QUALITY MANAGEMENT

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OM
CHAPTER 15
QUALITY MANAGEMENT
DAVID A. COLLIER AND JAMES R. EVANS
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Chapter 15 Quality Management

• Quality management refers to systematic policies,
  methods, and procedures used to ensure that goods
  and services are produced with appropriate levels
  of quality to meet the needs of customers.
• Organizations today integrate quality principles
  into their management systems using tools such as
  Total Quality Management (TQM), Six Sigma, and
  Lean Operating Systems (Chapter 17).

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Chapter 15 Quality Management

• Understanding Quality
• Quality can be a confusing concept, partly
  because people view quality in relation to
  differing criteria based on their individual
  roles in the value chain, such as
• perfection,
• delighting or pleasing the customer,
• eliminating waste,
• doing it right the first time, and/or
• consistency.

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Chapter 15 Quality Management

• Understanding Quality
• Fitness for use is the ability of a good or
  service to meet customer needs.
• Quality of conformance is the extent to which a
  process is able to deliver output that conforms
  to design specifications.
• Specifications are targets and tolerances
  determined by designers of goods and services.

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Chapter 15 Quality Management

• Understanding Quality
• Quality Control means ensuring consistency in
  processes to achieve conformance.
• Service Quality is consistently meeting or
  exceeding customer expectations (external focus)
  and service delivery system performance criteria
  (internal focus) during all service encounters.

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Chapter 15 Quality Management

• Understanding Quality
• Principles of Total Quality
• A focus on customers and stakeholders,
• A process focus supported by continuous
  improvement and learning, and
• Participation and teamwork by everyone in the
  organization.

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Chapter 15 Influential Leaders in Quality
Management

• W. Edwards Deming
• Focus on bringing about improvements in product
  and service quality by reducing uncertainty and
  variability in goods and services design and
  associated processes (the beginning of his ideas
  in 1920s and 1930s).
• Higher quality leads to higher productivity and
  lower costs.
• 14 Points management philosophy.
• Deming Cycle Plan, Do, Study, and Act.

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Chapter 15 Influential Leaders in Quality
Management
W. Edwards Deming 14 Points Point 1 Create a
Vision and Demonstrate Commitment Point
2 Learn the Philosophy Point 3 Understand
Inspection Point 4 Stop Making Decisions
Purely on the Basis of Cost Point 5
Improve Constantly and Forever Point 6
Institute Training Point 7 Institute
Leadership
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Chapter 15 Influential Leaders in Quality
Management
W. Edwards Deming 14 Points Point 8 Drive Out
Fear Point 9 Optimize the Efforts of Teams
Point 10 Eliminate Exhortations Point 11
Eliminate Numerical Quotas Point 12 Remove
Barriers to Pride in Work Point 13 Encourage
Education and Self- Improvement Point
14 Take Action
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Exhibit Extra
The Deming Cycle

• Plan study current situation
• Do implement plan on trial basis
• Study determine if trial is working correctly
• Act standardize improvements

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Chapter 15 Quality Management

• ISO 90002000
• Quality standards were created in 1987 and
  revised in 1994 and 2000 to improve product
  quality, improve the quality of operations
  processes, and provide confidence to
  organizations and customers that quality system
  requirements are fulfilled.
• Internationally recognized (and sometimes
  required to do business in certain countries).
• Standardizes key terms in quality and provides a
  set of basic principles for initiating quality
  management systems.

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Chapter 15 Quality Management

• Six Sigma
• Six Sigma is a business improvement approach that
  seeks to find and eliminate causes of defects and
  errors in manufacturing and service processes by
  focusing on outputs that are critical to
  customers and results in a clear financial return
  for the organization.
• Used by companies including Motorola, Allied
  Signal, Texas Instruments, and General Electric.

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Chapter 15 Quality Management
Six Sigma Defects are any mistakes or errors that
are passed on to the customer (many people also
use the term nonconformance). Defects per unit
(DPU)Number of defects discovered
Number of units processed
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Chapter 15 Quality Management

• Six Sigma
• The Six Sigma concept characterizes quality
  performance by defects per million opportunities
  (dpmo), computed as DPU ? 1,000,000 opportunities
  for error (or, as is often used in services,
  errors per million opportunities epmo).

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Chapter 15 Quality Management

• Six Sigma
• A DPU measure might be lost bags per customer.
  However, customers may have different numbers of
  bags thus the number of opportunities for error
  is the average number of bags per customer.
• If the average number of bags per customer is
  1.6, and the airline recorded 3 lost bags for
  8,000 passengers in one month (note 12,800
  opportunities for error in one month), then
• epmo (3/8,000 DPU) ? 1,000,000/1.6 234.375

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Chapter 15 Quality Management

• Six Sigmas DMAIC Process
• Define identify customers and their priorities
  identify and define a suitable project identify
  CTQs (critical to quality characteristics).
• 2. Measure determine how to measure the process
  and how it is performing identify key internal
  processes that influence CTQs and measure current
  defects.
• 3. Analyze determine likely causes of defects
  and understand why defects are generated by
  identifying key variables that cause process
  variation.

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Chapter 15 Quality Management
Six Sigmas DMAIC Process 4. Improve identify
means to remove causes of defects confirm key
variables modify the process to stay within
acceptable range. 5. Control determine how to
maintain improvements put tools in place to
ensure that key variables remain within
acceptable ranges under the modified process.
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Chapter 15 Quality Management

• Cost of Quality Measurements
• The cost of quality refers to the costs
  associated with avoiding poor quality or those
  incurred as a result of poor quality. Four major
  categories are
• Prevention costs are those expended to keep
  nonconforming goods and services from being made
  and reaching the customer.
• Appraisal costs are those expended on
  ascertaining quality levels through measurement
  and analysis of data to detect and correct
  problems.

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Chapter 15 Quality Management

• Cost of Quality Measurements
• Internal-failure costs are costs incurred as a
  result of unsatisfactory quality that is found
  before delivery of good or service to the
  customer.
• External-failure costs are incurred after
  poor-quality goods or services reach the customer.

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Chapter 15 Seven Tools of Quality Management

• The Seven QC Tools
• Flowcharts process mapping to identify the
  sequence of activities or flow of materials/
  information in a process.
• Run Charts and Control Charts a run chart is a
  line graph with data plotted over time control
  charts include control limits.
• Checksheets simple tools for data collection,
  ensure completeness.
• Histograms graphically represent frequency of
  values within a specified group.

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Exhibit 15.3
The Structure of a Control Chart
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Exhibit 15.4
Defective Item Checksheet
Source K. Ishikawa, Guide to Quality Control
(Tokyo Asian Productivity Organization, 1982),
p. 33.
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Chapter 15 Seven Tools of Quality Management

• The Seven QC Tools
• Pareto Diagrams separate the vital few from the
  trivial many causes provide direction for
  selecting projects for improvement.
• Cause-and-Effect Diagrams represent chain of
  relationships often called a fishbone diagram.
• Scatter Diagrams graphical component of
  regression analysis.

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Exhibit 15.5
Use of Pareto Diagrams for Progressive Analysis
Source Small Business Guidebook to Quality
Management, Office of the Secretary of Defense,
Quality Management Office, Washington, DC (1988).
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Exhibit 15.6
Cause-and-Effect Diagram for Hospital Emergency
Admission
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Chapter 15 Quality Management
Other Quality Improvement Strategies Kaizen
focuses on small, gradual, and frequent
improvements over the long term with minimum
financial investment and with participation by
everyone in the organization. Poka-yoke
(mistake-proofing) is an approach for
mistake-proofing processes using automatic
devices or methods to avoid simple human error.