OM

CHAPTER 15

QUALITY MANAGEMENT

DAVID A. COLLIER
AND
JAMES R. EVANS

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 Chapter 15 Learning Outcomes

learning outcomes
LO1 Explain the concepts and definitions of quality.
LO2 Describe the quality philosophies and principles of
Deming, Juran, and Crosby.
LO3 Explain the GAP model and its importance.
LO4 Describe the concepts and philosophy of ISO
9000:2000.
LO5 Describe the philosophy and methods of Six Sigma.
LO6 Explain the categories of cost of quality
measurement.
LO7 Describe how to apply the 7 QC Tools.
LO8 Explain the concepts of kaizen and poka-yoke.

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 Chapter 15 Quality Management

ow!” exclaimed Lauren when she saw the ski runs at Deer Valley
Resort in Park City, Utah. Deer Valley has been called “The Ritz-
Carlton” of ski resorts, and Lauren’s dad was expecting
exceptional services and a superior ski vacation experience after all he had
read in ski magazines. He wasn’t disappointed. When he drove up to the
slopes, a curbside ski valet took their equipment from his car, parking lot
attendants directed him to the closest available parking, and a shuttle
transported them from the lot to Snow Park Lodge. From the shuttle, he and
his daughter walked to the slopes on heated pavers that prevent freezing and
assist in snow removal. Staff provided complimentary mountain tours to
familiarize them with the slopes. At the end of the day, they were able to
store their skis without charge at the lodge and easily retrieve them the next
morning. The resort limits the number of skiers on the mountain to reduce
lines and congestion. Everyone is committed to ensuring that each guest has a
wonderful experience. Even the food is consistently rated number one by ski-
enthusiast magazines.
What do you think? What satisfying service experiences similar to
the Deer Valley episode have you personally encountered?
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 Chapter 15 Quality Management

• Quality management refers to systematic

policies, methods, and procedures used to
ensure that goods and services are produced
with appropriate levels of quality to meet the
needs of customers.
• Organizations today integrate quality principles
into their management systems using tools
such as Total Quality Management (TQM), Six
Sigma, and Lean Operating Systems (Chapter
17).

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 Chapter 15 Quality Management

A Brief History of Quality Management

• Historical uses of quality management include the
precision involved in building of Egyptian pyramids,
interchangeable parts during Industrial Revolution, and
statistical tools used for quality control during World
War II.
• Dr. Joseph Juran and Dr. W. Edwards Deming were
pioneers in the field (more later on these two quality
gurus).
• The Japanese integrated quality ideas and methods
throughout their organizations and developed a culture
of continuous improvement.

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 Chapter 15 Quality Management

Understanding Quality
• Quality can be a confusing concept, partly
because people view quality in relation to
differing criteria based on their individual roles
in the value chain, such as:
 perfection,
 delighting or pleasing the customer,
 eliminating waste,
 doing it right the first time, and/or
 consistency.
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 Chapter 15 Quality Management

Understanding Quality
• Fitness for use is the ability of a good or
service to meet customer needs.
• Quality of conformance is the extent to
which a process is able to deliver output that
confirms to design specifications.
• Specifications are targets and tolerances
determined by designers of goods and
services.

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 Chapter 15 Quality Management

Understanding Quality
• Quality Control means ensuring
consistency in processes to achieve
conformance.
• Service Quality is consistently meeting
or exceeding customer expectations
(external focus) and service delivery
system performance criteria (internal
focus) during all service encounters.
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 Chapter 15 Quality Management

Understanding Quality
Principles of Total Quality
1. A focus on customers and stakeholders,
2. A process focus supported by continuous
improvement and learning, and
3. Participation and teamwork by everyone
in the organization.

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 Chapter 15 Influential Leaders in Quality Management

W. Edwards Deming
• Focus on bringing about improvements in product
and service quality by reducing uncertainty and
variability in goods and services design and
associated processes (the beginning of his ideas
in 1920s and 1930s).
• Higher quality leads to higher productivity and
lower costs.
• “14 Points” management philosophy.
• Deming Cycle – Plan, Do, Study, and Act.
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 Chapter 15 Influential Leaders in Quality Management

W. Edwards Deming 14 Points

Point 1: Create a Vision and Demonstrate
Commitment
Point 2: Learn the Philosophy
Point 3: Understand Inspection
Point 4: Stop Making Decisions Purely on
the Basis of Cost
Point 5: Improve Constantly and Forever
Point 6: Institute Training
Point 7: Institute Leadership
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 Chapter 15 Influential Leaders in Quality Management

W. Edwards Deming 14 Points

Point 8: Drive Out Fear
Point 9: Optimize the Efforts of Teams
Point 10: Eliminate Exhortations
Point 11: Eliminate Numerical Quotas
Point 12: Remove Barriers to Pride in Work
Point 13: Encourage Education and Self-
Improvement
Point 14: Take Action
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Exhibit Extra The Deming Cycle

• Plan: study current situation

• Do: implement plan on trial basis
• Study: determine if trial is working correctly
• Act: standardize improvements
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 Chapter 15 Influential Leaders in Quality Management

Joseph Juran
• Wrote Quality Control Handbook in 1951, a
comprehensive quality manual.
• Defined quality as “fitness for use.”
• Advocated use of quality cost measurement.
• Quality Trilogy: quality planning, quality control,
and quality improvement.

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 Chapter 15 Influential Leaders in Quality Management

Philip B. Crosby
• Wrote Quality is Free in 1979, which brought quality to the
attention of top corporate managers in the U.S.
• Crosby’s Absolutes of Quality Management include:
 Quality means conformance to requirements, not
elegance.
 There is no such thing as a quality problem.
 There is no such thing as the economics of quality; doing
the job right the first time is always cheaper.
 The only performance measurement is the cost of quality,
which is the expense of nonconformance.
 The only performance standard is Zero Defects (ZD).
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 Chapter 15 The GAP Model

The GAP model recognizes that there are several ways

to misspecify and mismanage the creation and delivery
of high levels of quality. These “gaps” are shown in the
model in Exhibit 15.2 and explained below.
• Gap 1 is the discrepancy between customer
expectations and management perceptions of
those expectations.
• Gap 2 is the discrepancy between management
perceptions of what features constitute a target
level of quality and the task of translating these
perceptions into executable specifications.

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Exhibit 15.2 Gap Model of Quality

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 Chapter 15 The GAP Model

• Gap 3 is the discrepancy between quality

specifications documented in operating and
training manuals and plans and their
implementation.
• Gap 4 is the discrepancy between actual
manufacturing and service delivery system
performance and external communications to
the customers.
• Gap 5 is the difference between the customer's
expectations and perceptions. The fifth gap
depends on the other four.
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Exhibit 15.2 Gap Model of Quality

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 Chapter 15 Quality Management

ISO 9000:2000
• Quality standards were created in 1987 and revised
in 1994 and 2000 to improve product quality,
improve the quality of operation’s processes, and
provide confidence to organizations and customers
that quality system requirements are fulfilled.
• Internationally recognized (and sometimes required
to do business in certain countries).
• Standardizes key terms in quality and provides a set
of basic principles for initiating quality management
systems.
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 Chapter 15 Quality Management

Six Sigma
• Six Sigma is a business improvement approach
that seeks to find and eliminate causes of
defects and errors in manufacturing and service
processes by focusing on outputs that are
critical to customers and results in a clear
financial return for the organization.
• Used by companies including Motorola, Allied
Signal, Texas Instruments, and General Electric.

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 Chapter 15 Quality Management

Six Sigma
Defects are any mistakes or errors that are
passed on to the customer (many people also use
the term nonconformance).

Defects per unit (DPU)=Number of defects discovered

Number of units processed

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 Chapter 15 Quality Management

Six Sigma
• The Six Sigma concept characterizes
quality performance by defects per
million opportunities (dpmo),
computed as DPU  1,000,000
opportunities for error (or, as is often
used in services, errors per million
opportunities – epmo).

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 Chapter 15 Quality Management

Six Sigma
• A DPU measure might be lost bags per customer.
However, customers may have different numbers of
bags; thus the number of opportunities for error is
the average number of bags per customer.
• If the average number of bags per customer is 1.6,
and the airline recorded 3 lost bags for 8,000
passengers in one month (note: 12,800 opportunities
for error in one month), then
epmo = (3/8,000 DPU)  1,000,000/1.6 = 234.375

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 Chapter 15 Quality Management

Six Sigma’s DMAIC Process

1. Define: identify customers and their priorities;
identify and define a suitable project; identify
CTQs (critical to quality characteristics).
2. Measure: determine how to measure the process
and how it is performing; identify key internal
processes that influence CTQs and measure
current defects.
3. Analyze: determine likely causes of defects and
understand why defects are generated by
identifying key variables that cause process
variation.
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 Chapter 15 Quality Management

Six Sigma’s DMAIC Process

4. Improve: identify means to remove causes
of defects; confirm key variables; modify the
process to stay within acceptable range.
5. Control: determine how to maintain
improvements; put tools in place to ensure
that key variables remain within acceptable
ranges under the modified process.

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 Chapter 15 Quality Management

Cost of Quality Measurements

• The cost of quality refers to the costs associated
with avoiding poor quality or those incurred as a
result of poor quality.
• Prevention costs are those expended to keep
nonconforming goods and services from being
made and reaching the customer.
• Appraisal costs are those expended on
ascertaining quality levels through measurement
and analysis of data to detect and correct
problems.
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 Chapter 15 Quality Management

Cost of Quality Measurements

• Internal-failure costs are costs incurred as
a result of unsatisfactory quality that is found
before delivery of good or service to the
customer.
• External-failure costs are incurred after
poor-quality goods or services reach the
customer.

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 Chapter 15 Seven Tools of Quality Management

The “Seven QC Tools”

1. Flowcharts: process mapping to identify the
sequence of activities or flow of materials/
information in a process.
2. Run Charts and Control Charts: a run chart
is a line graph with data plotted over time;
control charts include control limits.
3. Checksheets: simple tools for data collection,
ensure completeness.
4. Histograms: graphically represent frequency of
values within a specified group.
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Exhibit 15.3 The Structure of a Control Chart

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Exhibit 15.4 Defective Item Checksheet

Source: K. Ishikawa, Guide

to Quality Control (Tokyo:
Asian Productivity
Organization, 1982), p. 33.

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 Chapter 15 Seven Tools of Quality Management

The “Seven QC Tools”

5. Pareto Diagrams: separate the vital few
from the trivial many causes; provide
direction for selecting projects for
improvement.
6. Cause-and-Effect Diagrams: represent
chain of relationships; often called a fishbone
diagram.
7. Scatter Diagrams: graphical component of
regression analysis.
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Exhibit 15.5

Use of Pareto Diagrams for

Progressive Analysis

Source: Small Business Guidebook to Quality Management,

Office of the Secretary of Defense, Quality Management
Office, Washington, DC (1988).

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Exhibit 15.6 Cause-and-Effect Diagram for Hospital Emergency Admission

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 Chapter 15 Quality Management

Other Quality Improvement Strategies

Kaizen focuses on small, gradual, and frequent
improvements over the long term with minimum
financial investment and with participation by
everyone in the organization.
Poka-yoke (mistake-proofing) is an approach for
mistake-proofing processes using automatic
devices or methods to avoid simple human error.

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 Chapter 15 Quality Management

Poka-Yoke Examples
• Machines have limit switches connected to
warning lights that tell the operator when parts
are positioned improperly on the machine.
• Fast food restaurants use automated french-
frying machines that can only be operated one
way; the french fries are prepackaged and the
equipment automated to reduce the chance of
human error.

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