copyright 2006 john wiley & sons, inc. quality management chapter 3

Copyright 2006 John Wiley & Sons, Inc.

Quality ManagementQuality Management

Chapter 3Chapter 3

Copyright 2006 John Wiley & Sons, Inc. 2-2

What is quality in the eye of What is quality in the eye of beholder?beholder?

What are the different quality What are the different quality characteristics you (as a consumer) characteristics you (as a consumer) would expect to find in the following three would expect to find in the following three products: a products: a DVD playerDVD player, , a pizzaa pizza, , running running shoesshoes? Conduct threaded discussion on ? Conduct threaded discussion on each selected product.each selected product.


The Meaning of Quality

1. Quality from the Consumer’s Perspective a. Dimensions of Quality: Manufactured

Products (what do you look at ?)PerformanceFeaturesReliabilityConformanceDurabilityServiceabilityAestheticsSafety


b. Dimensions of Quality: Services Time and timeliness Completeness Courtesy Consistency Accessibility Convenient Accuracy Responsiveness


2. Quality from the Producer’s Perspective

“Quality of Conformance”

How effectively the production process is able to conform to the specifications required by the design.


The Meaning of Quality: A Final The Meaning of Quality: A Final Perspective Perspective

The combination of both perspectivesThe combination of both perspectives


Total Quality ManagementTotal Quality Management

1.1. The Evolution of Total Quality The Evolution of Total Quality ManagementManagement

a. a. W. Edwards DemingW. Edwards Demingb. b. Deming's Fourteen Points (Table 3.2) Deming's Fourteen Points (Table 3.2)

and Plan-Do-Study-Act Cycle (Figure 3.2)and Plan-Do-Study-Act Cycle (Figure 3.2)2.2. Principles of Total Quality Management Principles of Total Quality Management (pg:86)(pg:86)3.3. TQM and Business PartnersTQM and Business Partners

Suppliers as business partner (conformance to quality Suppliers as business partner (conformance to quality standards) eg: Whirlpool corporationstandards) eg: Whirlpool corporation


4.4. TQM and CustomersTQM and Customers

Continuous customer satisfaction surveyContinuous customer satisfaction survey

5.5. TQM and Information TechnologyTQM and Information Technology

eg: Ritz Carlton Hoteleg: Ritz Carlton Hotel

systematically enter customer data into a database, systematically enter customer data into a database, which which holds millions of files. When the same customer check holds millions of files. When the same customer check into into one of its hotel around the world, it can customized its one of its hotel around the world, it can customized its service service specifically to meet its customer need and specifically to meet its customer need and preferencepreference


Quality Improvement and the Role Quality Improvement and the Role of Employeesof Employees

1.1. Kaizen and Continuous ImprovementKaizen and Continuous ImprovementKaizen: Japanese term for Kaizen: Japanese term for continuous improvementscontinuous improvements

Involving everyone in the process of quality improvement.Involving everyone in the process of quality improvement.

eg: Samsung (propose – accepted- implemented ideas got eg: Samsung (propose – accepted- implemented ideas got reward) reward)

2.2. Quality Circles Quality Circles (small meeting on Q, staff from the (small meeting on Q, staff from the same area)same area)

3.3. Process Improvement Teams – Process Improvement Teams – Involving Involving people people from several department (eg: dist., Pack., Mfg.) to improves a from several department (eg: dist., Pack., Mfg.) to improves a certain process (eg: customer service)certain process (eg: customer service)


Six SigmaSix Sigma

1.1.The Six Sigma Goal – 3.4 DPMOThe Six Sigma Goal – 3.4 DPMO

2.2.Improvement Projects Improvement Projects ( champions paid with ( champions paid with bonus tied to the successful of the project)bonus tied to the successful of the project)

3.3.The Breakthrough Strategy: DMAICThe Breakthrough Strategy: DMAIC

4.4.Black Belts Black Belts ((project leader) project leader) and Green Belts and Green Belts ((project team member) project team member)

Measure of how much a process deviates from

perfection (Zero defects)


The Cost of Achieving good The Cost of Achieving good QualityQuality

1.1. The Cost of Achieving Good QualityThe Cost of Achieving Good Quality

a.a. Prevention CostsPrevention Costs

b.b. Appraisal CostsAppraisal Costs



a.a. Prevention CostsPrevention Costs ( Cost of trying to prevent poor- quality from ( Cost of trying to prevent poor- quality from reaching the customer)reaching the customer)

Quality planning costsQuality planning costs: The cost of developing and : The cost of developing and implementing quality management programimplementing quality management program

Product-Design costs:Product-Design costs: The costs of designing products The costs of designing products with quality characteristics.with quality characteristics.

Process costs:Process costs: The cost expended to make sure the The cost expended to make sure the productive process conforms to quality specificationproductive process conforms to quality specification

Training costs:Training costs: The cost to train employee The cost to train employee Information costs:Information costs: The cost of acquiring and maintaining The cost of acquiring and maintaining

(typically on computers) data related to quality, and the (typically on computers) data related to quality, and the development and analysis of reports on quality performancedevelopment and analysis of reports on quality performance



b.b. Appraisal Costs Appraisal Costs ( Costs of measuring, testing, and ( Costs of measuring, testing, and analyzing materials, parts, products, and the productive analyzing materials, parts, products, and the productive process to ensure product-quality specifications are being process to ensure product-quality specifications are being met)met)

Inspection and testing costInspection and testing cost Test equipment costsTest equipment costs Operator costsOperator costs


The Cost of Poor Quality The Cost of Poor Quality (The cost of (The cost of nonconformance)nonconformance)

Normally accounts for 70% -90% of total Normally accounts for 70% -90% of total quality cost.quality cost.

a.a. Internal Failure CostsInternal Failure Costs

b.b. External Failure CostsExternal Failure Costs


The Cost of Poor QualityThe Cost of Poor Quality

a.a. Internal Failure Costs: Internal Failure Costs: Costs incurred Costs incurred when poor quality products are discovered before they when poor quality products are discovered before they are delivered to the customer (eg)are delivered to the customer (eg)

Scrap costsScrap costs Rework costsRework costs Price- downgrading costsPrice- downgrading costs


The Cost of Poor QualityThe Cost of Poor Quality

b.b. External Failure Costs : External Failure Costs : Costs incurred Costs incurred after the customer has received a poor-quality products after the customer has received a poor-quality products and primarily related to customer service. Eg:and primarily related to customer service. Eg:

Product return costProduct return cost Lost sale cost: customer dissatisfied with poor quality Lost sale cost: customer dissatisfied with poor quality

product product and do not make future purchase. and do not make future purchase.


Measuring and Reporting Quality Measuring and Reporting Quality Costs Costs

Example H & S Motor Company Example H & S Motor Company

(pg: 101)(pg: 101)


The Effect of Quality Management The Effect of Quality Management on Productivityon Productivity

1.1.ProductivityProductivity

2.2.Measuring Product Yield and ProductivityMeasuring Product Yield and Productivity

3.3.The Quality-Productivity RatioThe Quality-Productivity Ratio


Measuring Product Yield and Measuring Product Yield and ProductivityProductivity

The UMRO Company starts production for a special The UMRO Company starts production for a special sport bag. The production process begins with 100 sport bag. The production process begins with 100 bags each day. The percentage of good bags bags each day. The percentage of good bags produced each averages to 80% and the percentage produced each averages to 80% and the percentage of poor-quality bags that can be reworked is 50%. of poor-quality bags that can be reworked is 50%.

What is the company’s daily product yield?What is the company’s daily product yield? If the percentage of good-quality bags increased to If the percentage of good-quality bags increased to

90%, what is the effect on productivity?90%, what is the effect on productivity?


Computing product cost per unitComputing product cost per unit

The UMRO company has a direct manufacturing cost The UMRO company has a direct manufacturing cost per unit of RM30, and bags that are inferior quality can per unit of RM30, and bags that are inferior quality can be reworked for RM12 per unit. 100 bags are produced be reworked for RM12 per unit. 100 bags are produced daily, 80% are good quality and 20% are defective. Of daily, 80% are good quality and 20% are defective. Of the defective bags, half can be reworked to yield good-the defective bags, half can be reworked to yield good-quality products. Through its quality management quality products. Through its quality management program, the company has discovered a problem in its program, the company has discovered a problem in its production process that, when corrected (at a production process that, when corrected (at a minimum cost), will increase the good-quality product minimum cost), will increase the good-quality product to 90%. to 90%.

What is the direct impact on the direct cost per unit of What is the direct impact on the direct cost per unit of improvement in product quality?improvement in product quality?


Computing product yield for a Computing product yield for a multi stage processmulti stage process

At UMRO Company, bags are produced in a four-At UMRO Company, bags are produced in a four-stage process. Bags are inspected following in each stage process. Bags are inspected following in each stage, with percentage yield (on average) of good-stage, with percentage yield (on average) of good-quality work-in-process units as follows.quality work-in-process units as follows.

What is the daily product yield for product input of 100 What is the daily product yield for product input of 100 units per day ?units per day ?

How many input units it would have to start with each How many input units it would have to start with each day to result in a final daily yield of 100 goof-quality day to result in a final daily yield of 100 goof-quality units?units?

Stage Average percentage Good Quality

1 0.93 2 0.95 3 0.97 4 0.92


Computing the Quality-Computing the Quality-Productivity Ratio (QPR)Productivity Ratio (QPR)

UMRO Company produces bags at processing cost of UMRO Company produces bags at processing cost of RM30 per unit. Defective bags can be reworked for RM30 per unit. Defective bags can be reworked for RM12 per unit. 100 bags are produced daily, 80% are RM12 per unit. 100 bags are produced daily, 80% are good quality, resulting in 20% defects, 50% of which can good quality, resulting in 20% defects, 50% of which can be reworked prior to shipping to customers. The be reworked prior to shipping to customers. The company wants to examine the effects of:company wants to examine the effects of:

1.1. Increasing the production rate to 200 bags per dayIncreasing the production rate to 200 bags per day2.2. Reducing the processing cost to RM26 and the rework Reducing the processing cost to RM26 and the rework

cost to RM10cost to RM103.3. Increasing, through quality improvement, the product Increasing, through quality improvement, the product

yield of good-quality products to 95%yield of good-quality products to 95%4.4. The combination of 2 and 3The combination of 2 and 3


Tools to Identify Quality Problems Tools to Identify Quality Problems and Causesand Causes

1.1.Pareto AnalysisPareto Analysis

2.2.Process Flow chartsProcess Flow charts

3.3.Check Sheets and HistogramsCheck Sheets and Histograms

4.4.Scatter DiagramsScatter Diagrams

5.5.Process Control Charts and Statistical Process Control Charts and Statistical Process ControlProcess Control

6.6.Cause-and-Effect DiagramsCause-and-Effect Diagrams


In class exercise 1In class exercise 1

A company has a direct manufacturing cost A company has a direct manufacturing cost per unit of $50, with a rework cost of $30 per per unit of $50, with a rework cost of $30 per unit. Daily input to the process is 500 units. unit. Daily input to the process is 500 units. The process averages 85% good units The process averages 85% good units produced with the percentage of bad units produced with the percentage of bad units that can be reworked averaging 40%. The that can be reworked averaging 40%. The manufacturing cost per good unit produced manufacturing cost per good unit produced for this company is ?for this company is ?



A company has a direct manufacturing cost A company has a direct manufacturing cost per unit of $50, with a rework cost of $20 per per unit of $50, with a rework cost of $20 per unit. Daily input to the process is 250 units. unit. Daily input to the process is 250 units. The process averages 80% good units The process averages 80% good units produced with 60% of the bad quality units produced with 60% of the bad quality units able to be reworked. If the company can able to be reworked. If the company can improve its process average from 80% to improve its process average from 80% to 90% for good quality products then the 90% for good quality products then the impact on the direct cost per unit will be ?impact on the direct cost per unit will be ?



A company produces a product with a A company produces a product with a processing cost of $50 per unit. Defective processing cost of $50 per unit. Defective units can be reworked at a cost of $20 per units can be reworked at a cost of $20 per unit. The company produces 100 units per unit. The company produces 100 units per day and averages 90% good-quality day and averages 90% good-quality production, resulting in 10% defects, 40% of production, resulting in 10% defects, 40% of which can be reworked before being which can be reworked before being shipped. What is this company’s quality shipped. What is this company’s quality productivity ratio (QPR)?productivity ratio (QPR)?

copyright 2006 john wiley & sons, inc. quality management chapter 3

Documents

dimensions of quality

meaning of quality

quality standards

poor quality

john wiley sons

process of quality improvement

quality management chapter

customer service slide