Quality Management

“It costs a lot to produce a bad product.”

Norman Augustine
 What is quality management all about?

Try to manage all aspects of the organization in

order to excel in all dimensions that are
important to “customers”

Two aspects of quality:

features: more features that meet customer needs
= higher quality
freedom from trouble: fewer defects = higher
quality
Quality management ensures that an organization,
product or service is consistent. It has four main
components:

1. Quality planning
2. Quality assurance
3. Quality control
4. Quality improvement

Quality management is focused not only on product

and service quality, but also on the means to
achieve it through long term customer satisfaction.
The Quality Gurus – Edward Deming

Quality is “uniformity
and dependability”
Focus on SPC and
statistical tools
“14 Points” for
management
PDCA method

1900-1993

1986
The Quality Gurus – Joseph Juran

Quality is “fitness for

use”
Pareto Principle
Cost of Quality
General
management
approach as well as
statistics

1904 - 2008

1951
• The focus on product quality gained
importance in the 1920s.

• Walter shewhart developed the first

process control chart.

• The Japanese dominance in the world of

motor vehicles , electronics, and other
industries is due to their high regard for
quality
 To Make the Quality Focus Work
Motorola:
–Aggressively began a worldwide
education program to be sure that
employees understood quality and
statistical process control
–Established goals
–Established extensive employee
participation and employee teams
 Ways in Which Quality Can Improve
Productivity

Sales Gains
– Improved response
– Higher Prices
– Improved reputation
Improved Increased
Quality Reduced Costs Profits
 Increased productivity
 Lower rework and scrap
costs
 Lower warranty costs
Flow of Activities Necessary to Achieve
Total Quality Management

 Organizational Practices

 Quality Principles

 Employee Fulfillment

 Customer Satisfaction
 Organizational Practices
• Leadership
• Mission statement
• Effective operating procedure
• Staff support
• Training
Yields: What is important and what is to be
accomplished
 Quality Principles
• Customer focus
• Continuous improvement
• Employee empowerment
• Benchmarking
• Just-in-time
• Tools of TQM
Yields: How to do what is important and to
be accomplished
 Customer Satisfaction
• Winning orders
• Repeat customers

Yields: An effective organization with a

competitive advantage
 Employment Fulfillment
• Empowerment
• Organizational commitment

Yields: Employees’ attitudes that they can

accomplish what is important and to be
accomplished
 Definitions of Quality

Product characteristics & features that affect

customer satisfaction
• User-Based: What consumer says it is
• Manufacturing-Based: Degree to which a
product conforms to design specification
• Product-Based: Level of measurable product
characteristic
 Dimensions of Quality for Goods

 Operation
 Reliability & durability
 Conformance Quality
 Serviceability
 Appearance
 Perceived quality
• Quality of conformance is the ability of a
product, service, or process to meet its design
specifications.
• Perceived quality can be defined as the
customer's perception of the overall quality
or superiority of a product or service with
respect to its intended purpose, relative to
alternatives.
 Service Quality Attributes
Reliability Responsiveness
Tangibles Competence
Under-
standing Access

Security Courtesy
© 1995 Corel Corp.

Credibility Communication
 Importance of Quality

 Costs & market

share Market Gains
 Company’s Reputation
reputation Volume
Price
 Product
Improved Increased
liability
Quality Profits
 International Lower Costs
implications Productivity
Rework/Scrap
Warranty
 Quality cost
Quality costs are the all the costs that a
manufacturer incurs to ensure it
produces a quality product.

Quality costs include both costs to prevent

low-quality production and costs that
arise after a low quality product is
produced.
 7 QC Tools

Quality pros have many names for these

seven basic tools of quality, first
emphasized by Kaoru Ishikawa, a
professor of engineering at Tokyo
University and the father of “quality
circles.”
 7 QC Tools
1. Cause-and-effect diagram (also called Ishikawa or
fishbone chart): Identifies many possible causes for an
effect or problem and sorts ideas into useful
categories.
2. Check sheet: A structured, prepared form for
collecting and analyzing data; a generic tool that can
be adapted for a wide variety of purposes.
3. Control charts: Graphs used to study how a process
changes over time.
4. Histogram: The most commonly used graph for
showing frequency distributions, or how often each
different value in a set of data occurs.
5. Pareto chart: Shows on a bar graph which
factors are more significant.
6. Scatter diagram: Graphs pairs of numerical
data, one variable on each axis, to look for a
relationship.
7. Stratification: A technique that separates
data gathered from a variety of sources so
that patterns can be seen (some lists replace
“stratification” with “flowchart” or “run
chart”).
 Case: shortening telephone waiting
time…

• A bank is employing a call answering service

• The main goal in terms of quality is “zero waiting time”

- customers get a bad impression
- company vision to be friendly and easy access

• The question is how to analyze the situation and

improve quality
The current process

Customer Receiving
Operator
A Party

Customer
B How can we reduce waiting
time?
Fishbone diagram analysis :

Absent receiving Working system of

party operators

Absent Too many phone

calls
Out of office Lunchtime

Not at desk Absent

Makes
customer
Not giving wait
receiving party’s Does not
coordinates Lengthy talk understan
Does not know d customer
Complaining organization
well
Leaving a Takes too much time
message to explain

Customer Operator
Reasons why customers have to wait
(12-day analysis with check sheet)

Daily Total
average number
A One operator (partner out of office) 14.3 172

B Receiving party not present 6.1 73

C No one present in the section receiving call 5.1 61

D Section and name of the party not given 1.6 19

E Inquiry about branch office locations 1.3 16

F Other reasons 0.8 10

29.2 351
Pareto Analysis: Reasons why customers
have to wait
Frequency Percentage

300 87.1%

250 71.2%
200
49%
150
100

0%
A B C D E F
 Ideas for improvement

1. Taking lunches on three different shifts

2. Ask all employees to leave messages when
leaving desks
3. Compiling a directory where next to
personnel’s name appears her/his title
 Results of implementing the
recommendations
Before… …After
Frequency Percentage Frequency Percentage

100%

300 87.1 300

%
71.2
% Improvement
200 200
49
%

100 100 100%

0% 0%

A B C D E F B C A D E F
 What is Quality Control?
1. Setting quality standards (objectives or targets)
2. Appraisal of conformance (quality
measurement)
3. Taking corrective actions to reduce deviations
4. Planning for quality improvement
 Statistical Quality Control (SQC)
• Statistical Quality Control: Application of
statistical techniques to accept or reject
products already produced or to control the
process while it is being carried out.

• Statistical Process Control (SPC): Statistical

evaluation of the output of a process during
production.
 Quality Characteristics
Variables Attributes
 Characteristics that you • Characteristics for which
measure, e.g., weight, you focus on defects
length • Classify products as either
 May be in whole or in ‘good’ or ‘bad’, or count #
fractional numbers defects
 Continuous random – e.g., radio works or not
variables • Categorical or discrete
random variables
 Acceptance Sampling
Acceptance Sampling: A statistical
technique used to take a decision
regarding acceptance or rejection of a lot
without having to examine the entire lot.
 Why Acceptance Sampling?

Is input Yes Manufacturing

Input acceptable? Process

Correction
No
Scrap or Is process
Rework under
control?
No

Yes Yes
Is output Output
Customer
acceptable? Whether the input or output
materials are acceptable or
not can be found through a
technique called Acceptance
Sampling.
 Acceptance Sampling Technique
• Acceptance sampling inspection can be either
sampling by attributes or sampling by variables.

• Acceptance sampling plans have two important

concepts as background when the characteristic
being measured are attributes. They are.
i. Average outgoing quality curves
ii. operating characteristic curves.

Which are described below.

 Acceptance Sampling: Attributes & Variables
The input or output articles are available in lots or batches
(population). It is practically impossible to check each and every
article of a batch.

So we randomly select a few articles (sample) from a

batch, inspect them, and then draw conclusion whether the
batch is acceptable or not. This is called acceptance sampling.

•Sometimes the articles inspected are merely classified as

defective or non-defective. Then we deal with acceptance
sampling of attributes.

•Sometimes the property of the articles inspected is actually

measured, then we deal with acceptance sampling of variables.
An Average Outgoing Quality (AOQ) Curve
 Operating Characteristic (OC) Curve

• An operating characteristics curve shows

how well an acceptance sampling plan
discriminates between good and bad lots.
Operating Characteristic Curve
 Types of Acceptance Sampling Plans

Three types of acceptance sampling plans are:

• Single sampling
• Double sampling
• Sequential sampling
 Control Charts
Control Chart: A graphic comparison of process
performance and data with control limits drawn
as limit lines on a chart. Helps to determine
whether the on-going process is under statistical
control or not.

Types of control charts :

• Control charts for variables.
• Control charts for attributes.
 Control Charts
• Control charts are used extensively to monitor
quality.
Steps :
• Select the quality characteristic that are to be
controlled.
• Analyze the production process to determine
that kind and location of the probable causes of
irregularities.
 Control Chart Types

Continuous Control
Categorical or
Numerical Charts Discrete Numerical
Data Data
Variables Attributes
Charts Charts

R X P C
Chart Chart Chart Chart
 Total Quality Management
New Thinking About Quality

Old Quality is “small q” New Quality is “Big Q”

• About products About organisations
• Technical Strategic
• For inspectors For everyone
• Led by experts Led by Management
• High grade The appropriate grade
• About control About improvement
 Three Levels of Quality

1. Organisation level – Meeting external customer

requirements
2. Process level – Meeting the needs of internal
customers
3. Performer level (job level – Meeting the requirements of
or task design level) accuracy, completeness innovation,
timeliness and cost.
 What is Total Quality Management (TQM)?
A philosophy that involves everyone in an organisation in a
continual effort to improve quality and achieve customer
satisfaction.

Six Basic Concepts in TQM

• Top management commitment and support.
• Focus on both internal and external customers.
• Employee involvement and empowerment.
• Continuous improvement (KAIZEN)
• Partnership with suppliers
• Establishing performance measures for processes.
 Scope of TQM
1. Are integrated organisational infrastructure
2. A set of management practices
3. A wide variety of tools and techniques
 Total Quality Management Program
1. Top management commitment and involvement
2. Customer involvement
3. Designing products for quality
4. Designing and controlling production processes
5. Developing supplier partnerships
6. Customer service, distribution, installation
7. Building teams of empowered employees
8. Benchmarking and continuous improvement (Kaizen)
 Benchmarking
 Bench marketing : Measuring a company’s
performance against that of best-in-class
companies, determining how the best-in-class
achieve those performance levels and using the
information as a basis for the company’s
targets, strategies and implementation.

 3 Types of Benchmarking
1. Performance benchmarking
2. Process benchmarking
3. Strategic benchmarking
 Business Process Reengineering (BPR)

 Business Process Reengineering: The fundamental

rethinking and radical redesign of business processes
to achieve dramatic improvements in critical
contemporary measures of performance such as cost,
quality, service and speed.
 Kaizen Movement or Japanese 5 ‘S’
Approach

1. Seiri – Straighten-up – Avoid unnecessary materials,

tools, machinery, documents etc.
2. Seiton – putting things in order – Everything should be
in its place and there should be place for everything
(good house keeping)
3. Seiso – clean-up – Every individual should clean-up his
work place everyday after the work.
4. Seiketsu – (Personal cleanliness) – Healthy body –
healthy mind.
5. Shitsuke (discipline) – Every worker & manager has to
follow rules and procedures in the work place.
 3 ‘MU’s Check List (of Kaizen)
1. Muda (Waste)
2. Muri (Strain)
3. Mura (Discrepancy)

Quality Circles (QC)

 A small group of employees who meet regularly to
undertake work-related projects designed to improve
working conditions, spur mutual self-development and
to advance the company, all by using quality control
concepts.
 Quality Certification
 Quality Systems
• A quality system is defined as "The collective plans, activities
and events that are provided to ensure that a product, process
or service will satisfy given needs".

ISO 9000
ISO 9000: A set of international standards on quality
management and quality assurance, critical to international
business
ISO 14000: A set of international standards for assessing a
company’s environmental performance.
 ISO 9001 : 2000
 The Indian standard (second revision) which is identical with ISO
9001 : 2000 "Quality Management Systems – Requirements"
issued by International organisation for standardisation (ISO) was
adopted by the Bureau of Indian Standards (BIS) on the
recommendation of the Quality Management Sectional Committee
and approval of the Management and Systems Division Council.

Process Approach
 ISO 9001 : 2000 promotes the adoption of a process approach
when developing, implementing and improving the effectiveness
of a quality management system, to enhance customer satisfaction
by meeting customer requirements.
Service Operations
 Fundamentally, there are no differences
between service and manufacturing
operations! Both are concerned with:

• Efficiency
• Effectiveness
• Quality
• Cost
Effectiveness
• Right prescription
• Right advice Cost
• Service availability • Inventory management
• Tradeoffs
• Purchasing

Efficiency
• No. of servers Quality
• Use of resources • Training
• Error prevention
• Continuous Improvement
 Service Defined
• Intangibility – Services cannot be touched,
shipped, handled, or looked at. They are an
occurrence, not a tangible good.
• Inventory – Services cannot be stored for later
use. They occur, or they do not occur.
• Inseparability – Services cannot be pulled into
different parts or separated (as many tangible
goods can be—which makes operations
management quite different for products).
• Inconsistency – Services tend to be unique. A
teacher may teach you a topic, and another
teacher may teach you the same topic in
another course. Each teacher will deliver this
topic somewhat differently. This is a good
example of service inconsistency.
• Involvement – Consumers are often directly
involved in the service delivery. A therapist is a
good example of this. The consumer is the
center of the service, and thus each instance
of the service is unique based on the
individual involved.
 Service Operations
The Service Operations Practice scrutinizes the
day-to-day operations in retail outlets,
branches, distributed service networks, back
offices, and other functions to determine the
delivery options that best serve the business
strategy
 Role of Services in an Economy
FINANCIAL INFRASTRUCTURE SERVICE
SERVICES · Communications
· Financing · Transportation
· Leasing · Utilities
· Insurance · Banking

PERSONAL
MANUFACTURING SERVICES
Services inside company: · Healthcare
· Finance DISTRIBUTIO · Restaurants
· Accounting N SERVICES · Hotels
· Legal · Wholesaling
· R&D and design · Retailing
· Repairing CONSUMER
(Self-service)

BUSINESS SERVICES
· Consulting GOVERNMENT SERVICES
· Auditing · Military
· Advertising · Education
· Waste disposal · Judicial
· Police and fire protection
 Service Design
Service design is the activity of planning and
organizing people, infrastructure,
communication and material components of a
service in order to improve its quality and the
interaction between the service provider and
its customers.
 Transformations

• Physical--manufacturing
• Locational--transportation
• Exchange--retailing
• Storage--warehousing
• Physiological--health care
• Informational--telecommunications

5
 Service Design Definitions

• Service
–Something that is done to, or for, a customer
• Service delivery system
–The facilities, processes, and skills needed to
provide a service
• Product bundle
–The combination of goods and services
provided to a customer
 Service Design

Begins with a choice of service strategy, which

determines the nature and focus of the service, and the
target market
– Key issues in service design
• Degree of variation in service requirements
• Degree of customer contact and involvement
 Characteristics of Services
(1 of 3)
1. Services are acts, they are intangible but highly visible to
the customers
2. Most services contain a mix of tangible and intangible
attributes
3. Services have customer contact
4. Service performance can be affected by workers’ personal
factors
5. Services are created and delivered at the same time and
are not consumed but experienced, cannot be
inventoried.
 Characteristics of Services
(2 of 3)
6. Services are idiosyncratic
7. Everyone is an expert on service
8. In service business quality of work is not quality of
service
9. Services have low barriers to entry
10. Services are perishable
11. Location is important for service
 Characteristics of Services
(3 of 3)
12. Services are inseparable from delivery
13. Service requirements are variable
14. Services tend to be decentralized and dispersed
15. Services are consumed more often than products
16. Services can be easily emulated
17. Services often take the form of cycles of encounters
involving face-to-face, phone, Internet,
electromechanical, and/or mail interactions
 Service or Good?

• “If you drop it on your foot, it won’t hurt

you.” (Good or service?)

• “Services never include goods and

goods never include services.” (True or
false?)

7
 What about McDonald’s?

• Service or Manufacturing?

• The company certainly manufactures tangible

products

• Why then would we consider McDonald’s a

service business?

8
 Differences Between Product and Service
Design (1 of 2)

Service design often focuses more on

intangible factors
Less latitude in finding and correcting errors
before the customer, so training & process
design are important
As services are noninventoriable, capacity
issues are very important
 Differences Between Product and Service
Design (2 of 2)
Services are highly visible to consumers and
must be designed with that in mind
Some services have low barriers to entry and
exit, so service design has to be innovative and
cost-effective
As convenience is a major factor, location is
important to service design
Service design with high customer contact
generally requires inclusion of the service
delivery package
 Service Delivery System

Components of service delivery system:

Facilities
Processes
Skills
 Service Design

• Service design involves

– The physical resources needed
– The goods that are purchased or
consumed by the customer
– Explicit services
– Implicit services
 Performance Priorities in Service Design

• Treatment of the customer

• Speed and convenience of service delivery
• Price
• Variety
• Quality of the tangible goods
• Unique skills that constitute the service offering
 Phases in Service Design

 Conceptualize
 Identify service package components
 Determine performance specifications
 Translate performance specifications into
design specifications
 Translate design specifications into delivery
specifications
 Three Contrasting Service Designs
• The production line approach (ex. McDonald’s)

• The self-service approach (ex. automatic teller

machines)

• The personal attention approach (ex. Ritz-

Carlton Hotel Company)
 Service Systems

 Service systems range from those with little or no

customer contact to very high degree of customer contact
such as:
– Insulated technical core (software development)
– Production line (automatic car wash)
– Personalized service (hair cut, medical service)
– Consumer participation (diet program)
– Self service (supermarket)
 Service Quality
• Defining service quality is more difficult than
defining manufacturing quality.
– Expectation vs Perception
– Expectation vs Performance
 Developing a Culture of
Service Quality
• Hire the right people.
• Educate and train them well.
• Allow them to fix anything.
• Recognize and reward them regularly.
• Tell them everything, every day.
 Service Recovery
• Measure the costs
• Listen closely for complaints
• Anticipate needs for recovery
• Act fast
• Train employees
• Empower front line
• Close the loop
 Dimensions of Service Quality
• Reliability
• Responsiveness
• Assurance
• Empathy
• Tangibles
 Service Operations Management
Selected Issues
• New service development
• Managing service experiences
• Front-office/Back-office
• Analyzing processes
• Service quality
• Yield management
• Inventory management
• Waiting time management
 Yield Management
Purpose is to sell the right capacity to the right
customer at the right price.

• Overbooking
• Differential pricing
• Capacity allocation