Chapter 14

Quality Management
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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 pre-

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 Production Conformance to specifications Cost

Quality of Design Marketing

Quality characteristics Price

Figure 14.1

Fitness for Consumer Use

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

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Demings 14 Points
1. 2. 3. 4. Create constancy of purpose Adopt philosophy of prevention Cease mass inspection 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

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The Deming Wheel (or PDCA Cycle)

4. Act
Institutionalize improvement; continue the cycle.

1. Plan
Identify the problem and develop the plan for improvement.

3. Study/Check
Assess the plan; is it working?

2. Do
Implement the plan on a test basis.

Figure 14.2
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Total Quality Management

1. 2. 3. 4. 5. 6. 7. 8. Customer defined quality Top management leadership Quality as a strategic issue All employees responsible for quality Continuous improvement Shared problem solving Statistical quality control 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 AfterTo Accompany Russell and Taylor, Operations Management, 4th Edition, 2003 Prentice-Hall, Inc. All rights reserved.

TQM and External Suppliers

 Support of suppliers required to satisfy customer expectations  Single-sourcing Single 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

 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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Quality on the Web

 Internet creates new rules doing business  Key factors in differentiating firms  B2B largest part of Internet business  Direct sales more visible  Internet removes the human dimension
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Dimensions of Web Quality

1. Ease of use 2. Clarity of information and instructions 3. Server reliability 4. Speed of page loading 5. Transaction time 6. Aesthetics 7. Privacy and security 8. Domain name 9. Human backup 10. Transaction reliability
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Cost of Quality
 Cost of achieving good quality
Prevention
 Planning, Product design, Process, Training, Information

Appraisal
 Inspection and testing, Test equipment, Operator
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Cost of Quality
 Cost of poor quality
Internal failure costs
 Scrap, Rework, Process failure, Process downtime, PricePricedowngrading

External failure costs

 Customer complaints, Product return, Warranty, Product liability, Lost sales
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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 Quality Costs Prevention Appraisal Internal failure External failure Total $ 27,000 155,000 386,400 242,000 $ 810,400 2000 41,500 122,500 469,200 196,000 829,200 2001 74,600 113,400 347,800 103,500 639,300 2002 112,300 107,000 219,100 106,000 544,400

Accounting Measures Sales $ 4,360,000 Mfg costs 1,760,000

4,450,000 1,810,000

5,050,000 1,880,000

5,190,000 1,890,000

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Quality Costs and Index

total quality costs Quality index = (100) base $810,400(100) Quality cost per sale = 4,360,000
YEAR 1999 2000 2001 2002 QUALITY SALES INDEX 18.58 18.63 12.66 10.49

= 18.58

QUALITY MANUFACTURING COST INDEX 46.04 45.18 34.00 28.80

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Quality 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 profit--maker  In the long run, quality and profitability are closely related
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Quality and Productivity

 Productivity = output 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) (I)(%G (I )(%R

where Y I %G %R = yield = number units started in production = percentage good units = 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) (I)(%G (I )(%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) )(I (K )(R Product cost = Y

where Kd I Kr R Y = direct manufacturing cost per unit = input = rework cost per unit = reworked units = 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) )(I (K )(R Product cost = Y ($30)(100) + ($12)(10) Product cost = = $34.67 per motor 90 motors The manufacturing cost after quality improvement is ($30)(100) + ($12)(5) Product cost = 95 motors
Example 14.3

= $32.21 per motor

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Multistage Product Yield

Y = (I) (%g1)(%g2)...(%gn) (I (%g )(%g )...(%g where I = input batch size %gi = percent good at stage i

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Multistage Process Yield

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

Y = (I) (%g1)(%g2)...(%gn) (I (%g )(%g )...(%g = (100)(0.93)(0.95)(0.97)(0.92) Y = 78.8 motors Solve for I Y 100 I= = = 126.8 motors (%g )(%g )...(%g (%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 QPR = GoodGood-quality units (input)(processing cost) + (defective units)(rework cost) (100)

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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)($30) + (10)($12) (100) = 2.89

Case 1: Increase input to capacity of 200 units 160 + 10 QPR = (200)($30) + (20)($12) (100) = 2.89

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

Case 3: Increase initial good-quality to 95% good95 + 10 QPR = (100) = 3.22 (100)($30) + (2.5)($12) Case 4: Decrease costs and increase initial good-quality good95 + 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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The Quality Circle Process

Organization
8-10 members Same area Supervisor/moderator

Presentation

Training
Group processes Data collection Problem analysis

Implementation Monitoring

Solution
Problem results

Problem Identification
List alternatives Consensus Brainstorming

Problem Analysis
Cause and effect Data collection and analysis

Figure 14.3
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Seven Quality Control Tools

 Pareto Analysis  Flow Chart  Check Sheet  Histogram  Scatter Diagram  SPC Chart  Cause-and-Effect Diagram Cause-and1 2 3 4
Dirt Old Temp Fault

Process 1 2 3 4 5

x x x x x x

x x x

x xx x x x

UCL

LCL

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

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Percent from each cause

Pareto Chart

70 60 50 40 30 20 10 0

(64)

(13)

(10) (6) (3) (2) (2)

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 5 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 24 21

Control Chart
UCL = 23.35 c = 12.67

Number of defects

18 15 12 9 6 3 2

LCL = 1.99

10

12

14

16

Sample number
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Cause-andCause-and-Effect Diagram
Measurement
Faulty testing equipment Incorrect specifications Improper methods

Human
Poor supervision Lack of concentration Inadequate training

Machines
Out of adjustment Tooling problems Old / worn

Inaccurate temperature control

Quality Problem
Defective from vendor Not to specifications Poor process design Ineffective quality management Deficiencies in product design

Dust and Dirt

MaterialMaterialhandling problems

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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ISO 9000 Categories

 ISO 9001  ISO 9002  ISO 9003  ISO 9004 ~ ~ ~ ~ Suppliers and Designers Production Inspection and Test Quality Management

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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 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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