MODULE 2

QUALITY PLANNING AND ITS

DEVELOPMENT

Definitions of Quality

Different investigators defined quality in different ways.

According to Joseph Moses Juran (Industrial Engineer), Quality is defined as

“Fitness to use”. A component is said to be good quality if it works well at the end
use.

According to William Edwards Deming (American statistician), Quality is defined

as “Continuous Improvement”.

According to Kaoru Ishikawa, Quality is defined as “most economical, most useful

and always satisfactory to the customer”.

According to Philip B. Crosby, Quality is defined as “Conformance to

Requirement”.

As per ISO 9000, Quality is defined as “the totality of features and characteristics
of a product or service that bear on its ability to satisfy stated needs”.

Dimensions of Quality

Following are the quality dimensions:

1) Performance 7) Conformance

2) Features

3) Durability

4) Reliability

5) Service ability

6) Aesthetics
Quality Planning

It is the process of establishing quality objectives and developing theplans for

meeting those objectives.

It is the activity of developing the products and processes required to meet

customer’s needs.

Objectives of Quality Planning

1. To develop products and processes required to meet customer’s needs.

2. To define quality standards and to prepare product specifications.

3. To prepare guidelines on various elements affecting quality.

4. To review and evaluate product designs.

5. To create an excellent operating culture.

6. To develop quality control techniques.

Process of Quality planning

Identification of Customers

Discovering customer needs

Translate customer needs into supplier’s language

Develop the product that meets the customer’s needs

Optimize product design

Develop the process

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………… ……… ……… ……… ……… ……… ……… ……… ……… ……… ……… ……… ….…… ……… .. ……………………………………………………………………………………… ……………………………………………………………………………………………… ……….….

Transfer to operations
Three Prong Approach to Quality Planning
According to three prong approach, identification and preparation of quality
planning is done by: 1) Product planning

2) Managerial and operational planning

3) Documentation

1) Product planning – It may be defined as evaluation of the range, mix,

specification and pricing of existing and new products in relation to
present and future market requirements. It also includes planning of
product range and mix, pricing to satisfy company objectives,
research, design and development.

2) Managerial and operational planning – This includes preparing the

application of the quality system such as organisational structure,
procedures, processes and resources needed to implement the quality
management.

3) Documentation – All the elements, requirements and provisions

adopted by the company for its quality management system should
be documented in a systematic and orderly manner, in the form of
written policies and procedures, which includes drawings, work
instructions, test procedures, quality manual, blue prints etc.

Quality Management System

It is defined as “A management system to direct and control an organization with

regard to quality”. In other words, “It is a system to establish quality policy and
quality objectives and to achieve those objectives”.

Quality management system can assist organizations in enhancing customer

satisfaction. The ISO 9000 family defines standards on quality management system
Concept and Role of ISO 9000

ISO is the International Organisation for Standardisation founded in 1946, with an

objective of promotion and development of international standards and related
activities.

ISO9000 is a family of standards for quality management system maintained by

ISO, based in Geneva.

The ISO 9000 series of standards promotes the adoption of process approach when
developing, implementing and improving the effectiveness of a quality
management system to enhance customer satisfaction by meeting customer
requirements.

ISO-9000 helps:

1. Organizations who want to promote their products in international

markets
2. Organizations in creating confidence among the customers regarding
product quality, inturn improves profit.
3. Suppliers in improving quality of raw materials, semi finished and
finished products.
4. Customers in getting good quality products.
5. Organizations in expanding their business worldwide.

ISO 9000 series have five standards:

1. ISO-9000- This standard describes fundamentals of quality management and
quality standard.
2. ISO 9001- This standard ensures quality through the whole cycle of
production-from design and development, production, installation and
servicing.
3. ISO 9002- This standard focuses on detecting failures during production,
installation and implementation to prevent them.
4. ISO 9003- model for quality assurance in final inspection and testing.
5. ISO 9004-This standard provides guidelines on factors like technical,
administrative and human factors affecting quality of products and services.
Elements of ISO 9000

A quality system has 20 requirements (elements) which has to be established and

compiled for ISO9000 certification.

1. Management responsibility: to define, document, and implement a policy for

quality.

2. Quality system: to establish, document, and maintain a quality system which

includes a quality manual, system procedures, and quality planning.

3. Contract review: to establish and maintain documented procedures for contract

review.

4. Design control: to establish and maintain documented procedures to control and

verify the design of the product to ensure conformance to specified requirements.

5. Document and data control: to establish and maintain documented procedures

to control all documents and data (including hard copy and electronic media)
including such documents as standards and customer drawings.

6. Purchasing: to establish and maintain documented procedures to ensure that

purchased product, associated documents and data conform to requirements.
Sub-contractors are to be evaluated and selected on their ability to meet
subcontract requirements and the type and extent of control exercised by the
supplier over sub-contractors is to be defined.

7. Control of customer-supplied product: to establish and maintain documented

procedures for the control of verification, storage and maintenance of
customer-supplied product provided for incorporation into the supplies or for
related activities.

8. Product identification and traceability: where appropriate, to establish and

maintain documented procedures for identifying the product from receipt and
during all stages of production, delivery and installation.

9. Process control: to identify and plan the production, installation and servicing
processes which directly affect quality, and to ensure these processes are carried
out under controlled conditions.
10. Inspection and testing: to establish and maintain documented procedures for
inspection and testing activities to in order to verify that the specified requirements
for the product are met.

11. Control of inspection, measuring and test equipment: to establish and

maintain documented procedures to control, calibrate and maintain inspection,
measuring and test equipment (including test software) used by the supplier to
demonstrate the conformance of product to the specified requirements.

12. Inspection and test status: the inspection and test status of product shall be
identified and maintained throughout the production, installation and servicing of
the product to ensure that only product that has passed the required inspections and
tests (or released under an authorized concession) is dispatched, used or installed.

13. Control of non-conforming product: to establish and maintain documented

procedures to ensure that product that does not conform to specified requirements
is prevented from un-intended use or installation.

14. Corrective and preventive action: to establish and maintain documented

procedures for implementing corrective action in the handling of customer
complaints, product non-conformities, and the application of controls to ensure
corrective action is taken and that it is effective. Preventive action procedures will
detect, analyze, and eliminate potential causes of non-conformities.

15. Handling, storage, packaging, preservation and delivery: to establish and

maintain documented procedures to prevent damage or deterioration of product.

16. Control of quality records: to establish and maintain documented procedures

for identification, collection, indexing, access, filing, storage, maintenance and
disposition of quality records. Quality records shall be maintained to demonstrate
conformance to specified requirements and the effective operation of the quality
system.

17. Internal quality audits: to establish and maintain documented procedures for
planning and implementing internal quality audits to verify whether quality
activities and related results comply with planned arrangements and to determine
the effectiveness of the quality system.
18. Training: to establish and maintain documented procedures for identifying
training needs and provide for the training of all personnel performing activities
affecting quality. Appropriate records of training shall be maintained.

19. Servicing: where servicing is a specified requirement, to establish and maintain

documented procedures for performing, verifying and reporting that the servicing
meets the specified requirements.

20. Statistical techniques: the supplier identify the need for statistical techniques
required for establishing, controlling and verifying process capability and product
characteristics, and shall establish and maintain documented procedures to
implement and control their application.

Steps For Installation Of ISO 9000

1. Preparatory Step
2. Implementation Step
3. Registration and Certification Step

1. Preparatory Step:

a) Quality awareness is conducted at different levels, to ensure desired skills

are available to meet quality standards.
b) Task force established to prepare quality documents at three levels-
management level, department heads, and junior level executives.
c) Analyse the existing practice and take corrective actions.
d) Design and develop standard procedures of manufacturing.
e) All the data related to quality management system should be documented
in a systematic and orderly manner.

2. Implementation Step :

a) Implement the documented quality system into practice.

b) Conduct internal audit and evaluate the effectiveness
c) Conduct a third party or external party audit.
 3. Registration and Certification Step :

a) Apply for the registration.

b) Certification body will conduct audit
c) Certificate will be issued.

Quality Audit

It is defined as a systematic and independent examination to determine the

quality objectives are as per the plans, and whether these plans are
implemented effectively in achieving quality objectives, with the
maintenance of quality standards.

Objectives of Quality Audit

1. To study the quality of the existing systems and find out the non
conformity within the system.

2. To suggest corrections to be done.

3. To propose and implement methods as per ISO standards.

4. To evaluate supplier before entering into contract.

5. To suggest best procedures and practices.

6. To reduce loss of money due to duplication of activities, high

repairs, scraps etc.

Benefits of becoming an ISO company

1. ISO 9000 provides a competitive edge in the domestic and global markets.
2. It provides climate for consistent improvement in quality.
3. It reduces wastage and repairs-enhancing profit.
4. It maintains streamlined records.
5. It maintains streamlined material handling and storage.
6. It changes attitude of workers, the result is quality awareness, good working
atmosphere.
 7. It gives international credibility, recognition, thereby increasing number of
customers.

Types of Audits

1. Adequacy audit: It is an office exercise to determine the extent to which the

documented system adequately meets the requirements of the applicable
standard. Also known as documentation review or intent audit.
2. Compliance audit: It is an audit to establish the extent to which the
documented system is compiled or not. Also called Implementation or
effectiveness audit.
3. System audit: It evaluates the quality aspects of various systems in the
organization such as production and planning, research and development etc.
4. Product audit: It evaluates the acceptance level of the finished products
made by the inspection and testing departments.
5. First party audit: It is also called internal audits. The audits are carried out
within an organization by its own personnel to assess the quality
management system.
6. Second party audit: The audits are conducted by parties having an interest
in the organization such as customers or other persons on their behalf.
7. Third party audit: Audits are conducted by external independent
organizations and they provide certification or registration of conformity
with requirements such as ISO9001.

Total Quality Management (TQM)

TQM means quality in every aspect of the company’s operation.

TQM is a management approach of an organization, centered on quality based on

the participation of all its members and departments aiming at long term success
through customer satisfaction and benefits to all members of the organization and
to society.
Ten mantras of TQM

1) Quality is never an accident

2) Quality is never comes out without hard work and devotion.

3) Quality is everybody’s work

4) Take care of quality; quality will take care of everything.

5) Document is dependable, but not the memory

6) Quality begins with the cleanliness of the workplace

7) Quality is achieved through team work

8) Quality begins and ends with education

9) Quality is the attribute that a customer uses to evaluate products and

services.
10) Make it right for first time and all times.

Mission statement

Mission statement is a declaration of what an organization should like in future.

Mission is to design manufacture and supply high quality reliable products.

Mission statement should be easy to understand.
Link between ISO 9000 and TQM

TQM is a mechanism to change the culture of the company to achieve its goals,
ISO certification or standards which is a quality management system, facilitates
this change. Thus ISO may be called as a subset of TQM.

MATERIALS AND SALES MANAGEMENT

Materials Management

Materials management is defined as “the function responsible for the coordination

of planning, sourcing, purchasing, moving, storing and controlling materials in an
optimum manner so as to provide a pre-decided service to the customer at
minimum cost”.

Various functions of material management are:

i) Material planning
ii) Procurement or purchasing of materials
iii) Receiving and ware housing
iv) Storage and store administration
v) Inventory control
vi) Standardization, simplification and value analysis
vii) External and internal transportation
viii) Disposal of scrap
Purchase Department

Separate department is provided for purchasing of materials in many companies.

Objectives of Purchase Department

1. To maintain regular flow of materials

2. To purchase materials in right quality, in right quantity and at a
right time from a right source at a competitive price
3. To ensure higher productivity
4. To ensure better margin of profit
5. Maintain the records of all purchases, suppliers and prices of materials.
6. To prepare purchasing budget
7. To ensure prompt payments are made to suppliers
Methods of Purchase (BuyingTechniques)

1) Purchasing by Requirements

In this method the required quantity of materials for a particular job

is purchased when the jobs is in hand. Suitable for industries having less
working capital.

2) Purchasing for a specific future period

In this method the materials are purchased in bulk for specific future
period to maintain the flow of production. The standard items which are in
regular use are purchased so.

3) Market Purchase

The materials are purchased when they are available at low price. The price
fluctuations are taken advantage off.
 4) Speculative Purchase

In this method, the purchases are made in with a view that there will be
greater demand for the product in future.

5) Contract Purchase

Contracts are given to suppliers for large amounts of future

requirements, for a certain period, subject to review and cancellation with
appropriate notice period.

6) Central Purchase Organization

For large industries having section-wise stores at different places, a central
organization will be present which makes direct dealings with manufactures and
distribute the material store wise.

7) Through Directorate General of Supplies and Disposal

They supply different products at relatively cheaper rates for different

government organization

Purchase Procedure
The main objective of purchase department is to procure the materials os specified
quality and quantity at lowest price.

The purchase procedure consists of seven stages:

1) Receipt and analysis of requirements and processing of

requisitions

2) Choice and location of potential suppliers

3) Request, receipt and analysis of quotations

4) Placing of orders

5) Follow up
 6) Verification of supplier’s invoices for payment

7) Closing the order and maintain the records

1) Receipt and analysis of requirements and processing of requisitions

Various departments communicate with the purchase department

through a requisition form. The form includes details of material to purchased, date
by which material is required, place of delivery, name of the suggested supplier
etc.

2) Choice and location of potential suppliers

This process consists of selecting a fair number of vendors through

authorized representatives, advertisements etc. based on their reliability.

3) Request, receipt and analysis of quotations

Quotation or Render is an enquiry to know whether the suppliers can

supply desired material by the specified date under specified conditions and
at what rate.

Tenders may be of different types:

i) Single tender: Only a reliable firm already in contract will be asked to

supply material at a mutually accepted rate.
ii) Close tender: Firms which are registered are invited to tender their rates
and most economic offer will be considered. It is called ‘Limited Tender
System’ as only limited participants are invited.
iii) Open tender: It is also called ‘Unlimited Tender Syetem’ as all the
interested firms can apply.
Earnest money deposit is demanded from the supplier who quotes tender so that
he does not backout from the rates.

A comparative statement is prepared for analysis and the vendor selected is

asked to make a security deposit.
 4) Placing of orders

After selecting the right vendor, a purchase order is sent to him. The
purchase order is a legal authority for supplying materials according to the terms
and conditions. At least six copies are taken each sent to store keeper, supplier,
accounts, inspection department, to the department placing the order and one copy
is retained in the purchase department.

5) Follow up

Getting information about the progress, reminding and take corrective

actions.

6) Verification of supplier’s invoices for payment

Invoices and materials are checked to ensure that the material has been
received as per purchase order specifications and payment is done accordingly.

7) Closing completed orders and maintenance of records

After verification, the order is treated as complete and the records of these
transactions are filled.

INVENTORY

It is a detailed list of movable goods such as raw materials, materials in

process, finished products, general supplies and equipments which are necessary to
manufacture a product and to maintain the equipment and machinery in good
working order.

Inventory control

It is defined as the systematic location, storage and recording of goods in

such a way that desired degree of service can be made to the operating firms at
minimum ultimate cost.

In other words, it is the scientific method of finding out how much stock should be
maintained in order to meet the production demands and be able to provide right
type of material at right time in the right quantities and at competitive prices.
The need of inventory control:

 To maintain proper store/reserve of goods to ensure proper production

and sales at the lowest cost.
 To promote smooth factory operation and to prevent piling up or idle
machine time.
 To take advantage of seasonal fluctuations

Inventory control Techniques

There are three important techniques for inventory control.

i) Economic Order Quantity (EOQ) model

ii) ABC analysis or selective control analysis
iii) System of Re-ordering

i) Economic Order Quantity (EOQ) model

Economic order quantity (EOQ) is the ideal quantity of units a company

should purchase to meet demand while minimizing inventory costs such as holding
costs, shortage costs, and order costs.

Before calculating EOQ, we have to familiarize some important terms called

quality standards.

At an instant, let OA be the inventory in the stores. It is uniformly consumed along

AD till it reaches B. It takes L number of days between initiating order and
receiving the required inventory. Purchase requisition in initiated from B to C in R
days. C to D is the inventory procurement time – P days. At D, only reserve stock
is left and as ordered material is reached, the inventory raise to A.

Maximum stock (OA): Maximum quantity of material that is allowed to be kept in

the store at any time.

Minimum stock (OE): Minimum limit of inventory that has to be kept in the store
at any time.

Standard order (A’D): Difference between maximum and minimum quantity and is
known as economic purchase inventory size or economic order quantity.

Reorder point (B): It indicates the high time to initiate a purchase order.

Lead time or procurement time: It is the time taken after placing the order and
receiving the materials

Buffer or safety stock: It is the stock which is not consumed in normal

circumstances. It is used only if lead time increases under unavoidable
circumstances.

Cycle time: Time between two successive orders.

The economic order quantity depends upon two types of costs:

a) Procurement cost or buying cost: It includes expenditure on

i) Calling quotations
ii) Processing quotations
iii) Placing purchase orders
iv) Receiving and inspecting
v) Verifying and payment of bills
b) Inventory carrying cost: It consists of expenditure made for
i) Interest on capital
ii) Storage, handling, record
keeping etc.
iii) Deterioration and obsolescence
iv) Insurance, tax etc.
EOQ is obtained by the quantity where procurement cost is equal inventory
carrying cost. Total cost is calculated by adding procurement cost and carrying
cost.

A graph is plotted between procurement cost, inventory carrying and total cost
with respect to quantity per order. Procurement cost decreases as the order quantity
increases and inventory carrying cost increases as the order quantity increases.

Total cost is minimum at the point A and thus A’ represents the economic order
quantity. At EOQ, procurement cost is equal to inventory carrying cost.
ii) ABC Analysis
ABC analysis is meant for relative control in which maximum
attention can be given to items which consume more money, a fair
attention can be given to medium valued items, while the attention for
low valued can be reduced.

According to ABC analysis, all the items in the industry are divided
into three groups based on the number and value of items

a) A class items

 These are high valued but limited in number

 They constitute 10% of items and 70% of total inventory cost
 The need careful and close inventory control, properhandling and
storage facilities.
b) B class items

 These are medium value items and their number lies between Aand
C items
 They constitute 20% of total items and 20% of total inventorycost
 They need moderate control
c) C class items

 These are valued but maximum numbered items.

 They constitute 70% of total items and 10% of the totalinventory
cost
 These items do not need any control
Stores and Stores Management

Generally unfinished material is known as stores and is kept in ‘Store Room”.

Finished products are called stock and are kept in “Stock Room”.

Stores management is to “receive materials to protect them in storage, to issue the

materials in right quantities at right time and to the right place and provide the
services promptly and at least cost”.

Functions of Stores Department (Functions Of Store Keeper)

 To receive, handle and issue materials economically and efficiently.

 Arrange the materials in systematic and efficient manner
 Inform purchase department whenever the existing stockislikely to
be exhausted
 Prevent from theft, wastage etc.
 To maintain records of stock
 Kept storing area clean and order
 Prevent unauthorized persons from entering the stores
 To coordinate and cooperate with purchasing, manufacturing, inspection
departments
Stores Location

Stores may be located as

1) Centralised store
2) Decentralised store

1) Centralised store
In small factories, it is desirable to centralise the materials so that it these
may be brought under the control of one store keeper and the store room
should be near to the place, where material is to be used.
 Moulding& Smithyor Hear Machine
cashing forging treatment shop

foundry

Pattern Stores Packing

making And
Fitting Office Storing
shop

2) Decentralised store
In large factories, where there are several departments, each using
different types of materials, it becomes economical to separate these
stores. This type isknown as decentralised stores

Moulding& Stores Smithy or Stores

cashing forging
stores Machine
shop
Pattern
making
Office stores
stores stores
Parking Packing &
area storing
Fitting shop

Stores layout

The internal arrangement of a store is known as a layout.

The efficiency of store keeping depends on its layout.

A good layout aims at:

i) Maximum utilization of the available space

ii) Greater efficiency of store
iii) Easier accessibility to all the materials
iv) Maximum security of all the materials and records maintained
v) Greater economy and less time in receipt, movement, placement and
issue of materials
vi) Minimization of spoilage, damage etc.

While designing a good layout, the following factors are to be considered:

1. Layout should provide for easy receipt, storage and issue of materials.
2. The available section is split for different purposes like receiving section,
inspection area, bulk storage etc.
3. Layout should ensure easy movement of materials, storage, men etc.
4. Layout should provide proper protection from sun, rain etc.
5. Clear and adequate lighting.
6. Place should be decided according to the material stored.
7. Proper placement of fire extinguishers, sand bags and buckets etc.
8. Unauthorized entry should be restricted.
9. A good passage for movement of vehicles and people
10.Different materials in different places like raw materials near first operation,
finished goods near shipping area etc.

Stores Records

(a) Inward and outward Registers: When material is received by the store
keeper, it is entered in inward register and when the material goes out of the
store, it is entered in outward register.
(b) Stock Register:

i) Dead stock or non consumable register : Maintained by store

keeper in which entries are non consumables
ii) Consumable register: Store keeper maintains the record of non-
consumable entries.
(c) Indent is basically a letter raised by employees of an institute asking for
materials needed which are present in the store.
(d) Daily Receipt Register: When any material comes to store, it is entered in
the register.
 (e) Issue Register: All materials issued from the store are entered in the issue
register by the store keeper.
(f) Store Ledger: It is a detailed record of the receipt and issue of materials .A
separate sheet/card is maintained for each article. It contains the name,
description, bin number, balance etc. The inspecting officer gives his
recommendations in the ledger.

(g) Surplus Stock Register: Materials which do not come in use for long time
are surplus and are entered in this register.
(h) Suspense Register: Defective items are entered in this register.
(i) Condemned Article Register: Unserviceable items are entered in this
register by authorized persons until it is disposed off.
(j) Loan Register: Materials issued for a temporary period is registered here.

BIN CARD

This is a card attached to each bin, rack, and shelf. A record of materials entering
or leaving the bin and balance material in hand, is kept in this card. It is inspected
often. Sometimes duplicate bincards are used-one attached to the bin and the other
with the store keeper.
IMPORTANCE OF SALES DEPARTMENT

Sales Management can be defined as the process of distributing goods from the
producer to the ultimate user including planning, directing, selling, advertising,
storing, transportation, handling, financing and recruiting, training of sales
personnel.

IMPORTANCE/FUNCTIONS OF SALES DEPARTMENT

1. Studying the consumer’s psychology and demand.
2. Studying the competitions existing.
3. Studying the market fluctuations.
4. Preparing market plans, sales forecasts
5. Preparing sales budgets
6. Deciding distribution policy, methods and networks.
7. Planning advertising campaigns.
8. Developing sales report and statistical analysis.
9. Determining sales staff requirements, recruitments and compensation of
sales staff.
10.To explore newer markets for selling.
Sales forecasting

It is an estimate of the sales potential of the firm in future.

Importance of sales forecasting

1. It helps to determine production volumes.

2. It forms a basis for sales budget
3. It helps in taking decision about the plant expansion and changes to be made
in production
4. It helps in deciding policies
5. It helps to determine the extent of advertising
6. It helps in preparing production and purchase schedules

Types of forecasting

1. Short term forecasting: Forecasting for a period of 3 months to 1 year

2. Long term forecasting: For a period of 5 to 20 years.