CHAPTER 6

1. CHAPTER 6 MANAGEMENT OF QUALITY

2. Quality • Quality refers to the ability of a product or service to consistently meet or exceed customer requirements or expectations. However, different customers will have different requirements, so a working definition of quality is customer-dependent. • Quality of design refers to the intention of designers to include or exclude certain features in a product or service. • Quality of conformance refers to the degree to which goods and services conform to (i.e., achieve) the intent of the designers.

3. The Evolution of Quality Management • In 1924, Bell Telephone Laboratories introduced statistical control charts. • In 1930, H. F. Dodge and H. G. Romig, introduced tables for sampling • In 1950s, the quality movement evolved into quality assurance. • In 1960s, the concept of “zero defects” gained favor. • In 1970s, quality assurance methods gained increasing emphasis in services. • In 1980s, focus in improving the quality of their goods while lowering their costs.

4. The Determinants of Quality The degree to which a product or a service successfully satisfies its intended purpose has four primary determinants which are as follows: 1. Design 2. How well the product or service conforms to the design 3. Ease of use 4. Service after delivery

5. Benefits of Good Quality Business organizations with good or excellent quality typically benefit in a variety of ways: • An enhanced reputation for quality, • The ability to command premium prices, • An increased market share, • Greater customer loyalty, • Lower liability costs and fewer production or service problems

6. The Consequences of Poor Quality It is important for management to recognize the different ways in which the quality of a firm’s products or services can affect the organization and to take these into account in developing and maintaining a quality assurance program. Some of the major areas affected by quality are as follows: 1. Loss of business 2. Liability 3. Productivity 4. Costs

7. The Costs of Quality • Appraisal costs: Costs of activities designed to ensure quality or uncover defects. • Prevention costs: Costs of preventing defects from occurring. • Failure costs: Costs caused by defective parts or products or by faulty services. • Internal failures: Failures discovered during production. • External failures: Failures discovered after delivery to the customer. • Return on quality: An approach that evaluates the financial return of investments in quality.

8. Quality Awards • Baldrige Award : Annual award given by the U.S. Government to recognize quality achievements of U.S. companies. • European Quality: Award European award for organizational excellence. • The Deming Prize: This prize is Japan’s highly coveted award recognizing successful quality efforts.

9. Quality Certification Many firms that do business internationally recognize the importance of quality certification. • ISO 9000: A 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 24700: A set of international standards that pertains to the quality and performance of office equipment that contains reused components.

10. Total Quality Management Total quality management: (TQM): A philosophy that involves everyone in an organization in a continual effort to improve quality and achieve customer satisfaction. A number of other elements of TQM are important: • Continuous improvement • Competitive benchmarking • Employee empowerment • Team approach • Decisions based on facts rather than opinions • Knowledge of tools • Supplier quality • Champion • Quality at the source • Suppliers

11. Six Sigma Six sigma :A business process for improving quality, reducing costs, and increasing customer satisfaction. Six sigma is based on following guiding principles: 1. Reduction of variation is an important goal. 2. The methodology is data driven; it requires valid measurements. 3. Outputs are determined by inputs; focus on modifying and/or controlling inputs to improve outputs. 4. Only a critical few inputs have a significant impact on outputs (the Pareto effect); concentrate on those.

12. Six Sigma DMAIC (define-measure-analyze-improve-control) is a formalized problem-solving process of six sigma. It is composed of five steps that can be applied to any process to improve its effectiveness. The steps are as follows: 1. Define: Set the context and objectives for improvement 2. Measure: Determine the baseline performance and capability of the process 3. Analyze: Use data and tools to understand the cause-and-effect relationships of the process 4. Improve: Develop the modifications that lead to a validated improvement in the process 5. Control: Establish plans and procedures to ensure that improvements are sustained