Today’s topic

Introduction and
evolution of quality
movement

MMS Sem IV 1
 Introduction to TQM
Until late 1980s, Indian industries had a comfortable
period, due to License Raj. They were in protective
environment operating in seller’s market. Customer
Orientation was totally missing. Following of socialistic
policies led to lethargic work force and both private
and public Indian companies, operated with outdated
technology, lower productivity, poor product quality,
and stagnant Industry.
In the mean time Japanese industries followed the
path of Quality Gurus Joseph Juran & Deming and
followed TQM. Hence by 1970s, Japanese became
world leaders in many industries and consumer
product segments.

MMS Sem IV 2
 Introduction to TQM Contd…
Japanese companies, for example, Sony in consumer
electronics, Toyota and Honda in four-wheeler automobile
industry, Honda and Yamaha in two-wheeler Industry, Seiko
and Citizen in Watch Industry and Mitsubishi in heavy
industry etc., followed TQM principles and became world
famous Japanese companies. Pioneering work in TQM was
also done by Taichi Ohno, who implemented famous JIT
and Toyota Production Systems(TPS).
Gradually, the concept of TQM spread to most of the
world’s Industries in Korea, Europe and USA and TQM
became a way of life. Importance of quality was accepted
and the result was revolutionary rate of growth, in the
1970s in Europe,USA and some Asian countries like China,
Taiwan & Korea.

MMS Sem IV 3
 Introduction of TQM in India
In early1990s, floodgate of liberalization and globalization
was opened in India and suddenly, a wide gap in quality was
visible in Indian products and they struggled to compete with
Japanese and other progressive companies following TQM
principles.
Gradually, Indian companies started appreciating TQM
principles . A new branch of management consultants started
talking about SQC,Kaizen and quality circles. Then emerged a
new group of Industries like TVS Group, Wipro, Infosys,
Reliance industries, PCS etc,who practiced TQM principles like
customer focus, continuous improvements, Employee
empowerment, Six sigma, ISO 9000,QMS and other SPC
techniques. Existing industries like L&T,Tata group, Birla group
etc also joined this TQM movement and gained big success in
the competitive world.

4
Evolution of TQM – New Focus

5
 A shift from traditional approaches to quality
Inspection->QC->QA->TQM
TOTAL QUALITY MANAGEMENT
- Involvement of all employees, customers and suppliers - Empowered employees
- Teamwork - Quality strategy based upon a common mission and vision
- Process oriented

QUALITY ASSURANCE
-Quality systems (ISO 9000) -Quality planning - Quality policy
- Quality costing - Problem solving

QUALITY CONTROL
- Quality standards -Statistical quality
techniques
- Process performance -Treating quality
problems
INSPECTION
-Error detection
- Rectification

6
 DEFINITION, CONCEPTS & FEATURES OF TQM
• TQM can be defined as “an organized scientific
approach towards continuous improvement of
quality involving every one in the Organization
aimed towards total customer satisfaction.
• Total quality management is both a philosophy and a
set of guiding principles that represent the foundation
of a continuously improving organization.
• It, encompasses mobilizing the entire organization
(involve everyone) to satisfy the demands of the
customers and systematic improvement of quality.
• TQM provides a way of life to constantly improve
performance by creating a positive environment for
continuous improvement based on Team work, Trust
and Respect.
MMS Sem IV 7
 TQM Philosophy

■ TQM Focuses on identifying root causes of quality problem

■ It encompasses the entire organization
■ It provides guidance on ways of improving quality
■ Relies on seven basic concepts
■ Customer focus

■ Continuous improvement

■ Employee empowerment

■ Use of quality tools

■ Product design

■ Process management ( kaizen & PDCA)

■ Managing supplier quality

8
 TQM Philosophy - concepts
• Focus on Customer
– Identify and meet customer needs
– Stay tuned to changing needs, e.g. fashion styles
• Continuous Improvement
– Continuous learning and problem solving, e.g. Kaizen, 6
sigma
• Employee Empowerment
– Empower all employees; external and internal customers
– Teams formed around processes – 8 to 10 people
– Meet weekly to analyze and solve problems
• Quality Function Deployment
– Used to translate customer preferences to product design

9
 TQM Philosophy– Concepts (continued)
• Seven Tools of Quality Control
– Tools typically taught to problem solving teams(Cause-and-
Effect Diagrams, Flowcharts, Checklists, Control Charts
,Scatter Diagrams, Pareto Analysis, Histograms
• Walter Stewart's Plan-Do-Check-Act Cycle (PDCA)
popularized by Edward Deming
– Also called the Deming Wheel after originator
– Circular, never ending problem solving process
• Benchmarking
– Studying practices at “best in class” companies
– Use the study to improve product quality & supplier quality

10
 Kaizen Philosophy & PDCA cycle
• TQM concerns incremental and ongoing
improvement of yourself, your work, and your
organization.
• The Kaizen philosophy is imbedded in the TQM
concept and encompasses continuous and
gradual improvement of all employees in the
organization.
• Leads to improvement in employees’ personal
output on a daily basis
• In the Kaizen approach “Deming Wheel” is
central, consisting of a cycle of activities
necessary for effective quality improvement.
• The cycle consists of Plan, Do, Check, and Act.
MMS Sem IV 11
 PDCA Details
• Plan ACT PLAN
– Evaluate current process
– Collect procedures, data, identify problems
– Develop an improvement plan, performance objectives
• Do CHECK DO
– Implement the plan or processes
– Train all involved employees in the use of quality improvement
methods and techniques.
• Check
– Monitor and measure the processes and product against policies and
objectives
• Verify whether the improvement has been successful.
• Act
– Take action to continuously improve process performance
– Improvements are documented in standard procedures so all
employees are well informed on how to handle in future.
• Usually the cycle gets repeated under different circumstance
and conditions to test how consistent the results are
• Back
12
 Product Design - Quality Function
Deployment
• Process used to ensure that the product meets
customer specifications
• Useful tool for translating customer specifications
into technical requirements is Quality Function
Deployment (QFD)
• QFD encompasses
– Customer requirements
– Competitive evaluation
– Product characteristics
– Relationship matrix
– Trade-off matrix
– Setting Targets

13
 8 building blocks of TQM
TQM can be summed up in to following 8 building blocks:
1.Act always in line with customer needs
2.Develop an internal customer –supplier relationship
3.Measure the value added to the input and the cost of
value addition. The difference will give the efficiency of
process
4.Do it right the first time using SPC or six sigma techniques
to produce zero defects in the product, elimination of
waste and timely delivery of products.
5.Work under 7 zero banner. The seven zeros are:
Zero Defect Zero Inventory Zero delay Zero
paper
Zero Zero Zero disdain for
downtime accidentMMS Sem IVothers 14
 8 building blocks of TQM continued…
6. Focus on prevention of repetitive mistakes.
Any mistake has to be analyzed to find out
the root cause.
7. Involve everyone in the Organization
8. Satisfy all parties and stakeholders –
employees, suppliers, customers,
environment,society & country at large

MMS Sem IV 15
 Quality Principles
A.Customer focus and customer involvement
- Employees regularly visit their customers.
- Customers are known and understood
- Customers’ needs are integrated in the
activities.
- More is being done than the customer expects
- Satisfied customers are priority number one.
- Changing customer needs are systematically
collected and lead to improvement.
MMS Sem IV 16
B. Involvement of all employees
• Voluntary total involvement of everyone.
• Teamwork that leverage the knowledge and
provides synergy based on open
communication, respect and trust.
• Skills are developed on the basis of “Learning by
doing”.
• Decisions on the basis of consensus.
• The present situation is open for discussion.
• Investing in knowledge.
• Empowered employees
• Entrepreneurial approach and leadership skills
at all business levels.
MMS Sem IV 17
C. Consistency of purpose
- An inspiring mission and vision is developed
and communicated to all organizational levels.
- SMART- goals are formulated and
preserved.(Specific, Measurable, Achievable,
Realistic, and Time specific).
- Managers are consistent in their behaviour
regarding these goals.
- Guidance is given to quality improvement
process.
- There is commitment at top management.
MMS Sem IV 18
D. Act according to facts
- Work according to facts and not based on
rumours or feelings.
- The causes and consequences of problems are
analyzed according to “measuring is knowing”.
- Goal oriented data is gathered and interpreted
accordingly.
- Measurements are based on figures; verify
everything with data.
- Quality costs are analyzed.

MMS Sem IV 19
E. Process oriented
- Internal customers are also satisfied.
- The process is more important than the results;
address the means of work accomplishment and not
the outcomes.
- The effectiveness of process is measured.
- The output is standardized.
- The processes are documented in schemes and
standard working procedures.
- Suppliers are regarded as partners and long term
relationships are established.
- The TQM culture is expanded to suppliers.
- Reduction of process variations occurs continuously.
MMS Sem IV 20
F. Focus on continuous improvement.
- Employees improve themselves and their work
and help others improve themselves and their
organization.
- Problems are regarded as a means for
improvement and a chance to improve
processes.
- Emphasis on problem prevention instead of
correction.
- Improvements are based on cross-functional,
structured, and holistic approach, and are
continuously documented.
MMS Sem IV 21
• Total quality management is a common
method to improve the whole organization
stepwise, structured and systematically
according to hard work, discipline, intensive
training, and consistent implementation of
techniques and resources.
• The quality principles form the foundation of
TQM and are expressed in the four pillars of the
TQM-house, namely
1.Problem solving Discipline
2.Interpersonal skills
3.Teamwork
4.Quality improvement process.

MMS Sem IV 22
 Total Quality Management

Problem Interpersonal Teamwork Quality

Skills. improvement
solving
discipline process

Employee involvement, Structured, Stepwise, Discipline,

Consistency.
MMS Sem IV 23
• The success of TQM improves proportionately
in conjunction with the percentage of
employees within the organization who master
this quality attitude, mentality, and skills,
• TQM covers all parts of the organization.
• For an organization to be truly effective, every
single part of it, each department, each
activity, each person and each level must work
properly together, because every person and
every activity affects and in turn is affected by
others.

TQM VIDEO.FLV
24
What is Quality ? Defining – 5 Ways
Quality can be defined as the totality of the state of
the product or services that satisfies the stated and
implied need of the customer.
• Conformance to specifications
– Does product/service meet targets and tolerances defined by
designers?
• Fitness for use
– Product is considered to be of good quality, if it is fit for intended
use
• Value for price paid
– Evaluation of usefulness vs. price paid. e.g. Axe made of gold for
wood cutting is not good quality. Only axe made of steel is of good
quality
• Support services
– Quality of support after sale
• Psychological
– e.g. Ambiance, prestige, friendly staff

25
 Quality is “Conformance to Specifications”

• Conformity is ‘Fulfillment of a requirement”

• The Rolls Royce that meets all its specified
requirements is a quality product.
• The family saloon that meets all its specified
requirements is equally a quality product.
• Dr. Deming defines quality as the need to
“provide customers with what they need, when
they need it and at a higher perceived value
and lower cost than anyone else.
MMS Sem IV 26
 Prevention rather than detection to
achieve quality
• Traditional methods include inspection, tests,
audits to detect errors and eliminating them by
scrapping or reworking products to conform to
specification.
• This system of appraisal is commonly
categorized as “Quality Control”.
• Inspection is the king.
• During late 1950s and early 1960s the principle
of achieving quality by inspecting-out reject
products was challenged.

MMS Sem IV 27
• It was realized that quality is inherent within
the product and cannot be introduced once
the product is made.
• The philosophy of “prevention rather than
detection” provides the opportunity for
eliminating the potential for error.
• It involves identifying opportunities for error
and taking actions to eliminate those
opportunities before a problem arises.
• It results in the contemporary quality
expression of “Quality Assurance- Right First
Time”
MMS Sem IV 28
 Success of TQM depends on what?
• For TQM to be successful top management
commitment is a must.
• Firm should create a Quality Organization in the
form of Quality council to implement all vital
decisions.
• To formulate a strategic action plan which is a long
range plan known as Vision and a value system for
the organization.
• Firm should be Customer Oriented aimed at
maximizing customer satisfaction and ROI.
• Employees should be trained in TQM activites
• Work towards total employee involvement to TQM.
• Focus on prevention based systems, teamwork and
reward & recognize contributing employees
29
 Prerequisites for success of TQM
1. Know your customers, both external and internal:
- Who they are, their current needs, and their future
requirements.
- Respond to their changing needs.
- Do not forget the users.
1.1 Possible Actions
- Customer surveys
- Functional analysis
- Quality cost analysis
- Quality function deployment
MMS Sem IV 30
2. Know your competitors
2.1 Possible Actions
- Customer surveys
- Competitor analysis
- Bench marking
3. Know the cost of non-conformance (CONC)
3.1 Possible Actions
- Quality cost analysis
- Functional analysis
4. Measure performance against key customer driven parameters
4.1 Possible Actions
- Customer surveys
- Competitor analysis
- Bench marking
MMS Sem IV 31
5. Make sure that each employee understands
and commits themselves to the quality
objectives of the business.
5.1 Possible Actions
- Functional analysis
- Education and training
- Communication
6. Top Management commitment to the continual
improvement of quality within the business.

MMS Sem IV 32
6.1 Possible Actions
- Quality cost analysis
- Functional analysis
- Education and training
- Communication.
7. Define the purpose of each department and activity
in terms of satisfying external and internal customer
requirements.
7.1 Possible Actions
- Functional analysis

MMS Sem IV 33
8. Enable the employees to fulfill their
commitment to quality by influencing the
programme of continuous improvement.
8.1 Possible Actions
- Education and training
- Communication
- Corrective action task force, corrective actions
group.
- Error cause removal schemes.
- Quality circles
- Problem solving
MMS Sem IV 34
- Statistical process control
- Recognition of performance
- Suggestion programmes
- Self inspection programmes.
9. Wherever possible replace the inspection and
correction techniques of quality control with
effective preventive actions.
9.1 Possible Actions
- Quality cost analysis
- Functional analysis
MMS Sem IV 35
- Quality Management Systems
- Error Cause removal schemes
- Quality Circles
- Problem solving
- Suggestion programmes.
10.Never accept a non-conforming output in the
form of a product for external or internal
customer.
10.1 Possible Actions
- Quality Cost Analysis
MMS Sem IV 36
- Functional Analysis
- Education and Training
- Communication.
11. Plan effectively before undertaking any
actions.
11.1 Possible Actions
- Quality Improvement Team
→ Apparently, there is no end to improvement.
• The recognition of the necessity to
continuously revise the quality thinking is
essential to the ultimate success of business
venture. MMS Sem IV 37
 Why TQM Efforts Fail

• Lack of a genuine quality culture

• Lack of top management support and

commitment

• Over- and under-reliance on SPC

methods

38
 TQM Within Operations Mgmt
• TQM leads to broad sweeping organizational change
• TQM impacts
– Marketing – providing key inputs of customer information
– Finance – evaluating and monitoring financial impact
– Accounting – provides exact costing
– Engineering – translate customer requirements into
specific engineering terms
– Purchasing – acquiring materials to support product
development
– Human Resources – hire employees with skills necessary
– Information systems – increased need for accessible
information

39
 Highlights
• TQM is different from the old concept of quality, as
its focus is on serving customers, identifying the
causes of quality problems, and building quality
into the production process. It evolved from
Inspection to QC to QA and then to TQM.

• Seven features of TQM combine to create TQM

philosophy; customer focus, continuous
improvement, employee empowerment, use of
quality tools, product design, process management,
and managing supplier quality

40
 Highlights - Continued
• QFD is a tool used to translate customer needs into
specific engineering requirements
• management.
• Quality can be defined as the one that satisfies the
stated and implied need of the customer
• Success of TQM depends on various factors
• Housekeeping (5 S) is given great importance in TQM.
• TQM fails when there is lack of senior Mgmt support
and quality culture in the Organization.

41
 Session V
• Basics of sampling
• Reliability

1
 Acceptance Sampling
• Definition: Acceptance sampling refers to the SQC
process of randomly inspecting a certain number of
items from a lot or batch in order to decide whether to
accept or reject the entire batch
• Different from SPC because acceptance sampling is
performed either before or after the process rather
than during
– Sampling before typically is done to supplier’s material
– Sampling after involves sampling finished items before
shipment or finished components prior to assembly
• Used where inspection is expensive, volume is high, or
inspection is destructive
 Decision to accept or reject entire lot depends
on sample drawn
• Goal of Acceptance Sampling plans is to determine the criteria for
acceptance or rejection based on:
– Size of the lot (N)-population size
– Size of the sample (n)
– Number of defects above which a lot will be rejected (c)
(acceptance no.)
– Level of confidence we wish to attain
• There are single, double, and multiple sampling plans
– Which one to use is based on cost involved, time consumed,
and cost of passing on a defective item
• Can be used on either variable or attribute measures, but more
commonly used for attributes
 Operating Characteristics (OC) Curves
• OC curves are graphs which
show the probability of
accepting a lot given various
proportions of defects in the lot
• X-axis shows % of items that
are defective in a lot- “lot
quality”
• Y-axis shows the probability or
chance of accepting a lot
• As proportion of defects
increases, the chance of
accepting lot decreases
• Example: 90% chance of
accepting a lot with 5%
defectives; 10% chance of
accepting a lot with 24%
defectives
 AQL, LTPD, Consumer’s Risk (α) &
Producer’s Risk (β)
Lot Tolerance Percent Defective is the worst quality beyond which buyer is
not willing to accept the incoming lots
• AQL is the small % of defects that P
r
consumers are willing to accept; o
order of 1-2% b
a
• LTPD is the upper limit of the b
percentage of defective items i
consumers are willing to tolerate l
i
• Consumer’s Risk (α) is the chance t
of accepting a lot that contains a y
greater number of defects than o
the LTPD limit; Type II error f
• Producer’s risk (β) is the chance a a
lot containing an acceptable c
quality level will be rejected; Type c
I error.

Good sampling plan reduces

both type I & II errors
 Developing OC Curves
• OC curves graphically depict the discriminating power of a
sampling plan
• Cumulative binomial tables like partial table below are used to
obtain probabilities of accepting a lot given varying levels of
lot defectives
• Top of the table shows value of p (proportion of defective
items in lot), Left hand column shows values of n (sample size)
and x represents the cumulative number of defects found

Table 6-2 Partial Cumulative Binomial Probability Table (see Appendix C for complete table)
Proportion of Items Defective (p)
.05 .10 .15 .20 .25 .30 .35 .40 .45 .50
n x
5 0 .7738 .5905 .4437 .3277 .2373 .1681 .1160 .0778 .0503 .0313
Pac 1 .9974 .9185 .8352 .7373 .6328 .5282 .4284 .3370 .2562 .1875
AOQ .0499 .0919 .1253 .1475 .1582 .1585 .1499 .1348 .1153 .0938
 Example Constructing an OC Curve

• Lets develop an OC curve for a

sampling plan in which a
sample of 5 items is drawn
from lots of N=1000 items
• The accept /reject criteria are
set up in such a way that we
accept a lot if no more that
one defect (c=1) is found
• Using Table 6-2 and the row
corresponding to n=5 and x=1
• Note that we have a 99.74%
chance of accepting a lot with
5% defects and a 73.73%
chance with 20% defects
 Reliability-Probability of a plant to
give satisfactory performance
• Reliability is the ability of the plant and equipment to
continue to be fit for the purpose .
• There is a need to design reliability into products and
services.
• Amount of plant maintenance work will depend upon
the reliability of the system.
• Reliability can be influenced by everyone involved in
the organization from marketing through delivery and
after-sales service and those concerned with supply of
goods and services.
8
• While quality is defined as “conformance to the
requirement at the start of use” by the
customer, the question “how many of these
units still meet the specifications after a week
of operation, or after a month, or at the end of
one year warranty period”? remains to be
answered.
• This is where ‘reliability’ comes in.
• Quality is a snapshot at the start of the life and
reliability is a motion picture of day to day
operation.
• Reliability video.flv
9
• Assume that in a factory there are 100 bulbs in
use and the average guaranteed life of these
bulbs based on past experience is 10,000
hours.
• If we collect the data about the number of
bulbs survived till 10000 hours, we can
compute the reliability of the bulbs.
►In the above case, Reliability = (Number of
bulbs survived till the specified time limit) ÷
(Number of Bulbs inspected).
• If the number of bulbs survived till 10,000
hours is 60, then we say the reliability is 0.6 or
60%.
10
• Reliability is invariably associated with the
performance of the product.
• There would be little point in having a bulb which
may light at the time of purchase but which may
burn off after 50 hours of use.
1. Numerical value- indicates the element of
probability that makes measurement of reliability
possible.
2. Life- indicates the age of the product through
which it must be performing to satisfaction.
3. Intended function- the product must perform a
certain function or do a certain job for which it is
designed, when required.

11
►For example, in case of refrigerators, the
intended application is of cooling the cabinet
for preserving the food and cooling the contents
within it. The refrigerator cannot be used for
cooling a room by keeping its doors open for a
while.
• Environmental conditions- Even the storage and
transport conditions, have a significant effect on
product reliability.

12
 Definitions of Reliability
• Reliability is the probability of a device
performing its purpose adequately for the
period of time intended under the operating
conditions encountered.
• The reliability of a system or device, is the
probability that it will give satisfactory
performance for a specified period of time
under specified conditions.

13
• Reliability of a product is a “measure of the
ability of the product to function successfully,
when required for required period in the
specific manner”.
• Reliability is the capability of equipment not to
breakdown in operation.
• Reliability may also be defined as the
probability of no failure throughout a
prescribed operating period.

14
 Need for Reliability
1. Accurate prediction and control of reliability
has a significant impact on the profitability of
a product.
2. Service costs for products within warranty
period or under a service contract are a
major expense and a significant pricing factor.
3. Proper inventory of spare parts, hiring and
training of personnel would also depend
upon good reliability fallout predictions.

15
4. Missing reliability targets may also invoke
contractual penalties and cost future business.
5. Companies that can economically design and
market products that meet their customers’
reliability expectations have a strong competitive
advantage in today’s market place.
►For instance, the reliability of railway signaling
systems, aircrafts, power plants are some of the
interesting examples for demonstrating the
reliability concept.
- In all these cases, a failure will lead to heavy
penalty.

16
- In thermal power plants providing electric power for
various uses, reliability problems may cause shut
down or reduced generation of power resulting in load
shedding leading to loss of productive activities.
- Failure of any component in an aircraft may result in
forced landing or an accident, even causing life
damage.
- Similarly, failure of a car brake system while it is
running may cause severe accident.
- The same applies to washing machines, computers,
video cameras, mp3 players etc though the magnitude
of the inconvenience caused due to failure of such
products may be smaller scale.

17
 System Reliability
• A system is an assembly of a number of parts
or components.
• The components may be of similar or different
types.
• Further, the components may be connected in
series or parallel or both.
(1) Series system
- In this system two or more components
operate in series.

18
 A
B
R1 R2 R3
- The characteristics of the above system are
(a) If either component fails, the system itself
fails.
(b) The effective reliability of the system between
points A and B is RAB =R1 x R2 x R3 where R1, R2
and R3 are the reliabilities of the three
components or more generally:
• RTOTAL = R1 R2 R3……..RN

19
• Suppose a system consists of three mechanical
devices A, B and C arranged in a series with
probability of the devices to operate without
failure being 0.95, 0.90 and 0.80 respectively.
• The probability of the system to operate
without any breakdown is given by
►Rsystem = R1 x R2 x R3 = 0.95 x 0.90 x 0.80= 0.684

20
(2) Parallel systems/ Standby systems
- In this system two or more components
operate in parallel.
R1
A B
R2

R3

- The characteristics of these systems are

21
(a) If either component fails, the system
continues to operate but at a reduced
performance
- Suppose if device A with reliability R1 fails,
then device B with reliability R2 acts as the
standby unit.
- Further if device two also fails then device 3
with reliability R3 will act as the standby. In the
figure shown, the system uses two standby
units.
(b) The effective reliability of the system between
two points A and B is RAB= 1-(1-R1) (1-R2) (1-R3)22
• Or more generally Rtotal = 1- (1-R1) (1-R2) (1-
R3)……(1-RN)
• If R1=0.95, R2 = 0.90 and R3 =0.80 then
reliability of the system is Rtotal= 1-(1- 0.95) (1-
0.90) (1-0.80)= 0.999
(3) Mixed Systems
1 3
A B
2 4

23
• As shown in the figure two devices A and B are
connected in series.
• Device A consists of two parts 1 and 2
connected in parallel.
• Similarly, device B consists of two parts 3 and 4
connected in parallel.
• The reliability of device A is RA= 1- (1-P1) (1-P2)
• The reliability of device B is RB= 1- (1-P3) (1-P4)
• The reliability of the system is Rtotal= RA x RB

24
• To conclude, with series-connected
components, it is essential that all the
components should work in order for the
system or equipment to work. Whereas, a
parallelly connected system will fail only if all
the components so connected fails. Even if one
component is working, the sytem will work.
• In parallel connection, the system reliability is
greater than the reliability of the individual
components.

25
 Session VI
• FMEA

1
 Failure Mode and Effect analysis
• The ‘failure mode’ can be defined as the
manner in which a product or a process
can fail to meet the specification.
• The failure mode is basically associated
with a non-conformance or a defective
product to meet the customer
expectations.
• The ‘effect’ is the impact on the internal
or external customer if the failure mode is
not prevented or corrected. 2
 What is FMEA?
FMEA is the acronym for Failure Modes and Effects Analysis. It helps in assessing
“risk”.
Risk is a combination of likelihood and consequences of failure.
Goal is to provide an analytical technique usable to assess :
Deviation from
How significant is the impact on the product - Severity standard
How likely is the cause of failure mode to occur - Occurrence
How likely is the current system to detect cause of failure-Detectability
Severity : Rating the extent of damage that is likely to occur in case the Deviation occurs.
Eg: Process step X if fails causes the entire operation to come to halt. Hence rated 9 or 10
The lesser the damage/inconvenience the lower the rating would be, on a scale of 1-10
Occurance : The likeliness of the stated Deviation in day to day operations is rated on a scale
1-10. The higher the occurrence (irrespective of the extent of damage) the higher the rating.
E.g: Process step X fails very often(2 times a day), is rated 9 or 10. If occurs once in a month
or two, may be 3 or 4.

Detectability : The easier it is to detect the better it is for us. The difficult it is to detect, the
Longer it could take to be identified/ corrected. This could mean “disaster”.
Eg: Process step X failure gets identified through an alarm. Hence rated 1 or 2.

Note : Risk = Severity + Occurrence

FMEA is measured by the numerical number Risk Priority Numbers
(RPN) : Risk Priority No. is the mathematical product of the numerical
Severity, Occurance, and Detectability ratings:

RPN = (Severity) x (Occurance) x (Detectability)

(SEV) (OCC) (DET)
The RPN is used to prioritize failure modes that need attention first.

The ratings : Though there is a world average to how to rate Severity,

Occurance & Detectability, the best way would be to adapt the scoring
to the scenario where we are using the tool. The rating scale just need
to be able to reflect the three attributes on the 1-10 scale.

❑ Created by Aerospace Industry in 1960s

❑ FORD began using FMEA in 1972
❑ Incorporated by the “Big 3” in 1988
4
 Benefits of FEMA
⮚Make output error free
⮚ Better Safety of the product Reduces product
⮚ Better Quality dev.timing & cost
⮚ Better Reliability
⮚ Improves Customer Satisfaction
⮚ Reduces Risk & warranty concerns

Helps in the improvement stage of ‘Six sigma’ where organization

needs to identify risks for vital inputs to optimize resource usage.
 When FMEA needs to be carried out?
• When new products, processes and systems are being designed.
• When existing processes or the designs are being changed.
• When existing designs and processes are used in the new
application or the new environment.
• Also implemented after a problem-solving study to prevent the
recurrence of the problem.
FMEA is a tool that can be used at stage of scoping the project :
Benefit being able to decide on the chosen modes that needs
attention on priority
FMEA is a standard tool used in Improve stage :
To check the strength of the Solution options at hand
FMEA can also be used at later stages old Control as the real world scenarios
starts affecting :
To understand new failure modes coming up
To understand the evolving existing failure modes
6
 Procedural Steps in FMEA Analysis
• First construct an FMEA sheet as shown in next slide.
• Determine for each process step, possible failure modes and
anticipate possible failures due to other processes.
• Indicate what is the cause of each failure mode.
• Indicate what is the effect on the controllability of the
process.
• Quantify the weak points in the process, by estimating the
Probability of occurrence (P) and the Severity of the failure
(S) for each failure mode.
• The product of these two factors is the Risk Priority Number
(RPN). Or RPN = SEV x OCC x DET.

7
• Determine for each failure mode the actions
necessary to improve the weak points in the
process.
• The failures with the highest RPN factor have
the highest priority.
• Report FMEA results to the management.
• Give feedback to team members about the
status of the executed actions.
• Verify and evaluate the actions.

FMEA Video.flv
8
 SessionXIII
TQM in Service Industry
• Quality Management in Services-the
SERVAQUAL Model

MMS Sem IV 1
 TQM IN SERVICE SECTOR
• Service sector is all about interacting with customers.
• Measuring quality in Services set-up is different from a Mfg. set-up
• Services are performances that one party offers to another and are
intangible and does not result in transfer of ownership of a tangible
asset. Whereas, manufacturing deals with tangible products.
• Services are heterogeneous because performances vary from producer
to producer & consumer to consumer. E.g. all Dentists do not produce
the same service to customers.
• Services have an element of Simultaneity because, unlike a product,
services are not manufactured in a plant and then delivered to
customer. Here, quality occurs during delivery of service.
• Hence , measure of service quality involves perceptions of the customer
and the service provider.
 Service Industry - Facts
• Service industries generate over 2/3rd of GNP and
employment in developed countries - ISSN Journal Volume 22, 2004)
• 9 out of 10 jobs are created by Services economy –
“Delivering Service Quality” by Valerie, Parsuraman and Leonard”;

• Of the top 100 revenue earners worldwide, 55% are

service firms – www.service-growth.com
• Top service firm in revenue worldwide – Wal-Mart is a
service firm;
• Service firms produced 45% more revenue per employee
than manufacturing firms;
• Service Industry Contributions to India’s GDP is
increasing steadily compared to Mfg due to “Outsourcing”

3
 What Makes Service Quality Unique

1. Service is intangible - it cannot be easily

measured, tested and verified in advance of sales
to assure quality;
2. Services are perishable;
3. Precise standards like manufacturing can rarely be
set;
4. It is created and consumed simultaneously or near
simultaneously; Service Production and
Consumption are often inseparable i.e. Customer
is in service factory.
5. Services offered can vary from “Producer to Producer”
e.g. outlet to outlet;

4
 What Makes Service Quality Unique
6. Outcome of Service is as important as process of
delivery; assessment of quality is made during the
service delivery process.
7. Service Quality is more difficult for customer, to
evaluate, than product quality;
8. Customer cannot retain the actual service. The
effect of the service can be retained.
Services Include a large variety of industries :
Financial services – banking, insurance; transportation, energy supply,
health-care, media, BPO, Retailing, Distribution; Hotels and tourism;
Leisure, recreation, entertainment; Professional and business services
like accountancy, marketing, law, consulting; Software etc.
5
 Customers assessment of Service Quality
Dimensions of Service Quality Word Personal Past
of Needs Experience
1. Accessibility/approachability (24x7) Mouth
2. Communicating to keep
customers informed in their
language
External
3. Competence to perform service Expected Communication
4. Courtesy & politeness towards Service to Customers
people
5. Credibility & honesty of Service Perceived
purpose-financial ratings, Image Quality Service
6. Reliability-honouring promise Gap Quality

7. Responsiveness to provide
services beyond specified-speed
Perceived
8. Security- Ability to dispel risk Service
9. Tangibles-physical delivery
10. Listening to their customers &
understanding their needs 6
 Service Quality Gap
• Company’s perception of service outcome should
match customer's expectation. If it fails, there is a
service gap.
• The gap between expected and perceived service is a
measure of service quality
• Expectation > Service perceived = Exceptional Quality,
• Expectations < Service perceived = Unacceptable
quality.
• Expectations = Service perceived = Satisfactory Quality.
SERVQUAL model is a gap analysis tool developed by
Parasuraman, Zeithamel & Berry in 1988.
5 gaps exists which can be analyzed on 5 dimensions of
service quality 7
SERVQUAL Model

5 Dimensions of Tangibles,
Reliability,Responsiveness,
Assurance & Empathy on
ratings scale (1-7)
 Gap 1 : Not knowing what customers expect
- The difference between customer expectations and management’s idea or
perception of customer expectations

- E.g. Financial / telecom organizations treat issues of privacy and confidentiality as

unimportant but consumers consider these issues very important.
- Management has inaccurate perception of what customer actually expects.
- Gap exists because there is a lack of customer focus.

1. Lack of Market
Research Orientation;
2. Inadequate upward
communication;
3. Too many levels of
management
 Gap 2 : The wrong service quality
standards
– Mismatch between manager’s expectations of customer’s
service quality and service quality specifications
– Gap between management’s perception of customer’s
expectation and company’s quality specifications.
– Represents inability of management to translate customers’
expectations to service quality specifications

1. Inadequate
management
commitment to
Service Quality
2. Perception of
infeasibility
3. Absence of goal
setting
Gap 3 : The service performance gap
– Poor delivery of service quality
– Occurs because of lack of support for frontline staff and
process problems
– Gap between service quality specifications and actual
service delivery
1. Role ambiguity
2. Role conflict
3. Poor technology
4. Lack of team work
5. Poor employee – job fit
 Gap 4 : When promises do not match
actual delivery
– Differences between service delivery and external
communication with customer
– Gap results from inadequate communication from
service provider
1. Propensity to over-
promise
2. Inadequate horizontal
communication
 Gap 5 : Difference between customer
perception and expectation
- Differences between Expected and Perceived Quality
- Perceived quality of service depends on size of the gap
which in turn depends on gap associated with marketing,
design and delivery of service.
- Gap between customer expectation and perceived service
 SERVQUAL features
Can serve as an effective diagnostic tool for uncovering
broad areas of a company’s service quality shortfalls
and strengths. Used to analyze the gaps influencing
customer perceptions.
SERVQUAL is a 21-item tool that measures both
expectations and customer perceptions of the service
encounter
The SERVQUAL scale offers the potential to determine
the relative importance of the 5 major service quality
dimensions-- Reliability, Responsiveness, Assurance,
Tangibles, and Empathy -- and to track service quality
performance over time
The scale serves as a suitable generic measure of service
quality, transcending specific functions, companies,
and industries
 Revised SERVQUAL 21 Items for Rating
Reliability
1. Providing services as promised
2. Dependability in handling customers' service problems
3. Performing services right the first time
4. Providing services at the promised time
5. Keeping customers informed about when services will be performed
Tangibles
Responsiveness 17. Modern equipment
6. Prompt service to customers 18. Visually appealing facilities
7. Willingness to help customers 19. Employees who have professional appearance
8. Readiness to respond to customers' requests 20. Visually appealing materials
21. Convenient business hours
Assurance
9. Employees who instill confidence in customers Assurance:-
10. Making customers feel safe in their transactions Competence,
11. Employees who are consistently courteous
12. Employees who have the knowledge to answer customer questions
Courtesy
Empathy Credibility, Security
13. Giving customers individual attention Empathy:-
14. Employees who deal with customers in a
caring fashion Access,
15. Having the customer's best interest at heart Communication,
16.Employees who understand the needs of Understanding
their customers
15
 SERVQUAL Data - How Useful is it?
1. We can assess service quality from the customer’s
perspective
2. We can track customer expectations and perceptions
over time and the discrepancies between them
3. We can compare a set of Servqual scores against those
of competitors or best practice examples
4. We can compare expectations & perceptions of
different customer groups-useful in Public sector.
5. We can use data on customer priorities to feed into the
House of Quality (QFD) . Customer priorities and their ranked order of
importance can become the WHATS . These WHATS can then be compared with the
HOWS (key business processes) and relationships matched to check service design
and provision according to key requirements
PROCESS MODEL FOR CONTINUOUS MEASUREMENT AND IMPROVEMENT
OF SERVICE QUALITY

DO YOUR CUSTOMERS PERCEIVE YES CONTINUE TO MONITOR

YOUR OFFERINGS AS MEETING CUSTOMERS’ EXPECTATIONS
OR EXCEEDING THEIR EXPECTATIONS? AND PERCEPTIONS

NO
Firms needs to
DO YOU HAVE AN ACCURATE NO TAKE CORRECTIVE ACTION
UNDERSTANDING OF address these
CUSTOMERS’ EXPECTATIONS?
gaps to
YES
improve
ARE THERE SPECIFIC
STANDARDS IN PLACE TO MEET
NO
TAKE CORRECTIVE ACTION quality. E.g. 5-
CUSTOMERS’ EXPECTATIONS? star Hotels,
YES Airlines,
DO YOUR OFFERINGS MEET OR NO
TAKE CORRECTIVE ACTION
Hospitals keep
EXCEED THE STANDARDS?
guest feedback
YES form to
IS THE INFORMATION
NO address Gap1,
TAKE CORRECTIVE ACTION
COMMUNICATED TO CUSTOMERS
ABOUT YOUR OFFERINGS ACCURATE?
YES
1
 SERQUAL Gaps Model Example

• If a survey was taken which showed the averages

for each dimension is as follows:
Dimension Perception Average Expectation Average
Tangibles 5.4 2.4
Reliability 5.6 4.6
Responsiveness 3.2 3.5
Assurance 6.2 3.4
Empathy 2.8 4.2

• Perceptions and Expectations were rated on a

scale of 1 to 7.
• What dimension should be emphasized?
 SERVAUAL Gaps Model
Solution
• Perception – Expectation = Difference
– Tangibles: 5.4 - 2.4 = 3.0
– Reliability: 5.6 - 4.6 = 1.0
– Responsiveness: 3.2 - 3.5 = -0.3
– Assurance: 6.2 - 3.4 = 2.8
– Empathy: 2.8 - 4.2 = -1.4
• Empathy has the lowest rating therefore it is the
dimension where training should be
emphasized the most. A focus should also be
placed on Responsiveness because of its
negative rating.
 FedEx Service Quantitative performance standards
& other examples
• No. of damaged packages;
• No. of lost packages;
• Missed pickups;
• Aircraft delays;
• Complaints not solved first time
• Wrong day late deliveries;
• Right day wrong delivery;
• Abandoned calls;
• Invoice adjustment requests;
• Missing proof of deliveries.
Firms like Aravind Eye Hospital,
Madurai give brochure in English
& vernacular language to patients
giving details : Registration: 5min,
vision test 10 min etc. Shaping
customer expectations & meeting
them-meeting Gap 4.
They provide employee training on
communication & behavior to
address Gap 3.
20
 Session IX

• Process Capability Studies

MMS Sem IV 1
 Process Capability
• “6 sigma process" means, if one has six standard
deviations between the process mean and the nearest
specification limit, practically no items will fail to meet
specifications.
• Process capability is the ability of a process to produce
output within specification limits and satisfying
customer needs.
• Thus, Process capability = 6 σ ( where σ = standard
deviation) and is a measure of the spread of the
process called natural tolerance.
• Using process capability, it is possible to know the % of
products which will be produced with in limits of ±3 σ
on either side of mean x (bar).
 Process Capability is the spread of the process
This process has 6 sigma quality
Lower Upper If the std. Deviation of the process is
Specification Specification “sigma”, then the process capability is 6
sigma. i.e. process can produce goods
within + or- 3 sigma
A. Process variability
matches specifications
Lower Upper
Specification Specification

B. Process variability
Lower Upper
Process is capable , as 99.73% of well within specifications Specification Specification
the goods will be within the
specifications

C. Process variability
exceeds specifications
Process Capability Ratio is a statistical measure
of process capability
Natural data
spread

The natural spread of

-3σ -2σ -1σ µ +1σ +2σ +3σ the data is 6σ

Lower Upper
Spec Spec
specification width
Process capability ratio, Cp =
process width

Cp = Upper specification – lower specification

6σ
• Product SpecificationsProcess Capability
– Preset product dimensions - tolerances
– e.g. bottle fill might be 16 oz. ±.2 oz. (15.8oz.-16.2oz.)

• Process Capability – Cp and Cpk

– Cp estimates what the process is capable of producing if the mean is centered
between specification limits
– Cp assumes that the process is centered in the specification range

– Cpk estimates process capability, considering lack of centering between

specification limits
Relationship between Process Variability
and Specification Width
• Three possible ranges for Cp

– Cp = 1, as in Fig. (a), process

variability just meets
specifications

– Cp ≤ 1, as in Fig. (b), process not

capable of producing within
specifications

– Cp ≥ 1, as in Fig. (c), process

exceeds minimal specifications

• One shortcoming, Cp assumes

that the process is centered on
the specification range

• Cp=Cpk when process is

centered
 Computing the Cp Value at Cocoa Fizz: three bottling machines are being evaluated for
possible use at the Fizz plant. The machines must be capable of meeting the design
specification of 15.8-16.2 oz. with at least a process capability index of 1.0 (Cp≥1)

• The table below shows the information • Solution:

gathered from production runs on – Machine A
each machine. Are they all
acceptable?
Machine σ USL-LSL 6σ
– Machine B
A .05 .4 .3
Cp=
B .1 .4 .6
– Machine C
C .2 .4 1.2
Cp=
Computing the Cpk Value at Cocoa Fizz

• Design specifications call for a target

value of 16.0 ±0.2 OZ.
(USL = 16.2 & LSL = 15.8)
• Observed process output has now
shifted and has a µ of 15.9 and a
σ of 0.1 oz.

• Cpk is less than 1, revealing that the

process is not capable
 SessionXI

• Cost of Quality

MMS Sem IV 1
COSTS OF QUALITY

Visible costs, e.g., waste and

returned goods

Hidden costs, e.g., wrong

decisions, non-competitive
manufacturing process,
low yield, maintenance, idle
machine time, workers
attitude, etc.

2/59
 Cost of Quality (COQ)
Out-of-pocket costs associated with quality
generally fall into two categories:

Costs associated with

activities to correct failure
to control quality.

Costs associated with

controlling quality.
 Two Costs associated with
controlling quality
Prevention
Costs aimed at preventing defects
and building acceptable quality
into products & services. It
includes
• Training & Designing
procedures
• Certifying Suppliers
• Development & maintenance
costs as well as quality planning
cost.
• Quality Training & Audit cost
• Process Improvements
• Prevention is avoidable activity
Appraisal
Costs incurred to measure
extent of conformance and
include costs mentioned below:-
• Measuring,Inspecting,Testing
& auditing to determine
conformance with Standards.
• Inspecting costs of incoming
Raw materials.
• In process testing/SPC & final
product testing costs.
• Production trials costs
• Materials consumed during
inspection & testing.
• Maintenance & calibration of
equipment costs.
 Costs of Failing to Control
Quality
Internal Failure External Failure
Costs associated with Costs associated with
defects in products and defects in products and
processes that are found processes that are
prior to delivery to detected after delivery to
customers. customers.
COST OF:- COST OF :-
• Scrapping • Complaint handling
• Rework • Repairs
• Reinspecting / Retesting • Extended warranty
• Loss of productive time • Replacement
• Opportunity loss • Product Liability
• Restoring reputation 7-5
 Costs of Quality (COQ)
It is easier to COQ is not
MEASURE required to
the COQ in be reported
organizations in the
that use ABC financial
and ABM. statements.

When COQ is reported, it

is usually expressed as a
% of sales.
Usage of ACTIVITY BASED COSTING thru cost drivers makes it
easier to gather Quality related costs .ABC breaks down costs
into elements called COST DRIVERS e.g. m/c set up
 USE OF QLTY COST INFORMATION
• It provides ability to enhance corporate profit
• Improves purchasing and supplier related costs
• Helps to identify waste in activities
• Helps to identify quality problems
• COQ is critical for judgment of process
effectiveness
• Quality costs are directly proportional to the
conformance of the product
• Measurement of these costs helps to identify
areas needing improvement.
 BREAKUP OF QLTY COSTS AT ASHOK
LEYLAND

• TOTAL QLTY COST IS 8.2% OF REVENUE

• QLTY ASSURANCE IS 71.1%
• QLTY INSPECTION IS 12.8%
• QLTY CONTROL IS 15.9%
 CASE STUDY OF COST OF NON
CONFORMTIY
• Installed capacity of Production / month = 1.1 Million MTRS
• Planned production for the month as per production plan = 0.86 MIL MTR
• Actual production (owing to breakdown in bottleneck process) is 0.79 MIL MTR
• Avg. Sales realization /MTR of goods quarterly , is RS 100/MTR
• Opportunity loss = 0.79 MIL MTRS/MTH = 0.84 MIL MTRS /YR
• Opportunity loss//Yr = 0.84 MIL MTR * 100RS/MTR =RS 8.4 Crores.
• Planned 1ST Quality material for MTH was 95% .Actual obtained 90% .
• Quality Loss = 5% FOR MTR. LOSS for 2ND QLTY/ MTR = RS 40
• Quality Loss/Yr = 5% * 0.79 * 40 * 12 = RS 1.896 Crores.
• Total Cost of Non Conformity = 8.4 + 1.896 =10.296 Crores/Year
• Annual Turnover = 135 Crores.
• % LOSS OF NON CONFORMITY = 10.296/135 = 7.5% OF SALES
HIDDEN COST OF QLTY
• Potential lost sales due to Quality
• Cost of redesign due to quality reasons
• Cost of changing Manufacturing process due to
inability to meet Quality requirement.
• Extra manufacturing costs due to defects
• Unreported Scrap
• Excess process costs of acceptable products.
 DISTINCTION TO BE MADE BETWEEN NON
CONFORMING AND DEFECTIVE

• NON CONFORMING IS WHEN INTENDED PURPOSE IS MET BUT SOME

SPECIFICATIONS ARE NOT MET. E.g. Seconds garments
• DEFECTIVE IS WHEN INTENDED PURPOSE IS NOT MET AND PRODUCT
IS UNFIT TO BE USED FOR INTENDED PURPOSES AND SCRAP IS THE
ULTIMATE OF DEFECTIVE GOODS
 Steps involved in dealing with Non
Conformity

• DISCOVERY:- It is a stage at which Non conformity is discovered

and investigation done to decide what needs to be done. With
existing units and how to prevent recurrence.
• IDENTIFICATION:-labeling of Non Conforming material.
• SEGREGATION:-Separation of Non Conforming material.
• ANALYSIS:-Extent of deviation from specifications /Reasons
• APPROVAL:-Acceptance of Quality material and return of
Rejected goods to suppliers or Condemnation of unift goods.
• ACTION:-Return note to supplier OR Scrap Note OR Corrective
Rework Workorder.
• TRACKING:-Tracking defective material to suppliers.
Implementing Quality Cost Programs
• FOR EACH FAILURE OR NON CONFORMANCE THERE IS A COST AND A
CAUSE
• CAUSE SHOULD BE DRILLED DOWN TO THE ROOT CAUSE AND CAUSES
STUDIED AND PREVENTED
• STRATEGIES FOR ANALYSING QLTY COSTS INCLUDE:
-USING ZERO DEFECT PROGRAM TO ELIMINATE FAILURE COSTS
-USE CAUSE EFFECT ANALYSIS TO STUDY PATTERN OF FAILURES
-ELIMINATION OF FAILURES THRU EFFECTIVE CORRECTIVE ACTION
• FOR SUCCESSFUL DEPLOYMENT OF TQM ORG NEEDS TO ADOPT QLTY
COST PROGRAMS TO BE MORE PRODUCTIVE AND PROFITABLE
 Implementing Quality cost program
• IDENTIFY AND DEFINE QLTY COST ITEMS
• DESIGN FORMATS FOR COLLECTING COST DATA
• LINK QLTY COST DATA WITH ACCOUNTING SYSTEM
• ANALYSE AND IDENTIFY COST AREAS REQUIRING IMPROVEMENT
• DEVELOP CORRECTIVE ACTION PROGRAMS
• IMPLEMENT CHANGES
• REVIEW AND RECTIFY
 What is CMM?
• Capability Maturity Model (CMM) , was developed at the
Software Engineering Institute (SEI) at Carnegie-Melon
University in Pittsburgh, PA, funded largely by the U.S. Defense
Department.
• CMM is a unique quality certification programme adopted by
software sector.
• It is a model used by many firms to identify the best practices
useful in helping them increase the maturity of their processes.
• Evaluations of firms are done by third parties; these third-party
evaluators have varying degrees of expertise and creditability.
• The highest level of CMM is Level Five; less than a hundred
organizations in the world are certified as Level Five.
• CMM is similar to ISO 9000; but while CMM focuses primarily
on improving performance, ISO 9000 focus on establishing and
maintaining careful documentation, procedures, and standards.

ISO9000 is a process compliance standard

CMMI is a process improvement model
 What is CMMI?
In the year 2000, CMM was upgraded to Capability
maturity Model Integration (CMMI).

• Capability Maturity Model Integration

– process improvement model for the development
and maintenance of products and services
– consists of best practices that addresses
productivity, performance, costs, and stakeholder
satisfaction
What processes should be implemented not How they can
be implemented
 Bridging the Divide
CMMI:
• Integrates systems and
software disciplines into
one process
improvement
framework.
• Provides a framework
for introducing new
disciplines as needs
arise.

P-CMM model framework from Carnegie Mellon Institute helps Organizations in

developing workforce maturity and addressing their critical people issues. It is
based
3 on best practices in HR,Org. Dev & Knowledge Management.
 CMMI Staged Representation - 5 Maturity Levels
Process performance continually
Level 5 improved through incremental and
innovative technological improvements.
A Continuous process of seeking out best
Optimizing practices from around the world.
Level 4
Processes are controlled using statistical and
Quantitatively other quantitative techniques. All development
Managed activities follow these corporate “best practices”
Level 3
Processes are well characterized and understood.
Processes, standards, procedures, tools, etc. are defined
Defined
at the organizational (Organization X ) level. Proactive.
Level 2
Processes are planned, documented, performed, monitored, and
Repeatable controlled at the project level. Can repeat successful activities
and tasks; developers learn from each other. Closer to
Level 1 achieving the specific objectives such as quality, cost.

Initial Processes are unpredictable, poorly controlled, reactive & difficult to repeat.
They may not meet specific objectives such as quality, cost, and schedule, but
useful work can be done.
Maturity Level Process Characteristics Behaviors

Focus is on continuous Focus on "fire prevention"; imprvement is

Optimizing quantitative improvement anticipated and desired and impacts assessed.

Quantitatively Process is measured Greater sense of teamwork and

Managed and controlled interdependencies-

Process is characterized Reliance on defined process. People

Defined for the organization and understand, support and follow the
is proactive process.

Process is characterized Over reliance on experience of good

Managed for projects and is often people – when they go, the process
reactive goes. “Heroics.”

Process is unpredictable, Focus on "fire fighting";

Initial poorly controlled, and Effectiveness low – frustration is high.
reactive
 CMMI Representations
• Representations allows an org to pursue
different improvement paths
• CMMI Models have 2 different
representation types
1. Continuous (6 Capability Levels)
– Allows organizations to select a process area and improve
processes related to it
2. Staged (5 Maturity Levels)
– Uses predefined sets of process areas to define an
improvement path for an organization

Organization and presentation of the data are different

in each representation but the content is the same.
Comparison of Representations
Staged
• Process improvement is
measured using maturity
levels.
• Maturity level is the degree
of process improvement
across a predefined set of
process areas.
• Organizational maturity
pertains to the “maturity”
of a set of processes across
an organization
7
Continuous
Process improvement is
measured using capability
levels.
Capability level is the
achievement of process
improvement within an
individual process area.
Process area capability pertains
to the “maturity” of a particular
process across an organization.
Advantages of Each Representation
• Staged
• Provides a roadmap for implementing
– groups of process areas
– sequencing of implementation
• Familiar structure for those transitioning from
the Software CMM

• Continuous
• Provides maximum flexibility for focusing on
specific process areas according to business
8
goals and objectives
 CMMI Components
• Within each of the 5 Maturity Levels, there are basic functions
that need to be performed – these are called Process Areas
(PAs).
• All CMMI process areas are common to both continuous and
staged representations.
Process Areas examples in Project Mgmt:
– Process Management Project Planning, Monitoring and Control
– Project Management ,Supplier Agreement Management, Risk
– Engineering Management, Integrated Supplier Management
– Support etc

• Within each PA there are Goals to be achieved and within each

Goal there are Practices, work products, etc. to be followed that
will support each of the Goals.
 CMMI Terminology &
Structure
Maturity Levels (1 - 5)

Process Area 1 Process Area 2 Process Area n

Required. Specific for Specific Generic Required. Common across

Goals Goals all process areas.
each process area.
Common Features

Commitment Ability Directing Verifying

to Perform to Perform Implementation Implementation

Specific Generic
Practices
Required Required Practices

Sub practices, typical work products,
discipline amplifications, generic
practice elaborations, goal and
practice titles, goal and practice notes,
and references
Sub practices, typical work products,
discipline amplifications, generic
practice elaborations, goal and
practice titles, goal and practice notes,
and references
Organizational Improvement with
CMMI
• CMMI enables organizations that want to
pursue process improvement in multiple
functional areas to do so with less additional
investment for each additional function.

– CMMI supports process integration and product

improvement.

– Allows for better business alignment

– Increased customer satisfaction
– Increased return on investment
11
– Improved employee morale
 CMM levels & Outsourcing Controversy
• Today, many U.S. government agencies insist that companies that bid
for their business obtain at least a CMM Level 3.
• CIOs in IT Companies, increasingly use CMM assessments to whittle
down the lists of dozens of unfamiliar offshore service providers—
especially in India—wanting their business. For CIOs, the magic
number is 5, and software development and services companies that
don't have it risk losing billions of dollars worth of business from
American and European corporations.
• Some software providers routinely exaggerate their assessments,
leading CIOs to believe that the entire company has been assessed at
a certain level when only a small slice of the company was examined.
• And once providers have been assessed at a certain level, there is no
requirement that they test themselves ever again—even if they change
dramatically or grow much bigger than they were when they were first
assessed. They can continue to claim their CMM level forever.
 Some of the Organizations
Currently Using CMMI
• Accenture ■ Raytheon
■ IBM Global Svcs
• Bank of America ■ Reuters
■ Infosys
• Boeing ■ SAIC
■ Intel
• Bosch ■ Samsung
■ J. P. Morgan
• BMW ■ Social Security Admin.
■ KPMG
• Dyncorp ■ Tata Consultancy Srvs
■ L3 Communications
• EDS ■ TRW
■ Lockheed Martin
• Ericsson ■ U.S. Air Force
■ Motorola
• FAA ■ U.S. Army
■ NASA
• Fannie Mae ■ U.S. Navy
■ NDIA
• Fujitsu ■ U.S. Treasury Dept
■ NEC
• General Dynamics ■ Wipro
■ Nokia
• General Motors ■ Zurich Financial Srvs
■ Northrop Grumman
• Hitachi
• Honeywell ■ Polaris
 σ What Is Six Sigma?
• Six Sigma is a business strategy originally
developed by Bill Smith in Motorola, USA in
Sigma is a Greek 1986.
letter that stands
for standard • Six sigma improves quality by reducing
deviation defects
• Reduces variations in process for better
quality;
• It uses a set of statistical methods and also
SD measures
the amount
measures of process capability;
of variation • Benchmark for comparison;
in a process • Uses the Japanese mantra of ‘Muda’ ensures
elimination of all wastages
• Enhances customer satisfaction by providing
defect free products & services-”Brand image”
1
 σ What Is Six Sigma?

Sigma is a letter•Six Sigma improves Yield or productivity. A

in the Greek single rejection saved is an additional piece
Alphabet produced.
• Enables companies to drastically improve
bottom lines
• Any time saved in reworking is time utilized
for effective production of the products and
services, which again adds to productivity.
• Improves substantially the bottom line, without
any investment, just by training and changing
the employees’ mindset and garnering their
greater involvement in their work and
organization.
2
 Six Sigma Definitions
• Business Definition
✔A break through strategy to significantly
improve customer satisfaction and
shareholder value by reducing variability in
every aspect of business.
• Technical Definition
✔A statistical term signifying 3.4 defects per
million opportunities.
Indiscipline in removing irrelevant things leads to accumulation of
fat, which in the Lean Six Sigma world is called "waste, or Non-
Value Added Work (NVA)." Surprisingly, in most organizations,
NVA occupies the maximum space at the cost of "BVA (Business
Value Add) or CVA (Customer Value Add)." Lean Six Sigma helps
3
to remove these NVAs to make organization more customer-centric.
 SIX SIGMA (Σ)
What is a Sigma?
Normal Curve represents
number of defects

6 Sigma would be way out here; so the area under the normal curve (or
the number of defects is very, very, very small –about 3.4 defects per
4
million operations
 SIX SIGMA (Σ)
If things were only at 3 Sigma Quality (99.7% or 3 defects
per 1,000 operations): Here are some consequences.

1. The post office would lose 20,000 pieces of mail every

hour
2. Drinking water would be unsafe 15 minutes every day
3. There would be 5,000 incorrect surgical procedures
every week
4. Two short or long landings at major airports every day
5. 200,000 incorrect drug prescriptions every year
6. The electricity would be out 7 hours every month.
5
Sigma Defects Per Rate of % Accuracy
Level Million Improvement
Opportunities
1σ 690,000 30.23%

2σ 308,000 2 times 69.13%

3σ 66,800 5 times 93.32%

Current standard

4σ 6,210 11 times 99.3790%

5σ 230 27 times 99.97670%

6σ 3.4 68 times 99.999660%

World Class

6
 Who is Implementing Six Sigma ?
• At least 25% of the fortune 200 claim to
have a serious six sigma program - Michael
Hammer.

• Financial - Bank of America, GE Capital,

Electronics - Allied Signal, Samsung, Sony
• Chemicals - Dupont, Dow Chemicals
• Manufacturing - GE Plastics, Johnson and
Johnson, Motorola, Nokia, Microsoft, Ford.
• Airline - Singapore, Lufthansa, Bombardier
• And hundreds of others in Americas,
Europe, Sub Continent.
Some practitioners have combined Six Sigma ideas with lean
purchasing & manufacturing named Lean Six Sigma. This
addresses process flow and waste issues, along with Six Sigma.
7

IBM uses Lean Six Sigma to focus transformation efforts

 Six Sigma Results
Company Annual Savings
General Electric $2.0+ billion
JP Morgan Chase *$1.5 billion (*since inception in
1998)

Motorola $ 16 billion (*since inception in 1980s)

Johnson & Johnson $500 million
Honeywell $600 million
Six Sigma Savings as % of revenue vary from 1.2 to 4.5 %
For $ 30 million/yr sales – Savings potential $ 360,000 to $
1.35 million.
Investment: salary of in house experts, training, process
redesign. 8
 Where can Six Sigma be
applied?
Service
Design
Management

Purchase

Administration Six Sigma

Methods Production

IT
Quality
Depart.
HRM M&S
 Bank of America – SS Experience
• Goals
– # 1 in Customer Satisfaction
– Worlds’ most admired company
– Worlds’ largest bank
• Strategy - “ Develop business process excellence
by applying voice of the customer to identify few
business processes using Six Sigma
• Wanted results in 1 year;
• Hired more than 225 MBB & BBs from GE, Motorola,
Allied Signal for rapid deployment
• Developed 2 week Green Belt training programs
• Introduced computer simulation of processes
• 80 % of Executive Team trained in GB and 50 % Certified10
 Bank of America – SS Experience

Results of first 2 years:

• Reduced ATM withdrawal losses by 29.7 %
• Reduced counterfeit losses in nationwide cash
vaults by 54%
• Customer delight up 20%;
• Added 2.3 million customer households
• 1.3 million fewer customer households
experienced problems
• Stock value up 52%
• Y 2002 – BOA named Best Bank in US & Euro
money's Worlds Most Improved Bank
11
 Six Sigma projects follow two methodologies
inspired by Deming's Plan-Do-Check-Act Cycle.
DMAIC DMADV
DMAIC has 5 Project Phases (Tools-cause &effect,QFD,Process map, 7QC
tools,SPC,Cp,Cpk, Poka Yoke. DMAIC-used for existing processes

Define Measure Analyze Improve Control

⮚Identify, ⮚Collect data on ⮚Analyze data, ⮚Improvement ⮚Establish

evaluate and size of the establish and strategy standards to
select projects selected confirm the “ ⮚Develop ideas maintain
for problem, vital few “ to remove root process;
improvement ⮚identify key determinants causes ⮚Design the
⮚Set goals customer of the ⮚Design and controls,
⮚Form teams. requirements, performance. carry out implement and
⮚Determine key ⮚Validate experiments, monitor.
product and hypothesis ⮚Optimize the ⮚Evaluate
process process. financial
characteristic. ⮚Final solutions impact of the
projectfuture process
Control
Define the Measure current Analyse & find Improve current so that any deviations
problem/voice process & out root causes process using
of Customer collect data of the defects are corrected before
Poka Yoke… defects are formed
2. DMADV is used for designing new processes or
products such that they produce very little or no
defects when they actually are put into use.
DMADV project methodology, also known as DFSS
("Design For Six Sigma"), features five phases:
• Define goals consistent with customer demands and
the enterprise strategy
• Measure and identify CTQs (characteristics that
are Critical To Quality), product capabilities,
production process capability, and risks
• Analyze to develop alternatives, create a high-level
design and evaluate design capability to select the
best design
13
 DMADV project methodology continued….
• Design details, optimize the design, and plan for
design verification This phase may require
simulations
• Verify the design, set up pilot runs, implement
the production process and hand it over to the
process owner(s)
six sigma video.flv

14
 Six Sigma – Case Study
Service Organisation
Background

• M/s Alpha Inc. manages out bound cargo from

a distribution centre to different stores.
• Deliveries made on trucks - owned and hired.
• Customers dissatisfied at delivery schedules.
• Leadership decision to deploy Six Sigma;
• Team of 1 Black Belt and 3 Green Belts
formed
• Sponsor of the project – Distribution Manager

15
 Define - Critical to Quality (CTQ)
• Focus on customers generating annual
revenue of USD 400,000/-.

Customer Improved delivery

needs performance
Level 1 CTQ Timely delivery
Level 2 CTQ On time delivery to schedule
Level 3 CTQ Delivery within +/- 1 hour of
scheduled delivery time
Current process sigma level - 2.43 or 175889 DPMO
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 Define - Goal Statement
• Reduce number of delayed deliveries by 50 % by 31st
December Y 2002 to better meet customer requirement of
timely delivery defined as within +/- 1 hour of scheduled
delivery.
Define - Performance Standards
Output unit A scheduled delivery of freight
Output characteristic Timely delivery
Project Y measure Process starts when an order is received
Ends when goods are received & signed at
customers desk.
Measurement – Deviation from scheduled
delivery time in minutes.
Specification limits LSL = -60 minutes : USL= +60 minutes
Target Scheduled time or zero minutes deviation
Defect Delivery earlier or later than 1 hour.
No. of defects /per unit 1 opportunity for a defect per delivery of freight.
17
 Define - SIPOC Diagram
Supplier Stores Manager

Input Stores Order

Process Steps Receive order
(high level) Plan delivery
Dispatch Driver with goods
Deliver goods to stores
Receive delivery
Output Received freight with
Documents
Customer Store Manager
• Detailed process maps drawn
18
 Measure and Analyze

• Driver and Distance identified as key

factors influencing delivery performance.
• Driver selected for focus.
• Potential root causes as to why Driver
influenced the time:
– Size of the vehicle
– Type of engine
– Type of tyres
– Fuel capacity

19
 Improve
• Experiments designed and conducted
using truck type and tyre size.
• Findings:
– Larger tyres took longer time at certain
routes where area was cramped and time
lost in maneuvering.
– High incidence of tyre failures since tight
turns led to stress on tyres thus increasing
number of flat tyres.
• Team modified planning of dispatch
process by routing smaller trucks at
more restrictive areas.
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 Control
• Test implementation.
• Process sigma level up from 2.43 or
175889 DPMO to 3.94 or 7353 DPMO.
• Performance still fell short of best in class
4.32 or 2400 DPMO.
• Improvement led to significant customer
satisfaction.
• Process continually monitored and data on
new cycle times, tyre failure collected as
per defined methods and frequency,
analysed and monitored.
• Customer satisfaction measured and
monitored.
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 Key Lessons Learnt
• Define
– Difficulty in identifying the right project and
defining the scope;
– Difficulty in applying statistical parameters
to Voice of the Customers;
– Trouble with setting the right goals;
• Measure
– Inefficient data gathering;
– Lack of measures;
– Lack of speed in execution;

22
 Key Lessons Learnt
• Analyse
– Challenge of identifying best practices
– Overuse of statistical tools/ under use of practical
knowledge
– Challenge of developing hypotheses
• Improve
– Challenge of developing ideas to remove root
causes
– Difficulty of implementing solutions
• Control
– Lack of follow up by Managers/ Process Owners
– Lack of continuous Voice of the Customer
feedback
– Failure to institutionalize continuous improvement.

23
 How is 6Σ implemented ?
1. Needs a champion
2. Needs everyone’s commitment (Top to Bottom)
3. Breakthrough Strategy – Using Deming’s PDCA Wheel
4. Requires lots of training and reinforcement (e.g.
incentives)
5. Using experts in Statistical process controls, motivation
and team work
a. Master Black Belts – Mentors for Black Belts
b. Black Belts – Project Leaders
c. Green Belts – Project Team Members

(Side Bar: At General Electric no one is considered for

promotion to any management position without Black or
Green Belt training. The goal is to have one Master
Black Belt for every 100 Black Belts).
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