTION DEPLOYMENT
S
CONTENTS
6.1 Introduction
IM
6.2
6.2.1
Concept of Quality Function Deployment
Objectives of Quality Function Deployment
6.2.2 Process of Quality Function Deployment
6.2.3 Benefits of Quality Function Deployment
Activity
6.3 Taguchi Methods Leading to Robust Design
M
Activity
6.4 Poka Yoke (Mistake Proofing)
6.4.1 Objectives of Poke Yoke
6.4.2 Poka Yoke Techniques
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6.4.3 Poka Yoke Systems

6.4.4 Quality at Source
6.4.5 Jidoka Concepts
Activity
6.5 Summary

N O T E S
QUALITY FUNCTION DEPLOYMENT AT SMART

COMMUNICATIONS
Smart Communications, a major telecommunication company,

was going through hard times with its service activation process.
A large segment of customers of the customers were not billed in
timely and accurate manner. As a result, the company had to face
revenue loss of around 25%. In addition, a lot of time was taken
to establish new connections. Consequently, both employees and
customers were left unhappy with the existing processes and ser-
vices of the company.
The company decided to solve the problem by applying QFD
S
methodologies. The main aim of the company to implement QFD
was to configure the processes according to the needs of the cus-
tomers. For this, Smart Communications conducted a market re-
search to determine and understand the needs and expectations
IM of customers. Moreover, the cross-functional project team of the
company defined the benchmarks to be used for critical processes
adopted. Various actions were taken to move these critical process
characteristics from the current level to the required higher level.
After the QFD methodologies were adopted, Smart Communica-

tions experienced a The QFD a sharp fall in the service activation
time. Furthermore, the revenue loss was reduced to near zero and
M
the satisfaction of customers and employees greatly increased.
Apart from QFD, various other techniques are used by organisa-

tions to maintain quality, such as Taguchi methods and PokaYoke.
In this chapter, you will study about the complete process of QFD
aother techniques used for the maintenance of quality in an or-
N
ganisation’s processes and products.

QUALITY FUNCTION DEPLOYMENT 103
N O T E S
LEARNING OBJECTIVES

>> Define the concept of quality function deployment
>> Describe the process of quality function deployment
>> State taguchi methods leading to robust design
>> Explain the concept of Poka Yoke
6.1 INTRODUCTION
The customer considers quality as its prime factor for any products
or services. However, sometimes organisations fail to meet the hope
S
of customers. This happens as products and services do not integrate
the features projected by the customers. For instance, customers may
imagine definite functions in an automobile which the automobile
company may not be able to offer due to lack of knowledge regarding
IM
customer`s expectation. Due to this, it is exceedingly imperative that
organisations comprehend the expectations of the customers and de-
sign products and services in view of that. QFD is a quality manage-
ment technique, that assists organisations to judge the requirements
and choices of the customers and thereby meet customer satisfaction.
QFD emphasies on the needs of maintaining quality in processes as

well as products. The aim of using QFD us that the quality must be
M
designed in to product and not inspected after manufacturing. It is a
quality system that brings out a close linkage between end user with
other organisational processes like marketing, design, quality, produc-
tion, manufacturing, and engineering.
N
CONCEPT OF QUALITY FUNCTION

6.2
DEPLOYMENT
The concept of QFD was first introduced by Yoji Akao, a Japanese qual-
ity planning expert in 1966. The prime goal of Mr. Akio behind QFD was
to work out a method that would support manufacturers in designing
products as per the choice of the customers. He once eminently men-
tioned that “Time was when a man could order a pair of shoes directly
from the cobbler. By measuring the foot himself and personally han-
dling all aspects of manufacturing, the cobbler could assure the custom-
er would be satisfied,” So, he devised QFD as technique of including
customers’ choice in the products in the design phase itself.
QFD methodology was first used in the Mitsubishi`s Kobe shipyard in

1972. Later, QFD was adopted by different Japanese firms.
The methodology was introduced in the automotive and electronic

industry in USA in the 1980s. Firstly, American companies showed

N O T E S
unwillingness in adopting QFD. Nevertheless, the methodology soon

became popular in USA by the companies facing tough competition
from Japanese firms. Toyota is the most famous Japanese company
which introduced QFD very widely from the start.
Currently, QFD is comprehensively employed in manufacturing and

service industries (including IT companies, BPOs and KPOs.)
QFD offers a strategic method of comprehending customer`s choices,

translating the choices into product features and design the products
. For instance, customers anticipate smooth writing familiarity when
they use a pen. QFD assists in translating this customer expectation
i.e. smooth writing experience into product features such as the prop-
er level viscosity of the ink of the pen so that customer contentment
S
can be met. Dr. YojiAkao (1966) explains QFD as “a method to trans-
form user demands into design quality, to deploy the functions form-
ing quality, to deploy methods for achieving the design quality into
subsystems and component parts and ultimately to specific elements
IM of the manufacturing process.”
Let us consider an instance to have a clarity about QFD. Assume an

automobile manufacturer receives regular criticism from the custom-
ers based on compensation to car bumpers in low-speed collisions.
And the customers expect improved and stronger bumpers to be fitted
with the automobiles.
Such kind of scenarios, the QFD team advices the automobile manu-
M
facturers to follow the following steps:
1. Recognise the Customers: For instance, Car owners
2. Find out Their Requirements: A requirement for stronger
bumpers to endure slow-speed collisions, smart looking, cost-
N
effective, rust-free, and long-lasting are the need in the situation.

3. Importance of the Requirements: Good looking, stronger
bumpers to endure slow-speed collisions, cost-effective, rust-free
and long-lasting
4. Interpret: Take account of the customer expectations into design
specifications and manufacture enhanced quality bumper. Utilise
quality material and instill the required designing alterations to
manufacture enhanced and stronger bumpers.
QFD is all about two factors:

Quality Deployment: It deploys the customer expectation in the
design of the product. This makes sure that customers` require-
ments are met.
Function Deployment: It relates to all business functions from
design-to-manufacturing with the support of teams. This function
supports in incorporating the different organisational functions

N O T E S
to toil towards the common objective of offering uperior quality

products to customers.
6.2.1 OBJECTIVES OF QUALITY FUNCTION DEPLOYMENT
The main rule of QFD is that the quality awareness should be very
much incorporated into the products and there must not be any re-
quirement of quality assessment after manufacturing. In QFD, the re-
quirements of the customers are continuously communicated to the
design and productions teams, in this manner, connecting the custom-
ers in some way in the production process. QFD was primarily intro-
duced to lessen the variation mid customer`s requirement and the
manufacturer’s product design. Furthermore, QFD assists in creating
a close link between the end users of products with many organisa-
S
tional processes, like designing the product, quality control, produc-
tion and marketing. The main objectives of deploying QFD are:
To understand customers’ needs and expectations
To
IM
define the needs to be priotitised
To search the ways to satisfy the needs
To implement the ways cost-effectively
To maintain quality in all the processes and end products
6.2.2 PROCESS OF QUALITY FUNCTION DEPLOYMENT

M
QFD is an approach engaged to make sure quality in design while the

product is in the designing phase. One can consider QFD as a proce-
dure wherein customer voice is esteemed and recognised to carry all
through the process of production. The QFD process initiates with
product planning and goes on through product designing and pro-
N
cess designing and lastly closes up with quality management, testing,

maintenance, and training. These stages are shown in Figure 6.1:
Product Planning
Product Designing, Development and Specification
Process Planning
Production Process Controlling
Figure 6.1: Stages of the QFD Process

N O T E S
Let us discuss the stages in detail.

1. Product Planning: This stage is even known as developing
abode of quality. The stage starts with recognising customer
needs and requirements and performing market study on
competitors, warranty data, measurements, product features,
sketches, national and international quality standards, ideas,
blue prints and market plans. Getting customer data in this stage
is extremely relevant for the achievement of QFD, as the final
aim of QFD is to fulfill the goals of the customers.
2. Product Designing, Development, and Specification: In this
stage, product features are defined and a sample is developed.
This stage is led and administered by the designing and
engineering teams. The prime aim of this stage is to translate
S
the customers` need into product specifications. Thus, this stage
includes a lot of originality and inventiveness.
3. Process Planning: In this stage the real products and their
IM sub-parts are developed as per the disclaimer of the previous
stage. This stage is led and administered by the production and
the engineering department. The prime aim of this stage is to
build the flowchart and regulate the production process and the
products.
4. Production Process Controlling: In this stage, the production
process is administered and controlled to make sure that the
products are being manufactured as per the specifications. In
M
this stage, firstly, the Key Performance Indicators (KPIs) are
explained for the control and monitoring process, production
scheduling and risk assessment. Additionally, the product
testing requirements are even mentioned. Currently, let us move
forwards and analyse the important advantages of QFD in the
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subsequent segment of the chapter.
6.2.3 BENEFITS OF QUALITY FUNCTION DEPLOYMENT
The prime aim of the QFD is to perk up customer contentment by in-

cluding their choices in the products. Table 6.1 explains on the major
advantages of QFD:
TABLE 6.1 BENEFITS OF QFD

Customer driven production zz QFD identifies the implicit as well as
the explicit customer requirements and
concentrates on the value adding pros-
pects of the customers. It supports on
concentrating ‘Voice of the Customer’
and not what the organisation desires
to manufacture. Every product devel-
opment activities is based on customer
requirement.

N O T E S
TABLE 6.1 BENEFITS OF QFD

Competitive advantage zz In QFD, competitors’ products and ser-
vices are analysed and compared with
the own products. This offers competi-
tive advantage to the firms.
Reduction in development zz QFD concentrates on making amend-
time ments and changes of products in the
design stage itself. So, there would be
roughly no design alterations in the pre-
ceding phases of product development.
This leads to lessening in the product
development time.
Reduction in development zz QFD reduces the cost required in
S
costs warranty claims, support cost, design
changes cost as the alterations are
made in initial life cycle and the needs
of the customers are considered while
developing the products.
IM
Along with the support of the QFD process, a top petrochemical com-
pany has been able to resolve issues of recruiting and retaining ca-
pable employees. Execution of QFD has assisted the organisation in
benchmarking performance standards and measuring the potential of
the employees in adding to the success of the company.
The organisation had been confronting the setback of soaring attrition

M
rate. Most of the intellectual employees with 3 to 8 years of experience
were quitting the job. This led to an inexperienced middle manage-
ment as the fresh employees replacing the departing employees were
of comparatively low experience. To handle the problem, the company
started a two-step QFD process, first to recognise the kind of people
the company desires to recruit and then to recognise the requirements
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of the desirable employees from the company.
The organisation performed an internal study to determine and adapt

the desirable employee features into quantifiable parameters. Few of the
sought-after employee features comprise skill sets, steadiness, growth
orientation, and capitalist. External research was even performed to ar-
range the list of anticipation of the preferred employees from the organ-
isation. The main motives of the employees comprise best remunera-
tion, training and development, and growth opportunities. The list was
further converted into measurable employer features. These comprise
the standard remuneration receieved by the employees in the organi-
saiton vis-à-vis other alike firms and average time for advertising. Next,
tangible actions were performed to instill these features into the legal
practices and enhance customer retention.
There are various other instances of QFD execution of companies:

1. Toyota had lessened initial losses by 61%.
2. Mazda limited last minute design alterations by half.

N O T E S
1. ________________ methodology was first used in the

Mitsubishi’s Kobe shipyard in 1972.
2. _______________deploys the customer expectation in the
design of the product. This makes sure that customers’
requirements are met.
a. Quality b. Function
c. Process d. Program
3. One cannot consider QFD as a procedure wherein customer
voice is esteemed and recognised to carry all through the
process of production. (True/False)
S
4. In which stage of QFD process the real products and their
sub-parts are developed as per the disclaimer of the previous
stage?
IM a. Product planning b. Product designing
c. Process planning d. Product development
5. In QFD, competitors’ products and services are analysed and
compared with the own products. (True/False)
6. QFD increases the cost required in warranty claims, support
cost, design changes cost as the alterations are made in initial
M
life cycle and the needs of the customers are considered while
developing the products. (True/False)
ACTIVITY
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Using the Internet, search two organisations that have implement-

ed QFD.
TAGUCHI METHODS LEADING TO

6.3
ROBUST DESIGN
Taguchi methods imply the statistical approaches developed byDr.
Genichi Taguchi for the enhancement of qualities of products and
services. The below are his chief contributions in the area of quality
management:
Taguchi Loss Function: Taguchi loss function is the basis of the
quality enhancement methodologies of Taguchi. Prior to Taguchi,

N O T E S
the conventional approach was that a product within the condi-

tion is of high quality and the remaining are of poor quality. Thus,
Taguchi advanced the point that a product which is slightly within
the requirement is of higher quality than a product that is slightly
outside the requirement.
Off-Line Quality Control:The off-line quality control methods of
Taguchi identify that variations in products must be removed in
the design and manufacturing phase.
Innovations in DOE: The term ‘experiment’ defines a methodical
approach performed in a forbidden environment to discover some
unidentified impact or to authenticate a theory. In the same way,
design of experiments as a technique deal with finding the link
between the process inputs and the outputs. Alternatively, DOE
S
is a methodical approach of measuring the production processes
of organisations to determine the process inputs which have very
noteworthy impacts on the process outputs i.e. the final outcome.
Let us suppose an instance to comprehend the idea more evident-
IM
ly. Consider, an electronic company manufactures amplifiers.The
typical inputs in the production process are W: the width of the
microstrip lines, R: a resistor, and C: a capacitor. In such situation,
the responsibility of DOE is to assess all these inputs of the pro-
duction process and find out the impact of every design inputs in
the final output.
Taguchi methods are used by organisations to built robust design. It

M
is the main aspect in growing engineering productivity. Robust design
supports in enhancing the effectiveness of the prime purpose of the
product with the support of flexible design. The rationale behind vig-
orous design is that it is expensive to administer the reason of manu-
facturing differences of products than to make a process numb to the
N
variations of the inputs. It means later the product flaw may prove
expensive for manufacturers. So, in well built design, the variations in
the inputs do not impact the outputs due to the flexible design of the
manufacturing process. For instance, a caramel producing company
determined that the “chewability” of the candies is based on the exter-
nal temperature. So, the company expected to lessen the dependence
of the “chewability” of the candies on the external temperature, so
that the candies were equally pleasing in various external tempera-
tures. Robust design supported the company in mixing the different
ingredients in such a manner that the dependence of the “chewabili-
ty” of the candies on external temperature became less.

N O T E S
7. _________________imply the statistical approaches developed

byDr.Genichi Taguchi for the enhancement of qualities of
products and services.
8. The __________________ methods of Taguchi identify that
variations in products must be removed in the design and
manufacturing phase.
a. Taguchi loss function b. Innovations in DOE
c. Off-line quality control d. Poka Yoke
9. _________________supports in enhancing the effectiveness of
the prime purpose of the product with the support of flexible
S
design.
10. The rationale behind vigorous design is that it is expensive
to administer the reason of manufacturing differences of
IM products than to make a process numb to the variations of the
inputs. (True/False)
ACTIVITY
List down the companies that have adopted Taguchi methods in

their production process.
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6.4 POKA YOKE (MISTAKE PROOFING)

While creating a password for your e-mail account in case the password
is too petite, a warning shows up on the screen: “Password strength:
N
too short”. When you try to locate an item in Google, it offers you with
the alternative of spell check to make sure that you get the spelling
of the item correct. In case of an electronic door lock system, the lock
of the car door does not open when the engine is running. These are
all cases of Poka Yoke in our day to day life. Alternatively, Poka Yoke
implies to a series of methods that supports in error prevention. These
techniques recognise how things can go wrong and how the mistakes
can be prevented at the priority. Therefore, Poka Yoke can be defined
as a series of quality management techniques that supports in remov-
ing defects in products by choosing various kinds of mistakes at the
design phase or the production phase.
Poka Yoke comprises various simple tools of mistake prevention. For

instance, we set alarm to wake up on time (this prevents the error of
waking up late), arrange checklist to make sure all the necessary items
have been packed before going for a vacation(preventing mistake of
not shipping valuable items uch as passports or tickets or other pass-
es) etc. Same as personal lives, there are big numbers of simple mis-

N O T E S
take prevention techniques followed in organisations which put off

damage and enhance quality. For instance, we have colour coding of
the wires and the plugs in a computer CPU so that the right wires (like
those of key pads and pointers) are linked to the right plugs.
The term PokaYoke is a amalgamation of two Japanese words ‘poka’

meaning unintentional error and ‘Yoke’ meaning stop. The main con-
cept of Poka Yoke is to devise the organisational processes in such a
manner that errors are avoided or found and corrected at an initial
phase of production.
Formal Poka Yoke practices were launched by Shigeo Shingo, a Jap-

anese industrial engineer. Shigeo Shingo was even one of the propo-
nents of statistical tools in quality control in the Japanese manufactur-
S
ing in the 1950s. Thus, steadily he recognised that statistical process
control tools are unable of lessening product errors to zero. The cause,
as per him, was that the statistical control method trusting on sam-
pling method, due to which 100% products are not inspected before
IM
they arrive at the customers. Due to the random sampling approach,
the statistical methods examine only a small part of the products. So,
the statistical methods leave much scope of a rate of errors to get to
the customers. That is exactly when he designed Poka Yoke to entirely
eliminate defects in products. As described by Shingo, “Poka Yoke is a
“100% inspection” technique and it concentrates on inspecting 100%
products before they arrive at the customers.
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While visiting the Yamada Electric Plant in 1961, Shingo was informed
about specific errors in one of the products of the plant. In a portion of
the product, there was a little switch including two push buttons held
by two springs. On the other hand, in other occasions, workers would
not remember to put a spring under a push-button. This mistake could
not be recognised before the product reached the customers and the
N
defects were recognised by them. In this condition, the company had

to send engineers to the location of the customer, dismantle the prod-
uct and position the spring under the button. The management of the
firm took many teps, consisting warning the workers against many
mistakes and expecting them to be more helpful. Thus, despite of the
efforts of the workers, the issue of misplace of spring could not be to-
tally eradicated.
In such a scenario, Shingo adviced positioning a small dish in front of

the part box. The workers were expected to take two springs from the
tool box and place those on the plate. After that, they were expected
to put in the springs in a switch. Thus, in case any spring was left on
the plate, workers routinely knew that they did not put in a spring in
the switch. The recognition of the error was simpler and exact and the
issue of missing spring was entirely eradicated.
The idea of Poka Yoke started from this mistake proofing concept of
Shingo. For the subsequent thirty years, he kept on developing the

N O T E S
concept. Poka Yoke is not a complicated approach of quality control.

Instead, it is a method of applying different easier mistake-proofing
concepts used in everyday life. Firms use various easy Poka Yoke
methods to enhance efficiency, superiority and competence. For in-
stance, Toyota uses an average 12 mistake-proofing devices at every
workstation.
6.4.1 OBJECTIVES OF POKE YOKE
The main idea or building blocks of Poka Yoke is also called the objec-
tives of Poka Yoke. Below are the objectives of Poka Yoke:
To build quality as an in-built nature into the production process-
es. This supports in enhancing quality at limited cost and effort
S
To remove all unintended errors and human errors
To initiate to do it correct from now onwards
To ignore excuses and putting positive efforts in the quality en-
IM hancement
To remove errors and lessening defects to zero is possible only
through mixed efforts of all the workers concerned in the process.
So, optimistic inspiration and a sense of obligation towards quality
development is relevant.
To execute a concept which has even 51% chance of being thriving
is a good concept.
M
To concern workers is extremely relevant in enhancing quality.

To locate the sole reason of the defects supports in getting perma-
nent remedies of preventing the errorsinstead of taking a short-
term and makeshift method.
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6.4.2 POKA YOKE TECHNIQUES
Various Poka Yoke methods can be applied at various levels of a pro-

cess. For instance, certain methods support in preventing occurrences
of mistakes in the first place; while other techniques sense the mis-
takes once they have happened.
Poka Yoke techniques are chiefly applied in the below three levels:
Preventing a mistake from being committed: This is the first
stage of Poka Yoke. Although Poka Yoke identifies that because of
human mistakes, errors are expected. But, the method expects at
lessening the errors from happening primarily. For instance, con-
sider an automobile manufacturer expects to put definite partic-
ular heat resistant bolts in the engine assembly. To stop mistakes
of putting the bolts in other assemblies, the bolts can be made of

N O T E S
certain physical dimensions which would only fit the engine as-
sembly. This way, the workers cannot erroneously use the special
bolts in other assemblies except the engine assembly.
Detecting mistakes incurred unintentionally: The technique ex-
pects detecting mistakes before they become main problems and
considerably cost to the company. For instance, car seatbelt warn-
ing indicator beeps when a person overlook putting on the seat
belt while driving. This informs the customer about the incidence
of the error that is, forgetting to put on the seat belt.
Mitigating the risk: At this stage, Poka Yoke methods alleviate
threat by detecting mistakes that have previously happened. For
instance, indicators are used in industrial complexes to find out
occurrences of unwanted incidences, like release of harmful gases.
S
6.4.3 POKA YOKE SYSTEMS
Poka Yoke devices are the different sensing devices used to find errors
IM
and stop failures. There are chiefly two kinds of sensing devices used
in Poka Yoke:
1. Physical Contact Devices: As the name denotes, these devices
function by actually touching a product or a part of a machine.
Usually, the physical contact devices are programmed in which
the instruments propel an electronic signal when a contact
happens. Below are few of the physical contact equipments of
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Poka Yoke:
Limit Switches: These devices sense the place of any object
contacting a small liver on the switch. Limit switches are the
most ordinary and profitable kind of contact device.
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Touch Switches: These switches work in the same manner

as limit switches except that these switches find out light
touch on a thin antenna.
2. Energy Sensing Devices: These devices use energy, like
electricity rather than physical contacts to find errors. Below are
various kinds of energy sensing devices:
Proximity Switches: These use beams of light to detect right
colour and size of objects, passage of objects on conveyor
belts and appropriate flow of parts.
Beam Sensors: These use electron beams to find items. An
instance of use of beam sensors is in entrance of retail stores
which stops any customer taking goods without making pay-
ment. In situation of unauthorised taking of items through
these gates, the beeper in gates intimates the store staff
about it.

N O T E S
Addition to these two kinds of Poka Yoke sensing devices, there is one
more kind of instrument that sense alterations in difefrent ituations,
like temperature and pressure. Few of the examples of these instru-
ments comprise thermostats, meter relays and pressure gauges.
6.4.4 QUALITY AT SOURCE
Quality at the Source (QatS) is a division of the lean manufacturing

concepts. The standard explains that the quality is not just measured
at the end of the production, but it should be evaluated and managed
at each step of a production process. Regrettably, it is one of the most
misinterpret and ignored of the 14 building blocks.
Quality at Source is made of five aspects:
S
Consistent work
Self-examination
Successive examination
IM Visual management and
Error proofing and incessant upgrading
The representation of Quality at the Source is the Andon light. This

light shows the quality standard at work station,the light will turn on
when the quality drops to a certain measure. Throughout this situa-
tion, the Work stops and a team of workers and engineers start resolv-
M
ing the issue to get rid of the source of the dreadful production.
6.4.5 JIDOKA CONCEPTS
Jidoka implies to the capacity of humans or machines to mark an ir-

N
regularity or variance condition in materials, machines, or approach,

and to make sure that the irregularity does not go by or move on to the
ensuing process. This is known as In Station Process Control (ISPC).
The aim of ISPC are to:

Create in quality by preventing the mass production of faulty
products
Prevent harming employees or injury to any part, or damage of
device, or equipment upon the occurrence of an unusual condition
Disconnect human work from machine work
As per Toyota’s website, the term ‘jidoka’ is‘automation with a human

touch’. Typically, completed parts and products are examined by an
inspector before being making the final delivery to the end user. Re-
gardless of examination, variety of finished goods does not make sure
error-free parts. Figure 6.2 demonstrates the idea of Jidoka:

N O T E S
A situation deviates from

the normal workflow.
A machine detects a problem

The line is and communicates it.
stopped.
Daily improvements
Manager/supervisor removes Improvements incorporated

cause of the problem. into the standard workflow.
Good products can be produced.
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Figure 6.2: The Concept of Jidoka
Source: http://riboparts.com/changeBlogsite.asp?changeInfo=Forum%20for%20Lean%20Pro-
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duction&changeClass=Lean%20Production&changeName=&id=2251
Figure 6.2 demonstrates that TPS is sturdily dedicated to “build the

quality into the process”, in which all team members has the account-
ability to examine quality carefully at each phase of his/her work, so
that errors are not passed down stream. Every team member is fa-
miliar with such a thinking and is conscious that “the downstream
process is a customer” and must never be held with a faulty prod-
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uct. In case there is a flaw in device, or it is not performing normally,
either the machine itself should be competent to reveal the concern
in a manner, for instance, making noise, variation in speed, churning
out faulty products, etc.; or some system should be capable to identify
the concern and discontinue function. Mistake proofing instruments
are frequently used as straightforward measures for this reason. This
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even enable maintaining the quality.
11. ____________ can be defined as a series of quality management

techniques that supports in removing defects in products by
choosing various kinds of mistakes at the design phase or the
production phase.
12. The main idea or building blocks of Poka Yoke is also called
the objectives of Poka Yoke. (True/False)
13. At which level, Poka Yoke techniques are expected to detect
mistakes before they become main problems and considerably
cost to the company?
a. Preventing a mistake from being committed
b. Detecting mistakes incurred unintentionally

N O T E S
c. Mitigating the Risk

d. Reducing the cost
14. ___________________implies to the capacity of humans or
machines to mark an irregularity or variance condition in
materials, machines, or approach, and to make sure that the
irregularity does not go by or move on to the ensuing process.
ACTIVITY
Search any two organisations that have applied Jidoka Cconcepts.
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6.5 SUMMARY
The concept of QFD was first introduced by YojiAkao, a Japanese
quality planning expert in 1966. QFD offers a strategic method of
IM comprehending customer`s choices, translating the choices into
product features and design the products.
QFD methodology was first used in the Mitsubishi`s Kobe ship-
yard in 1972. Later, QFD was adopted by different Japanese firms.
QFD consists of two factors quality deployment and function de-
ployment.
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The QFD process initiate with product planning and goes on
through product designing and process designing and lastly closes
up with quality management, testing, maintenance, and training.
Taguchi methods imply the statistical approaches developed by
Dr.Genichi Taguchi for the enhancement of qualities of products
and services.
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Robust design is the main aspect in growing engineering produc-

tivity. It supports in enhancing the effectiveness of the prime pur-
pose of the product with the support of flexible design.
Poka Yoke implies to a series of methods that supports in error
prevention. These techniques recognise how things can go wrong
and how the mistakes can be prevented at the priority.
The main objective of Poka Yoke is to build quality as an in-built
nature into the production processes and remove all unintended
errors and human errors.
Poka Yoke devices are the different sensing devices used to find
errors and stop failures. There are chiefly two kinds of sensing
devices used in Poka Yoke: physical contact devices and energy
sensing devices.

N O T E S
Qualityat the Source (QatS) is a division of the lean manufactur-

ing concepts. The standard explains that the quality is not just
measured at the end of the production.
Jidoka implies to the capacity of humans or machines to mark an
irregularity or variance condition in materials, machines, or ap-
proach, and to make sure that the irregularity does not go by or
move on to the ensuing process.
KEY WORDS
Attrition:It is the reduction in the number of employees in an

organisation due to retirement, resignation, etc.
Key Performance Indicators: It is a set of values used by a com-
S
pany to measure and compare performance.
Lean Manufacturing: A management philosophy that focuses
on the adoption of processes that eliminates waste from manu-
facturing process.
Remuneration:
IM
It is the compensation that is received by an
employee in lieu of work performed by him.
Taguchi Methods: These are statistical methods used by organ-
isations to improve the quality of goods produced.

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1. Define Quality Function Deployment (QFD).

2. State the objectives of QFD.
3. Explain the process of QFD.
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4. Discuss the main contributions of Dr. Genichi Taguchi in the

area of quality management.
5. Write a short note on robust design.
6. What are the objectives of using Poka Yoke?
7. What is Quality at source (QatS)? Explain.

Concept of Quality 1. QFD
Function Deployment
2. a. Quality
3. False

N O T E S

4. c. Process planning
5. True
6. False
Taguchi Methods 7. Taguchi methods
Leading to Robust
Design
8. c. Off-line quality control
9. Robust design
10. True
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Poka Yoke (Mistake 11. Poka Yoke
Proofing)
12. True
13. b. Detecting mistakes in-
IM 14.
curred unintentionally
Jidoka
1. QFD offers a strategic method of comprehending customer’s

choices, translating the choices into product features and design
the products. Refer to Section 6.2 Concept of Quality Function
M
Deployment.
2. The main objective of deploying QFD is to understand customers’
needs and expectations and define the needs to be prioritised.
Refer to Section 6.2 Concept of Quality Function Deployment.
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3. The QFD process initiates with product planning and goes on

through the product designing and process designing and lastly
closes up with quality management, testing, maintenance, and
training. Refer to Section 6.2 Concept of Quality Function
Deployment.
4. The chief contributions of Dr. Genichi Taguchi in the area of
quality management are taguchi loss function, off-line quality
control, and innovations in DOE. Refer to Section 6.3 Taguchi
Methods Leading to Robust Design.
5. Robust design is the main aspect in growing engineering
productivity. It supports in enhancing the effectiveness of the
prime purpose of the product with the support of flexible design.
Refer to Section 6.3 Taguchi Methods Leading to Robust
Design.

N O T E S
6. The main objective of using Poka Yoke is to build quality as an

in-built nature into the production processes. Refer to Section
6.4 Poka Yoke (Mistake Proofing).
7. Quality at the Source (QatS) is a division of the lean manufacturing
concepts. The standard explains that the quality is not just
measured at the end of the production. Refer to Section 6.4 Poka
Yoke (Mistake Proofing).
SUGGESTED READINGS
S
Cortada,J. (1995). TQM for information systems management. New
York: McGraw-Hill.
Hoyle,D., & Hoyle, D. (1998). ISO 9000 quality systems handbook.
Oxford: Butterworth-Heinemann.
Kanji,
Hall.
IM
G. (1995). Total quality management. London: Chapman &
Nanda, V. (2005). Quality management system handbook for product

development companies. Boca Raton, Fla.: CRC Press.
E-REFERENCES
M
Ee.iitb.ac.in,.
(2014). INTRODUCTION TO TAGUCHI METHOD.
Retrieved 8 November 2014, from https://www.ee.iitb.ac.in/~apte/
CV_PRA_TAGUCHI_INTRO.htm
Public.iastate.edu,.
(2014). Quality Function Deployment (QFD).
Retrieved 8 November 2014, from http://www.public.iastate.edu/~-
N
vardeman/IE361/s00mini/chen.htm
StickyMinds,. (2014). StickyMinds | Using Quality Function Deploy-
ment for Process Improvement. Retrieved 8 November 2014, from
http://www.stickyminds.com/article/using-quality-function-de-
ployment-process-improvement

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S
C H A
7 P T E R
QUALITY MANAGEMENT SYSTEMS
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CONTENTS
7.1 Introduction
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7.2
7.2.1
Introduction to Quality Management Systems
Objectives of Quality Management Systems
7.2.2 Applications of Quality Management Systems
Activity
7.3 Introduction to ISO
7.3.1 ISO 9000:2015
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7.3.2 ISO 14001:2015
7.3.3 IATF 16949:2016
7.3.4 ISO 45001:2018
7.3.5 Other Emerging Standards
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Activity
7.4 Summary

N O T E S
QMS IMPLEMENTATION AT ULTRA BASE
Ultra Base, a leading car manufacturer in India, has created a

name for itself in the auto industry through its consistent quality
output and services. Continual Quality Improvement (CQI) ap-
proach has been a prime quality objective of Ultra Base.
Lately, the market image of Ultra Base has been affected by a few
safety issues that the customers have faced. This became a threat
for Ultra Base to sustain in the existing competitive market as
there are several manufacturers that have good quality and safety
records. The management of Ultra Base, therefore, decided to ex-
amine policy and performance records of the last six months but
S
due to inconsistency in the maintenance of performance records,
it became difficult to evaluate the exact causes behind safety is-
sues. Failure to connect total quality to its services has, therefore,
led Ultra Base to be among the let-downs. It was at this point
IM that Ultra Base decided to adopt a Quality Management System
(QMS) to maintain complete documentation as well as achieve the
following objectives:
To prevent deficiencies in quality
To create the requirement of audits
To communicate quality objectives, practices and policies
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To provide uniformity in practice
To promise quality output by resource utilisation
To save time and wastage of resources
The workforce of Ultra Base was asked to design an effective

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QMS implementation process. To keep a check on the inconsis-

tent documentation and records, the workforce was instructed to
practice QMS documentation. As a result, Ultra Base implement-
ed QMS successfully and regained its position in the market in a
short span of time.

QUALITY MANAGEMENT SYSTEMS 123
N O T E S
LEARNING OBJECTIVES

> Describe the concept of Quality Management System (QMS)
> Explain the objectives of having a QMS
> Discuss the applications of a QMS
> Explain the significance of ISO and its work
> Describe the ISO 9001:2015 standard QMS
> Describe the ISO 14001:2015 standard for Environment
Management System (EMS)
> Explain the importance of IATF 16949:2016 standard for the
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automobile industry
> Explain the ISO 45001:2018 standard for workplace health
and safety
> List a few upcoming standards
IM
7.1 INTRODUCTION
It is common knowledge that organisations always try to maximise
their sales and profits. In today’s competitive world, organisations can
achieve this only when they are able to maintain quality in all their
systems, processes, activities, products, services, product design, pro-
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curement, services, production, etc. Due to ever-increasing competi-
tion and increased quality consciousness of customers, organisations
now need to maintain quality in all their aspects and must comply
with the desired quality standards related to management, food, safe-
ty, IT, software, etc. Majority of the organisations have already adopt-
ed the standards that are applicable for their respective businesses.
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For instance, organisations around the world have adopted some type
of Quality Management System (QMS), which is an integrated system
for ensuring quality and standards. Organisations use QMS to achieve
continual improvement in operational productivity, profitability, effi-
ciency, customer-focus and business development. QMS also helps or-
ganisations in bettering their performance from supply to sales.
Using QMS, organisations are better able to strike a balance between

their performance and customer requirements. QMS is implemented
and maintained in the form of documents such as policy, procedure,
work instructions and work records. QMS can be adopted by any type
of business whether it is big, small, private or public. Organisations
that adopt an effective QMS are able to control wastage. In addition, it
also helps the organisation to define its objectives, roles, use of equip-
ment and continuous quality improvement.

N O T E S
INTRODUCTION TO QUALITY
7.2
MANAGEMENT SYSTEMS
After the 1950s, the quality and its related concepts started gaining
importance in all areas of business, specifically in production and
manufacturing. Organisations started to understand the importance
of quality and the benefits that it can bring along with it. During the
late 1970s, the concept of Quality Systems began to gain industrial
acceptance because of its holistic approach. The concept of ‘quality
systems’ was adopted because organisations had to move from prod-
uct standards towards quality assurance systems. Organisations were
under immense pressure to produce and provide better quality prod-
ucts.
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A QMS can be defined as a set of inter-related and inter-acting activi-
ties/rules and procedures that are used by organisations to direct and
control their quality standards, accomplish their quality objectives
and continually improve their performance efficiency.
IM The American Society for Quality (ASQ) defines a QMS as a formal-
ized system that documents processes, procedures and responsibilities
for achieving quality policies and objectives. A QMS helps coordinate
and direct an organization’s activities to meet customer and regulatory
requirements and improve its effectiveness and efficiency on a contin-
uous basis.
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In simple words, a QMS refers to a documented set of policies or a
system designed to achieve conformance to specifications and stan-
dards and meet and suit the customers’ requirements in an effective
manner. QMS evolved as a ‘systems-based’ approach to management
of quality and subsequently led to a new paradigm of ‘standards’ for
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quality assessment.
QMSs also focus on revenue and savings that an organisation can

accelerate by controlling and eliminating errors and defects during
operations. However, QMSs cannot directly cover the financial func-
tions of an organisation. A QMS acts as a framework for assessment
of a company’s quality system and provides a structure to organisa-
tions ranging from the manufacturing process to service to sales and
is applicable to both large and small units. QMSs usually provide an
accepted and verifiable system of standard using a quality checklist
formulated by the organisation.
The organisation practising QMS usually study, explore and examine

various quality issues that it faces. It also trains and prepares its work-
force to produce products and/or services having the desired quality.
This means that the organisation strives for continual improvement of
quality in its multiple aspects such as resources, product realisation,
improvement, customers’ needs and satisfaction.

N O T E S
One of the most prominent approaches to QMS is the Continuous

Quality Improvement (CQI). The CQI approach advocates that an or-
ganisation that has created a corporate quality culture must not stop at
that stage. It should rather try to maintain consistency and continually
try to improve its quality. The CQI approach enables the workforce to
change and improvise processes and performances of an organisation
in their day-to-day operations. Employees are encouraged to generate
quality ideas and continually improve their work which leads to small
and incremental improvements. It can be said that the CQI focuses
on consistent development of the quality system of an organisation,
which means that there is an unlimited scope for improvement.
You have studied about CQI and TQM, which are widely adopted by
organisations for furthering their quality improvement efforts. Apart
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from these two, there are a lot of other methodologies that help in
implementing, maintaining and controlling quality. These include Six
Sigma methodology and Lean methodology. Six Sigma methodology
includes methods such as Statistical Process Control (SPC) and De-
IM
sign of Experiments (DOE) for quality and process improvements.
SPC is a statistical method used in quality control for determining and
monitoring whether the quality of output meets the desired standards
and specifications. A control chart is used to implement it and detect
errors during the process and take corrective actions. Six Sigma can
be clubbed and incorporated with other innovative product develop-
ment systems and approaches like Materials Requirement Planning
(MRP) and Just-in-Time (JIT) inventory control.
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7.2.1 OBJECTIVES OF QUALITY MANAGEMENT SYSTEMS
During the production process, errors might creep in at any stage. The
entire production process comprises various stages, such as produc-
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tion, testing and packaging stages and the errors can occur at any of
these stages. Repetitive occurrence of errors not only results in wast-
age of time, efforts, money, etc., but they also affect the market image
of an organisation negatively. QMSs aim to strike a balance between
the desired standard of quality and customers’ expectations.
Some important objectives of QMSs are as follows:

Improving the quality of products and services of the organisation
Establishing clear and achievable objectives
Promoting teamwork among staff members
Effectively communicating the pre-determined targets and contri-
butions from the workforce
Effectively recording and archiving information
Working towards continual quality development in product quali-
ty and services

N O T E S
Providing a framework for competency and awareness skills

Guiding all organisational members to effectively deal with the
changing business environment and improve the organisation’s
efficiency and effectiveness
Documenting, communicating, reviewing and auditing quality sys-
tems that are in place
Determining the gap between the desired standard and the actual
output
Ensuring that all the processes are subjected to quality controls
and assessment
Setting directions to understand customers’ needs and expecta-
S
tions
7.2.2 APPLICATIONS OF QUALITY MANAGEMENT

SYSTEMS
IM An organisation usually performs several activities, such as manufac-
turing, warehousing, distribution, marketing and development, to ful-
fil the requirements of customers. To achieve the desired goals and
performance standards, it is essential that the individual objectives
of the workers and the operational objectives of the organisation are
aligned. By implementing a QMS, an organisation can maintain quali-
ty standards in a systematic manner and can manage and improve the
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workforce performances continuously.
ISO 9001 is a quality standard developed by the International Stan-

dards Organisation (ISO). The ISO 9001 standard specifies the re-
quirements of a QMS. These requirements are generic and applicable
to any industrial business practice. However, organisations customise
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QMS standards according to their specific requirements. Organisa-

tions can specify the need of a QMS in anticipation of customers’ re-
quirements and the desired quality standard. The quality system can
be defined in the form of documents, in terms of policies, procedures
or instructions. It is the task of the management to ensure that all in-
dividuals working in an organisation are equally responsible for the
quality of its products or services.
An organisation can determine the criteria of quality by adopting

QMS in its production. There may be variance in the expectations and
requirements from one customer to another or from one product to
another. Organisations predefine these variations by ISO standards
through contract review a type of documentation method that spec-
ifies the requirements of customers. The contract review has to be
reviewed by all the stakeholders of production, starting from the raw
material supplier to the sales team.
The contract review enables the management to see if the workforce

team is able to meet technical and organisational requirements. Adop-

N O T E S
tion of QMS includes designing and producing the product as per cus-
tomers’ definition and in accordance with customer requirements. It
also includes providing better after-sales services, attending to com-
plaints promptly and establishing a system to monitor and measure
customer satisfaction. For example, for customer A, after-sales ser-
vices may be the key quality attribute; whereas, for another customer,
B, quality and durability of the product may be the main attribute.
Therefore, the quality management system is required to keep a regu-

lar tab on changing trends in the market and customer requirements.
A QMS is said to be effective if it provides scope for continual im-
provement to accelerate the productivity and customers’ satisfaction
level. If an organisation is able to deliver the required products to the
customers, it wins the confidence of customers.
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Some important advantages of QMS for an organisation are as follows:
Defines and communicates quality objectives, practices and poli-
cies clearly
Ensures
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uniformity in practice
Prevents and mitigates quality deficiencies
Provides training and the required skills to new staff
Maintains good organisational practices
Creates need for conducting audits
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Assures quality output maximum utilisation of resources
Helps an organisation to get acclimatised with change in trends
and customer preferences
Establishes a customer-oriented organisation that acquires and
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uses data for improvement on a regular basis

Guidesan organisation in accomplishing objectives set out and
documented on its policy and strategy
1. During the late 1970s, the concept of __________began to gain

industrial acceptance because of its holistic approach.
2. QMS evolved as a ‘analytics-based’ approach to management
of quality. (True/False)
3. Organisations using QMS strive for _______of quality in
its multiple aspects such as resources, product realisation,
improvement, customers’ needs and satisfaction.
4. Which of the following is a documented set of policies or a
system designed to achieve conformance to specifications and

N O T E S
standards and to meet and suit the customers’ requirements

in an effective manner?
a. Quality Management System
b. International Standards Organization
c. Total Quality Management
d. Quality Standard
5. List any two objectives of a QMS.
6. QMS prevents and mitigates quality deficiencies. (True/False)
ACTIVITY
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Using the Internet as your primary means, list down at least 10 In-
dian organisations that have implemented QMS. Against each or-
ganisation, also mention the impact that the QMS has had on them.
IM 7.3 INTRODUCTION TO ISO
The International Organization for Standardization (ISO) was set up in
1946. It is headquartered at Geneva, Switzerland. It is an internation-
al and non-governmental organisation, which sets quality standards
for different processes and industries. It comprises members from all
national standards organisations. ISO works towards promoting pro-
M
prietary and also for promoting standards for industries. Its mission
is worldwide promotion and development of standardisation and re-
lated activities with a view to facilitate the international exchange of
goods and services and develop cooperation in the spheres of intel-
lectual, scientific, technological and economic activities. The results
of the ISO technical work are published as International Standards.
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International Organisation for Standardisation (ISO) defines a stan-

dard as a document that provides requirements, specifications, guide-
lines or characteristics that can be used consistently to ensure that ma-
terials, products, processes and services that are fit for their purpose.
Prior to the creation of the ISO, different countries or regions used

to develop and adopt different criteria to evaluate similar types of
products and technologies. In such a scenario, it became difficult for
producers/ organisations to sell their products around the world, and
consequently, it had a direct effect on the international trading pro-
cess. Moreover, industries were required to be linked to each other di-
rectly or indirectly, as no industry can function independently. For ex-
ample, bolts are required by the aviation industry for manufacturing
airplanes and other equipment used in this sector. Similarly, nuclear
plants required control rods and steam generators. Rapid develop-
ment, globalisation and the increasing penetration and interdepen-
dence of industries and technology have led to the requirement for the
establishment of standards that can be accepted worldwide.

N O T E S
An important characteristic of ISO standards is that they are quite

generic in nature. Since all individual countries formulate their own
standards on the basis of ISO standards, care must be taken in inter-
preting their applicability to the concerned industry or organisation.
For instance, ISO 9000 is a series or family of standards for quality
assurance and management. ISO 9000 standards have been adopted
by around 45 countries as their own national standards. The nation-
al standards may be named differently, but they contain exactly the
same text as the original ISO 9000 standards. In India, the equivalent
standard of ISO 9000 is the Bureau of Indian Standards (BIS) 14000
series. In the United States, ANSI and ASQC have adopted and pub-
lished ISO 9000 standards and they are known as ANSI/ISO/ASQC
Q9000 series. If an organisation desires to achieve an ISO 9000 certifi-
cation, they must conform to its requirements.
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7.3.1 ISO 9000:2015
ISO 9000 standards were issued in 1987. They are based on the BS
IM
5750 standard, the first management quality system standard that was
developed by the British Standards Institute. Since they were first
developed, they have undergone various revisions in 1994, 2000, 2008
and in 2015. The current version of ISO 9000 is ISO 9000:2015.
NOTE
BS stands for British Standard.

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The ISO 9000 family of quality management standards can be used by

organisations for the following purposes:
Providing guidance and tools to those organisations that want to
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ensure the quality of their products and services

Meeting customer requirements consistently
Improving quality on a continuous basis
ISO 9000 standards on quality management and quality assurance

have been developed to ensure effective documentation required for
maintaining efficient quality systems. These standards are generic
and can be applied to any organisation of any size. There are four
standards in the ISO 9000 family—ISO 9000:2015, ISO 9001:2015, ISO
9004:2018 and ISO 19011:2018. Each standard has been created for a
different purpose. These standards are shown in Table 7.1:
TABLE 7.1: STANDARDS IN THE ISO 9000 FAMILY

ISO 9000:2015 Quality Management Systems—Fundamentals and
Vocabulary (definitions)
ISO 9001:2015 Quality Management Systems—Requirements

N O T E S
ISO 9004:2018 Quality Management—Quality of an Organization—

Guidance to Achieve Sustained Success (continuous
improvement)
ISO 19011:2018 Guidelines for Auditing Management Systems
Together, these four standards in the ISO 9000 series form a complete
quality management system. These standards can be used for nation-
al and international trade. The requirements for quality management
systems in organisations are contained in the ISO 9001:2015 standard.
Organisations try to get certifications to improve their credibility and

demonstrate that their products/services meet the expectations of
their customers. In some industries and organisations, it might be a
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legal/regulatory or contractual requirement to acquire certification. It
must be specifically stated that ISO as an organisation does the work
of setting standards only. It does not perform certification and does
not issue certificates on its own. This work is done by certain exter-
IM nal certification organisations. However, ISO has created a Commit-
tee on Conformity Assessment (CASCO) to produce various standards
related to the certification process. The bodies that issue certificates
must follow the CASCO standards. In common parlance, the ISO 9000
certification is not a necessity but customers’ demand for certified
products and services has made it quite significant. Initially, ISO 9000
standards were formulated to be used in case of contracts where the
suppliers were required to demonstrate their capability to meet re-
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quirements. The main idea behind this was to encourage customers to
buy certified products/services as they are no longer required to verify
the product on receiving it. It also serves as a convenient means to
ensure that the suppliers adhere to the requirements of ISO 9000 stan-
dards. The customers and third parties can use standards and cer-
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tifications to determine the capability of the organisation to provide

products that meet their requirements in addition to the regulatory
requirements.
It is not mandatory to acquire certifications but having a valid certifi-

cation helps organisations in reducing the cost of customer sponsored
audits and verifying the capability of its suppliers. Certifications also
help customers to effortlessly and successfully trade with organisa-
tions that do not have much credibility in the market.
ISO 9000 standards have evolved beyond their primary functions and
now serve as a concrete basis for developing and implementing qual-
ity management systems such as Total Quality Management (TQM).
ISO 9001:2015 (QUALITY MANAGEMENT SYSTEMS—

REQUIREMENTS)
ISO 9001:2015 is the most widely used quality management system

standard. It is the actual standard for the purpose of the ISO certifi-

N O T E S
cation. However, other standards are used to acquire more detailed

and elaborate information. All the standards under the ISO 9000 se-
ries are complimentary in nature. The current version of ISO 9001
is ISO 9001:2015. The previous version was ISO 9001:2008. The most
important change that has been made in ISO 9001:2015 is that it is
based on risk-based thinking rather than on a preventive action as in
the case of its 2008 version. The ISO 9001:2015 standard is a complete
operational tool that can help in improving the performance of an or-
ganisation.
Some key features and benefits of the ISO 9001:2015 are as follows:
ISO 9001:2015 standards help in managing a business in an opera-
tionally resilient manner.
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ISO 9001:2015 standards help in achieving long-term success.
ISO 9001:2015 standards help in ensuring customer satisfaction.
ISO 9001:2015 standards can be adopted by businesses of any size.
ISO
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9001:2015 standards are generic and flexible.
ISO 9001:2015 standards help facilitate continual improvement
ISO 9001:2015 standards help organisations in achieving compet-
itive advantage.
ISO 9001:2015 standards serves as the basis for other sector-specif-
ic standards such as the ISO 13495 standard for medical devices,
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ISO 16949 for automotive sector, AS/EN 9000 for aerospace, ISO
14001 for environment.
ISO 9001:2015 is based on a High-Level Structure (HLS).
ISO9001:2015 can be integrated with any existing ISO manage-
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ment system.
ISO 9001:2015 adopts a risk-based thinking.
ISO 9001:2015 has less prescriptive requirements for documenta-
tion and the organisations can decide the need and format of doc-
umented information.
ISO 9001:2015 does not use the terms ‘documents’ and ‘records’;
now, it uses the term ‘documented information’. Documented in-
formation refers to the information that needs to be controlled and
monitored.
ISO 9001:2015 defines the term ‘knowledge’ and also defines the
requirements for managing organisationa l knowledge using four
phases that are similar to the Plan-Do-Check-Act (PDCA) cycle.
Quality Manual and Management Representative (MR) are no lon-
ger mandatory as per this standard.

N O T E S
It has been decided by ISO that all the current and future quality and
management systems standards must contain ten main clauses, as
shown in Figure 7.1:
1. Scope
2. Normative references
3. Terms and definitions
4. Context of the organisation
5. Leadership
6. Planning
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7. Support
8. Operation
9. Performance evaluation
IM 10. Continual Improvement
Figure 7.1: Ten Main Clauses of ISO Standards
7.3.2 ISO 14001:2015
ISO 14001 is the international standard developed by ISO and it spec-

ifies the actual requirements for an Environmental Management Sys-
M
tem (EMS). It was published for the first time in 1996. The latest ver-
sion of this standard is ISO 14001:2015. It is the most widely used EMS
in the world. More than 14000 organisations have been ISO 14001 cer-
tified in the UK alone and more than 3 lakh organisations globally
(approximately 171 countries) have acquired ISO 14001 certification.
N
This standard applies to those environmental aspects which are un-

der the control of an organisation. This standard prescribes a frame-
work that any organisation can use to formulate and maintain its EMS
in accordance with environmental performance requirements. It is a
voluntary standard. Using a combination of ISO 9001 and 14001 stan-
dards is extremely beneficial for an organisation.
ISO 14001 helps an organisations achieve its commercial success

without neglecting its responsibilities towards the environment. ISO
14001 standard helps an organisation in meeting legal and regulatory
requirements related to environment and the ever-increasing custom-
er expectations at the same time.
Adopting this standard helps organisations to improve their environ-

mental performance by protecting the environment and preventing
pollution.
This standard can be adopted by any organisation belonging to any

sector that wishes to establish, implement, maintain and improve an

N O T E S
EMS. Organisations that are ISO 14001:2015 certified provide an as-

surance to the management and employees and other stakeholders
of the organisation that the organisation is taking essential steps for
measuring and improving the environmental impact.
Achieving an ISO 9001 certification also helps the organisation in as-

suring itself that its activities and policies are in conformance with the
environmental policy and ISO 14001:2015. All the requirements stated
in ISO 14001:2015 standard must be incorporated into any EMS. Table
7.2 presents the clauses of ISO 14001:2015 standard:
TABLE 7.2: CLAUSES OF ISO 14001:2015 STANDARD

Clause
S
0. Introduction
1. Scope
2. Normative References
3. Terms and Definitions
4. Context of the Organisation
5. Leadership
IM
6. Planning
7. Support
8. Operations
9. Performance Evaluations
10. Improvement
M
The requirements of an EMS are described from Clause 4 onwards.

The clause structure of ISO 14001:2015 with respect to the PDCA cycle
is presented in Figure 7.2:
N
PLAN DO CHECK ACT

4. Context of the 5. Leadership 6. Planning 7. Support 8. Operation 9. Performance 10. Improvement
organization evaluation
4.1 Understanding 5.1 Leadership and 6.1 Actions to 7.1 Resources 8.1 Operational 9.1 Monitoring, 10.1 General
the organization commitment address risk planning and measurement,
and its context associated with control analysis and
threats and evaluation
opportunities
4.2 Understanding 5.2 Environmental 6.2 Environmental 7.2 Competence 8.2 Emergency 9.2 Internal audit 10.2 Nonconformity
the needs and policy objectives and preparedness and and corrective
expectations of planning to achieve response action
interested parties them
4.3 Determining the 5.3 Organizational 7.3 Awareness 9.3 Management 10.3 Continual
scope of the EMS roles, review improvement
responsibilities and
authorities
4.4 Environmental 7.4 Communication
management
system
7.5 Documented
information
The following is aFigure 7.2: on

brief commentary ISO
those14001
clauses: and the PDCA Cycle
Source: https://www.sciqual.com.au/sites/default/files/clauses_of_the_new_iso_14001.2015_stan-
dard.pdf
Context
Some major of the organization
advantages of adopting an EMS are as follows:
Better
4.1 environmental
Understanding management
the organization and its context.
This is a new requirement: one of several that might suggest a greater union between the EMS or IMS and
wider business planning activities. Requires organizations to ascertain, monitor and review both internal
and external issues that are relevant to its purpose and strategic direction, and have the ability to impact
the management system and its intended results.NMIMS Global Access - School for Continuing Education
4.2 Understanding the needs and expectations of interested parties.

Requires the organization to determine which interested parties are relevant to the EMS, what are their
N O T E S
Reduction in wastage
Efficient energy use
Increased efficiency
Decreased cost of running businesses
Better image of the organisation
Access to more business opportunities
Increased trust from the side of the stakeholder and customer
Increase in the trust of customers and other stakeholders
Increase in adherence to legal obligations
S
Increase in the ability of an organisation to perform better
7.3.3 IATF 16949:2016
In the US, General Motors, Ford Motor Company and Fiat Chrys-

IM ler Automobiles US are called the ‘Big Three’. In 1994, the Big Three
automobile manufacturers developed the QS 9000 standard, which
was the first QMS standard meant for the automobile sector. This stan-
dard was managed by the Automotive Industry Action Group (AIAG).
QS 9000 was meant to be adopted by organisations that were involved

in the supply of automotive production materials, heat treatment, etc.
The purpose of this standard was to provide a single standard and
M
certification for all assessments, standards and certifications in the
automotive sector supply chain.
QS 9000 was the first standard for the automobile sector. It was de-
clared as obsolete in December 2006. QS 9000 was replaced by TS
N
16949:1999, which was further replaced by the IATF 16949 standard

in 2016.
The IATF 16949:2016 is an international QMS standard specifically

developed for the automotive industry by the International Automo-
tive Task Force (IATF) in association with the Automotive Industry
Action Group (AIAG). It is one of the most widely used quality man-
agement system. It was published on 3rd October 2016 by the IATF.
ATF 16949 standard is used by organisations for the development of

a Quality Management System that supports continual improvement,
helps in defect prevention and reduces variation and waste in the sup-
ply chain. Organisations can create their own unique QMS by using a
combination of IATF 16949 standard along with the applicable custom-
er-specific requirements. Such QMS requirements can be used for au-
tomotive production, service and/or accessory parts. IATF 16949:2016
is aligned with the structure and requirements of ISO 9001:2015 stan-
dard and must be implemented along with ISO 9001:2015 standard.

N O T E S
For organisations in the automobile sector, it is important to register to

IATF 16949 standard because all the organisations that are registered
with this standard need to develop their suppliers’ QMS. This ensures
that the suppliers conform to the IATF 16949 standard. Implementa-
tion of this standard ensures that the customers of the organisation
are able to receive good quality products and services, which manifest
in the form of various business benefits.
IATF 16949:2016 is based on seven key principles:

1. Customer focus
2. Engagement of people
3. Evidence-based decision making
S
4. Improvement
5. Leadership
6. Process approach
IM
7. Relationship management
The characteristics or features of the IATF 16949:2016 standard are

as follows:
Defines how organisations can meet customer requirements and
the requirements of other stakeholders at the same time
Emphasises on continual improvement
M
Mandates that the organisations define their objectives and con-
tinuously work towards achieving them
Focuses on defect prevention
Includes important tools of the automotive industry such as Ad-
N
vanced Product Quality Planning (APQP), Failure Mode and Ef-

fects Analysis (FMEA), Statistical Process Control (SPC), Mea-
surement Systems Analysis (MSA) and Production Part Approval
Process (PPAP)
Helps in reducing variation and waste in the supply chain
Mandatesthat policies related to corporate responsibility must be
documented and implemented
7.3.4 ISO 45001:2018
The ISO 45001 standard was released by ISO in 2018. This standard
is known as Occupational health and safety management systems – Re-
quirements with guidance for use. It is the most recent and widely-used
international standard for occupational health and safety (OH&S).
This standard has replaced OHSAS 18001:2007, which was the previ-
ous standard for workplace health and safety. Organisations that are
currently certified to the OHSAS 18001 standard have been given a

N O T E S
time of three years to transit to the ISO 45001 standard. Organisations

are not mandated to acquire certification of this standard.
ISO 45001:2018 standard has been designed to provide an effective

set of processes for improving workplace health and safety in supply
chains. This standard can be used by organisations and industries of
all sizes. With the introduction of the ISO 45001 standard, it is expect-
ed that workplace injuries and illnesses can be reduced measurably.
The International Labour Organization (ILO) has estimated in 2017

that each year approximately 2.78 million fatal accidents take place
at workplaces. In other words, every day, approximately 7700 people
die due to workplace injury or illness. Apart from this estimate, the
ILO has also estimated approximately 374 non-fatal work-related inju-
S
ries and illnesses each year. As a result of these injuries and illnesses,
many people remain absent for extended periods of time. It means
that people working in modern workplaces have to endure serious
consequences even as a result of doing their jobs.
IM Across the world, ISO 45001 is used to provide guidance to the gov-
ernmental organisations, industry and other stakeholders in order to
improve worker safety. The standard provides a framework that can
be used in all factories irrespective of their location.
David Smith, who was the chairperson of the committee that devel-
oped ISO 45001 quoted that, “It is hoped that ISO 45001 will lead to
a major transformation in workplace practices and reduce the tragic
M
toll of work-related accidents and illnesses across the globe.” The new
standard is quite promising and it is expected that its implementation
will help in providing a safe and healthy work environment for all the
workers and visitors across the world. This standard helps organisa-
tions in continually improving their health and safety related policies,
N
practices and standards.
NOTE
In 2021, the OHSAS:2007 will be withdrawn which means that ISO

45001 will become the only international standard for occupational
health and safety.
ISO 45001 is developed on an HLS structure and can be perfectly in-

tegrated with other HLS-based standards such as ISO 9001 and ISO
14001, which are the standards for QMS and EMS, respectively. Or-
ganisations that have already implemented these standards will be
able to implement ISO 45001 quite easily.
Benefits of implementing ISO 45001:2018 are as follows:

Integrable with various ISO standards
Senior management can assess the OH&S risks and opportunities

N O T E S
Management sets objectives related to OH&S and strives for con-

tinual improvement
The adoption of standard enables monitoring and review of the
safety performance of the organisation
The organisations may be inclined to conduct worker health pro-
motion campaigns
Implementation of the ISO 45001 standard is considered as a
demonstration of organisation and related stakeholders’ commit-
ment towards the protection of employees from accidents, injuries
and illnesses
Adoption of this standard helps in reducing the downtime that
might be caused due to the absence of workers due to OH&S haz-
S
ards
Adoption of this standard helps in reducing the chances of prose-
cution due to faulty OH&S standards
Adoption
IM
of internal process controls such as risk-based manage-
ment of contractors helps in encouraging safety culture and pro-
tecting business
Internaland external audits help an organisation in evaluating
and demonstrating the effectiveness of the OH&S systems and
processes
The participation of employees to identify health and safety fac-
M
tors that can lead to continuous improvement
Employee participation in OH&S helps in increasing organisa-
tion’s reputation, employee retention, increased motivation levels
and increased productivity
N
Adoption of the PDCA cycle makes the standard eligible to be ap-

plied in the whole management system as well as each individual
element of the management system.
Top management plays an important role in the implementation
and management of the OH&S systems
The ISO 45001 standard audits can be conducted at three levels name-
ly: internal audit, external audits and the certification audits.
Table 7.3 presents the clauses of the ISO 45001:2018 standard:
TABLE 7.3: CLAUSES OF THE ISO 45001:2018 STANDARD

Clause
0. Introduction
1. Scope
2. Normative References
3. Terms of Definition
4. Context of the Organisation

ANNEX SL
Prior to the introduction of Annex SL (previously known as ISO Guide 83), organizations who
implemented ISO 9001 Quality, ISO 14001 Environmental and ISO 27001 Information Security
standards had difficulty integrating management systems. Based on different clause structures
and terms of definition, the absence of Annex SL could lead to potential gaps between
management systems an unnecessary burden on resources. The introduction of Annex SL
including ISO 45001 has enabled multiple standards to adopt the same high-level structure to
harmonise 10 core clauses, making it easier to integrate common management standards.
N O T E S
High Level Structure

Clause
The first three clauses provide a background to the standard with
useful information including terms of definition. The rationale of
‘Context of the Organization’ (clause 4) is that the system focuses on
5. Leadership
Annex SL consists of 10 processes and requirements needed to achieve organizational policy
objectives. This is achieved by understanding the organization and
core clauses:
the context in which it operates. The Clause sets out the requirements
6. Planning
1. Scope for the organization to define the ‘Scope’ of the system, and the
subsequent planning of the system.
7. Support
2. Normative references
3. Terms of definition Clause 5 to 10 are common to all management system standards, ISO
8. Emergency
4. Context Preparedness
of organization
45001 specifically relates to occupational health and safety issues.
So, whilst there is commonality, there are OH&S processes to be
5. Leadership
9. Performance Evaluation established, implemented and maintained including understanding
6. Planning of the policy framework, identification of hazards, management
control of risks and worker participation. A successfully deployed
10. Improvement
7. Support Annex SL enables an integrated management system (IMS) which
8. Emergency preparedness simultaneously handles the requirements of ISO 45001, ISO 9001 and
ISO 14001. Typically, this would include a harmonised documented
9. Performance evaluation
The requirements of an EMS are described from Clause 4 onwards. information, procurement, audit and management review process
10. Improvement
The clause structure of ISO 45001:2018 with respect to the PDCA cycle
without the necessity of duplication.
is presented in Figure 7.3:

Annex SL Clause Overview
PLAN DO CHECK ACT
S
4 9
5 6 7 8 10
Context of the Performance
Leadership Planning Support Operations Improvement
organization evaluation
4.1 9.1 Monitoring, 10.1

6.1 Actions to 8.1 Operational
Understanding 5.1 Leadership measurement, Nonconformity
address risks and 7.1 Resources planning and
commitment analysis and and corrective
IM the organization
and its context
4.2
Understanding
the needs and
expectations of
5.2 Policy
opportunities
6.2 ISO 45001

objectives and
planning to
achieve them
7.2 Competence
control
8.2 Emergency
preparedness
evaluation
9.2
Internal audit
action
10.2 Continual
improvement
workers and 5.3

other interested Organizational 9.3
parties 7.3 Awareness
roles, Management
responsibilities review
4.3 Determining and authorities
the scope of
the ISO 45001 7.4
management Communication
system
4.4 ISO 45001 7.5 Documented

management information
system
M
ISO 45001:2018 OCCUPATIONAL HEALTH & SAFETY IMPLEMENTATION GUIDE 9
Figure 7.3: ISO 45001 and the PDCA Cycle

Source: https://www.nqa.com/medialibraries/NQA/NQA-Media-Library/PDFs/
NQA-ISO-45001-Implementation-Guide.pdf
7.3.5 OTHER EMERGING STANDARDS

N
Till now, you have studied about a few key standards that are used
internationally. Apart from these, there are a wide variety of standards
that are used across the globe for different purposes such as quali-
ty management, environment management and information securi-
ty. The standards setting and development bodies such as ISO keep
on developing new standards and revising the previously-established
standards to check whether they are appropriate for the contempo-
rary times. For instance, the ISO has mandated that all the interna-
tional standards must be reviewed at least once in every five years by
all the ISO member bodies.
The process of developing a new national standard begins after the

National Standards Body (NSB) of a country determines that there
is a market need for the proposed standard. After determining such
market need, the national standards body may adopt one of the fol-
lowing courses:
Develop a national standard for domestic use

N O T E S
Adopt the national standard of another country developed by its

NSB if it permits and by paying the required copyright fees
Adopt any existing similar standard
The process of developing a new international standard is somewhat

more elaborate. For developing a new international standard, one or
more NSB need to submit a proposal with ISO [and International
Electrotechnical Commission (IEC)/ International Telecommunica-
tion Union (ITU)]. After ISO receives such a proposal, the standard
is developed by following a six-stage process as shown in Figure 7.4:
Proposal Stage (NWIP Ballot)

New Work Item Proposal (NWIP)
S
Preparatory Stage
Building Expert Consensus
IM Committee Stage (CD Ballot)
Consensus Building within TC/SC
Enquiry Stage (DIS Ballot)

Enquiry on DIS
Approval Stage (FDIS Ballot)

M
Formal Vote on FDIS
Publication Stage
Publication of International Standard
N
Figure 7.4: International Standards Development Process
In the proposal stage, the new standard proposed is assessed for mar-
ket demand and then submitted for a three-month vote to the NSB of
the Technical Committee (TC) or the Sub Committee (SC) to decide
whether it should be taken up or not. In order to develop a proposed
standard, the NWIP must gain a simple majority from the participat-
ing members of the TC/SC and at least five members must actively
support the proposal.
If the NWIP acquires the required number of votes, the NWIP moves
to the preparatory stage. In this stage, the TC/SC sets up a working
group to prepare a working draft, which is finalised as a result of all
members consensus. This draft is then sent to the parent committee of
the working group and is put-up for consensus building.
At the stage where the initial draft is with the TC/SC, it is drafted as
per the ISO format and is prepared in the form of a Committee Draft
(CD), which is distributed to the members of the TC/SC for comment.

N O T E S
CDs are prepared successively till all the members agree upon one
CD. The final CD that is finalised by consensus of all the members is
submitted in the form of a Draft International Standard (DIS).
In the enquiry stage, the DIS is submitted to the ISO. At this stage,
the DIS is circulated to all ISO members for voting and commenting
that have to be completed within three months. ISO members and the
members of the committee that developed the draft are then asked to
vote for the DIS. The DIS will gain acceptance and approval only if
2/3rd of the votes of the members of the drafting committee vote in fa-
vour and not more than 1/4th of the total number of votes are negative.
If the DIS meets these criteria, it is developed in the form of a FDIS
(Final Draft International Standard) after voting. On the other hand,
if it fails to meet the criteria, it is returned to the TC/SC that has sub-
S
mitted it for further study and revision.
At the approval stage, the FDIS is circulated to all the ISO members
for the final voting within two months. The voting, acceptance and
IM approval criteria for FDIS are the same as for DIS. If the FDIS vote
satisfies the criterion, it is approved in the form of an International
Standard (IS) and if the FDIS vote fails to meet the given criteria, it
is returned to the TC/SC that has submitted it for further study and
revision.
At the publication stage, the approved FDIS, i.e., the international

standard (IS) is sent to the ISO CS (Central Secretariat) for publishing
M
the international standard.
Some of the important FDIS that have been finalised by ISO (which
would most probably go on to become important standards) and some
of the published standards (as of October 2019) are listed in Table 7.4:
N
TABLE 7.4: UPCOMING STANDARDS

A. FDIS
FDIS/Standard Description
ISO/PRF 643 Steels — Micrographic determination of the apparent
grain size (Revision of ISO 643:2012)
ISO/FDIS 14620-2 Safety requirements — Part 2: Launch site operations
2019-11-26 (Revision of ISO 14620-2:2011)
ISO 20766-20 Liquefied petroleum gas (LPG) fuel systems compo-
nents — Part 20: Filter unit
ISO/FDIS 15585 Hard coal — Determination of caking index
ISO/PRF 23169 Paints and varnishes — On-site test methods on qual-
ity assessment for interior wall coatings
ISO/PRF 15836-2 Information and documentation — The Dublin Core
metadata element set — Part 2: DCMI Properties and
classes (Revision of ISO 15836:2009, ISO 15836:2009/
Cor 1:2009)
ISO/FDIS 7870-1 Control charts — Part 1: General guidelines

N O T E S
FDIS/Standard Description
ISO/FDIS 10276 Nuclear energy — Fuel technology — Trunnion
systems for packages used to transport radioactive
material 2019-11-07 (Revision of ISO 10276:2010)
ISO/FDIS 16321-3 Eye and face protection for occupational use — Part
3: Additional requirements for mesh protectors
ISO/FDIS 14966 Ambient air — Determination of numerical concen-
tration of inorganic fibrous particles — Scanning
electron microscopy method 2019-11-12 (Revision of
ISO 14966:2002, ISO 14966:2002/Cor 1:2007)
ISO/FDIS 10015 Quality management — Guidelines for competence
management and people development 2019-11-04
(Revision of ISO 10015:1999)
S
ISO/FDIS 24444 Cosmetics — Sun protection test methods — In vivo
determination of the sun protection factor (SPF)
ISO/PRF TS 50044 Energy saving projects (EnSPs) — Guidelines for
economic and financial evaluation
ISO/IEC PRF TR
24772-1
IM
Programming languages — Guidance to avoiding
vulnerabilities in programming languages — Part 1:
Language-independent guidance (Revision of ISO/
IEC TR 24772:2013)
B. Standards Published
Standard Description
ISO 10642:2019 Fasteners — Hexagon socket countersunk head
screws with reduced loadability
M
ISO 21745:2019 Electronic record books for ships — Technical specifi-
cations and operational requirements
ISO 10679:2019 Steels — Cast tool steels
ISO 8267-2:2019 Aircraft — Tow bar attachment fittings interface re-
quirements — Part 2: Regional aircraft
N
ISO 6626-3:2019 Internal combustion engines — Piston rings — Part 3:

Coil-spring-loaded oil control rings made of steel
ISO 1018:2019 Hard coal — Determination of moisture-holding
capacity
ISO 3631:2019 Citrus fruits — Guidelines for storage
ISO 12944-5:2019 Paints and varnishes — Corrosion protection of steel
structures by protective paint systems — Part 5: Pro-
tective paint systems
ISO 10962:2019 Securities and related financial instruments — Clas-
sification of financial instruments (CFI) code
ISO/TS 25107:2019 Non-destructive testing — NDT training syllabuses
ISO 20264:2019 Stationary source emissions — Determination of the
mass concentration of individual volatile organic
compounds (VOCs) in waste gases from non-combus-
tion processes

N O T E S
Standard Description
ISO 14064-1:2018 Greenhouse gases — Part 1: Specification with guid-
ance at the organization level for quantification and
reporting of greenhouse gas emissions and removals
ISO/IEC/IEEE Systems and software engineering — Taxonomy of
21841:2019 systems of systems
Source: https://www.iso.org/files/live/sites/isoorg/files/news/magazine/ISOupdate/EN/2019/
ISOupdate_October_2019.pdf
7. ISO comprises members from all the_____________.

8. Which of the following word(s) appropriately describes the
S
nature of ISO standards?
a. Country-specific
b. Specific
IM c. Organisation size specific
d. Generic
9. In India, the equivalent standard of ISO 9000 is the ________.
10. ____________ standard is titled as Quality of an Organization—
Guidance to Achieve Sustained Success.
11. Customers who buy certified products/services no longer
M
require to verify products on receiving them. (True/False)
12. ISO 9001 is the most widely used Environmental Management
System (EMS) in the world. (True/False)
N
ACTIVITY
Visit a factory and list out what type of quality standards are being
followed there.
7.4 SUMMARY
During the late 1970s, the concept of quality systems began to gain
industrial acceptance because of its holistic approach. The con-
cept of quality systems was adopted because organisations had to
move from product standards towards quality assurance systems.
Organisations were under immense pressure to produce and pro-
vide better quality products.
A QMS refers to a documented set of policies or a system designed
to achieve conformance to specifications and standards and to
meet and suit the customers’ requirements in an effective manner.
One of the most prominent approaches to QMS is the Continuous
Quality Improvement (CQI). The CQI approach advocates that an

N O T E S
organisation that has created a corporate quality culture must not

stop at that stage. It should rather try to maintain consistency and
continually try to improve its quality.
QMSs aim to strike a balance between the desired standard of
quality and customers’ expectations.
Some of the important objectives of QMSs are improving the qual-
ity of the products and services of the organisation and establish-
ing clear and achievable objectives.
Some of the important advantages of an organisation are defining
and communicating the quality objectives, practices and policies
clearly and ensuring uniformity in practice.
The International Organization for Standardization (ISO) was set-
S
up in 1946. It is an international and non-governmental organisa-
tion which sets standards.
ISO 9000 standards were issued in 1987. They are based on the BS
IM
5750 standard, the first management quality system standard that
was developed by the British Standards Institute.
There are four standards in the ISO 9000 family—ISO 9000:2015,
ISO 9001:2015, ISO 9004:2018 and ISO 19011:2018.
The requirements for quality management systems in organisa-
tions are contained in the ISO 9001:2015 standard.
Organisations try to get certifications to improve their credibility
M
and demonstrate that their products/services meet the expecta-
tions of their customers.
ISO 9001:2015 is based on risk-based thinking and is a complete
operational tool that can help in improving the performance of an
organisation.
N
ISO 14001 is the international standard developed by ISO that

specifies the actual requirements for an Environmental Manage-
ment System (EMS).
ISO 14001 helps an organisation achieve its commercial success
without neglecting its responsibilities towards the environment.
IATF 16949:2016 is an international QMS standard specifically de-
veloped for the automotive industry by the International Automo-
tive Task Force (IATF) in association with the Automotive Indus-
try Action Group (AIAG).
IATF 16949 standard is used by organisations for the development
of a Quality Management System that supports continual improve-
ment, helps in defect prevention, and reduces the variation and
waste in the supply chain.
ISO 45001 standard was released by the ISO in 2018. This standard
is known as Occupational health and safety management systems –

N O T E S
Requirements with guidance for use. It is the most recent and wide-
ly used international standard for occupational health and safety
(OH&S).
Across the world, ISO 45001 is used to provide guidance to the gov-
ernmental organisations, industry and other stakeholders in order
to improve worker safety.
For developing a new international standard, one or more NSB
need to submit a proposal with the ISO. After ISO receives such a
proposal, the standard is developed by following a six-stage pro-
cess.
At the fifth stage (approval stage), the Final Draft International
Standard (FDIS) is circulated to all the ISO members for the final
S
voting within two months. If the FDIS vote satisfies the criterion,
it is approved in the form of an International Standard (IS) and if
the FDIS vote fails to meet the given criteria, it is returned to the
TC/SC.
IM KEY WORDS
Continuous Quality Improvement (CQI): It is an approach of

advancement towards quality management that brings about
conventional quality assurance methods by accentuating the
organisation and systems.
M
Environmental Management System (EMS): It is a set of pro-
cesses and practices used for supervising the impacts of an or-
ganisation’s performances on the environment.
Performance efficiency: It is the percentage output calculated
by comparing the actual output produced by a person or organ-
N
isation with the expected output.

Quality assessment: It is the activity of collecting data and ana-
lysing it to determine the degree of conformity of the quality of
an organisation as against the predetermined standards.
Quality Management System (QMS): It is a collection of busi-
ness procedures based on achieving quality policy and quality
objectives.

1. Define quality management system (QMS).
2. Discuss the objectives of QMS.
3. What are the advantages of implementing QMS?
4. Write a short note on ISO.

N O T E S
5. Discuss how ISO 9000 helps in managing quality.

6. Discuss how ISO 14001 helps in managing environment.
Topic Q. No. Answer

Introduction to Quality 1. Quality Systems
Management Systems
2. False
3. continual improvement
S
4. a. Quality Management System
5. Working towards continual
quality development in product
quality and services; document-
IM ing, communicating, reviewing
and auditing the quality systems
that are in place
6. True
Introduction to ISO 7. national standards organisations
8. d. Generic
9. BIS 14000
M
10. ISO 9004:2018
11. True
12. False

N
1. A QMS can be defined as a set of inter-related and inter-acting

activities/rules and procedures which are used by organisations
to direct and control their quality standards, accomplish their
quality objectives and continually improve their performance
efficiency. Refer to Section 7.2 Introduction to Quality
Management Systems.
2. QMSs aim to strike a balance between the desired standard of
quality and customers’ expectations, improving the quality of
the products and services, etc. Refer to Section 7.2 Introduction
to Quality Management Systems.
3. QMS helps an organisation in defining and communicating
quality objectives, practices and policies clearly, ensuring
uniformity in practice, etc. Refer to Section 7.2 Introduction to
Quality Management Systems.
4. The International Organization for Standardization (ISO) was
set up in 1946. It is headquartered in Geneva, Switzerland. It is

N O T E S
an international and non-governmental organisation which sets

standards. It comprises members from all the national standards
organisations. ISO works towards promoting proprietary and
industrial and commercial standards. Refer to Section 7.3
Introduction to ISO.
5. ISO 9001:2015 is the most widely used quality management
system standard. ISO 9001:2015 is the actual standard for the
purpose of ISO certification. ISO 9001:2015 standard is a complete
operational tool that can help in improving the performance of
an organisation. Refer to Section 7.3 Introduction to ISO.
6. ISO 14001 is the international standard developed by ISO
and specifies the actual requirements for an Environmental
Management System (EMS). This standard prescribes a
S
framework that any organisation can use to formulate and
maintain its EMS in accordance with the environmental
performance requirements. Refer to Section 7.3 Introduction
to ISO.
IM
SUGGESTED READINGS
Cortada, J. (1995). TQM for Information Systems. New York: Mc-
Graw-Hill.
M
Hoyle, D. (2000). ISO 9000 Quality Systems Handbook. Oxford: But-

terworth-Heinemann.
Kanji,G. (1995). Total Quality Management Process. Madras, India:
Productivity Press.
Nanda, V. (2005). Quality Management System Implementation.
N
Boca Raton, Fla.: CRC Press.
E-REFERENCES
COPOLCO. (2019). Retrieved 6 December 2019, from https://www.
iso.org/sites/ConsumersStandards/voting_iso.html
(2019).Retrieved 6 December 2019, from https://www.bsigroup.
com/Documents/iso-9001/resources/ISO9001-IMPLEMENTA-
TION-GUIDE-FINAL-APRIL2016.pdf
(2019). Retrieved 6 December 2019, from http://www.stqc.gov.in/
content/ quality-management-system-qms
What is an ISO 9001 Quality Management System? - ISO 9000
Store. (2019). Retrieved 6 December 2019, from https://the-
9000store.com/iso-9001-2015-requirements/what-is-iso-9001-quali-
ty-management-system/

C H A
8 P T E R
QUALITY CIRCLES
S
CONTENTS
8.1 Introduction
IM
8.2
8.2.1
Concept of Quality Circles
Objectives of Quality Circles
8.2.2 Organisation of Quality Circles
8.2.3 Success of Quality Circles in Indian Industries
Activity
8.3 Quality of Work Life
M
Activity
8.4 Organising for Total Quality Management
Activity
N
8.5 Summary

N O T E S
EFFECTIVE IMPLEMENTATION OF QUALITY

CIRCLE BY ALIGARH MUSLIM UNIVERSITY
Aligarh Muslim University is among the oldest, government-fund-

ed, central universities in India. It operates a polytechnic that pro-
vides diploma courses in technical education to students. For the
past few years, the workshop of the polytechnic was experiencing
continuous material loss. To find out the cause for the on-going
problem of material loss, a quality circle was formed.
The quality circle has a leader, a facilitator, a coordinator, and four

members. The main aim of the quality circle was to find the root
cause of the reduction of material wastage and suggest solutions
S
for the problem. The circle checked the following aspects:
What was the level of reduction in material wastage?
Whether there were any saving and financial losses due to
IM wastage?
Whether it had any effect on working of employees?
The quality circle found that there were differences in the actual
and expected material consumption. After thorough discussions
and brain storming sessions, the following causes related to man,
machine, material and methods were found:
M
Causes related to man: These involved a lack of knowledge
about materials, operations, and handling special tools as well
as the absence of proper instruction.
Causes related to machines: These causes were related to
non-functioning of machines, frictional wear of machine parts,
N
misalignment of machine components, and lack of implemen-

tation of new and automatic machines.
Causes related to methods: These included lack of proper
inspection in the machine shop after the material has been
issued from the store and lack of knowledge of improving the
existing method of production.
Causes related to material: They involved lack of proper in-
spection of material dimension before machining and absence
of required composition of materials.
These issues were communicated to the top management of the

polytechnic and possible actions were taken to resolve the prob-
lems. After the implementation of a quality circle, steady reduc-
tion in material wastage was observed.

QUALITY CIRCLES 149
N O T E S
LEARNING OBJECTIVES

> Discuss the concept of quality circles
> List the ways to improve the quality of work life
> State ways for organising a total quality management
program
8.1 INTRODUCTION
Quality circles are groups of 8-10 employees in an organisation who
S
work together to implement, monitor, and control quality improve-
ment programs in their organisation. The number of members in a
quality circle may vary according to the size of an organisation; it may
be less in case of smaller organisations. A quality circle group can also
IM
include external consultants for their expert views and advice to dis-
cuss and devise solutions during quality enhancement processes.
In other words, a quality circle can be defined as an organisational

system that consists of members/employees who identify, discuss, and
analyse problems and propose suggestions. The members of a quality
circle contribute to cross-functional and inter-departmental perspec-
tives of quality issues and then work for a common goal of quality
improvement. The members meet at regular intervals to discuss prob-
M
lems.
In this chapter, you will study about the concept of quality circles, its
objectives, and success stories. After that, the chapter discusses the
concept of quality of work life. Towards the end, it explains organising
N
for total quality management.
8.2 CONCEPT OF QUALITY CIRCLES

Let us understand the concept of quality circles with the help of an
example. ABC Group of Institutes runs vocational training centres in
New Delhi. The company opened a central library for all its vocational
centres running across the city. In the initial days of its opening, the li-
brary’s staff faced various problems, such as missing books, misplace-
ment of books of different categories, book purchasing issues, and al-
location of work and responsibilities. To tackle these problems, the
management organised a brainstorming session and created a group
of five staff members to study, observe and analyse these issues for
two weeks. The group needed to identify the reasons/causes behind
the issues and suggest long lasting, permanent solutions. At the end of
the two week period, a report was submitted by the group, which sum-
marised the root cause of the on-going problems and their solutions.
Some of the solutions suggested by the group were:

N O T E S
Classification and location of books with the help of Radio-Fre-

quency Identification (RFID) technology.
Every issuance of books should be done using software
Information related to return and renewal of books, arrival of new
books, etc. should be given to students or faculty members through
SMS or email.
The management took a note of it and implemented the suggestions

of the group. After implementation, it was observed that most of the
issues were resolved within a period of one month.
In quality management, a group of employees (the group of library

staff in this case) that contributes to resolving problems in an organi-
S
sation (the library) is referred to as a quality circle. Principally, a qual-
ity circle is based on employee management participation to identify
problems, take decisions, and suggest solutions for improvement.
A quality circle is neither a technique nor a decision making body; it

IM is designed to identify quality issues on a regular basis, conduct meet-
ings, discuss and analyse these issues and suggest solutions or take
concrete steps for solving the issues. With their focus on optimum util-
isation of available resources, a quality circle ensures a smooth flow of
manufacturing and supply chain processes.
According to Edwin B. Flippo (1984), quality circle refers to a “self-gov-

erning group of workers with or without their supervisors who volun-
M
tarily meet regularly to identify, analyse and solve problems of their
work field’. These workers meet at defined intervals to discuss the
quality related problems and find out solutions for improvement.
Quality circle is usually a small and autonomous group of workers and
is generally led by a supervisor or facilitator. The leader or facilitator
N
brings cohesiveness to the group.”
From the above discussion, the main characteristics of quality circles

can be summarised as follows:
The members of quality circles meet at certain intervals of time.
The membership in quality circles is voluntary.
The problems are not only identified by members but also anal-
ysed and resolved.
They can be both formal and informal and autonomous groups.
The Union of Japanese Scientists and Engineers developed the con-

cept of quality circle. In India, however, the concept of ‘Gun Mandal’
(meaning quality circle) has been there for ages to promote the ‘Satvic
Qualities’, such as urge for excellence and knowledge, mutual trust
and confidence, self-actualisation, etc. The concept of quality circle

QUALITY CIRCLES 151
N O T E S
lays emphasis on the concept of problem solving through participa-

tion of different individuals in a group. Many Indian organisations,
such as TVS, Maruti etc., have adopted the concept of quality circles.
8.2.1 OBJECTIVES OF QUALITY CIRCLES
The main objective of quality circles is to identify quality-related is-

sues, find out their root causes, and solve issues to improve overall
quality in an organisation. For example, the objective of quality circles
in BHEL is to ‘achieve and sustain a reputation for quality at compet-
itive prices in national and international market for the entire product
range.’ The following are the main objectives of a quality circle:
Todevelop problem solving, leadership, and supervisory skills
S
among employees.
To make effective utilisation of human resources.
To improve the quality of products and services.
To
IM
reduce production and operational costs.
To utilise imaginative, creative, and innovative skills of employees
through participation, cooperation, and mutual trust.
To encourage teamwork in an organisation.
To boost employee motivation.
To develop cordial relationships between management and work-
M
ers/employees.
To improve the flow of communication within an organisation.
To reduce absenteeism and grievances.
8.2.2 ORGANISATION OF QUALITY CIRCLES

N
As discussed earlier, a quality circle is a group of people responsible

for identifying quality issues and suggesting solutions to the manage-
ment. Figure 8.1 shows the hierarchy of a quality circle:
Steering
Commitee
Coordinator
Facilitator
Circle Leader
Members
Figure 8.1: Composition of a Quality Circle

N O T E S
Let us discuss the composition of a quality circle as follows:

Steering Committee: It consists of representatives from the top
management, from human resources department and representa-
tives from the workforce in an organisation. The steering commit-
tee takes the suggestions from members of different departments.
Coordinator: A coordinator in the steering committee generally
belongs to the middle level management and his/her chief job is to
maintain coordination between facilitators and the steering com-
mittee.
Facilitator: The supervisory officer who manages a number of
quality circles is called a facilitator. A facilitator generally belongs
to the quality control or production department.
S
Circle Leader: He/she is generally chosen from the lower level
management and is responsible for organising and conducting
circle activities. The circle leader organises and ensures period-
ic meetings and discussions on quality issues and reports sugges-
IM tions to the facilitator.
Circle Members: These are the active workers in a quality circle
who share their suggestions and ideas and have active participa-
tion in improving quality. Each circle member responsibly involves
himself in the task of quality improvement. Circle members may
approach the circle leader in case of grievances.
M
8.2.3 SUCCESS OF QUALITY CIRCLES
IN INDIAN INDUSTRIES
To gain access to the technological expertise in the automobile indus-

try, Maruti collaborated with Suzuki. However, gradually, the collab-
oration did not remain solely limited to the transfer of technology;
N
various management practices of Suzuki were also successfully imple-

mented by Maruti. Quality circle was one such management practice
and over the years it became very popular in Maruti. Around two years
back, Maruti started forming quality circles among shop floor work-
ers. Over the years, this practice yielded good results for the company.
The shop floor workers meet at regular intervals to discuss issues and
find solutions. The solutions offered by quality circles not only help
in improving product quality and reducing cost but also enable man-
agers to motivate workers by involving them in the decision-making
process. The members of quality circles receive financial rewards on
the basis of their suggestions. Apart from Maruti, many other Indian
organisations have successfully implemented the concept of quality
circles. The following are some of those organisations:
Hero Honda Motors: ‘Sunrise Quality Circle’
Lucas TVS, Chennai: ‘Honey bee Quality Circle’
Tata Refractories, Odisha: ‘Niharika Quality Circle’

QUALITY CIRCLES 153
N O T E S
1. Define quality circle.

2. Who among the following is a supervisory officer who manages
a number of quality circles?
a. Coordinator b. Facilitator
c. Circle leader d. Operator
3. One of the main objectives of quality circle in any organisation
is to identify quality related issues. (True/False)
ACTIVITY
S
Suppose you are working for a manufacturing organisation. Your
organisation has been constantly facing the issues of product de-
fects and deteriorating product quality. The organisation has de-
cided to form a quality circle and appointed you as the coordinator.
IM
What would be your role as a coordinator? Prepare a job descrip-
tion for the coordinator.
8.3 QUALITY OF WORK LIFE

Quality of Work Life (QWL) can broadly be defined as the ‘quality of
relationship’ between employees and their total work environment. It
M
is a mechanism through which an organisation ensures optimum and
efficient utilisation of workers’ skills and abilities and responds to the
needs of employees. The productivity and job satisfaction of an em-
ployee is directly related to the work environment or work culture of
an organisation. In other words, better the work environment; higher
the productivity and job satisfaction of employees. The following are
N
some popular definitions of QWL:
Robbins (1989) defined QWL as “a process by which an organisation

responds to employee needs by developing mechanisms to allow them
to share fully in making the decisions that design their lives at work.”
According to Walton, QWL is “a work culture that serves as a corner

stone.” He provided the following elements that influence QWL:
Adequate Payment and Job Security: Job dissatisfaction and de-
cline in the productivity of employees takes place if there is an
unfair compensation in an organisation. Thus, an organisation
should ensure that compensation provided to employees is pro-
portional to their skills, knowledge, experience, and performance.
Apart from this, sometimes employees develop job insecurity due
to sudden changes in the work environment; which may adversely
affect their efficiency and productivity. Therefore, an organisation
must convey to its employees how important they are for the or-
ganisation.

N O T E S
Career Growth and Personal Prospects: An organisation should

provide sufficient career opportunities to employees, which leads
to their personal development and growth. Various training and
development sessions should be organised to develop or improve
employees’ skills so that they can be prepared for higher job re-
sponsibilities in the future.
Development of Human Capabilities: When an employee is as-
signed a particular job, he/she should be competent enough to
perform it. Opportunities should provide ample learning opportu-
nities to employees so that they can develop their skills and com-
petencies and better perform their jobs.
Safe and Healthy Environment: It is the responsibility of an or-
ganisation to provide a safe work environment to employees. A
S
work environment is said to be safe if it is free from any hazards
and work-related injuries. Moreover, an organisation should en-
sure that all laws related to work environment are complied with.
Work-life Balance: An organisation should ensure that employees
IM are not overburden or pressurised. This is because high workload
may lead to an unbalance in the personal and professional lives of
employees. This may result in
Constitutionalism: Employees should be well aware of their
rights. There are variations from company to company in issues
like privacy, distribution of rewards etc., which directly influence
the morale of employees. This can affect the QWL of employees.
M
Social Integration: The self-esteem level of an employee is direct-
ly influenced by the working environment. A sense of community,
interpersonal relationship, appreciation as incentives and promo-
tions etc., satiate the yearning for self-recognition.
Social Relevance: Socially irresponsible organisations generate
N
irresponsible employees who depreciate the value of their work

and career. Thus, organisations should act responsibly, not only for
themselves but also for the environment.
Thus, it can be said that there is a direct relation between QWL and
job satisfaction. This not only reduces employee absenteeism and
turnover but also ensures higher quality and quantity of work output.
4. Quality of Work life (QWL) can broadly be defined as the

________ between employees and their total work environment.
5. Who defined QWL as “a process by which an organisation
responds to employee needs by developing mechanisms to
allow them to share fully in making the decisions that design
their lives at work”?
6. Job satisfaction of an employee is directly related to the work
environment. (True/False)

QUALITY CIRCLES 155
N O T E S
ACTIVITY
Meet some of your neighbours who are working. Discuss with them
how QWL affects their other area of life. Based on your discussion,
prepare a report stating the importance of QWL.
ORGANISING FOR TOTAL QUALITY

8.4
MANAGEMENT
In the previous chapter, you have studied about the concept of To-
tal Quality Management (TQM). It is an organisation-wide program
of creating an environment wherein an organisation can improve its
ability to deliver quality products to customers on a continuous basis.
S
TQM is a customer-centred approach that focuses on employee in-
volvement and continual improvement. Being a crucial program for
an organisation, it needs to be organised properly by the quality staff.
In order to organise its TQM program, the quality staff must:
Work
IM
towards adopting a cultural change that focuses on the im-
portance of total quality.
Implement a management philosophy that lays emphasis on total
employee involvement and customer satisfaction.
Seek and exploit opportunities for improvement at all levels of the
organisation.
M
Make decisions with respect to the core business processes of the
organisation.
Develop and communicate quality policies, procedures, and re-
quirements to employees at all levels as well as to suppliers.
Be careful while making quality commitments with customers as
N
any false commitment may lead to customer dissatisfaction and

mobilise resources to solve quality-related issues.
7. ____________ is an organisation-wide program of creating an

environment wherein an organisation can improve its ability
to deliver quality products to customers on a continuous basis.
8. TQM is a customer-centred approach that focuses on employee
involvement and continual improvement. (True/False)
9. The quality staff must work towards adopting a _________ that
focuses on the importance of total quality.
10. For a TQM to be organised, what kind of a management
philosophy should be adopted?
11. The quality staff should be indifferent to make quality
commitments with customers and mobilise resources to solve
quality-related issues. (True/False)

N O T E S
ACTIVITY
Discuss how you can help to develop TQM in a neighbouring small

establishment.
8.5 SUMMARY
Quality circles are groups of 8-10 employees in an organisation
who work together, with cross functional and inter-departmental
perspectives of quality to implement, monitor and control quality
improvement programs in their organisation.
Principally, a quality circle operates on employee-management
participation to take decisions and solve problems for improve-
S
ment of quality issue within an organisation.
The members from different quality circles can contribute to is-
sues and then work for a common goal of quality improvement.
IM A quality circle is designed to identify quality issues on a regular
basis, conduct meetings, discuss and analyse these issues and sug-
gest solutions or take concrete steps for solving the issues.
Quality of Work Life (QWL) can broadly be defined as the quality
of relationship between employees and their total work environ-
ment.
The productivity and job satisfaction of an employee is directly re-
M
lated to the work environment or work culture in an organisation.
Total quality management is a highly customer-focused philoso-
phy that requires continuous innovation.
KEY WORDS
N
Quality: It is the degree of excellence of a product or service.

Quality control: It is a process of setting certain standards and
maintaining them to ensure the quality criteria of the product.
Brainstorming: It involves intensive discussions carried out to
solve problems or to generate ideas.
Implement: To put some ideas into actions.

1. What do you understand by a quality circle?
2. Discuss the hierarchy of a quality circle.
3. What are the objectives of a quality circle?
4. Discuss the relationship between QWL and job satisfaction.
5. What should be done to organise a TQM program?

QUALITY CIRCLES 157
N O T E S
Topic Q.No. Answers

Concept of Quality Circles 1. A group of employees that contrib-
utes to resolving quality-related
problems is called a quality circle.
2. b. Facilitator
3. True
Quality of Work Life 4. Quality of relationship
S
5. Robbins (1989)
6. True
Organising for Total 7. TQM
Quality Management
IM 8. True
9. Cultural change
10. A management philosophy that
lays emphasis on total employee
involvement and customer satis-
faction should be embraced.
M
11. False

1. In quality management, a group of employees that contributes to
resolving problems in an organisation is referred to as a quality
N
circle. Refer to Section 8.2 Concept of Quality Circles.

2. A quality circle is composed of steering committee, coordinator,
facilitator, circle leader, and circle members. Refer to Section
8.2 Concept of Quality Circles.
3. The main objectives of a quality circle are to develop problem
solving, leadership, and supervisory skills among employees;
make effective utilisation of human resources; improve the
quality of products and services; and so on. Refer to Section
8.2 Concept of Quality Circles.
4. QWL is a mechanism through which an organisation ensures
optimum and efficient utilisation of workers’ skills and abilities
and responds to the needs of employees; thus leads to job
productivity. Refer to Section 8.3 Quality of Work Life.
5. In order to organise its TQM program, the quality staff must
work towards adopting a cultural change that focuses on the
importance of total quality; implement a management philosophy

N O T E S
that lays emphasis on total employee involvement and customer

satisfaction; etc. Refer to Section 8.4 Organising for Total
Quality Management.
SUGGESTED READINGS
Cascio,W. (1998). Managing human resources. Boston: Irwin Mc-
Graw-Hill.
Hutchins, D. (1985). Quality circles handbook. New York, NY: Nich-
ols.
S
Juran, J. (1988). Juran on planning for quality. New York: Free
Press.
E-REFERENCES
IM
Asq.org,. (2014). TQM - Total Quality Management Resources | ASQ.
Retrieved 8 November 2014, from http://asq.org/learn-about-quali-
ty/total-quality-management/overview/overview.html
Hrmars.com,. (2014). Untitled Document. Retrieved 8 November
2014, from http://hrmars.com/hrmars_papers
Isixsigma.com,. (2014). The Eight Elements of TQM. Retrieved 8
M
November 2014, from http://www.isixsigma.com/methodology/to-
tal-quality-management-tqm/eight-elements-tqm/
Managementhelp.org,. (2014). Total Quality Management (TQM).
Retrieved 8 November 2014, from http://managementhelp.org/
quality/total-quality-management.htm
N

C H A
9 P T E R
CUSTOMER-SUPPLIER RELATIONSHIP
S
CONTENTS
9.1 Introduction
IM
9.2

Customer-Supplier Partnership
Activity
9.3 Sourcing
Activity
9.4 Supplier Selection
M
Activity
9.5 Supplier Rating
Activity
N
9.6 Relationship Development

Activity
9.7 Summary

N O T E S
BUILDING AN EFFECTIVE RELATIONSHIP
Willow Group, based in Noida, is an exclusive supplier of sports

goods. Many NCR based firms dealing in sports goods buy their
sports accessories from Willow Group. Apart from their quality,
productivity and accuracy, Willow Group is recognised for their
excellent rapport with customers.
DBS Sports is an emerging new organisation in this field. It is lo-

cated in New Delhi and has an excellent network in its core area.
DBS group decided to take the services of Willow Group for their
supplying needs. Consequently, they organised a meeting with
Willow Group.
S
DBS Sports was amazed with the optimistic market image of Wil-
low Group. After completing the necessary discussions and con-
ferences, DBS Sports placed its first order for `5,00,000. Based on
IM the business contract, DBS Sports paid a part of the total mon-
ey and the remaining was paid after receiving the products. The
quality standards of the products delivered by Willow Group en-
abled DBS Sports to carve its niche in the Sports market. With
their growing understanding and association, the two parties
eventually set up the following rules for developing and maintain-
ing an efficient customer supplier association:
Rule of equal responsibility
M
Rule of non-adversarial agreement

Rule of satisfaction
Rule of sharing information
N
Rule of quality evaluation

Rule of satisfying end users

Customer-Supplier Relationship 161
N O T E S
LEARNING OBJECTIVES

> Discuss the importance of customer-supplier relationship
> Explain sourcing and its types
> Explain the process of selecting suppliers
> Explain the process of rating suppliers
> Discuss the concept of relationship management
9.1 INTRODUCTION
S
In the previous chapter, you have studied about quality circles. The
main objective of a quality circle is to increase the quality of the final
product. However, if the quality of raw materials used in manufac-
turing the final product is not good, then it will not be possible to get
IM
a high quality end product. Thus, it is necessary for organisations to
procure good and high quality raw materials at right time and right
place. For this purpose, organisations must select good suppliers and
maintain healthy relationships with them. In this chapter, you will
study about the customer-supplier relationship in detail.
Total Quality Management (TQM) is a process of defining quality stan-

dards for the products and services of an organisation and ensuring
M
that these objectives are met throughout the lifecycle of a product or
service.
Organisations usually spend large amounts of money on obtaining

quality resources from suppliers as the quality of raw materials given
by suppliers affects the overall quality of the finished product. Inferior
N
quality raw material not only affects the quality of the product but also
tarnishes the image of the organisation in the market. Therefore, it is
very important to source and select the right kind of suppliers before
purchasing any material from them.
Customer supplier relationship plays a vital role in delivering supe-

rior quality output to the end user. Business-oriented measures of
performance are conventionally linked to an organisation’s internal
activities or competitive environment. An organisation’s performance
may be jeopardised in case its partners do not attain the anticipated
performance. Therefore, performance depends on the efficiency of
business-oriented relationships with interdependence between part-
ners. Customers (organisations) require to pay more attention while
choosing the most efficient suppliers in the market. Some key criteria
that customers generally expect from suppliers are appropriateness,
quality of materials, services and trade discounts, etc. In this chapter,
you will learn about various aspects of customer-supplier relationship.

N O T E S
9.2 CUSTOMER-SUPPLIER PARTNERSHIP

Suppliers are required to maintain good relationships with customers
for the smooth operations of the business. This relationship can be
developed by offering quality products and services to customers. D
Krause, a researcher at Michigan State University, mentions: “An ag-
gressive supplier development programme can play an important part
in helping the firm achieve its competitive goals.”
Both the customer and the supplier play major roles in enhancing the
productivity of an organisation. A customer is someone to whom you
offer your final output or services in return for certain monetary val-
ue. Thus, to meet their rising needs, you need to maximise your pro-
ductivity and quality. On the other hand, a supplier is any business
S
unit or individual from whom you obtain raw materials for producing
the final output. It is important for an organisation to choose the cor-
rect supplier from whom quality resources can be obtained.
IM There are many aspects that enhance the bond between suppliers and
customers. The major aspects are price and timely delivery of mate-
rials. Before 1980s, procurement decisions were made exclusively on
the basis of price and the agreement for buying the raw materials is
given to the lowest bidder. This adversely impacted the quality and
timely delivery of products. Quality guru, Deming, mentioned that
customers should discontinue this choice for suppliers depending on
just low-priced offers. Price, in real, has no value in case the quality of
M
the final products or output cannot be obtained in return. Addition-
ally, Deming advocated single suppliers for each good so that a high-
er level of trust and loyalty could be built, helping suppliers expand
long-term relationships with their customers. As a result, suppliers
initiated offering products and services that achieved customers’ need
N
in both quality and price.
The second aspect leading suppliers to concentrate on their relation-

ship with customers is well-timed delivery of products. That is why the
theory of Just-in-Time (JIT) was introduced in business exercise. JIT
is a manufacturing method that supports an organisation in preparing
products accurately based on customers’ needs. It even enables man-
ufacturers to identify when the customers desire the products and in
what quantity. JIT has radically changed production processes. It has
supported manufacturers control production schedules depending on
customers’ particular requirements by keeping minimal costs and low
lead time. JIT even supports to diminish the surplus of resources and
make products obtainable at the exact time.
In the current business scenario, organisations spend a large amount

of money on the acquisition of quality materials, so that advanced
quality products can be delivered to the end users. The quality output
and services get customers back to their chosen suppliers, leading to
a better association between them.

N O T E S
Figure 9.1 shows the expectations of customers from suppliers:
Quality materials
Competitiveness
Services
S
Timeliness
IM
Figure 9.1: Expectations of Customers
Let’s study the points, illustrated in Figure 9.1:

Quality Materials: Enhanced quality material often gives quali-
ty output. These inputs are given by suppliers. In case the final
output is capable to realise customers’ need, they will purchase
more material from the supplier. This will enhance the intensity of
transactions. Increased transactions mean higher demand, which
M
leads to higher efficiency. Therefore, offering quality output not
only enhances the level of transactions, but even supports an or-
ganisation to build up a superior association with both suppliers
and end users.
Competitiveness: Suppliers could be in an advantageous posi-
N
tion depending on pricing, suitability, consistency and excellence.

From the viewpoint of quality, a firm would like to deal with sup-
pliers who offer better quality than their competitors.
Services: It includes the various facilities offered by suppliers to
their customers, like trade discounts, price exemptions, credit fa-
cilities, and free shipping. The longer the relationship, the higher
the likelihood of receiving good service from suppliers.
Timeliness: One of the prime factors that all customers expect
from suppliers is timeliness. In case, an organisation obtains re-
sources at the exact time from the supplier, it can fulfil its obliga-
tion to the customers at the exact time. Delay in delivery of materi-
als leads to delays in the final output, and in the long run impacts
the goodwill and consciousness of suppliers. Additionally, lack
of time management even creates breach between organisations
and the end users and affects the overall business relationship be-
tween a supplier and a customer. Timeliness brings a vital stability
between supplier, customer and end users.

N O T E S
In order to establish a long-lasting relationship, suppliers look ahead

to the following from their customers:
Timely Payments: A customer is required to clear all monetary
dues on time to evade any chaos that can impact customer-suppli-
er relations
Lead Time: Customers must offer ample lead times to suppliers,
so that suppliers can administer production and delivery of the
necessary resources on time.
Information Sharing: Business information should be shared be-
tween customers and suppliers, in order to understand any new
changes, like the number of orders, delivery date and payments
terms.
S
1. __________ is a manufacturing method that supports an

IM organisation in preparing the products accurately based on
the needs of customers.
2. Only the supplier plays a major part in enhancing the
productivity of an organisation. (True/False)
3. Which of the following is not expected by customers from a
supplier?
a. Timeliness b. Quality material
M
c. Raw materials d. Services

4. Before 1990s, procurement decisions were made exclusively
on the basis of price and the agreement for buying the raw
materials is given to the lowest bidder. (True/False)
N
5. ________brings a vital stability between supplier, customer

and end users.
ACTIVITY
Using the Internet, find out what customers expect from suppliers.
9.3 SOURCING
Sourcing is the first step in cultivating a fruitful customer-supplier
association. The term sourcing indicates ‘finding or tracing the right
supplier from whom the required resources can be acquired.’
There are three types of sourcing, as illustrated in Figure 9.2:

N O T E S
Sole
Multiple Single
Figure 9.2: Types of Sourcing
Let us discuss the three types of sourcing as follows:

Sole Sourcing: This is when customers have only a single source
for purchasing necessary resources. The rationale behind opting
for a sole source is that just one organisation or division of an or-
ganisation produces a specific product. Due to limited sources of
S
supply, sole sourcing offers the scope for developing a multidimen-
sional relationship, known as partnering, between the customer
and supplier.
Multiple Sourcing: In this type of sourcing, there are more than
IM
two suppliers in the market for a specific kind of product. This
kind of sourcing leads to rivalry among suppliers. The progress of
customer-supplier association when there are multiple sources is
based on aspects like the level of quality resources, price, profit-
able offers, discounts facilities and services offered by suppliers.
Single Sourcing: In this type of sourcing, the customer (organisa-
tion) selects a specific supplier out of various accessible sources.
M
Single sourcing leads to a long-term association among the cus-
tomer and supplier. Single sourcing is advantageous to an organ-
isation in terms of limited production costs, supplier loyalty and
enhanced output.
Table 9.1 shows the differences between sole source and single source:
N
TABLE 9.1: DIFFERENCE IN SOLE SOURCE AND

SINGLE SOURCE
Sole Source Single Source
1. Customer does not have any op- 1. This source offers customers
tion to select from. a variety of choices to select
from.
2. Having only one supplier limits 2. A lot of time and resources
the time and resources required in are consumed in finding the
moving from supplier to supplier. best alternative.
6. Sourcing is the first step in cultivating a fruitful customer-

supplier association. (True/False)
7. Name three types of sourcing.
8. _________ leads to a long-term association among the customer
and supplier.

N O T E S
ACTIVITY
Explore more about different types of sourcing from various sourc-

es such as Internet, Business magazines, etc. Discuss your findings
with those of your friends.
9.4 SUPPLIER SELECTION

Selecting a supplier involves identifying, evaluating, and drafting
agreements and contracts with suppliers. Choosing a supplier is a
tough job that must be carried out after thorough consideration as any
incorrect decision may lead to the losses in time, capital and effort.
S
The following list of questions helps a customer (organisation) in
choosing the right kind of suppliers:
What is the volume of the output that needs to be produced and
IM supplied?
How efficient is the supplier?
Is the supplier financially efficient?
What is the market image of the supplier?
Does the supplier have the required technology and equipment
and a skilled workforce to meet the specified requirements?
M
Each of the above query must be answered based on delivery, costs,
safety, quality, services and attainment of technical knowledge. The
following conditions must also be taken into consideration before tak-
ing the final decision:
The supplier should clearly understand the policies and quality
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objectives of the organisation.

The supplier should maintain high technical standards and must be
proficient enough to deal with future advancements in technology.
The supplier should be prepared to cater to the growing demand
of customers without compromising on quality standards.
The supplier should adhere to the business terms.
The supplier should maintain confidentiality.
The entire business process flow should be traced on a regular
basis.
There should be adequate and effective communication between
the customer and the supplier.
The supplier should have a successful quality system and enhance-
ment program.
The supplier should have a track record of customer satisfaction.

N O T E S
9. Which of the following is not considered while choosing the

right supplier?
a. Market image of the supplier
b. Geographical location of the supplier
c. Financial condition of the supplier
d. Technical proficiency of the supplier
10. Selecting a supplier involves _______, _______ and ________
agreements and contracts with suppliers.
11. There should be adequate and effective communication
S
between the customer and the supplier. (True/False)
ACTIVITY
IM
Visit the marketing executive of a manufacturing unit and find out
the procedure that they follow to select their suppliers. Prepare a
questionnaire for selecting a suitable supplier on the basis of this
information.
9.5 SUPPLIER RATING

M
In today’s competitive business environment, many suppliers have

successfully established their existence in the market. Their long-
term existence in the market reflects their potential and standard of
services. These suppliers are often rated as ‘good’ or ‘excellent’ when
they meet or exceed expectations. This rating helps in assessing the
N
performance of supplier and establishes a positive impression in the

minds of end users and in the market. Suppliers should be rated on
the basis of the following:
Standard and official review of suppliers’ overall performance
Standard evaluation system for all suppliers
A supplier rating system is usually referred to as the ‘scorecard’ sys-

tem. It evaluates approved suppliers based on their services, product
quality and opinion from end users. Some key criteria in rating a sup-
plier are:
Market position
Time management and precision
Discounts and payment terms
Zero defect product
Redressal of issues and complaints

N O T E S
The supplier’s rating system depends on quality, delivery and service.

Based on these criteria, the performance metrics of a supplier are
shown using the three colours of a traffic signal, red (problems), yel-
low (potential problems) and green (no problems).
Table 9.2 shows an example of a supplier scorecard in the hardware

industry, where the main rating criteria comprises product technolo-
gy, lead time, delivery and technical support:
TABLE 9.2: EXAMPLE OF A SUPPLIER SCORECARD

Period: 4Q94 Supplier
A B C D E
Quality Points
Performance
S
Maximum Actual
Line returns 30 27.66 29.61 28.11 28.71 28.65
PPM deduction (Max- –10 –10 –10 –10 –10
imum-10)
IM Certified yield multi-
plier
0.9 0.94 0.87 0.85 0.72
Penalty: Field issues (Maximum–15)

Stop shipment (Maximum–15)
Line purge (–5 each time)
Subtotal (0-30) 30 15.894 18.433 15.756 15.904 13.428
Process control 8 6.5 6.5 5.5 5 6
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Process technology 6 5.2 4 5.2 4.8 4.6
Sustaining technical 6 2.3 1.6 3.5 4 2.8
support
On-time delivery 20 20 18 19 19 18
Product technology 10 9.7 6.7 9.1 7.4 8.2
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Lead time 15 13 13 13 13 13
Purchasing and ma- 5 5 3 2 5 2
terial support
Performance matrix 100 77.594 71.233 73.056 74.204 68.028
total
Price index= target 1 0.878 0.947 1 0.905 0.967
price/actual price
Score=performance 100 68.127 67.457 73.056 67.154 65.783
matrix × price index
Total cost of 1 1.3187 1.3254 1.2694 1.3285 1.3422
supply=((100–
score)/100)+1
1.0=perfect
2.02=worst possible
Reproduced, with permission, from Richand A. Allen and Ralph H.
Kilmann, “How Well Does Your Reward System Support TQM?” Quality
Progress (December 1998):47-51.

N O T E S
12. Name the two criterions of rating suppliers.

13. The suppliers’ rating system depends on _______, _________
and ________.
14. Suppliers should never meet customer’s expectations in
services and products. (True/False)
15. A supplier rating system is usually referred to as the ______
system.
ACTIVITY
S
Using the Internet, find more about supplier rating methods.
IM
9.6 RELATIONSHIP DEVELOPMENT
The customer supplier relationship depends upon many factors: fre-
quency of their interactions with each other, adherence to policies,
quality objectives and business terms, etc.
This relationship can be strengthened by taking care of the following

points:
M
Inspection: It refers to the practice of examining the degree to
which quality objectives are met by the customer and supplier. The
relationship is a two-way approach in which the business activities
and products/services of both parties are inspected. There are four
levels of an inspection process: 100 % inspection, sampling, audit,
N
and identity check.

Training: Providing proper training to suppliers is essential to
maintain the desired standards of quality. Training programs also
offers the scope of collective participation by both suppliers and
customers.
Team approach: Developing the spirit of working in a team helps
all the members to contribute productively towards a common
goal.
Recognition: It involves providing incentives, monetary rewards,
letter of commendation and other business opportunities to suppli-
ers who have met or exceeded the expectations of the organisation.
From the discussion so far, it can be summarised that establishing an

effective customer-supplier relationship is a five-step process that in-
volves:
1. Sourcing the right suppliers
2. Select the right suppliers

N O T E S
3. Ensuring the standards of quality delivered by the suppliers

4. Assessing the performance of suppliers and rating them.
5. Establishing a good customer-supplier relationship by inspection,
training, team approach and recognition.
16. The four levels of an inspection assessment does not include:

a. Sampling
b. Audit
c. Identity check
S
d. Training
17. Creating a successful customer-supplier relationship is a four
step approach. (True/False)
IM ACTIVITY
Visit some marketers and find how they improve their relationships
with their customers.
9.7 SUMMARY
M
JIT is a manufacturing method that supports an organisation in
preparing the products accurately based on customers’ needs.
Enhanced quality material often gives quality output. These in-
puts are given by suppliers.
One of the prime factors that all customers expect from suppliers
N
is timeliness. In case, an organisation obtains resources at the ex-

act time from the supplier, it can fulfil its obligation to the custom-
ers at the exact time.
Sourcing is the first step in cultivating a fruitful customer-supplier
association.
Selectinga supplier involves identifying, evaluating and drafting
agreements and contracts with suppliers.
A supplier rating system is usually referred to as the ‘scorecard’
system. It evaluates approved suppliers based on their services,
product quality and opinion from end users.
The customer-supplier relationship depends upon many factors:
frequency of their interactions with each other, adherence to poli-
cies, quality objectives and business terms, etc.

N O T E S
KEY WORDS
Acquisition: This is the act of acquiring an asset, normally a

corporate act.
Lead Time: This indicates the time elapsed between the begin-
ning and completion of a production/project/supply process.
Productivity: This is of the rate of output per unit of input.

1. Emphasise the importance of maintaining good customer-
supplier partnership in business.
S
2. List the expectations of customers from their suppliers.
3. What is necessary to maintain a long-lasting relationship between
customers and suppliers?
IM
4. Define sourcing. Elaborate on its types.
5. List the conditions that should be taken into account before
selecting a supplier.
6. What is the criteria to rate suppliers?
7. Discuss the factors on which the customer-supplier relationship
depends.
M

N
Topic Q.No. Answers

Customer-Supplier 1. Just-In-Time (JIT)
Partnership
2. False
3. c. Raw materials
4. False
5. Timeliness
Sourcing 6. True
7. Sole, multiple, and single
8. Single sourcing
Supplier Selection 9. b. Geographical location of the
supplier

N O T E S
Topic Q.No. Answers

10. Identifying, evaluating and
drafting
11. True
Supplier Rating 12. Standard and official review of
suppliers’ overall performance and
Standard evaluation system for all
suppliers
13. Quality, delivery and service
14. False
15. Scorecard
S
Relationship Development 16. d. Training
17. False

IM 1. Suppliers are required to maintain good relationships with
customers for the smooth operations of the business. Refer to
Section 9.2 Customer-Supplier Partnership.
2. Both the customer and the supplier play major roles in
enhancing the productivity of an organisation. Refer to Section
9.2 Customer-Supplier Partnership.
M
3. In order to establish a long-lasting relationship, suppliers look
ahead to the following from their customers. Refer to Section
9.2 Customer-Supplier Partnership.
4. Sourcing is the first step in cultivating a fruitful customer-
supplier association. Refer to Section 9.3 Sourcing.
N
5. The following conditions must be taken into consideration before

taking the final decision. Refer to Section 9.4 Supplier Selection.
6. In today’s competitive business environment, many suppliers
have successfully established their existence in the market.
Refer to Section 9.5 Supplier Rating.
7. The customer-supplier relationship depends upon many factors
like frequency of their interactions with each other, adherence
to policies, quality objectives and business terms, etc. Refer to
Section 9.6 Relationship development.

N O T E S
SUGGESTED READINGS
Supplier Relationship Management By Jonathan O›Brien
TQM for Purchasing Management by James F. Cali
E-REFERENCES
Journal of Supply Chain Management- Retrieved 31 September
2014, from http://www,ism.ws >publications
Managing Supplier relationships -Retrieved 31 September 2014,
from http://www finance.tufts.edu/purchasing/12-managing-sup-
S
plier-relationships/
How Well Does Your Reward System Support TQM? Quality Prog-
ress (December 1998) By Richand A. Allen and Ralph H. Kilmann
Relationships
IM
for supply chain success-Retrieved 31 September
2014, from http://www.supplychainquarterly.com/topics/Strategy
M
N

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M
IM
S
C H
10 A P T E R
PERFORMANCE MEASUREMENT
S
CONTENTS
10.1 Introduction
IM
10.2
10.2.1
Concept of Performance Measurement
Objectives of Performance Measurement
10.2.2 Typical Measurement
10.2.3 Criteria for Measurement
Activity
10.3 Strategic Performance Measurement
M
Activity
10.4 Summary
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N O T E S
PERFORMANCE MEASUREMENT AT CEMOTECH LTD.
CemoTech Ltd. is considered to be the major ready mix concrete

producers in India. It has 400 employees who are functioning in
seven diverse locations. The organisation has been confronting
a number of issues like rise in costs, decline in sales volume, and
dissatisfaction of customers for the last three months.
Based on the current scenario, the management of CemoTech has

decided to execute a sophisticated culture, improved customer
service, enhancement programs. For this, the organisation has im-
plemented a performance measurement program. This program
has supported the organisation in finding the areas of customer
S
service improvement and cost minimisation. Moreover, the organ-
isation has communicated the rationale of its total quality initia-
tives to its employees so that they can administer performance
results and lessen variation in the worth of products or processes.
IM With the execution of an efficient performance measurement sys-
tem, CemoTech Ltd. is capable to safeguard 20 to 30 million ru-
pees every year. Currently, the organisation is capable to attain a
superior rank of customer approval by having efficient planning
and meeting quality standards based on customer needs.
M
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PERFORMANCE MEASUREMENT 177
N O T E S
LEARNING OBJECTIVES

> Discuss the concept of performance measurement
> Explain the objectives of performance measurement
> List the criteria for performance measurement
> Describe the concept of performance measurement
10.1 INTRODUCTION
“Performance of any organisation is one of the most important meth-
S
ods to attain people’s commitment towards achieving the goals of or-
ganisation.”
Performance measurement is considered to be a vital factor of the total

quality management (TQM) efforts of an organisation. Conventionally,
IM
organisations used to measure performance in financial terms like su-
perior revenues; high profits or liquidation. However, this convention-
al performance estimation does not help organisations in their quality
initiatives as there is no room for process performance and consumer
approval in such type of estimation.
In a total quality-oriented organisation, performance is estimated on

the basis of the satisfaction level of customers and effectiveness and
M
efficiency of processes performed in the organisation. Management of
total quality needs a much wider set of performance estimation based
on the organisation’s strategy. An efficient performance measurement
system constitutes processes for collecting, analysing, and storing
data for evaluating performance. It is rather known as a management
N
system that focuses on the detection and prevention of errors in order

to reach conformance to quality standards.
In this chapter, you will study about the concept of performance mea-
surement, its objectives, and criteria for measurement. Further, the
chapter explains the concept of strategic performance measurement.
CONCEPT OF PERFORMANCE
10.2
MEASUREMENT
Performance measurement is one of the most essential factors of the to-
tal quality initiatives of an organisation. It is concerned with managing
the result and minimising the overall variation in products or processes.
The primary goal of performance measurement is to make efficient de-
cisions based on actions affecting products, processes, and output. Per-
formance measurement is principally an overall management system
that aims at detecting and preventing errors so as to reach conformance
of the quality of products, services, or processes to consumer needs.

N O T E S
Additionally, it intends to process optimisation by reaching enhanced

effectiveness and efficiency of products, services, and processes. Per-
formance measurement comprises significant metrics, data collection
and analysis, and enhanced actions. Performance measurement plays
a major role in:
Determining and tracking organisational performance
Administering and controlling business processes
Identifying opportunities for regular enhancement
Comparing performance against the desired standards
Quality-related performance measures include the assessment of pro-

cesses, supply chain performance, inventory limitations, and so on.
S
The performance measurement process of an organisation must re-
spond to the following queries:
Why to measure: It is basically the purpose of performance mea-
surement. An organisation may measure its performance to:
IM Ensure that consumer needs are met
Set and fulfil process aims
Give standards for assessment
Emphasise quality issues
M
Determine the cost of quality
Substantiate the utilisation of resources
Offer views for motivating constant enhancement effort
What to Measure: An organisation needs to gauge its efficiency,
N
effectiveness, quality, productivity, and suitability so as to find its

overall performance.
When to Measure: Performance can either be estimated when the
processes are performed or after the result is produced. Organ-
isations generally choose the in-process measurement of perfor-
mance as it corrects flaws there and then without affecting the by
and large process cycle.
How to Measure: It involves the selection of a method to be used
for a specific measurement, the measurement tool required, cali-
bration and precision requirements, etc.
10.2.1 OBJECTIVES OF PERFORMANCE MEASUREMENT
In recent aggressive business milieu, organisations require to contin-

ually ensure how they are performing to endure in the market. Per-
formance measurement is a vital technique that supports organisa-
tions to assess its performance on a timely basis and ensure enhanced

N O T E S
efficiency. Without an efficient measurement system, precise decisions

cannot be completed. As a result, efficient performance measurement
is critical for an organisation. Figure 10.1 lists the objectives of perfor-
mance measurement:
Control
Self-Assessment
Continuous Improvement
S
Overall Monitoring
IM
Figure 10.1: Different Objectives of Performance Measurement
These objectives of performance measurement are explained as fol-

lows:
Control: Performance measurement must facilitate an organisa-
tion to perceive variations in the performance and the required
performance and undertake preventive measures. This supports
in lessening variations and meeting organisational aims in the re-
M
quired time.
Self-assessment: Performance measurement is a self-assessment
technique to examine process competence and efficiency. This
supports an organisation to determine the bottlenecks in process-
es and make corrections before they obstruct the standard func-
N
tioning of the organisation.

Continuous Improvement: Performance measurement must per-
mit an organisation to recognise the field of enhancement by spot-
ting flaws and defective processes. In such a manner, it offers op-
portunities for constant enhancement.
Overall Monitoring: Performance management must enable an
organisation to avoid flaws in services, products, and process-
es; ensure if organisational objectives and consumer needs are
reached as decided; conform to quality standards; and recognise
flaws and fix them.
10.2.2 TYPICAL MEASUREMENT
Typical performance measurement helps an organisation in periodi-

cally setting business goals and then providing feedback to managers
on progress towards those goals. These goals can be short term or long
term. Performance measurement is a primary building block of TQM.

N O T E S
Traditionally, organisations focused on measuring performance in fi-

nancial terms. Thus, conventional performance measures were based
on cost accounting information. However, these measures provided
little support to organisations in their quality drive. In today’s busi-
ness environment, for the success of an organisation, performance
should be measured against the result delivered to customers.
10.2.3 CRITERIA FOR MEASUREMENT
In total quality management, measuring performance requires a con-

ceptual framework. This framework lists the criteria for what should
be measured. The following is the criteria for measuring and evaluat-
ing performance:
S
Effectiveness: It involves assessing the results achieved at any
point in operations. Such criteria also include reviewing inputs,
process activities, and outputs and outcomes.
Efficiency: It involves measuring performance against the amount
IM of resources utilised to produce an output or outcome. These re-
sources can include personnel, materials, facilities, and money.
Quality: It involves checking whether the set quality standards are
met and products and services meet customer requirements. Ex-
amples are poor quality may include defective products, rework
needed, level of customer dissatisfaction, and so on.
Timeliness: It involves assessing the time taken to complete a par-
M
ticular activity, such as producing a lot of products, order shipping,
problem solving, etc. This criterion also involves checking the time
experienced by a customer waiting for a product or service.
Finance:It involves checking the profitability of an organisation,
management of funds, budget limits, and so on.
N
Workplace Environment: It involves checking the condition of

physical amenities and organisational culture.
1. Performance measurement is principally an __________

that aims at detecting and preventing errors so as to reach
conformance of the quality of products, services, or processes
to consumer needs.
2. Quality-related performance measures include the assessment
of processes, supply chain performance, inventory limitations,
and so on. (True/False)
3. Which criterion involves assessing the results achieved at any
point in operations?
4. Which of the following criterion involves assessing the time
taken to complete a particular activity?

N O T E S
a. Efficiency
b. Finance
c. Timeliness
d. Workplace environment
5. In total quality management, measuring performance requires
a _______.
6. Performance measurement is the secondary building block of
TQM. (True/False)
7. Traditionally, organisations focused on measuring
performance in ______.
S
8. The quality criterion involves checking the profitability of an
organisation, management of funds, budget limits, and so on.
(True/False)
9. Performance measurement must permit an organisation
IM
to recognise the field of ___________ by spotting flaws and
defective processes.
10. In recent aggressive business milieu, organisations require to
continually ensure how they are performing to endure in the
market. (True/False)
M
ACTIVITY
Find information on the performance measurement criteria set by

some software development organisations.
N
STRATEGIC PERFORMANCE
10.3
MEASUREMENT
Strategic Performance Measurement (SPM) is a process of defining
and working toward attaining strategic objectives and aligning be-
haviours and attitudes with an aim to improve organisational per-
formance. It is a powerful tool of measuring an organisation’s per-
formance against its strategic goals. SPM helps organisations in the
following ways:
Developing, implementing, and assessing organisational strategy.
Communicating the results attained to stakeholders, thereby
building t brand and reputation.
Facilitatingperformance improvement culture and fostering or-
ganisational learning; thereby motivating employees at all levels.
The strategic performance of an organisation is measured on the basis

of four perspectives, which are explained as follows:

N O T E S
Financial Perspective: An organisational strategy is said to be ef-

fective if it meets its financial goals. These financial goals are the
targets set for the revenue growth with the existing product or ser-
vice lines, profit margins, total cost. Financial perspective goals
can also be related to improved asset utilisation, speedy collection
of receivables, etc.
Customer Perspective: Every organisation focuses on meeting
customers’ requirements while formulating its strategy. The cus-
tomer-related goals of an organisation (included in a strategy) can
be improved customer acquisition and retention, increased mar-
ket share, quick response to customer needs, optimum product
mix, maximum customer satisfaction, strong brand image, etc.
Internal Process Perspective: A strategy also has internal process
S
goals related to improved employee productivity, short process
cycle times, low cost, reduced inventory levels, increased service
response times, etc.
IM Learning and Growth Perspective: These are the intangible goals
incorporated in an organisational strategy. These goals can be re-
lated to better training to improve the skills and competencies of
employees; rewards for performers; innovative contribution; em-
ployee retention and motivation; and so on.
The SPM process begins at the top level of management and involves
the following steps:
M
1. Creating the vision and formulating the strategy
2. Building the top-level scorecard
3. Educating and communicating strategic goals to stakeholders
4. Creating an effective reward system
N
5. Reviewing progress on a continuous basis

6. Modifying the strategy if needed as per the review
11. ___________ is a powerful tool of measuring an organisation’s

performance against its strategic goals.
12. The financial goals are the targets set for revenue growth with
an organisation’s product or service lines, profit margins, total
cost. (True/False)
13. Which are intangible goals incorporated in an organisational
strategy?
14. Which is the third step of the SPM process?

N O T E S
ACTIVITY
Find information on the strategic performance measurement pro-

cess of some renowned manufacturing organisations.
10.4 SUMMARY
Performance measurement is concerned with managing the result
and minimising the overall variation in products or processes. The
objectives of performance measurement are control, self-assess-
ment, continuous improvement, and overall monitoring.
The criteria for measuring and evaluating performance involve ef-
S
fectiveness, efficiency, quality, timeliness, finance, and workplace
environment.
StrategicPerformance Measurement (SPM) is a process of defin-
ing and working toward attaining strategic objectives and aligning
IM
behaviours and attitudes with an aim to improve organisational
performance.
SPM helps organisations in developing, implementing, and assess-
ing organisational strategy; communicating the results attained to
stakeholders, thereby building t brand and reputation, and so on.
The strategic performance of an organisation is measured on the
basis of four perspectives, namely financial, customer, internal
M
process, and learning and growth.
KEY WORDS
Effectiveness: It is described as the ratio of the real output to

N
the usual output.

Efficiency: It is the ratio of resources actually used to resources
decided to be utilised.
Productivity: It is the ratio of output to inputs.
Timeliness:It implies estimating whether the work has been
performed properly within the stipulated time.

1. What are the queries to which performance measurement
respond?
2. Write a short note in the continuous improvement objective of
performance measurement.

N O T E S
3. Discuss the quality criterion of performance measurement.

4. Explain a typical performance measurement.
5. What do you understand by the term SPM?
6. List the steps involved in the SPM process.
Topic Q.No. Answers
S
Concept of Performance 1. Overall management system
Measurement
2. True
3. Effectiveness
IM 4. d. Timeliness
5. Conceptual framework
6. False
7. Financial terms
8. True
M
9. Enhancement
10. True
Strategic Performance 11. SPM
Measurement
12. True
N
13. Learning and growth related goals

14. Educating and communicating
strategic goals to stakeholders

1. The queries to which performance measurement respond are
why to measure, what to measure, when to measure, and how
to measure. Refer to Section 10.2 Concept of Performance
Measurement.
2. Performance measurement should aims at continuously
recognising the areas of improvement by spotting flaws
and defective processes. Refer to Section 10.2 Concept of
Performance Measurement.
3. The quality criterion involves checking whether the set quality
standards are met and products and services meet customer

N O T E S
requirements. Refer to Section 10.2 Concept of Performance

Measurement.
4. A typical performance measurement helps an organisation in
periodically setting business goals and then providing feedback
to managers on progress towards those goals. Refer to Section
10.2 Concept of Performance Measurement.
5. SPM is a process of assessing an organisation’s strategic
objectives and aligning behaviours and attitudes in order
to improve organisational performance. Refer to Section
10.3 Strategic Performance Measurement.
6. The steps involved in creating the vision and formulating
a strategy; building the top-level scorecard; educating and
S
communicating strategic goals to stakeholders; etc. Refer to
Section 10.3 Strategic Performance Measurement.

IM
SUGGESTED READINGS
Epstein,
M., & Manzoni, J. (2004). Performance measurement and
management control. Amsterdam: Elsevier JAI.
Tonchia, S., & Quagini, L. (2010). Performance measurement. Ber-
lin: Springer-Verlag.
M
E-REFERENCES
Aafp.org,.(2014). Performance Measures Criteria -- AAFP Policies
-- AAFP. Retrieved 8 November 2014, from http://www.aafp.org/
about/policies/all/performance-measures.html
N
Balancedscorecard.org,.
(2014). Performance Measures & KPIs.
Retrieved 8 November 2014, from http://balancedscorecard.org/
Resources/Performance-Measures-KPIs
Slideshare.net,.(2014). Measuring Strategic Performance. Re-
trieved 8 November 2014, from http://www.slideshare.net/Jenine-
Serviolo/measuring-strategicperformance
Som.cranfield.ac.uk,.
(2014). Cranfield School of Management |
Performance Measurement in Strategy Implementation. Retrieved
8 November 2014, from http://www.som.cranfield.ac.uk/som/
p17523/Think-Cranfield/2012/June-2012/Performance-Measure-
ment-in-Strategy-Implementation

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S
C H
11 A P T E R
CASE STUDIES
CONTENTS
S
Case Study 1 Managing Quality in the Food Industry
Case Study 2 Quality Control at Pure-Aqua
Case Study 3 New Processes at XYZ
IM
Case Study 4
Case Study 5
Process Quality Management at Paramount Com
Acceptance Sampling in Manufacturing
Case Study 6 Poka Yoke for Error Proofing in Hospitals
Case Study 7 Godrej Nature’s Basket Quality Standards
Case Study 8 Organising for Total Quality Management in Megastar Pvt. Ltd.
Case Study 9 Relationship Between Suppliers and Customers in Dell
Case Study 10 Profitability Based Performance Measurement in Indian Banks
M
Case Study 11 The Crisis of Car Manufacturers
Case Study 12 Ramesh Gent’s Hair Stylist, Chennai
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CASE STUDY 1
N O T E S
MANAGING QUALITY IN THE FOOD INDUSTRY
This case study discusses the significance of quality management in

the food industry. This is with respect to Chapter 1 of the book.
S
IM
The food industry comprises various food chains, stores, food
markets, groceries, restaurants and bakeries that prepare and sell
food items. It employs millions of people in the business of procur-
ing, buying, processing and selling various food products.
When it comes to food, people do not want to compromise on the

M
quality and hygiene. They want to eat fresh, healthy and tasty
stuff at a reasonable cost. Most food items are perishable, and can
cause a considerable loss, if not properly maintained. Such items
are also high risk products. If a person is caught selling stale or
bad food product, he/she is liable to be punished by the law and
N
the public. Some common quality related concerns in the food

industry include:
Insufficient shipment of food products
Poor refrigeration of food items
Use of hazardous containers to store food items
Distribution and/or selling of expired food products
To maintain and control the quality and hygiene of food items,

the India Ministry of Food Processing Industries has adopted the
Total Quality Management (TQM) approach. It has implement-
ed several standards at various levels of the food industry. These
quality standards include:
ISO 14000: ISO 14000 family addresses various aspects of en-
vironmental management. It provides practical tools for com-
panies to identify and control their environmental impact and
constantly improve their environmental performance.

CASE STUDY 1: MANAGING QUALITY IN THE FOOD INDUSTRY 189
CASE STUDY 1
N O T E S
ISO 22000: ISO 22000 family addresses the issues related to

the food safety management.
Hazard Analysis and Critical Control Points (HACCP):
HACCP is a management system that addresses food safety
issues by analysing and controlling biological, chemical and
physical hazards from the production, procurement and han-
dling of raw materials to the manufacturing, distribution and
consumption of the finished product.
Good Manufacturing Practices (GMP): These practices con-
form to the guidelines to control authorisation and licensing
for manufacture and sale of food, drug products and active
pharmaceutical products.
S
Good Hygiene Practices (GHP): These practices address the
issues related to record-keeping, staff training, public hygiene,
and verification equipment in the food service industry.
IM
Various quality inspectors and experts use the above-mentioned
standards to evaluate the quality of food products and services in
organisations, stores and restaurants.
QUESTIONS
1. Why is quality a major concern in the food service

industry?
M
(Hint: If not maintained properly, dealing in food items

may involve a considerable loss as they are perishable
and high risk products.)
2. Which standards should be followed by a food service
N
provider in the Indian food industry?

(Hint: ISO 14000, ISO 22000, HACCP, GMP and GHP are
few quality standards that should be followed by a food
service provider in the Indian food industry.)

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S
CASE STUDY 2
N O T E S
QUALITY CONTROL AT PURE-AQUA
This Case Study discusses the significance of quality control in an

organisation. It is with respect to Chapter 2 of the book.
Pure-Aqua deals in packaged drinking water and has been work-

ing hard for the last few years to sustain its superior product
quality. With more than eight bottling plants in Chandigarh, Pure-
Aqua has emerged as one of the key players in the flourishing
packaged drinking water market. The five year old organisation
is now planning to expand its business in the interior areas of Ra-
jasthan and Haryana.
S
Keeping in mind health issues, a six members’ quality control
team is formed for its new projects. After analysing the scope of
business development in these areas, Pure-Aqua found that there
is a lot of scope for creating a niche market in high quality pack-
IM
aged drinking water. Therefore, the quality control team decided
to initiate an effective quality control program for these areas.
The quality control team of Pure-Aqua has undergone a quality

survey with the following findings:
Most of the population of rural and sub-urban areas suffers
from water-borne diseases every year.
M
Most of the people of interior areas suffer the crippling disease
due to high amount of arsenic and fluoride.
Insufficient rain often leads to drought, which compels people
of these areas to drinking water from local ponds.
Some of the hand pump water and well contain higher volume
N
of iron, arsenic and salinity.
After considering the above findings, the expert members of the

quality control team decided to go for digging multiple deep ponds
as a source of water. However, during the initial phase, the quality
control team was not much confident about the quality of the fi-
nal output. Therefore, the management of Pure-Aqua planned to
design an effective quality control process and take various pre-
ventive measures by practicing a number of quality control tools
and techniques.
After 12 months of hard work, the quality control head of Pure-

Aqua presented the probability of acceptance and defect rate
through an operating characteristics curve. Finally, when the out-
put was placed for acceptance, the packaged drinking water met
the standards and specifications of quality required by ISO.

CASE STUDY 2
N O T E S
However, to ensure the continuous success, the organisation fo-

cused on hiring more quality experts and skilled manpower in this
domain. In addition, for controlling and minimising the presence
of iron, arsenic, and salinity, more advanced equipment were sug-
gested by the quality control team to be used in the processing of
the packaged drinking water. However, the company was worried
about the increasing cost of quality and was focusing on finding
ways to maintain the same.
QUESTIONS
1. After considering quality issues, what is the scope of

quality control for Pure-Aqua?
S
(Hint: To improve quality continuously, minimise re-
work, ensure minimum wastage of resources, etc.)
2. According to you what were the major challenges that
IM Pure-Aqua could face while controlling and assuring
quality?
(Hint: Controlling and minimising the presence of iron,
arsenic, and salinity in the water, applying more advanced
equipment, controlling the increasing the cost of quality,
etc.)
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N

CASE STUDY 3
N O T E S
NEW PROCESSES AT XYZ
This Case Study discusses the change in processes at XYZ for proper
monitoring of operations. It is with respect to Chapter 3 of the book.
XYZ is an information technology company dealing in software

and hardware development solutions. It also provides consultan-
cy services to clients in the form of Quality Management Imple-
mentation System and SAS-70 implementation. XYZ has various
offices in different parts of the world. It was noticed that the com-
pany was generating a great amount of revenue from some offices
while from other offices, it was not generating any revenue.
S
The reason for this variation in the revenue was that the processes
were not updated and some offices did not have a quality manage-
ment system. Thus, the company planned to implement a process
improvement exercise and quality management systems so that
IM
the various operations could be streamlined across the world.
The company also planned to set up a Project Management Office
(PMO), which is widely used by units that have their offices at dif-
ferent locations all over the world. PMO helps in monitoring each
unit of an organisation.
A team of consultants was appointed to give shape to the compa-

ny’s vision and it undertook a massive exercise of data collection
M
across the world.
The following tables give the details of some of the data of the dif-
ferent offices of the company generated by this exercise:
Table No: A
N
Location: Sydney
Number of Projects in the Study = 4
Parameter under study = Testing Process (Software Develop-

ment)
No. of Test Cycles No. of Defects Time Taken to Rectify

Conducted Generated the Defects (in min)
4 23 2 hrs.
6 45 5 hrs.
5 23 3 hrs
6 35 5 hrs.
Table No: B
Location: Cape Town

CASE STUDY 3
N O T E S
Number of Projects in the Study = 4
Parameter under study = Testing Process (Software Develop-

ment)
No. of Test Cycles No. of Defects Time Taken to Rectify

Conducted Generated the Defects (in min)
15 78 2 hrs.
22 67 5 hrs.
57 56 3 hrs.
61 45 5 hrs.
The process control expert for XYZ has to perform the following
S
operations:
Compare which of the offices is doing better in terms of pro-
cess capability.
IM Draw appropriate control charts for the above data.
Suggest process improvement strategies for both the offices in
Sydney and in Cape Town.
QUESTIONS
1. What are control charts?

M
(Hint: A control chart is an SPC tool used to determine
whether a process is stable and predictable or unstable
and unpredictable.)
2. How would the quality management system help XYZ?
(Hint: A quality management system focuses on revenue
N
and savings, which an organisation can accelerate by

controlling and eliminating errors and defects during the
operations.)

CASE STUDY 4
N O T E S
PROCESS QUALITY MANAGEMENT AT PARAMOUNT COM
This Case Study discusses the impact of effective process quality

management on the performance of organisations. It is with respect
to Chapter 4 of the book.
Robert recently joined Paramount Com, a nine-year-old Compact

Disc (CD) manufacturing organisation, as Assistant Quality Man-
ager. Headquartered in Melbourne, Australia, Paramount Com
produces 10000 CDs a day and is now planning to introduce vari-
ous advanced CD manufacturing equipment to meet the compet-
itive business environment in the market.
S
As the process of CD replication is quite common and repetitive,
Paramount Com follows eight steps in its manufacturing process,
which are shown in the figure given below:
IM
Premastering Mastering
Electroplating Pressing
M
Metallisation Varnishing
N
Label printing Packaging
Figure: Steps in the Manufacturing Process.
A recently conducted market research by the marketing unit

of Paramount Com revealed that many consumers felt that the
quality of CDs manufactured by Paramount Com still had a lot of
scope for improvement. The feedback received from the custom-
ers during the market research also gave the company an idea
about the customer’s requirements regarding quality enhance-
ment.
The report highlighted that in the last three months, the sales of
CDs had gone down to five percent in the market. According to
the report, around 57% of the customers were in favour of im-
proving the quality of the CDs, and 35% preferred a stylish de-

CASE STUDY 4
N O T E S
sign and packaging. Based on the findings of the market research,

Garry, the Quality Manager of Paramount Com, asked Robert to
do an in-depth analysis of the situation. He asked Robert to visit
the plant to have a clear understanding of the processing of the
CDs.
While observing the manufacturing process, Robert noticed that

during the varnishing phase, a thin, soft lacquer was used on the
CDs to protect them from scratches. On close inspection of the
CDs, Robert detected a tiny scratch left on the polish when the
logo of Paramount Com is placed during the label printing phase.
This scratch appeared as a spot on the polished surface of the
CDs.
S
Robert also felt that the CDs would look more stylish if the place-
ment of the logo was changed and the packaging was done in a
more attractive manner. Such improvements could enhance the
visual appeal of the finished product and would therefore pro-
IM duce a more positive response from customers.
While examining the various equipment used during the different

phases of the CD manufacturing process, Robert also discovered
that some of them were obsolete and as a result, consuming too
much time and effort. After analysing the entire manufacturing
process, Robert was now all set to prepare and present his report
based on his findings and observations.
M
QUESTIONS
1. According to you which phase of the manufacturing

process requires to be improved?
N
(Hint: The label-printing phase of the CD manufacturing

process should be improved.)
2. Do you think the quality manager needs to have a flowchart
for smooth functioning? Give reasons to support your
answer.
(Hint: Yes. A flowchart is a graphical or symbolic
representation of a process and the order of the activities
involved in the process. It can be used to give the quality
manager a snapshot of the business process so that he/she
can easily analyse, design, and manage the process.)

CASE STUDY 5
N O T E S
ACCEPTANCE SAMPLING IN MANUFACTURING
This Case Study discusses the concept of acceptance sampling in

the manufacturing of electronic and electrical products. It is with
respect to Chapter 5 of the book.
Acceptance sampling has now become an important part of qual-
ity control. It was popularised by Dodge and Roming and first ap-
plied practically by the U.S. military during World War II to test
bullets. It was evident that if each bullet was tested individually,
no bullet would be left for use in the war. Also, if any lot of bullets
was shipped without testing, it would prove hazardous as their us-
ability would be in question. Dodge suggested that for sampling, a
S
random sample should be picked, and a lot should be accepted or
rejected on the basis of certain parameters. This process is called
acceptance sampling.
There are two major classifications of acceptance sampling plans,
IM
one based on attributes (“Go, no-go”) and the second based on
variables. For acceptance sampling based on attributes, attribute
inspection is done, which is based on physical characteristics
like colour and feel and touch. After the inspection, the product
may be classified as good/bad, bright/dark, light/dark, tight/loose
or smooth/rough. The sampling plan specifies a range or limit of
the number of defectives that are tolerable, and the lots can be
accepted at that level. The sampling plan based on variables re-
M
quires calculating a mean value/average, a range or standard de-
viation to make a decision whether to accept or to reject a lot.
Acceptance sampling plans are a way of testing products requir-
ing appraisal. At the end of the appraisal, the product can be ac-
cepted or rejected. A sample is selected and checked based on
N
various parameters. The sample may be a standalone product or

grouped in a lot. For products that come in lots, the whole lot may-
be accepted or rejected. The decision to accept or reject a product
is based on specific criteria, the level of defects and the number of
defective units found in a sample.
Sampling that is carried out at the end of the manufacturing pro-
cess indicates that the product has already gone through suffi-
cient quality control procedures. The product is accepted and
passed on to the customer if the manufacturing process was con-
trolled adequately. The sampling procedure used by the manufac-
turing department prevents the products from reaching the cus-
tomer if any process or quality controls are broken. For effective
acceptance sampling, products need to be selected carefully, and
specific rules need to be applied for lot inspection. To maximise
the quality level at the minimum cost, the sampling plan may be
applied on a lot-by-lot basis.

CASE STUDY 5
N O T E S
For the purpose of quality assurance, single attribute acceptance

sampling is commonly used in manufacturing firms across Ma-
laysia. Here, we saw the relation between the selection of the ac-
ceptance sampling plan and the effectiveness of selection in the
manufacturing of electrical and electronic products. Based on
studies done by three companies, namely J, K and L, these com-
panies were able to investigate and assess the quality of the sup-
plier’s product soon after the products arrived in the company.
The study also revealed that it was imperative for a company to
continuously improve and review the ongoing acceptance sam-
pling plan in order to improve product quality.
S
QUESTIONS
1. Explain how sampling procedures help in ensuring

customer satisfaction.
IM (Hint: The sampling procedure used by the manufacturing
department if an organisation prevents products from
reaching the customer if any process or quality controls
are broken.)
2. Discuss what should be done to maximise product quality
at the minimum cost.
(Hint: The sampling plan may be applied on a lot-by-lot
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basis.)
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CASE STUDY 6
N O T E S
POKA YOKE FOR ERROR PROOFING IN HOSPITALS
This case study discusses the importance of Poka Yoke in reducing

errors in hospitals. This is with respect to Chapter 6 of the book.
A hospital is a highly vulnerable place for various types of errors,

including:
Human errors, such as:
Wrong diagnosis by physicians
Lack of coordination during shift changes among doctors,
nurses and other employees
S
Overdosing by the patients themselves
Errors in methods, such as:
Lack of coordination among medical staff
Power
IM
struggle and competitiveness among physicians
Malfunctioning of medical equipment, such as:
Use of faulty or obsolete devices
Use of complex devices in which the physicians have less
expertise
M
These errors can be inter-related and interactive, i.e. one error

may lead to another. Irrespective of the cause or type, any error
in a hospital can harm patients and even turn fatal. For example,
a recent study suggests that medical errors cost more than 98,000
lives in a year in the US alone. Most of these errors are due to
N
complex systems and procedures followed by the hospitals.
To minimise the frequency of medical errors, most hospitals have

started using Poka Yoke. It is a ‘mistake proofing’ technique used
to remove defects by preventing, correcting, or drawing attention
to human errors. Some Poka Yoke techniques used in the medical
environment are as follows:
Surgeons need to mark ‘X’ or ‘No’ on the left leg/hand of a pa-
tient if he/she needs to be operated on the right leg/hand and
vice versa.
Hospitals put wristband IDs on patients and check the IDs
each time the patients need to be given drugs or need to take
a blood test.
Hospitals put bar codes on the wristband IDs and scan the bar
codes to ensure that the right patient is given the right kind of
medications and treatment.

CASE STUDY 6
N O T E S
QUESTIONS
1. Explain the application of Poka Yoke in medical

environment.
(Hint: It is a ‘mistake proofing’ technique used to remove
defects by preventing, correcting, or drawing attention to
human errors.)
2. What objectives does Poka Yoke fulfil in hospitals?
(Hint: Ensuring safety of patients, averting mistakes, etc.)
S
IM
M
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CASE STUDY 7
N O T E S
GODREJ NATURE’S BASKET QUALITY STANDARDS
This Case Study discusses the significance of a quality management

system in an organisation. It is with respect to Chapter 7 of the book.
S
The Godrej Group is an Indian conglomerate that operates in
IM
diverse sectors, including real estate, consumer products, indus-
trial engineering, appliances, furniture, security, and agricultural
products. In 2005, the group entered into the retail industry with
its new venture called Godrej Nature’s Basket.
Started as a single fresh food store, it is today India’s leading retail

destination for fine food items including cheese, fresh and spicy
ingredients, meat and meat products, oil and vinegar, exotic and
M
fresh organic produce, wine, and beer. It has 27 premium gourmet
stores in strategically selected locations, including Mumbai, Del-
hi/NCR, Pune, Hyderabad, and Bangalore. It also includes a team
of well-experienced and famous food experts who continuously
search for the best food products from all over the world.
N
Godrej Nature’s Basket has been able to achieve this consider-

able success and customer satisfaction due to a series of strin-
gent quality standards. It meticulously takes the highest level of
care and precautions to ensure that it provides the highest quality
products and services to its customers. Some of its quality stan-
dards are as follows:
A+ quality levels: To provide the best quality of fresh produce
and bakery products, it adopts stringent standards to locate,
source, and produce only the finest quality of products.
Everyday freshness: To sell fresh items, it procures fresh pro-
duce on a daily basis and discards or returns the leftover stale
and old produce of the previous day.
Appropriate storage care: To guarantee appropriate storage
so that products are 100% fit for consumption, Godrej Na-
ture’s Basket:

CASE STUDY 7
N O T E S
Stores products according to the recommended conditions

and in an ideal temperature.
Never switches off freezers, chillers, or other refrigeration
equipment. This ensures that the temperature-sensitive
products are always stored at the right temperature.
Always switches on exhaust fans during night. This helps
to maintain adequate air circulation required by ambient
products.
Superior quality vendors: To ensure the good quality of prod-
ucts, Godrej Nature’s Basket procures suppliers and vendors
that:
Deliver the best quality of products
S
Trade ethically and do not deal with the grey market
In case a vendor and/or a supplier is found interfering with
the quality of the products, the company penalises the ven-
IM dor and/or supplier and ends their contracts.
Exhaustive stock checks: Godrej Nature’s Basket inspects its
branded products every month to keep a tab on their expiry
dates. It segregates all the products that are close to expiry
dates and either returns or discards them.
Expert care (management): The store enforces certain quali-
ty guidelines for its representatives, including:
M
Hand gloves and hairnet should be worn while handling food.
Store fixtures must be sanitised properly on a regular basis.
Food storage and display areas must be thoroughly cleaned
according to the prefixed schedules by using the highest
quality food grade cleaners.
N
Return policy: In spite of the care and precautions taken by

the store, there happens to be unlikely events such as products
purchased are expired or damaged when purchased. In these
cases, the store replaces or exchanges the purchased goods or
refunds money to the customer.
QUESTIONS
1. Why does Godrej Nature’s Basket deal only with superior

quality vendors and suppliers?
(Hint: To ensure the good quality of products; thereby
achieving high customer satisfaction.)
2. Discuss the parameters that help Godrej Nature’s Basket
to maintain quality standards.
(Hint: Fresh produce, appropriate storage for food items,
superior quality suppliers, and regular stock checks, and
so on.)

CASE STUDY 8
N O T E S
ORGANISING FOR TOTAL QUALITY

MANAGEMENT IN MEGASTAR PVT. LTD.
This Case Study discusses the significance of effective organising

for quality management in an organisation. It is with respect to
Chapter 8 of the book.
Established in 1932, MegaStar Pvt. Ltd. is one of the oldest phar-

maceutical organisations in India, with the core business of
manufacturing personal care products. The wide range of the
organisation’s products are very popular among various con-
sumer segments. The strategic intent of the organisation is to
continuously adapt innovative technologies and introduce en-
S
vironment-friendly products in the market. The organisation is
committed towards enforcing continuous quality improvement
techniques in its processes by considering the changing environ-
mental needs.
IM
The organisation has planned to expand its business portfolio by
entering the Fast Moving Consumer Goods (FMCG) sector. For
this, it opened a new branch that could handle the new business
separately. However, it did not hire new employees but instead
moved some of the existing employees to the new branch.
The expansion of the business required the organisation to orga-

M
nise its resources, processes, and activities in such a manner that
the quality could be managed and maintained efficiently. How-
ever, the organisation has started facing a number of problems.
Some of these problems can be listed as follows:
The organisational structure of MegaStar Pvt. Ltd. was not
N
very efficient to implement the major changes required.

The employees of the newly established branch were not very
clear about their roles and responsibilities as per the needs of
the new business as they were accustomed to their old duties.
The resources were not sufficient so that the required level of
quality could be managed.
The size of the new branch was small, and this made it diffi-
cult for the organisation to allocate and organise its resources
properly.

CASE STUDY 8
N O T E S
QUESTIONS
1. Suppose you are the CEO of MegaStar Pvt. Ltd. What

steps would you take to resolve problems faced by the
new branch of MegaStar?
(Hint: As a CEO of MegaStar Pvt. Ltd., the following steps
could be taken:
Creating the quality policy for the organisation and
ensuring that quality objectives are implemented
Conducting management reviews to ensure that qual-
ity objectives are implemented
S
Ensuring the availability of resources
Conveying the required level of quality standard to
employees.
IM Adopting a pro-active approach to the problems relat-
ed to quality and motivating the employees to follow
the same approach
Communicating standard operating procedures or in-
structions to the employees so they can work toward
achieving the quality goals and objectives.)
M
2. Write the importance of organising for quality management
with respect to the given case study.
(Hint: To manage quality effectively, it is important for
an organisation to organise its processes, tasks, and
people well. In other words, the effectiveness of quality
N
management depends on how efficient the organising

function of an organisation is.)

CASE STUDY 9
N O T E S
RELATIONSHIP BETWEEN SUPPLIERS

AND CUSTOMERS IN DELL
This Case Study discusses the significance of managing supplier

relationship for an organisation. It is with respect to Chapter 9 of
the book.
Dell is a US-based multinational computer technology company

that develops, sells, repairs, and supports computers and related
products and services. For the past 28 years, the company has de-
veloped into a unique global technology giant. In 1995, the compa-
ny flagged off a unique collaborative supply chain model practice,
which enabled it to save considerable costs and gave it a compet-
S
itive edge for several years.
First, Dell reduced its supplier organisations from 204 to 47. Then,
to operate on a Just-In-Time (JIT) inventory basis, the suppliers
IM
stocked their components in warehouses, which were located just
15 minutes away from the Dell factory. This JIT inventory system
not only reduced inventory costs, but also provided a 6% profit
advantage in components, which was passed along to customers.
This supply chain model provided the following advantages:
As against the industry average of 75 to 100 days, Dell reduced
the inventory time to just 13 to 30 days.
M
It was easier to customise computers according to the custom-
ers’ exact specifications.
The possibility of having obsolete raw materials was mini-
mised, as the components were procured JIT on the need-ba-
sis.
N
The company was easily able to adjust production levels to

meet demand.
A finished product was ready for shipment just 36 hours after
an order was placed.
Dell also made a move to have its shippers house the monitors
for its computer systems. Therefore, after a computer was assem-
bled, Dell would send an email to a contracted shipper to notify
that a system was ready. After receiving the email, the shipper
would schedule the monitor so that the computer system and
monitor are simultaneously delivered to the customer. Therefore,
by stocking monitors with shippers, Dell was able to save US$ 30
million in freight costs per monitor.
In conclusion, Dell’s effectively aligned supplier and distributor

networks provided the following advantages to the company:

CASE STUDY 9
N O T E S
Reduction in Inventory Time: This reduced by 57% due to

the JIT inventory system.
Increase in Production Space: This increased due to the de-
creased storage area needed for inventory.
Substantial Cost Savings: These included reduced storage
costs, inventory management costs, and freight charges.
Delighted Customers: They were delighted because they
were able to save considerable costs in terms of reduced pric-
es for the same quality of products and services.
These supply chain initiatives enabled Dell to sustain a more than

50% growth rate for three consecutive years, which increased the
S
company’s annual sales to US$ 12 billion by 1997.
QUESTIONS
IM 1. How does the JIT inventory system help Dell to maintain
a profitable relationship with suppliers and customers?
(Hint: To operate on a Just-In-Time (JIT) inventory basis,
the suppliers stocked their components in warehouses,
which were located just 15 minutes away from the Dell
factory. This helped in reduction in inventory time and
cost. Apart from this, it also provided a 6% profit advantage
M
in components, which were passed along to customers.
This resulted in customer satisfaction.)
2. What benefits did the company get from this supplier
relationship?
(Hint: Reduction in inventory time, increase in production
N
space, substantial cost savings, and delighted customers.)

CASE STUDY 10
N O T E S
PROFITABILITY BASED PERFORMANCE

MEASUREMENT IN INDIAN BANKS
This Case Study discusses the empirical results of profitability per-

formance measurement in Indian banks. It is with respect to Chap-
ter 10 of the book.
During the last one-and-a-half decades, India saw a rapid increase

in competition in the banking sector along with fast changing tech-
nology and services due to globalisation and the opening up of
industry. Globalisation of the banking industry took place in both
the segments, namely the wholesale banking and retail banking.
All these changes led to the emergence of non-standardised ser-
S
vices and decreased customer focus. For an industry like banking,
it is important for customers to have faith and commitment to-
wards the bank, and this can be gained and maintained only when
the bank performs consistently. It is also important for banks to
IM
maintain their performance in order to achieve their goals. The
banking industry has and is still attracting new players into this
segment, and these players facing stiff competition from each oth-
er. Increased competition has also led to an increased number of
products and services entering the market.
The performance of a bank is, to a large extent, judged by its

profitability. We know that the banking sector has been going
M
through changes such as the evolving regulatory requirements,
cost of funds, changes in customer preferences, compliance re-
quirements, increasing competition from both national and inter-
national players, etc.
Given these major changes in the banking segment, two main

N
questions arise: One, what drives performance in the banking sec-

tor? And two, how to drive performance in the banking sector?
With the banking sector undergoing all these changes, perfor-
mance measurement and management based on the profitability
model are now assuming greater importance.
Since long, net income has been used in banking to measure per-
formance. However, net income as an indicator of performance
is not very efficient as it does not depict how effectively a bank is
functioning with relation to its size. It also fails to effectively rep-
resent asset efficiency.
Another method to measure performance is Net Interest Margin

(NIM), which reflects the difference of the interest income and
interest cost of the bank. However, it only reflects how well the
assets and liabilities of the bank are being managed and not the
operational efficiency of the bank.

CASE STUDY 10
N O T E S
Nowadays, banks resort to profitability-based management be-

cause it is much more inclusive. Profitability-based manage-
ment includes operational efficiency, and also takes into account
non-interest income activities and management of costs. Profit-
ability based management measures are also more robust than
their former counterparts.
Some major profitability-based performance measurement met-

rics are shown in the following table:
Metric Name Formula

Abbreviation
ROA Return on Assets Net Profit After Tax/Assets
S
RAROA Risk-Adjusted Re- Economic Profit/Assets
turn on Assets
ROE Return on Equity Net Profit After Tax/Equity
RAROE Risk-Adjusted Re- Economic Profit/Equity
IM RAROC
turn On Equity
Risk-Adjusted Economic Profit/Economic
Return On Capital Cost
EVA Economic Value Economic Profit – Net Cost
Added of Economic Capital
Good performance management systems such as the ones based

on profitability make way for value addition and enhancement
M
of profitability, which in turn result in better performance of the
bank. In some studies, it has been found that benefits in the range
of 40%-130% have been recorded in a time frame of three years
when using measures like ROA and ROE.
N
QUESTIONS
1. Why is net income as an indicator of performance not

very efficient?
(Hint: Net income as an indicator of performance not
very efficient because it does not show how effectively a
bank is functioning with relation to its size.)
2. Why do you think banks now prefer profitability-based
management to traditional performance measures?
(Hint: Banks prefer profitability-based management
to traditional performance measures as it includes
operational efficiency and is a more robust measurement
system.)

CASE STUDY 11
N O T E S
THE CRISIS OF CAR MANUFACTURERS
This Case Study discusses the significance of quality theories

in reviving the car manufacturing industry. It is with respect to
Chapter 1 of the book.
S
IM
A golden period of car manufacturers was from 1987 to 1991, when
the demand for cars was accelerating at a rapid pace. Most car
manufacturers introduced new car models to increase their sales.
M
They were able to introduce new models because of advanced
quality management systems. However, implementing such qual-
ity management systems required a considerable investment.
This investment was much more than sales revenues earned by
car manufacturers.
N
As by this time customers became quality conscious, car manufac-

turers could not roll back quality programs. To satisfy increasing-
ly discerning customers, they started adopting alternate assem-
bly plants. Soon, they were beginning to face crises in delivering
quality performance from the workers in those plants. Since most
of the workers were enrolled in quality programs, their numbers
in assembly lines dwindled. Moreover, they were having a prob-
lem in hiring quality workers because of the booming job market.
Due to the shortage of workers, the sales of cars declined, which,
in turn, affected the quality standard of car manufacturers.
To avoid this impending crisis, some car manufacturers, such as

Nissan, Mazda, and Toyota, started to develop an assembly line
with a human-friendly slogan. They focused the following key
points in their new assembly lines:
Quality planning and control
Zero-defect quality standard

CASE STUDY 11
N O T E S
Regular improvement of personal and professional life of

workers, such as introduction of flexible working conditions
Planning and execution of quality circles
QUESTIONS
1. Discuss issues faced by car manufacturers while

introducing a quality management system
(Hint: Huge investment, low efficiency of workers,
shortage of workers, etc.)
2. Identify the contribution of W. Edwards Deming in this
S
case study.
(Hint: Deming’s management system was based on the
concept of incessant progress toward the perfect quality
model.)
IM
M
N

CASE STUDY 12
N O T E S
RAMESH GENT’S HAIR STYLIST, CHENNAI
This Case Study discusses the importance of quality standards for

an organisation. It is with respect to Chapter 7 of the book.
Chances are that this is the first time you would be coming across
the name of Ramesh Gent’s Hair Stylist. However, this hair salon
in Nungambakkam High Road in Chennai has something in com-
mon with giant industrial groups such as TVS, Tata, and Birlas.
You might wonder what could be the common link between them.
It is the ISO quality certification.
Yes, Ramesh Gent’s is the first personal care business in Asia to
S
be awarded the ISO quality certification in the service category. It
was certified by Mumbai-based ISO auditors, International Cer-
tification Services (Asia) Private Limited, accredited by the Aus-
tralia and New Zealand joint accreditation system. Only two other
IM
salons in the world have achieved ISO certification in the field of
hair styling.
The salon’s owner, G Ramesh, entered the hair styling profession

at the young age of 12 years. He started his career at Ambuli Sa-
lon and moved his way up to work at Taj Coromandel in Chennai.
In 1987, he launched his own venture, Ramesh Gent’s Hair Stylist.
Today, the salon employs more than 50 people. When asked why
M
he chose to get ISO certification, Ramesh replied, “We want to go
global and set up our business overseas and also meet competi-
tive threats at home.”
Ramesh has finalised plans to start operations in Malaysia with a

local partner. He is also planning to strengthen his brand in India
N
by expanding to other Indian metros and convert his sole propri-

etorship into a private limited company. However, Ramesh rules
out the possibility of turning his business into a franchise to pre-
vent his high standards from being diluted.
“Prior to the certification, we didn’t fix prior appointments. Ser-

vice was on a first come first serve basis,” says Ramesh. He adds,
“With the ISO certification, the salon had systematised all its op-
erations. Every time a customer comes to the salon, a job card is
prepared listing details like personal preferences and allergies to
products.”
The salon maintains the records of customers’ visits and sends

them reminders about the next appointment. To maintain qual-
ity standards, the salon uses disposable equipment, sterilised
grooming kits, neck capes, and disposable shaving kits. It also of-
fers shower facilities. There is a plan to include a health club with
sauna, Jacuzzi, ayurvedic massage, and a gym.

CASE STUDY 12
N O T E S
Ramesh’s Gent boasts of having reputed clients as its loyal cus-

tomers, including famous cine and television stars, industrialists,
bureaucrats, ministers from the state and central governments,
and an assortment of MPs and MLAs. Considering the vision of
the proprietor Ramesh, the salon has an even rosier future ahead.
QUESTIONS
1. Did Ramesh make the right decision to go for ISO

certification to gain a competitive advantage at home and
abroad? Explain your answer.
(Hint: Yes, improved quality strengthened the brand)
S
2. What changes did the ISO bring to Ramesh’s Gent salon?
(Hint: Systematic operations and records of visits are
maintained)
IM
M
N

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TOTAL QUALITY MANAGEMENT

Chief Academic Officer

Content Reviewer TOC Reviewer

Author : Sanjive Saxena

NMIMS Global Access - School for Continuing Education

CHAPTER NO. CHAPTER NAME PAGE NO.

1 Introduction to Total Quality Management 1

2 Cost of Quality and Quality Control 25

3 Statistical Process Control (SPC) 47

6 Quality Function Deployment 101

7 Quality Management Systems 121

8 Quality Circles 147

9 Customer-Supplier Relationship 159

10 Performance Measurement 175

11 Case Studies 187

NMIMS Global Access - School for Continuing Education

Quality Management Systems: Introduction to Quality Management Systems, Introduction to ISO

Performance Measurement: Basic Concepts of Performance Measurement, Strategy Performance

NMIMS Global Access - School for Continuing Education

INTRODUCTION TO TOTAL QUALITY MANAGEMENT

1.4.1 W. Edward Deming’s 14 Points for Quality Improvement

NMIMS Global Access - School for Continuing Education

TQM AT ABC PVT. LTD.

ABC Pvt. Ltd. is a leading ready mix concrete producer in India,

This program has helped the organisation to determine the areas

With TQM implementation, ABC is able to save $2 to $3 million

NMIMS Global Access - School for Continuing Education

After studying this chapter, you will be able to:

To survive in a competitive market, the products and services offered

The quality of a product or service is also affected by many factors,

such as the availability of resources, manufacturing conditions, total

TQM aims at improving efficiency, flexibility, and competitiveness of

NMIMS Global Access - School for Continuing Education

The chapter begins by explaining the concept of quality and discusses

1.2 CONCEPT OF QUALITY

 Kaoru Ishikawa: “Quality is a companywide issue and must be an

NMIMS Global Access - School for Continuing Education

1.2.1 OBJECTIVES OF QUALITY

The main objective of ensuring quality in products and services is to

1.2.2 MEASURING QUALITY

Quality has different dimensions that provide in-depth description of

Figure 1.1: Eight Dimensions of Quality

NMIMS Global Access - School for Continuing Education

Let us now explain these dimensions in detail.

ty according to Garvin. A customer prefers products with quality

NMIMS Global Access - School for Continuing Education

SELF ASSESSMENT QUESTIONS

1. Quality products or services decrease an organisation’s sales

CORE CONCEPTS OF TOTAL QUALITY

In 1957, Dr. A. V. Feigenbaum came out with the concept of TQM. He

ran, contributed in the field of quality to a large extent. The following

According to Sashkin and Kiser, TQM is, “creating an organisational

ISO defined TQM as “Management approach of an organisation cen-

TQM is rather a proactive approach used by an organisation to satisfy

NMIMS Global Access - School for Continuing Education

 Employee Involvement: Encourage employees at every level to

TQM is applied to every aspect of an organisation, its functions, prod-

1.3.1 OBJECTIVES OF TOTAL QUALITY MANAGEMENT

increase customer satisfaction. Some of the other objectives of TQM

NMIMS Global Access - School for Continuing Education

1.3.2 PRINCIPLES OF TOTAL QUALITY MANAGEMENT

1.3.3 APPLICATIONS OF TOTAL QUALITY MANAGEMENT

TQM relies on concepts, such as leadership, commitment, trust, re-

higher education institutions.

Kaoru Ishikawa: “Quality is a companywide issue and must be an

Employee Involvement: Encourage employees at every level to

1.4.2 JOSEPH M. JURAN’S 10 STEPS TO QUALITY

1.4.3 PHILIP B. CROSBY’S 14 STEPS TO QUALITY

Installation and product service, etc.

From a customer’s point of view, quality is associated with a value,

The TQM framework started with the contributions of quality

Collaboration: It refers to an individual working with another