Module 2

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 Syllabus
Strategic Quality Management: Cost of Quality- Customer
satisfaction- Quality Function Deployment (QFD)-
Integrating quality into strategic management - quality and
the management cycle- obstacles to achieving successful
strategic quality management- supplier selection- Concepts
of 5S, Six Sigma, Lean, Kaizen

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 Cost of Quality (COQ)
❖ Cost of quality (COQ) is defined as a methodology that allows
an organization to determine the extent to which its resources
are used for activities that prevent poor quality.
❖ It appraise the quality of the organization's products or
services, and that result from internal and external failures.
❖ Cost of Quality is the total expenses incurred by an
organization in achieving and maintaining good quality as well
as in managing poor quality throughout its line of operations
with an aim of attaining the highest level of customer
satisfaction.

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 Cost of Quality consists of four categories
1. Prevention Cost
Prevention costs signify the costs incurred with the efforts
taken to prevent the occurrence of defects.
Prevention Costs imply the following:
❖Developing a quality management system and the associated qu
ality planning documents
❖Establishing product specifications, new product development
based on that, and testing
❖Proper employee quality awareness and training and supplier e
valuation
❖An analysis of the quality audit and quality improvement progr
am
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 Cost of Quality consists of four categories
2. Appraisal Cost
Appraisal costs represent the costs incurred with inspected
tests and performed checks to determine whether the
particular requirements are met. Appraisal costs can
include the following:
❖Inspections and tests of incoming material and products, finishe
d product acceptance, test equipment purchase, and maintenance
❖Inspection and test documentation and employees’ wages
❖An analysis of the inspection and test results
❖Supplier assessments

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 Cost of Quality consists of four categories
3. Internal Failure
The internal failure costs describe the costs incurred to
rectify all the nonconformities found before the product
supply to the recipient. Internal failure is determined by
the following:
❖Heaps of scrap
❖Costs of reprocessing and repeating the tests
❖Performing product remedy, rework and repair operations
❖Product downgrading costs and costs associated with failure an
alysis
❖Machine breakdown due to inappropriate maintenance and tras
h due to inadequately designed processes.
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 Cost of Quality consists of four categories
4. External Failure
The external failure costs depict the costs incurred to
correct all the nonconformities found after the product
supply to the recipient. External failure costs indicate the
following:
❖Customer complaints and product or material returns
❖Damages due to poor packaging and penalties for delays in deli
veries
❖Providing service and repair costs
❖Incorrect sales orders
❖Warranty claims

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 Strategies to reduce cost of quality?
❖Tips for Reducing Cost of Quality (COQ)

❖Focus on Prevention
❖Train Workers on Quality Standards
❖Invest in Software that Focuses on Quality.

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 Customer Satisfaction
❖ Customer satisfaction is defined as a measurement that determines h
ow happy customers are with a company's products, services, and ca
pabilities.
❖ Customer satisfaction information, including surveys and ratings, ca
n help a company determine how to best improve or changes its pro
ducts and services.
❑ How to measure customer satisfaction
❖ Use a free online questionnaire development tool to generate a surve
y to capture details about the customer experience.
❖ Provide incentives for customers to take the survey, such as discoun
ts on future purchases or a chance to win prizes.
❖ Follow up with phone calls or run focus groups to get more in-depth
data.
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 Factors that Influence Customer Satisfaction

❖ Accessibility.
❖ Empathy.
❖ Language.
❖ Response Time.
❖ Convenience.
❖ Choices.
❖ Simplicity.
❖ Quality.

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 Quality Function Deployment (QFD)

❖ It uses a house of quality to translate customer requirements into eng

ineering specifications.
❖ It has been widely used as a tool to develop new products.
❖ It has been adopted in the fields of education quality, service quality,
software development and marketing planning.

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 Phases of Quality Function Deployment (QFD)

❖ The comprehensive process of QFD is divided into 4 major phases:

1) Product Planning
2) Product Development
3) Process Planning
4) Production Planning.

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Phases of Quality Function Deployment (QFD)

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 Integrating Quality into Strategic Management
❖ The quality strategy should include a quality mission, vision and/or pol
icy documents.
❖ They should be clear statements of what is expected from the quality s
ystem.
❖ The quality strategy is a vital element to building the quality process a
nd expectations of the organization.
❖ During planning, employees establish root causes for problems and qu
ality management issues that the organization should address.
❖ It helps an organization achieve greater consistency in tasks and activit
ies that are involved in the production of products and services.
❖ It increases efficiency in processes, reduces wastage, and improves the
use of time and other resources.
❖ It helps improve customer satisfaction.
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 Strategies to Improve Quality Management
❖ 5 Strategies to Improve Your Approach to Quality Management

1) Build a company culture that emphasizes quality improvement.

2) Design a robust training program
3) Develop a detailed quality inspection program
4) Ensure that equipment is regularly maintained
5) Schedule periodic internal audits.

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 Quality Management Cycle
❖ A quality management process consists of four main components:

1) Quality Planning
2) Quality Assurance
3) Quality Control
4) Continuous Improvement

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 PDCA Cycle

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 Obstacles to TQM implementation
❖Lack of a vision
❖Lack of a strategic plan
❖Poor organisational culture
❖Poor communication
❖Lack of employee empowerment
❖Inadequate resources
❖Employee resistance to change

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 Supplier Selection
❖Supplier selection is the process by which firms identify, evalu
ate, and contract with suppliers.
❖The supplier selection process deploys an enormous amount of
a firm's financial resources and plays crucial role for the succes
s of any organization.
❖Supplier selection depends upon several factors such as reliabil
ity, reputation, cost, service, value for money, etc.

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 Steps to Supplier Selection
❖ Step 1 – Supplier Selection Scorecard. The first step in the sup
plier selection process is to create a supplier selection scorecar
d.
❖Step 2 – Identify Suitable Suppliers.
❖Step 3 – Scorecard Ranking.
❖Step 4 – Negotiate.
❖Step 5 – Create Contract.

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 Criteria for Selecting a Supplier
❖Price.
❖Value for money.
❖Quality.
❖Reliability.
❖Responsiveness.
❖Flexibility.

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 5 S Concept
❖The 5S methodology is often summarized by the philosophy of
“a place for everything and everything in its place.”
❖There are five 5S phases.
➢Sort: Eliminate that which is not needed.
➢Set in order: Organize what remains after sorting.
➢Shine: Clean and inspect the work area.
➢Standardize: Write standards for 5S.
➢Sustain: Consistently apply the 5S standards.

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 5 S Concept

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 The key benefits of a 5S program:

❖Creating space within your facility by removing unnecessary t

ools and equipment
❖Reducing waste from unnecessary motion by organizing the w
orkspace
❖Reducing down time and improving quality by consistently ma
intaining equipment
❖Engaging operators by granting them more responsibility for th
eir work environment
❖Creating a safer work environment by ensuring it is clean and
well-maintained

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 The key benefits of a 5S program:

❖Creating space within your facility by removing unnecessary t

ools and equipment
❖Reducing waste from unnecessary motion by organizing the w
orkspace
❖Reducing down time and improving quality by consistently ma
intaining equipment
❖Engaging operators by granting them more responsibility for th
eir work environment
❖Creating a safer work environment by ensuring it is clean and
well-maintained

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 Six Sigma

❖Six Sigma is a process that makes use of statistics and data ana
lysis to analyze and reduce errors or defects.
❖ In this process, the purpose is to improve cycle times while re
ducing manufacturing defects.
❖Sigma is a process improvement strategy that eliminates defect
s by implementing standard processes, identifying problem areas,
and more.

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 Six Sigma

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 Lean Six Sigma

❖ Lean Six Sigma is a team-focused managerial approach that se

eks to improve performance by eliminating resource waste and d
efects.
❖It combines Six Sigma methods and tools with the lean manufa
cturing/lean enterprise philosophy.

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 Lean Six Sigma

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 Kaizen
❖Kaizen focuses on eliminating waste, improving productivity, a
nd achieving sustained continual improvement in targeted activ
ities and processes of an organization.
❖The Kaizen approach consists of 5 founding elements :
❖Teamwork,
❖Personal discipline,
❖Improved morale,
❖Quality circles,
❖Suggestions for improvement.

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 Kaizen Tools
❖Kaizen tools are simply the methods and techniques used to id
entify and eliminate waste in a process.
❖These tools are commonly used in the manufacturing industry t
o eliminate the 'Eight Wastes' namely,
❖ Defects
❖ Waiting
❖ Overproduction
❖ Transportation
❖ Non-utilized talent
❖ Inventory
❖ Extra-processing
❖ Motion.
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 Kaizen

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