1. Managing Quality
Chapter 5

2. Chapter Objectives Be able to:
Discuss the various definitions and dimensions of quality and why quality is important to operations and supply chains.
Describe the different costs of quality, including internal and external failure, appraisal, and prevention costs.
Describe what TQM is, along with its seven core principles.
Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes.
Describe the key issues associated with acceptance sampling, as well as the use of OC curves.
Distinguish between Taguchi’s quality loss function and the traditional view of quality.

3. Quality Defined
Quality – The characteristics of a product or service that bear on its ability to satisfy stated or implied needs; a product or service that is free of deficiencies.
Value perspective – A quality perspective that holds that quality must be judged, in part, by how well the characteristics of a particular product or service align with the needs of a specific user.
Conformance perspective – A quality perspective focused on whether or not a product was made or a service was performed as intended.

4. Eight Dimensions of Quality
Performance
Features
Reliability
Durability
Conformance
Aesthetics
Serviceability
Perceived Quality

5. Quality Dimension Examples
Table 5.1

6. Total Cost of Quality
Prevention costs – Costs an organization incurs to actually prevent defects from occurring to begin with.
Appraisal costs – Costs a company incurs for assessing its quality levels.
Internal failure costs – Costs caused by defects that occur prior to delivery to the customer.
External failure costs – Costs incurred by defects that are not detected until a product or service reaches the customer.

7. Total Cost of Quality Traditional View
Figure 5.2

8. Total Cost of Quality Zero Defects View
Figure 5.3

9. Total Quality Management
Total Quality Management - A managerial approach in which an organization is managed so that it excels in all quality dimensions that are important to customers.

10. Total Quality Management
Customer focus
Leadership involvement
Continuous improvement
Employee empowerment
Quality assurance
Strategic partnerships
Strategic quality plan

11. Total Quality Management
Customer focus
Each employee has a customer whether internal or external to the company.
Leadership involvement
Must be ‘top’ down, throughout the company.
If not, major cause of TQM failures.
Continuous improvement
There is always room for improvement.

12. Total Quality Management
Employee empowerment
Giving employees the responsibility for managing quality.
Quality assurance
Quality Function Deployment (QFD) discussed in Chapter 15
Statistical quality control (SQC), also called statistical process control (SPC)

13. Total Quality Management
Supplier Partnerships
The commitment between firms and supply chain partners must be the same.
Strategic Quality Plan
Sets a broad set of objectives.
Should establish measurable goals for the short-term.

14. Process Capability
Answers the Question: Can the process provide acceptable quality consistently?

15. Process Capability Ratio (Cp)
Process Capability Ratio (Cp) – Measures whether or not a process is potentially capable of
meeting certain quality standards
Cp = Upper Tolerance Limit – Lower Tolerance Limit 6σ
Where σ is the estimated
standard deviation
for the individual observations

16. Normal Distribution
Figure 5.4

17. Process Capability Values
Figure 5.5

18. Process Capability Index
Process Capability Index (Cpk) – Measures whether or not a process is capable of
meeting certain quality standards and is centered between the specification limits.

19. Six Sigma Quality
To achieve Six Sigma quality, the variability of a process must be reduced to the point that the process capability ratio is greater than or equal to 2.

20. Six Sigma Quality
Figure 5.6

21. Control Charts
Control Chart – A specialized run chart that helps an organization track changes in key measures over time.
Continuous variable – A variable that can be measured along a continuous scale.
Attribute – The presence or absence of a particular characteristic.

22. Sampling
Sampling – Using carefully selected samples to get a fairly good idea of how well a process is working.
Good sample:
Every outcome has an equal chance of being selected into the sample.
The sample size is large enough to not be swayed by any single observation.

23. Continuous Variable Measurements

24. Control Charts
X chart - A specific type of control chart for a continuous variable that is used to track the average value for future samples.
R chart – A specific type of control chart for a continuous variable that is used to track how much the individual observations within each sample vary.
p chart – A specific type of control chart for attributes that is used to track sample proportions.

25. Step 1 – Sampling the Process
Observation
Sample 1 2 3 4 5
136
137
144
141
138
143
140
139
135 6
142 7 8 9 10

26. Step 2 – Calculate the Mean and Range for each sample𝑋 R 1
139.2 8 2
140 5 3
139.4 9 4 6 7
141.4
139
140.2 10
139.6

27. Step 3 – Calculate control limits

28. Step 3 – Calculate control limits

29. Step 4 – Plot the Data Sample R 11 141.2 8 12 142 9 13 144 14 140 5 15𝑋 R 11
141.2 8 12
142 9 13
144 14
140 5 15
139.6 4 16
140.8
Figure 5.8

30. p = (8 late)/(50 deliveries) = 0.16
Sampling by Attribute
Gonzo Pizza is interested in tracking the proportion (%) of late deliveries
Like before, you take several samples of say, 50 observations each when things are “typical”
For each sample, you calculate the proportion of late deliveries and call this value p. For example:
Average all of the 15 sample proportions. For example:
p = (8 late)/(50 deliveries) = 0.16

31. Where n = size of each sample = 50
Sampling by Attribute
Calculate the standard deviation for the p chart as follows:
Where n = size of each sample = 50

32. Sampling by Attribute

33. Sampling by Attribute
Although text says to go ahead with control charts, consider that it is probably too early to develop them since the process is not yet in control (i.e., late deliveries are too high a percentage at present).
A more practical approach would be:
First, fix the more obvious problem(s)
Then take new samples
Then put in place control charts

34. Acceptance Sampling Some definitions Acceptable quality level (AQL)
Maximum defect level for 100% customer acceptance
Lot tolerance percent defective (LTPD)
Highest defect level customer will tolerate
Consumer’s risk
Probability of accepting a bad lot
Producer’s risk
Probability of rejecting a good lot
Operating characteristics (OC) curve
Probability of accepting a lot given the actual fraction defective in the entire lot and the sampling plan being used

35. Producer’s and Consumer’s Risk
Figure 5.10

36. Traditional View of the Cost of Variability
There is no failure cost associated with units that fall within the tolerance limits, while units outside the tolerance limits immediately result in failure costs.
Figure 5.12

37. Taguchi’s Quality Loss Function
Any deviation from the target value results in some failure cost.
As long as there is variability in the process, there is room for improvement.
Figure 5.13

38. ISO 9000 Family
ISO A family of standards supported by the International Organization for Standardization.
Goals:
Meet the customer’s quality requirements and applicable regulatory requirements.
Enhance customer satisfaction.
Achieve continual improvement of performance in pursuit of these objectives.

39. Managing Quality Case Study
Dittenhoefer’s Fine China

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