Lecture 8 (Quality)

Quality Management
By Nida Qamar
Lecture Outline
Meaning of Quality
Importance of Better Quality
Cost of Quality
Meaning of Quality
Websters Dictionary
degree of excellence of a thing
American Society for Quality
totality of features and characteristics

that satisfy needs
Consumers and Producers

Perspective
Meaning of Quality:
Consumers Perspective
Fitness for use
how well product or

service does what it is
supposed to
Quality of design
designing quality
characteristics into a
product or service
A Mercedes and a Ford are
equally fit for use, but with
different design dimensions
Meaning of Quality:
Producers Perspective
Quality of Conformance
Making sure a product or service is

produced according to design
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
specifications of its design
Dimensions of Quality:
Manufactured Products
Performance
basic operating characteristics of a product; how

well a car is handled or its gas mileage
Features
extra items added to basic features, such as a

stereo CD or a leather interior in a car
Reliability
probability that a product will operate properly

within an expected time frame; that is, a TV will
work without repair for about seven years
Manufactured Products (cont.)
Conformance
degree to which a product meets preestablished

standards
Durability
how long product lasts before replacement
Serviceability
ease of getting repairs, speed of repairs, courtesy

and competence of repair person
Manufactured Products (cont.)
Aesthetics
how a product looks, feels, sounds,

smells, or tastes
Safety
assurance that customer will not suffer

injury or harm from a product; an
especially important consideration for
automobiles
Perceptions
subjective perceptions based on brand

name, advertising, and the like
Service
Time and Timeliness
How long must a customer wait for service,

and is it completed on time?
Is an overnight package delivered overnight?
Completeness:
Is everything customer asked for provided?

Is a mail order from a catalogue company
complete when delivered?
Service (cont.)
Courtesy:
How are customers treated by employees?

Are catalogue phone operators nice and are
their voices pleasant?
Consistency
Is the same level of service provided to each

customer each time?
Is your newspaper delivered on time every
morning?
Service (cont.)
Accessibility and convenience
How easy is it to obtain service?

Does a service representative answer you calls quickly?
Accuracy
Is the service performed right every time?

Is your bank or credit card statement correct every month?
Responsiveness
How well does the company react to unusual situations?

How well is a telephone operator able to respond to a
customers questions?
Meaning of Quality:
A Final Perspective
Consumers and producers
perspectives depend on each other
Consumers perspective: PRICE
Producers perspective: COST
Consumers view must dominate
Meaning of Quality
Meaning
Meaning of
of Quality
Quality
Producers
Producers Perspective
Perspective
Quality
Quality of
of Conformance
Conformance
Production
Production
Conformance to
specifications
Cost
Consumers
Consumers Perspective
Perspective
Quality
Quality of
of Design
Design
Quality characteristics
Price
Fitness
Fitness for
for
Consumer
Consumer Use
Use
Marketing
Marketing
Cost of Quality
Cost of Achieving Good Quality
Prevention costs
costs incurred during product design
Appraisal costs
costs of measuring, testing, and analyzing
Cost of Poor Quality
Internal failure costs
include scrap, rework, process failure, downtime, and

price reductions
External failure costs
include complaints, returns, warranty claims, liability,

and lost sales
Prevention Costs
Quality planning costs
costs of developing and

implementing quality
management program
Product-design costs
costs of designing
products with quality
characteristics
Process costs
costs expended to make

sure productive process
conforms to quality
specifications
Training costs
costs of developing and

putting on quality training
programs for employees
and management
Information costs
costs of acquiring and

maintaining data related
to quality, and
development of reports on
quality performance
Appraisal Costs
Inspection and testing
costs of testing and inspecting materials, parts, and

product at various stages and at the end of a
process
Test equipment costs
costs of maintaining equipment used in testing

quality characteristics of products
Operator costs
costs of time spent by operators to gather and

maintained data for testing product quality, to make
equipment adjustments to maintain quality, and to
stop work to assess quality
Internal Failure Costs

Scrap costs
costs of poor-quality products

that must be discarded,
including labor, material, and
indirect costs
Rework costs
costs of fixing defective

products to conform to quality
specifications
Process failure costs
costs of determining why

production process is
producing poor-quality
products
Process downtime costs
costs of shutting down

productive process to fix
problem
Price-downgrading costs
costs of discounting poorquality productsthat is,

selling products as
seconds
External Failure Costs

Customer complaint costs
costs of investigating and

satisfactorily responding to a
customer complaint resulting
from a poor-quality product
Product return costs
litigation costs
resulting from product
liability and customer
injury
Lost sales costs

costs of handling and replacing
poor-quality products returned

by customer
Warranty claims costs
Product liability costs
costs of complying with

product warranties
costs incurred
because customers
are dissatisfied with
poor quality products
and do not make
additional purchases
Measuring and
Reporting Quality Costs
Index numbers
ratios that measure quality costs against a

base value
labor index
cost index
ratio of quality cost to manufacturing cost
sales index
ratio of quality cost to labor hours
ratio of quality cost to sales
production index
ratio of quality cost to units of final product

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Quality Management

degree of excellence of a thing

American Society for Quality

totality of features and characteristics

Consumers and Producers

how well product or

Making sure a product or service is

if new tires do not conform to specifications, they

basic operating characteristics of a product; how

extra items added to basic features, such as a

probability that a product will operate properly

degree to which a product meets preestablished

how long product lasts before replacement

ease of getting repairs, speed of repairs, courtesy

how a product looks, feels, sounds,

assurance that customer will not suffer

subjective perceptions based on brand

How long must a customer wait for service,

Is everything customer asked for provided?

How are customers treated by employees?

Is the same level of service provided to each

How easy is it to obtain service?

Is the service performed right every time?

How well does the company react to unusual situations?

Importance of Better Quality

Importance of Better Quality

costs incurred during product design

costs of measuring, testing, and analyzing

Cost of Poor Quality

Internal failure costs

include scrap, rework, process failure, downtime, and

External failure costs

include complaints, returns, warranty claims, liability,

costs of developing and

costs expended to make

costs of developing and

costs of acquiring and

costs of testing and inspecting materials, parts, and

Test equipment costs

costs of maintaining equipment used in testing

costs of time spent by operators to gather and

Internal Failure Costs

costs of poor-quality products

costs of fixing defective

Process failure costs

costs of determining why

Process downtime costs

costs of shutting down

costs of discounting poorquality productsthat is,

External Failure Costs

costs of investigating and

Product return costs

Lost sales costs

poor-quality products returned

Warranty claims costs

Product liability costs

costs of complying with

ratios that measure quality costs against a