You should be able to:

1.
2.
3.
4.
5.
6.
7.
8.
9.

Define the term quality as it relates to products and as it

relates to services
Identify the determinants of quality
Explain why quality is important and the consequences of
poor quality
Distinguish the costs associated with quality
Discuss the importance of ethics in managing quality
Discuss quality certification and its importance
Describe TQM
Describe the six sigma methodology
Describe and use various quality tools
9-1

 Quality

The ability of a product or service to consistently meet or exceed

customer expectations

For a decade or so, quality was an important focal point in business.

After a while, this emphasis began to fade as other concerns took

precedence

There has been a recent resurgence in attention to quality given

recent experiences with the costs and adverse attention

associated with highly visible quality failures:

Auto recalls (Toyota brakes, GM ignition switch, Ford airbag switch)

Talking about quality is cheap (i.e. lip service), but recalls arent!!
Toys (produced in overseas with lead paint!)
Produce (mad cow disease; tainted lettuce)
Dog food
Pharmaceuticals
Many of the above types of issues leads to multi-million/billion $

lawsuits

How does that impact Customer Perception? Financial Statements? 9-2

Tier-1 OEM automobile parts manufacturer specializing

in braking and suspension systems (critical to safety)

If suspect parts are found at auto assembly plant (ex.

Ford, Chrysler, etc.), the SUPPLIER is called in to sort
(100%) of all existing components, as well as pay for the
inspection of any cars already assembled
Supplier must also pay for employees to go to assembly
plant and do the sorting (hotel, airfare, food, etc.)

Supplier must expedite (typically air shipments) 100%

inspected replacement parts to the assembly plant

Supplier must pay for any line stoppage at auto

assembly plant (typically $35,000+/hour)

Supplier is also (at least particularly) responsible for

footing the bill for any recalls (i.e. when you take your
car into the dealership for inspection)

Supplier is then put on (at minimum) probation which

jeopardize future business

Lives can be lost. Families can be destroyed. Due to a

lack of focus on ensuring Quality
9-3

Performance main characteristics of the product

2. Aesthetics appearance, feel, smell, taste
3. Special features extra characteristics
4. Conformance how well the product conforms to design
1.

specifications

5.
6.
7.
8.
9.

Reliability consistency of performance

Durability the useful life of the product
Perceived quality indirect evaluation of quality
Serviceability handling of complaints or repairs
Consistency quality doesnt vary
one size does NOT fit all
Individuals view the above dimensions differently
ex. is Wal-Mart is a high quality retailer (products)?

9-4

See Table 9.2 as

excellent reference
for Service / auto
repair shop.

2.

Convenience the availability and accessibility of the service

Reliability ability to perform a service dependably, consistently, and

3.

Responsiveness willingness to help customers in unusual situations and

4.

Time the speed with which the service is delivered

Assurance knowledge exhibited by personnel and their ability to convey

1.

5.

accurately

to deal with problems

trust and confidence

7.

Courtesy the way customers are treated by employees

Tangibles the physical appearance of facilities, equipment, personnel,

8.

Consistency the ability to provide the same level of good quality

6.

9.

and communication materials

repeatedly

Expectancy meet (or exceed) customer expectations

moment of truth when service quality is judged instantly
(often one element overriding the other dimensions).
9-5

1.

Quality of design
Intention of designers to include or exclude features in a product or service

2.

Quality of conformance
The degree to which goods or services conform to the intent of the designers

3.

Ease-of-Use and user instructions

Increase the likelihood that a product will be used for its intended purpose and

in such a way that it will continue to function properly and safely

4.

After-the-sale service
Taking care of issues and problems that arise after the sale

9-6

 Top management
Design
Procurement
Production/operations
Quality assurance
Packaging and shipping
Marketing and sales

Everyone in the organization has

some responsibility for Quality,

but certain areas (ex Quality
Dept. & Operations) of the
organization are involved in
activities that make them key
areas of responsibility.

Customer service

9-7

 Enhanced reputation for quality

Ability to command premium prices (always a good thing)
Increased market share
Greater customer loyalty
Lower liability costs
Fewer production or service problems
Lower production costs
Higher profits

9-8

 Loss of business: lower market share, lower sales, lower selling

price = lower profit margin = threat to long-term viability of the firm

Liability: damages resulting from faulty design or poor

workmanship (recall the example I used earlier with Tier-1

auto/brake supplier)

Productivity: poor quality can adversely affect production if

existing parts have to be reworked/sorted/scrapped

Costs: the cost to fix a problem (reactively) at the customer is

estimated to be minimum 5x the cost to have avoided (proactive) the

problem to begin with!
9-9

1.

Appraisal Costs

2.

Prevention Costs

3.

Internal failure costs

4.

External failure costs

9-10

 Appraisal Costs

Costs of activities designed to ensure quality or uncover

defects

Ex. Inspectors, testing, lab equipment, quality audits, field testing, etc.

Prevention Costs

All TQ training, TQ planning, customer assessment,

process control, and quality improvement costs to
prevent defects from occurring

Ex. planning and administration systems, working with vendors,

training, quality control procedures, etc.

9-11

 Failure Costs - costs incurred by defective

parts/products or faulty services.

Internal Failure Costs

Costs incurred to fix problems that are detected before the
product/service is delivered to the customer.
External Failure Costs
All costs incurred to fix problems that are detected after the
product/service is delivered to the customer

9-12

 Walter Shewart
father of statistical quality control
Control charts
Variance reduction
W. Edwards Deming
Special vs. common cause variation
The 14 points
Joseph Juran
Quality Control Handbook, 1951
Viewed quality as fitness-for-use
Quality trilogy quality planning,
quality control, quality improvement

Armand Feigenbaum
Quality is a total field
The customer defines quality
Philip B. Crosby
Zero defects
Quality is Free, 1979
Kaoru Ishikawa

Cause-and-effect diagram
Quality circles
Recognized the internal customer

Genichi Taguchi
Taguchi loss function
Taiichi Ohno and Shigeo Shingo
Developed philosophy and methods
of kaizen
9-13

Deming Prize

Baldrige Award

European
Foundation for
Quality Model
(EFQM) Excellence
Award
Firms highly covet these types of awards as it
affirms/confirms internally (within the firmemployees)
and externally (suppliers, competitors, existing
customers, potential customers, investors, etc.) that the
firm provides Quality products and/or services.
9-14

 The International Organization for Standards (ISO)

was formed after World War II

ISO 9000International Quality Standard

First one established in 1994
Currently transitioning to ISO 9000:2008
ISO 14000International Environmental Standard
First one established in 1998
Current one is ISO 14001:2004
Many firms will not buy from a manufacturer that

is not ISO-certified. Why?

9-15

ISO certification (International Standards Organization)

Global quality benchmark
Refine and upgrade quality to meet ISO standards
Ensures a firm is following their documented procedures
Not necessarily that the documented procedures are good, but
rather that theyre being followed
Do what you say/say what you do
Discussion Point: ISO audits

1st Question: What is your Quality Policy?

2nd Question: Who is your firms Management Representative for

Quality

3rd Question: Who has responsibility for ensuing Quality (answer:

everyone)

Corning Incorporateds Quality Policy (example)

Total Quality is the guiding principle of Corning's business life. It requires each of us,
individually and in teams, to understand, anticipate, and surpass the expectations of
our customers. Total Quality demands continuous improvement in all our processes,
products, and services. Our success depends on our ability to learn from experience,
to embrace change, and to achieve the full involvement of all our employees.
Total Quality Policy: It is the policy of Corning Incorporated to achieve Total Quality
through Performance Excellence. Performance Excellence is Quality in Action -Values, Collaboration, Execution, and Improvements. This means each of us,
individually and in teams, will understand, anticipate and surpass the expectations of
customers and markets without error, on time, every time.
Quality Principles
Meet Customer Requirements: Establish and measure the customer's Critical to
Quality (CTQ) characteristics
Error-Free Work: Establish and measure performance standards based on 6
Sigma: 99.9997% or 3.4 defects per million
Design in Quality: Build quality into products and processes at the start or
manage by prevention
Measure & Improve Performance: Prioritize corrective action, measure progress,
9-17
and improve performance based on the cost of Quality

 Business leaders are increasingly recognizing the

importance of their supply chains in achieving their quality

goals
Requires:
Focus on the overall Total Cost of inputs vs focusing mainly on unit
purchase price
Measuring customer perceptions of quality
Identifying problem areas
Correcting these problems
Supply chain quality management can benefit from a

collaborative relationship with suppliers

Helping suppliers with quality assurance efforts

Information sharing on quality-related matters
9-18

 Total Quality Management (TQM) is a philosophy focused on

1.

meeting customer expectations/specifications with respect to all needs

2.

across all company functions

3.

and recognizing all customersboth internal and external

TQMs basic conceptual elements are:

1.
Top Management commitment and support
2.

Maintaining a customer focus in product, service and process performance

3.

Integrated operations within and between organizations

4.

A commitment to continuous improvement

1.

Find out what the customer wants

2.

Design a product or service that meets or exceeds customer

wants

3.

Design processes that facilitate doing the job right the first
time

4.

Keep track of results

5.

Extend these concepts throughout the supply chain

6.

Top management must be involved and committed

9-20

1.
2.
3.
4.
5.
6.
7.
8.
9.

Continuous improvement (kaizen): equipment, methods, materials, people.

Competitive benchmarking: studying other organizations to learn how to
improve ones own organization
Employee empowerment: giving workers the responsibility to identify and
implement improvement ideas.
Team approach: the use of team problem solving and group synergies helps to
solve problems.
Decision based on fact, not opinion: the importance of data (we studied this
earlier in the semester)
Knowledge of tools: various tools available to help solve problems
Suppliers/supplier quality: suppliers must be includes in TQM as they provide
the inputs which determine the Quality of the outputs
Champion: promotes the value and importance of TQM throughout the
organization
Quality at the source: each worker (even internally) is responsible for the
quality of his/her product/service
9-21

9-22

 Obstacles include:
1. Perceived lack of support from top management
2. Lack of company-wide definition of quality
3. Lack of strategic plan for change
4. Lack of customer focus
5. Poor inter-organizational communication
6. Lack of employee involvement/empowerment
7. View of quality as a quick fix
8. Emphasis on short-term financial results
9. Inordinate presence of internal politics and turf issues
10. Lack of strong motivation
11. Lack of time to devote to quality initiatives
9-23

 Process Improvement
A systematic approach to improving a process
Map the process
Collect information about the process and identify each step in

the process
Prepare a flowchart that accurately depicts the process
Analyze the process
Ask critical questions about the process
Ask specific questions about each step in the process

Redesign the process

9-24

1.

Identify a critical process that needs improvement

2.

Identify an organization that excels in this process

3.

Contact that organization

4.

Analyze the data

5.

Improve the critical process

9-25

 Six Sigma
A business process for improving quality, reducing costs,

and increasing customer satisfaction

Statistically
Having no more than 3.4 defects per million
Conceptually
Program designed to reduce defects
Requires the use of certain tools and techniques

9-26

 Principles
Reduction in variation is an important goal
The methodology is data driven; it requires data validation
Outputs are determined by inputs
Only a critical few inputs have a significant impact on outputs
DMAIC
Define:
Measure:
Analyze:
Improve:
Control:

Set the context and objectives for improvement

Determine the baseline performance and capability of
the process
Use data and tools to understand the cause-and-effect
relationships of the process
Develop the modifications that lead to a validated
improvement of the process
Establish plans and procedures to ensure that
improvements are sustained

iDMAIC: smaller opportunities that can be done by ndividuals

9-27

Basic Quality Tools

9-28

 Quality is a strategic imperative for organizations

Customers are very concerned with the quality of goods and services
they receive
Quality products/services often entail a price premium (customers
willing to pay more)
Lack of Quality can lead to lower market share, lower prices, lower
profitability, lower brand imageand consumers who can also be
physically/emotionally harmed (faulty brakes example)
Quality is a never-ending journey (kaizen)
It is important that most organizational members understand and buy
into this idea
Quality needs to be incorporated throughout the entire

organization, not just in Operations itself

9-29

Supplemental Slides

9-30

Start Here

9-31

Act

Plan

Study

Do

Plan-Do-Study-Act (PDSA) Cycle

Plan
Begin by studying and documenting the current process.
Collect data on the process or problem
Analyze the data and develop a plan for improvement
Specify measures for evaluating the plan
Do
Implement the plan, document any changes made, collect
data for analysis

9-32

Act

Plan

Study

Do

Plan-Do-Study-Act (PDSA) Cycle

Study
Evaluate the data collection during the do phase
Check results against goals formulated during the plan phase
Act
If the results are successful, standardize the new method and
communicate it to the relevant personnel
Implement training for the new method
If unsuccessful, revise the plan and repeat the process

9-33