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Chapter 1

Fundamentals of Quality
Gitlow, Oppenheim, Oppenheim and Levine
Chapter 1
Fundamentals of Quality
Learning Objectives
Understand the definition of a process
Understand variation and its causes in a process
 Special causes of variation
 Common causes of variation
Understand the two definitions of quality
 Goal post view
 Continuous improvement view
Understand the quality environment
Chapter 1
Fundamentals of Quality
Learning Objectives
 Understand the three types of quality
 Quality of design or redesign
 Quality of conformance
 Quality of performance
 Understand the relationship between Quality and Cost
 Features and price
 Uniformity and dependability
 Understand the relationship between Quality and Productivity
 Understand the benefits of improving quality
 Know how to apply take-away knowledge
Process Basics
Definition of a process
A process is a collection of interacting components
that transform inputs into outputs toward a common
aim called a mission statement.

Inputs Process Outputs

Manpower Transformation of Manpower
inputs, value (time, Equipment
place, form) is added
Materials/Goods or created Materials/Goods

Methods Methods

Environment Environment
Definition of a process

It is management’s job to optimize the entire

process toward its aim.

This may require the sub-optimization of selected

components of the process.
Definition of a Process
Processes exist in all facets of organizations and
our understanding of them is crucial
 Administration
 Sales and service
 Human resources
 Maintenance
 Communication
 Production

Relationships between people are processes

All processes can be studied, documented, defined,
improved, and innovated
Definition of a process
An organization is a multiplicity of micro sub-
processes, all synergistically building to the macro
process of that firm.

All processes have customers and suppliers; these

customers and suppliers can be internal or external
to the organization.
Variation in a Process
 The outputs from all processes and their
component parts vary over time.

Actual Values
Number of

(Variation among

actual values)

Variation between Ideal and Actual Values

Ideal Value = 0

Variation in a process
Special causes of variation are due to events
external to the usual functioning of a system.
Examples could include (if they are not part of the system):
 New raw materials
 A drunk employee
 A new operator
Variation in a process
Common causes of variation are due to the
process itself.
Process capability is determined by inherent
common causes of variation.
Examples of common causes of variation include:
 Hiring, training and supervisory practices
 Lighting
 Stress
 Management style
 Policies and procedures
 Design of products or services
Variation in a process
Employees cannot control a common cause of
variation and should not be held accountable for, or
penalized for, its outcomes.

 Managers must realize that unless a change is

made in the process (which only they can make) the
process’s capability will remain the same.
Process Basics

The Drunk Employee
More About the Feedback Loop
A feedback loop relates information about outputs
from any stage or stages back to another stage or
stages so that an analysis of the process can be

Input Process Output

Feedback Loop
More About the Feedback Loop

There are three feedback loop situations

 no feedback loop
 special cause only feedback loop
 special and common cause feedback loop

Goal Post View

Continuous Improvement View
Goal post view
Conformance to valid customer requirements, that
is, as long as an output fell within acceptable limits,
called specification limits, around a desired value,
called the nominal value (denoted by “m”), or
target value, it was deemed conforming, good, or
Definition of Quality

No No
Good, Good,
Loss Good, Loss
No Loss

LSL USL Quality
Goal post view (example)
The desired diameter of stainless steel ball
bearings is 25 mm (the nominal value).
A tolerance of 5 mm above or below 25 mm is
acceptable to purchasers.
Thus, if a ball bearing diameter measures between
20 mm and 30 mm (inclusive), it is deemed
conforming to specifications.
If a ball bearing diameter measures less than 20
mm or more than 30 mm, it is deemed not
conforming to specifications, and is scrapped at a
cost of $1.00 per ball bearing.
Continuous Improvement View
Quality is a predictable degree of uniformity and
dependability, at low cost and suited to the market.
Losses begin to accrue as soon as a quality
characteristic of a product or service deviates from
the nominal value.
As with the “goal post” view of quality, once the
specification limits are reached the loss suddenly
becomes positive and constant, regardless of the
deviation from the nominal value beyond the
specification limits.
Continuous improvement view
L(y) = k(y-m)2 = loss of deviating (y-m) units from
the nominal value of “m”
y= the value of the quality characteristic for a
particular item of product or service
m = the nominal value for the quality characteristic
k = a constant, A/d2
A = the loss (cost) of exceeding specification limits
(e.g., the cost to scrap a unit of output)
d = the allowable tolerance from “m” that is used to
determine specification limits.
Continuous improvement view
Under the Taguchi Loss Function the
continuous reduction of unit-to-unit variation
around the nominal value is the most
economical course of action, absent capital
Continuous improvement view (example)
Returning to the production of stainless steel ball
bearings. Every millimeter higher or lower than 25
mm causes a loss that can be expressed by the
following Taguchi loss function:

L(y) = k(y-m)2 = (A/d2)(y-m)2 = ($1.00/5mm2)(y-25mm)2

= (.04)(y-25mm)2
Diameter of Ball Bearing (y) Value of Taguchi Loss
Function L(y)
18 1.00
19 1.00
20 1.00
21 0.64
22 0.36
23 0.16
24 0.04
25 0.00
26 0.16
27 0.36
28 0.64
29 1.00
30 1.00
31 1.00
32 1.00
The Quality Environment
The pursuit of quality requires that organizations
globally optimize their system of interdependent
This system includes employees, customers,
investors, suppliers and subcontractors,
regulators, the environment, and the community.
Employees are the most critical stakeholders
of an organization.
According to quality expert Kaoru Ishikawa:
“In management, the first concern of the
company is the happiness of people who are
connected with it. If the people do not feel
happy and cannot be made happy, that
company does not deserve to exist. . . The
first order of business is to let the employees
have adequate income. Their humanity must
be respected, and they must be given an
opportunity to enjoy their work and lead a
happy life.”
Types of Quality
There are three types of quality:
Quality of design / redesign
Quality of conformance
Quality of performance
The above types of quality create the never
ending spiral of continuous improvement of
products, services or processes
Quality of design

Quality of design / redesign focuses

on determining the quality
characteristics of products that are
suited to the needs and wants of a
market, at a given cost; that is, quality
of design develops products from a
customer orientation.
Quality of design / redesign
Quality of design studies begin with consumer
research, service call analysis, and sales call
analysis, and lead to the determination of a product
concept that meets the consumer’s needs and
Next, specifications are prepared for the product
Quality of conformance
Quality of conformance is the extent to which a
firm and its suppliers can produce products with a
predictable degree of uniformity and dependability,
at a cost that is in keeping with the quality
characteristics determined in a quality-of-design
The ultimate goal of process improvement and
innovation efforts is to create products and services
whose quality is so high that consumers (both
external and internal) extol them.
 Quality-of-performance
Quality of performance studies focus on
determining how the quality characteristics
determined in quality-of-design studies, and
improved and innovated in quality-of-conformance
studies, are performing in the marketplace.
The major tools of quality-of-performance studies
are consumer research and sales/service call
These tools are used to study after-sales service,
maintenance, reliability, and logistical support, as
well as to determine why consumers do not
purchase the company’s products.
Relationship between
Quality and Cost
Features and Price
Features and price determine whether a consumer
will initially enter a market segment; hence features
and price determine market size.
Dependability and uniformity determine a product’s
success, and therefore its market share, within a
market segment.
Generally, products or services with more features
or fancier features have higher costs to the
manufacturer and higher prices to the consumer
than products or services with fewer or simpler
Dependability and Uniformity
Uniformity and dependability create an inverse
relationship between quality and cost. When the
degree of uniformity and dependability of a product
is high, the quality of the product is high, and the
overall cost to both the manufacture and the
consumer is less.
This relationship is explained by the Taguchi Loss
1.5 Relationship between
Quality and Cost
Managers must balance the cost of having many
market segments with the benefits of high
consumer satisfaction caused by small deviations
between an individual consumer’s needs and the
product characteristic package for his market
segment. Also, managers must continually strive to
reduce variation in product characteristics for all
market segments.
Stressing productivity often has the opposite
effect of what management desires
Management’s ability to improve the process
results in a decrease in defectives, yielding an
increase in good units, quality, and productivity
Benefits of Improving Quality
 Several benefits result from improving a process:
 rework decreases
 productivity rises
 quality improves
 cost per good unit is decreased
 price can be cut
 workers’ morale goes up because they are not seen as the
problem. This last aspect leads to further benefits:
 less employee absenteeism
 less burnout,
 more interest in the job
 increased motivation to improve work.
 This is called the chain reaction of quality