Chapter 5

Quality Management

Reference (textbook): Operations Management: Sustainability

and Supply Chain Management
Heizer, Jay., Render, B. & Munson, C. (2017)

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Syllabus Content
1. Quality and Strategy
2. Defining Quality
3. Quality dimension for Goods and Services
4. Concept of TQM
5. Tools of TQM

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1.0 Quality and Strategy
• Quality is a wonderful tonic for improving operations
• Managing quality helps build successful strategies of differentiation, low cost, and response (read
example on page 254)
• Improvement in quality help firms increase sales and reduce costs- both of which can increase
profitability (Figure 6.1)
• One study found that companies with the highest quality were 5 times as productive as
companies with the poorest quality.
Two way Quality Improves Profitability

Sales gain via

• Improved Response
Improved • Flexible Pricing
• Improved Reputation Increased Profits
Quality
Reduced Cost via
• Increased productivity
• Lower rework and scrap costs
• Lower warranty costs
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• Lack of quality affects the entire organization from supplier to customer and from product design to
maintenance.
• Figure 6.2 – flow of activities for an organization to use to achieve TOTAL QUALITY
MANAGEMENT (TQM).
1. Begins with organizational culture that nurtures quality
2. Understanding of the principle of quality
3. Engaging employees in the necessary activities to implement quality
4. Ultimate goals to win customers – customer satisfaction
Organizational Practices
Leadership, Mission Statement, Effective Operating Procedures, Figure 6.2
Staff support, Training The Flow
Yields: What is important and what is to be accomplished of
Activities
Quality Principle Necessary
Customer focus, Continuous improvement, Benchmarking, Just-in- to Achieve
TQM
Time, Tools of TQM
Yields: How to do what is important and to be accomplished
Employee Fulfillment
Empowerment, Organizational Commitment
Yields: employees attitudes that can accomplish what is
important
Customer Satisfaction
winning Orders, Repeat Customers
Yields: an effective organization with a competitive advantage
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2.0 Defining Quality
• An operations manager’s objective is to build a Total Quality Management system that identifies
and satisfies customer needs.
• Definition of Quality = The ability of a product or service to meet customer needs
• Definition of quality falls in several categories:-
1. User – Based view = “ Lies in the eyes of the beholder” – higher quality
means better performance, nicer features, and other
improvement (marketing people like this approach)
2. Manufacturing – based view = Conforming to standards and “making it right the
first time”
3. Product – based view = Precise and measurable variable (e.g. good ice cream has
high butterfat levels –premium ice-cream always have high
butterfat- the fatty part of milk- e.g Haagen Dazs, Ben &
Jerry’s)
• The two most well-known quality awards are:
1. U.S = Malcolm Baldridge National Quality Award, named after a former secretary of commerce
2. Japan = Deming Prize, named after an American, Dr. W. Edwards Deming
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2.1 Implication of Quality

• Quality has other implication. Here are three other reasons why quality is
important:-

1. Company reputation = Quality will show up in perceptions about the firm’s new
products, employment practices, and supplier relations – be good or bad.
2. Product liability = Legislations such as Consumer Product Safety Act - banning
products that do not reach standards – impure foods that cause illness, auto fuel
tanks that explode etc
3. Global Implications = Products must meet global quality, design and price
expectation.

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2.2 ISO 9000 International Quality Standards
• ISO 9000 is the quality standard with international recognition.
• Its focus to enhances success through 8 quality management principles
1. Top management leadership
ISO 9000:2000 = Garis panduan Am
2. Customer satisfaction ISO 9001:2000 = Sistem Pengurusan Kualiti
ISO 9004:2000 = Penambahbaikan Pengurusan Kualiti
3. Continual improvement ISO 19011:2000 = Pengurusan Kualiti dan Audit Persekitaran
4. Involvement of people ISO 14000 =Sistem Pengurusan Kualiti Alam Sekitar

5. Process Analysis
6. Use of data-driven decision making
7. A systems approach to management
8. Mutually beneficial supplier relationships
• The ISO standard encourages establishment of quality management procedures,
detailed documentation, work instructions, and recordkeeping.
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2.3 Cost of Quality (COQ)
• Four major categories of costs are associated with quality called the Cost of
Quality (COQ) :-
1. Prevention Costs : Costs associated with reducing the potential for defective
parts or services – training, quality improvement programs
2. Appraisal Costs: Cost related to evaluating products, process, parts and services
– testing, labs, inspectors
3. Internal failure costs: Costs that result from production of defective parts or
services before delivery to customers – rework, scrap, downtime
4. External failure costs : Costs that occur after delivery of defective parts or
services – rework, returned goods, liabilities etc

• Leaders in Quality : W. Edward Deming, Joseph M. Juran, Armand Feigenbaum,

Philip B. Crosby (table 6.1- page 257)
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3.0 Total Quality Management (TQM)
• Refers to a quality emphasis that encompasses the entire organization from supplier
to customer.
• TQM stresses a commitment by management to have a continuing drive toward
excellence in all aspects of products and services that are important to the customers.
• W. Edwards Deming used 14 points (Table 6.2 page 258) to indicate how to
implemented TQM.
• From that- develop seven concepts for an effective TQM
1. Continuous improvement
2. Six Sigma
3. Employee Empowerment
4. Benchmarking
5. Just-in-Time
6. Taguchi concepts
7. Knowledge
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3. Seven (7) concepts for an effective TQM
1. Continuous Improvement
- A continuous improvement model that involves four stages : Plan, Do, Check and
Act (PDCA)

4. Act 1. Plan
Implement Identify the
the plan, problem and
document make a plan

3. Check
2. Do
Is the plan
Test the plan
working?

- The Japanese use the word Kaizen to describe the ongoing process of unending
improvement – the setting and achieving of ever higher goals
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2. Six Sigma
- A program to save time, improve quality, and lower costs
- In statistical sense, Six Sigma describes a process, products or services with an
extremely high capability – 99. 997% accuracy, or 3.4 defects per million.
- Six Sigma is a comprehensive system- a strategy, a discipline and a set of tools-
for achieving and sustaining business success:
- It is a strategy because it focuses on total customer satisfaction
- It is discipline because it follow the formal Six Sigma Improvement Model Known as DMAIC
(Defines, Measures, Analyze, Improve, Controls)
- It is Set of tools because follow the seven tools : check sheets, scatter diagrams, cause-and-
effect diagrams, Pareto charts, flowcharts, histograms, and statistical process control.

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3. Employee Empowerment
- Enlarging employee jobs so that the added responsibility and authority are moved to the
lowest level possible in the organization.
- Business literature suggest that some 85% of quality problems have to do with materials
and processes, not with employee performance.
- Therefore, the task to design equipment and processes that produced desired quality is
best done by those who understand the systems and have a high degree of involvement.
- When nonconformance (failure to conform) occurs, the worker is seldom at fault. Either
the product was designed wrong, the process that makes the product was wrong, or the
employee was improperly trained. Although the employee may be able to help solve the
problem, the employee rarely to cause it
- Techniques for building employee empowerment include: (1) building communication
networks that include employee, (2) developing open, supportive supervisor, (3)moving
responsibility from both, managers and staff to production employees, (4) building high
morale organization, (5) creating such formal organization structures as teams and
quality circles.
- Quality circle- is a group of employee who meet regularly to solve work-related problem.
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4. Benchmarking
- Selecting a demonstrated standard of performance that represents the very best
performance for a process or an activity.
- The idea is to develop a target at which to shoot and then to develop a standard or
benchmark against which to compare your performance.
- The steps for developing benchmarks are:
1. Determine what to benchmark
2. Form a benchmark team
3. Identify benchmark partners
4. Collect and analyze benchmarking information
5. Take action to match or exceed the benchmark
- Typical performance measures used in benchmarking include percentage of
defects, cost per unit or per order, processing time per unit, service response time,
return on investment, customer satisfaction rates, and customer retention rates.
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5. Just-in-Time (JIT)
- The philosophy behind just-in-time (JIT) involves continuing improvement and
enforced problem solving.
- JIT systems are designed to produce or deliver goods just as they are needed
- JIT related to quality in 3 ways:
1. JIT cuts the cost of quality:
- This occurs because scrap, rework, inventory investment, and damage costs are
directly related to inventory on hand. With JIT= less inventory = cost are lower.
2. JIT improves quality:
- As JIT shrinks lead times, it keep evidence of errors fresh and limits the number of
potential sources of error. JIT creates early warning system for quality problems,
both within firm and vendors
3. Better quality means less inventory and a better, easier- to- employ JIT system:
- Often the purpose of keeping inventory is to protect against poor production
performance resulting from unreliable quality. If consistent quality exists, JIT allows
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to reduce all the costs associated with inventory
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6. Taguchi Concepts
- Genichi Taguchi has provided with 3 concept aimed at improving both product and
process quality.
1. Quality Robust
- Products that are consistently built to meet customer needs, despite adverse
condition in the production process – remove the effects to adverse conditions
instead of removing the causes
2. Target-Oriented quality
- A philosophy of continuous improvement to bring the product exactly on target
3. Quality loss function
- A mathematical function that identifies all costs connected with poor quality and
shows how these cost increase as output moves away from the target value.

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7. Knowledge of TQM Tools
- To empower employees and implement TQM as a continuing effort, everyone in
the organization must be trained in the technique of TQM
- Seven tools that are use in TQM.

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4.0 Tools of TQM
• 7 tools that are particularly helpful in TQM

(1) Check Sheets

- Is any kind of form that is designed for recording data
- The recording is done so the pattern are easily seen while data are being taken
- Help analysts find the facts or pattern that may aid subsequent analysis

Hour
Defect 1 2 3 4 5 6 7 8
A /// / / / / /// /
B // / / / // ///
C / // // ////
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(2) Scatter Diagrams
- A graph of the value of one variable vs. another variable
- Show the relationship between two measurement
- If the two items are closely related, the data points form a tight band
- If a random pattern results, the item are unrelated
Productivity

Absenteeism
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(3) Cause and Effect Diagram
- A tool that identifies process elements (causes) that might effect an outcome
- Also known as an Ishikawa Diagram or Fish-Bone Chart.
- The shape resembling the bones of a fish
- Each bone represent a possible source of error
- The OM Managers starts with 4Ms: Material, Machinery (equipment), manpower,
methods. – 4Ms are the causes.
Cause
Materials Methods
Effect

Manpower Machinery
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(4) Pareto Charts

- A graphic that identifies the few critical items as opposed to many less important
one / a graph to identify and plot problems or defect in descending order of
frequency
- A method of organizing errors, problems, or defect to help focus on problem-
solving efforts
Frequency

Percent
A B C D E
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(5) Flowcharts
- Graphically present a process or system using annotated boxes and
interconnected lines
- They are a simple but great tool for trying to make sense of a process or explain a
process

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(6) Histogram
- A distribution showing the frequency of occurrence f a variable
- Shows the most frequently occurring reading as well as the variations in the
measurement
- Descriptive statistic may be calculated to describe the distribution

Frequency Distribution

Repair time (minutes)

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(6) Statistical Process Control (SPC)
- A process used to monitor standards, make measurements, and take corrective
action as a product or service is being produced.
- A Chart with time on the horizontal axis to plot values of a statistic
- Monitor standards, makes measurements, and takes corrective action as a product
or service is being produced
- Sample of process output are examined, if within the acceptable limit, the process
is permitted to continue
- Control chart; graphic presentation of process data over time, with predetermined
control limits.
Upper control limit

Target value
Lower control limit

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5.0 The Role of Inspection
- Inspection : a means of ensuring that an operation is producing at the quality level expected.
- This inspection can involve measurement, tasting, touching, weighting, or testing of the product
(sometimes even destroying it when doing so)
- It goals is to detect a bad process immediately.
- OM Managers needs to know critical point in the system : (1) when to inspect and (2) where to
inspect

a) When and Where to Inspect

1. At your supplier’s plant while the supplier is producing
2. At your facility upon receipt of goods from your supplier
3. Before costly or irreversible processes
4. During the step-by-step production process
5. When production or service is complete
6. Before delivery to your customer
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5.0 The Role of Inspection
b) Source Inspection (source control)
- The best inspection can be thought of as no inspection at all; this “inspection” is
always done at the source – it is just doing the job properly with the operator
ensuring that is so.
- Is consistent with the concept of employee empowerment- where individual
employees self-check their own work.
- The idea is that each supplier, process, and employee treats the next steps in the
process as the customers, - ensuring perfect product to the next “customer”
- This inspection may be assisted by the use of checklists and controls such as fails-
safe dive called poka-yoke
- A Poka-yoke is a foolproof device or technique that ensures production of goods
units every time. –avoid errors by provide quick feedback of the problems.
- Checklists are type of poka-yoke that lists the steps needed to ensure consistency
and completeness in a tasks. E.g: To-Do List
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c) Service Industry Inspection
- In service oriented organization, inspection point can be assigned at a wide range
of locations (refer Table 6.4) page 270.
- The OM must decide where inspections are justified and my find the 7 tools of
TQM useful when making these judgements.

d) Inspection of Attributes Vs Variables

- When inspection take place, quality characteristics may be measured as either
attributes or variables
- Attribute inspections – an inspections that classifies items as being either good or
defective – does not address degree of failure (e.g.: lightbulb burns or it does not)
- Variable inspection – measure such dimension as weight , speed, size or strength
to see if an item falls within an acceptable range (e.g.: if a electrical wire supposed
to 0.01 inch in diameter- use micrometer to check)
- Knowing whether attributes or variables are being inspected help us decide which
statistical quality control approach to take.
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6.0 TQM in Service

- Service quality is more difficult to measure than the quality of goods

- User of service has features in mind that form a basis for comparison among
alternatives. Lack of any one feature may eliminate the service from further
consideration.
- What is very different about the selection of services is the poor definition of the (1)
intangible differences between products and (2) the intangible expectations
customers have of those products.
- Intangible attributes may be not defined at all – unspoken images in the
purchaser’s mind.

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6.0 TQM in Service
- OM plays a significant role in addressing several major aspects of service quality:-
1) The tangible component of many services is important.
- How well the service is designed and produced does make a difference. (e.g. how
accurate, clear and complete your checkout bill at hotel, how warm food at Taco
Bell)
2) The Service Process
-Table 6.5 : 9 out of 10 determinant of service quality are related to service process.
- OM can design process that have these attributes and can ensure their quality
3) The customer’s expectations are the standard against which is service is judged.
- Customers’ perceptions of service quality result from a comparison of their “before-
service expectation” with their “actual-service experience”
- In other word – service quality is judged on the basis of whether it meets
expectations.
- OM don’t promise more than you
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can deliver.
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6.0 TQM in Service
4) The manager must expect exceptions.
- There is a standard quality level at which the regular service is delivered, e.g. bank
teller's handling of a transaction.
- However, there are “exceptions” or “problem” initiated by the customer or by less-
than-optimal operating condition (e.g. the computer “crashed”).
- Quality control system must recognize and have a set of alternative plans for less-
than-optimal operating conditions.
- All company have service recovery strategies (training and empowering frontline
workers to solve a problem immediately)
- E.g. staff at Marriot Hotels are train with LEARN routine ( Listen, Emphatize,
Apologize, React, Notify)
- Ritz-Carlton Hotel- staff trained no to say sorry but please accept my apology
- Managers in service firm also can used SERVQUAL to evaluate performance. It a
tools to compare between customers
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6.0 TQM in Service

Quality Dimensions for Service Quality

 Reliability- consistency  Credibility- trustworthiness,

 Responsiveness- readiness believability, honesty
 Competence- knowledge and skills  Security- free from danger,
risk, doubt
 Access- contact
 Understanding/ knowing the
 Courtesy- polite, respect, customer- making effort to
consider, friendly understand
 Communication- understandable,  Tangibles- physical evidence
listen

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6.0 TQM in Service

Quality Dimensions for Goods

 Reliability  Esthetic value

 Durability  Operation
 Conformance
 Serviceability
 Appearance
 Perceived quality

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