Chapter 3 Quality Management Meaning of Quality Websters

Chapter 3 Quality Management

Meaning of Quality § Webster’s Dictionary § degree of excellence of a thing § American Society for Quality § totality of features and characteristics that satisfy needs § Consumer’s and producer’s perspective Copyright 2006 John Wiley & Sons, Inc. 3 -2

Meaning of Quality: Consumer’s Perspective § Fitness for use § how well product does what it is supposed to § Quality of design § designing quality characteristics into a product Copyright 2006 John Wiley & Sons, Inc. 3 -3

Dimensions of Quality: Manufactured Products § Performance § basic operating characteristics of a product; § Features § “extra” items added to basic features, § Reliability § probability that a product will operate properly within an expected time frame Copyright 2006 John Wiley & Sons, Inc. 3 -4

Dimensions of Quality: Manufactured Products (cont. ) § Conformance § § degree to which a product meets pre–established standards Durability § § how long product lasts before replacement? Serviceability § ease of getting repairs, speed of repairs, courtesy and competence of repair person Copyright 2006 John Wiley & Sons, Inc. 3 -5

Dimensions of Quality: Manufactured Products (cont. ) § Aesthetics § how a product looks, feels, sounds, smells, or tastes? § Safety § assurance that customer will not suffer injury or harm from a product; an especially important consideration for automobiles § Perceptions § subjective perceptions based on brand name, advertising, and like Copyright 2006 John Wiley & Sons, Inc. 3 -6

Dimensions of Quality: Service § Time and timeliness § § how long must a customer wait for service, and is it completed on time? is an overnight package delivered overnight? § Completeness: § § is everything customer asked for provided? is a mail order from a catalogue company complete when delivered? Copyright 2006 John Wiley & Sons, Inc. 3 -7

Dimensions of Quality: Service (cont. ) § Courtesy: § § how are customers treated by employees? are catalogue phone operators nice and are their voices pleasant? § Consistency § § is same level of service provided to each customer each time? is your newspaper delivered on time every morning? Copyright 2006 John Wiley & Sons, Inc. 3 -8

Dimensions of Quality: Service (cont. ) § Accessibility and convenience § § how easy is it to obtain service? does service representative answer you calls quickly? § Accuracy § § is service performed right every time? is your bank or credit card statement correct every month? § Responsiveness § § how well does company react to unusual situations? how well is a telephone operator at able to respond to a customer’s questions? Copyright 2006 John Wiley & Sons, Inc. 3 -9

Meaning of Quality: Producer’s Perspective § Quality of conformance § Making sure product or service is produced according to design § § if new tires do not conform to specifications, y wobble if a hotel room is not clean when a guest checks in, hotel is not functioning according to specifications of its design Copyright 2006 John Wiley & Sons, Inc. 3 -10

Meaning of Quality: A Final Perspective § Consumer’s and producer’s perspectives depend on each other § Consumer’s perspective: PRICE § Producer’s perspective: COST § Consumer’s view must dominate Copyright 2006 John Wiley & Sons, Inc. 3 -11

Meaning of Quality Producer’s Perspective Quality of Conformance Production • Conformance to specifications • Cost Consumer’s Perspective Quality of Design • Quality characteristics • Price Marketing Fitness for Consumer Use Copyright 2006 John Wiley & Sons, Inc. 3 -12

Total Quality Management w Commitment to quality throughout organization w Principles of TQM n n n n Customer-oriented Leadership Strategic planning Employee responsibility Continuous improvement Cooperation Statistical methods Training and education Copyright 2006 John Wiley & Sons, Inc. 3 -13

Quality Gurus w Walter Shewart n n In 1920 s, developed control charts Introduced term “quality assurance” w W. Edwards Deming n n Developed courses during World War II to teach statistical quality-control techniques to engineers and executives of companies that were military suppliers After war, began teaching statistical quality control to Japanese companies w Joseph M. Juran n n Followed Deming to Japan in 1954 Focused on strategic quality planning Copyright 2006 John Wiley & Sons, Inc. 3 -14

Quality Gurus (cont. ) § Armand V. Feigenbaum § In 1951, introduced concepts of total quality control and continuous quality improvement § Philip Crosby § § In 1979, emphasized that costs of poor quality far outweigh cost of preventing poor quality In 1984, defined absolutes of quality management— conformance to requirements, prevention, and “zero defects” § Kaoru Ishikawa § § § Promoted use of quality circles Developed “fishbone” diagram Emphasized importance of internal customer Copyright 2006 John Wiley & Sons, Inc. 3 -15

Deming’s 14 Points 1. 2. 3. 4. Create constancy of purpose Adopt philosophy of prevention Cease mass inspection Select a few suppliers based on quality 5. Constantly improve system and workers Copyright 2006 John Wiley & Sons, Inc. 3 -16

Deming’s 14 Points (cont. ) 6. Institute worker training 7. Instill leadership among supervisors 8. Eliminate fear among employees 9. Eliminate barriers between departments 10. Eliminate slogans Copyright 2006 John Wiley & Sons, Inc. 3 -17

Deming’s 14 Points (cont. ) 11. Remove numerical quotas 12. Enhance worker pride 13. Institute vigorous training and education programs 14. Develop a commitment from top management to implement above 13 points Copyright 2006 John Wiley & Sons, Inc. 3 -18

Deming Wheel: PDCA Cycle 4. Act Institutionalize improvement; continue cycle. 1. Plan Identify problem and develop plan for improvement. 3. Study/Check 2. Do Assess plan; is it working? Implement plan on a test basis. Copyright 2006 John Wiley & Sons, Inc. 3 -19

TQM and… w … Partnering n a relationship between a company and its supplier based on mutual quality standards w … Customers n system must measure customer satisfaction w … Information Technology n infrastructure of hardware, networks, and software necessary to support a quality program Copyright 2006 John Wiley & Sons, Inc. 3 -20

Quality Improvement and Role of Employees w Participative problem solving n employees involved in

Quality Circle Organization 8 -10 members Same area Supervisor/moderator Training Presentation Implementation Monitoring Group processes Data collection Problem analysis Solution Problem Identification Problem results Problem Analysis List alternatives Consensus Brainstorming Cause and effect Data collection and analysis Copyright 2006 John Wiley & Sons, Inc. 3 -22

Strategic Implications of TQM w Strong leadership w Goals, vision, or mission w Operational

Six Sigma w A process for developing and delivering near perfect products and services w Measure of how much a process deviates from perfection w 3. 4 defects per million opportunities w Champion n an executive responsible for project success Copyright 2006 John Wiley & Sons, Inc. 3 -24

Cost of Quality w Cost of Achieving Good Quality n Prevention costs l n costs incurred during product design Appraisal costs of measuring, testing, and analyzing w Cost of Poor Quality n Internal failure costs l n include scrap, rework, process failure, downtime, and price reductions External failure costs l include complaints, returns, warranty claims, liability, and lost sales Copyright 2006 John Wiley & Sons, Inc. 3 -25

Prevention Costs w Quality planning costs n costs of developing and implementing quality management program w Training costs n w Product-design costs of designing products with quality characteristics w Process costs n costs expended to make sure productive process conforms to quality specifications Copyright 2006 John Wiley & Sons, Inc. costs of developing and putting on quality training programs for employees and management w Information costs of acquiring and maintaining data related to quality, and development of reports on quality performance 3 -26

Appraisal Costs w Inspection and testing n costs of testing and inspecting materials, parts, and product at various stages and at end of process w Test equipment costs n costs of maintaining equipment used in testing quality characteristics of products w Operator costs n costs of time spent by operators to gar data for testing product quality, to make equipment adjustments to maintain quality, and to stop work to assess quality Copyright 2006 John Wiley & Sons, Inc. 3 -27

Internal Failure Costs w Scrap costs n costs of poor-quality products that must be discarded, including labor, material, and indirect costs w Rework costs n costs of fixing defective products to conform to quality specifications w Process failure costs n costs of determining why production process is producing poor-quality products Copyright 2006 John Wiley & Sons, Inc. w Process downtime costs n costs of shutting down productive process to fix problem w Price-downgrading costs n costs of discounting poorquality products—that is, selling products as “seconds” 3 -28

External Failure Costs w Customer complaint costs n costs of investigating and satisfactorily responding to a customer complaint resulting from a poor-quality product w Product return costs of handling and replacing poor-quality products returned by customer w Warranty claims costs n costs of complying with product warranties Copyright 2006 John Wiley & Sons, Inc. w Product liability costs n litigation costs resulting from product liability and customer injury w Lost sales costs n costs incurred because customers are dissatisfied with poor quality products and do not make additional purchases 3 -29

Measuring and Reporting Quality Costs w Index numbers n n ratios that measure quality costs against a base value labor index l n cost index l n ratio of quality cost to manufacturing cost sales index l n ratio of quality cost to labor hours ratio of quality cost to sales production index l ratio of quality cost to units of final product Copyright 2006 John Wiley & Sons, Inc. 3 -30

Quality–Cost Relationship w Cost of quality n n Difference between price of nonconformance and conformance Cost of doing things wrong l n Cost of doing things right l n 20 to 35% of revenues 3 to 4% of revenues Profitability l In the long run, quality is free Copyright 2006 John Wiley & Sons, Inc. 3 -31

Product Cost where: Kd = direct manufacturing cost per unit I = input Kr

Quality–Productivity Ratio QPR n productivity index that includes productivity and quality costs (non-defective units) QPR = (input) (processing cost) + (defective units) (reworked cost) Copyright 2006 John Wiley & Sons, Inc. 3 -33

Seven Quality Control Tools w w Pareto Analysis Flow Chart Check Sheet Histogram Copyright

Pareto Analysis CAUSE NUMBER OF DEFECTS Poor design Wrong part dimensions Defective parts Incorrect machine calibration Operator errors Defective material Surface abrasions Copyright 2006 John Wiley & Sons, Inc. PERCENTAGE 80 16 12 7 4 3 3 64 % 13 10 6 3 2 2 125 100 % 3 -35

Po or De si gn di m en De si fe on ct s iv e M pa ac rts hi ne ca O pe libr at ra io to ns re r De ro rs fe ct iv e Su m at rfa er ce ia ls ab ra si on s W ro ng Percent from each cause 70 (64) 60 20 10 Pareto Chart 50 40 30 (13) (10) Copyright 2006 John Wiley & Sons, Inc. (6) (3) (2) 0 Causes of poor quality 3 -36

Flow Chart Start/ Finish Operation Copyright 2006 John Wiley & Sons, Inc. Operation Decision

Histogram 20 15 10 5 0 1 2 6 13 10 16 19 17

Scatter Diagram Y X Copyright 2006 John Wiley & Sons, Inc. 3 -39

Control Chart 24 UCL = 23. 35 Number of defects 21 c = 12.

Cause-and-Effect Diagram Measurement Faulty testing equipment Inadequate training Environment Old / worn Quality Problem Defective from vendor Not to specifications Dust and Dirt Tooling problems Lack of concentration Improper methods Machines Out of adjustment Poor supervision Incorrect specifications Inaccurate temperature control Human Materialhandling problems Materials Copyright 2006 John Wiley & Sons, Inc. Poor process design Ineffective quality management Deficiencies in product design Process 3 -41

ISO 9000 w A set of procedures and policies for international quality certification of suppliers w Standards n ISO 9000: 2000 l l Quality Management Systems—Fundamentals and Vocabulary defines fundamental terms and definitions used in ISO 9000 family Copyright 2006 John Wiley & Sons, Inc. w ISO 9001: 2000 n n Quality Management Systems —Requirements standard to assess ability to achieve customer satisfaction w ISO 9004: 2000 n n Quality Management Systems —Guidelines for Performance Improvements guidance to a company for continual improvement of its quality-management system 3 -42

Implications of ISO 9000 for U. S. Companies w Many overseas companies will not do business with a supplier unless it has ISO 9000 certification w ISO 9000 accreditation w ISO registrars w A total commitment to quality is required throughout an organization Copyright 2006 John Wiley & Sons, Inc. 3 -43