Quality Management

Sanjay Choudhari
Indian Institute of Management
Indore

Learning Objectives

Evolution of Quality
Gurus (Deming, Joseph and
Quality
Crosby)
Tools for Quality Improvement
Eight Dimensions of Quality
Cost of Quality (Juran)
Statistical Quality Control
Statistical Process Control
Acceptance Sampling

Process capability and capability index

Evolution of Quality

Product inspection
Statistical quality control (SQC)
Quality programs
Total Quality Management

Quality Gurus
View of Deming, Juran and Crosby

Prevention rather than cure /detection

Top management must be integral
Believe
part of quality
Quality as powerful competitive weapon

Quality Gurus
Edwards Deming

Created a quality revolution in Japan.

85 % of quality problems, Management should take a

lead

Approach focus on process improvement

Introduced a statistical approach to solving quality
problems defines quality as Reduced variation and
their causes.

Believed that the pursuit of quality results in lower

costs, improved productivity, and competitive success.
Workers management relationship
14 points

Quality Gurus
Joseph Juran

Defined Quality as fitness for use.

Quality of design , Quality of conformance ,

Availability, Safety, Field Use

Advocated Cost of quality accounting system.

Believed that the pursuit of quality pays for itself only
up to a certain point.
Role of quality professionals who assist management
Stressed on the need to set goals and targets by
improvement project.

Quality Gurus
Phillip Crosby

Defines quality as conformance to requirements.

Believes that quality is free.

Relies on the notion that cost of prevention will

always be lower than the cost of after-the-fact
detection and correction.

Focuses on the motivational aspects of people.

Communicate problems to the next level of
management
14 points program for quality improvement (e.g. Zero
defect day)
Quality management maturity grid

Quality Gurus
Taguchi

Quality is function of Good/Robust Design

Quality Gurus

Taguchi

Even Small Deviations are Quality Losses

Quality

Quality
Loss

Loss = C(x-T)2

Performanc
Metric, x

Good
Performance
Metric

Bad
Minimum
acceptable
value

Target
value

Maximum
acceptable
value

Target
value

It is not enough to look at Good vs Bad Outcomes

Tools for Quality Improvement

1.

Frequency histogram

2.

Pareto chart

3.

Cause and Effect diagram

4.

Scatter diagram

5.

Process flow chart/ process analysis

6.

Run chart

7.

Control charts

Tools for Quality Improvement

1.

Frequency histogram
- Shows the frequency distribution of a variable of interest between the
high and low range of data.

Medication error by
shift

Tools for Quality Improvement

2.

Pareto chart
- Helps in separating the important few factors from the trivial many.

Circuit board defects

Tools for Quality Improvement

3.

Cause and effect diagram

- Helps in identifying the source of problems

Fast food restaurant

Tools for Quality Improvement

3.

ATM

Cause and effect diagram

- Helps in identifying the source of problems

Tools for Quality Improvement

4.

Scattered diagram
- Shows the correlation between two variables.
- Used to infer the causality of problems.

Meditation error Vs.

Number of patient per
nurses

Tools for Quality Improvement

5.

Process flow chart

- Flow chart of how a system works, showing the inputs, operations and
outputs of the process.

- Helps in identifying the source of a problem

Processing in Department 2

Rework
Operation 1

No

Dept. 1
Inspection

Yes

Operation 2

Storage

Dept. 3

Tools for Quality Improvement

6.

Run chart
- Shows how a variable has changed over time.

Oil consumption of a
specific machine over a
period of time.

Measurement

- Displays excessive variation of data or disturbing trends.

Time

Tools for Quality Improvement

7.

Control charts
- By putting control limits, we can determine whether the process is in
control or not.

Upper limit
Average
Lower limit

Tools for Quality Improvement

Benefits of Seven Q.C. Tools
1- Provide Training in Thinking
2- Raise Peoples Problem Solving Confidence
3- Increase Peoples Ability to Predict Future Events

Roles of Seven Q.C. Tools

12345-

Express verbal data diagrammatically

Make information visible
Organize information intelligibly
Clarify overall picture and fine details
Get more people involved

Eight Dimension of Quality

Performance
Refers to primary operating characteristics of a

product. e.g. Automobile, TV, Airline

Features
Secondary characteristics that supplement products

basic function.

Reliability
Reflects the probability of a products failure within a

specified time.

Conformance
Degree to which a products design and operating

characteristics match pre-established standards.

Eight Dimension of Quality

Durability
A measure of product life.

Serviceability
The speed, courtesy, and competence of repair.

Aesthetics
How a product looks, feels, sounds, and tastes-

subjective assessment in these dimensions.

Perceived quality
Inference about quality rather than reality itself .

Eight Dimension of Quality

Pursue a selective quality niche to

distinguish your product or service from

those of your competitors.

Conduct market research to determine

which of your dimension of quality are more

important to your customers. Do not insist
the one that are not important to your
customer.

Costs of Quality

(Juran, Quality planning)

A failure to satisfy a customer is considered a
defect

Failure cost
Internal
External

failure costs
failure costs

Control Cost
Appraisal

costs

Prevention

costs

Costs of Quality
Internal

failure costs

Costs from product defect before shipment to

the customer

Scrap

Reworks

Retest

Downtime

Yield losses

Disposition

Costs of Quality
External

failure costs

Cost associated with defects found after shipment to

customer.

Complaints adjustment

Returned materials

Warranty charges

Allowances

Toyota to recall 7.4 million cars

October 2012) BBC news

(10

Toyota is voluntarily recalling more than seven million vehicles

worldwide, including some Yaris, Corolla and Camry models, over
faulty window switches.

Costs of Quality
Appraisal

costs

Cost associated with discovering the

condition of products and raw materials

Incoming material inspection

Inspection and test

Maintaining accuracy of test equipment

Materials and services consumed

Evaluation of stocks

Costs of Quality
Prevention

costs

Cost associated with preventing defects and

limiting failure and appraisal cost

Quality planning

New product review

Training

Process control

Quality data acquisition and analysis

Quality reporting

Improvement projects

Costs of Quality (COQ) ?

COQ helps in focusing managers
attention on the cost of poor quality
It assists in problem solving by comparing
costs and benefits of different qualityimprovement programs and setting
priorities for cost reduction
COQ provides a single, summary measure
of quality performance for evaluating
Prevention/appraisal/failure cots

An example..

An item with sales price (P)= Rs 70/unit

Planned items per month = 1300

Planned revenue: Rs 91,000 /month

Actual items performed in field = 1243

Actual revenue= Rs 87,010 (i.e. 70 x 1243)

Assume Man-Hour cost : Rs 7.05/hr

Time spent on inspection & control of bought-out

item = 3.5 hrs/month

Validation inspection = 169 hrs/month

Commercial testing = Rs 113/month

Repair & rectification = 500 hours/month

Example (contd.)
(A) Cost of Inspection & control = Rs 3.5 hrs x Rs
7.05/hr = Rs 24.67

(B) Validation Inspection & testing cost = 169 hrs x

Rs 7.05/hr + Rs 113= Rs 1191.45
(C) Cost of repair & rectification = 500 hrs x Rs 7.05
/hr= Rs 3525
(D) Replacement cost = 57 items failed in field x Rs
70 /item = Rs 3990
Total Quality related Cost = (A) +(B) +( C) +(D)
= Rs 8844.12/month
Quality costs as % of expected revenue =
Rs 8844.12/91,000 = 9.72 %