Chapter 9

Six-Sigma Quality

McGraw-Hill/Irwin Copyright © 2011 The McGraw-Hill Companies, All Rights Reserved

Learning Objectives

1. Understand total quality management.

2. Describe how quality is measured and
be aware of the different dimensions
of quality.
3. Explain the define, measure, analyze,
improve, and control (DMAIC) quality
improvement process.
4. Understand what ISO certification
means.

9-2
 Key Six Sigma Concepts

• Critical to quality: attributes most important

to the customer
• Defect: failing to deliver what customer wants
• Process capability: what your process can
deliver
• Variation: what customer sees and feels
• Stable operations: ensuring consistent,
predictable processes to improve what the
customer sees and feels
• Design for six-sigma: designing to meet
customer needs and process capability

LO 1
9-3
 Total Quality Management (TQM)

• Total quality management:

managing the entire organization so
that it excels on all dimensions of
products and services that are
important to the customer
• Two fundamental operational goals:
1. Careful design of the product or service
2. Ensuring that the organization’s systems
can consistently produce the design

LO 1
9-4
 Malcolm Baldridge National Quality
Award

• Established in 1987 by Department of

Commerce
• Goal is to help companies review and
structure their quality programs
• Has requirement that suppliers
demonstrate they are measuring and
documenting their quality practices

LO 1
9-5
 The Quality Gurus Compared

LO 1
9-6
 The Quality Gurus Compared Continued

LO 1
9-7
 Quality Specifications and Quality
Costs

• Design quality: inherent value of the

product in the marketplace
• Conformance quality: degree to which
the product or service design
specifications are met
• Quality at the source: the person who
does the work takes responsibility for
making sure it meets specifications

LO 1
9-8
 The Dimensions of Design Quality

• Performance: primary product or

service characteristics
• Features: added touches, bells and
whistles, secondary characteristics
• Reliability/durability: consistency of
performance over time
• Serviceability: ease of repair
• Aesthetics: sensory characteristics
• Perceived quality: past performance
and reputation
LO 2
9-9
 Cost of Quality

How significant is the cost of quality? It has been

estimated at between 15 and 20 percent of every
sales dollar—the cost of reworking, scrapping,
repeated service, inspections, tests, warranties,
and other quality-related items. It is generally
believed that the correct cost for a well-run quality
management program should be under 2.5 percent.

9-10
 Cost of Quality

• Basic cost assumptions

1. Failures are caused
2. Prevention is cheaper
3. Performance can be measured
• Cost of quality
1. Appraisal cost
2. Prevention cost
3. Internal failure cost
4. External failure cost

LO 2
9-11
Appraisal costs. Costs of the inspection, testing, and other
tasks to ensure that the product or process is acceptable.

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

9-12
Internal failure costs. Costs for defects incurred within the
system: scrap, rework, repair.

External failure costs. Costs for defects

that pass through the system: customer
warranty replacements, loss of customers
or goodwill, handling complaints, and
product repair.

9-13
 Six-Sigma Quality
Six Sigma refers to the philosophy and methods companies such
as General Electric and Motorola use to eliminate defects in their
products and processes.

A defect is simply any component that does not fall within the
customer’s specification limits.

Each step or activity in a company represents an opportunity for

defects to occur, and Six Sigma programs seek to reduce the
variation in the processes that lead to these defects.

9-14
 Six-Sigma Quality

• Six-sigma is a philosophy and methods

used to eliminate defects
• Seeks to reduce variation in the
processes
• One metric is defects per million
opportunities (DPMO)

Number of defects
DPMO  1,000,000
Number of opportunities for error per unit  Number of units

LO 2
9-15
 Six-Sigma Methodology

• Uses many of the same statistical tools

as other quality movements
– Used in a systematic project-oriented
fashion through define, measure, analyze,
improve, and control (DMAIC) cycle
• More detailed version of Deming PDCA cycle
• Continuous improvement: seeks
continual improvement in all aspects of
operations
– Also uses scientific method
LO 2
9-16
 DMAIC Methodology

1. Define
– Identify customers and their priorities
– Identify a project
– Identify critical-to-quality characteristics
2. Measure
– Determine how to measure the process
– Identify key internal processes
3. Analyze
– Determine most likely causes of defects
– Understand why key defects are generated

LO 3
9-17
 DMAIC Methodology Continued

4. Improve
– Identify means to remove causes of
defects
– Confirm the key variables
– Identify the maximum acceptance ranges
– Modify process to stay within acceptable
range
5. Control
– Determine how to maintain improvements
– Put tools in place to track key variables

LO 3
9-18
 Analytical Tools for Six Sigma and
Continuous Improvement

• Flowcharts
• Run charts
• Pareto charts
• Checksheets
• Cause-and-effect diagrams
• Opportunity flow diagrams
• Control charts

LO 2
9-19
 Example: Flowchart

LO 2
9-20
 Example: Run Chart

LO 2
9-21
 Example: Pareto Chart

LO 2
9-22
 Example: Checksheet

LO 2
9-23
 Example: Cause-and-Effect
Diagram

LO 2
9-24
 Example: Opportunity Flow
Diagram

LO 2
9-25
 Example: Control Chart

LO 2
9-26
 Other Six Sigma Tools

• Failure mode and effect analysis

(FMEA): a structured approach to
identify, estimate, prioritize, and
evaluate risk of possible failures at
each stage in the process
• Design of experiments (DOE): a
statistical test to determine cause-and-
effect relationships between process
variables and output

LO 3
9-27
 Six Sigma Roles and
Responsibilities

1. Executive leaders must champion the

process of improvement
2. Corporation-wide training in Six Sigma
concepts and tools
3. Setting stretch objectives for
improvement
4. Continuous reinforcement and
rewards

LO 3
9-28
 The Shingo System: Fail-Safe
Design

• Shingo’s argument:
– SQC methods do not prevent defects
– Defects arise when people make errors
– Defects can be prevented by providing workers
with feedback on errors
1. Successive check
2. Self-check
3. Source inspection
• Poka-Yoke includes:
– Checklists
– Special tooling that prevents workers from making
errors

LO 3
9-29
 ISO 9000 and ISO 14000

• Series of standards agreed upon by the

International Organization for
Standardization (ISO)
– Adopted in 1987
– More than 160 countries
• A prerequisite for global competition?
• ISO 9000 an international reference for
quality, ISO 14000 is primarily
concerned with environmental
management
LO 4
9-30
 Three Forms of ISO Certification

1. First party: A firm audits itself against

ISO 9000 standards
2. Second party: A customer audits its
supplier
3. Third party: A "qualified" national or
international standards or certifying
agency serves as auditor

LO 4
9-31
 External Benchmarking Steps

1. Identify those processes needing

improvement
2. Identify a firm that is the world leader
in performing the process
3. Contact the managers of that
company and make a personal visit to
interview managers and workers
4. Analyze data

LO 4
9-32