1

Chapter 8

Quality Management

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OBJECTIVES
Total Quality Management Defined
Quality Specifications and Costs

Six Sigma Quality and Tools

External Benchmarking

ISO 9000

Service Quality Measurement

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Total Quality Management (TQM)

Total quality management is

defined as managing the entire
organization so that it excels on all
dimensions of products and
services that are important to the
customer

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Quality Specifications

Design quality: Inherent value of the

product in the marketplace

Dimensions include: Performance, Features,

Reliability/Durability, Serviceability,
Aesthetics, and Perceived Quality.

Conformance quality: Degree to which

the product or service design
specifications are met

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Costs of Quality

Appraisal Costs

External Failure Costs of

Costs Quality Prevention Costs

Internal Failure
Costs

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Six Sigma Quality

A philosophy and set of

methods companies use
to eliminate defects in
their products and
processes
Seeks to reduce variation
in the processes that lead
to product defects
The name, six sigma
refers to the variation that
exists within plus or
minus three standard
deviations of the process
outputs

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Six Sigma Quality (Continued)

Six Sigma allows managers to readily
describe process performance using a
common metric: Defects Per Million
Opportunities (DPMO)

Number
Numberof
of defects
defects
DPMO
DPMO xx1,000,000
1,000,000
Number
Numberof of
opportunit ies xx No.
opportunities
for No.of
of units
units
forerror per
errorper
unit
unit

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Six Sigma Quality (Continued)

Example So,
So,for
forevery
everyone
Exampleof of Defects
DefectsPer
PerMillion
Million million
one
Opportunities
Opportunities(DPMO)
(DPMO) calculation.
calculation. millionletters
letters
delivered
deliveredthis
this
Suppose
Supposewe weobserve
observe200200letters
letters citys
cityspostal
postal
delivered
delivered incorrectly
incorrectlyto
tothe
thewrong
wrong managers
managerscan can
addresses
addressesin inaasmall
small city
cityduring
duringaa expect
expecttotohave
have
single 1,000
1,000letters
singleday
daywhen
whenaa total
totalof
of200,000
200,000 letters
incorrectly
letters
letterswere
weredelivered.
delivered. What
Whatis is the
the incorrectlysent
sent
totothe
thewrong
wrong
DPMO
DPMOin inthis
thissituation?
situation? address.
address.

200
200
DPMO
DPMO 1,000,000 11,,000
xx1,000,000 000
11 xx200,000
200,000
Cost
Cost of
of Quality:
Quality: What
What might
mightthat
that DPMO
DPMOmeanmean in
interms
terms
of
of over-time
over-timeemployment
employment to
to correct
correctthe
theerrors?
errors?
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Six Sigma Quality: DMAIC Cycle

Define, Measure, Analyze, Improve, and
Control (DMAIC)
Developed by General Electric as a
means of focusing effort on quality
using a methodological approach
Overall focus of the methodology is to
understand and achieve what the
customer wants
A 6-sigma program seeks to reduce the
variation in the processes that lead to
these defects
DMAIC consists of five steps.

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Six Sigma Quality: DMAIC

Cycle (Continued)
1. Define (D) Customers and their priorities

2. Measure (M) Process and its performance

3. Analyze (A) Causes of defects

4. Improve (I) Remove causes of defects

5. Control (C) Maintain quality

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Example to illustrate the

process

We are the maker of this cereal.

Consumer Reports has just published
an article that shows that we
frequently have less than 15 ounces
of cereal in a box.
What should we do?

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Step 1 - Define

What is the critical-to-quality

characteristic?
The CTQ (critical-to-quality)

characteristic in this case is the

weight of the cereal in the box.

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2 - Measure

How would we measure to evaluate

the extent of the problem?
What are acceptable limits on this

measure?

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2 Measure (continued)
Lets assume that the government
says that we must be within 5
percent of the weight advertised on
the box.
Upper Tolerance Limit = 16 + .05(16)
= 16.8 ounces
Lower Tolerance Limit = 16 .05(16)
= 15.2 ounces

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2. Measure (continued)
We go out and buy 1,000 boxes of
cereal and find that they weight an
average of 15.875 ounces with a
standard deviation of .529 ounces.
What percentage of boxes are

outside the tolerance limits?

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Process
Lower Tolerance Mean = 15.875 Upper Tolerance
= 15.2 Std. Dev. = .529 = 16.8

What percentage of boxes are defective (i.e. less than 15.2 oz)?

Z = (x Mean)/Std. Dev. = (15.2 15.875)/.529 = -1.276

NORMSDIST(Z) = NORMSDIST(-1.276) = .100978

Approximately, 10 percent of the boxes have less than 15.2

Ounces of cereal in them!

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Step 3 - Analyze - How can

we improve the capability of
our cereal box filling
process?
Decrease Variation
Center Process
Increase Specifications

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Step 4 Improve How good

is good enough?
Motorolas Six Sigma
6 minimum from process center to
nearest spec

12

3 2 1 0 1 2 3

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Motorolas Six Sigma

Implies 2 ppB bad with no process shift

With 1.5 shift in either direction from center (process will
move), implies 3.4 ppm bad.

12

3 2 1 0 1 2 3

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Step 5 Control
Statistical Process Control (SPC)
Use data from the actual process
Estimate distributions
Look at capability - is good quality
possible
Statistically monitor the process
over time

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Analytical Tools for Six Sigma and

Continuous Improvement: Flow Chart

Material
No,
Received Continue
Inspect
from
Material for Defects
Supplier
Defects found?

Yes

Can
Canbebeused
usedto
to
find
findquality
quality Return to
problems
problems Supplier
for Credit

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Analytical Tools for Six Sigma and

Continuous Improvement: Run Chart
Can
Canbebeused
usedtotoidentify
identify
when
whenequipment
equipmentor or
processes
processesarearenot
not
behaving
behavingaccording
accordingtoto
Diameter

specifications
specifications
0.58
0.56
0.54
0.52
0.5
0.48
0.46
0.44
1 2 3 4 5 6 7 8 9 10 11 12
Time (Hours)
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Analytical Tools for Six Sigma and Continuous

Improvement: Pareto Analysis

Can 80%
Can be be used
used
to
to find
find when
when
80%
80%of of the
the
problems
problems Frequency
may
may be be
attributed
attributed to to
20%
20%of of the
the
causes
causes
Design Assy. Purch. Training
Instruct.

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 Analytical Tools for Six Sigma and 24

Continuous Improvement:
Checksheet
Can
Canbebeused
usedtotokeep
keeptrack
trackof
of
defects
defectsororused
usedtotomake
makesure
sure
people
peoplecollect
collectdata
datain
inaa
Monday correct
correctmanner
manner
Billing Errors

Wrong Account

Wrong Amount

A/R Errors

Wrong Account

Wrong Amount

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Analytical Tools for Six Sigma and
Continuous Improvement:
Histogram
Can
Canbebeused
usedto
toidentify
identifythe
thefrequency
frequencyof ofquality
quality
Number of Lots

defect
defectoccurrence
occurrenceand
anddisplay
displayquality
quality
performance
performance

0 1 2 3 4 Defects
Data Ranges in lot
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Analytical Tools for Six Sigma and

Continuous Improvement: Cause &
Effect Diagram

Possible The
Theresults
Possiblecauses:
causes: results
or
or effect
effect
Machine Man

Environment Effect

Method Material

Can
Canbebeused
usedto
tosystematically
systematicallytrack
trackbackwards
backwardsto
to
find
findaapossible
possiblecause
causeof
ofaaquality
qualityproblem
problem(or
(or
effect)
effect)
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 Analytical Tools for Six Sigma and 27

Continuous Improvement: Control

Charts

Can
Canbebeused
usedto
tomonitor
monitorongoing
ongoingproduction
productionprocess
process
quality
qualityand
andquality
qualityconformance
conformanceto
tostated
statedstandards
standardsof
of
quality
quality
1020
UCL
1010
1000
990
980
LCL

970
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

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Other Six Sigma Tools

Failure Mode and Effect Analysis
(DMEA) is a structured approach
to identify, estimate, prioritize, and
evaluate risk of possible failures
at each stage in the process
Design of Experiments (DOE) a

statistical test to determine cause-

and-effect relationships between
process variables and output

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Six Sigma Roles and

Responsibilities
1. Executive leaders must
champion the process of
improvement
2. Corporation-wide training in Six
Sigma concepts and tools
3. Setting stretch objectives for
improvement
4. Continuous reinforcement and
rewards

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The Shingo System: Fail-Safe

Design

Shingos argument:
SQC methods do not prevent defects
Defects arise when people make errors
Defects can be prevented by providing
workers with feedback on errors

Poka-Yoke includes:
Checklists
Special tooling that prevents workers from
making errors

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ISO 9000
Series of standards agreed upon by the
International Organization for
Standardization (ISO)
Adopted in 1987
More than 100 countries
A prerequisite for global competition?
ISO 9000 directs you to "document
what you do and then do as you
documented"

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Three Forms of ISO

Certification

1. First party: A firm audits itself against

ISO 9000 standards

2. Second party: A customer audits its

supplier

3. Third party: A "qualified" national or

international standards or certifying
agency serves as auditor

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External Benchmarking Steps

1. Identify those processes needing

improvement

2. Identify a firm that is the world leader in

performing the process

3. Contact the managers of that company

and make a personal visit to interview
managers and workers

4. Analyze data

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Service Quality
Measurement:Servqual
A perceived service quality
questionnaire survey methodology

Examines Dimensions of Service

Quality including: Reliability,
Responsiveness, Assurance, Empathy,
and Tangibles (e.g., appearance of
physical facilities, equipment, etc.)

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Service Quality Measurement:

Servqual (Continued)
New version of this methodology is
called e-Service Quality dealing
service on the Internet
Dimensions of Service Quality on the e-
Service methodology include:
Reliability, Responsiveness, Access,
Flexibility, Ease of Navigation,
Efficiency, Assurance/Trust,
Security/Privacy, Price Knowledge, Site
Aesthetics, and
Customization/Personalization

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