OM CHAPTER 15 QUALITY MANAGEMENT DAVID A. COLLIER AND JAMES R. EVANS

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).

Understanding Quality 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.

Understanding Quality 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 conforms to design specifications. Specifications are targets and tolerances determined by designers of goods and services.

Understanding Quality 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.

Understanding Quality Principles of Total Quality Chapter 15 Quality Management Understanding Quality Principles of Total Quality A focus on customers and stakeholders, A process focus supported by continuous improvement and learning, and Participation and teamwork by everyone in the organization.

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.

W. Edwards Deming 14 Points 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

W. Edwards Deming 14 Points 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

Plan: study current situation Do: implement plan on trial basis 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

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.

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.

Number of units processed 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

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).

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

Six Sigma’s DMAIC Process Chapter 15 Quality Management Six Sigma’s DMAIC Process 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.

Six Sigma’s DMAIC Process 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.

Cost of Quality Measurements 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. Four major categories are: 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.

Cost of Quality Measurements 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.

Chapter 15 Seven Tools of Quality Management The “Seven QC Tools” Flowcharts: process mapping to identify the sequence of activities or flow of materials/ information in a process. Run Charts and Control Charts: a run chart is a line graph with data plotted over time; control charts include control limits. Checksheets: simple tools for data collection, ensure completeness. Histograms: graphically represent frequency of values within a specified group.

Exhibit 15.3 The Structure of a Control Chart

Exhibit 15.4 Defective Item Checksheet Source: K. Ishikawa, Guide to Quality Control (Tokyo: Asian Productivity Organization, 1982), p. 33.

Chapter 15 Seven Tools of Quality Management The “Seven QC Tools” Pareto Diagrams: separate the vital few from the trivial many causes; provide direction for selecting projects for improvement. Cause-and-Effect Diagrams: represent chain of relationships; often called a fishbone diagram. Scatter Diagrams: graphical component of regression analysis.

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).

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

Other Quality Improvement Strategies 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.