1

Managing Quality

• Quality defined

• Total cost of quality

• Strategic Quality

– Total quality management (TQM)

– Continuous improvement tools

• Quality assurance

– Statistical quality control

2

Definitions of Quality

• ASQ:– The characteristics of a product or service that bear on

its ability to satisfy stated or implied needs– A product or service free from defects

• Joseph Juran– Fitness for use

• How would you evaluate the quality of the following?– Golf shirt– Used car

3

Defensive Quality

• Quality analyzed in economic terms

Total Cost of Quality:

$ Failure Costs

$ Appraisal Costs

$ Prevention Costs

4

Total Cost of Quality — One View

Q* = Optimal Quality

($)

Cost per defect-free unit of product

Appraisal Costs

100% Defects 0% Defects

Internal/ExternalFailure Costs

PreventionCosts

Total Costof Quality

Minimum TotalCost

5

Another View

The need for

appraisal and

prevention costs fall as defect

levels decrease

($)

Cost per defect-free unit of product

100% Defects 0% DefectsQ* = Optimal Quality

Internal/ExternalFailure Costs

Appraisal andPrevention Costs

Total Costof Quality Minimum Total

Cost

6

Dimensions of Quality

• Performance• Features• Reliability• Durability• Conformance• Aesthetics• Serviceability• Perceived Quality

Idea:

Firms can actually competeby excelling on selecteddimensions.

7

Total Quality Management (TQM)

Managing the entire organization so that it excels in all dimensions important to the customer. Product development

Marketing Manufacturing Support services

8

TQM Principles

• Customer focus

• Leadership involvement

• Continuous improvement

• Employee empowerment

• Quality assurance (including SPC)

• Strategic partnerships

• Strategic quality plan

9

Continuous Improvement (CI) versus “Leaps” Forward

Per

form

ance

Time

10

Common Improvement Tools(See Textbook!)

• Process mapping

• Cause and effect diagrams (aka “Fishbone” or Ishikawa diagrams)

• Check sheets

• Pareto analysis

• Run charts and scatter plots

• Bar graphs

• Histograms

11

In the Text, It Was Noted That Organizations Must ...

• Understand which quality dimensions are important

• Develop products and services that will meet users’ quality needs

• Put in place business processes capable of meeting these needs

• Verify that business processes are meeting the specifications

12

Inspect every itemExpensive to do

Testing can be destructive

Statistical techniques

Statistical process control (SPC) Acceptance Sampling

Discovering “problems”

13

Statistical Process Control

• “Representative” samples

– good, but not perfect, picture

• Sampling by Variable

• Sampling by Attribute (good, bad, %?)

14

Sampling by Variable

X-bar Chart: 3 Sigma Only

UCL = X + A2R LCL = X - A2R

X-bar Chart: Any Sigma

UCL = X + ZσX LCL = X - ZσX

R-Chart: 3 Sigma Only

UCL = D4R LCL = D3R

15

Sampling by Attribute I

p – chart: Any Sigma

UCL = p + Zσp, LCL = p - Zσp

σp = √ p(1-p)/n

c-chart: Any Sigma

UCL = c + Z√ c LCL = c - Z√ c

16

Process Capability

Answers the Question:

Can the process provide acceptable quality

consistently?

17

Process Capability Ratio (Cp)

Upper Tolerance Limit – Lower Tolerance Limit

6σ

Where σ is the estimatedstandard deviation for the individual observations

18

Shown Graphically:

Process Capability ratio of 1(99.7% coverage)

LTL UTLMean

3 3

19

“Six Sigma Quality”

LTL UTLMean

6 6

When a process operates with 6σ variation inside the tolerance limits, only 2 parts out of a million will be unacceptable.

20

Process Capability Index (Cpk)

• Used when the process is not precisely centered

3,

3min

UTLLTLCpk

21

Type I and Type II Errors

• A Type I error occurs when a process that is in control is falsely determined to be out of control. Our control charts deal with Type I or α errors. The probability of a Type I error lies in the tails of the curve outside of the upper and lower control limits.

• A Type II error occurs when a process that is not in control is falsely determined to be in control. We will not deal with Type II or β errors.

22

The Big Picture

So how do TQM, continuous improvement, and all these statistical

techniques “fit” together?

23

3 Lines of Defense1) PREVENT defects from occurring

TQM and continuous improvement

2) DISCOVER problems early Process control charts

3) CATCH DEFECTS before used or shipped

inspection / acceptance sampling