1. Chapter 7 Quality Management2

2. OBJECTIVES Total Quality Management Defined
Quality Specifications and Costs
Six Sigma Quality and Tools
ISO 9000
External Benchmarking
Service Quality Measurement 2

3. Total Quality Management (TQM) Defined
Total quality management is defined as managing the entire organization so that it excels on all dimensions of products and services that are important to the customer 3

4. Total Quality Management (TQM)
The TQM culture follows the Deming approach:
Cultural environment for SPC
Training employees in the TQM concept
Problem solving
Design of experiments
TQM is customer (external/internal) driven
TQM is company-wide not QC departments only

5. Culture of TQM Participative management:
Create proper cultural environment
Promote team concepts
Change of attitude (management and labor)
Company versus individual goals
Have a long-term focus
TQM is based on an integrated whole
All departments
All functions
All people in the company

6. TQM Concepts Interest mostly due to: The goal is customer satisfaction
Consumer interest in quality—more for their money
Foreign competition
The trade deficit
The goal is customer satisfaction
TQM integrates all function/processes in the company

7. Malcolm Baldrige National Quality Award
Initiated in 1987 to promote quality
Foreign competition was rationale
Award set national standards for quality
Designed to promote awareness:
Awareness of quality as competitive weapon
Requirements for quality excellence
Benchmarking: information sharing

8. Quality Specifications
Design quality:
Inherent value of the product in the marketplace
Strategic decision for the firm
Dimensions include:
Performance, Features, Reliability, Durability,
Serviceability, Response, Aesthetics, and
Reputation.
Conformance quality:
Degree to which the product or service design specifications are met 7

9. Internal Failure Costs
Costs of Quality
Appraisal Costs
External Failure
Costs
Prevention Costs
Costs of
Quality
Prevention is
cheaper
Failures are
caused
Internal Failure Costs

10. Costs of Quality Appraisal costs: Prevention costs:
Inspection and testing of purchased materials
Inspection and testing of products
Prevention costs:
Training of employees in quality
Quality planning activities
Internal failure costs:
Costs of scrap and rework
Costs of analyzing failures
External failure costs:
Costs of warrantees
Costs of liabilities

11. Six Sigma Quality
A philosophy and set of methods companies use to eliminate defects in their products and processes
Seeks to reduce variation in the processes that lead to product defects
The name, “six sigma” refers to the variation that exists within plus or minus three standard deviations of the process outputs

12. Six Sigma Quality (Continued)
Six Sigma allows managers to readily describe process performance using a common metric: Defects Per Million Opportunities (DPMO)

13. Six Sigma Quality (Continued)
Example of Defects Per Million Opportunities (DPMO) calculation. Suppose we observe 200 letters delivered incorrectly to the wrong addresses in a small city during a single day when a total of 200,000 letters were delivered. What is the DPMO in this situation?
So, for every one million letters delivered this city’s postal managers can expect to have 1,000 letters incorrectly sent to the wrong address.
Cost of Quality: What might that DPMO mean in terms of over-time employment to correct the errors?

14. Six Sigma Quality: DMAIC Cycle
Define, Measure, Analyze, Improve, and Control (DMAIC)
Developed by General Electric as a means of focusing effort on quality using a methodological approach
Overall focus of the methodology is to understand and achieve what the customer wants
DMAIC consists of five steps….

15. Six Sigma Quality: DMAIC Cycle (Continued)
1. Define (D)
Customers and their priorities
2. Measure (M)
Process and its performance
3. Analyze (A)
Causes of defects
4. Improve (I)
Remove causes of defects
5. Control (C)
Maintain quality

16. Analytical Tools for Six Sigma and Continuous Improvement: Flow Chart
No, Continue…
Material Received from Supplier
Inspect Material for Defects
Defects found?
Yes
Return to Supplier for Credit
Can be used to find quality problems 4

17. Analytical Tools for Six Sigma and Continuous Improvement: Run Chart
Can be used to identify when equipment or processes are not behaving according to specifications
0.44
0.46
0.48
0.5
0.52
0.54
0.56
0.58 1 2 3 4 5 6 7 8 9 10 11 12
Time (Hours)
Diameter

18. Analytical Tools for Six Sigma and Continuous Improvement: Pareto Analysis
80%
Can be used to find when 80% of the problems may be attributed to 20% of the causes
Frequency
Design
Assy.
Instruct.
Purch.
Training
Other 12

19. Analytical Tools for Six Sigma and Continuous Improvement: Checksheet
Can be used to keep track of defects or used to make sure people collect data in a correct manner
Monday
Billing Errors
Wrong Account
Wrong Amount
A/R Errors 16

20. Analytical Tools for Six Sigma and Continuous Improvement: Histogram
Can be used to identify the frequency of quality defect occurrence and display quality performance
Number of Lots 1 2 3 4
Defects in lot
Data Ranges 14

21. Analytical Tools for Six Sigma and Continuous Improvement: Cause & Effect Diagram
Possible causes:
The results or effect
Man
Machine
Material
Method
Environment
Effect
Can be used to systematically track backwards to find a possible cause of a quality problem (or effect) 17

22. Analytical Tools for Six Sigma and Continuous Improvement: Control Charts
Can be used to monitor ongoing production process quality and quality conformance to stated standards of quality
970
980
990
1000
1010
1020 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
LCL
UCL

23. Other Six Sigma Tools
Opportunity Flow Diagram used to graphically show those activities that add value from those that are performed (and maybe could be reduced or removed) that do not add value to the finished product
Failure Mode and Effect Analysis (DMEA) is a structured approach to identify, estimate, prioritize, and evaluate risk of possible failures at each stage in the process
Design of Experiments (DOE) a statistical test to determine cause-and-effect relationships between process variables and output

24. Six Sigma Roles and Responsibilities
Executive leaders must champion the process of improvement
Corporation-wide training in Six Sigma concepts and tools
Setting stretch objectives for improvement
Continuous reinforcement and rewards

25. The Shingo System: Fail-Safe Design
Shingo’s argument:
SQC methods do not prevent defects
They provide information about defects but after the fact
Errors can best be prevented by strategic placement of controls within the process
Defects arise when people make errors
Defects can be prevented by providing workers with feedback on errors
Might require 100% inspection at all times 21

26. Poka-Yoke Fail-safe procedures or devices that: Include checklists
Prevent the worker from making an error that leads to a defect before starting a process, or
Give rapid feedback of abnormalities in the process to the worker in time to correct it

27. ISO 9000
Series of standards agreed upon by the International Organization for Standardization (ISO)
Adopted in 1987
More than 100 countries
A prerequisite for global competition?
ISO 9000 directs you to "document what you do and then do as you documented" 24

28. ISO 9000 Series
9001
Model for Quality Assurance in Design, Production Installation, and Servicing
9002
Model for Quality Assurance in Production and Installation
9003
Model for Quality Assurance in Final Inspection and Test

29. Guidelines for Use
9000
Quality Management and Quality Assurance Standards: Guidelines for Selection and Use
9004
Quality Management and Quality Systems Elements—Guidelines

30. Three Forms of ISO Certification
1. First party: A firm audits itself against ISO 9000 standards
2. Second party: A customer audits its supplier
3. Third party: A "qualified" national or international standards or certifying agency serves as auditor 27

31. More About ISO 9000 They are not award programs
They just provide criteria for measuring quality systems
They are quite flexible
Applies to all industries
It is a worldwide standard
Offers opportunity for global competition

32. External Benchmarking Steps
1. Identify those processes needing improvement
2. Identify a firm that is the world leader in performing the process
3. Contact the managers of that company and make a personal visit to interview managers and workers
4. Analyze data 20

33. Steps to Benchmarking Align benchmark goals to organizational goals
Develop methods of measuring performance
Undertake benchmark improvement activities
Measure performance
Repeat the process and continue to improve

34. Benefits of Benchmarking
Cultural change
Allows firm to set realistic goals
Engenders cultural change: compare oneself
Performance improvement
Forces firm to define and identify gaps
Provides way for improvement
Human resource benefits
Recognizes the importance of people
Provides for training and make them part of problem-solving process

35. Pitfalls of Benchmarking
It is not a panacea
Will not work if the culture is lacking
Could be counterproductive
Potential pitfalls
Failure to involve/empower employees
Failure to define/understand own process first
Failure to take action on results
Failure to set realistic goals

36. Service Quality Measurement:Servqual
A perceived service quality questionnaire survey methodology
Examines “Dimensions of Service Quality” including: Reliability, Responsiveness, Assurance, Empathy, and Tangibles (e.g., appearance of physical facilities, equipment, etc.) 20

37. Service Quality Measurement: Servqual (Continued)
New version of this methodology is called “e-Service Quality” dealing service on the Internet
Dimensions of Service Quality on the e- Service methodology include:
Reliability, Responsiveness, Access, Flexibility, Ease of Navigation, Efficiency, Assurance/Trust, Security/Privacy, Price Knowledge, Site Aesthetics, and Customization/Personalization 20