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Statistical Quality Control

Prof. Mahmoud M. El-Sherbiny


Chairman of Operations Research Department
Institute of Statistical Studies and Research
Cairo University
msherbiny@cu.edu.eg

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Outline
What is quality ?
Dimensions of Quality
The Meaning of Quality
The Deming Cycle
Total Quality Management
Cost of Quality
The Quality Circle Process
Quality Improvement
Seven Quality Control Tools
Process capability
Design of Experiments (DOE)

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What Is Quality?

The degree of excellence of a thing
(Websters Dictionary)

The totality of features and
characteristics that satisfy needs (ASQ)

Fitness for use
Quality of design

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Dimensions of Quality (Garvin)

1. Performance
Basic operating characteristics
2. Features
Extra items added to basic features
3. Reliability
Probability product will operate over
time

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Dimensions of Quality (Garvin)

4. Conformance /
Meeting pre-established standards
5. Durability
Life span before replacement
6. Serviceability
Ease of getting repairs, speed &
competence of repairs

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Dimensions of Quality (Garvin)

7. Aesthetics /
Look, feel, sound, smell or taste
8. Safety
Freedom from injury or harm
9. Other perceptions /
Subjective perceptions based on
brand name, advertising, etc

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Service Quality

1. Time & Timeliness
Customer waiting time, completed on time

2. Completeness
Customer gets all they asked for

3. Courtesy
Treatment by employees

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Service Quality

4. Consistency
Same level of service for all customers

5. Accessibility & Convenience
Ease of obtaining service

6. Accuracy
Performed right every time

7. Responsiveness
Reactions to unusual situations

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Quality of Conformance

Ensuring product or service produced
according to design

Depends on
Design of production process

Performance of machinery

Materials

Training

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The Meaning of Quality

The Meaning of Quality

Producers Perspective Consumers Perspective


Quality of Conformance Quality of Design


Production Conformance to Quality characteristics


Marketing
specifications

Price
Cost

Fitness for
Consumer Use
Figure 14.1

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Quality on the Web

Internet creates new rules doing business

Key factors in differentiating firms

B2B largest part of Internet business
B2B
Direct sales more visible

Internet removes the human dimension

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Dimensions of Web Quality
Ease of use
Clarity of information and instructions

Server reliability
Speed of page loading
Transaction time
Aesthetics
Privacy and security
Domain name
Transaction reliability

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Quality Costs

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Quality Cost Control

If you dont measure results, you cant tell success
from failure

If you cant see success, you cant reward it and
if you cant reward success, you are probably
rewarding failure
-

If you cant recognize failure, you cant correct it

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Quality Costs

Quality Costs




Assurance costs
Failure costs



Internal Failure Costs
External Failure Costs Appraisal Costs Prevention Costs

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Cost of Quality

Cost of achieving good quality(Assurance cost)



Prevention
Planning, Product design, Process, Training,
Information

Appraisal
Inspection and testing,
Test equipment,
Operator

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Prevention Cost

Costs associated with designing,
installing, maintaining and auditing plans
for control of manufacturing products and
services to prevent the creation of defects
and failures or the creation of process
wastes.


.

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Prevention Cost--Examples
Personnel associated with preventing
poor quality
Quality training and education

Contract reviews

Design reviews
Defect prevention activities (Quality ) (
improvement)
Reliability engineering and testing
Process Capability studies
Preventive efforts with supplier
Supplier evaluation
Supplier selection
Supplier surveillance

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Appraisal Cost
Costs associated with the measuring,
evaluating, or auditing of goods, components,
services and purchased materials to verify
conformance with quality standards and
performance requirements. the cost of
evaluating processes and their outputs to
ensure quality


.

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Appraisal Cost--Examples
Inspection and Test
Set-up
Materials
Personnel
Equipment/tools /
Energy
Product quality audits
Any activities
associated with
checking previously
performed work
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Cost of Quality
Cost of poor quality (Failure cost )
Internal failure costs
Scrap, Rework, Process failure, Process
downtime, Price-downgrading

External failure costs
Customer complaints,
Product return,
Warranty, Product
liability, Lost sales

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Internal Failure Cost

Costs associated with defective products,


components, and materials which fail to
meet quality requirements and found
before delivery to the customer, namely
costs incurred to correct an identified
defect before the customer receives the
product




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Internal Failure Cost--examples
Scrap and Rework
Material
Labor
Failure investigations
Overtime to correct internal
failures
Downtime, Delay Time
Corrective action to
eliminate the internal
failures /
Design and development of
rework/repair techniques

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External Failure Cost

Costs associated with deficiencies found


to the customer and with customer
dissatisfaction

Costs that relate to all errors not detected
and corrected before delivery to the
customer

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External Failure Cost--Examples
Repair, Replacement
Expenses under
Warranty

customer complaint

Product liability claims

Failure investigations

Corrective actions

Downtime charges

Modification delays and
costs

Product recalls

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10

100

( : )100:10:1 1
10 100
( )
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Calculating the Total Quality Cost

Total
Prevention Appraisal Failure
Quality = Cost
+ Cost
+ Cost
Cost


= + +

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Quality
Quality Costs
Cost in $

Total cost
Failure cost

Control cost

0% Minimum 100%
Optimal
Acceptable Quality Level
Defective Rate

Amount of Inspection
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Effects of poor Quality

Low customer satisfaction
Low productivity, sales & profit
Low morale of workforce
More re-work, material & labor
costs

High inspection costs
Delay in shipping

High repair costs


Higher inventory costs
Greater waste of material

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Benefits of Quality

Higher customer satisfaction
Reliable products/services /
Better efficiency of operations
More productivity & profit
Better morale of work force
Less wastage costs

Less Inspection costs

Improved process

More market share
Spread of happiness & prosperity .
Better quality of life for all.

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Measuring and Reporting Quality

Labor index
Quality cost / labor hours
Cost index
Quality cost / manufacturing cost
Sales index
Quality cost / sales
Production index
Quality cost / units produced

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Quality Costs and Index
YEAR
1999 2000 2001 2002
Quality Costs
Prevention $ 27,000 41,500 74,600 112,300
Appraisal 155,000 122,500 113,400 107,000
Internal failure 386,400 469,200 347,800 219,100
External failure 242,000 196,000 103,500 106,000
Total $ 810,400 829,200 639,300 544,400

Accounting Measures
Sales $ 4,360,000 4,450,000 5,050,000 5,190,000
Mfg costs 1,760,000 1,810,000 1,880,000 1,890,000

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Trend Analysis
$1000 x

33
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Quality Costs and Index

total quality costs


Quality index = (100)
base
$810,400(100)
Quality cost per sale = = 18.58
4,360,000
QUALITY QUALITY MANUFACTURING
YEAR SALES INDEX COST INDEX
1999 18.58 46.04
2000 18.63 45.18
2001 12.66 34.00
2002 10.49 28.80

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Pareto analysis based on quality failure cost types
Failure types Annual loss Percentage in total
for quality quality failure cost
failure
Proportion Accumulated
1000$
(100%) prop. (100%)
Rework 5560 61 61
Customer complaint 1220 14 75
Scrap 780 9 84
Material quality problem 670 7 91
Sales discount 370 4 95
Failure investigation 280 3 98
Downtime 190 2 100
Total Cost 9070 100

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Pareto analysis of Rework based on product types

Product types Annual rework Proportion Accumulated


loss1000$ (100%) prop. (100%)

A 1320 24 24
B 960 17 41
C 720 13 54
D 680 12 66
E 470 8 74
F 330 6 80
Other kinds 1080 20 100
Total cost 5560 100

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Pareto Chart for C1

100
5000
80
4000

Percent
Count

60
3000

40
2000

1000 20

0 0
Other kinds

Defect A B C D E F

Count 1320 960 720 680 470 330 1080


Percent 23.7 17.3 12.9 12.2 8.5 5.9 19.4
Cum % 23.7 60.4
41 73.4
53.9 66.1
85.6 94.1
74.6 100.0
80.5 43.2
100
100

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Setting up proper quality cost subjects
Quality failure costs collecting table
1st 2nd 3rd Sum ($)

Last year This year Growth rate

Scrap failure
Internal failure

Repair failure
cost

Failure analysis and


Quality failure costs

recheck

Downtime failure

Guarantee fee
External failure cost

Failure analysis and


recheck

Lawsuit fee

Claim fee

Sales discount
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QualityCost Relationship

Increased prevention costs lead to decreased
failure costs

Improved quality leads to increased sales and
market share

Quality improvement at the design stage

Higher quality products can command higher
prices

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Profitability
Deming Prize winners showed higher than
average results on financial performance
indicators
Baldrige Award winners consistently exceed
industry averages on financial performance
Quality leads to improved profitability and ROI
Quality is ... a profit--maker
In the long run, quality and profitability are
closely related

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Quality and Productivity

output
Productivity =
input

Fewer defects increase output


) (

Quality improvement reduces inputs


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Measuring Yield and Productivity

Yield = (total input) (% good units) +
(total input)(1 - % good units)(% reworked)

Y = I (%G) + I (1 - %G)(%R)

where
Y = yield
I = number of units started in production

% G = percentage of good units

% R = percentage of defective units reworked

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Product Yield
Start 100 motors per day
80% are good
50% of poor quality units can be reworked
Yield = I (%G) + I (1 - %G)(%R)
Y = 100(0.80) + 100(1 - 0.80)(0.50)
= 90 motors
If product quality is increased to 90% good,
Y = 100(0.90) + 100(1 - 0.90)(0.50)
= 95 motors

Example 14.2
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Product Cost
(direct manufacturing cost per unit)(input) +
(rework cost per unit)(reworked units)
Product cost =
yield

(Kd) I + (Kr) R
Product cost =
Y
where
Kd = direct manufacturing cost per unit

I = input
Kr = rework cost per unit
R = reworked units
Y = yield
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Product Cost
Direct mfg cost = $30, Rework cost = $12
100 motors started, 20% defective
50% of defective motors can be reworked
(Kd) I + (Kr) R
Product cost =
Y
($30)(100) + ($12)(10)
Product cost = 90 motors= $34.67 per motor

The manufacturing cost after quality improvement is

($30)(100) + ($12)(5)
Product cost = = $32.21 per motor
95 motors
Example 14.3
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Multistage Product Yield

Y = I (%g1)(%g2)...(%gn)

where
I = input batch size
%gi = percent good at stage i

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Multistage Process Yield

AVERAGE PERCENTAGE
STAGE GOOD QUALITY
1 0.93
Start with 2 0.95
100 motors 3 0.97
4 0.92

Y = (I) (%g1)(%g2)...(%gn)
= (100)(0.93)(0.95)(0.97)(0.92)
Y = 78.8 motors
Solve for I

Y 100
I= = = 126.8 motors
(%g1)(%g2)...(%gn) (0.93)(0.95)(0.97)(0.92)

Example 14.4
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Quality Productivity Ratio (QPR)

Includes productivity and quality costs
Increases
if processing or rework costs decrease
if process yield increases

Good-quality units
QPR = (100)
(input)(processing cost) +
(defective units)(rework cost)

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QPR Example
Direct cost = $30/unit Rework cost = $12/unit
Start with 100 motors per day
80% are good, 50% of defective units can be reworked

Company studies 4 changes


1. Increase production to 200 units/day
2. Cut processing cost to $26 & rework cost to $10
3. Increase yield to 95%
4. Combine 2 and 3

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QPR Example
Direct cost = $30/unit Rework cost = $12/unit
Start with 100 motors per day
80% are good, 50% of defective units can be reworked

Base case:
80 + 10
QPR = (100) = 2.89
(100)($30) + (10)($12)

Case 1: Increase input to capacity of 200 units

160 + 20
QPR = (100) = 2.89
(200)($30) + (20)($12)

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QPR Example
Case 2: Reduce processing cost to $26 and rework to $10
80 + 10
QPR = (100) = 3.33
(100)($26) + (10)($10)

Case 3: Increase initial good-quality to 95%


95 + 2.5
QPR = (100) = 3.22
(100)($30) + (2.5)($12)

Case 4: Decrease costs and increase initial good-quality

95 + 2.5
QPR = (100) = 3.71
(100)($26) + (2.5)($10)

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Employees and Quality
Improvement
Employee involvement
Quality circles
Process improvement teams
Employee suggestions

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Statistical Process
Control

Take periodic samples from process


Plot sample points on control chart
Determine if process
is within limits UCL

Prevent quality
problems LCL

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Variation
Common Causes
Variation inherent in a process
Can be eliminated only through
improvements in the system

Special Causes
Variation due to identifiable factors
Can be modified through operator or
management action
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Types of Data

Attribute data
Product characteristic
evaluated with a discrete choice
Good/bad, yes/no
Variable data
Product characteristic that
can be measured
Length, size, weight, height,
time, velocity

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SPC Applied to Services

Nature of defect is different in


services
Service defect is a failure to meet
customer requirements
Monitor times, customer
satisfaction

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Service Quality Examples
Hospitals
Timeliness, responsiveness,
accuracy of lab tests
Grocery Stores
Check-out time, stocking, cleanliness
Airlines
Luggage handling, waiting times,
courtesy
Fast food restaurants
Waiting times, food quality,
cleanliness, employee courtesy
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Service Quality Examples
Catalog-order companies
Order accuracy, operator
knowledge and courtesy,
packaging, delivery time,
phone order waiting time
Insurance companies
Billing accuracy, timeliness of claims
processing, agent availability and
response time

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Statistical Process Control (SPC)

SPC is a collection of tools that


when used together can result in
process stability and variability
reduction

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Seven Quality Control Tools
Pareto Analysis 1
Process

Flow Chart
2
3
1 2 3 4 4
Dirt 5

Check Sheet
Old
Temp
Fault

Histogram x xx
x
x x x

Scatter Diagram
x x
x x x
x UCL
x x x

SPC Chart LCL

Cause-and-Effect Diagram

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Pareto Chart
NUMBER OF
CAUSE DEFECTS PERCENTAGE

Poor design 80 64 %
Wrong part dimensions 16 13
Defective parts 12 10
Incorrect machine calibration 7 6
Operator errors 4 3
Defective material 3 2
Surface abrasions 3 2
125 100 %

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Pareto
Chart 70
(64)
60
Percent from each cause
50

40

30

20
(13)
(10)
10 (6)
(3) (2) (2)
0

Causes of poor quality


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Flow Chart

Start/
Finish Operation Operation Decision Operation

Operation Operation

Decision Start/
Finish

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Check Sheet

Components Replaced By Lab


Time Period: 22 Feb To 27 Feb 2002
Repair Technician: Bob

TV Set Model 1013


Integrated Circuits ||||
Capacitors |||| |||| |||| |||| |||| ||
Resistors ||
Transformers ||||
Commands
CRT |

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Histogram
25

20

15

10

0
1 2 6 13 10 16 19 17 12 16 20 17 13 5 6 2 1

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Scatter Diagram
Y

X
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27
Control Chart
24
UCL = 23.35
21
Number of defects

18 c = 12.67

15

12

6
LCL = 1.99
3

2 4 6 8 10 12 14 16
Sample number
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Cause-and-Effect Diagram
Measurement Human Machines
Faulty
testing equipment Poor supervision Out of adjustment

Incorrect specifications Lack of concentration Tooling problems

Improper methods Inadequate training Old / worn

Quality
Inaccurate Problem
temperature
control Defective from vendor Poor process design
Ineffective quality
Not to specifications management
Dust and Dirt Material- Deficiencies
handling problems in product design

Environment Materials Process

Figure 14.6

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Quality Awards and
Certifications
The Malcolm Baldrige Award
The Deming Prize
RIT/USA Today Quality Cup
European Quality Award
Presidents Quality Award
Excellence in Productivity Improvement
NASA

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Implications Of ISO 9000
Truly international in scope
Certification required by many foreign
firms
U.S. firms export more than
$150 billion annually to Europe
Adopted by U.S. Navy,
DuPont, 3M, AT&T, and others

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ISO Family of Standards
ISO 9001:2000 Basis for certification
ISO 9004:2000 to prepare for national quality
award
ISO 10006 for project management
ISO 10007 for configuration management
ISO 10012 for measurement systems
ISO 10013 for quality documentation
ISO/TR 10014 managing economics of Q
ISO 10015 for training
ISO/TS 16949 for automotive suppliers
ISO 19011 for auditing
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Certificatio
n Structure

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ISO Accreditation
European registration
3rd party registrar assesses quality program
European Conformity (CE) mark authorized
United States 3rd party registrars
American National Standards Institute (ANSI)
American Society for Quality (ASQ)
Registrar Accreditation Board (RAB)

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Quality Philosophers

Walter Shewhart
W. Edwards Deming
Joseph Juran
Philip Crosby
Armand Feigenbaum

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Demings 14 Points
14
1. Create constancy of purpose
2. Adopt philosophy of prevention
3. Cease mass inspection
4. Select a few suppliers based on quality

5. Constantly improve system and workers

6. Institute worker training

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Demings 14 Points
7. Instill leadership among supervisors

8. Eliminate fear among employees

9. Eliminate barriers between departments

10. Eliminate slogans
11. Remove numerical quotas

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Demings 14 Points
12. Enhance worker pride
13. Institute vigorous training and
education programs

14. Develop a commitment from top
management to implement these 13
points
13

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The Deming Wheel
(or PDCA Cycle)

4. Act 1. Plan
Institutionalize Identify the
improvement; problem and
continue the develop the
cycle. plan for
improvement.

3. Study/Check 2. Do
Assess the plan; Implement the
is it working? plan on a test
basis.

Figure 14.2

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The Quality Organization

Circle 8-10 members


Same area
Supervisor/moderator

Process Presentation
Training
Group processes
Implementation Data collection
Monitoring Problem analysis

Problem
Solution Identification
Problem results List alternatives
Consensus
Brainstorming
Problem
Analysis
Cause and effect
Data collection
and analysis

Figure 14.3

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Total Quality Management
1. Customer defined quality
2. Top management leadership
3. Quality as a strategic issue
4. All employees responsible for quality

5. Continuous improvement
6. Shared problem solving
7. Statistical quality control
8. Training & education for all employees

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TQM Throughout the
Organization
Marketing, sales, research
Engineering
Purchasing
Human resources
Management
Packing, storing, shipping
After-sale support

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Malcolm Baldrige National Quality
Award
Named after the late secretary of commerce, a strong proponent of
enhancing quality as a means of reducing the trade deficit. The award
promotes, recognizes, and publicizes quality strategies and
achievements.

1. Category 1 Leadership 120 points


2. Category 2 Strategic Planning 85 points
3. Category 3 Customer and Market Focus 85 points
4. Category 4 Measurement, Analysis, and
Knowledge Management 90 points
5. Category 5 Human Resource Focus 85 points
6. Category 6 Process Management 85 points
7. Category 7 Business Results 450 points

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TQM and External Suppliers

Support of suppliers required to satisfy
customer expectations

Single-sourcing /
Partnering
Suppliers may be required to adopt quality
programs or meet specific standards

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TQM and Customer Satisfaction

Requires some form of measurement system



Customer surveys widely used

Total customer satisfaction is often an
organizations overriding objective

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TQM and Information Technology (IT)

Critical to monitoring and controlling quality in an organization

IT systems must be structured to satisfy the requirements of TQM
systems

IT systems tie together all the organization's functions and
processes

IT systems must be able to apply appropriate tools to drive
improvement

IT systems must be able to store and access relevant data for
analysis

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Strategic Implications of TQM

Quality is key to effective strategy

Clear strategic goal, vision, mission

High quality goals

Operational plans & policies


Feedback mechanism

Strong leadership

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TQM in Service Companies

Inputs similar to manufacturing

Processes & outputs are different

Services tend to be labor intensive

Quality measurement is harder

Timeliness is important measure

TQM principles apply to services

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