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Quality DefinedASQC 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 thecustomer thinks it should do and wants it to do

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Dimensions of Qualityquality of design - degree to which quality characteristics aredesigned into a product

products or services designed with different levels of quality for different types of customers

customer determines quality

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Dimensions of Quality (cont)customer dimensions of product quality

performance, features, reliability

conformance, durability, serviceability

aesthetics, safety, other perceptions

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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

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Dimensions of Quality (cont)quality from producer perspective

quality of conformance product is produced according todesign specifications

achieving quality of conformance

design of production process

equipment, technology, materialsemployees, use of statistical quality control (SQC)

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TQMTQM total commitment to quality throughout the entireorganization

Deming approach to quality management

continuous improvement of production process to achieveconformance to specifications and reduce variation

two primary sources of process improvement

common causes of quality problems poor productdesign or insufficient employee training

special causes of quality problems improperlyoperating equipment or a poor operator

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TQM (cont)emphasizes extensive use of SQC to reduce variability inproduction process

dismisses extensive use of inspections as coming too late toreduce product defects

primary responsibility for quality is with employee andmanager, not quality manager or inspection technician

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TQM (cont)Deming's 14 points

create constancy pf purpose toward productimprovement

prevent poor-quality products rather than acceptablelevels of poor quality

eliminate need for inspection to achieve quality and relyon SQC to improve product and process design

select a few suppliers or vendors based on qualitycommitment rather than competitive prices

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TQM (cont)constantly improve production process by focus on twoprimary sources of quality problems, the system andworkers

institute worker training on prevention of quality problemsand use of SQC

instill leadership among supervisors to help workersperform better

encourage employee involvement by eliminating fear of reprisal for asking questions and identifying qualityproblems

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TQM (cont)eliminate barriers between departments and promotecooperation and a team approach

eliminate slogans and numerical targets that encourageworkers to achieve higher performance levels withoutfirst showing them how to do it

eliminate numerical quotas which employees attempt tomeet at any cost without regard for quality

enhance worker pride, artistry, and self-esteem byimproving supervision and the production process so thatworkers can perform to their capabilities

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TQM (cont)institute training programs in methods of qualityimprovement throughout the entire organization

develop a commitment from top management toimplement previous points

Deming Wheel (PDCA Cycle) plan, do, study/check, act

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TQM (cont)Joseph Juran - included quality in strategic planning process

strategic quality planning - determine desired quality leveland design production process to achieve desired qualitycharacteristicsemphasizes quality improvement by focus on chronic qualityproblems and securing a break-thru solution

hundreds, or even thousands, of quality improvement

projects going on at any one time

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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

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TQM (cont)Armand Feigenbaum introduced total quality control in 1980s

total quality control total commitment of management andemployees throughout the organization to improve qualityJapanese adopt this approach referred to as company-wide quality control

Japanese believe all employees at all levels are responsiblefor continuous quality improvement

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TQM (cont)TQM and continuous process improvement

focus of continuous process improvement is businessprocesses rather than business functions

continuous process improvement

identify critical processes

analyze processes to find out how all tasks and functionsare interrelatedobjective is to determine how to improve process whileimproving quality of work performed

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TQM (cont)principles of TQM

TQM is set of principles that focus on quality improvementas driving force in all functional areas and in all levels in anorganizationprinciples of TQM

customer defines quality and customer needs are toppriority

top management must provide leadership for qualityquality is a strategic issue

quality is the responsibility of all employees at all levels

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TQM (cont)all functions within an organization must focus oncontinuous quality improvement

quality problems are solved through cooperation amongemployees and management

problem solving and continuous quality improvement areSQC methodstraining and education of all employees is the basis for

continuous quality improvement

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TQM (cont)TQM throughout the organization

marketing and R&D, engineering

purchasing, human resources

management, shipping

customer service

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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

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Cost of Qualitycosts 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 planningcosts, product design costs, process costs, trainingcosts, and information costs

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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 associatedwith poor quality

cost of failures is difference between what it actuallycosts to produce a product and what it would cost if therewere no failures

cost of poor quality is usually largest quality cost sourcein organization

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Cost of Quality (cont)two types of cost of nonconforming

internal failure costs

discovered before product is delivered tocustomer

lower for service than manufacture

examples of internal failure costs scrap,

rework, process failure, process downtime, price-downgrading

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Cost of Quality (cont)index numbers are one means of measuring and reportingquality costs

index numbers are ratios which measure quality costsagainst a base value

general form is quality index = (total quality cost / base) x100

useful as standard to make comparisons over time

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Cost of Quality (cont)labor index

(total quality cost / direct labor hours) x 100

may not be appropriate for comparisons wheretechnology change reduces labor usage

cost index

(total quality cost / manufacturing cost) x 100

not affected by technology change

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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 differentproducts

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Cost of Quality (cont)quality-cost relationship

as prevention and appraisal costs increase, internal andexternal failure costs typically decrease

as company focuses on achieving quality, cost of achievinggood quality goes down leads companies to frequentlyseek 100% quality or zero defects

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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 stagerather than trying to build quality in production process

long-term view of firm success suggests firms who takelong-term focus on quality do increase profitability

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Cost of Quality (cont)impact of quality management on productivity

productivity = output / input

quality impact on productivity fewer defects increasesoutput while quality improvement reduces inputs

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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 productionprocess

%G = % good units produced%R = % reworked units

any increase in % of good products produced willincrease product yield

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Cost of Quality (cont)product yield for multiple stage production process with norework

Y = (I) (%g 1) (%g 2) . . . (%g i) where

I = input of items in the production process that will resultin finished products

%g i = good quality, work-in-progress products at stage I

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Cost of Quality (cont) product manufacturing cost

cost = ((K d) (I) + (K r ) (R)) / (Y) where

Kd = direct manufacturing cost per unit

I = inputKr = rework cost per unit

R = reworked unitsY = yield

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Cost of Quality (cont)quality-productivity ratio (QPR)

QPR = (good quality units)(100) / ((input) (processingcost) + (defective units) (rework cost))

QPR increases if either processing cost or rework cost or bothdecrease

more good quality units are produced relative to totalproduct input (number of units that begin productionprocess)

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Cost of Quality (cont)indirect productivity gains

quality improvement may have indirect as well as directimpact of productivity

in general, any quality improvements or improveddesigns which enhance the workplace, reducecongestion, or smooth out and speed up productionprocess increase productivity

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Cost of Quality (cont)quality improvement and role of employees

participative problem solving involves employeesdirectly in quality management process

quality circles group of workers from same area whoaddress production problems

process improvement teams includes members frominter-related functions that make up a process

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QC Improvement ToolsPareto analysis

flow charts (process flow chart)

check sheetshistograms

scatter diagramsstatistical process control (SPC) chartscause-and effect diagrams

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Quality AwardsMalcolm Baldridge National Quality Award (since 1987)

given annually to one or two companies in each of threecategories: manufacturing, services, and small businesses(less than 500 full-time employees)

award criteria leadership, information and analysis,strategic quality planning, human resource utilization, qualityassurance of products and service, quality results, and

customer satisfactionmarked increase in productivity in firms who have beenfinalists or winners

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ISO 9000standards are set forth by the International Organization for Standardization (ISO) located in Geneva, Switzerland

members are national standards organizations for more than 90countriesISO member for US is the American National StandardsInstitute (ANSI)

purpose of ISO is to facilitate global consensus agreements on

international quality standardsresult is a system for certifying suppliers to make sure they meetinternationally accepted standards for quality management

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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 Servicingapplies to suppliers who have responsibility for the designand development, production, installation, and servicing of aproduct

includes set of requirements for suppliers qualitymanagement program, beginning with top management andproviding objective criteria to verify that key elements of totalquality management approach are present

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ISO 9000 (cont)three other ISO standards (ISO 9002, 9003, and 9004) existdepending 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 9000certified to compete

many foreign countries will not do business with supplierswho are not ISO 9000 accredited

many US companies are being pressured by US customersto ISO 9000 certified

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ISO 14000new environmental management standard in development byISO; probably adopted soon

contains five core elements environmental management,auditing, performance evaluation, labeling, and life-cycleassessment

advantages positive public image, reduced exposure toliability, good systematic approach to pollution prevention

through minimized ecological impact of products and processes,and compliance with regulatory environment