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Chapter 9
Quality Management
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Total Quality Management (TQM)
• 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
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Quality Specifications
• Design quality: Inherent value of
the product in the marketplace
– Dimensions include: Performance,
Features, Reliability/Durability,
Serviceability, Aesthetics, and
Perceived Quality.
• Conformance quality: Degree to
which the product or service
design specifications are met
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Costs of Quality
Appraisal Costs
External Failure
Costs
Costs of
Quality
Prevention Costs
Internal Failure
Costs
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Quality movement
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The birth of 6 Sigma
• In 1980, Motorola involved in
Japanese BB Call market
• Through the use of statistical tools
• On Jan. 15, 1987, Motorola
launched ‘Six Sigma Quality
Program’
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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
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6 Sigma
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Standard Deviation vs Performance
Sigma
Errors/million transactions
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3.4 (99.9997%)
5
233 (99.98%)
4
6210 (99.38%)
3
66807 (93.32%)
2
308527 (70%)
1
690000 (29%)
transaction
99%
6 sigma
Lost orders/per
300,000 trans.
3000
1
complaints/50,000
trans.
410
<2
Computer down time
1.68hrs/wk
<1.8sec/wk
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Six Sigma Quality (Continued)
• Six Sigma allows managers to readily
describe process performance using a
common metric: Defects Per Million
Opportunities (DPMO)
DPMO 
Numberof defects
x 1,000,000
 Numberof 
 opportunit
ies  x No.of units
 for error per 
 unit



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The 6 sigma organization
• Champion
• Master Black Belt
• Black Belt
• Green Belt
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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
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Analytical Tools for Six Sigma and Continuous
Improvement: Flow Chart
Material
Received
from
Supplier
No,
Continue…
Inspect
Material for
Defects
Defects
found?
Yes
Can be used to
find quality
problems
Return to
Supplier
for Credit
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Analytical Tools for Six Sigma and Continuous Improvement:
Cause & Effect Diagram
Possible causes:
Machine
Man
The results
or effect
Effect
Environment
Method
Material
Can be used to systematically track backwards to
find a possible cause of a quality problem (or
effect)
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Analytical Tools for Six Sigma and Continuous
Improvement: Checksheet
Monday
Can be used to keep track of
defects or used to make sure
people collect data in a
correct manner
Billing Errors
Wrong Account
Wrong Amount
A/R Errors
Wrong Account
Wrong Amount
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Number of Lots
Analytical Tools for Six Sigma and Continuous Improvement:
Histogram
Can be used to identify the frequency of quality
defect occurrence and display quality
performance
0
1
2
Data Ranges
3
4 Defects
in lot
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Analytical Tools for Six Sigma and Continuous Improvement: Pareto
Analysis
80%
Frequency
Can be used
to find when
80% of the
problems
may be
attributed to
20% of the
causes
Design
Assy.
Instruct.
Purch.
Training
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Diameter
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
0.58
0.56
0.54
0.52
0.5
0.48
0.46
0.44
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2
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Time (Hours)
9
10 11 12
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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
1020
UCL
1010
1000
990
LCL
980
970
0
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2
3
4
5
6
7
8
9
10 11 12 13 14 15
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Six Sigma Roles and Responsibilities
1. Executive leaders must
champion the process of
improvement
2. Corporation-wide training
in Six Sigma concepts and
tools
3. Setting stretch objectives
for improvement
4. Continuous reinforcement
and rewards
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PDCA Cycle (Deming Wheel)
1. Plan a change
aimed at
improvement.
4. Institutionalize
the change or
abandon or do
it again.
4. Act
1. Plan
3. Check
2. Do
3. Study the results; did
it work?
2. Execute the
change.
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Continuous Improvement (CI)
• Management's view of performance standards of
the organization
–
performance level of the firm as something to be
"continuously challenged and incrementally upgraded."
• The way management views the contribution and
role of its workforce
–
believe employee involvement and team efforts are the
key to improvement
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ISO 9000 and ISO 14000
• Series of standards agreed upon by
the International Organization for
Standardization (ISO)
• Adopted in 1987
• More than 160 countries
• A prerequisite for global competition?
• ISO 9000 an international reference for
quality, ISO 14000 is primarily
concerned with environmental
management
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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 Test
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Guidelines for Use
• 9000
–
Quality Management and Quality Assurance
Standards: Guidelines for Selection and Use
• 9004
–
Quality Management and Quality System
Elements--Guidelines
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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
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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
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