CHAPTER SIX

QUALITY MANAGEMENT
Dr. Mulugeta K.
Department of Management
Quality Defined

• Quality is a degree or level of excellence.

-The Oxford American Dictionary

• Quality is a subjective term for which each person has his or

her own definition.
-The American Society for Quality (ASQ)
• Technically, quality can have two meanings:
1) The characteristics of a product or service that bear on its
ability to satisfy stated or implied needs and
2) A product or service free of deficiencies.
I. Quality from the Customer’s Perspective

• Product quality is determined by what the customer wants and

is willing to pay for.
• This results in a commonly used definition of quality, i.e. fitness
for use.
– It indicates how well does a product do what the user thinks
it is supposed to do and wants it to do.
• Products are designed with intentional differences in quality to
meet different wants.
• This is called the quality of design
– degree to which quality characteristics are designed into the pdt.
Dimensions of Quality for Manufactured Products

1. Performance: Basic operating characteristics of a product.

– Example: how well a car handles or its gas mileage.
2. Features: The “extra” items added to the basic features.
– Example: a stereo CD or a leather interior in a car.
3. Reliability: The probability that a product will operate
properly within an expected time frame;
– Example: a TV will work without repair for about seven years.
4. Conformance: The degree to which a product meets pre-
established standards.
 Cont…

5. Durability: The product’s life span before replacement.

– Example: A TV, with care, might be expected to last a lifetime.
6. Serviceability: The ease and speed of getting repairs, the
courtesy and competence of the repair person.
7. Aesthetics: How a product looks, feels, sounds, smells, or
tastes.
8. Safety: Assurance that the customer will not suffer injury or
harm from a product.
9. Other perceptions: Based on brand name, advertising, etc.
Dimensions of Quality for Services

• Evans and Lindsay (2005) identified the following.

1. Time and timeliness: How long must a customer
wait for service, and is it completed on time?
2. Completeness: Is everything the customer asked for
provided?
3. Courtesy: How are customers treated by employees?
4. Consistency: Is the same level of service each time?
 Cont…

5. Accessibility and convenience: How easy is it to

obtain the service?
6. Accuracy: Is the service performed right every time?
• Example: Is your bank statement correct every month?
7. Responsiveness: How well does the company react
to unusual situations?
II. Quality from the Producer’s Perspective

• Quality of conformance:
– how effectively the production process is able to conform
to the specifications required by the design
• Examples of the quality of conformance:
– If new tires do not conform to specifications, they wobble.
– If a hotel room is not clean when a guest checks in, the
hotel is not functioning according to the specifications of
its design; it is a faulty service.
 Cont…

• Achieving quality of conformance depends on a number of

factors, including:
– the design of the production process,
– the performance level of machinery, equipment and
technology,
– the materials used,
– the training and supervision of employees, and
– the degree to which statistical quality-control techniques
are used.
A Final Perspective on Quality
Quality Tools

• There are seven well-known tools for identifying quality

problems and their causes.
• These tools are sometimes called the “magnificent seven.”
• These include:
1. Process flowchart 5. Pareto charts
2. Cause-and-Effect diagram 6. Scatter diagram, and
3. Check sheet 7. Statistical process control
4. Histograms
Cont…
Cont…
 Cont…

• Statistical Process Control will be discussed in reseanable

detail later in this chapter.
A general cause-and-effect (fishbone) diagram
Total Quality Management (TQM)

• TQM originated in the 1980s as a Japanese style

management approach to quality improvement,
• It is strategy for continuously improving performance at
every level, and in all areas of responsibility.
• TQM is a philosophy for managing an organization centered
on quality and customer satisfaction
– as “the” strategy for achieving long-term success.
• It requires the active involvement, participation and
cooperation of everyone in the organization.
The Basic Principles of TQM

1. Quality can and must be managed.

2. The customer defines quality, and customer satisfaction is the
top goal; it is a requirement and is not negotiable.
3. Management must be involved and provide leadership.
4. Continuous quality improvement is “the” strategic goal.
5. Quality is the responsibility of every employee
6. Quality problems are found in processes, and problems must
be prevented, not solved.
7. The quality standard is “no defects.”
8. Quality must be measured using quality tools especially SPC
Old and New Concepts of Quality

• Time line showing the differences between old and new

concepts of quality
Continuous Improvement

• Kaizen is the Japanese term for continuous improvement.

• The original meaning of Kaizen is “change for the better.”
• Kaizen represents involving everyone in a process of gradual,
organized, and continuous improvement.
• If an improvement is not part of a continuous, ongoing
process, it is not considered kaizen.
• Employees are the real experts in their immediate
workspace.
 Cont…

• The three approaches that can help companies with

continuous improvement:
A. The plan–do–study–act (PDSA) cycle,
B. Benchmarking and
C. The quality circles
A. The Deming Wheel (PDCA Cycle)

• The plan–do–study–act (PDSA) cycle describes the activities a

company needs to perform in order to incorporate continuous
improvement in its operation.
 Cont…

• This cycle, shown in previous figure, is also referred to as the

Shewhart cycle or the Deming wheel.
• The circular nature of this cycle shows that continuous
improvement is a never-ending process.
• Steps in the cycle are explained as follows:

• Plan: evaluate the process and make plans based on any problems found.
• Do: Implement the plan and collect data about improvements.
• Study evaluate the data to see whether the plan achieved the goals
• Act: communicate the results to other members
B. Benchmarking

• The method of by studying business practices of companies

considered “best in class” is called benchmarking.
• The ability to learn and study how others do things is useful
for continuous improvement.
• The company does not have to be in the same business,
– as long as it excels at something that the company doing
the study wishes to emulate.
• Example: many companies have used American Express to
benchmark conflict resolution.
C. Quality Circles

• A quality circle is a small, voluntary group of employees and

their supervisor(s), comprising a team of about 8 to 10
members from the same department.
• A circle meets about once a week during company time to work
on problems of their own choice.
• These problems may not always relate to quality issues;
• They focus on productivity, costs, safety, or other work-related
issues in the circle’s area.
• They follow an established procedure for identifying, analyzing,
and solving problems.
 Cont…

A graphical representation of the quality circle process

The Cost of Quality

• The costs of quality are those incurred to achieve good quality

and to satisfy the customer, as well as costs incurred when
quality fails to satisfy the customer.
• In general, quality costs fall into two categories:
1. The cost of achieving good quality
 also known as the cost of quality assurance, and
2. The cost associated with poor-quality products,
 also called cost of not conforming to specifications.
1. The Cost of Achieving Good Quality

These are of two types:

A.Prevention costs:
– costs of trying to prevent poor-quality products from
reaching the customer.
– Prevention costs include:
• Quality planning costs: to apply quality management program
• Product-design costs: to design products with quality characteristics
• Process costs: to make the productive process right
• Training costs: training for employees and management.
• Information costs: to get and maintain data related to quality.
 Cont…

B. Appraisal costs:
– costs of measuring, testing, and analyzing materials, parts,
products, and the productive process
• to ensure that quality specifications are being met.
– Appraisal costs include:

• Inspection and testing costs: to test and inspect materials, parts, and
the product at each stage
• Test equipment costs: to maintain the testing machine.
• Operator costs: time spent by operators to gather data for testing
product quality
2. The Cost of Poor Quality

• These are of two types:

A. Internal Failure Costs:
– when defect is detected before delivered to the customer.
– Internal failure costs include:

• Scrap costs: poor-quality products that must be discarded

• Rework costs: to fix defective products.
• Process failure costs: To diagnosis the process for problems
• Process downtime costs: stopping the process to fix the problem.
• Price-downgrading costs: selling poor-quality products for low price.
 Cont…

B. External Failure Costs:

– incurred after the customer has received a poor-quality
product
– They are primarily related to customer service.
– External failure costs include:
• Customer complaint costs: to satisfactorily respond to a customer
• Product return costs: to replace poor-quality products
• Warranty claims costs: to comply with product warranties.
• Product liability costs: Litigating costs results from harm
• Lost sales costs: when customers make no additional purchases
Statistical Process Control (SPC)

• SPC is a statistical procedure using control charts to see if

any part of a production process is not functioning properly
and could cause poor quality.
• It is used to inspect and measure the production process to
see if it is varying from what it is supposed to be doing.
• If there is unusual or undesirable variability, the process is
corrected so that defects will not occur.
• SPC provides a statistical signal when assignable causes of
process variation are present
The Basics of Statistical Process Control

• Process control is achieved by፡

– taking periodic samples from the process and,
– plotting these sample points on a chart, to see if the process
is within statistical control limits.
• A sample can be a single item or a group of items.
• If a sample point is outside the limits:
– the process may be out of control, and
– the cause is sought so that the problem can be corrected.
• If the sample is within the control limits:
– the process continues with continued monitoring.
 Cont…

• Process Variation can be caused by two reasons:

1. Random (Natural) Causes
– Represent the inherent random variability of the process
– depends on the equipment and machinery, engineering,
the operator, and the system used for measurement.
– It is a result of natural (non-assignable) occurrences.
2. Non-random (Assignable) Causes
– unique or special causes that are identifiable and can be
corrected.
 Cont…

– These include:
• Equipment that is out of adjustment,
• Defective materials, changes in parts or materials,
• Broken machinery or equipment,
• Operator fatigue or poor work methods, or
• Errors due to lack of training
– If left unattended, they will cause poor quality.
Quality Measures: Attributes and Variables

• The quality of a product can be evaluated using either an

attribute or a variable measure.
• Attribute: a product characteristic such as color, surface texture,
cleanliness, or perhaps smell or taste.
– Evaluated with a discrete response such as good or bad,
acceptable or not, or yes or no.
– It is a qualitative classification method.
• Variable: a product characteristic that is measured on a
continuous scale such as length, weight, temperature, or time.
– It is a quantitative classification method.
Control Charts

• Control charts are graphs that visually show if a sample is

within statistical control limits.
• They have two basic purposes:
– to establish the control limits for a process and
– to monitor the process to indicate when it is out of control.
• There are four common types of control charts:

For Attribute For Variable

1. P-chart 3. Mean ( )chart
2. C-chart 4. Range (R) -chart
 Cont…

• The formulas for conducting upper and lower limits in control

charts are based on a number of standard deviations, “z,” from
the process average based on a normal distribution.
• When the normal distribution exits the process is operating
consistently and we can predict the process behavior.

 Z= 1.00 corresponds to a normal probability of 68%,

 Z= 2.00 corresponds to a normal probability of 95%,
 Z = 3.00 corresponds to a normal probability of 99.73%.

• Occasionally, z is equal to 2.00 but most frequently 3.00.

Process Control Chart

•
Normal Distribution

• Management usually selects z = 3.00 because if the process is in

control it wants a high probability that the sample values will fall
within the control limits.
With wider limits management is less likely to (erroneously) conclude that the process is out of control
when points outside the control limits are due to normal, random variations.
 Cont…

• A process is generally considered to be in control if:

 There are no sample points outside the control limits.
 Most points are near the process average (the center line),
• (without too many close to the control limits)
 Approximately equal numbers of sample points occur
above and below the center line.
 The points appear to be randomly distributed around the
center line (i.e., no discernible pattern).
1. Control Charts for Attributes

• The quality measures used in attribute control charts are

discrete values reflecting a simple decision criterion such as
good or bad.
– A p-chart uses the proportion of defective items in a sample
as the sample statistic.
• when it is possible to distinguish between defective and non-
defective items
– A c-chart uses the actual number of defects per item in a
sample.
• when it is not possible to compute proportion of defects
A. P-Chart

• With a p-chart a sample of n items is taken periodically from

the production or service process.
• Then, the proportion of defective items in the sample is
determined to see if the proportion falls within the control
limits.
• Formulas used, based on normal distribution, to compute the
upper control limit (UCL) and lower control limit (LCL) of a p-
chart are indicated in the next slide
Cont…
Example 1

• The Western Jeans Company produces denim jeans. The

company wants to establish a p-chart to monitor the production
process and maintain high quality. Western believes that
approximately 99.74% of the variability in the production process
(corresponding to 3-sigma limits [z = 3.00]) is random and thus
should be within control limits, whereas 0.26% of the process
variability is not random and suggests that the process is out of
control. The company has taken 20 samples (one per day for 20
days), each containing 100 pairs of jeans (n = 100), and
inspected them for defects, the results of which are as follows.
• The company wants to construct a p-chart to determine when
the production process might be out of control.
Cont…

To be
computed
Solution
 Cont…

• The p-chart for the above problem is shown in the figure below:
Conclusion

• The process was below the lower control limits for sample 2
(i.e., during day 2).
• Although this could be perceived as a “good” result, it might also
suggest that something was wrong with the inspection process
during that week that should be checked out.
• The process was above the upper limit during day 19.
• This suggests that the process may not be in control and the
cause should be investigated.
B. C-Chart

• A c-chart is used when it is not possible to compute a

proportion defective.
• Thus, the actual number of defects must be used as sample
statistics.
• For example, when automobiles are inspected,:
– the number of blemishes can be counted for each car,
– but a proportion cannot be computed,
– since the total number of possible blemishes is not known.
– In this case a single car is the sample.
 Cont…

δČ =Č
Example 2

• The Ritz Hotel has 240 rooms. The hotel’s housekeeping

department is responsible for maintaining the quality of the
rooms’ appearance and cleanliness. Every room is briefly
inspected each day by a housekeeping supervisor. An inspection
sample includes 12 rooms, that is, one room selected at random
from each of the twelve 20-room blocks serviced by a
housekeeper. Results from 15 inspection samples conducted at
random during a one-month period is given below. The hotel
believes that approximately 99% of the defects are caused by
random variations in the housekeeping service, with 1% caused
by nonrandom variability. They want to construct a c-chart to
monitor the housekeeping service.
 Cont…

• Solution
• Because c, the population
process average, is not
known, sample estimate
can be used instead:
 Cont…

• The control limits are computed using z=3.00, as follows:

• The resulting c-chart, with the

sample points, is shown in the
figure:

 Conclusion
• All the sample observations
are within the control limits,
suggesting that the room
quality is in control.
2. Control Charts for Variables

• Variable control charts are used for continuous variables that

can be measured, such as weight or volume.
• The range chart and the mean chart are commonly used.
A. Range (R-) chart: reflects the amount of dispersion
present in each sample;
B. Mean (X) chart: indicates how sample results relate to
the process average or mean.
• These charts are normally used together to determine
whether a process is in control.
A. Mean (Ẍ) Chart

• In a mean chart, each time a sample of a group of items is

taken from the process.
• Then, the mean of the sample is plotted on the chart, thus,
each sample mean (Ẍ) is a point on the control chart.
• The samples taken tend to be small, usually around 4 or 5.
• The centre line of the control chart is the overall process
average, that is, the mean of the sample means.
• The Ẍ-chart is based on the normal distribution.
 Cont…

• Ẍ-chart can be constructed in two ways:

a. If the standard deviation of the distribution is known
from past experience or historical data,
• In this case the formulas using the standard deviation can
be used to compute the upper and lower control limits.
b. If the standard deviation is not known,
• In this case a table of values based on sample ranges is
available to develop the upper and lower control limits.
 Cont…

a. Constructing Ẍ-chart if the standard deviation of the

distribution is known
– The formulas for computing the upper control limit (UCL)
and lower control limit (LCL) are:
Example 3

• The Goliath Tool Company produces slip-ring bearings, which look

like flat doughnuts or washers. They fit around shafts or rods, such
as drive shafts in machinery or motors. At an early stage in the
production process for a particular slip-ring bearing, the outside
diameter of the bearing is measured. Employees have taken 10
samples (during a 10-day period) of 5 slip ring bearings and
measured the diameter of the bearings. The individual observations
from each sample (or subgroup) are shown in the table below. From
past historical data it is known that the process standard deviation
is .08.
• The company wants to develop a control chart with 3-sigma limits
to monitor this process in the future.
Cont..
Solution

• The process average is computed as:

• The control limits are

Conclusion: None of the sample means fall outside these control limits, which
indicates that the process is in control and this is an accurate control chart.
 Cont…

b. Constructing Ẍ-chart if the standard deviation of the

distribution is not known
– the following formulas are used to compute the control
limits:

Where:
• is the average of the sample means and is the average range value.
• A2 is a tabular value that is used to establish the control limits.
Factors for Determining Control Limits for x- and R-Charts
Example

• The Goliath Tool Company desires to develop an -chart using table

values. The sample data collected for this process with ranges is
shown in the following table. The company wants to develop an Ẍ-
chart to monitor the process.
 Cont…

• Ṝ is computed by first determining the range for each sample by

computing the difference between the highest and lowest
values.
• These ranges are summed and then divided by the number of
samples, k, as follows:
 Cont…

• Upper and lower control limits are computed as:

• The Mean-chart defined by these control limits is shown in

the next figure.
 Cont…

Conclusion: The process is in control

B. Range (R-) Chart

• In an R-chart, the range is the difference between the smallest

and largest values in a sample.
• This range reflects the process variability instead of the
tendency toward a mean value.
• The formulas for determining control limits are:

• D3 and D4 are table values

developed based on range
values rather than standard
deviations.
Example 4

• The Goliath Tool Company from the previous examples wants to

develop an R-chart to control process variability.
 Solution:
• The control limits are given by:

• These limits define the R-chart shown in the next figure.

• Conclusion: It indicates that the process appears to be in control;
any variability observed is a result of natural random occurrences.
 Cont…

• The range chart for the problem is shown as follows:

Exercise 1

Twenty samples of n =200 were taken by an operator at a workstation

in a production process. The number of defective items in each sample
was recorded as follows.
Management wants to develop a p-chart using 3-sigma limit. Set up
the p-chart, and plot the observations to determine if the process was
out of control at any point.
Exercise 2

A quality control inspector at the Zenith Shampoo Company has taken

three samples with four observations each of the volume of shampoo
bottles filled. The data collected by the inspector and the computed
means are shown here:
Sample of Shampoo Bottle volume in ml
Sample Observations
Numbers 1 2 3 4
1 19.7 19.7 19.17 18.8
2 20.6 20.2 18.7 20.2
3 18.9 18.9 21.6 19.7
4 20.8 20.7 20.0 18.0
5 19.1 18.6 17.9 19.4
6 21.0 19.5 18.3 20.6
 Cont…

If the standard deviation of the shampoo bottle-filling operation,

from historical data, is known to be 0.2 ounces, use the
information in the table to develop control chart with 3-sigma
limits for the operation.
a) Determine the center line, UCL and LCL of the X-chart.
b) Determine the center line, UCL and the LCL for the R-chart.
c) Develop an R-chart and an x bar chart for this process.
d) Is the process in control? Explain your answer.
73