Chapter 7

Quality

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 Key Questions
Addressed in Chapter 7

• How do we assure quality?

• How do we know that what we ordered

meets expectations?

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 Market Niches for Quality

Quality

Better than Same as Lower than

Competitors Competitors Competitors

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 The Transformation and
Value-Added Chain

Customer Supplier Converter

Supplier Converter Customer

Converter Customer Supplier

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 What is Quality?

• Often used to describe:

– Function
– Suitability
– Reliability
– Conformance with specifications
– Satisfaction with actual performance
– Best buy

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 Eight Dimensions of Quality

1. Performance: The primary function of the product or

service
2. Features: The bells and whistles.
3. Reliability: The probability of failure within a specified time
period.
4. Durability: The life expectancy.
5. Conformance: The meeting of specifications.
6. Serviceability: The maintainability and ease of fixing.
7. Aesthetics: The look, smell, feel, and sound.
8. Perceived quality: The image in the eyes of the customer.

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The Traditional View of
Quality-Cost Trade-off

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The Current View of the
Quality-Cost Trade-off

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 Five Major Cost of Quality Categories

• Prevention costs

• Appraisal costs

• Internal failure costs

• External failure costs

• Morale costs

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 Lean
• A management philosophy focused on
maximizing customer value while minimizing
waste
• Waste, or “muda,” comes in seven forms:
– Overproduction
– Waiting
– Transportation
– Nonvalue-adding processes
– Inventory
– Motion
– Costs of quality (scrap, rework, and inspection)

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 Value Streams

• A series of steps executed in the right way and

at the right time to create value for the customer.
• Each step must be:
– valuable to the customer
– capable (gets the exact same result every time)
– available (it can be performed whenever needed)
– adequate (capacity to perform it exactly when
needed)
– flexible (can respond rapidly to changing customer
desires without creating inefficiencies)

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 Lean and Value Streams

• Goal: Optimize the flow of products and services

through value streams that flow internally across
technologies, assets, and departments to
customers and externally with supply chain
partners
– “Pull” system versus “push” system

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 Total Quality Management (TQM)

• A philosophy and system of management focused

on long-term success through customer
satisfaction.
– Quality integrated throughout the organization’s activities
– Employee commitment to continuous improvement
– Suppliers are partners in the TQM process
– Uses tools including continuous improvement or kaizen,
quality function deployment (QFD), and statistical
process control (SPC) to achieve performance
improvements

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 Quality Function Deployment (QFD)

• QFD is a process, supported by a set of tools, to

translate customer requirements, or “voice of the
customer” (VOC), into specifications.
– Helps to understand what value represents to the
customer and provides direction
– Across-functional activity, involving input from
operations, marketing/sales, engineering, accounting/
finance, and supply.
– Can be applied to both products and services.

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 Kaizen

• Relentless pursuit of product and process

improvement through a series of small,
progressive steps

• Follows a well-defined and structured approach

– plan–do–check–act (the Deming Wheel)

• Incorporates problem-solving tools

– Pareto analysis, histograms, scatter diagrams, check
sheets, fishbone diagrams, control charts, run charts,
and process flow diagrams

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 The Potential Role of Supply in QFD

• Product planning - Provide expertise in analyzing

customer requirements and generating a list of new
product ideas
• Parts deployment - Provide alternative design
concepts and estimate the manufacturing costs of
various parts
• Process planning - Determine supplier process
constraints
• Production planning - Help develop performance
measurement criteria for production planning

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 Six Sigma
• Philosophy that work is processes that can be defined,
measured, analyzed, improved and controlled (DMAIC)
• Six sigma quality (6 σ) represents 3.4 defects per million
opportunities
– six standard deviations are very close to zero defects and
correspond to a Cpk value of 2.0
• Uses a set of tools, such as SPC, control charts and
flowcharting, to drive process improvements.
• Well-defined projects with measurable goals:
– e.g., cost reduction or profit increase through improvements in
cycle time, delivery, safety, etc.
• Team members have training in statistics
• Applies to manufacturing and to services

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 Statistical Process Control (SPC)

• A technique that involves testing a random sample

of output from a process in order to detect if
nonrandom changes in the process are occurring
• Causes of variation: Common causes and special
or nonrandom, assignable causes
• Process capability: ability of the process to meet
specifications consistently

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 Assuring Supplier Quality
Through SPC
1. Buyer establishes required quality specifications
2. Supplier determines process capability
a. Identify common or chance causes of variation
b. Identify special or assignable causes of variation
c. Eliminate special causes
3. Compare buyer’s quality requirements to the
supplier’s process capability
4. Make necessary adjustments
a. Negotiate process improvements with supplier
b. Seek an alternate supplier

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 Control Chart

Control Chart

0.03
0.03
0.03 UCL
0.03 LCL
0.03 Sample
0.03 Average

0.03
0.03
1 2 3 4 5 6 7 8 9 10

Sample Number

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 Dimensions of Service Quality
Evaluation
• Reliability: Ability to perform the promised service
dependably and accurately
• Responsiveness: Willingness to help customers
and provide prompt service
• Assurance: Knowledge and courtesy of
employees and their ability to inspire trust and
confidence
• Empathy: Caring, individualized attention the firm
provides its customers
• Tangibles: Appearance of physical facilities,
equipment and appearance of personnel
Source: Parasuraman, A., “Finding Service Gaps in the Age of e-Commerce,” IESE Insight, Second Quarter 2013, Issue 17, pp. 30–37.

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 A Framework for Analyzing Services

• Value of the service

– high, medium low
– Pareto/ABC analysis
• Degree of repetitiveness
– repetitive versus unique
• Degree of tangibility
– low versus high
• Direction of the service
– directed towards people or assets

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 A Framework for Analyzing Services
(cont’d)
• Production of the service
– People, equipment or people and equipment
– Skill level of people
• Nature of demand
– Continuous, periodic or discrete
• Nature of service delivery
– Location, time
• Degree of standardization
– Standard or customized
• Skills required for the service
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 ISO Quality Standards
• ISO has adopted a common “high level structure” (HLS) for its
management systems standards
– Ten sections: scope, normative references, terms and conditions, context
of the organization, leadership, planning, support, operation, performance
evaluation, and improvement.
• ISO 9001: 2015
– Provides a set of standardized requirements for a quality management
system, regardless of what the user organization does, its size, or
whether it is in the private or public sector.
– defines the requirements a quality system must meet, but does not dictate
how they should be met, leaving scope and flexibility for implementation.
• ISO 14001: 2015
– Sets the requirements for an effective environmental management
system.
– Similar to ISO 9001, it is suitable for organizations of all types and sizes.

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 Quality Awards
• Deming Prize
– Established in Japan in 1950 to honor Dr. W. Edward Deming’s
contribution to the quality field
– Given annually to recognize both individuals for their contributions
to the field of TQM and businesses that have successfully
implemented TQM.
– Non-Japanese companies now eligible

• Malcolm Baldrige National Quality Award

– Annual award that recognizes U.S. organizations in manufacturing,
service, small business, health care, education, and nonprofit
– Evaluates both quality management programs and achievement of
results, with heavy emphasis on organization-wide financial
performance.

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