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Contents
BM60116 – Modeling in Operations Management
• What is Quality?
• Dimensions of quality
Quality Management:
Introduction to TQM, Six Sigma, • Costs associated with quality
and SQC • Brief about Total Quality Management – TQM

• Six Sigma
Sushil Punia
VGSOM, IIT KGP • SQC and SPC

Jan-May 2024
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What is Quality? Operations Strategy and Quality

• Quality helps to improve operations of a firm

Quality is the ability of a product or service • Managing quality helps build successful operations
strategies - differentiation, low cost, and response
to consistently meet or exceed customer
expectations.
Examples:
Bose Speakers – Differentiation
Nucor Steel – Low Cost Steel
Dell Computers – Responsiveness to customers

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Quality and Profitability Deming Chain Reaction of Quality

Quality helps firms increase sales and reduce costs Scheme of things in the background when improving quality.

Sales Gains via

• Improved (Quick) response
• Flexible pricing
• Improved reputation
Improved Increased
Quality Profits
Reduced Costs via
• Increased productivity
• Lower rework and scrap costs
• Lower warranty claims/costs

Companies with the highest quality could be five times as productive as companies
with the poorest quality
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Operations Strategy and Quality

Building a Quality Organization Different Views (definitions of quality)

Quality could be defined as:

Begins with an organizational culture that
fosters quality
 User-based – What the user wants! - better performance and more features

Followed by an understanding of the principles of  Manufacturing-based – conformance to standards and “making it right the first time”
quality (Customer focus, Continuous improvement,
 Product-based – specific and measurable attributes of the product
Benchmarking, Just-in-time, Tools of TQM)
User-based  Manufacturing-based  Product-based  Quality Product
Engaging employees in the necessary activities
to implement quality  Environment-based – consider all the effects that the product will cause on the environment

and society
Finally, the organization satisfies its customers and obtains a
competitive advantage.  Value-based Approach - In contrast to quality as absolute, the value-based approach regards quality

as relative to price. Buyer’s perception of value represents a mental trade-off between the

benefits perceived relative to the price

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Dimensions of Product Quality

Dimensions of Product Quality
Customer expectations can be broken down into a number of
categories, or dimensions, that customers use to judge the quality
of a product or service.
Performance – primary characteristics of
the product/service
 Performance  Durability
 Features  Serviceability An automobile’s performance would include traits like acceleration,
handling, speed, and comfort;
 Conformance  Aesthetics
 Reliability  Perceived quality For an LED tv set, performance means sound and picture clarity,
color

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David Garvin, “Competing on the Eight Dimensions of Quality,” Harvard Business Review 65, no. 6 (1987). David Garvin, “Competing on the Eight Dimensions of Quality,” Harvard Business Review 65, no. 6 (1987).

Dimensions of Product Quality Dimensions of Product Quality

Features - extra characteristics that supplement their Durability - useful life of the product or service before
basic functioning, going out of service

e.g.
• Active noise cancellation on call Serviceability – ease of repair, service after sale
• AI based applications in smartphones (handling of complaints and repairs)

Conformance - how well product/service conforms to Reliability - consistency of performance

design specifications • more relevant to durable goods than to products and services
• Car matches manufacturer’s specifications that are consumed instantly.

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David Garvin, “Competing on the Eight Dimensions of Quality,” Harvard Business Review 65, no. 6 (1987). David Garvin, “Competing on the Eight Dimensions of Quality,” Harvard Business Review 65, no. 6 (1987).

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Dimensions of Quality Costs of Quality

Aesthetics
Exterior and interior design

Perceived Quality
indirect evaluation of quality by customer (e.g. reputation)

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David Garvin, “Competing on the Eight Dimensions of Quality,” Harvard Business Review 65, no. 6 (1987).

Managing Costs of Quality Total cost of quality model

Classic Model of Optimum Quality Costs

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From: Gartner’s report on cost of quality (2012) From: Jurans Quality Control Handbook, 4th edition. J.M. Juran, editor. 1988, McGraw-Hill.

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Issues with Total Cost of Quality Quality cost models –

(TCOQ) model
“traditional” and “new”
• Optimal level of quality cost occurs at less than 100 percent The new model of optimum quality cost incorporates the possibility
conformance of zero defects
• Appraisal and prevention costs have very different cost behavior
• Appraisal costs in the new manufacturing environment are relatively flat (or
fixed).

• Nature of the curves would be different under different

manufacturing environments.
• Contribution lost from loss of customer goodwill, due to poor
quality or missed opportunities, ignored in the TCOQ
…

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Source: Jurans Quality Control Handbook, 4th edition. J.M. Juran, editor. 1988, McGraw-Hill.

Key Contributors to the Field

Total Quality Management
of Quality Management
A philosophy that involves everyone in an organization in
a continual effort to improve quality and achieve
customer satisfaction.

- Quality control to quality management

- Encompasses entire organization from supplier to
customer
- Deming’s 14 points for TQM

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19 Definition: asq.org

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14 Points for TQM Implementation

(by Deming) TQM vs Non-TQM company
1. Create consistency of purpose.
Once IBM plant in Ontario ordered a batch of components
2. Lead to promote change.
from a Japanese manufacturer and specified that the batch
3. Build quality into the product; stop depending on inspections to catch problems.
4. Build long-term relationships based on performance instead of awarding business on the basis of
should have acceptable quality level of three defective parts
price. per thousand.
5. Continuously improve product, quality, and service.
6. Start with training.
When the parts arrived in Ontario they were accompanied by
7. Emphasize leadership. a letter which expressed the supplier’s bewilderment at being
8. Drive out fear. asked to supply defective parts as well as good ones. The
9. Break down barriers between departments. letter also explained that the supplier had found it difficult to
10. Stop haranguing workers. make parts which were defective, but had indeed managed it.
11. Support, help, and improve.
These three defective parts per thousand had been included
12. Remove barriers to pride in work.
and were wrapped separately for the convenience of the
13. Institute a vigorous program of education and self-improvement.
14. Put everybody in the company to work on the transformation.
customer.
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Basic Quality Tool for Process

Main TQM Approach
Improvement (7-QC Tools)
1. Find out what customers want. 1) Check Sheet
2. Design a product or service that will meet (or 2) Scatter Diagram
exceed) what customers want.
3. Design processes that facilitate doing the job right 3) Cause-and-Effect Diagram
the first time. 4) Pareto Chart
4. Keep tracking the results, and use them to guide
continuous improvement in the system.
5) Flowchart (Process Diagram)
5. Extend these concepts throughout the supply chain. 6) Histogram
6. Top management must be involved and committed. 7) Process Control Chart
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Check Sheets Scatter Diagram

For problem Identification To establish correlation
Hour

Defect 1 2 3 4 5 6 7 8

A /// / / / / /// /

Productivity
B // / / / // ///
C / // // ////

Absenteeism

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Cause and Effect Analysis Cause and Effect Analysis: An Example

Structured approach to assigning possible causes to problems

who, what, where, when, why, and how questions who, what, where, when, why, and how questions
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Pareto Analysis Process Flow Chart

Focus on most important causes/problems Study the process flow

Data for Month 1

1. Physician schedules MRI 7. If unsatisfactory, repeat
70 –
2. Patient taken to MRI 8. Patient taken back to room
60 –
54 3. Patient signs in 9. MRI read by radiologist
Frequency (number)

Cumulative percent
50 – 4. Patient is prepped 10. MRI report transferred to
40 – 5. Technician carries out MRI physician
30 –
Number of 6. Technician inspects film 11. Patient and physician
occurrences discuss
20 –
12
10 – 8
4 3 2 80%
0 – 1 2 3 4 5 6 7 11
Room svc Check-in Pool hours Minibar Misc. 9 10
72% 16% 5% 4% 3%
20%
Causes and percent of the total
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Control Chart

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