MANAGING QUALITY DEFINING QUALITY

Managing quality helps build successful An operations manager’s objective is to build a

strategies of differentiation, low cost, and total quality management system that identifies
response. and satisfies customer needs.

Two ways that quality improves profitability Quality —The ability of a product or service to
are: meet customer needs.

Sales gains via improved response, price Definitions of quality into several categories:
flexibility, increased market share, and/or
User Based - They propose that quality “lies in
improved reputation.
the eyes of the beholder.” Marketing people like
Reduced costs via increased productivity, lower this approach and so do customers. To them,
rework and scrap costs, and/ or lower warranty higher quality means better performance, nicer
costs. features, and other (sometimes costly)
improvements.

Manufacturing Based – to production

managers, they believe that quality means
conforming to standards and “making it right
the first time.”

Product Based - which views quality as a precise

and measurable variable. In this view, for
example, good ice cream has high butterfat
levels.

IMPLICATIONS OF QUALITY

1. Company reputation: An organization can

expect its reputation for quality—be it good
or bad—to follow it. Quality will show up in
perceptions about the firm’s new products,
employment practices, and supplier
relations. Self-promotion is not a substitute
for quality products.

2. Product liability: The courts increasingly

hold organizations that design, produce, or
distribute faulty products or services liable
for damages or injuries resulting from their
use. Legislation such as the Consumer
Product Safety Act sets and enforces
product standards by banning products that
do not reach those standards. Impure foods
that cause illness, nightgowns that burn,
tires that fall apart, or auto fuel tanks that
 explode on impact can all lead to huge legal 5 Core Elements
expenses, large settlements or losses, and
• Environmental Management
terrible publicity.

3. Global implications: In this technological • Auditing

age, quality is an international, as well as • Performance Evaluation
OM, concern. For both a company and a
country to compete effectively in the global • Labelling
economy, products must meet global
• Life cycle measurement
quality, design, and price expectations.
Inferior products harm a firm’s profitability Cost of quality (COQ) —The cost of doing
and a nation’s balance of payments. things wrong; that is, the price of
nonconformance.
Malcolm Baldrige National Quality Award
The four major categories of costs associated
The global implications of quality are so
with quality
important that the U.S. has established the
Malcolm Baldrige National Quality Award for • Prevention Costs - costs associated with
quality achievement. The award is named for reducing the potential for defective parts or
former Secretary of Commerce Malcolm services (e.g., training, quality improvement
Baldrige. Winners include such firms as programs).
Motorola, Milliken, Xerox, FedEx, Ritz-Carlton
• Appraisal Costs - costs related to evaluating
Hotels, AT&T, Cadillac, and Texas Instruments.
products, processes, parts, and services
The American Society for Quality (ASQ) defines (e.g., testing, labs, inspectors).
quality as “the totality of features and
characteristics of a product or service that bears • Internal Failure Costs - costs that result
on its ability to satisfy stated or implied needs.” from production of defective parts or
services before delivery to customers (e.g.,
The two most well-known quality awards are: rework, scrap, downtime).
• U.S.: Malcolm Baldrige National Quality • External Failure Costs - costs that occur
Award, named after a former secretary of after delivery of defective parts or services
commerce (e.g., rework, returned goods, liabilities, lost
goodwill, costs to society).
• Japan: Deming Prize, named after an
American, Dr. W. Edwards Deming Four leaders in the field of quality
management
ISO 9000 —A set of quality standards
developed by the International Organization for • W. Edwards Deming - Deming insisted
Standardization (ISO). ISO 9000 is the only management accept responsibility for
quality standard with international recognition. building good systems. The employee
To do business globally, being listed in the ISO cannot produce products that on average
directory is critical. exceed the quality of what the process is
capable of producing.
Joseph M. Juran TOTAL QUALITY MANAGEMENT

• A pioneer in teaching the Japanese how to Total quality management (TQM) —

improve quality. He was also a believer in Management of an entire organization so that it
teams that continually seek to raise quality excels in all aspects of products and services
standards. He was also a believer in teams that are important to the customer.
that continually seek to raise quality
-refers to a quality emphasis that encompasses
standards.
the entire organization, from supplier to
• Juran Trilogy – Focus on customers. customer.

• Quality Planning, Quality Control, Quality Deming’s 14 Points for Implementing Quality
Improvement Improvement

• Armand Feigenbaum - He viewed quality 1. Create consistency of purpose.

not as a set of tools but as a total fi eld that
2. Lead to promote change.
integrated the processes of a company. His
work in how people learn from each other’s 3. Build quality into the product; stop
successes led to the fi eld of cross- depending on inspections to catch problems.
functional teamwork.
4. Build long-term relationships based on
Philip B. Crosby performance instead of awarding business on
the basis of price.
• - Quality Is Free was Crosby’s attention-
getting book published in 1979. Crosby 5. Continuously improve product, quality, and
believed that in the traditional trade-off service.
between the cost of improving quality and
6. Start training.
the cost of poor quality, the cost of poor
quality is understated. 7. Emphasize leadership.

Four Absolutes of Quality 8. Drive out fear.

• Crosby's response to the quality crisis was the 9. Break down barriers between departments.
principle of "doing it right the first time" 10. Stop haranguing workers.
(DIRFT).
11. Support, help, and improve.
He also included four major principles:
12. Remove barriers to pride in work.
The First Absolute - The definition of quality is
13. Institute a vigorous program of education
conformance to requirements (not as goodness)
and self-improvement.
The Second Absolute - The system of quality is
14. Put everybody in the company to work on
prevention (not appraisal)
the transformation.
The Third Absolute - The performance standard
Seven concepts for an effective TQM program
is zero defects (not "that's close enough").
are:
The Fourth Absolute - The measurement of
(1) continuous improvement,
quality is the price of nonconformance (not
indexes) (2) Six Sigma,
(3) employee empowerment, This five-step process improvement model

(4) benchmarking, (1) Defines the project’s purpose, scope, and

outputs and then identifies the required process
(5) just-in-time (JIT),
information, keeping in mind the customer’s
(6) Taguchi concepts, and definition of quality

(7) knowledge of TQM tools. (2) Measures the process and collects data

PDCA —A continuous improvement model that (3) Analyzes the data, ensuring repeatability
involves four stages: plan, do, check, and act. (the results can be duplicated) and
reproducibility (others get the same result)
PDA CYCLE
(4) Improves, by modifying or redesigning,
1. Plan – Identify the problem and make a plan existing processes and procedures.
2. Do – Test the plan. Perform (5) Controls the new process to make sure
3. Check –Monitor. Is the plan working? performance levels are maintained.

4. Act – Implement the plan. Improve. DMAIC PROCESS

The Japanese use the word kaizen to describe Define - Identify the problem to create project
the ongoing process of unending scope.
improvement—the setting and achieving of Measure - Creates a roadmap using measurable
ever-higher goals. data.
Six Sigma —A program to save time, improve Analyze - Perform a root cause analysis.
quality, and lower costs. Popularized by
Motorola, Honeywell, and General Electric. Improve - Systematically influence the outcome
and eliminate root cause.
In a statistical sense, Six Sigma describes a
process, product, or service with an extremely Control - control performance metrics by
high capability—99.9997% accuracy, or 3.4 monitoring in real time.
defects per million.

The second TQM definition of Six Sigma is a

program designed to reduce defects to help
lower costs, save time, and improve customer
satisfaction.

◆ It is a strategy because it focuses on total

customer satisfaction.

◆ It is a discipline because it follows the formal

Six Sigma Improvement Model known as
DMAIC.
Employee empowerment —Enlarging employee Internal Benchmarking - When an organization
jobs so that the added responsibility and is large enough to have many divisions or
authority are moved to the lowest level possible business units, a natural approach is the internal
in the organization. benchmark. Data are usually much more
accessible than from outside firms. Typically,
Business literature suggests that some 85% of
one internal unit has superior performance
quality problems have to do with materials and
worth learning from.
processes, not with employee performance.
Just-in-Time (JIT)
Techniques for building employee
empowerment include: The philosophy behind just-in-time (JIT) involves
continuing improvement and enforced problem
(1) building communication networks that
solving. JIT systems are designed to produce or
include employees;
deliver goods just as they are needed.
(2) developing open, supportive supervisors;
JIT is related to quality in three ways:
(3) moving responsibility from both managers
◆ JIT cuts the cost of quality: This occurs
and staff to production employees;
because scrap, rework, inventory investment,
(4) building high morale organizations; and and damage costs are directly related to
inventory on hand. Because there is less
(5) creating such formal organization structures inventory on hand with JIT, costs are lower. In
as teams and quality circles. addition, inventory hides bad quality, whereas
Quality circle —A group of employees meeting JIT immediately exposes bad quality.
regularly with a facilitator to solve work-related ◆ JIT improves quality: As JIT shrinks lead time,
problems in their work area. it keeps evidence of errors fresh and limits the
Facilitator - usually helps train the members and number of potential sources of error. JIT
keeps the meetings running smoothly. creates, in effect, an early warning system for
quality problems, both within the firm and with
Benchmarking —Selecting a demonstrated vendors.
standard of performance that represents the
very best performance for a process or an ◆ Better quality means less inventory and a
activity. better, easier-to-employ JIT system: Often the
purpose of keeping inventory is to protect
The steps for developing benchmarks are: against poor production performance resulting
1. Determine what to benchmark. from unreliable quality. If consistent quality
exists, JIT allows firms to reduce all the costs
2. Form a benchmark team. associated with inventory.
3. Identify benchmarking partners. Quality robust —Products that are consistently
built to meet customer needs, despite adverse
4. Collect and analyze benchmarking
conditions in the production process.
information.
Target-oriented quality —A philosophy of
5. Take action to match or exceed the
continuous improvement to bring the product
benchmark
exactly on target.
Quality loss function (QLF) —A mathematical
function that identifies all costs connected with
poor quality and shows how these costs
increase as output moves away from the target
value.

Knowledge of TQM Tools

To empower employees and implement TQM as

a continuing effort, everyone in the organization
must be trained in the techniques of TQM.

CHECK SHEET - is any kind of a form that is

designed for recording data.

SCATTER DIAGRAMS - Backboard stability

Scatter diagrams show the relationship between
two measurements.

CAUSE-AND-EFFECT DIAGRAM - also known as

an Ishikawa diagram or a fish-bone chart. A
schematic technique used to discover possible
locations of quality problems.

PARETO CHARTS - A graphic way of classifying

problems by their level of importance, often
referred to as the 80–20 rule.

HISTOGRAMS - Histograms show the range of

values of a measurement and the frequency
with which each value occurs.

STATISTICAL PROCESS CONTROL (SPC) - A

process used to monitor standards, make
measurements, and take corrective action as a
product or service is being produced.

CONTROL CHARTS - Graphic presentations of

process data over time, with predetermined
control limits.