Operations
Management
Managing Quality
Chapter 6
6-1
Outline
Quality and Strategy.
Defining Quality.
International Quality Standards.
Total Quality Management.
Tools of TQM.
Inspection.
TQM in Services.
6-2
Quality Improves Profitability
Sales Gains
Higher sales.
 Higher prices.
 Improved reputation.

Improved
Quality
Reduced Costs
Increased productivity.
Lower rework and scrap
costs.
 Lower warranty costs.


6-3
Increased
Profits
Definitions of Quality
 Product characteristics & features that affect
customer satisfaction. (American Society for
Quality)
 User-Based: What consumer says it is.
 Manufacturing-Based: Degree to which a
product conforms to design specification.
6-4
Dimensions of Quality for Goods
 Operation or Performance.
 Reliability.
 Durability.
Quality
 Conformance.
 Serviceability.
 Appearance to senses.
 Perceived quality.
6-5
Implications of Quality
 Company reputation.

Real or perceived.
 Product liability.

Large $ can be awarded.
 Global implications.

Company quality affects national image.
6-6
International Quality Standards
 ISO 9000 series (Europe/EC)

Common quality standards for products sold in
Europe (even if made in U.S.).
 ISO 14000 series (Europe/EC)

Standards for recycling, labeling etc.
6-7
Costs of Quality
 Prevention costs (5-10%) - To prevent failures.
 Appraisal costs (15-40%) - To evaluate products.
 Failure costs (50-80%):
Internal failure costs - Defective parts or services
discovered in-house.
 External failure costs - Defective parts or services
discovered by customer.

 Most organizations do not know the cost of poor
quality.
6-8
Costs of Quality
Internal failure costs.
Scrap and rework.
 Downtime.
 Safety stock inventory.
 Overtime.

External failure costs.
Complaint handling and replacement.
 Warranties.
 Liability.
 Loss of goodwill.

6-9
Traditional
Quality Process (Manufacturing)
Customer
Marketing
Engineering
Operations
Specifies
Need
Interprets
Need
Designs
Product
Produces
Product
Defines
Quality
Plans
Quality
Monitors
Quality
6-10
TQM - Total Quality Management
Encompasses entire organization from
supplier to customer.
Commitment by management to a continuing
company-wide drive toward excellence in all
aspects of products and services that are
important to the customer.
6-11
Three Key Figures
W. Edwards Deming
Management & all employees have responsibility for
quality.
 14 points.
 Deming Prize in Japan.

Joseph Juran
Focus on customer.
 Continuous improvement and teams.

Philip Crosby
Quality is free!
 Cost of poor quality is underestimated.

6-12
Deming’s Points
 Create consistency of purpose across the
organization.
 Leadership must play a key role.
 Build quality into the products.
 Build long term relationships.
 Continuously improve product, quality, and
service.
 Training & education are crucial.
 Empower employees.
6-13
Malcom Baldrige National Quality
Award
 Established in 1988 by the U.S. government.
 Designed to promote TQM practices.
 Criteria include:

Senior executive leadership.

Strategic planning.

Management of process quality.

Quality results.

Customer satisfaction.
6-14
Malcom Baldrige National Quality
Award - Guidelines
 The leadership of the U.S. in product and
process quality has been challenged strongly by
foreign competition.
 Quality improvement programs are essential to
the well-being of our economy and our ability to
compete globally.
6-15
Malcom Baldrige National Quality
Award - Guidelines
 It is crucial to have improved:

management understanding of the factory floor,

worker involvement in quality, and

greater emphasis on statistical process control.
 “Quality improvement programs must be
management-led and customer-oriented, and this
may require fundamental changes in the way
companies and agencies do business.”
6-16
Concepts of TQM
Top management has primary responsibility.
Focus on customer.
Continuous improvement.
Employee empowerment.
Benchmarking.
Knowledge of tools for TQM.
6-17
Continuous Improvement
 Continuously improve process & customer
satisfaction.
 Involve all operations & work units.
 Other names:

Kaizen (Japanese).

Zero-defects.

Six sigma.
6-18
Employee Empowerment
 Involve employees in product & process
improvements.

85% of quality problems are due to process & material.
 Techniques:

Support workers; workers solve quality problems.

Let workers make decisions.

Train workers; provide tools for improved quality.

Build teams & quality circles.
6-19
Benchmarking
Selecting best practices to use as a standard
for performance.
 Determine what to benchmark.
 Form a benchmark team.
 Collect and analyze benchmarking information.
 Take action to match or exceed the benchmark.
6-20
Tools for TQM
Quality Function Deployment (QFD).
Taguchi techniques.
Cause-and-effect diagrams.
Pareto charts.
Statistical process control.
6-21
Quality Function Deployment
(QFD)
Determines what will satisfy the customer.
Translates customer desires into target
design.
Helps determine product and process to
ensure quality.
6-22
Taguchi Techniques
 Experimental design methods to improve
product & process design.

Identify key component & process variables
affecting product variation.
 Taguchi Concepts:

Quality robustness.

Quality loss function.
6-23
Quality Robustness
 Design and make products so that variations
in production do not cause failure.
 Identify important variations.
 Eliminate the effect of variations rather than
the cause.

Allow variation, but limit its ability to reduce
quality.
6-24
Quality Loss Function
 Poor quality can be viewed as deviation from a
desired level.

Most quality characteristics (e.g., length, weight)
have a target value.

Large deviations are much more expensive than
small deviations.
 Quality loss function shows cost of deviation
and is not linear.

A deviation twice as large may be 10 times as
expensive.
6-25
Cause and Effect Diagram
Used to find problem sources/solutions.
Other names:

Fish-bone diagram, Ishikawa diagram.
Steps:

Identify problem to correct.

Draw main causes for problem as ‘bones’.

Ask ‘What could have caused problems in these
areas?’ Repeat for each sub-area.
6-26
Cause and Effect Diagram
Example
Problem
Too many
defects
6-27
Cause and Effect Diagram
Example
Method
Manpower
Main Cause
Too many
defects
Material
Machinery
Main Cause
6-28
Cause and Effect Diagram
Example
Method
Manpower
Drill
Over
Time
Too many
defects
Wood
Steel
Material
Lathe
Machinery
Sub-Cause
6-29
Cause and Effect Diagram
Example
Method
Manpower
Tired
Drill
Over
Time
Slow
Old
Wood
Steel
Material
Lathe
Machinery
6-30
Too many
defects
Pareto Charts
Number
 The majority of quality problems (defects) have
only a few causes.
 Pareto chart shows relative importance of causes.
70
60
50
40
30
20
10
0
54
12
Scratches
70%
Porosity
16%
5
Nicks
6%
4
Contamination
5%
2
Misc.
3%
Causes of Glass Defects, by % of total defects
6-31
Statistical Process Control (SPC)
Uses statistics & control charts to identify
when to adjust process.
Involves:

Creating standards (upper & lower limits).

Measuring sample output (e.g. mean weight).

Taking corrective action (if necessary).
Done while product is being produced.
6-32
Inspection
Examine items to see if they are good or
defective.
Detects defective products.

Does not correct deficiencies in process or
product.
Issues:

What to inspect?

When & where to inspect?
6-33
When and Where to Inspect
Products
 At the supplier’s plant while the supplier is producing.
 At your facility upon receipt of goods from the supplier.
 Before costly or irreversible processes.
 During the step-by-step production processes.
 When production or service is complete.
 Before delivery from your facility.
 At the point of customer contact.
6-34
Inspection Points in Services
Organization
Some Points
of Inspection
Restaurant
Kitchen
Clean, proper storage,
unadulterated food, health
regulations observed, wellorganized.
Cashier station
Speed, accuracy, appearance.
Dining areas
Clean, comfortable, regular
monitoring by personnel.
Issues to Consider
Food
Presentation, taste,
quantity.
6-35
TQM In Services
Customer contact is important!
Service quality is more difficult to measure
than for goods.

Courtesy, competence, communication, etc.
Service quality perceptions depend on:

Expectations versus reality.

Process and outcome.

Type of service (normal vs. exception).
6-36