*Quality

Management
*
After WW2 Mid-1960’s

Huge domestic Price for

USA: Oversupply.
market, high competitive
capacity advantage

Europe, Can’t match US Quality for

productivity & competitive Increased
Japan: economies of scale productivity
advantage
*Quality Management

“It’s not necessary to change;

survival is not mandatory”

- Deming
 *Importance Of Quality
* More than 90% of Dissatisfied Customers NEVER Again Do
Business with the Offending Organization

* The Average Customer who has a Problem Tells Nine Others

* Attracting a New Customer Costs Five to Six Times as Much as

Keeping the Current Customer

4
 *Defining Quality
* Quality: the ability of a product (a good or a service) to
consistently meet or exceed customer expectations

* Ability: the competence, either native or acquired, that

enables one to do something well

* Consistently: refers to a reliable or steady pattern of

performance

* Expectations: a state of anticipation about a future outcome

*

*1. Goods  Tangible Products. Quality relates to

specifications, features, functions, etc.

*2. Services  Intangible goods = Intangible

Factors
 *Quality of Goods
1. Performance - operating characteristics
2. Features – “bells and whistles”
3. Reliability – time until/between breakdowns
4. Durability - needs replacement when?
5. Conformance – characteristics meet established standards
6. Serviceability - ease of maintenance
7. Aesthetics - overall appearance/appeal
8. Perceived Quality - perceptions/reputation
 *Quality of Services
Unique Issues:
* 1. Tangibles  Ambiance, beauty, etc.
* 2. Responsiveness  How quickly customer needs
are met
* 3. Assurance  Confidence in service provider
* 4. Empathy  Ability to recognize specific needs of
customer
 *Different Types of Quality
Quality of market research
Quality of design Quality of concept
Quality of specification
Technology
Quality of conformance Employees
Management
Customer
satisfaction Reliability
Availability Maintainability
Logistical support
Promptness
Field service Competence
Integrity
 *

Costs to obtain good quality Costs resulting from poor quality

Internal External
Prevention Appraisal
Failure Failure

• design • inspection • scrap • warranty costs

• training • testing • rework • loss of goodwill
 *
Cost

Time

Internal External
Prevention Appraisal
Failure Failure

Note: the closer a failure is to the customer the more expensive it is!!
* Importance to the Bottom Line

Profit = Revenue – Cost

→ Revenue is a function of quality

• ↑ Quality → ↓ Demand elasticity → ↑ Prices → ↑ Revenue

• ↑ Quality → ↑ Perceived value → ↑ Market share → ↑ Revenue

→ Cost is a function of quality

• ↑ Quality → ↑ Productivity → ↓ Costs
* How Quality Contributes to Profitability

QUALITY
(Design and conformance)

Reduced Greater Greater

waste productivity Value

Lower
Costs Increased market
share

Improved asset Improved

utilization margins Revenue
growth

IMPROVED PROFITABILITY
 *Why is Process Improvement
Important?

*North American Automakers

PRODUCED 15 million Vehicles in 2004 ----
and RECALLED 25 million.

2014:
Toyota – 6.4 million in April and 2.7 in June
Chevy – 13.8 million by May

14
 *What is a Quality Process?
*Quality Process
*A Process that Produces Error-free Products

*Because of Variation, No Process Produces Error-

free Products. So, What Percentage of Defects is
Acceptable?
10 % ?
5%?
1%?

15
 *When 99.9% Quality is Not Enough

*Two million documents would be lost by IRS each

year
*22,000 checks would be deducted from the wrong
bank account in the U.S.
*1,314 phone calls in the U.S. would be misrouted
each day
*12 babies would be given to the wrong parents
each day
 *How Much Quality is Enough?

*1999: 98,000 deaths from medical errors in the

U.S., 7000 from medication errors.

*Hospitals commit 400,000 preventable drug errors

each year.1 Average is 1 per patient per day.

*3 to 8 percent of prescriptions are filled

incorrectly in U.S.2
 *How Much Quality is Enough?
*Only 80 percent of hospitals in the U.S. have
procedures in place to avoid operating on the wrong
body parts. (i.e. 20 percent do not!)

*IRS agents give bad or no information 43 percent of

the time (in 2002 study by Dept. of Treasury). Guess
who is responsible if you use the bad information?
*Is 99% Correct Good Enough?
*20,000 Wrong Prescriptions Each Year
*15,000 Babies Dropped by Doctors Each Year
*2 Short or Long Landings at Airports Daily
*500 Incorrect Surgeries Weekly
*2,000 Lost Pieces of Mail Each Hour!
*GE, Motorola, and Others Want to be Correct
~99.99966% of the Time --- Thus, only 3.4
Defects per 1 Million Opportunities
*This Is a Six Sigma Standard !
19
 *Overview
• Total Quality Management
• Quality
• What is it?
 *Overview
• Total Quality Management
• Quality
• What is it?
• Dimensions
• Cost / Importance

• Quality Gurus

• Continuous improvement
 *Managing Quality
* 1. Total Quality Management (TQM)
* A. Term for quality management system that
addresses all areas of an organization
* B. Emphasizes customer satisfaction and uses
continuous improvement tools and techniques.

*2. Elements of TQM

*A. Employee participation
*B. Customer focus
*C. Management by fact
*D. Continuous improvement
*Total Quality Management (TQM)
•* Total : integrated into all business functions

•* Quality : meeting or exceeding customer expectations

•* Management : improving business systems/processes

“Managing the entire organization so that it

excels on all dimensions of products and
services that are important to the customer.”
 *Quickly Count the “F’s”
Count the F's in the sentence below.
Count them ONLY ONCE.

Do not go back and count them again

“FINISHED FILES ARE THE RESULT OF YEARS

OF SCIENTIFIC STUDY COMBINED WITH THE
EXPERIENCE OF YEARS.”
*
 *Quickly Count the “F’s”
FINISHED FILES ARE THE RESULT OF
YEARS OF SCIENTIFIC STUDY
COMBINED WITH THE EXPERIENCE
OF YEARS.

Average # of F’s found is 3. There

are actually 6
*Root Causes of Quality Problems

*“…most quality problems are caused by poor

systems, not by the workers.”
*Deming: 90 percent of quality problems are
caused by management.
*J.D. Power: at least 2/3 of the long-term quality
problems in autos are engineering and design
problems.
 *Managing Quality
*1. Malcolm Baldridge National Quality Award (MBNQA) 
Premiere award recognizing quality in the United States
 *Managing Quality
*W. Edwards Deming (b. 1900- d.1993)
*1. Known as “father” of quality management
*2. Developed “14 Points”
*3. Highlights of “14 Points”
*A. (3) Cease dependence on inspection
*B. (4) Reduce cost by reducing variation
*C. (6) Training
*D. (8) Drive out fear
*E. (10) Eliminate slogans
 *Dimensions of Quality
The
“Abilities”

Quality
Field
of QUALITY Service
Conformance

Quality
of
Design
Who is 42?

8-31
Who is 4?
 *The Deming Wheel:
Institutionalize Plan a change
the change (or aimed at
abandon/repeat) improvement.

4. Act 1. Plan

3. Check 2. Do
Study the results. Execute the
Did it work? change.
 *The Quality Cycle

Concurrent Needs CUSTOMER Product

engineering team
Specifies quality needs
(QFD)

MARKETING
Interprets customer needs
Works with customer to
design product to fit
operations
Interpretation of needs

OPERATIONS
ENGINEERING Produces the product or
Defines design concept
Prepares specifications Specifications services
QUALITY CONTROL
Define quality Plans and monitors
characteristics quality
* Implementation of quality improvement
through the quality cycle

1. Define quality attributes on the basis of

customer needs
2. Decide how to measure each attribute
3. Set quality standards
4. Establish appropriate tests for each standards
5. Find and correct causes of poor quality
6. Continue to make improvements
 *Even with proactive planning…

… problems can still come up.

That’s OK, as long as we address

them by stepping in the right direction
toward total quality.
 *Continuous Improvement

1. Small changes in processes to improve long

run quality

2. Requires worker involvement & process

monitoring
 *Continuous Improvement
*Seven Tools
*1. Process flow charts
*2. Cause and effect diagrams
*3. Control charts
*4. Histograms
*5. Check sheet
*6. Pareto charts
*7. Scatter diagrams (and run charts)
 *Process Flow Chart
*1. Traces flow and
sequence of
operations in a
process

*2. Helpful to identify

non-value adding
activities
 *Cause and Effect Diagram

*1. Illustrates range of possible causes that lead

to an outcome (a.k.a. Fishbone or Ishikawa
diagram)
 *Control Charts

*1. Used to show process trends

 *Histogram (of Hole Diameters)

Shows frequency and distribution of data

* Checksheet for Recording Complaints
*Checksheet for Group Sizes in a
Restaurant
 * Pareto Analysis
Ranking of causes from most to least significant

Frequency
80%
80%ofofthe
the
problems
problems may
may
be
beattributed
attributed
to
to20%
20% ofofthe
the
causes.
causes.
Design Mfg Purch Mktg Other
 *Pareto
Charts to
Set
Priorities

9-46
* Pareto Chart of Factors in an
Emergency Room
 *Scatter Diagram
*1. Identify Relationships Between 2 Variables
* Scatterplot of Customer Satisfaction and
Waiting Time in an Upscale Restaurant
 *Example
*Main office of a large bank
*500 customer calls/day
*Caller irritation if phone rings 5x before answer

*Telephone reception importance:

*First impression of a business
*Company slogan “Don’t make customers wait”
*Company wide campaign to “be more friendly”
 *Example
*Why Customers Wait
 *Example
*Cause and Effect Diagram
 *
*Checksheet Analysis
 *Example
*Solutions?
*How to Reduce Number of Waiting Callers?
*1. Ensure more than one operator on duty
*Rolling lunch shifts
*2. Simplify operator duties
*Notify operator if employee away from desk
*Compile directory of employees
The solution
Number of waiting callers before and after Quality Program

Effects of Quality Program (Pareto Diagram)

 *
*The SERVQUAL system is one method used to
measure quality in services. It has five dimensions:

*Tangibles
*Reliability
*Responsiveness
*Assurance
*Empathy
 *ISO 9000
*Guidelines for designing, manufacturing, selling,
and servicing products.
*Selecting an ISO 9000 certified supplier provides
some assurance that supplier follows accepted
business practices in areas covered by the standard.
*Required by many companies, esp. in Europe,
before one can be a supplier.
*www.iso.ch
ISO 9000 Audit

•Document what you do…

•Do what you say you do.
Turkish
bottled
water
served on
a Dutch
airline
Saudi cookies are ISO 9000 certified
Airports can be ISO 9000 certified
Hotels can be
ISO 9000
certified
*The ISO 9000 Audit

•Document what you do…

•Do what you say you do.
 *ISO 9000

•Document what you do…

•Do what you say you do.
 *ISO 14000
*Series of standards covering environmental
management systems, environmental auditing,
evaluation of environmental performance,
environmental labeling, and life-cycle
assessment.

*Intent is to help organizations improve their

environmental performance through
documentation control, operational control,
control of records, training, statistical
techniques, and corrective and preventive
actions.
ISO 14001 is an
environmental
certification
*Quality is not a new Idea

The label on the

bottles reads:
“Brewed according
to the German
Purity Regulations
of 1516”
 *Summary
*What is quality?
*How may increased quality result in higher revenues or
reduced costs?
*What are the standards or quality for goods versus
services?
*What standard (99%?) is used in quality control?
*Steps important in quality improvement
*Tools to assist in continuous improvement
*Goal of ISO 9000/9001
*Goal of ISO 14000/140001