1. Chapter 14 Quality Management
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.

2. What Is Quality?
“The degree of excellence of a thing” (Webster’s Dictionary)
“The totality of features and characteristics that satisfy needs” (ASQ)
Fitness for use
Quality of design

3. Relevant Web sites

4. Dimensions of Quality (Garvin)
Performance
Basic operating characteristics
Features
“Extra” items added to basic features
Reliability
Probability product will operate over time

5. Dimensions of Quality (Garvin)
Conformance
Meeting pre-established standards
Durability
Life span before replacement
Serviceability
Ease of getting repairs, speed & competence of repairs

6. Dimensions of Quality (Garvin)
Aesthetics
Look, feel, sound, smell or taste
Safety
Freedom from injury or harm
Other perceptions
Subjective perceptions based on brand name, advertising, etc

7. Service Quality Time & Timeliness Completeness Courtesy
Customer waiting time, completed on time
Completeness
Customer gets all they asked for
Courtesy
Treatment by employees

8. Service Quality Consistency Accessibility & Convenience Accuracy
Same level of service for all customers
Accessibility & Convenience
Ease of obtaining service
Accuracy
Performed right every time
Responsiveness
Reactions to unusual situations

9. Quality of Conformance
Ensuring product or service produced according to design
Depends on
Design of production process
Performance of machinery
Materials
Training

10. Producer’s Perspective Consumer’s Perspective
The Meaning of Quality
Fitness for
Consumer Use
Producer’s Perspective
Consumer’s Perspective
Quality of Conformance
Conformance to specifications
Cost
Quality of Design
Quality characteristics
Price
Marketing
Production
The Meaning of Quality
Figure 14.1

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

12. Deming’s 14 Points Create constancy of purpose
Adopt philosophy of prevention
Cease mass inspection
Select a few suppliers based on quality
Constantly improve system and workers
Institute worker training

13. Deming’s 14 Points Instill leadership among supervisors
Eliminate fear among employees
Eliminate barriers between departments
Eliminate slogans
Remove numerical quotas

14. Deming’s 14 Points Enhance worker pride
Institute vigorous training and education programs
Develop a commitment from top management to implement these 13 points

15. The Deming Wheel (or PDCA Cycle)
1. Plan
Identify the problem and develop the plan for improvement.
2. Do
Implement the plan on a test basis.
3. Study/Check
Assess the plan; is it working?
4. Act
Institutionalize improvement; continue the cycle.
Figure 14.2

16. Total Quality Management
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

17. TQM Throughout the Organization
Marketing, sales, research
Engineering
Purchasing
Human resources
Management
Packing, storing, shipping
After-sale support
Marketing, sales, R&D
define what customer wants
Engineering
specifications, parts requirements, job design
Purchasing
acquire high quality parts & material
Personnel
hire qualified employees
Management
maintain smooth flow through processes
Packing, storing, shipping
prevent product damage
Customer service
install & provide instructions 15

18. 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

19. TQM and Customer Satisfaction
Requires some form of measurement system
Customer surveys widely used
Total customer satisfaction is often an organization’s overriding objective

20. 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

21. 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

22. 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

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

24. 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
Human backup
Transaction reliability

25. Cost of Quality Cost of achieving good quality Prevention Appraisal
Planning, Product design, Process, Training, Information
Appraisal
Inspection and testing, Test equipment, Operator
Cost of achieving good quality
Prevention
quality planning, product design
process, training
information
Appraisal
inspection & testing
test equipment
operator
Cost of poor quality
Internal failure costs
scrap, rework
process failure & downtime
downgrading products
External failure costs
customer complaints
returns, warranty
product liability, lost sales 18

26. Cost of Quality Cost of poor quality Internal failure costs
Scrap, Rework, Process failure, Process downtime, Price-downgrading
External failure costs
Customer complaints, Product return, Warranty, Product liability, Lost sales
Cost of achieving good quality
Prevention
quality planning, product design
process, training
information
Appraisal
inspection & testing
test equipment
operator
Cost of poor quality
Internal failure costs
scrap, rework
process failure & downtime
downgrading products
External failure costs
customer complaints
returns, warranty
product liability, lost sales 18

27. 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

28. Quality Costs and Index
YEAR
Quality Costs
Prevention $ 27,000 41, , ,300
Appraisal 155, , , ,000
Internal failure 386, , , ,100
External failure 242, , , ,000
Total $ 810, , , ,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

29. Quality Costs and Index
Quality index = (100)
total quality costs
base
Quality cost per sale = = 18.58
$810,400(100)
4,360,000
QUALITY QUALITY MANUFACTURING
YEAR SALES INDEX COST INDEX

30. Quality–Cost 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

31. 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

32. Quality and Productivity
output
input
Fewer defects increase output
Quality improvement reduces inputs

33. 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 units started in production
% G = percentage good units
% R = percentage of defective units reworked

34. 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( )(0.50)
= 90 motors
Y = 100(0.90) + 100( )(0.50)
= 95 motors
If product quality is increased to 90% good,
Example 14.2

35. Product Cost (Kd)(I) + (Kr)(R) Y
(direct manufacturing cost per unit)(input) + (rework cost per unit)(reworked units)
yield
Product 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

36. Product Cost Direct mfg cost = $30, Rework cost = $12
100 motors started, 20% defective
50% of defective motors can be reworked
Product cost =
(Kd)(I) + (Kr)(R) Y
Product cost = = $34.67 per motor
($30)(100) + ($12)(10)
90 motors
The manufacturing cost after quality improvement is
Product cost = = $32.21 per motor
($30)(100) + ($12)(5)
95 motors
Example 14.3

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

38. Multistage Process Yield
AVERAGE PERCENTAGE
STAGE GOOD QUALITY
1 0.93
2 0.95
3 0.97
4 0.92
Start with 100 motors
Y = (I) (%g1)(%g2)...(%gn)
= (100)(0.93)(0.95)(0.97)(0.92)
Y = 78.8 motors
Solve for I
I = = = motors Y
(%g1)(%g2)...(%gn)
100
(0.93)(0.95)(0.97)(0.92)
Example 14.4

39. Quality Productivity Ratio (QPR)
Includes productivity and quality costs
Increases
if processing or rework costs decrease
if process yield increases
QPR = (100)
Good-quality units
(input)(processing cost) + (defective units)(rework cost)

40. 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
Increase production to 200 units/day
Cut processing cost to $26 & rework cost to $10
Increase yield to 95%
Combine 2 and 3

41. 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:
QPR = (100) = 2.89
(100)($30) + (10)($12)
Case 1: Increase input to capacity of 200 units
QPR = (100) = 2.89
(200)($30) + (20)($12)

42. QPR Example Case 2: Reduce processing cost to $26 and rework to $10
(100)($26) + (10)($10)
Case 3: Increase initial good-quality to 95%
QPR = (100) = 3.22
(100)($30) + (2.5)($12)
Case 4: Decrease costs and increase initial good-quality
QPR = (100) = 3.71
(100)($26) + (2.5)($10)

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

44. The Quality Circle Process
Presentation
Implementation
Monitoring
Solution
Problem results
Problem Analysis
Cause and effect
Data collection and analysis
Problem Identification
List alternatives
Consensus
Brainstorming
Training
Group processes
Data collection
Problem analysis
Organization
8-10 members
Same area
Supervisor/moderator
Figure 14.3

45. Seven Quality Control Tools1 2 3 4
Dirt
Old
Temp
Fault x
UCL
LCL 5
Process
Pareto Analysis
Flow Chart
Check Sheet
Histogram
Scatter Diagram
SPC Chart
Cause-and-Effect Diagram

46. 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 %

47. Percent from each cause
Pareto Chart
Percent from each cause
Causes of poor quality
Machine calibrations
Defective parts
Wrong dimensions
Poor Design
Operator errors
Defective materials
Surface abrasions 10 20 30 40 50 60 70
(64)
(13)
(10)
(6)
(3)
(2)

48. Flow Chart
Operation
Decision
Start/ Finish

49. Check Sheet Integrated Circuits ||||
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 |

50. Histogram 5 10 15 20 25

51. Scatter Diagram Y X

52. Control Chart Number of defects Sample number 18 12 6 3 9 15 21 24 2710 14 16
Sample number
Number of defects
UCL = 23.35
LCL = 1.99
c = 12.67

53. Cause-and-Effect Diagram
Quality
Problem
Out of adjustment
Tooling problems
Old / worn
Machines
Faulty
testing equipment
Incorrect specifications
Improper methods
Measurement
Poor supervision
Lack of concentration
Inadequate training
Human
Deficiencies
in product design
Ineffective quality
management
Poor process design
Process
Inaccurate
temperature
control
Dust and Dirt
Environment
Defective from vendor
Not to specifications
Material-
handling problems
Materials
Figure 14.6

54. Quality Awards and Certifications
The Malcolm Baldrige Award
The Deming Prize
RIT/USA Today Quality Cup
European Quality Award
President’s Quality Award
Excellence in Productivity Improvement
NASA

55. ISO 9000 Categories ISO 9001 ~ Suppliers and Designers
ISO ~ Production
ISO ~ Inspection and Test
ISO ~ Quality Management

56. 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

57. 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)