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UNIT IV
TQM TOOLS AND TECHNIQUES II
Quality Circles - Cost of Quality - Quality Function Deployment (QFD) - Taguchi quality
loss function - TPM - Concepts, improvement needs - Performance measures.

4.1 QUALITY CIRCLES

A Quality Circle is a volunteer group composed of members who meet to talk about
workplace and service improvements and make presentations to their management with their
ideas.
A circle of employees that is formed to solve problems related to quality of work
environment.

History of quality circles:

The term quality circles derive from the concept of PDCA (Plan, Do, Check, Act) circles
developed by Dr. W. Edwards Deming. However they were first established in Japan in 1962
by Kaoru Ishikawa. The movement in Japan was coordinated by the Japanese Union of
Scientists and Engineers (JUSE). The first circles were established at the Nippon Wireless and
Telegraph Company but then spread to more than 35 other companies in the first year.

Basic Terminologies of Quality Circle

1. Small Group of 6-12 employees.
2. Who basically do similar kind of work.
3. Meet on voluntarily basis.
4. To identify improvements in work areas.
5. Analyze and solve work related problems.
6. Leading to mutual upliftment of employees as well as organization.
• It is a way of capturing the creative and innovative power that lies within the
workforce

Objectives
The objectives of Quality Circles are multi-faced.
a) Change in Attitude
• From "I don‘t care" to "I do care"
• Continuous improvement in quality of work life through humanisation of work.
b) Self Development
• Bring out ‗Hidden Potential‘ of people
• People get to learn additional skills.
c) Development of Team Spirit
• Individual Vs Team – "I could not do but we did it"
• Eliminate inter departmental conflicts.
d) Improved Organizational Culture
• Positive working environment.

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• Total involvement of people at all levels.

• Higher motivational level.
• Participate Management process.

Concept of Quality Circle

Quality Circle concept has the following three major attributes:
1. Quality circle is a form of participation management.
2. Quality circle is a human resource development technique.
3. Quality circle is a problem solving technique.

Structure of Quality Circle

• A quality circle has an appropriate organizational structure for its effective and
efficient performance. It varies from industry to industry, organization to organization.
• A typical structure of quality circle is depicted in Fig.

Launching Quality Circle

• Expose middle level executives to the concept.
• Explain the concept to the employees and invite them to volunteer as members of
Quality Circles.
• Nominate senior officers as facilitators.
• Form a steering committee.
• Arrange trainings.
• A meeting should be fixed preferably one hour a week for the Quality Circle to meet.
• Formally inaugurate the circle.
• Arrange necessary facilities for the Quality Circle meeting and its operation.

Quality Circle Process

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Tools of Quality circles

• The Ishikawa or fishbone diagram - which shows hierarchies of causes contributing
to a problem.
• The Pareto Chart - which analyses different causes by frequency to illustrate the
vital cause.
• Process Mapping, Data gathering tools such as Check Sheets and graphical tools such
as histograms, frequency diagrams, spot charts and pie charts.

Advantages:
• Increase Productivity.
• Improve Quality.
• Boost Employee Morale.

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Disadvantages:
• Inadequate Training.
• Unsure of purpose.
• Non Truly Voluntary.
• Lack Of Management Interest.

Conclusion
• QCs are not limited to manufacturing firms only.
• They are applicable for variety of organizations where there is scope of group based
solutions of work related problems.
• QCs are relevant for IT, factories, schools, hospitals, firms, universities, research
institutes, banks government offices etc.

4.2 COST OF QUALITY

Concept: Quality-related costs are costs incurred by an organization to ensure that the
products / services it provides conform to customer requirements. In other words, quality
costs are the sum of money spent on ensuring that customer requires are met and also the
costs wasted through failing to achieve the desired level of quality. Thus quality cost is the
cost of not meeting the customer’s requirement. i.e., the cost of doing things wrong.
The cost of quality is the difference between the actual cost of making and selling
products/services and the cost of no failure.
Definition: Quality costs are defined as those costs associated with the non- achievement of
product/service quality as defined by the requirements established by the organization and its
contracts with customers and society.
In simple words, quality cost is the cost of poor products or services.
Quality involves in creating, maintaining, upgrading and delivering a product having some
standards that meets or exceeds the expectations of the customers.
In doing so, certain costs are incurred to perform quality related activities such as quality
planning & management; Statistical Process Control; investments in quality related
information systems; Inspection & Testing; Tracking the causes and effects of the problem;
quality improvements; Monitoring Progress; Scrap and Rework Costs; Complaints &
Warranty Costs etc.

Classification
Broadly Cost of Quality (COQ) can be classified into two categories –
1. Cost of Conformance (COC) or Cost of Good Quality (COGQ) and
2. Cost of Non-Conformance (CONC) or Cost of Poor Quality (COPQ).
Cost of Conformance (COC) or Cost of Good Quality (COGQ) can be defined as Costs
associated with doing quality job, conducting quality improvements, and achieving quality
goals. These are the costs that aim at assurance of quality and prevention of bad quality. That

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means Cost of Conformance has two sub-divisions : Cost of Assurance and Cost of
Prevention.

Cost of Assurance : These costs are associated with the quality requirements, systems and
procedures, control measures and audits to ensure appropriate quality standards are used and
complied such as money spent on establishing methods and procedures; Process Capability
Studies; robust Product Design; proper employee training in performing good quality job;
supplier rating / supplier certification (assessment and approval of suppliers of products and
services), Quality audits (confirmation that the quality system is functioning correctly)
acquiring tools, and planning for quality. Quality assurance provides confidence in the system
that ensures quality of deliverables.
Cost of Prevention: The costs that arise from efforts to keep defects from occurring at all-
prevent errors to happen and to do the job right the first time. Prevention costs may include
Costs of Verifications – checking of incoming material, processes, products, and services to
ensure that they conform to agreed specifications; Preventive Maintenance; Calibration of
measuring and test equipment etc. These are planned and incurred before actual operation and
money is all spent before the product is actually built. The focus on prevention tends to reduce
preventable costs of bad quality.

Cost of Non-Conformance (CONC) or Cost of Poor Quality (COPQ) is the costs associated
with all activities and processes that do not meet agreed performance and / or expected
outcomes. These costs would disappear if every task were always performed without
deficiency. These costs have two sub-divisions : Cost of Appraisal and Cost of Failure.

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Cost of Appraisal: Money spent to review completed products against requirements.

Appraisal includes the cost of inspections, testing, and reviews. This money is spent after the
product is built but before it is shipped to the user or moved into customers place. They could
include: inspection of finished goods, field testing, pre- dispatch inspection, checking the
shipping documents before dispatch etc

Cost of Failure : All costs associated with defective products produced and or that have
been delivered to the user. These costs are further sub-divided into Internal Failure Costs and
External Failure Costs.
Internal Failure Costs– These are the Costs generated before a product is shipped but after a
product is made and inspected and found non-conformance to requirements, such as –
Product/service design failure costs (internal – Design corrective action; Rework due to
design changes; Scrap due to design changes); Purchasing failure costs (Purchased material
reject disposition costs; Purchased material replacement costs; Supplier corrective action;
Rework of supplier rejects; Uncontrolled material losses); Operations (product or service)
failure costs (Material review and corrective action costs – Disposition costs –
Troubleshooting or failure analysis costs (operations) – Investigation support costs –
Operations corrective action; Operations rework and repair costs – Rework – Repair; Re-
inspection / retest costs; Extra operations; costs of Scrap (operations); Downgraded end
product or service; Internal failure – labour losses; Other internal failure costs
External Failure Costs—Costs generated after a product is shipped as a result of non-
conformance to requirements, such as Complaint investigation / customer or user service;
Returned goods; Retrofit costs; Recall costs; Warranty claims; Liability costs; Penalties;
Customer/user goodwill; Lost sales; Other external failure costs

Goals of COQ
 Elimination of Failure Costs
 Reduction in Appraisal Costs
 Investments in Prevention Activities
 Investments in Quality Assurance

The 1-10-100 Rule

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As per this rule one dollar spent on prevention will save $10 on appraisal and $100 on failure
costs. This rule helps one to prioritize expenditure on prevention, which is sure to bring in
greater returns.

Four Phases of COQ System

Quality Costs increase over:

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Measuring Cost of Quality

Optimum Cost of Performance

Figure shows that there is a minimum total quality cost, which is a combination of prevention,
appraisal and failure. Reducing any of these reduces the total quality cost. Optimal cost is
obtained by striking the correct balance between the three. Clearly prevention reduces both
appraisal and failure costs, however eventually the: cost of prevention itself starts to increase
the total cost and so this must be controlled and set at an effective level. From the figure it is
clear that to achieve a reduction in failure costs, it is necessary to increase prevention and
appraisal costs. It is understood that the sum of the prevention and appraisal costs rises from
zero to infinity as perfection is approached. In contrast, the failure cost drops from infinity to
zero as perfection is approached.

Return on Quality (ROQ) : Minimizing Cost of Quality : Maximizing Profits

ROQ – an approach that evaluates the financial return of investments in quality. Poor quality
causes higher costs of products or services and at the same time also leads to customer

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dissatisfaction and loss of business. Reducing or eliminating the cost of poor quality is one of
the best ways to increase a company‘s profit.
Edwards Deming proposed that improving quality reduces cost and improves
profitability. Therefore investments on improving quality has greater positive returns in terms
of increased sales, getting Repeat Orders, expanding Customers base, Commanding better
Prices, gaining Competitive Advantage, getting opportunity in Business Expansion.

Returns on Quality is maximized when benefits of improved quality is more with

minimal investments on quality.

Benefits of preventing poor quality

From the chart below it is evident that by improving quality efforts of Assurance and
Prevention, though there is small increase in these costs, the associated costs of quality failure
and appraisal are drastically fallen down and therefore sharp fall in total quality cost resulting
in net benefits.

Advantages of using quality costs for management

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4.3 QUALITY FUNCTION DEPLOYMENT (QFD)

A method of transferring customer needs and requirements into technical specifications
for new product (or improve existing product) and service development.

Objectives of QFD
• To identify the true voice of the customer and to us this knowledge to develop
products which satisfy customers.
• To help in the organization and analysis of all the pertinent information associated
with the project.

Brief History
• First implemented at Mitsubishi Heavy Industries, Kobe Shipyard in 1972
• Toyota strongly influenced adoption of QFD in North America
– Between 1977-1984 achieved a 61% reduction in product development cost, a
33% reduction in product development cycle, and virtual elimination of rust related
warranty problems.

Benefits of QFD
• Customer Driven
• Reduces Implementation Time
• Promotes Teamwork
• Provides Documentation

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The QFD Team

Two Types of Teams
– A. New product or Service.
– B. Improving an existing product or Service.
Teams consist of members from marketing, design, quality, finance and production, etc.,

The Voice of the Customer

• QFD begins with marketing to find out what exactly the customer wants from a
product or service.
The QFD Team Must Continually Ask:
1. What does the customer really want?
2. What are the customer‘s expectations?
3. Are the customer‘s expectations used to drive the design process?
4. What can the design team do to achieve customer satisfaction?

Types of Customer Information and How to Collect It

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Organizing the Data

• The Affinity Diagram gathers a large amount of data and organizes the data into
groups based on natural interrelationships.
• Other data organizers include:
– Interrelationship Diagrams,
– Tree Diagrams,
– Cause and Effect Diagrams

House of Quality
 House of quality is a primary planning tool used in QFD process.
 It is a set of matrix that translates the voice of the customers into design requirements
that meet the specific target values and characteristics of the final product. Since the
structure of QFD resembles like a house, it is referred to as the House of Quality.
Basic Structure of House of Quality
The parts of the house of quality are: described as follows:

1. Customer Requirements: It is the left exterior walls of the house which indicates the
voice of the customer (ie) what the customer expect from the listed products.
2. Prioritized customer requirements: It is the right exterior walls of the house which
indicates the priority of customer requirements or planning matrix. The listed items in this are
customer benchmarking, customer importance rating, target value, and sales point.
3. Technical descriptors: The ceiling of the house contains technical descriptors. It is the
voice of the organization which shows the product design characteristics, design constraints
and parameters.

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4. Relationship matrix: It is the interior walls of the house which shows the relationships
between customer requirements and technical descriptors. This relationship matrix correlates
the customer requirements with the product characteristics.
5. Trade-off Matrix
It is the roof of the house which shows the interrelationships between the technical
descriptors. Tradeoffs between similar and/or conflicting technical descriptors are identified.
6. Prioritized technical descriptors: It is the foundation of the house which lists the
priorities of technical descriptors. Some of the listed items are the technical benchmarking,
degree of technical difficulty, and target value.

The detailed basic house of quality matrix is shown in below figure. It contains the
considerable amount of information within this matrix. It is very easy to understand the
overall QFD process, if each part of the matrix is discussed in detail.

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QFD Methodology (Constructing the House of Quality)

The steps required for building the house of quality are listed below,
Step 1- List the Customer Requirements (What’s):
 Quality function deployment starts with the list of goals and objectives.
 List out WHAT the customer needs or expects in a particular product (i.e.) connecting
rod.
 List out the general primary customer requirements and the detailed secondary
customer requirements needed to support the primary requirements.
Step 2- List the technical descriptors (How’s):
 The objective of house of quality is to design or change the design of a product in
order to meet the customer requirements.
 The QFD team should list out the engineering characteristics or technical descriptors
(How‘s) that will affect one or more of the customer requirements.
 These technical descriptors make up the ceiling, or second floor of the house of
quality.
 Each of the customer requirements is broken down into one or more primary technical
descriptors.
 The primary technical descriptors are material selection and manufacturing process.
The secondary technical descriptors include the part specifications and manufacturing
parameters that an engineer can adopt up on.
Step 3- Develop a relationship matrix between What’s and How’s:
 It compare the customer requirements (What‘s) and technical descriptors (How‘s) and
then determine their respective relationships.
 L-shaped matrix is used to determine the relationship between the customer
requirements and technical descriptors.
 The following symbols and their weight age numbers are used to represent the degree
of relationship between these two.

Step 4- Develop an interrelationship matrix between How’s:

 Identify any interrelationship between each of the technical descriptors and mark the
symbols over the roof of the house of quality.

Step 5- Competitive Assessments:

 Compare the current organization products with that of the competitive products.
 These are the weighted tables classified· into two categories (ie) (i) customer
competitive assessment and (ii) technical competitive assessment.
 The customer competitive assessment is the columns corresponding to each customer
requirements in the house of quality on the right side of the relationship matrix.
 The technical competitive assessment is the rows corresponding to each technical
descriptor in the house of quality at the bottom of the relationship matrix.

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Step 6: Develop prioritized customer requirements:

 The priorities of customer requirements are listed on the right side of the customer
competitive assessment corresponding to each customer requirements in the house of
quality.
 These prioritized customer requirements contain columns for importance to customer,
target value, scale-up factor, sales point and an absolute weight.
Step 7: Develop prioritized technical descriptors:
 The priorities of technical descriptors are listed at the bottom of the technical
competitive assessment corresponding to each technical descriptor in the house of
quality.
 These prioritized technical descriptors contain degree of technical difficulty, target
value, absolute and relative weights.

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QFD Process
 The house of quality chart now contains a large amount of information, it is still
necessary to refine the technical descriptors further until an actionable level of detail is
achieved.
 The process is accomplished by creating a new chart in which the HOWs (technical
descriptors) of the previous chart became the WHATs (customer requirements) of the
new chart, as shown in Figure.
 This process continues until each objective is refined to an actionable level.

An example of the complete QFD process from the beginning to the end is shown in the flow
diagram in below Figure.

 The first chart in the flow diagram is for the product-planning phase. For each of the
customer requirements, a set of design requirements is determined, which, if satisfied,
will result in achieving customer requirements.
 The next chart in the flow diagram is for part development. Design requirements from
the first chart are carried to the next chart to establish part-quality characteristics. The
term part quality characteristics are applied to any elements that can aid in measuring
the evolution of quality. This chart translates the design requirements into specific part
details.
 Once the part-quality characteristics have been defined, key process operations can be
defined in the process-planning phase.
 The next step is process planning, where key process operations are determined from
part-quality characteristics. Finally, production requirements are determined from the
key process operation.

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4.4 TAGUCHI QUALITY LOSS FUNCTION

 Taguchi method is a statistical method developed by Taguchi and Konishi.
 Initially it was developed for improving the quality of goods manufactured, later it was
expanded to many other fields .
 Fields such as Engineering, Biotechnology, Marketing and Advertising.
 Sometimes called Robust Design methods.
Goal
 The most common goals are minimizing cost, maximizing throughput, and/or
efficiency.
 This is one of the major quantitative tools in industrial decision making.
Definition
 Taguchi defines Quality as ―the loss imparted by the product to society from the time
the product is shipped.‖

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
LOSS = Cost to operate, Failure to function, maintenance and repair cost, customer
satisfaction, poor design.
 Product to be produced ―being within specification‖
Taguchi Quadratic Quality Loss Function
 Taguchi defined quality as "the loss imparted by the product to society (social loss- loss to
the consumers and producers) from the time the product is shipped".
 This loss includes not only the loss to the company through the cost of rework or scrap,
maintenance cost, but also the down time cost due to equipment failure, customer
dissatisfaction costs due to poor product performance injurious caused by poor design, cost
due to poor reliability.
 Therefore, Taguchi's loss function concept is that whenever a product deviates from its
target value, it generates a loss to the society.
 The loss function establishes a financial measure of the customer's dissatisfaction with a
products performance as it deviates from the target performance. Therefore, the loss
function strategy is to produce products as close to the target value as possible rather than
achieving the values within the specifications.

Comparison between the traditional approach and the Taguchi’s approach

 Suppose if the manufacturing specifications for a component is 20 ± 3 mm, the upper and
lower specification limits are 17mm and 23mm respectively.
 The target value 'N' is the central value or mean of 20 mm. In traditional approach, the
produced product dimension is accepted when the process or product performs well within
the USL and LSL. When the product dimension is less then LSL and more than USL, then
the product is not accepted.


Taguchi’s Quadratic Quality Loss Function

 Quality Loss Occurs when a product‘s deviates from target or nominal value.
 Deviation Grows, then Loss increases.

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Taguchi’s U-shaped loss Function Curve




Taguchi suggested a quadratic curve (quadratic loss function) to represent the customer
dissatisfaction with the product's performance.
 The area of customer dissatisfaction is shaded by the 'U' shape curve.
 Quality loss occurs when the product specifications deviate from the exact target value
'N' (20) whether it fall inside or outside the specification limits.

Three Common Loss Functions

Although Taguchi developed more than 68 loss functions, the following three‘s are
commonly used:
1. Nominal-the-best (many situations are approximated by the quadratic function)
2. Smaller-the-better
3. Larger-the-better

1. Nominal-the-best
Taguchi uses Quadratic Equation to determine loss Curve
 L (x) = k (x-N)²
Where L (x) = Loss Function,
k = C/d² = Quality Loss Coefficient (or) Constant of proportionality,
where C – Loss associated with spec. limit
d - Deviation of specification from target value
x = Quality Features of selected product,
N = Nominal Value of the product and

Problem 1 :
A part dimension on a power tool is specified as 32.25±0.25. Company records show±0.25
exceeded & 75% of them returned for replacement. Cost of replacement is Rs.12,500.
Determine k & QLF.
Solution : Expected Cost of repair
C = 0.75(12500) = Rs 9,375
k = C/d²= 9375/(0.25)² = Rs 1,50,000
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QLF =L (x) = 1,50,000(x-N) ²

= 1,50,000(x-32.25) ²
Problem 2:
If the specifications are 10 ± 3 for a particular quality characteristic and the average repair
cost is $230, determine the loss function. Determine the loss at x = 12.
k = C/d² = 230/3² = 25.6
L (x) = k (x-N)²
Thus, L = 25.6 (12- 10) ²
= $102.40

2. Smaller the Better

 Some characteristics can never take negative values, also their ideal value always
zero and as their value increases, the performance becomes progressively worse.
 for example, carbon dioxide emissions.

 When N = 0
 L(x)=kx²

3. Larger the Better

 Some characteristics do not take negative values, but zero is the worse value and
as their value becomes more, the performance become progressively better, the
quality loss becomes progressively smaller. Their ideal value is infinity and at that
quality loss equals to zero.
 for example, agricultural yield.
 L(x)= k (1/x²)

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4.5 TOTAL PRODUCTIVE MAINTENANCE (TPM)

 Total Productive Maintenance (TPM) is keeping the current plant and equipment at its
highest productive level through cooperation of all areas of the organization.
 The total maintenance function should be directed towards the elimination of
unplanned equipment and plant maintenance. The objective is to create a system in
which all maintenance activities can be planned and not interfere with the production
process. Surprise equipment breakdowns should not occur.
Analyzing TPM into its three words, we have:
Total = All encompassing by maintenance and production individuals working together.
Productive = Production of goods and services that meet or exceed customers‘ expectations.
Maintenance = Keeping equi pment and plant in as good as or better than the original
condition at all times.
Goals
The overall goals of TPM are:
1. Maintaining and improving equipment capacity.
2. Maintaining equipment for life.
3. Using support from all areas of the operation.
4. Encouraging input from all employees.
5. Using teams for continuous improvement.
Types:

Features of TPM or Eight Pillars of TPM

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Seven Basic Steps for TPM

1. Management learns the new philosophy.
2. Management promotes the new philosophy.
3. Training is funded and developed for everyone in the organization.
4. Areas of needed improvement are identified.
5. Performance goals are formulated.
6. An implementation plan is developed.
7. Autonomous work groups are established.

1. Management learns the new philosophy.

• One of the most difficult things for senior management to deal with is change.
• They need to learn about TPM and how it will affect their operations.
• There are many successful examples; there are also many organizations that have tried
various techniques to improve performance and failed.
• Benchmarking with a successful organization will provide valuable information.
2. Promoting the Philosophy
• Senior management must spend significant time in promoting the system.
• They must sell the idea and let the employees know that they are totally committed to
its success.
• If the belief in the new philosophy and commitment are not there, then positive results
will not happen.

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• Too often lip service is given to a ―new idea.‖ This action is usually brought on by a
belief that the new system will solve some immediate problems and lead to an
immediate return on investment.
• A long-term commitment to the new philosophy is required.
• One of the best ways to implement the new philosophy is just to start doing it. In other
words, start giving the maintenance and production personnel more autonomy.
• Once the employees realize that management is serious about taking the organization
in a new, more positive direction, employees usually respond.
3. Training
• Teach the philosophy to managers at all levels. Begin with senior management, and
work down to first-line supervisors.
• Don‘t just teach the HOW: also teach the WHY.
• Senior management must spend time learning about and understanding the
ramifications (branching out) of applying this philosophy to their organization.
• Some managers may need to be replaced or take early retirement because they will not
change their way of dealing with people. Those managers who readily respond to the
new philosophy should also be identified.
• First-line supervisors need to learn their role in what most likely will be a new
environment. Supervisors who have been used to guiding their groups will find this an
easy transition.
• Employees need to learn about the various tools used in performing their tasks as part
of an autonomous work group. There needs to be some instruction in the area of jobs
that maintenance people do and jobs that production people do.

4. IMPROVEMENT NEEDS
• There are usually some machines that seem to be on the verge of breaking down or
require an excessive amount of maintenance.
• Employees who work with the equipment on a daily basis are better able to identify
these conditions than anyone else in the organization.
• A good first step is to let the operators and maintenance technicians tell management
which machines and systems need the most attention.
• An implementation team of operators and technicians to coordinate this process is
essential. This action will build credibility and start the organization towards TPM.
• One of the first steps for the team is to identify the current status. The following
measurements were developed by the Japanese and are accepted by most practitioners.
• Six major loss areas need to be measured and tracked:
Downtime Losses
1. Planned
– a. Start-ups
– b. Shift changes
– c. Coffee and lunch breaks
– d. Planned maintenance shutdowns
2. Unplanned Downtime
– a. Equipment breakdown
– b. Changeovers
– c. Lack of material
Reduced Speed Losses
3. Idling and minor stoppages
4. Slow-downs

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Poor Quality Losses

5. Process nonconformities
6. Scrap

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5. Performance goals are formulated

• Goals should be set after the improvement needs are identified.
• A good first goal is to establish the timeframe for fixing the first prioritized problem.
• Technicians and operators will probably want it done faster than management because
it causes them more problems on a daily basis.
• Identifying needs and setting goals begins the process of getting the organization to
work together as a team.

6. Developing Plans
• First, develop and implement an overall plan of action for training all employees.

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• Plans for developing the autonomous work groups should take place during the
training phase.
• Plan to use teams of maintenance technicians and operators to work on particularly
troublesome problems.
• Priorities can be set and management can make a commitment with resources to
correct some of the basic problems.

7. Autonomous Work Groups

• Autonomous work groups are established based on the natural flow of activity.
• First, make the operator responsible for the equipment and the level of maintenance
that he is capable of performing.
• Next, identify the maintenance personnel who work in certain areas or have certain
skill levels.
• Operators and maintenance personnel are brought together, resulting in an autonomous
work group.
• These groups must have the authority to make decisions about keeping the equipment
in first-class running order.

4.6 PERFORMANCE MEASURES

• It plays an important part in the overall success or failure of a business organization.
• Performance measures quantitatively tell us something important about our products,
services, and the processes that produce them.
• They are a tool to help us understand, manage, and improve what our organizations
do.
Objectives
Organization to know about:
• How well we are doing?
• Are we meeting our goals?
• Is it our customers are satisfied.
• Is it our processes are in statistical control.
• Where improvements are necessary?

Typical Measurements

S.No. Items Measures

Lost time due to accidents, absenteeism, turnover, employee

Human satisfaction index, no. of suggestions for improvement, no. of
1.
Resources suggestions implemented, no. of training hours per employee,
training cost per employee, no. of active teams, no. of grievances.
Number of complaints, number of on-time deliveries, warranty
data such as parts replacement, customer satisfaction index, time
2. Customers
to resolve complaints, telephone data such as response time, mean
time to repair, dealer satisfaction, report cards.

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Inventory turns, SPC charts, Cp/Cpk, amount of scrap/rework,

nonconformities per million units, software errors per 1000 lines
3. Production
of code, process yield, machine downtime, actual performance to
goal, number of products returned, cost per unit.
New product time to market, design change orders, R & D
Research and
4. spending to sales, average time to process proposal, recall data,
Development
cost estimating errors.
SPC charts, Cp/Cpk, on-time delivery, service rating, quality
5. Suppliers performance, billing accuracy, average lead time, percent of
suppliers that are error free, just-in-time delivery target.
Sales expense to revenue, order accuracy, introduction cost to
Marketing/ development cost, new product sales to total sales, new customers,
6.
Sales gained or lost accounts, sales income to number of salespeople,
number of successful calls per week.
Revenue per employee, expense to revenue, cost of poor quality,
percent of payroll distributed on time, number of days accounts
7. Administration receivable past due, number of accounts payable past due, office
equipment up-time, purchase order errors, vehicle fleet data, order
entry/billing accuracy.

Criteria
• In order to evaluate the existing measures or add new ones, the following ten criteria
are recommended:
1. Simple
2. Few in number
3. Developed by users
4. Relevance to customers
5. Improvement - focus on improvement, prevention, and strategic long-term
planning and goal setting
6. Cost – profit, cost of poor quality
7. Visible - unit measures should be posted at the machine or work centre.
8. Timely - measurements are taken hourly, daily, or weekly rather than monthly
or quarterly as in traditional.
9. Aligned - align all activities with organizational goals
10. Results - Key result measures need to be guided and balanced by the interests
of all stakeholders.
Strategy
• The quality council has the overall responsibility for the performance measures.
• It ensures that all the measures are integrated into a total system of measures.
• To develop the system, the quality council will obtain appropriate information from all
of the stake-holders.
• They will utilize the core values, goals, mission, and vision statements as well as the
objectives and criteria as discussed earlier.
• With this information, the strategic measurement system is created.
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Performance Measure Presentation

• The various techniques used for presenting performance measures are:
1. Time series trend graphs,
2. Control charts,
3. Capability Index,
4. Taguchi's quality loss function,
5. Cost of poor quality, and
6. Quality awards
1. Time Series Trend Graph
• In time series graph, the time in (days, weeks, months, etc) is represented in X-axis
and the performance measure is marked in the Y-axis.

Control charts, Capability Index, Taguchi's quality loss function, Cost of poor quality – Refer
previous topics.

6. Quality Awards
• The last method includes the performance measurement based on the criteria of
national/international quality awards such as
• Malcolm Baldrige National Quality Award (U.S.),
• Deming Prize (Japan) or
• Rajiv Gandhi National Quality Award (India).

The Malcolm Baldrige National Quality Award

 The Malcolm Baldrige National Quality Award (MBNQA) is an
annual award to recognize U.S organizations for performance
excellence.
• It was created by public law in 1987. This award promotes
complete understanding of the requirements for performance
excellence & competitiveness improvement.
• There are five categories
• Manufacturing
• Service

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• Education
• Healthcare
• Small business
• Key characteristics of the criteria
• Customer satisfaction
• Human resource performance
• Productivity
• Market share, new development

Rajiv Gandhi National Quality Award

• Rajiv Gandhi National Quality Award (RGNQA) was instituted by the Bureau of
Indian Standards (BIS) in 1991.
RGNQA helps Indian Industry to improve quality by
• Encouraging Indian industry to make significant improvements,
in the quality for maximizing consumer satisfaction and
successfully facing competition in the global market.
• Recognizing the achievements of those organizations, which
have improved the quality of their products and services and
thereby, set an example for others
• Establishing guidelines and criteria that can be used by the
industry in evaluating their own quality improvement efforts

For The Year 2012 (19th Awards Winners)

• BEST OF ALL AWARD - Rail Wheel factory (Ministry of Railways), Bangalore
CATEGORY AWARDS
• Large Scale Manufacturing Industry - Sakthi Masala P. Ltd., Erode, Tamil Nadu
• Large Scale Service Industry - Tata Business Support Services Limited, Hyderabad
• Small Scale Manufacturing Industry - Elin Appliances Pvt. Ltd., Solan, Himachal
Pradesh
COMMENDATION CERTIFICATES
• Large Scale Manufacturing Industry – Chemical Dalmia Cement (B) Limited, Kadapa,
Andhra Pradesh
• Electrical & Electronic - EOS Power India Pvt. Ltd., Mumbai, Maharashtra
• Engineering & Others - Currency Note Press (A unit of security Printing & Minting
Corporation of India Ltd.), Nashik, Maharashtra
• Food & Drug - Mehsana Dist Co-Op Milk Producers' Union Ltd., Dudhsagar Dairy,
Mehsana, Gujarat.
Large Scale Service Industry
• Health care - Apollo Speciality Hospital Madurai, Tamil Nadu
• Others – Engineers India Limited, New Delhi
• Education - Amity University Uttar Pradesh, Noida, Uttar Pradesh

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