Cost of Quality the cost of doing things wrong. 4 components. 1.

. Prevention costs costs associated with reducing the potential for defective parts or services. Ex. Training. 2. Appraisal costs costs related to evaluating products. Ex. testing, inspection. 3. Internal Failure costs that result from production of defective parts before delivery to customers. Ex. scrap and rework. 4. External Costs costs that occur after delivery of defective parts. Ex. retained goods, recalls. Very expensive! 8 dimensions of quality performance, features, reliability, conformance, durability, serviceability, aesthesis, and perception Deming insisted management accept responsibility for building good systems. 14 points for implementing quality improvement. Crosby- zero defects quality is free ISO 9000 a set of quality standards developed by the international organization for standardization. Only standard w/ international recognition. Deals entirely with standards to follow. To become certified organizations go through a 9-18 month process. ISO 14000- environmental management standards that contain 5 core elements. 1. Environmental management. 2. Auditing. 3. Performance Evaluation. 4. Labeling. 5. Life Cycle Assessment. Advantages to ISO 9000 = pollution prevention and positive public image Total Quality Management (TQM) a quality emphasis that encompasses the entire organization. 7 concepts. 1. Continuous Improvement. Plan,Do,Check,Act (PDCA), Japanese term kaizen and zero defects all emphasize continuous improvement 2. Six Sigma. A program to save time, improve quality, and reduce costs. 99.9% accuracy. Three Sigma = 99.7%. Follows DMAIC = Define, Measure, Analyze, Improve and Control 3. Employee Empowerment. Enlarging employee jobs so that the added responsibility and authority is moved to the lowest level possible in the organization. The employee rarely causes the problem. Quality Circle = a group of employees who meet regularly to solve work related problems. 4. Benchmarking. Involves selecting a demonstrated standard of products, services, costs or practices that represent the very best performance for an activity or process. Ex. cost per unit, % of defects, and customer satisfaction rates. 5. Just-in-Time. Designed to produce goods just as they are needed. No inventory. Cuts cost and improves quality. 6. Taguchi Concepts. 3 concepts 1. Quality Robust products that are consistently built to meet customer needs in spite of sdverse conditions in the production process. 2. Quality Loss Function identifies all costs connected with poor quality and shows how costs increase as the product moves away from being exactly what the customer wants. L = DC L = loss to society C= cost of the deviation at the specification limit D = square of the distance from the target value. The smaller the loss the more desirable the product. The farther the product is from the target value, the more sever the loss. 3. Target oriented Quality continuous improvement to bring a product exactly on target, not just within the limits. Conformance Oriented Quality brings the products w/in 3 standard deviations. 7. Knowledge of TQM tools. 7 tools. First 3 used for generating ideas 1. Check sheets any kind of form that is used for recording data. Helps find patterns by tallying defects. 2. Scatter Diagrams shows relationship b/w 2 measurements. If the items are related, the points will form a tight band. 3. Cause and Effect Diagrams identifies causes that may affect an outcome. Next 2 are used for organizing data. 4. Pareto Charts a graph that plots problems or defects in descending order of frequency. 80% of a firms problems are a result of only 20% of the causes. 5. Flowchart describes the steps in a process. The last two are used for identifying problems. 6. Histogram A distribution that shows the frequency of occurrences of a variable. 7. Statistical Process Control a chart with time on the horizontal axis for plotting values of a statistic. Monitors standards, makes measurements, and takes corrective actions as a product is being produced. Control Charts graphic presentations of data over time that show upper and lower limits for the process we want to control. Inspection- a means of ensuring that an operation is producing at the quality level expected. Ex. tasting, weighing, testing. Source Inspection controlling at the point of production, employees selfcheck their work. Ex. checklists. Poka-yoke- fool proof device that ensures the production of a good unit every time. Attribute Inspection classifies items as being either good or defective. Does not address the degree of failure. Variable Inspection- classifications of items such as dimensions and strength. Service Recovery training frontline workers to solve a problem immediately.

Natural Variations- variability that affects every production process to some degree and it to be expected common cause Assignable Variations- variation in a production process that can be traced to specific causes ex. machine wear and tired workers. Sample 4 to 8 items X Chart tells us whether changes have occurred in the central tendency of a process. R Chart indicates that a gain or loss in dispersion has occurred. Tracks the range within a sample. Central Limit Theorem- states that regardless of the distribution of the population, the distribution of Xs will tend to follow a normal curve as the # of samples increases. The mean of the distribution of Xs will equal the mean of the overall population. 99.73% within 3 deviations. 95.45% within 2 deviations. 2 kinds of attribute control charts: 1. P Charts measures the % defective in a sample. 2. C Charts Count the # of defectives. Run Test A test used to examine the points in a control chart to see if nonrandom variation is present. Process capability The ability to meet design specifications. 2 measures for determining if a process is capable. 1. Compatability Ratio capable process are greater than or equal to 1, the higher the ratio the better. 2. Process capability Index cp and cpk are equal when the process is centered. Acceptance Sampling measuring random samples of lots or batches of products against predetermined standards. Producers Risk- The mistake of having a producers good lot rejected. Most at 5%. Consumers Risk The mistake of a customers acceptance of a bad lot. Most at 10% Type I Error- the probability of rejecting a good lot Type II Error- the probability of accepting a bad lot. Supply-chain management- is the integration of the activities that procure materials and services, transform them into intermediate goods and final products, and deliver them to customers. this includes: Transportation vendors, Credit and cash transfers ,Suppliers Distributors Accounts payable and receivable Warehousing and inventory Order fulfillment Sharing customer, forecasting and production information. Management must be able to react to disruptions in Processes (raw materials ) Controls (management metrics , financial transactions) Environment- (customs duties, tariffs, natural disaster) Make or Buy decision - a choice between producing a component or service in-house or purchasing it from a outside source. Outsourcing- transferring a firms activities that have traditionally been internal to external suppliers. Six supply chain strategies Many suppliers, Few suppliers, Vertical integration- producing goods that used to be bought or buying the supplier, Joint ventures, Keiretsu networks- a Japanese term that describes suppliers who become part of a company coalition Virtual companies- rely on a variety of supplier relationships to provide services on demand. Also known as hollow companies. Managing a supply chain needs - Mutual agreement on goals, Trust ,Compatible organizational cultures Issues in an integrated supply chain- Local optimization ,Incentives , Large lots Bullwhip effect- is when a order is transferred from stage to stage in the supply chain it gets larger or smaller Opportunities in an integrated supply chain 11 of them Pull Data- accurate sales data so that you can pull a product though the chain Lot size reductionSingle-stage control of replenishment- puts one person in charge of chain Vender managed inventory-suppliers maintains material for buyer Collaborative planning, forecasting and replenishment- or (CPFR)- is kinda like the two before people in chain work together to save money Blanket orders- a long term purchase commitment to a supplier for items that are to be delivered but they still need proof of payment then it ships Postponement- delaying any modifications to a product as long as possible in the production process Drop shipping- shipping directly to the buyer from supplier Pass-through facility- expedites shipment by holding merchandise and delivering from shipping hubsChannel assembly-postpones final assembly of a product so the distribution channel can assemble it E-procurement- internet purchase Electronic data interchange-electronic ordering Describe the steps in vendor selection -Vendor evaluation Vendor development ,Negotiations