1. Beni Asllani University of Tennessee at Chattanooga
Chapter 2
Quality Management
Operations Management - 6th Edition
Roberta Russell & Bernard W. Taylor, III
Beni Asllani University of Tennessee at Chattanooga
Copyright 2009 John Wiley & Sons, Inc.

2. Lecture Outline Some slides have notes beneath them. What Is Quality?
The Deming Wheel and Quality Tools
TQM and QMS
Focus of Quality Management—Customers
Role of Employees in Quality Improvement
Six Sigma
Cost of Quality
Baldrige Award
ISO 9000
CE Mark
Some slides have notes beneath them.
Copyright 2009 John Wiley & Sons, Inc.

3. What is Quality? General definitions
Fitness for use and quality of design
Dimensions of quality for goods and services
Measuring service quality
Product specifications and conformance quality
What is quality? – A final perspective
Copyright 2009 John Wiley & Sons, Inc.

4. What Is Quality?
Oxford American Dictionary: a degree or level of excellence
American Society for Quality: the totality of features and characteristics that satisfy [customer] needs without deficiencies
Customer’s and producer’s perspective
In Operations, a customer is any organization or person that purchases your company's goods or services, either directly or through an intermediary, such as a retailer or distributor. Some manufacturers sell only to business customers, such as other manufacturers, retailers, distributors, and service companies. When the final customer is a consumer, then the perspectives of consumers and intermediaries are both important.
Copyright 2009 John Wiley & Sons, Inc.

5. What Is Quality: Customer’s Perspective
Fitness for use: how well a product or service does what it is supposed to
Quality of design: designing quality characteristics into a product or service – first step in quality assurance
Goods and services with the highest design quality offer better performance and features.
A Mercedes and a Ford are equally “fit for use,” but with different design requirements.
What does "fitness for use" mean in your doctor's office? at a fine dining restaurant? at McDonalds?
Copyright 2009 John Wiley & Sons, Inc.

6. Dimensions of Quality for Goods
Performance
Features
Reliability
Conformance to specifications
Durability
Serviceability and quality of service
Aesthetics
Safety
Customer perceptions
As you study each characteristic, try to think of an industry in which that characteristic is particularly important.
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7. Dimensions of Service Quality
Time and timeliness
Completeness
Courtesy
Consistency
Accessibility and convenience
Accuracy
Responsiveness
As you study each characteristic, try to think of an industry in which that characteristic is particularly important.
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8. Measuring Service Quality
Absolute measures are based on a fixed standard and can be measured numerically
Waiting time and service time
% of transactions without errors.
Web site availability
Perceptual measures are based on customers’ opinions.
How important was this characteristic to the customer?
How satisfied was the customer?
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9. Product or Service Specification
Characteristics of the product or service which will be measured to determine quality
Target values for each characteristic
Should be based on customer expectations
If a product or service consistently meets specifications, it has conformance quality.
A company's operations function is expected to produce goods or services with conformance quality.
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10. Producer – Based Quality (Conformance quality)
Conformance to specifications.
Specifications must be based on customer expectations or requirements
Initial specifications are set when the product is designed
Specifications may change over time as technology and customer requirements change
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11. Achieving Conformance Quality
Conformance quality depends on most of the things we do in Operations Management
Product or service design
Process technology and equipment
Purchasing and materials management
Planning and scheduling
Hiring, training, and supervision
Measurement and control
EJR 2006
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12. Customer Requirements Product launch activities: Revise periodically
Product Specifications
Process Specifications
Statistical Process Control:
Measure & monitor quality
Meets
Specifications?
Ongoing Activities
Fix process or inputs No
Yes
Conformance Quality
EJR 2006

13. Meaning of Quality
Copyright 2009 John Wiley & Sons, Inc.

14. What Is Quality: A Final Perspective
Customer’s and producer’s perspectives depend on each other
Producer’s perspective:
production process and COST
Customer’s perspective:
fitness for use and PRICE
Customer’s view must dominate
Copyright 2009 John Wiley & Sons, Inc.

15. Levels of Quality Improvement
Incremental: many small improvements add up to major improvements at modest cost
Uses Plan-Do-Check-Act cycle and quality tools
Breakthrough improvements: large improvements required to meet business objectives
Re-engineer the process
Six Sigma is often used
New technology is often needed
EJR 2006
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16. Deming Wheel: PDCA Cycle
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17. Quality Tools Process Flow Chart Cause-and-Effect Diagram Check Sheet
Pareto Analysis
Histogram
Scatter Diagram
Statistical Process
Control Chart
Copyright 2009 John Wiley & Sons, Inc.

18. Flow Chart We will discuss flowcharts in Chapter 6.
Copyright 2009 John Wiley & Sons, Inc.

19. Cause-and-Effect Diagram
Cause-and-effect diagram (“fishbone” diagram)
chart showing different categories of problem causes
The major categories (yellow boxes) in this diagram apply to most quality problems.
The cause-and effect diagram is usually generated through a brainstorming session. The diagram is a good way to organize the data.
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20. Check Sheets and Histograms
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21. Pareto Analysis Most quality problems result from a few causes
Sort data from largest to smallest
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22. Pareto Chart In most situations, the problem that occurs
most often should be
solved first.
Continuous improvement is
the long-term goal, and
other problems should not
be ignored.
Copyright 2009 John Wiley & Sons, Inc.

23. Pareto Analysis and Cumulative Sums
Starting with the most common problem, which problems
must be solved to eliminate 80% of the defects?
Copyright 2009 John Wiley & Sons, Inc.

24. Scatter Diagram The cause is the independent variable (x-axis).
The effect or problem is the dependent variable (y-axis).
Copyright 2009 John Wiley & Sons, Inc.

25. Control Chart We will discuss control charts in Chapter 3.
Copyright 2009 John Wiley & Sons, Inc.

26. Total Quality Management (TQM)
A commitment to quality throughout an organization
Includes anything that is important to customers
Customer-oriented
Requires leadership
Requires strategic planning
Every employee is responsible for quality
Requires cooperation
The quality standard is zero defects.
Requires training
Quality is measured
Statistical process control and quality tools are used to improve.
Copyright 2009 John Wiley & Sons, Inc.

27. Quality Management System
Quality Management System (QMS)
a company-wide system to achieve customer satisfaction that complements other company systems
Describes the policies and procedures that are necessary to improve and control specific processes, leading to improved business performance
Examples: Baldrige Award criteria, Six Sigma
Copyright 2009 John Wiley & Sons, Inc.

28. Focus of Quality Management— Customers
TQM and QMS
serve to achieve customer satisfaction
Partnering
a relationship between a company and its supplier based on mutual quality standards
Measuring customer satisfaction
important component of any QMS
customer surveys, telephone interviews
used to identify product or service characteristics that should be improved
Copyright 2009 John Wiley & Sons, Inc.

29. Role of Employees in Quality Improvement
Participative problem solving
employees involved in quality-management
every employee has undergone extensive training to provide quality service to Disney’s guests
Kaizen
involves everyone in process of continuous improvement
Copyright 2009 John Wiley & Sons, Inc.

30. Quality Circles and QITs
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
Quality circle
group of workers and supervisors from same area who address quality problems
Process/Quality improvement teams (QITs)
focus attention on business processes rather than separate company functions
Copyright 2009 John Wiley & Sons, Inc.

31. Six Sigma
A process for developing and delivering virtually perfect products and services
Measure of how much a process deviates from perfection
3.4 defects per million opportunities
Champion
an executive responsible for project success
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32. Six Sigma: Breakthrough Strategy—DMAIC
DEFINE
MEASURE
ANALYZE
IMPROVE
CONTROL
3.4 DPMO
67,000 DPMO
cost = 25% of sales
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33. Six Sigma: Black Belts and Green Belts
project leader
Master Black Belt
a teacher and mentor for Black Belts
Green Belts
project team members
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34. Six Sigma Design for Six Sigma (DFSS) Profitability
a systematic approach to designing products and processes that will achieve Six Sigma
Profitability
typical criterion for selection Six Sigma project
one of the factors distinguishing Six Sigma from some TQM programs
Copyright 2009 John Wiley & Sons, Inc.

35. Cost of Quality Cost of Achieving Good Quality Cost of Poor Quality
Prevention costs
costs incurred during product design
Appraisal costs
costs of measuring, testing, and analyzing
Cost of Poor Quality
Internal failure costs
include scrap, rework, process failure, downtime, and price reductions
External failure costs
include complaints, returns, warranty claims, liability, and lost sales
If a company has not had a quality management system (QMS) in the past, then prevention costs will include the costs of developing and implementing a QMS.
Copyright 2009 John Wiley & Sons, Inc.

36. Prevention Costs Quality planning costs Product-design costs
costs of developing and implementing quality management program
Product-design costs
costs of designing products with quality characteristics
Process costs
costs expended to make sure production process conforms to quality specifications
Training costs
costs of developing and putting on quality training programs for employees, management, & suppliers
Information costs
costs of acquiring and maintaining data related to quality, and development and analysis of reports on quality performance
Copyright 2009 John Wiley & Sons, Inc.

37. Appraisal Costs Inspection and testing Test equipment costs
costs of testing and inspecting materials, parts, and product at various stages and at end of process
Test equipment costs
costs of maintaining equipment used in testing quality characteristics of products
Operator costs
costs of time spent by operators to gather data for testing product quality, to make equipment adjustments to maintain quality, and to assess quality
Copyright 2009 John Wiley & Sons, Inc.

38. Internal Failure Costs
Scrap costs
costs of poor-quality products that must be discarded, including labor, material, and indirect costs
Rework costs
costs of fixing defective products to conform to quality specifications
Process failure costs
costs of determining why the production process is producing poor-quality products
Process downtime costs
costs of shutting down production process to fix a problem
Price-downgrading costs
costs of discounting poor-quality products—that is, selling products as “seconds”
Copyright 2009 John Wiley & Sons, Inc.

39. External Failure Costs
Customer complaint costs
costs of investigating and satisfactorily responding to a customer complaint resulting from a poor-quality product
Product return costs
costs of handling and replacing poor-quality products returned by customer
Warranty claims costs
costs of complying with product warranties
Product liability costs
litigation costs resulting from product liability and customer injury
Lost sales costs
costs incurred because customers are dissatisfied with poor-quality products and do not make additional purchases
Copyright 2009 John Wiley & Sons, Inc.

40. Quality–Cost Relationship
The cost of quality is the difference between the cost of nonconformance and the cost of conformance
cost of doing things wrong: 20 to 35% of revenues
cost of doing things right: 3 to 4% of revenues
Finalists for the Malcolm Baldrige National Quality Award have shown that corporate-wide quality improvement programs increase productivity, customer satisfaction, market share, and profitability.
Copyright 2009 John Wiley & Sons, Inc.

41. Baldrige Award Competitive quality award presented by U. S. government
5 award categories: Manufacturing, services, small business, health care, education
All written applications are reviewed by trained examiners
Site visits to leading candidates
Maximum of 2 awards per category per year
EJR 2006
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42. Baldrige Award Criteria
Leadership
Information and analysis
Strategic planning
Human resource focus
Process management
Customer and market focus
Business results (most important)
Copyright 2009 John Wiley & Sons, Inc.

43. ISO 9000 Standards
International quality certification program guided by the International Standards Organization (ISO)
Any firm that passes an ISO 9000 standards audit will be certified.
U. S. participates in the development of these standards:
American National Standards Institute (ANSI)
American Society for Quality (ASQ)
Professional organizations
EJR 2006
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44. ISO 9000
ISO 9000 standards audits must be performed by a registrar, a firm that is certified to do ISO 9000 audits
Some companies require their suppliers to be ISO 9000 certified
Be sure that your registrar is acceptable to your customers
Firms must be re-certified periodically.
EJR 2006
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45. CE Mark -
Shows that a good meets the product standards of the European Union (EU)
If the EU has a standard for a product, a company must earn the CE mark to sell that product in the EU.
Many EU companies also require their suppliers to be ISO 9000 certified.
Copyright 2009 John Wiley & Sons, Inc.
Copyright 2006 John Wiley & Sons, Inc.
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46. Copyright 2009 John Wiley & Sons, Inc. All rights reserved
Copyright 2009 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permission Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein.
Copyright 2009 John Wiley & Sons, Inc.