Quality & Performance

What is quality? It is always defined by the customer. Typically it’s a product that lasts a long
time or is superior to competitors’ products, or services that are unmatched. Whatever
definition you settle on as an operations manager, poor quality will always have a cost.

Typically there are four costs associated with quality:

1. Prevention costs: preventing defects before they happen
2. Appraisal costs: assessing the process while the product is being produced or the service
is being delivered
3. Internal failure costs: which are the costs associated with scrap or rework
4. External failure costs: the cost of returned product or lost customers

How does an organization manage its quality to ensure it meets its customers’ demands?
Ensure you use the P-D-S(C)-A cycle, as described below.

Plan: The team selects a process that needs improvement, documents the process, analyzes the
data, sets the goals for improvement, brainstorms various ideas to meet the goals, and finally
assesses the costs and benefits. These activities would help develop a plan for improvement.
Do: The team implements the plan and monitors progress, collects data continuously to
measure improvements in the process, documents the changes in the process, and makes
further revisions.
Study (Check): If major shortcomings exist, reevaluate the plan or even stop the project and
regroup.
Act: If the results are successful, the team documents the revised process so that it becomes
the standard procedure. The team then instructs other employees in the use of the revised
process.

So, once we have a process that is stable and works for us, how do we ensure it continues to
perform in that manner? We apply the techniques of Six Sigma statistical process control. Let’s
begin with the basics. One “tool” of Six Sigma is the “DMAIC” process, as described below.
D – Define: As an operations manager, define what needs to be measured. Typically this is
something important to the process, product or customer.
M – Measure: Once you define what needs to measured, you will need to perform the actual
measurements of the process. This will entail engaging your employees to perform measures
of the process, using various measurement tools.
A – Analyze: Now it’s time to analyze all of the measures you have collected for the process. As
an operations manager, you should have a myriad of information and data to work with to
determine next steps.
I – Improve: You and your team are now armed with plenty of information and data, and it’s
time to implement improvements. Use the data collected from the previous steps to decide
the improvements to make.
C – Control: You’ve measured performance, analyzed data collected, and implemented
improvements. Now it’s time to ensure your improvements are sustained. You and your team
need to put controls in place through training, documentation, discipline, and continual
measurement of the process output.

Let’s now discuss quality through sampling and statistical process control. First, let’s define
“sampling”.

Organizations who do not trust the quality of incoming materials, or who need to ensure that
the quality of incoming materials is top-notch, will implement acceptance sampling. Meaning,
before the materials are accepted for use, they are checked to ensure that all characteristics
meet specifications.

Sampling can also take place while manufacturing is in process. This is called “in-process”
sampling. Again, here you and your team are looking for compliance to specifications.

Typically, sampling will include selecting a random sample of materials, measurement of those
selections, recording of the data, and either accepting the results of the process (and letting it
run), or rejecting the results (and stopping the process to investigate).

Now let’s explore statistical process control (SPC) in detail. SPC requires sampling,
measurement, and recording of characteristics. You and your team are looking for either
natural variation (following the normal distribution curve), or assignable causes (outside forces)
acting on your process. If you detect assignable causes, the process needs to be stopped and
corrective actions need to be implemented.

Let’s discuss the logistics behind SPC. Variables or attributes are measured and documented on
an SPC chart, and compared to pre-calculated control limits on the chart. The trend of the
measurements is watched closely, and if the measured process begins to trend toward “out-of-
control”, the process is stopped and corrected. The SPC chart should give you advance notice
of problems creeping into your process.

You’ll learn all the details in the chapter.