OPERATIONS MANAGEMENT

Session 7 (Stevenson, Chapters 9 & 10):

Quality Management
&
Quality Control
Slides by
McClean Agbalenyo
 Quality
• What does the term quality mean?
• Quality is the ability of a product or
service to consistently meet or
exceed customer expectations.

2
Evolution of Quality Management
• Industrial revolution and division of labour
• New emphasis on quality in Frederick Taylor’s
Scientific Management era
• 1924 - Statistical process control charts
• 1930 - Tables for acceptance sampling
• 1940’s - Statistical sampling techniques
• 1950’s - Quality assurance/total quality control
• 1960’s - Zero defects
• 1970’s - Quality assurance in services

3
 The Quality Gurus
• Walter Shewhart
– “Father of statistical quality control”
• W. Edwards Deming
• Joseph M. Juran
• Armand Feigenbaum
• Philip B. Crosby
• Kaoru Ishikawa
• Genichi Taguchi
• Taiichi Ohno & Shigeo Shingeo
4
 Key Contributors to Quality
Management
Contributor Known for
Deming 14 points; special & common causes of
variation

Juran Quality is fitness for use; quality trilogy

Feigenbaum Quality is a total field

Crosby Quality is free; zero defects

Ishikawa Cause-and effect diagrams; quality

circles

Taguchi Taguchi loss function

Ohno and Continuous improvenment

Quality
Shingo

5
 Quality Assurance vs.
Strategic Approach
• Quality Assurance
– Emphasis on finding and correcting
defects before reaching market
• Strategic Approach
– Proactive, focusing on preventing
mistakes from occurring
– Greater emphasis on customer
satisfaction

6
 Dimensions of Product Quality
 Performance - main characteristics of the product/service
 Aesthetics - appearance, feel, smell, taste
 Special Features - extra characteristics
 Conformance - how well product/service conforms to
customer’s expectations
 Reliability - consistency of performance
 Durability - useful life of the product/service
 Perceived Quality - indirect evaluation of quality (e.g.
reputation)
 Serviceability - service after sale, i.e. handling of
complaints or repairs
7
 Dimensions of Service Quality
 Convenience – availability and accessibility of the service
 Reliability – ability to perform service dependably, accurately, etc
 Responsiveness – willingness of service provider to help
customers in unusual situations and to deal with problems
 Time – speed with which service is delivered
 Assurance – the knowledge exhibited by personnel who
interface with customers and their ability to convey trust and
confidence
 Courtesy – the way employees treat customers who come into
contact with them
 Tangibles – the physical appearance of facilities, equipment,
personnel, and communication equipment
 Consistency – ability to provide the same level of good quality
repeatedly

8
 Challenges with Service
Quality
• Customer expectations often change
• Different customers have different
expectations
• Each customer contact is a “moment of
truth”
• Customer participation can affect
perception of quality
• Fail-safing must be designed into the
system
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Determinants of Quality

Ease of
Design
use

Conforms
to design Service

9-10 10
 Determinants of Quality
• Quality of design
– Intention of designers to include or exclude features in a
product or service
• Quality of conformance
– The degree to which goods or services conform to the
intent of the designers
• Ease-of-Use and user instructions
– Increase the likelihood that a product will be used for its
intended purpose and in such a way that it will continue to
function properly and safely
• After-sales service
– Taking care of issues and problems that arise after the sale

11
The Consequences of Poor
Quality
• Loss of business
• Liability
• Productivity
• Costs

12
 Benefits of Good Quality
• Enhanced reputation
• Ability to command premium prices
• Greater customer loyalty
• Lower liability costs
• Fewer production/service problems
• Increased market share

13
 Responsibility for Quality
• Top management
• Design
• Procurement
• Production/operations
• Quality assurance
• Packaging and shipping
• Marketing and sales
• Customer service

14
 Costs of Quality
• Failure Costs - costs incurred by defective
parts/products or faulty services.
• Internal Failure Costs
– Costs incurred to fix problems that are
detected before the product/service is
delivered to the customer.
• External Failure Costs
– All costs incurred to fix problems that are
detected after the product/service is delivered
to the customer.
15
 Costs of Quality
• Appraisal Costs
– Costs of activities designed to ensure
quality or uncover defects
• Prevention Costs
– All TQ training, TQ planning, customer
assessment, process control, and quality
improvement costs to prevent defects
from occurring

16
 Ethics and Quality
• Substandard work
– Defective products
– Substandard service
– Poor designs
– Shoddy workmanship
– Substandard parts and materials

Having knowledge of these and failing to correct

and report it in a timely manner is unethical.

17
Quality Awards

Baldrige Award
European Quality Award
Deming Prize
Japan Prize
Guyana Quality
Award???

18
 Quality Certification
• International Organization for Standardization (ISO)
• ISO 9000
– Set of international standards on quality management and
quality assurance, critical to international business
• ISO 14000
– A set of international standards for assessing a company’s
environmental performance
• ISO 18000
– A series of international standards for the air interface
protocol used in RFID systems for tagging goods within the
supply chain
• ISO 24700
– Pertains to the quality and performance of office equipment
that contains reused components

19
 Total Quality Management
• A philosophy that involves everyone in
an organization in a continual effort to
improve quality and achieve customer
satisfaction.

20
 The TQM Approach
1.Find out what the customer wants
(both internal and external customers)
2.Design a product or service that meets
or exceeds customer wants
3.Design processes that facilitates doing
the job right the first time
− Pokayoke/fail-safing/foolproofing
4.Keep track of results
5.Extend these concepts throughout the
supply chain
21
 Elements of TQM
1. Continuous improvement
2. Competitive benchmarking
3. Employee empowerment
4. Team approach
5. Decisions based on facts, not opinions
6. Knowledge of tools
7. Supplier quality
8. Champion
9. Quality at the source
10. Suppliers
– Long term relationship preferable
– Should practice quality at the source
22
 Continuous Improvement
• Philosophy that seeks to make never-ending
improvements to the process of converting
inputs into outputs.
• Focuses on the following factors:
– Equipment
– Methods
– Materials
– people
• Kaizen: Japanese word for continuous
improvement.
23
 Competitive Benchmarking
• Identifying other organisations that are the best
at something and studying how they do it to
learn how to improve your operation.
• In other words, comparing a product or process
against the best-in-class product.
• The company need not be in the same line of
business
• E.g., NCN TV benchmarked itself to the BBC in
terms of content, and to CNN in the area of the
‘look and feel’ viewers get.

24
 Quality at the Source
• The philosophy of making each worker
responsible for the quality of his or her work.
• Each worker is their own quality inspector
• By passing on work to the next workstation, the
worker is in effect ‘certifying’ that the item meets
quality standards

25
 Six Sigma
• Six sigma:
– A business process for improving quality, reducing costs, and
increasing customer satisfaction.
• Statistically, Six sigma means:
– Having no more than 3.4 defects per million opportunities (DPMO)
• Conceptually, Six sigma means:
– Program designed to reduce variability, defects, costs, and
delivery time
– Increases productivity, quality, and customer satisfaction
– Requires the use of certain tools and techniques
• Six sigma principle
– Reduction in variation is an important goal
– The methodology is data driven; it requires data validation
– Outputs are determined by inputs
– Only a critical few inputs have a significant impact on outputs
26
 Six Sigma Team
• Top management
• Program champions
• Master “black belts”
• “Black belts”
• “Green belts”

27
 Six Sigma Process
• DMAIC
– Define: Set the context and objectives for improvement
– Measure: Determine the baseline performance and capability of
the process
– Analyze: Use data and tools to understand the cause-and-effect
relationships of the process
– Improve: Develop the modifications that lead to a validated
improvement of the process
– Control: Establish plans and procedures to ensure that
improvements are sustained
• The DMAIC methodology is also known as breakthrough
strategy.

28
 Some Success Stories of
Six Sigma
 Citibank has used Six Sigma to reduce response time for
credit card applications, as well as to achieve a five to ten
times reduction in defects such as errors in customer
statements

A Six Sigma team at North Carolina Baptist Hospital

reduced the time for getting heart attack patients from the
emergency room into cardiac treatments labs by an
average of 41 minutes

Since implementing Six Sigma in 1999, Ford experienced

a 27% decrease in warranty spending in a two-year period,
accruing $2 billion in savings. 29
Obstacles to Implementing
TQM
• Lack of:
– Company-wide definition of quality
– Strategic plan for change
– Customer focus
– Real employee empowerment
– Strong motivation
– Time to devote to quality initiatives
– Leadership

30
Obstacles to Implementing
TQM
• Poor inter-organizational
communication
• View of quality as a “quick fix”
• Emphasis on short-term financial
results
• Internal political and “turf” wars

31
 The PDSA Cycle
• Plan-Do-Study-Act (PDSA) Cycle is a
conceptual framework for problem
solving and improvement activities

• Also known as PDCA cycle, Shewhart

cycle, or Deming wheel

32
The PDSA Cycle

33
 Basic Quality Tools
• There are a number of tools that can be used for problem
solving and process improvement
• Tools aid in data collection and interpretation, and provide
the basis for decision making
• Basic quality tools include
1. Flowcharts
2. Check sheets
3. Histograms
4. Pareto Charts
5. Scatter diagrams
6. Control charts
7. Cause-and-effect diagrams (or fishbone diagrams)
8. Run charts
34
Basic Quality Tools

35
Basic Quality Tools

36
 Measuring Service Quality:
The SERVQUAL model
• SERVQUAL Model measures customer
satisfaction based on the service quality gap
– The SERVQUAL model breaks down the five
dimensions of service quality into 22 items for assessing
customer perceptions and expectations regarding the
quality of service.
– A level of agreement or disagreement with a given item
is rated on a seven-point Likert scale ranging from 1
(strongly disagree) to 7 (strongly agree).
– Positive scores show that perceived service exceeds
expected service and vice versa; a zero score implies
that performance exactly matches with expectation.
10-37
 Measuring Service Quality:
The SERVQUAL model
• The SERVQUAL instrument was used to collect the following
information amongst First-Year Masters students of the University of
Guyana. The information concerns the students’ Expectations versus
Perceptions of their educational experience at the UG over the last
year. Complete the table and give your opinion.

Quality Average Average Unweighted Average

Dimension Expectations Perceptions Average Gap Weightings Score
Score
Tangibles 6.88 4.96 21

Reliability 6.10 3.69

Responsiveness 6.69 4.66 27

Assurance 6.91 5.63 15

Empathy 5.13 3.37 18

OVERALL
SCORES
10-38
 What is Quality Control?
• Quality Control
– A process that evaluates output relative to a
standard and takes corrective action when
output doesn’t meet standards
• If results are acceptable no further action is required
• Unacceptable results call for corrective action
– Inspection alone is generally not sufficient to
achieve a reasonable level of quality
• Most organization rely upon some inspection and a
great deal of process control to achieve an
acceptable level of quality.
10-39
 Inspection
• Inspection
– An appraisal activity that compares goods or services to a
standard
• To find out to what extent items conform to a standard
– While inspection cannot be completely eliminated, it is
hardly necessary in well-designed processes
– To be sure if a process is functioning as intended or if a
batch of input materials or finished products do not have
more than specified acceptable percentage of defective
goods, it is necessary to physically inspect at least some of
the items in question.
– Inspection issues:
1. How much to inspect and how often
2. At what points in the process to inspect
3. Whether to inspect in a centralized or on-site location
4. Whether to inspect attributes or variables
 Inspection
• Inspection
– Inspection can occur at three points:
• before production — to make sure that inputs are
acceptable.
• during production — to make sure that the conversion of
inputs into outputs is proceeding in an acceptable manner.
• after production — to make a final verification of
conformance before passing goods on to customers.
– Inspection before and after production often involves
acceptance sampling procedures, while monitoring
during the production process is referred to as
process control
 Inspection
• How much to Inspection and How Often
– The frequency of inspection depends largely on
• the rate at which a process may go out of control inspected (is
the process stable or unstable?).
• the number of lots being (the higher the number of lots, the
more the inspection required because it is important to obtain
sample data from each lot.
– For high-volume, repetitive operations, computerized
automatic inspections at critical points in a process
are cost effective.
 Inspection
• Where to Inspect in the Process
• In manufacturing:
1. Raw materials and purchased parts
2. Finished products
3. Before a costly operation
4. Before an irreversible process
5. Before a covering process
• In services:
1. Incoming purchased materials and supplies
2. Personnel
3. Service interfaces (e.g., service counter)
4. Outgoing completed work (e.g., repaired appliances)
 Inspection
in Services

• Examples of
inspection points
in service
organizations
 Control Process
• Sampling and corrective action are only a part of the
control process
• Steps required for effective control:
– Define: What is to be controlled?
– Measure: How will measurement be accomplished?
– Compare: There must be a standard of comparison
– Evaluate: Establish a definition of out of control
– Correct: Uncover the cause of nonrandom variability and
fix it
– Monitor: Verify that the problem has been eliminated
Control Charts
 Control Charts
• Control Chart
– A time ordered plot of representative sample statistics obtained
from an ongoing process (e.g. sample means), used to
distinguish between random and nonrandom variability
– A graph that visually show if a sample is within statistical control
limits.
– Basic purposes of control charts is to establish the control
limits for a process, and then to monitor the process to
indicate when it is out of control.
– Control limits
• The dividing lines between random and nonrandom
deviations from the mean of the distribution
• Upper and lower control limits define the range of
acceptable variation
Control Charts
 Control Charts for Variables
• Variables generate data that are measured
– Mean control charts
• Used to monitor the central tendency of a process.
– “x-bar” charts

– Range control charts

• Used to monitor the process dispersion
– R charts

10-49
 Establishing Control Limits
k

x i

x i 1
k
where
x  Average of sample means
x i  mean of sample i k

k  number of samples R i
R i 1
k
where
R  Average of sample ranges
Ri  Range of sample i
 X-Bar Chart: Control Limits
• Used to monitor the central tendency of
a process

x  chart Control Limits

UCLx  x  A2 R

LCLx  x  A2 R
where
A2  a control chart factor based on sample size, n
 Range Chart: Control Limits
• Used to monitor process dispersion
R Chart Control Limits
UCLR  D4 R
LCLR  D3 R
where
D3  a control chart factor based on sample size, n
D4  a control chart factor based on sample size, n
 Control Charts for Attributes
• Attributes generate data that are counted.
– p-Chart
• Control chart used to monitor the proportion of
defectives in a process

– c-Chart
• Control chart used to monitor the number of defects
per unit
 Run Tests
• Even if a process appears to be in control, the
data may still not reflect a random process
• Analysts often supplement control charts with a
run test
– Run test
• A test for patterns in a sequence
– Run
• Sequence of observations with a certain
characteristic

10-54
Control Chart Patterns
Nonrandom Patterns
 Process Capability
• Once a process has been determined to be stable, it is
necessary to determine if the process is capable of
producing output that is within an acceptable range
– Tolerances or specifications
• Range of acceptable values established by engineering
design or customer requirements
– Process variability
• Natural or inherent variability in a process
– Process capability
• The inherent variability of process output (process width)
relative to the variation allowed by the design specification
(specification width)
 Cp

UTL - LTL
Cp 
6
where
UTL  upper tole rance (specifica tion) limit
LTL  lower tole rance(spec ification) limit

10-58
Thank You!

59