OM

CHAPTER 15

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
1
 Chapter 15 Quality
Management

QUALITY
MANAGEMENT

DAVID A. COLLIER
AND
JAMES R. EVANS
• Quality management refers to systematic
policies, methods, and procedures used to
ensure that goods and services are produced

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
9
 Chapter 15 Quality
Management
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).
Understanding Quality
• Quality can be a confusing concept, partly
because people view quality in relation to

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
9
 Chapter 15 Quality
Management
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.
Understanding Quality

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
9
 Chapter 15 Quality
Management
• 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.

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
9
 Chapter 15 Quality
Management
• Quality Control means ensuring
consistency in processes to achieve
conformance.

• Service Qualityisconsistently meeting

or exceeding customer expectations
(external focus) and service delivery
system performance criteria (internal
focus) during all service encounters.

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
9
 Chapter 15 Quality
Management

Understanding Quality

Principles of Total Quality

1. A focus on customers and stakeholders,

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
9
 Chapter 15 Quality
Management
2. A process focus supported by
continuous improvement and learning,
and

3. Participation and teamwork by everyone

in the organization.

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
9
 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.

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
1
 Chapter 15 Influential Leaders in Quality
Management

• Deming Cycle – Plan, Do, Study, and Act.

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
OM, Ch. 15 Quality Management
©2009 South-Western, a part of Cengage Learning
1
 Chapter 15 Influential Leaders in Quality
Management

Point 6: Institute Training

Point 7: Institute Leadership
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

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
1
 Chapter 15 Influential Leaders in Quality
Management

Point 13: Encourage Education and

SelfImprovement
Point 14: Take Action

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
1
Exhibit Extra The Deming Cycle

• Plan: study current situation

• Do: implement plan on trial basis

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
1
 Chapter 15 Quality
Management
• Study: determine if trial is working correctly
• Act: standardize improvements
ISO 9000:2000
• Quality standards were created in 1987 and revised
in 1994 and 2000 to improve product quality,
improve the quality of operation’s 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).

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
2
 Chapter 15 Quality
Management
• Standardizes key terms in quality and provides a set
of basic principles for initiating quality management
systems.
Six Sigma
• Six Sigmais 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

OM, Ch. 15 Quality Management
©2009 South-Western, a part of Cengage Learning
2
 Chapter 15 Quality
Management
Signal, Texas Instruments, and General Electric.
Six Sigma
Defectsare 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
Six Sigma

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
2
 Chapter 15 Quality
Management
• 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).
Six Sigma
• A DPU measure might be lost bags per customer.
However, customers may have different numbers of
OM, Ch. 15 Quality Management
©2009 South-Western, a part of Cengage Learning
2
 Chapter 15 Quality
Management
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

Six Sigma’s DMAIC Process
1. Define: identify customers and their priorities;
identify and define a suitable project; identify
CTQs ( critical to quality characteristics ).
OM, Ch. 15 Quality Management
©2009 South-Western, a part of Cengage Learning
2
 Chapter 15 Quality
Management
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.
Six Sigma’s DMAIC Process

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
2
 Chapter 15 Quality
Management
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.
Cost of Quality Measurements
Thecost of qualityrefers to the costs associated with
avoiding poor quality or those incurred as a result of
poor quality. Four major categories are:
OM, Ch. 15 Quality Management
©2009 South-Western, a part of Cengage Learning
2
 Chapter 15 Quality
Management
• Prevention costsare those expended to keep
nonconforming goods and services from being
made and reaching the customer.

• Appraisal costsare those expended on

ascertaining quality levels through measurement
and analysis of data to detect and correct
problems.
Cost of Quality Measurements
• Internal-failure costsarecosts incurred as a
result of unsatisfactory quality that is found

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
2
 Chapter 15 Quality
Management
before delivery of good or service to the
customer.

• External-failure costsare incurred after

poor-quality goods or services reach the
customer.

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
2
 Chapter 15 Seven Tools of Quality Management

The “Seven QC Tools”

1.Flowcharts: process mapping to identify the
sequence of activities or flow of materials/
information in a process.
2.Run Charts and Control Charts: a run chart
is a line graph with data plotted over time;
control charts include control limits.

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
2
 3.Checksheets: simple tools for data collection,
ensure completeness.
4.Histograms: graphically represent frequency of
values within a specified group.

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
3
OM, Ch. 15 Quality Management
©2009 South-Western, a part of Cengage Learning
3
OM, Ch. 15 Quality Management
©2009 South-Western, a part of Cengage Learning
3
Exhibit 15.3 The Structure of a Control Chart Exhibit 15.4

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
3
Defective Item Checksheet Chapter 15 Seven Tools of Quality
Management

The “Seven QC Tools”

5.Pareto Diagrams: separate the vital few
from the trivial many causes; provide
direction for selecting projects for
improvement.

6.Cause-and-Effect Diagrams: represent

chain of relationships; often called a fishbone
Source: K. Ishikawa, Guide
to Quality Control (Tokyo:
Asian Productivity
Organization, 1982), p. 33.

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
3
 diagram.

7.Scatter
Diagrams:
graphical
component of
regression
analysis.
Exhibit 15.5

Use of Pareto Diagrams

for
Progressive Analysis

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
3
 Source: Small Business Guidebook to Quality Management, Office of the Secretary of Defense, Quality Management Office, Washington, DC (1988).

Exhibit 15.6 Cause-and-Effect Diagram for Hospital Emergency

Admission

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
3
 Chapter 15 Quality Management
OM, Ch. 15 Quality Management
©2009 South-Western, a part of Cengage Learning
3
 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) isan approach for

mistake-proofing processes using automatic
devices or methods to avoid simple human error.

OM, Ch. 15 Quality Management

©2009 South-Western, a part of Cengage Learning
3