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QUALITY MANAGEMENTCHAPTER 15

OM2

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LO1 Explain the concepts and definitions of quality.

LO2 Describe the quality philosophies and principles of Deming, Juran, and Crosby.

LO3 Explain the GAP model and its importance.

LO4 Describe the concepts and philosophy of ISO 9000:2000.

LO5 Describe the philosophy and methods of Six Sigma.

LO6 Explain the categories of cost of quality measurement.

LO7 Describe how to apply the 7 QC Tools.

LO8 Explain the concepts of kaizen and poka-yoke.

l e a r n i n g o u t c o m e s

Chapter 15 Learning Outcomes

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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 TQM, Six Sigma, and Lean Operating Systems.

A Brief History of Quality Management

•Historical uses of quality management include the precision involved in building of Egyptian pyramids, interchangeable parts during Industrial Revolution, and statistical tools used for quality control during WW II.

•Dr. Joseph Juran and Dr. W. Edwards Deming were pioneers in the field.

•The Japanese integrated quality ideas and methods throughout their organizations and developed a culture of continuous improvement.

A Brief History of Quality Management

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• 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 confirms to design specifications.

• Specifications are targets and tolerances determined by designers of goods and services.

• 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.

• Principles of Total Quality1. A focus on customers and stakeholders,2. A process focus supported by continuous improvement and

learning, and3. Participation and teamwork by everyone in the organization.

Understanding Quality

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• 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.

1. Create a Vision and Demonstrate Commitment 2. Learn the Philosophy3. Understand Inspection4. Stop Making Decisions Purely on the Basis of Cost5. Improve Constantly and Forever6. Institute Training7. Institute Leadership8. Drive Out Fear9. Optimize the Efforts of Teams10. Eliminate Exhortations11. Eliminate Numerical Quotas 12. Remove Barriers to Pride in Work13. Encourage Education and Self-Improvement14. Take Action

W. Edwards Deming

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• Plan: study current situation• Do: implement plan on trial basis• Study: determine if trial is working

correctly• Act: standardize improvements

Deming Cycle – Plan, Do, Study, and Act

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• Joseph Juran• Wrote Quality Control Handbook in 1951, a comprehensive quality

manual.• Defined quality as “fitness for use.”• Advocated use of quality cost measurement.• Quality Trilogy: quality planning, quality control, and quality

improvement.

• Philip B. Crosby• Wrote Quality is Free in 1979, which brought quality to the attention of

top corporate managers in the U.S.• Crosby’s Absolutes of Quality Management include: Quality means conformance to requirements, not elegance. There is no such thing as a quality problem. There is no such thing as the economics of quality; doing the job right the

first time is always cheaper. The only performance measurement is the cost of quality, which is the

expense of nonconformance. The only performance standard is Zero Defects (ZD).

Joseph Juran & Philip B. Corsby

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The GAP model recognizes that there are several ways to misspecify and mismanage the creation and delivery of high levels of quality. These “gaps” are shown in the model in Exhibit 15.2 and explained below.

• Gap 1 is the discrepancy between customer expectations and management perceptions of those expectations.

• Gap 2 is the discrepancy between management perceptions of what features constitute a target level of quality and the task of translating these perceptions into executable specifications.

• Gap 3 is the discrepancy between quality specifications documented in operating and training manuals and plans and their implementation.

• Gap 4 is the discrepancy between actual manufacturing and service delivery system performance and external communications to the customers.

• Gap 5 is the difference between the customer's expectations and perceptions. The fifth gap depends on the other four.

The GAP Model

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GAP Model of Quality

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• 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.

• Why firms seek ISO 9000 certification?

• See how Sears, Roebuck and Co. used ISO 9000 to improve its operations

ISO 9000:2000

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• 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.

• 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

• 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.

Six Sigma – 1

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• The Six Sigma concept characterizes quality performance by defects per million opportunities (dpmo), computed as DPU 1,000,000 opportunities for error (also used in services as errors per million opportunities – epmo).

• A "six sigma" quality level corresponds to a dpmo or epmo equal to 3.4 (this is derived from some advanced statistical calculations), which represents almost perfect quality.

Calculating the Sigma LevelThe sigma level can easily be calculated in Excel using the cell formula=NORMSINV(1 – Number of Defects/Number of Opportunities) + 1.5 or equivalently,=NORMSINV(1 – dpmo/1,000,000) + 1.5 (12.2)

Using formula (12.2), we can show thata 3-sigma process has dpmo = 66,807a 4-sigma process has dpmo = 6,210A 5-sigma process has dpmo = 233

Six Sigma – 2

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Suppose that the average number of bags checked by passengers is 1.6, and the airline recorded three lost bags for 8,000 passengers in one month. What is epmo, and at what sigma level is this process operating?

SolutionThe average number of bags checked is calculated as(8,000 passengers × 1.6 bags/passenger) = 12,800.

Therefore, using Equation (12.1), the number of defects per unit (lost bags per bags checked) is DPU = 3/12,800 = 0.000234375.By multiplying DPU by 1,000,000, we find epmo = 234.375.

Using the Excel formula, the sigma level is calculated as=NORMSINV(1 – 234.375/1000000) + 1.5 = 4.99828 or ~ a 5-sigma level

Solved Problem – Sigma Level

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1. 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.

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.

Six Sigma’s DMAIC Process

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Total Cost of QualityTotal Cost of Quality

Prevention C osts Appra isa l C osts

C ontrol C osts

In ternal Fa ilu re C osts Externa l Failu re C osts

Fa ilu re C osts

Tota l C ost o f Q uality

The cost of planning and executing a project so it is error-free or within an acceptable error range

Quality planning Training Process planning New product

review QC procedures

The cost of evaluating processes and their outputs to ensure quality, including measurement and test equipment costs: capital cost of equipment

Inspection

Testing

Equipment

The cost incurred to correct an identified defect before the customer receives the product

Lost production Scrap Rework Employee injury

The cost that relates to all errors not detected and corrected before delivery to the customer

Warranty work

customer complaints

Replacements

Liabilities

Loss of goodwill

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Cost of Quality Measurements

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A major news story in 2009 was the case of Peanut Corporation of America. At least 677 people were sickened and nine died after eating salmonella-contaminated products made from peanut butter paste from the Peanut Corporation of America. At least 12 times, when one of the company’s products tested positive for salmonella, the company shopped around for new tests until a laboratory certified that the product was clean. They shipped the products and continued to use the same equipment and processes. Inspectors found roaches, mold, and a leaking roof in one of its factories. It has also led to more than 2,000 product recalls, one of the largest in U.S. history. On March 12, 2009, the company issued the following statement: “As you may know, certain recent events have made it necessary for Peanut Corporation of America to seek protection under the U.S. Bankruptcy Code. Effective immediately, all corporate operations will cease.” Food safety lawyers are optimistic that victims and their families can still be compensated.

The Unfortunate Costs of Poor Quality

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1. Flowcharts: process mapping to identify the sequence of activities or flow of materials/ information in a process.

2. Run Charts and Control Charts: a run chart is a line graph with data plotted over time; control charts include control limits.

3. Checksheets: simple tools for data collection, ensure completeness.

4. Histograms: graphically represent frequency of values within a specified group.

5. Pareto Diagrams: separate the vital few from the trivial many causes; provide direction for selecting projects for improvement.

6. Cause-and-Effect Diagrams: represent chain of relationships; often called a fishbone diagram.

7. Scatter Diagrams: graphical component of regression analysis.

The Seven QC Tools

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Control Chart Defective Item Check Sheet

Cause-and-Effect DiagramFishbone ChartIshikawa Diagram

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Use of Pareto Diagrams forRoot Cause Analysis

Root Cause AnalysisThe root cause is a term used to designate the source of a problem. A useful approach to identify the root cause is called the 5-Why Technique. This approach forces one to redefine a problem statement as a chain of causes and effects to identify the source of the symptoms by asking why, ideally five times.

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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 a method for mistake-proofing processes using automatic devices or methods to avoid simple human error.

Poka-Yoke Examples•Machines have limit switches connected to warning lights that tell the operator when parts are positioned improperly on the machine.

•Fast food restaurants use automated french-frying machines that can only be operated one way; the french fries are prepackaged and the equipment automated to reduce the chance of human error.

Other Quality Improvement Strategies