Quality Management

It costs a lot to produce bad product

Norman Augustine

Operations Management
Rabindra Silwal

OM - Quality Management 1
Definitions of Quality
Quality tries to manage all aspects of the
organization in order to excel in all
dimensions that are important to customers

ASQ: Totality of features and characteristics of a

product or service having the ability to meet
customer needs (implied or stated)
User-Based: What consumer says it is
Manufacturing-Based: Degree to which a product
conforms to design specification
Product-Based: Measurable variable product
characteristics
OM - Quality Management 2
 Determinants of Quality
Quality of design
Intention of designers to include or exclude
features in a product or service
Quality of conformance
The degree to which goods or services
conform to the intent of the designers
Ease-of-Use and user instructions
Increase the likelihood that a product will be
used for its intended purpose and in such a
way that it will continue to function properly
and safely
After-the-sale service
Taking care of issues and problems that arise
after the sale OM - Quality Management 3
Dimensions of Quality for Goods
Performance and
features
Reliability
Quality
Durability
Conformance
Serviceability
Appearance OM - Quality Management 4
Dimensions of Quality for Services
Time and Timeliness
Completeness
Courtesy
Consistency
Accessibility and convenience
Accuracy
Responsiveness

OM - Quality Management 5
Costs of Quality
Cost of Achieving Good quality
Prevention costs - reducing the potential for
defects e.g. training, QI programs
Appraisal costs - evaluating products & processes
e.g. testing, labs, inspectors

Cost of Poor Quality

Internal failure - producing defective parts or
service before delivery to customers e.g. rework,
scrap, downtime, etc
External costs - occur after delivery of defective
parts e.g. rework, returned goods, lost goodwill, etc

OM - Quality Management 6
Prevention Costs
Quality planning costs
costs of developing and
implementing quality
management program
Product-design costs
costs of designing products
with quality characteristics
Process costs
costs expended to make
sure productive process
conforms to quality
specifications
Training costs
costs of developing and
putting on quality training
programs for employees and
management
Information costs
costs of acquiring and
maintaining data related to
quality, and development of
reports on quality
performance
Appraisal Costs
Inspection and testing
costs of testing and inspecting materials, parts, and
product at various stages and at the end of a process
Test equipment costs
costs of maintaining equipment used in testing
quality characteristics of products
Operator costs
costs of time spent by operators to gather data for
testing product quality, to make equipment
adjustments to maintain quality, and to stop work to
assess quality
Internal Failure Costs
Scrap costs Process downtime costs
costs of poor-quality products
that must be discarded, costs of shutting down
including labor, material, and productive process to fix
indirect costs problem
Rework costs
costs of fixing defective
Price-downgrading costs
products to conform to quality costs of discounting poor-
specifications quality productsthat is,
Process failure costs selling products as
costs of determining why seconds
production process is
producing poor-quality
products
External Failure Costs
Customer complaint costs
costs of investigating and
satisfactorily responding to a
customer complaint resulting
from a poor-quality product
Product return costs
costs of handling and replacing
poor-quality products returned
by customer
Warranty claims costs
costs of complying with product
warranties
Product liability costs
litigation costs resulting
from product liability
and customer injury
Lost sales costs
costs incurred because
customers are
dissatisfied with poor
quality products and do
not make additional
purchases
Ways in Which Quality Can Improve Profits

Sales Gains
Improved response
Higher Prices
Improved reputation

Improved Increased
Quality Profits
Reduced Costs
Increased productivity
Lower rework and scrap
costs
Lower warranty costs

OM - Quality Management 11
Quality Awards and Certification

Malcolm Baldrige Award

Deming Medal, Edwards Medal, Shewart
Medal etc
ISO 9000
ISO 14000
ISO 21000
ISO 24700
HACCP etc

OM - Quality Management
ISO 9000 Standards

Guidelines for designing, manufacturing, selling, and

servicing products. Est. 1987.
Selecting an ISO 9000 certified supplier provides some
assurance that supplier follows accepted quality practices.
Required by many manufacturers, especially in Europe, to be
a supplier.
www.iso.org

OM - Quality Management
ISO 14000 Standards

Series of standards covering environmental management

systems, environmental auditing, evaluation of environmental
performance, environmental labeling, and life-cycle assessment.
Intent is to help organizations improve their environmental
performance through documentation control, operational
control, control of records, training, statistical techniques, and
corrective and preventive actions.

OM - Quality Management
Malcolm Baldrige Award

Est. 1987 to promote better quality management

practices and improved quality results by U.S. industry.
Award criteria have become standard for best quality
practice in U.S.
Given to at most 3 organizations in each of 6 categories.

www.baldrige.gov

OM - Quality Management
Categories - Malcolm Baldrige
Award

Manufacturing companies
Service companies
Small businesses
Health care organizations
Education institutions
Non-profit organizations (including government)

OM - Quality Management
Total Quality Management
Find out what customers want Internal and
external
Design a product or service that will meet (or
exceed) what customers want. Make it easy to
use and easy to produce
Design processes that facilitate doing the job
right the first time ensure fail-safing in design
Keep track of results, and use them to guide
improvement in the system. Never stop trying
to improve.
Extend these concepts throughout the supply
chain.

OM - Quality Management
Quality Pioneer: W. Edwards
Deming

The 14 Management Principles

Dont sacrifice quality for short-term profit
Emphasis on continuous improvement
PDCA Wheel
Plan, do, check, act
http://www.deming.org/

OM - Quality Management 13
Demings Wheel
Quality Pioneer: Joseph Juran

Quality Trilogyplanning, control and

improvement
Solve the vital few quality problems
Stressed quality control methods (Chapter 9)
Quality Handbook
http://www.juran.com

OM - Quality Management 13
Total Quality Management - Other
renowned contributors

Walter Shewhart - Statistical process control

W. Edward Deming - 14 points to improve
quality and Deming wheel
Joseph M. Juran - Quality in strategic
planning process
Philip Crosby - Cost of quality
V. Feigenbaum - Company-wide quality
control
Kaoru Ishikawa - Quality Circle and Fishbone
chart

OM - Quality Management 13
Seven Concepts of TQM
Continuous improvement (Kaizen)
Six Sigma
Employee empowerment
Benchmarking
Just-in-time (JIT)
Taguchi concepts
Knowledge of TQM tools

OM - Quality Management 16
Continuous Improvement
Represents continual
improvement of process &
customer satisfaction
Involves all operations
& work units
Other names
Kaizen (Japanese)
Zero-defects

OM - Quality Management 17
Six Sigma
A method that provides organisations tools to
improve the capability of their business
processes
Six Sigma quality is a term generally used to
indicate a process is well controlled
The process is extremely capable - 3.4 defect
in a million.
Qualitative and Quantitative tools to improve
process
Follows DMAIC methodology of improvement
(Define, Measure, Analyse, Implement,
Control) OM - Quality Management 19
Benchmarking

Selecting best practices to use as a

standard for performance
Determine what to benchmark
Form a benchmark team
Identify benchmarking partners
Collect and analyze benchmarking information
Take action to match or exceed the
benchmark

OM - Quality Management 20
Just-in-Time (JIT)

Relationship to quality:
JIT cuts cost of quality
JIT improves quality
Better quality means less
inventory and better, easier-to-
employ JIT system

OM - Quality Management 22
Taguchi Techniques
Quality control methodology that
combines control charts and process
control with product and process
design to achieve a total robust design.
Aims to reduce product variability with
a system for developing specification
and designing them into a product or
process

OM - Quality Management 23
Taguchi Concept

High loss Quality Loss Function (a)

Unacceptable
Loss (to Target-oriented
producing Poor quality yields more
organization, Fair product in the best
customer, and Good
category
society) Best
Low loss Target-oriented quality
brings products toward
the target value
Conformance-oriented
Frequency quality keeps product
within three standard
deviations
Distribution of
Lower Target Upper
specifications for product
Specification produced (b)

OM - Quality Management 25
Seven Tools for TQM

OM - Quality Management 26
Fish Bone Diagram
Service Quality
For services, the assessment of
quality is made during the service
delivery process.

Customer satisfaction can be

measured as the difference between
the customers service expectation
and the service actually received.
Walk-Through-Audit (WtA)
A diagnostic tool to identify gaps in
service perception
Involves three parties management,
front-line or customer contact personnel
and customers

OM - Quality Management 29
Gaps in Service Quality
Measuring the gap between
expected service and perceived
service is a routine customer
feedback process practiced by many
companies
Walk-Through-Audit (WtA)
First flow chart must be prepared to
highlight areas of customer interaction
Statements must be declarative rather
than questions
WtA must be limited to two pages since
customers would not be interested in
filling out long questionnaires
Best way to administer is through one-
on-one interview/dialogue

OM - Quality Management 30
Identifying GAPS with WtA
Another way to Measure Service
quality

Measures are perceptual/subjective

SERVQUAL is most popular measure
Tangibles: appearance
Reliability: promised service
Responsiveness: prompt, helpful
Assurance: knowledge, courtesy
Empathy: caring, individualized