Chapter 14

Quality
Management
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights re
 What Is Quality?
 “The degree of excellence of a
thing” (Webster’s Dictionary)
 “The totality of features and
characteristics that satisfy needs”
(ASQ)
 Fitness for use
 Quality of design

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
Dimensions of Quality (Garvin)

1. Performance
 Basic operating characteristics
1. Features
 “Extra” items added to basic features
1. Reliability
 Probability product will operate over
time

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
Dimensions of Quality (Garvin)

4. Conformance
 Meeting pre-established standards
4. Durability
 Life span before replacement
4. Serviceability
 Ease of getting repairs, speed &
competence of repairs

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
Dimensions of Quality (Garvin)

7. Aesthetics
 Look, feel, sound, smell or taste
7. Safety
 Freedom from injury or harm
7. Other perceptions
 Subjective perceptions based on
brand name, advertising, etc

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Service Quality
1. Time & Timeliness
 Customer waiting time, completed
on time
1. Completeness
 Customer gets all they asked for
1. Courtesy
 Treatment by employees

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Service Quality
4. Consistency
 Same level of service for all customers
4. Accessibility & Convenience
 Ease of obtaining service
4. Accuracy
 Performed right every time
4. Responsiveness
 Reactions to unusual situations
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Quality of
Conformance
 Ensuring product or service
produced according to design
 Depends on
Design of production process
Performance of machinery
Materials
Training

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 The Meaning of Quality
The
The Meaning
Meaning of
of Quality
Quality

Producer’s
Producer’s Perspective
Perspective Consumer’s
Consumer’s Perspective
Perspective

Quality
Quality of
of Conformance
Conformance Quality
Quality of
of Design
Design

Production
Production • Conformance to • Quality characteristics Marketing
Marketing
specifications • Price
• Cost

Fitness
Fitness for
for
Figure 14.1 Consumer
Consumer UseUse

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
Quality Philosophers
 Walter Shewhart
 W. Edwards Deming
 Joseph Juran
 Philip Crosby
 Armand Feigenbaum

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Deming’s 14 Points
1. Create constancy of purpose
2. Adopt philosophy of prevention
3. Cease mass inspection
4. Select a few suppliers based on
quality
5. Constantly improve system and
workers
6. Institute worker training
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Deming’s 14 Points
7. Instill leadership among
supervisors
8. Eliminate fear among employees
9. Eliminate barriers between
departments
10. Eliminate slogans
11. Remove numerical quotas

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Deming’s 14 Points
12. Enhance worker pride
13. Institute vigorous training and
education programs
14. Develop a commitment from top
management to implement these
13 points

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 The Deming Wheel
(or PDCA Cycle)

4. Act 1. Plan
Institutionalize Identify the
improvement; problem and
continue the develop the
cycle. plan for
improvement.

3. Study/Check 2. Do
Assess the plan; Implement the
is it working? plan on a test
basis.

Figure 14.2

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
Total Quality Management
1. Customer defined quality
2. Top management leadership
3. Quality as a strategic issue
4. All employees responsible for quality
5. Continuous improvement
6. Shared problem solving
7. Statistical quality control
8. Training & education for all employees

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
TQM Throughout the
Organization
 Marketing, sales, research
 Engineering
 Purchasing
 Human resources
 Management
 Packing, storing, shipping
 After-sale support
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 TQM and External
Suppliers
 Support of suppliers required to
satisfy customer expectations
 Single-sourcing
 Partnering
 Suppliers may be required to
adopt quality programs or meet
specific standards

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 TQM and Customer
Satisfaction
 Requires some form of
measurement system
 Customer surveys widely used
 Total customer satisfaction is
often an organization’s
overriding objective

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 TQM and Information
Technology
 Critical to monitoring and controlling
quality in an organization
 IT systems must be structured to satisfy
the requirements of TQM systems
 IT systems tie together all the
organization's functions and processes
 IT systems must be able to apply
appropriate tools to drive improvement
 It systems must be able to store and
access relevant data for analysis
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
Strategic Implications of
TQM
 Quality is key to effective strategy
 Clear strategic goal, vision, mission
 High quality goals
 Operational plans & policies
 Feedback mechanism
 Strong leadership

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
TQM in Service Companies
 Inputs similar to manufacturing
 Processes & outputs are different
 Services tend to be labor intensive
 Quality measurement
is harder
 Timeliness is
important measure
 TQM principles
apply to services
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Quality on the Web
 Internet creates new rules doing
business
 Key factors in differentiating firms
 B2B largest part of Internet
business
 Direct sales more visible
 Internet removes the
human dimension
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
Dimensions of Web Quality
1. Ease of use
2. Clarity of information and instructions
3. Server reliability
4. Speed of page loading
5. Transaction time
6. Aesthetics
7. Privacy and security
8. Domain name
9. Human backup
10. Transaction reliability
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Cost of Quality
Cost of achieving good quality
Prevention
 Planning, Product design,
Process, Training, Information
Appraisal
 Inspection and testing,
Test equipment,
Operator

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Cost of Quality
Cost of poor quality
Internal failure costs
 Scrap, Rework, Process failure,
Process downtime, Price-
downgrading
External failure costs
 Customer complaints,
Product return,
Warranty, Product
liability, Lost sales
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
Measuring and Reporting
Quality
Labor index
Quality cost / labor hours
Cost index
Quality cost / manufacturing cost
Sales index
Quality cost / sales
Production index
Quality cost / units produced
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Quality Costs and Index
YEAR
1999 2000 2001 2002
Quality Costs
Prevention $ 27,000 41,500 74,600 112,300
Appraisal 155,000 122,500 113,400 107,000
Internal failure 386,400 469,200 347,800 219,100
External failure 242,000 196,000 103,500 106,000
Total $ 810,400 829,200 639,300 544,400

Accounting Measures
Sales $ 4,360,000 4,450,000 5,050,000 5,190,000
Mfg costs 1,760,000 1,810,000 1,880,000 1,890,000

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
Quality Costs and Index
total quality costs
Quality index = (100)
base
$810,400(100)
Quality cost per sale = = 18.58
4,360,000
QUALITY QUALITY MANUFACTURING
YEAR SALES INDEX COST INDEX
1999 18.58 46.04
2000 18.63 45.18
2001 12.66 34.00
2002 10.49 28.80

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
Quality–Cost Relationship
 Increased prevention costs lead to
decreased failure costs
 Improved quality leads to
increased sales and market share
 Quality improvement at the design
stage
 Higher quality products can
command higher prices
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Profitability
 Deming Prize winners showed higher than
average results on financial performance
indicators
 Baldrige Award winners consistently exceed
industry averages on financial performance
 Quality leads to improved profitability and ROI
 “Quality is ... a profit--maker”
 In the long run, quality and profitability are
closely related

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
Quality and Productivity
output
 Productivity =
input

 Fewer defects increase output

 Quality improvement reduces inputs

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
Measuring Yield and
Productivity
Yield = (total input) (% good units) +
(total input)(1 - % good units)(% reworked)

Y = (I)(%G) + (I)(1 - %G)(%R)

where
Y = yield
I = number units started in production
%G = percentage good units
%R = percentage of defective units reworked

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Product Yield
Start 100 motors per day
80% are good
50% of poor quality units can be reworked

Yield = (I)(%G) + (I)(1 - %G)(%R)

Y = 100(0.80) + 100(1 - 0.80)(0.50)
= 90 motors
If product quality is increased to 90% good,
Y = 100(0.90) + 100(1 - 0.90)(0.50)
= 95 motors

Example 14.2
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Product Cost
(direct manufacturing cost per unit)(input)
+ (rework cost per unit)(reworked units)
Product cost =
yield

(Kd)(I) + (Kr)(R)
Product cost =
Y
where
Kd = direct manufacturing cost per unit
I = input
Kr = rework cost per unit
R = reworked units
Y = yield
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Product Cost
Direct mfg cost = $30, Rework cost = $12
100 motors started, 20% defective
50% of defective motors can be reworked

(Kd)(I) + (Kr)(R)
Product cost =
Y
($30)(100) + ($12)(10)
Product cost = = $34.67 per motor
90 motors

The manufacturing cost after quality improvement is

($30)(100) + ($12)(5)
Product cost = = $32.21 per motor
95 motors
Example 14.3
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
Multistage Product Yield
Y = (I) (%g1)(%g2)...(%gn)

where
I = input batch size
%gi = percent good at stage i

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Multistage Process Yield
AVERAGE PERCENTAGE
STAGE GOOD QUALITY
1 0.93
Start with 2 0.95
100 motors 3 0.97
4 0.92

Y = (I) (%g1)(%g2)...(%gn)
= (100)(0.93)(0.95)(0.97)(0.92)
Y = 78.8 motors
Solve for I

Y 100
I= = = 126.8 motors
(%g1)(%g2)...(%gn) (0.93)(0.95)(0.97)(0.92)
Example 14.4
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
Quality Productivity Ratio
(QPR)
 Includes productivity and quality costs
 Increases
 if processing or rework costs decrease
 if process yield increases

Good-quality units
QPR = (100)
(input)(processing cost) +
(defective units)(rework cost)

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 QPR Example
Direct cost = $30/unit Rework cost = $12/unit
Start with 100 motors per day
80% are good, 50% of defective units can be reworked

Company studies 4 changes

1. Increase production to 200 units/day
2. Cut processing cost to $26 & rework cost to $10
3. Increase yield to 95%
4. Combine 2 and 3

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 QPR Example
Direct cost = $30/unit Rework cost = $12/unit
Start with 100 motors per day
80% are good, 50% of defective units can be reworked

Base case:
80 + 10
QPR = (100) = 2.89
(100)($30) + (10)($12)

Case 1: Increase input to capacity of 200 units

160 + 20
QPR = (100) = 2.89
(200)($30) + (20)($12)

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 QPR Example
Case 2: Reduce processing cost to $26 and rework to $10
80 + 10
QPR = (100) = 3.33
(100)($26) + (10)($10)

Case 3: Increase initial good-quality to 95%

95 + 2.5
QPR = (100) = 3.22
(100)($30) + (2.5)($12)

Case 4: Decrease costs and increase initial good-quality

95 + 2.5
QPR = (100) = 3.71
(100)($26) + (2.5)($10)

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Employees and
Quality Improvement
 Employee involvement
 Quality circles
 Process improvement
teams
 Employee
suggestions

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
The Quality Organization

Circle 8-10 members

Same area
Supervisor/moderator

Process Presentation
Training
Group processes
Implementation Data collection
Monitoring Problem analysis

Problem
Solution Identification
Problem results List alternatives
Consensus
Brainstorming
Problem
Analysis
Cause and effect
Data collection
and analysis

Figure 14.3

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
Seven Quality Control Tools
 Pareto Analysis Process
1

 Flow Chart
2
3
1 2 3 4 4
Dirt
5

 Check Sheet Old

Temp
Fault

 Histogram
x xx
x x
x x x

 Scatter Diagram x
x x
x x x
x
x
UCL

 SPC Chart LCL

 Cause-and-Effect Diagram

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
Pareto
Chart
NUMBER OF
CAUSE DEFECTS PERCENTAGE

Poor design 80 64 %
Wrong part dimensions 16 13
Defective parts 12 10
Incorrect machine calibration 7 6
Operator errors 4 3
Defective material 3 2
Surface abrasions 3 2
125 100 %

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
Pareto 70

60
(64)

Chart

Percent from each cause

50

40

30

20
(13)
(10)
10 (6)
(3) (2) (2)
0

ns

ls
n

rt s

s
ns

s
io
ig

ia

on
or
at
io
es

pa

er
rr

si
ns

p e libr

at
D

re

ra
e

m
e

iv
or

ab
to
ca
m

ct

e
Po

ra
di

iv
fe

ce
ne

ct
ng

De

rfa
hi

fe
O
ro

ac

Su
De
W

Causes of poor quality

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Flow Chart
Start/
Finish Operation Operation Decision Operation

Operation Operation

Decision Start/
Finish

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Check Sheet
COMPONENTS REPLACED BY LAB
TIME PERIOD: 22 Feb to 27 Feb 2002
REPAIR TECHNICIAN: Bob

TV SET MODEL 1013

Integrated Circuits ||||
Capacitors |||| |||| |||| |||| |||| ||
Resistors ||
Transformers ||||
Commands
CRT |

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Histogram
25

20

15

10

0
1 2 6 13 10 16 19 17 12 16 20 17 13 5 6 2 1

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Scatter Diagram
Y

X
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 27 Control Chart
24
UCL = 23.35
21
Number of defects

18 c = 12.67

15

12

6
LCL = 1.99
3

2 4 6 8 10 12 14 16
Sample number
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
Cause-and-Effect Diagram
Measurement
Measurement Human
Human Machines
Machines
Faulty
testing equipment Poor supervision Out of adjustment

Incorrect specifications Lack of concentration Tooling problems

Improper methods Inadequate training Old / worn

Quality
Quality
Inaccurate Problem
Problem
temperature
control Defective from vendor Poor process design
Ineffective quality
Not to specifications management
Dust and Dirt Material- Deficiencies
handling problems in product design

Environment
Environment Materials
Materials Process
Process

Figure 14.6

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Quality Awards and
Certifications
 The Malcolm Baldrige Award
 The Deming Prize
 RIT/USA Today Quality Cup
 European Quality Award
 President’s Quality Award
 Excellence in Productivity Improvement
 NASA

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 ISO 9000 Categories
 ISO 9001 ~ Suppliers and Designers
 ISO 9002 ~ Production
 ISO 9003 ~ Inspection and Test
 ISO 9004 ~ Quality Management

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 Implications Of ISO 9000
 Truly international in scope
 Certification required by many foreign
firms
 U.S. firms export more than
$150 billion annually to Europe
 Adopted by U.S. Navy,
DuPont, 3M, AT&T, and others

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve
 ISO Accreditation
 European registration
 3rd party registrar assesses quality program
 European Conformity (CE) mark authorized
 United States 3rd party registrars
 American National Standards Institute (ANSI)
 American Society for Quality (ASQ)
 Registrar Accreditation Board (RAB)

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserve