Introduction to

1
Chapter 1

• Introduction to
• Quality

2
Modern Importance of Quality

• The first job we have is to turn out quality
  merchandise that consumers will buy and keep on
  buying. If we produce it efficiently and
  economically, we will earn a profit, in which you
  will share.
• - William Cooper Procter
• October 1887

3
Key Idea
Buildingand maintainingquality into an
organizations goods and services, and more
importantly, into the infrastructure of the
organization itself, is not an easy task.
4
The Importance of Quality

• Japanese success
• Impact of quality on productivity and profit
• Costs of quality
• Quality as a competitive advantage

5
Quality and Productivity
I. Market Gains

• Improved
• Performance
• Reliability
• Features
• etc.

Improved reputation for quality
Increased Market share
Experience-based scale economies
Increased Profits
Higher Prices
6
Quality and Productivity
II. Cost Savings
Increased productivity
Lower manufacturing costs

• Improved reliability or conformance

Lower rework and scrap costs
Increased Profits
Lower service costs
Lower warranty and product liability costs
7
Relative Quality Boosts rates of return

20
40
60
80
Relative quality (percentile)
8
The Costs of Quality

• Prevention Costs
• Appraisal Costs
• Internal Failure Costs
• External Failure Costs

9
Costs of quality assurancePrevention Costs

• QC administration and systems planning
• Quality training
• Quality planning (QC engineering work) Incoming,
  in-process, final inspection
• Special processes planning
• Quality data analysis
• Procurement planning
• Vendor surveys
• Reliability studies
• Quality measurement and control equipment
• Qualification of material

Source Adapted form J. W. Gavett, Production and
Operations Management (New York Harcourt Brace
Jovanovich
10
Costs of quality assuranceAppraisal Costs

• Testing
• Inspection
• Quality audits
• Incoming test and inspection and laboratory
  acceptance
• Checking labor
• Laboratory or other measurement service
• Setup for test and inspection
• Test and inspection material
• Outside endorsement
• Maintenance and calibration
• Product engineering review and shipping release
• Field testing

Source Adapted form J. W. Gavett, Production and
Operations Management (New York Harcourt Brace
Jovanovich
11
Costs of quality assuranceInternal Failure Costs

• Scrap, at full shop cost
• Rework, at full shop cost
• Scrap and rework , fault of vendor
• Material procurement
• Factory contact engineering
• QC investigations (of failures)
• Material review activity
• Repair and troubleshooting

Source Adapted form J. W. Gavett, Production and
Operations Management (New York Harcourt Brace
Jovanovich
12
Costs of quality assuranceExternal Failure Costs

• Complaints and loss of customer goodwill
• Warranty costs
• Field maintenance and product service
• Returned material processing and repair
• Replacement inventories
• Strained distributor relations

Source Adapted form J. W. Gavett, Production and
Operations Management (New York Harcourt Brace
Jovanovich
13
Costs of Detecting Defects
Cost of detection and correction
Process Final testing
Customer Where defect is detected
Figure 6.3
14
Percentage Cost Distribution by Category Watches
Fourth-Quarter Indexes
Appraisal 16
Internal failure 29
Prevention 3
External failure 52
15
Hidden costs of poor Quality
16
Competitive Advantage

• Is driven by customer wants and needs
• Makes significant contribution to business
  success
• Matches organizations unique resources with
  opportunities
• Is durable and lasting
• Provides basis for further improvement
• Provides direction and motivation

Quality supports each of these characteristics
17
History of Quality Assurance (1 of 3)

• Skilled craftsmanship during Middle Ages
• Industrial Revolution rise of inspection and
  separate quality departments
• Early 20th Century Scientific Management,
  statistical methods at Bell System, Walter
  Shewhart, MIL-STD
• Post-World War II. Japans success
• The U.S. quality revolution

18
History of Quality Assurance (2 of 3)

• Early successes Baldrige award, 1987
• Quality awareness in U.S. manufacturing industry
  during 1980s from Little Q to Big Q - Total
  Quality Management
• Disappointments and criticism Emergence of
  quality management in service industries,
  government, health care, and education,

19
History of Quality Assurance (3 of 3)

• Evolution of Six Sigma
• Current and future challenge keep progress in
  quality management alive

20
Defining Quality
Perfection
Fast delivery
Providing a good, usable product
Consistency
Eliminating waste
Doing it right the first time
Delighting or pleasing customers
Total customer service and satisfaction
Compliance with policies and procedures
21
Formal Definitions of Quality

• Transcendent definition excellence
• Value-based definition quality vs. price
• User-based definition fitness for intended use
• Product-based definition quantities of product
  attributes
• Manufacturing-based definition conformance to
  specifications

22
Quality Perspectives
transcendent value-based
user-based
needs
Marketing
Customer
product-based
Design
products and services
manufacturing- based
Manufacturing
Distribution
Information flow
Product flow
23
TOTAL QUALITY INTERFACES
CONSUMER NEEDS/REQUIREMENTS
QUALITY
QUALITY OF PERFORMANCE
QUALITY OF DESIGN
QUALITY OF CONFORMANCE
WORK PROCESS/SYSTEM
24
Quality as a Management Framework

• GE study
• Quality as a management discipline and not just
  a technical discipline.
• Total quality control, companywide quality
  control, total quality management, TQ

25
Principles of Total Quality

• Customer and stakeholder focus
• Participation and teamwork
• Process focus supported by continuous improvement
  and learning

all supported by an integrated organizational
infrastructure, a set of management
practices, and a set of tools and techniques
26
Customer and Stakeholder Focus

• Customer is principal judge of quality
• Organizations must first understand customers
  needs and expectations in order to meet and
  exceed them
• Organizations must build relationships with
  customers
• Customers include employees and society at large

27
Key Idea
To meet or exceed customer expectations,
organizations must fully understand all product
and service attributes that contribute to
customer value and lead to satisfaction and
loyalty.
28
Participation and Teamwork

• Employees know their jobs best and therefore, how
  to improve them
• Management must develop the systems and
  procedures that foster participation and teamwork
• Empowerment better serves customers, and creates
  trust and motivation
• Teamwork and partnerships must exist both
  horizontally and vertically

29
Key Idea
In any organization, the person who best
understands his or her job and how to improve
both the product and the process is the one
performing it.
30
Process Focus and Continuous Improvement

• A process is a sequence of activities that is
  intended to achieve some result

31
Continuous Improvement

• Enhancing value through new products and services
• Reducing errors, defects, waste, and costs
• Increasing productivity and effectiveness
• Improving responsiveness and cycle time
  performance

32
Key Idea
Major improvements in response time may require
significant simplification of work processes and
often drive simultaneous improvements in quality
and productivity.
33
Demings View of aProduction System
Suppliers of materials and equipment
Design and Redesign
Consumer research
Receipt and test of materials
Consumers
A B C D
Production, assembly inspection
Distribution
Tests of processes, machines, methods
INPUTS PROCESSES
OUTPUTS
Feedback
34
Learning

• The foundation for improvement Understanding
  why changes are successful through feedback
  between practices and results, which leads to new
  goals and approaches
• Learning cycle
• Planning
• Execution of plans
• Assessment of progress
• Revision of plans based on assessment findings

35
Infrastructure, Practices, and Tools
Infrastructure
Leadership Strategic HRM
Process Information and knowledge
Planning
mgt. management
Performance Training appraisal
Practices
Trend chart
Tools
36
TQ Infrastructure

• Customer relationship management
• Leadership and strategic planning
• Human resources management
• Process management
• Information and knowledge management