Quality Defined

 ASQC – totality of features and characteristics of a product or

service that bears on its ability to satisfy given needs
 fitness for its use – how well does the product do what the
customer thinks it should do and wants it to do
Dimensions of Quality
 quality of design - degree to which quality characteristics are
designed into a product
 products or services designed with different levels of quality for
different types of customers
 customer determines quality
Dimensions of Quality (cont)
 customer dimensions of product quality
 performance, features, reliability
 conformance, durability, serviceability
 aesthetics, safety, other perceptions
Dimensions of Quality (cont)
 customer dimensions of service quality
 time and timeliness, completeness, courtesy, consistency
 accessibility and convenience, accuracy, responsiveness
 quality characteristics weighed by customer relative to cost of
product or service
Dimensions of Quality (cont)
 quality from producer perspective
 quality of conformance – product is produced according to
design specifications
 achieving quality of conformance

design of production process

equipment, technology, materials

employees, use of statistical quality control (SQC)
TQM
 TQM – total commitment to quality throughout the entire
organization
 Deming approach to quality management
 continuous improvement of production process to achieve
conformance to specifications and reduce variation
 two primary sources of process improvement
 common causes of quality problems – poor product
design or insufficient employee training
 special causes of quality problems – improperly
operating equipment or a poor operator
TQM (cont)
 emphasizes extensive use of SQC to reduce variability in
production process
 dismisses extensive use of inspections as coming too late to
reduce product defects
 primary responsibility for quality is with employee and
manager, not quality manager or inspection technician
TQM (cont)
 Deming's 14 points

create constancy pf purpose toward product
improvement

prevent poor-quality products rather than acceptable
levels of poor quality
 eliminate need for inspection to achieve quality and rely
on SQC to improve product and process design
 select a few suppliers or vendors based on quality
commitment rather than competitive prices
TQM (cont)

constantly improve production process by focus on two
primary sources of quality problems, the system and
workers
 institute worker training on prevention of quality problems
and use of SQC
 instill leadership among supervisors to help workers
perform better
 encourage employee involvement by eliminating fear of
reprisal for asking questions and identifying quality
problems
TQM (cont)

eliminate barriers between departments and promote
cooperation and a team approach
 eliminate slogans and numerical targets that encourage
workers to achieve higher performance levels without
first showing them how to do it
 eliminate numerical quotas which employees attempt to
meet at any cost without regard for quality
 enhance worker pride, artistry, and self-esteem by
improving supervision and the production process so that
workers can perform to their capabilities
TQM (cont)

institute training programs in methods of quality
improvement throughout the entire organization
 develop a commitment from top management to
implement previous points
 Deming Wheel (PDCA Cycle) – plan, do, study/check, act
TQM (cont)
 Joseph Juran - included quality in strategic planning process
 strategic quality planning - determine desired quality level
and design production process to achieve desired quality
characteristics
 emphasizes quality improvement by focus on chronic quality
problems and securing a ‘break-thru’ solution
 hundreds, or even thousands, of quality improvement
projects going on at any one time
TQM (cont)
 Phillip Crosby – author of 1979 book Quality is Free
 emphasized the cost of poor quality
 cost of poor quality far outweighs cost of preventing poor
quality
TQM (cont)
 Armand Feigenbaum – introduced ‘total quality control’ in 1980s
 total quality control – total commitment of management and
employees throughout the organization to improve quality
 Japanese adopt this approach – referred to as company-
wide quality control
 Japanese believe all employees at all levels are responsible
for continuous quality improvement
TQM (cont)
 TQM and continuous process improvement
 focus of continuous process improvement is business
processes rather than business functions
 continuous process improvement

identify critical processes

analyze processes to find out how all tasks and functions
are interrelated
 objective is to determine how to improve process while
improving quality of work performed
TQM (cont)
 principles of TQM
 TQM is set of principles that focus on quality improvement
as driving force in all functional areas and in all levels in an
organization
 principles of TQM

customer defines quality and customer needs are top
priority
 top management must provide leadership for quality
 quality is a strategic issue
 quality is the responsibility of all employees at all levels
TQM (cont)

all functions within an organization must focus on
continuous quality improvement
 quality problems are solved through cooperation among
employees and management
 problem solving and continuous quality improvement are
SQC methods
 training and education of all employees is the basis for
continuous quality improvement
TQM (cont)
 TQM throughout the organization
 marketing and R&D, engineering
 purchasing, human resources
 management, shipping
 customer service
TQM (cont)
 strategic implications of TQM
 quality as core competency
 quality as order qualifier or order winner
 quality as means to position firm to compete
Cost of Quality
 costs of quality fall into two categories
 cost of quality assurance – cost of achieving quality

prevention costs
 reflect philosophy of doing it right first time
 examples of prevention costs - quality planning
costs, product design costs, process costs, training
costs, and information costs
Cost of Quality (cont)

appraisal costs
 catch mistakes after the fact
 examples of appraisal costs – inspection and testing,
test equipment, and operator costs
 cost of not conforming to specifications – costs associated
with poor quality
 cost of failures is difference between what it actually
costs to produce a product and what it would cost if there
were no failures
 cost of poor quality is usually largest quality cost source
in organization
Cost of Quality (cont)

two types of cost of nonconforming
 internal failure costs

discovered before product is delivered to
customer

lower for service than manufacture

examples of internal failure costs – scrap,
rework, process failure, process downtime, price-
downgrading
Cost of Quality (cont)
 external failure costs

discovered after customer receives poor quality
product
 examples of external failure costs – customer
complaint, product return, warranty claims,
product liability, and lost sales
Cost of Quality (cont)
 index numbers are one means of measuring and reporting
quality costs
 index numbers are ratios which measure quality costs
against a base value
 general form is quality index = (total quality cost / base) x
100
 useful as standard to make comparisons over time
Cost of Quality (cont)
 labor index

(total quality cost / direct labor hours) x 100

may not be appropriate for comparisons where
technology change reduces labor usage
 cost index

(total quality cost / manufacturing cost) x 100

not affected by technology change
Cost of Quality (cont)
 sales index

(total quality cost / sales) x 100

may be distorted by changes in selling price or costs
 production index

(total quality cost / # units final product) x 100

may not be as effective where have number of different
products
Cost of Quality (cont)
 quality-cost relationship
 as prevention and appraisal costs increase, internal and
external failure costs typically decrease
 as company focuses on achieving quality, cost of achieving
good quality goes down – leads companies to frequently
seek 100% quality or zero defects
Cost of Quality (cont)
 Japanese focus on improving quality at minimum cost

improve capabilities and training of employees rather
than on engineering solutions

concentrate on quality characteristics in design stage
rather than trying to build quality in production process
 long-term view of firm success suggests firms who take
long-term focus on quality do increase profitability
Cost of Quality (cont)
 impact of quality management on productivity
 productivity = output / input
 quality impact on productivity – fewer defects increases
output while quality improvement reduces inputs
Cost of Quality (cont)
 product yield (Y) for single stage production process

Y = (I) (%G) + (I) (1 - %G) (%R) where
 I = planned number of units started in the production
process
 %G = % good units produced
 %R = % reworked units
 any increase in % of good products produced will
increase product yield
Cost of Quality (cont)
 product yield for multiple stage production process with no
rework
 Y = (I) (%g1) (%g2) . . . (%gi) where

I = input of items in the production process that will result
in finished products
 %gi = good quality, work-in-progress products at stage I
Cost of Quality (cont)
 product manufacturing cost
 cost = ((Kd) (I) + (Kr) (R)) / (Y) where

 Kd = direct manufacturing cost per unit

 I = input
 Kr = rework cost per unit
 R = reworked units
 Y = yield
Cost of Quality (cont)
 quality-productivity ratio (QPR)

QPR = (good quality units)(100) / ((input) (processing
cost) + (defective units) (rework cost))

QPR increases if
 either processing cost or rework cost or both

decrease
 more good quality units are produced relative to total
product input (number of units that begin production
process)
Cost of Quality (cont)
 indirect productivity gains

quality improvement may have indirect as well as direct
impact of productivity

in general, any quality improvements or improved
designs which enhance the workplace, reduce
congestion, or smooth out and speed up production
process increase productivity
Cost of Quality (cont)
 quality improvement and role of employees

participative problem solving – involves employees
directly in quality management process

quality circles – group of workers from same area who
address production problems
 process improvement teams – includes members from
inter-related functions that make up a process
QC Improvement Tools
 Pareto analysis
 flow charts (process flow chart)
 check sheets
 histograms
 scatter diagrams
 statistical process control (SPC) charts
 cause-and effect diagrams
Quality Awards
 Malcolm Baldridge National Quality Award (since 1987)
 given annually to one or two companies in each of three
categories: manufacturing, services, and small businesses
(less than 500 full-time employees)
 award criteria – leadership, information and analysis,
strategic quality planning, human resource utilization, quality
assurance of products and service, quality results, and
customer satisfaction
 marked increase in productivity in firms who have been
finalists or winners
Quality Awards (cont)
 Deming Prize
 created in 1957 in Japan to honor Edwards Deming
 highly coveted and sought after in Japan
 companies from other countries can apply as well
 ISO 9000
 standards are set forth by the International Organization for
Standardization (ISO) located in Geneva, Switzerland
 members are national standards organizations for more than 90
countries
 ISO member for US is the American National Standards
Institute (ANSI)
 purpose of ISO is to facilitate global consensus agreements on
international quality standards
 result is a system for certifying suppliers to make sure they meet
internationally accepted standards for quality management
ISO 9000 (cont)
 ISO 9000 (published 1978) provides standards and guidance for
using four standards - for example ISO 9001
 Quality Systems - Model for Quality Assurance in

Design/Development, Production, Installation, and Servicing

 applies to suppliers who have responsibility for the design
and development, production, installation, and servicing of a
product
 includes set of requirements for supplier’s quality
management program, beginning with top management and
providing objective criteria to verify that key elements of total
quality management approach are present
ISO 9000 (cont)
 three other ISO standards (ISO 9002, 9003, and 9004) exist
depending on degree to which a supplier is responsible for
product from design to installation and servicing
 implication of ISO 9000 for US companies – must be ISO 9000
certified to compete
 many foreign countries will not do business with suppliers
who are not ISO 9000 accredited
 many US companies are being pressured by US customers
to ISO 9000 certified
ISO 9000 (cont)
 ISO 9000 accreditation
 accredited registrar assesses a company for a fee to
determine if it complies with ISO 9000 standards
 for US supplier to export ISO 9000 regulated products to an
EC (European Community) country, it must be accredited by
European registrars; more and more EC companies are
requiring ISO 9000 certification (EC conformity mark) for
unregulated products
 eventually all products exported to EC will probably require
ISO 9000 certification
ISO 14000
 new environmental management standard in development by
ISO; probably adopted soon
 contains five core elements – environmental management,
auditing, performance evaluation, labeling, and life-cycle
assessment
 advantages – positive public image, reduced exposure to
liability, good systematic approach to pollution prevention
through minimized ecological impact of products and processes,
and compliance with regulatory environment