Quality Management

& Statistical Quality Control

D. Anthony Chevers
SBCO 6240 - Production and Operations Management
 Lecture #2 - Quality
 Definitions; Purpose & Profitability
 Quality Inspection
 Total Quality Management (TQM)
 Continuous Improvement Tools
 Process Capability & Statistical QC
• Process Capability; Process Capability Ratio
• Process Capability Index; Six-Sigma
 International Standard Organization
 Customer Care & Key Performance Indicators
 Exercises/Case Analysis

Lecture 2 - Quality Management & Statistical Quality Control | 2

 Paradigm Shift
 Made in Japan
• Period – Early 1960’s
• Responses – Junk, cheap, low quality, poor quality, imitation, low
technology & toys
 Made in Japan
• Period – Early 1990’s and beyond
• Responses – Excellence, Premium price, high quality, innovation, high
technology & leadership
 Reason – Paradigm Shift to “Zero defect production”-
Deming 1950’s [Sturn Ruger & Swiss]
 Paradigm – The accepted way of doing a task or
accepted behavior; the norm

Lecture 2 - Quality Management & Statistical Quality Control |

 Only Survivors
“The only survivors at the
end of two decades will be
companies with constancy
of purpose for quality,
productivity and service.”
W. Edward Deming

Lecture 2 - Quality Management & Statistical Quality Control |

 Quality - Defined
 The American Society for Quality Control –
“The totality of features and characteristics
of a product or service that bear on its
ability to satisfy stated or implied needs.”
 A product or service free of deficiencies
 In general, quality means different things to
different people.
• Conformance to requirement; Utility
• Fitness for purpose; Reliability
• Value for money; Cost-effectiveness

Lecture 2 - Quality Management & Statistical Quality Control |

The Meaning of Quality

Lecture 2 - Quality Management & Statistical Quality Control |

 Eight Dimensions of Quality …
(Garvin)

 Performance – What are the basic operating

characteristics of the product or service?
 Features – What extra characteristics does the product
or service have, beyond the basic performance
operating characteristics?
 Reliability – How long can a product go between
failures or the need for maintenance?
 Conformance – Was the product made or service
performed to specifications?

Lecture 2 - Quality Management & Statistical Quality Control |

 Eight Dimensions of
Quality../2

 Durability – What is the useful life for a

product? How will the product hold up under
extended or extreme use?
 Serviceability – How easy is it to repair,
maintain or support the product or service?
 Aesthetics – How well does the product or
service appeal to the senses?
 Perceived quality – What is the reputation or
image of the product or service? [Lawn mower, car door, SSTP,
sweet non sense]

Lecture 2 - Quality Management & Statistical Quality Control |

 Market Gain
[Quality & Profitability]

Performance Market Share

Experience based
Features Reputation for
scale economies
Reliability, etc. quality

Higher Price

Profits

This model is well supported by empirical evidence

Lecture 2 - Quality Management & Statistical Quality Control |

 Quality And Productivity

 Productivity = output / input

 Fewer defects increase output

 Quality improvement reduces inputs

Lecture 2 - Quality Management & Statistical Quality Control |

 The Deming Chain Reaction
[Quality & Productivity & Sustainability]

Costs decreases
because of less Capture
rework, fewer the Provide
Improve mistakes, fewer Productivity market Stay in jobs and
Quality delays, fewer improves with business more
snags, better use better jobs
of machine time quality
and materials

Source: Reprinted from out of the Crisis by W. Edward Deming by permission of MIT and W. Edward Deming
Published MIT, Center for Advanced Engineering Study, Cambridge, Mass 02139, Copyright 1966 by W. Deming

Lecture 2 - Quality Management & Statistical Quality Control |

 Quality Control Along the
Production System & ISO
INPUTS CONVERSION OUTPUTS

Raw materials, Parts

Production Processes Product and Services
and Supplies

! ! !
! ! !
! ! !
Control Charts & Control Charts &
Control Charts
Acceptance Tests Acceptance Tests

Quality of partially
Quality of Inputs Quality of Outputs
completed products

Lecture 2 - Quality Management & Statistical Quality Control |

 International Standard
Organization (ISO) ….

 Origin – European
 Certifications – ISO9000/1/2 & 14000
 Purpose – All organizations must be ISO certified to
compete in the global marketplace.
 Statement – ISO certification, a statement that you are
a quality organization with standard systems
through:
• Policies
• Procedures
• Instructions
• Records

Lecture 2 - Quality Management & Statistical Quality Control |

 ISO …../2

 Motto
• Say what you do
• Do what you say
• Prove it
• Improve it
 Jamaican firms – Grace Kennedy, J.F.Mills, Cable &
Wireless, Alpart, Windalco, Jamalco, FedEx, Pegasus,
Sigma Unit Trust, Berger, Jamaica Boilers, JWN, etc
 Benefits – Consistently produce quality products
through quality systems.

Lecture 2 - Quality Management & Statistical Quality Control |

 Quality along the
Production System
 Quality inspection must be done along the
production system.
• Input
• Entrance test –Acceptance school & work
• Acceptance test of in-coming raw materials
• Transformation
• Mid module test
• Laboratory test along conversion
• Output
• Final exam
• Performance evaluation of lecturer
• Quality inspection of finished goods/services

Lecture 2 - Quality Management & Statistical Quality Control |

 Total Quality Management
(TQM)
 A managerial approach in which the entire
organization is managed so that it excels
in all quality dimensions that are
important to customers
 TQM is a business philosophy centered
around seven core ideas or principles
• Customer focus; Leadership involvement
• Continuous improvement; Employee
empowerment
• Quality assurance; Supplier partnerships
• Strategic quality plan
o

Lecture 2 - Quality Management & Statistical Quality Control |

 Total Cost of Quality
 Internal Failure Costs
• Costs caused by defects that occur prior to delivery to
customer, including money spent on repairing or reworking
defective products, as well as time wasted on these
activities (during production of service or product)
 External Failure Costs
• Costs incurred by defects that are not detected until a
product or service reaches the customer
 Appraisal Costs
• Costs a company incurs to assess its quality levels
 Prevention Costs
• The costs an organization incurs to actually prevent defects
from occurring to begin with
 Warranty – A written guarantee that the producer will
replace or repair defective parts or perform the service to
the customer’s satisfaction (Ritzman, 2005)

Lecture 2 - Quality Management & Statistical Quality Control |

 Continuous Improvement
Tools
 Process mapping/Flow charts
• An activity that uses graphical symbols to document the physical and
information flows of a process
 Control charts
 Root cause analysis
• A process by which organizations brainstorm about possible causes of
problems and then, through structured analysis and data gathering efforts,
gradually narrow the focus to a few root causes
 Five whys
• An approach used during the narrow phase of root cause analysis, in which
teams brainstorm successive answers to the question “Why is this a cause
of the original problem? [5 rounds]
 Cause-and-effect diagram/Fishbone diagram
• A graphical tool used to categorize the possible causes for a particular
result
 Pareto chart
• A special form of bar chart that shows frequency counts from highest to
lowest
 Benchmarking

Lecture 2 - Quality Management & Statistical Quality Control |

PDCA Cycle (Deming
Wheel)

Lecture 2 - Quality Management & Statistical Quality Control |

 Benchmarking
 Identify those processes needing
improvement
 Identify competitor performing ‘best
practices’
 Visit the facility and interview key
players at all levels
 Analyze data
 Customize and adapt if applicable

Lecture 2 - Quality Management & Statistical Quality Control |

21
 Definitions
 Statistical quality control (SQC)
• The application of statistical techniques to quality
control
• We want to keep the process in control
• Small variation of the process – products that meet
standard

Lecture 2 - Quality Management & Statistical Quality Control | 22

 Definitions
 Process capability [1 SQC technique]
• The ability to meet design specifications

 Process capability ratio (Cp)

• A mathematical determination of a process’s
capability to meet certain quality standards. A
Cp > 1 means the process is capable of meeting the
standard being measured

 Process capability index (Cpk)

• A mathematical determination of a process’s
capability of meeting certain tolerance limits

Lecture 2 - Quality Management & Statistical Quality Control | 23

 UCL

Normal
NormalBehavior
Behavior

Statistical Process LCL

Control (SPC) Charts 1 2 3 4 5 6 Samples

over time
UCL

Possible
Possibleproblem,
problem,investigate
investigate

LCL

1 2 3 4 5 6 Samples
over time
UCL

Possible
Possibleproblem,
problem,investigate
investigate

LCL

1 2 3 4 5 6 Samples
over time
Lecture 2 - Quality Management & Statistical Quality Control | 24
 Control Limits:
Normal Curve

x
µ
z
-3 -2 -1 0 1 2 3

Standard
Standarddeviation
deviation
units
unitsor
or“z”
“z”units.
units.

Lecture 2 - Quality Management & Statistical Quality Control | 25

Normal Curve – Student
Grades

Lecture 2 - Quality Management & Statistical Quality Control |

 Control Limits
We establish the Upper Control
Limits (UCL) and the Lower Control
Limits (LCL) with plus or minus 3
standard deviations from some x-bar or
mean value.

Based on this we can

99.7% expect 99.7% of our
sample observations to fall
LCL UCL x within these limits.

Lecture 2 - Quality Management & Statistical Quality Control | 27

 Process Capability

 Upper tolerance limit (UTL)

• The highest acceptable value for some measure of
interest
 Lower tolerance limit (LTL)
• The lowest acceptable value for some measure of
interest
 Cp = (UTL – LTL)/6σ
 Cpk=min[(µ-LTL)/3 σ , (UTL-µ)/3 σ]
 Where µ is average and σ is standard deviation
 (Cp) - Process Capability Ratio
 (Cpk ) - Process Capability Index
Lecture 2 - Quality Management & Statistical Quality Control | 28
 Process Capability Ratio
(Cp)
 For a process to be capable, its values must fall within upper and
lower specifications
 This typically means the process capability is within +/- 3 standard
deviations from the process mean
 Since this range of values is 6 standard deviations, a capable
process tolerance, which is the difference between the upper and
the lower specifications, must be greater than or equal to 6
 Capable process has Cp of at least 1.0
 If the Cp is less than 1.0, the process yields products or services
that are outside their allowable tolerance
 With a Cp of 1.0, 2.7 parts in 1,000 can be expected to be “out of
spec” [Standard Given]
 The higher the Cp, the greater the likelihood the process will be
within design specifications
 Many firms have chosen a Cp of 1.33 as a target for reducing
process variability. This means only 64 parts per million can be
expected to be out of spec.

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Normal Distribution

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Cp Values for Different
Tolerance Limits

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 Exercise - Cp

B ig F o rd M
o f 2 5 cm .,
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 Process Capability Index
-Cpk
 In some cases, the process mean, µ, is
not exactly centered on the target value
 In these cases, we use the process
capability index, Cpk, to determine
whether or not the process is capable of
meeting the tolerance limits 99.7% of the
time.

Lecture 2 - Quality Management & Statistical Quality Control | 33

 Process Capability Index,
Cpk
Capability
CapabilityIndex
Indexshows
shows
how  X − LTL UTL - X 
howwell
wellparts
partsbeing
being C pk = min  or 

produced 3 σ 3σ
producedfitfitinto
intodesign
design  
limit
limitspecifications.
specifications.

As
Asaaproduction
productionprocess
process
produces
producesitems
itemssmall
small
shifts
shiftsin
inequipment
equipmentoror
systems
systemscancancause
cause
differences
differencesininproduction
production
performance
performancefromfrom
differing
differingsamples.
samples.

Shifts in Process Mean

Lecture 2 - Quality Management & Statistical Quality Control | 34
 Exercise - Cpk

Engineers at Milb
for a key dyeing
Target v
Cpk = min µ
Upper t
Lecture 2 - Quality Management & Statistical Quality Control | 35
 Six-Sigma Quality

(UTL – LTL)/12σ
Lecture 2 - Quality Management & Statistical Quality Control | 36
Exercise – Six-Sigma

M ilb u rn T
Calcul
m e a n is
Lecture 2 - Quality Management & Statistical Quality Control | 37
 Service Quality #1

 Time & Timeliness

• Customer waiting time, completed
on time
 Correct & Accuracy
• Conduct the right transaction
• Performed right every time
 Completeness
• Customer gets all they asked for
 Courtesy
• Treatment by employees

Lecture 2 - Quality Management & Statistical Quality Control | 38

 Service Quality #2

 Consistency
• Same level of service for all customers
 Accessibility & Convenience
• Ease of obtaining service
 Responsiveness
• Reactions to unusual situations
 Others?

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Motto – Customer Service

Ford – “Customer 1st ”

U.S. Distributor – “It is not our intention to satisfy our customers. Its our intention to amaze them”

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Motto – Customer Service
“Customer Satisfaction is Worthless,
Customer Loyalty is Priceless”
- Jeffery Gitomer

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Motto – Customer Service

“Only the customer, and the

customer alone, will pay our
costs and provide our profits”.
 Rule #1 – The customer is
always right
 Rule #2 – If the customer is
wrong, kindly read rule #1

[It is imperative
that the customer
is happy]
Lecture 2 - Quality Management & Statistical Quality Control | 42
Quality Standards – KPI’s

Organization
Jones Law Office
Lecture 2 - Quality Management & Statistical Quality Control | 43
 Discussion Questions #1
• Different customers can perceive the value of the same
product or service very differently. Explain how this can
occur. What are the implications for developing successful
operations and supply chain strategies?

• Why can two people perceive the same product or service

as having different quality levels? From a business
perspective, why is it important then to “know your
customers”?

• Give at least three reasons why it is important for

organizations to continuously improve the quality of their
products and services.

• What are the advantages of using tools such as process

maps, root cause analysis and pareto charts to structure a
firm’s continuous improvement efforts? What are the risks
associated with not following such a thorough process?

Lecture 2 - Quality Management & Statistical Quality Control | 44

 Exercise - Calculation
 In a local Insurance Company claims department, the claims
process mean is 210 minutes and the standard deviation is
0.516 minutes. The design specification to meet customer
expectations is +/- 3 standard deviation. Is the process
capable to meet customer’s expectation?

 You are the process improvement manager and have

developed a new machine to cut insoles for the company’s
top-of-the-line running shoes. You are excited because the
company’s goal is no more than 3.4 defects per million and
this machine may be the innovation you need. The insoles
cannot be more than +/- 0.001 of an inch from the required
thickness of 0.250”. You want to know if you should replace
the existing machine, which has a Cpk of 1.0. The estimated
standard deviation is 0.0005 inches. You decide to determine
the Cpk for the new machine and make a decision on that
basis.

Lecture 2 - Quality Management & Statistical Quality Control | 45

 Solution – Local
Insurance Co.

Given: µ
Lecture 2 - Quality Management & Statistical Quality Control | 46
Solution – Improvement
Manager

Upper Spec
Lower Spec
Lecture 2 - Quality Management & Statistical Quality Control | 47
 Case Studies

Quality at the Ritz-Carlton Hotel Company

Dittenhoefer’s Fine China
Southwestern University: (C)*

Lecture 2 - Quality Management & Statistical Quality Control | 48

 NEXT LECTURE:
Process Analysis & Productivity

D. Anthony Chevers
delroy.chevers@uwimona.edu.jm
DOMS, Room #28

49