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Introduction to
Quality Management
From Bad Quality to Lean
• 1973: the Yom Kippur War
• 1973/74; First oil embargo
• 1978/79: Second oil crisis
• Severe economic recession from July
1981 to November 1982
• The peak of the recession in November and
December 1982
• nationwide unemployment rate was 10.8%,
highest since the Great Depression.
• Rockford, Illinois: highest unemployment of all
Metro areas with 25%.
• Michigan 14.5%.
• Alabama 14.3%
• West Virginia 14.0%.
• Youngstown-Warren metropolitan area 18.7%
So which would you rather own?
Too big?
Or this?
Once again. This?
Or this?
America’s response: the Ford Pinto
Sure, let’s save the $11.
How serious?
• Estimates of 500-700 people killed in fires
caused by faulty gas tank placement by 1977.
• Records indicate that Ford first conducted
rear-end collision tests on the Pinto in
December 1970, months after it was already
in production
• Initially, 11 carefully coordinated crashes were
conducted, and in all but three of them, gas
tanks ruptured and often burst into flames. In
the three tests that didn't result in fires, the
cars had prototype safety devices that
engineers had developed while working with
• Two of the protective devices would have cost
$5.08 and $11 per car.
Quality in the 80s
Training Manuals in the trash
Fiero Firing Squad (1984)
GM (1960-1982)
Joint Venture (GM / Toyota)
Tesla (2010)
1984 Pontiac Fiero

• One hundred percent recall for engine

• $100 million dollar charge
• Equivalent to $231 million dollars in 2015

DETROIT, Jan. 23— The General

Motors Corporation will recall
244,000 four-cylinder Pontiac
Fieros -every one ever made -
because of a nagging engine-fire
problem that contributed to the
company's decision to stop making
the two-seater.
Fremont Assembly (1962 – 1982)
The 411-acre plant produced GM A platform
Chevrolet, Pontiac, Buick, and Oldsmobile cars and
GMC trucks for the Western United States

At the time, the work force in the old GM Fremont plant was
considered to be an extraordinarily “bad” one. Many
considered it to be GM’s worst. The work force in those days
had a horrible reputation, frequently going out on strike
(sometimes wildcat strikes), filing grievance after grievance
and even sabotaging quality. Absenteeism routinely ran over
20%. And, oh yes, the plant had produced some of the worst
quality in the GM system. Remember, this was the early
1980s. So to be the worst in GM’s system at that time meant
you were very, very bad indeed.
It is important to note, however, that from the beginning,
Toyota’s objectives at NUMMI were defined by learning rather
than by the kinds of tangible business objectives that typically
define a joint venture. And if there’s one thing Toyota knows
how to do it is how to learn, especially where learning is most
important: down at the operational levels of the company.
ANDUN System
“Stop the line”

You intend to give these workers the right to stop the

line?” they asked. Toyota’s answer: “No, we intend to
give them the obligation to stop it — whenever they find
a problem.
Healthcare Application?
1980: NBC Special “If Japan can …”
• How the U.S. can respond to Japanese
• W. Edwards Deming
• Systems approach
• Need for higher quality and lower costs
Responding to Global Competition
• Lean supply chain management practices
• Lower costs
• Higher levels of quality
• Improved customer response capability
• Free, Perfect, and Now (Robert Rodin)
1.Defining Quality

• The totality of features and characteristics of a

product or service that bear on its ability to satisfy
given needs. (ASQ)
Absolutes of Quality Management (Crosby)

• Definition: Conformance to Requirements

• System: Prevention
• Performance Standard: Zero Defects
– Batavia, Ohio vs. Mazda: Ford ATX transmission
• Measurement: The Price of Nonconformance
An emphasis on customer value
Define quality by the value the product or service
provides to the customer.

Quality in a product or service is not what the supplier

puts in. It is what the customer gets out and is willing to
pay for. A product is not quality because it is hard to
make and costs a lot of money, as manufacturers typically
believe. This is incompetence. Customers pay only for
what is of use to them and gives them value. Nothing
else constitutes quality.
- Peter Drucker (1986) Innovation and Entrepreneurship
Competing on the eight dimensions of
• David Garvin
• Harvard Business Review (1987)

“I propose eight dimensions that can serve as a

framework for strategic quality management .….
The challenge to managers is to compete on
selected dimensions.”
• The product’s primary operating
• Example:
– Acceleration
– computers
– Time required to get a response for a loan request
Features of the product
• “Bells and whistles”
• Examples:
– CD Player, antilock brakes, airbag
– Investment services at a bank, Saturday and
evening hours, Internet access
• The probability of a product’s surviving over a
specified period of time under stated
conditions of use.
• Examples:
– 100k mile warranty
• Hyundai (1998)
– farming equipment
• The degree to which physical and
performance characteristics of a product meet
pre-established standards
• Example:
– Service at McDonald’s
– Holiday Inn: “no surprises”
• The amount of use one gets from a product
before it physically deteriorates to the point at
which it is more economical to replace it than
to repair it.
• Example:
– Appliances
• Speed, courtesy, and competence of repair
• What happens when the product fails?
• Examples:
– Saturn diagnostic plug and service database linking
• How the product looks, feels, sounds, tastes,
or smells.
• Example:
– leather in a new Jaguar
– Bank
– Harley Davidson
Perceived Quality
• Subjective assessment of quality resulting
from image, advertising, or brand names
• Example:
– Volvo (safety)
– Apple (innovation)
Dimensions of Service Quality
• James Evans and Bill Lindsey
• How long must the customer wait?
• Lead time reduction:
–key SC metric
• Will the service be performed when
• Will the product be delivered when
– Key SC metric
• Are all items in the order provided?
– Surgical tray
– Shadow board
• #1 for speed.
• #9 for accuracy

• Valid performance metric?

• why measure speed?
• Source: QSR Magazine
• Do front line employees treat customers
• Does the website?
• Are services provided in the same
fashion for all customers?
• Are supply chain lead times
–despite cyclical patterns of demand
–despite intentional disruptions to
predictable flow.
Accessibility and convenience
• Is the service easy to obtain?
– Ordering on Amazon
– Returning a product to Amazon
• need for reverse supply chain channels
• Challenge:
– Creating the neighborhood retail outlet online
• Is the service provided right the first
• Is the order from the supplier correct?
• Can service personnel react quickly to
resolve unexpected problems?
– How can we train/empower employees?
• Can the website react to resolve
(un)expected problems?
– How to we anticipate potential issues?
Operationalizing dimensions of

• Customers are the groups and

individuals you serve.
• Organizations exist to satisfy customer
needs and expectations.
• Everyone in the organization has one
or more customers
Needs and Expectations

• A need is a problem the customer is trying

to solve or something the customer is
trying to achieve.
• An expectation is created by the customer
based on experience with a particular
product or service.
Types of Customers

• Internal customers are other people in

your organization who use your
products and services.
• External customers are people outside
your organization who use your
products and services
• Direct external customers are
people outside your organization
who receive your organization’s
products and services.
• Indirect external customers are
those outside your organization
who have some kind of stake in its
work but are not the primary
reason for its existence.
3.Quality Systems
• A quality system is a system designed to
ensure the continued repeatability of a set of
product or service characteristics that have
been explicitly or implicitly agreed to by a
customer and a supplier.

Four quality systems
• Artisan
• Inspection
• Statistical process control
• Quality assurance
• A quality system characterized by a formal
progression through recognized levels of
experience and expertise.
• apprentice / journeyman / master
• skilled trades
• F test exercise
• Discussion
Problems with trying to achieve quality
through inspection:
• Inefficient
• Costly
• Customer dissatisfaction
• Confused responsibility
• Symptom-oriented
• Neglected improvement
Characteristics of a prevention-oriented
• Change in philosophy
• Change in focus
• Use of statistics
• Change in responsibility
• On-going improvements
Quality Assurance
• The activity of providing, to all concerned, the
evidence needed to establish confidence that
the quality function is being performed
• Examples
– ISO 9000
– AACSB Accreditation
– Joint Commission
Required Evidence:

• A formal plan which spells out how fitness for

use will be achieved.
• A system to verify that the plan, if followed,
will result in fitness for use.
• A system of audits to verify that the plans
actually are being followed.
Documentation Hierarchy:

• Level I: Quality manual

• Level II: Procedures
• Level III: Instructions
• Level IV: Database of records
Benefits of a documented quality system:

• forces agreement and clarity of policies,

procedures, and work instructions
• useful for training and reference
• provides a basis for changes and
• auditable internally and by customers and
accreditation body
5. Costs of Quality

• Costs for Prevention

• Costs for Appraisal
• Costs for Failure
Prevention Costs
• A prevention cost is any cost incurred in an
effort to prevent a failure in meeting
• Examples include: applicant screening,
capability studies, vendor evaluation, training,
preventive maintenance
Appraisal Costs
• An appraisal cost is any cost incurred in an
effort to detect a failure in meeting
• Examples include: audits, in-process
inspection, final inspection, receiving
Internal Failure Costs
• An internal failure cost is any cost incurred for
products that do not meet requirements and
have not been transferred to the customer.
• Examples include: sorting, premium freight,
overtime, repair/rework, scrap, reinspection,
External Failure Costs
• An external failure cost is any cost incurred for
products that do not meet requirements and
have been transferred to the customer.
• Examples include: warranty costs, loss of
market share, customer dissatisfaction,