Coursera – KAIST: SCM101

Supply Chain Management

A Learning Perspective
Lecture 4

Professor Bowon Kim

KAIST Business School

© 2014 Bowon Kim

Quality

• What is Quality?
• Recall the definition of value

Utility
Value =
Cost

• Utility – when the consumer feels satisfied and/or happy

• Quality  Utility
• When the consumer believes the quality of the product or service is high, she feels
satisfied/happy

• What are the elements of quality? Is it a one-dimensional concept? Or is it a

multi-dimensional concept?
Quality – Multidimensional Nature

• Eight dimensions of quality – Garvin (1988)*

• Conformance – meeting specification
• Performance – functionality
• Reliability – reliable performance
• Durability – long product life
• Features – supplementary functions
• Serviceability – maintenance, repair
• Aesthetics – feel, look, touch, subjective
• Perceived quality – brand, image, status
* Gravin, D. A. (1988). Managing Quality. Free Press.
Quality – Order Winning versus Qualifying

• Conformance
• Performance
• Reliability
Order-
• Durability
• Features
• Serviceability
Order-

• Aesthetics
• Perceived quality
Quality Costs – Quality Failure
• Internal Efforts for Quality Improvement
– Goal: To eliminate both internal and external quality failures
– Costs
• Prevention cost
• Appraisal cost
• Process and quality improvement activity cost
• Internal Quality Failure
– Costs
• Rework, repair, scrap costs
• External Quality Failure
– Costs
• Short-term
– Return, repair, rework costs
– Customer compensation
• Long-term
– Customer perception↓Reputation↓Customer loyalty↓ Future sales↓
– Rework↑ Disruption↑ Process variability↑ Quality deterioration↑
Quality Costs – Quality Failure

Costs
due to
Quality
Failure

Time
Internal External
Point of Purchase
Total Quality Management

Technical Statistical
Dimension Quality circle Process Six sigma
Control (SPC) TQM
(Total
Quality
Management)

“Managerial
Command – Empowerment Philosophy”
Organizational Control (Top Motivation Learning
Customer-
Dimension Incentive organization
down approach) orientation
Quality Improvement Dynamics
– Quality is Free?

Customer
+ Perception
Innovation +
Cap ability Quality

+ +
Process Quality Improvement Sales
Imp rovement Activity
+

- + +
Costs Resources + Profits
-
Quality Dynamics – “Quality – Learning”
Quality – An Analytical Perspective

• Quality from an Analytical Perspective

• Defect = deviation from the goal

Quality Problem:= Defect

Deviation:= |Goal – Actual Outcome|

Process Variability

Common Assignable
Causes Causes
Quality – Statistical Process Control

• Quality from an Analytical Perspective

• Defect = deviation from the goal

Mean
Target Value
Quality – Statistical Process Control

• Quality from an Analytical Perspective

• Defect = deviation from the goal

Actual Values Target Value

Deviation between Target and Actual Value

due to Common Causes
Quality – Statistical Process Control

• Quality from an Analytical Perspective

• Defect = deviation from the goal

Assignable cause
affecting the dispersion
Quality – Statistical Process Control

• Quality from an Analytical Perspective

• Defect = deviation from the goal

Assignable cause
affecting the mean
Quality – Statistical Process Control
• Statistical Process Control – plotting the actual outcomes

UCL

Target
Time

LCL

1st unit 5th unit

Quality – Statistical Process Control
• Statistical Process Control
• Type I Error: Probability(To say ‘out-of-control’ wrongly when in fact it is in-control)
• Type II Error: Probability(To say ‘in-control’ wrongly when in fact it is out-of-control)

Type I
Type II
Quality – Process Capability

Customer’ Specification
Tolerance Range

A’s Process Distribution

B’s Process Distribution

LC Target UC
Lower limit Upper limit
of specification of specification