Topic: Quality Management

Textbook chapter: 6

Session 14 and Session 15

Saturday 4th March and Tuesday, 7th March 2023

Session plan

Topics to be discussed
What is quality?
Why near zero defects or high quality?
Quality certifications
Costs of quality
Total Quality Management and its seven concepts
1. Continuous improvement
2. Six Sigma
3. Employee empowerment
4. Benchmarking
5. Just-in-time (JIT)
6. Taguchi concepts
7. Knowledge of TQM tools

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 Defining quality

Quality??
The definition of quality depends on the point of view of the people defining it.
Manufacturing based: Conformance to standards, making it right the first time.
User based: “Meeting the customer’s needs” or “fitness for use”.

Definition of quality as adopted by American Society for Quality

The totality of features and characteristics of a product or service that bears on its
ability to satisfy stated or implied needs.

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Why near zero defects?

Implication

This implies that at a nearly 99% quality level, 28,965 customers

would have been unsatisfied with the service that they have
received from the company during the year.

: Source: Prof. B. Mahadevan, IIM Bangalore.

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 Why near zero defects? . . .

Examples of 99% quality

Estimates arrived based on a study in two large 5 star hotels.

: Source: Prof. B. Mahadevan, IIM Bangalore.

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Why high levels of quality?

: Source: Prof. B. Mahadevan, IIM Bangalore.

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 Quality certifications

The quality standards are developed by International Organization for Standardiza-

tion (ISO).
ISO 9000
Set of international standards on quality management and quality assurance, critical to
international business.
Specifies eight quality management principles related to people and process improve-
ment.
ISO 14000
A set of international standards for assessing a company’s environmental performance.
ISO 24700
Pertains to the quality and performance of office equipment that contains reused com-
ponents.

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Costs of quality
This term was coined by Joseph M. Juran, who wrote about it in 1951 in his Quality Control
Handbook.
It refers to all of the costs attributable to the production of quality that is not 100 percent
perfect.
The costs of quality are generally classified into four types:
1. Prevention costs
The sum of all the costs to prevent defects, such as the costs to identify the cause of
the defect, to implement corrective action to eliminate the cause, to train personnel, to
redesign the product or system, and to purchase new equipment or make modifications.
2. Appraisal costs
Costs of the inspection, testing, and other tasks to ensure that the product or process
is acceptable.
3. Internal failure costs
Costs for defects incurred within the system: scrap, rework, repair.
4. External failure costs
Costs for defects that pass through the system: customer warranty replacements, loss
of customers or goodwill, handling complaints, and product repair.
Prevention and appraisal costs are classified under conformance costs. Internal and external
failure costs are classified under non-conformance costs.
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 Quality cost report

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Total quality management (TQM)

TQM may be defined as managing the entire organization so it excels in all dimensions
of products and services important to the customer. It has two fundamental operational
goals, namely
1. Careful design of the product or service.
2. Ensuring that the organization’s systems can consistently produce the design.
These two goals can only be achieved if the entire organization is oriented toward them –
hence, the term total quality management.
Quality expert W. Edwards Deming used 14 points (refer Table 6.2 in textbook) to indicate
how he implemented TQM. It is developed into seven concepts for an effective TQM
program:
1. Continuous improvement
2. Six Sigma
3. Employee empowerment
4. Benchmarking
5. Just-in-time (JIT)
6. Taguchi concepts
7. Knowledge of TQM tools
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 Continuous improvement Kaizen
One approach that can help companies with continuous improvement is the plan–do–check–act
(PDCA).

The PDCA cycle describes the activities a company needs to perform in order to incorporate
continuous improvement in its operation.
The cycle is also referred to as the Shewhart cycle or the Deming wheel.
The circular nature of this cycle shows that continuous improvement is a never-ending
process. Let’s look at the specific steps in the cycle.

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Continuous improvement Kaizen . . .

PDCA steps

1. Plan
The first step in the PDCA cycle is to plan.
Evaluate the current process and make plans based on any problems they find.
2. Do
The next step in the cycle is implementing the plan (do).
During the implementation process managers should document all changes made and
collect data for evaluation.
3. Check
The third step is to check the data collected in the previous phase.
The data are evaluated to see whether the plan is achieving the goals established in
the plan phase.
4. Act
The last phase of the cycle is to act on the basis of the results of the first three phases.

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 Six sigma

Businesses practicing 6σ

Originally developed by Motorola, adopted and enhanced by Honeywell and GE.

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Six sigma . . .
A business process for improving quality, reducing costs, and increasing customer satisfac-
tion.

Six sigma

A mechanism to deliver near zero defect in op-

erations using principles of process control.

Defect
Defect is an unacceptable state of a product or a
service for a customer.

Statistically
Having no more than 3.4 defects per million opportunities (DPMO).
Conceptually
Program designed to reduce defects
To achieve extremely high level of quality standards
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 Six sigma . . .
PPM

Manufacturing sector

Defect rate = Parts per million (PPM)

One PPM means one (defect or event) in a million or 1/1,000,000.

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PPM: Numerical example

Question
You have 25 pieces defective in a shipment of 1,000 pieces. What is the PPM?

Solution:
25/1000= .025 or 2.5% defective.
.025 X 1,000,000 = 25,000 PPM.
Example:
Let’s say, you produce 10,000,000 parts per year for your customer. If you’re like most
companies, your plant operates around 5 days a week, 50 weeks per year or 250 days
a year.
Let’s assume your customers requirements are 25 PPM. That means that you would
be allowed 25 pieces for every 1,000,000 pieces or 250 defective parts per year. Or to
put it another way, one bad part per day!
25 PPM or 0.0025%

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 Six sigma . . .
DPMO

DPMO calculation requires three pieces of data:

1. Unit. The item produced or being serviced.
2. Defect. Any item or event that does not meet the customer’s requirements.
3. Opportunity. A chance for a defect to occur.

Number of defects
DPMO = ∗ 106
Number of opportunities per unit x Number of units

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DPMO: Numerical example

Question
The products at a Ninja distribution center have to go through a cycle made up of 12 processes.
The products have to be pulled from the trucks by transfer associates, they are systemically
received by another associate before being transferred again from the receiving dock to the
setup stations, and from there they are taken to the packaging area where they are packaged
before being transferred to their stocking locations. On the outbound side, orders are dropped
into the system and allocated to the different areas of the warehouse, and then they are assigned
to the picking associates who pick the products and take them to the packing stations where
another associate packs them. After the products are packed, they are taken to the shipping
dock where they are processed and moved to the trucks that will ship them to the customers.
Each one of the processes presents an average of five opportunities for making a mistake and
causing defects. A total of 15 Parts XY1122AB have been audited and two defects have been
found. What is the DPMO?
Solution:
Total opportunity for defects =? 15 × 60 = 900
2
DPMO =? 900 ∗ 106 = 2222.222
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 Six sigma . . .

Percentage of products Percentage of Nonconformance

Range
in conformance nonconforming products out of a million
−1σ to +1σ 68.26 31.74 317,400
−2σ to +2σ 95.46 4.54 45,400
−3σ to +3σ 99.73 0.27 2700
−4σ to +4σ 99.9937 0.0063 63
−5σ to +5σ 99.999943 0.000057 0.57
−6σ to +6σ 99.9999998 0.00000002 0.002
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Six sigma . . .

What does 3.4 DPMO have to do with all this? We see in the previous table that a 6σ–level
corresponds to 0.002 defects per 1 million opportunities.
In fact, 3.4 DPMO is obtained at about ±4.5σ. But this only applies to a static process –
in other words, to a short-term process.
According to the Motorola Six Sigma advocates, small shifts that are greater than 1.5σ will
be detected and corrective actions taken, but shifts smaller than 1.5σ can go unnoticed
over a period of time.
In the long run, an accumulation of small shifts in the process average will lead to a drift
in the mean of the process.

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 Six sigma . . .

So in the worst case, the noise factors will cause a process average shift that will result in
it being 1.5σ away from the target, therefore only 4.5σ will be the distance between the
new average process and the closest specified limit. And 4.5σ corresponds to 3.4 DPMO
(above figure).

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Six sigma . . .
DMAIC

DMAIC??
An acronym for the define, measure, analyze, improve, and control improvement
methodology followed by companies engaging in Six Sigma programs.
A standard approach to Six Sigma projects is the following DMAIC methodology:
Define (D)
Identify customers and their priorities.
Identify a project suitable for Six Sigma efforts based on business objectives as well as
customer needs and feedback.
Identify CTQs (critical-to-quality characteristics) that the customer believes have the
most impact on quality.
Measure (M)
Determine how to measure the process and how it is performing.
Identify the key internal processes that influence CTQs and measure the defects cur-
rently generated relative to those processes.

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 Six sigma . . .
DMAIC
DMAIC?? “Dumb Managers Always Ignore Customers.”
Analyze (A)
Determine the most likely causes of defects.
Understand why defects are generated by identifying the key variables most likely to
create process variation.
Improve (I)
Identify means to remove the causes of defects.
Confirm the key variables and quantify their effects on the CTQs.
Identify the maximum acceptance ranges of the key variables and a system for mea-
suring deviations of the variables.
Modify the process to stay within an acceptable range.
Control (C)
Determine how to maintain the improvements.
Put tools in place to ensure that the key variables remain within the maximum accep-
tance ranges under the modified process.
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Employee empowerment
Employee empowerment means involving employees in every step of the production process.
Consistently, research suggests that some 85% of quality problems have to do with
materials and processes, not with employee performance. Therefore, the task is to design
equipment and processes that produce the desired quality.
This is best done with a high degree of involvement by those who understand the short-
comings of the system. Those dealing with the system on a daily basis understand it better
than anyone else.
When nonconformance occurs, the worker is seldom at fault. Either the product was
designed wrong, the process that makes the product was designed wrong, or the employee
was improperly trained.
Teams can be built to address a variety of issues. One popular focus of teams is quality.
Such teams are often known as quality circles.
A quality circle is a group of employees who meet regularly to solve work-related
problems. The members receive training in group planning, problem solving, and
statistical quality control.
Teams with a quality focus have proven to be a cost-effective way to increase produc-
tivity as well as quality.
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 Benchmarking
Selecting a demonstrated standard of performance that represents the very best performance
for a process or an activity.
Benchmarking involves selecting a demonstrated standard of products, services, costs,
or practices that represent the very best performance for processes or activities very
similar to your own.
The idea is to develop a target at which to shoot and then to develop a standard or
benchmark against which to compare your performance.
In the ideal situation, you find one or more similar organizations that are leaders in the
particular areas you want to study.
Then you compare yourself (benchmark yourself) against them.
Example: Xerox and Mercedes-Benz did when they went to L.L. Bean for orderfilling and
warehousing benchmarks.
Xerox noticed that L.L. Bean was able to “pick” orders three times faster. After
benchmarking, Xerox was immediately able to pare warehouse costs by 10%.
Mercedes-Benz observed that L.L. Bean warehouse employees used flowcharts to spot-
wasted motions. The auto giant followed suit and now relies more on problem solving
at the worker level.
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Just in time (JIT)

‘Pull’ system of production scheduling including supply management

Production only when signaled
Allows reduced inventory levels
Inventory costs money and hides process and material problems
Encourages improved process and product quality
Relationship to quality:
JIT cuts the cost of quality
JIT improves quality
Better quality means less inventory and better, easier-to-employ JIT system

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 Just in time (JIT) . . .
More or Less Inventory? A Simple Metaphor

Does inventory cover up problem?

So to improve a process, we need to turn the “inventory hiding quality problems” effect on
its head: we want to reduce inventory to expose defects and then fix the underlying root
cause of the defect.
Expose problems through inventory reduction
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Taguchi loss function

Taguchi and traditional views of the cost of poor quality

Given by Genichi Taguchi.

The traditional view? As long as output is within specifications, there is no cost.
Taguchi’s proposition? Any deviation from the target value represents poor quality, and
that the farther away from the target a deviation is, the greater the cost.
Taguchi’s approach suggests that any variation from the engineered target, be it within
or outside the specified limits, is a source of defects and a loss to society. That loss is
proportional to the distance between the production process mean and the specified target.
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 Taguchi loss function

According to Taguchi, the products that do not match the target – even if they are within
the specified limits – do not operate as intended and any deviation from the target, be it
within the specified limits or not, will generate financial loss to the customers, the company,
and to society, and the loss is proportional to the deviation from the target.
Example?
Suppose that a design engineer specifies the length and diameter of a certain bolt that
needs to fit a given part of a machine. Even if the customers do not notice it, any
deviation from the specified target will cause the machine to wear out faster, causing
the company a financial loss under the form of repairs of the products under warranty
or a loss of customers if the warranty has expired.
According to Taguchi, the cost of quality in relation to the deviation from the target is not
linear because the customers’ frustration increases (at a faster rate) as more defects are
found on a product. That’s why the loss function is quadratic.

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Taguchi loss function

Mathematical representation

Formulation

l(y ) = k(y − T )2
with

∆
k=
m2
where
y is the process mean
T is the engineered target
∆ is the cost of a defective product
m is a measure of the deviation from the target
m = LSL − T or m = T − USL.

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 Taguchi loss function: Numerical example
Question
Suppose a machine manufacturer specifies the target for the diameter of a given rivet to be 6
inches and the upper and lower limits to be 5.98 and 6.02 inches, respectively. A bolt measuring
5.99 inches is inserted in its intended hole of a machine. Five months after the machine was
sold, it breaks down as a result of loose parts. The cost of repair is estimated at $95. Find the
loss to society incurred as a result of the part not matching its target
∆
l(y ) = k(y − T )2 ; k =
m2
Solution:
T=? 6
y=? 5.99 inch
USL=? 6.02
m=? (USL − T ) = 6.02 − 6 = 0.02
∆ =? 95
k=? 95/0.04=$237,500
l(y ) =? 0.0001 ∗ $237, 500 = $23.75
Not producing a bolt that matches the target would have resulted in a financial loss to
society that amounted to $23.75. 31 / 33

Knowledge of TQM tools

1. Check Sheets
2. Scatter diagrams
3. Cause and effect diagrams
4. Pareto charts
5. Flow charts
6. Histograms
7. Control charts
Check the below url for details. The content is also explained in the textbook.
https://www.youtube.com/watch?v=yuH35ottILU&t=10s
The templates of the TQM tools are available on the link below.
https://asq.org/quality-resources/seven-basic-quality-tools

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Quality Gurus and their contributions

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