QUALITY MANAGEMENT

Module 3.1 Definition and Evolution

READINGS
• CHAPTER 6: MANAGING QUALITY
• CHAPTER 16: LEAN OPERATIONS
QUALITY ISSUES AT HYUNDAI AND KIA
KFC
Each business can potentially
encounter QUALITY ISSUES!
 Defining Quality

The ability of a product or service to

CONSISTENTLY meet or surpass a
CUSTOMER’s requirements.
 Defining Quality

The totality of features and

characteristics of a product or
service that bears on its ability to
satisfy stated or implied needs
 Quality and Strategy
🗹 Managing quality supports
differentiation, low cost, and
response strategies
🗹 Quality helps firms increase sales
and reduce costs
🗹 Building a quality organization is
a demanding task
 Two Ways Quality
Improves Profitability
Sales Gains via
🗹 Improved response
🗹 Flexible pricing
🗹 Improved reputation
Improved Increased
Quality Profits
Reduced Costs via
🗹 Increased productivity
🗹 Lower rework and scrap costs
🗹 Lower warranty costs
 Different Perspectives

🗹 Transcendant (Judgmental) -
based on an organization’s
definition of quality in its
products or services
🗹 Product-based – specific and
measurable attributes of the
product
 Different Perspectives
🗹 User-based – better performance,
more features; fitness for use

🗹 Value –based - total benefits

relative to the price
 Different Perspectives

🗹 Manufacturer - consistency in the

product or service; conformance
to specifications

🗹 Customer-based - meeting or
exceeding the customer’s
expectations
Implications of Quality
1. Company reputation
🗹 Perception of new products
🗹 Employment practices
🗹 Supplier relations
2. Product liability
🗹 Reduce risk
3. Global implications
🗹 Improved ability to compete
Key Dimensions (Measures)
of Quality: Products*
🗹Performance 🗹Durability
🗹Features 🗹Serviceability
🗹Reliability 🗹Aesthetics
🗹Conformance 🗹Perceived quality
🗹Value
 Key Dimensions (Measures)
of Quality:Services *
🗹 Tangibles 🗹 Credibility
🗹Reliability 🗹 Responsiveness
🗹 Responsiveness 🗹 Access
🗹 Competence 🗹Understanding of
the Customer
 Costs of Quality

🗹 Prevention costs – costs incurred by the organization to

prevent defective goods and services from being
produced.
🗹 Appraisal costs - costs incurred in evaluating products,
parts, and services
🗹 Internal failure – costs associated with producing
defective parts or service before delivery to the customer
(eg scrap, rework)
🗹 External costs - defects discovered after delivery (eg cost
of returns, warranty charges, customer dissatisfaction/
complaints, lawsuits and legal charges, lost revenues
 Costs of Quality

Total Total Cost

Cost
External Failure

Internal Failure

Prevention

Appraisal
Quality Improvement
Ethics and Quality Management

🗹 Operations managers must deliver

healthy, safe, quality products and
services
🗹 Poor quality risks injuries, lawsuits,
recalls, and regulation
🗹 Organizations are judged by how
they respond to problems
🗹 All stakeholders much be
considered
QUALITY CHALLENGES
• A major challenge to companies is to churn out consistent, high-quality products
and services. Usually, quality problems are encountered when there are
variances, gaps and errors in the product or service delivered.
• Many quality issues are rooted in poor quality design or control. Problems in
fulfillment or delivery due to a deviation in the expected output (eg long
turnaround or waiting time, defects, gaps) can be detected through a REVIEW
AND CONTROL OF THE PROCESS.
• Processes also need to be continuously REDESIGNED due to changing customer
needs, business requirements and technology updates.
APPLYING QUALITY
MANAGEMENT
• IDENTIFY EXISTING OR
POTENTIAL QUALITY ISSUES OR
OPPORTUNITIES USING
HISTORICAL DATA and TOOLS
( eg PARETO ANALYSIS, ROOT CAUSE
ANALYSIS, CUSTOMER FEEDBACK)
• APPLY THE QUALITY STRATEGIES
AND TOOLS TO CONTROL AND
IMPROVE QUALITY (eg TQM, SIX
SIGMA, LEAN. LEAN SIX SIGMA)
 KAIZEN* STEPS (ACROSS ALL QUALITY
MANAGEMENT APPROACHES)
1. Define the problem 6. Identify the Corrective Actions to
2. Define the goal Eliminate Waste/ Variation/ Errors

3. Define the baseline 7. Develop an Action Plan

4. Define the process 8. Review Results

5. Define the possible sources of 9. Replicate and Make Additional

variation Improvements
10. Celebrate

* Continuous Improvement / Change for the better

HISTORY OF QUALITY

• Age of Craftsmanship (Middle Ages) – The skilled craftsman was both

manufacturer and inspector. The quality of products and services
was highly personalized and customized.
• Industrial Revolution (1800s to early 1900s) – This was led by
Frederick Taylor whose main innovation was to separate planning
from execution. He also segmented a job into specific work tasks.
• Second Industrial Revolution (Late 1900s) - Spearheaded by Henry
Ford who started “quality practices”. Western Electric also was a
leader in early quality and produced pioneers like Shewart, Juran and
Deming.
HISTORY OF QUALITY

• QUALITY MOVEMENT in JAPAN (1940s to 1950s) - Post-World War II: Japanese

began to study US practices in Quality and hired two US Consultants, Dr Joseph
Juran and Dr W Edwards Deming who introduced statistical quality control
techniques; The Japanese integrated quality into their culture and introduced a
system of continuous improvement called KAIZEN.

• U.S. QUALITY REVOLUTION (1980s) - W Edward Deming revived the quality

movement in the United States; Quality was promoted as a key to world-wide
competitiveness; Many quality improvement programs including quality awards
were launched
 • Six Sigma – A new approach to TQM; Customer-
focused, results-oriented approach to business
improvement that integrates traditional quality
improvement tools with a bottom-line, strategic
orientation; Goal is towards performance
HISTORY OF excellence or almost zero defects/errors.
Lean Management - It is an approach to managing
QUALITY an organization that supports continuous
improvement and systematically seeks to achieve
Modern Quality small, incremental changes to improve efficiency
and quality.
Programs (2000 Lean Six Sigma - It is a synergized management
concept that combines Lean and Six Sigma and
focuses on eliminating 6 kinds of waste classified as
onwards) defects, over-production, waiting, non-utilized
talent, transportation, inventory, motion and extra-
processing.
TOTAL
QUALITY
MANAGEMENT
 TOTAL QUALITY
MANAGEMENT (TQM)
Encompasses entire organization, from supplier to
customer

Stresses a commitment by Management to have a

continuing, companywide drive toward
excellence in all aspects of products and services
that are important to the customer

More a strategic, qualitative approach.

Customer Satisfaction is the end goal.

 TQM
 Total organization-wide efforts
to install and make quality a
part of a Company’s culture
and where employees
continuously improve their
ability to provide on demand
products and services that
customers find of particular
value.
 Long-term approach towards
customer satisfaction.
TQM PRINCIPLES

▪ Principle 1: CUSTOMER FOCUS – understanding current and future customer needs,

customer requirements and customer expectations ; achieving customer satisfaction
▪ Principle 2: LEADERSHIP – unity of purpose; direction towards quality
▪ Principle 3: INVOLVEMENT OF PEOPLE – full involvement of people at all levels in the
quality movement
▪ Principle 4: PROCESS APPROACH – desired results are achieved by managing processes
▪ Principle 5: SYSTEM APPROACH TO MANAGEMENT – understanding and managing of
interrelated processes as a system
▪ PRINCIPLE 6: CONTINUAL IMPROVEMENT – becomes a permanent objective in the
organization
TQM PRINCIPLES

▪ Principle 7: FACTUAL APPROACH TO DECISION-MAKING – decisions are based on

analysis of data and information *.
▪ Principle 8: MUTUALLY BENEFICIAL SUPPLIER RELATIONS- enhance relationships
with suppliers to build greater value

▪ Note: Though included in TQM, data-gathering became the focal point of Six Sigma.
 TQM TECHNIQUES

1. STATISTICAL THINKING
2. QUALITY MANAGEMENT SYSTEMS
3. CONTINUAL IMPROVEMENT
4. EMPLOYEE EMPOWERMENT
5. BENCHMARKING
6. JUST-IN-TIME
7. TAGUCHI CONCEPTS (DESIGN TECHNIQUES)
8. QUALITY INSPECTION (AUDIT)
CONTINUAL IMPROVEMENT:
PDCA MODEL

1.Plan
4. Act Identify the
Implement improvement
the plan and make
a plan

3. Check 2. Do
Is the plan Test the
working? plan

Figure 6.3
QUALITY CIRCLES: EXAMPLE OF EMPLOYEE
EMPOWERMENT

🗹 Group of employees who meet

regularly to solve problems
🗹 Trained in planning, problem
solving, and statistical methods
🗹 Often led by a facilitator
🗹 Very effective when done
properly
 BENCHMARKING
Selecting best practices to use as a
standard for performance
🗹 Determine what to
benchmark
🗹 Form a benchmark team
🗹 Identify benchmarking partners
🗹 Collect and analyze benchmarking
information
🗹 Take action to match or exceed the
benchmark
EXAMPLES OF BENCHMARKS

 Product or service quality and consistency

 Correct and on-time delivery
 Speed of response
 New product development
 Correctness of billing
 Waste, rejects or errors
 Inventory levels
 Costs of operation
 Staff turn-over
 JUST-IN-TIME (JIT)

Relationship to quality:

🗹 JIT cuts the cost of quality

🗹 JIT improves quality
🗹 Better quality means less
inventory and better, easier-to-
employ JIT system
 JUST-IN-TIME (JIT)

🗹 ‘Pull’ system of production scheduling

including supply management
🗹 Production only when signaled
🗹 Allows reduced inventory levels
🗹 Inventory costs money and hides process
and material problems
🗹 Encourages improved process and
product quality
 QUALITY INSPECTION
(AUDIT)
🗹 Involves examining items to see if
an item is good or defective
🗹 Detect a defective product
🗹 Does not correct deficiencies in
process or product
🗹 It is expensive
🗹 Issues
🗹 When to inspect
🗹 Where in process to inspect
 WHEN AND WHERE TO
INSPECT
1. At the supplier’s plant while the supplier
is producing
2. At your facility upon receipt of goods from
the supplier
3. Before costly or irreversible processes
4. During the step-by-step production
process
5. When production or service is complete
6. Before delivery to your customer
7. At the point of customer contact
SIX SIGMA
 SIX SIGMA
🗹 Two meanings
🗹 Statistical definition of a process that
is 99.9997% capable, 3.4 defects per
million opportunities (DPMO)
🗹 A program designed to reduce
defects, lower costs, and improve
customer satisfaction
 SIX SIGMA
🗹 Two meanings
Lower limits Upper limits

🗹 Statistical definition of a process that

2,700 defects/million
is 99.9997% capable, 3.4 defects per
3.4 defects/million
million opportunities (DPMO)
🗹 A program designed to reduce
defects, lower costs, and improve
customer satisfactionMean
±3
σ
±6
Figure 6.4 σ
 SIX SIGMA PROGRAM
🗹 Originally developed by Motorola,
adopted and enhanced by
Honeywell and GE
🗹 Highly structured approach to
process improvement

6σ
🗹 A strategy
🗹 A discipline - DMAIC
SIX SIGMA

 GOAL: Create STABLE,

CONSISTENT and RELIABLE
products and services.
 MINIMIZE DEFECTS and reduce
them to lowest levels
 SIX SIGMA
IMPLEMENTATION
🗹 Emphasize defects per million
opportunities as a standard metric
🗹 Provide extensive training
🗹 Focus on corporate sponsor support
(Champions)
🗹 Create qualified process improvement
experts (Black Belts, Green Belts, etc.)
🗹 Set stretch objectives
  Technique to reduce waste
due to fluctuating
customer demand
LEAN  LEAN is the method used
MANAGEMENT to ELIMINATE
PROCESSES that have
NON VALUE-ADDING
PARTS.
LEAN OBJECTIVES

1. ELIMINATE WASTE – can come in the form of standing inventory, making unusable
products or services, spreading workstations too much, production queues, too
many workers assigned to a task, lacking process automation when it can be used.
2. KAIZEN- Continue to improve your businesses and processes; eliminate
bottlenecks; Start by documenting procedures and processes
LEAN OBJECTIVES:

3. RESPECT YOUR HUMAN ELEMENTS - Don’t overwork employees, show

them purpose behind their work, maintain accountability for successes and
failures, align the purpose with their goals; Challenge them without
demanding
4. HEIJUNKA (Level production) - No matter what happens, output remains
the same throughout the day
5. JUST IN TIME Production - Work on a task to meet demand; Nothing is
completed in excess; Minimize inventory
LEAN OBJECTIVES

6. One piece flow - Limit work-in-progress to a single item to increase efficiency;

7. Quality built into the process - Examples are: Poke-yoke (error-proofing processes)
and Jidoka (automatically detecting errors)
8 SOURCES OF WASTES

1. DEFECTS - Incorrect or missing information, documentation or parts in a process.

2. OVERPRODUCTION - Producing more than what a Customer requires
3. WAITING- Slack or lag time while waiting for information, instructions or parts to complete the process
4. NON-STANDARD PROCESSING - Inconsistent or different steps performed
5. TRANSPORTATION - Movement of machines, equipment or persons
6. INTELLECT (or Skills) – Underutilization of inability to perform the task efficiently due to lack of skills or
training.
7. MOTION - Excess bending or turning while doing the job
8. EXCESS INVENTORY – Storing materials or information before these are needed during any stage of
the process.
IN MANY SERVICE PROCESSES, WAITING TIME IS
CONSIDERED A NON-VALUE ADDING PROCESS.
MANAGE THE WAITING TIME WITH QUEUING SYSTEMS IN THE
SHORT TERM.
 Single line with sequential stages
 Parallel lines to multiple servers
 Single line to multiple servers
 Designated lines
 Taking a number
 Premium numbers/ lines
 Wait list
LEAN SIX SIGMA OBJECTIVES
QUALITY TOOLS
AND TECHNIQUES
DATA will have to be analyzed to identify PROCESS/ QUALITY
PROBLEMS using STATISTICAL METHODS and TOOLS.
➢ Gather relevant information (over what period, what frequency) on processes to be measured, the output of
those processes versus the standards of measurements set.
➢ If data is not available, gather the RIGHT SAMPLE SIZE.
➢ Plot the data using spreadsheets or diagrams/ histograms.
➢ Predict future trends using the information gathered. Identify if the variances are isolated incidents or
evidence of a trend.
➢ Decide and implement steps to address the gaps, errors and delays in the process or output produced.
➢ After deciding and implementing action steps, gather new information to monitor success or failure.
TYPES OF SAMPLING

❑ SIMPLE RANDOM SAMPLING - every item in the population has an equal probability of being selected.
❑ STRATIFIED SAMPLING – total population is partitioned into groups or strata and a sample is selected from
each group.
❑ SYSTEMATIC SAMPLING – every nth (4th, 5th, etc) item is selected.
❑ CLUSTER SAMPLING – population is partitioned into groups or clusters and a sample of clusters is selected.
Either all within a cluster or a random sample is selected.
❑ JUDGMENT SAMPLING – expert opinion is used to determine the best sample size.
BASIC QUALITY CONTROL TOOLS

🗹 Tools for Generating Ideas

🗹Check sheets
🗹Scatter diagrams
🗹Cause-and-effect diagrams (Fishbone)
🗹 Tools to Organize the Data
🗹Pareto charts
🗹Process Flowcharts
🗹 Tools for Identifying Problems
🗹Histogram / Frequency Distribution
🗹Statistical process control chart
CHECK SHEETS AND SCATTER DIAGRAMS

This Photo by Unknown Author is licensed under CC BY-SA-NC

This Photo by Unknown Author is licensed under CC BY-SA

CAUSE AND EFFECT / FISHBONE
DIAGRAM
 PARETO CHARTS
Data for October
– 100
70 – – 93
– 88
60 –
54
Frequency (number)

Cumulative percent
– 72
50 –

40 –
Number of
30 –
occurrences
20 –
12
10 –
4 3 2
0 –
Room svc Check-in Pool hours Minibar Misc.
72% 6% 5% 4% 3%

Causes and percent of the total

 PROCESS FLOW CHARTS
MRI Flowchart
1. Physician schedules MRI 7. If unsatisfactory, repeat
2. Patient taken to MRI 8. Patient taken back to room
3. Patient signs in 9. MRI read by radiologist
4. Patient is prepped 10. MRI report transferred to
5. Technician carries out MRI physician
6. Technician inspects film 11. Patient and physician discuss

8
80%
1 2 3 4 5 6 7 11
9 10
20%
FREQUENCY DISTRIBUTION
AND HISTOGRAM

 Frequency Distribution – show the data in table

format.
 Histogram - graphical representation of a frequency
distribution
 SPC CHART
Plots the percent of free throws missed

20% Upper control limit

10% Coach’s target value

0% | | | | | | | | |
Lower control limit
1 2 3 4 5 6 7 8 9

Game number
Figure 6.8
VOICE OF THE CUSTOMER

➢ Customer Interviews
➢ On-site Customer Surveys
➢ Live Chat/ Social Media/ Website Behavior
➢ Recorded Call Data
➢ On-Line Customer Reviews
➢ Focus Groups
➢ Net Promoter Score
➢ Emails
➢ Feedback Forms
BENCHMARKING

 Measures an organization’s operations, products or services against its

competitors
 Targets operations that will lead to a competitive advantage
EXAMPLES OF BENCHMARKS

 Product or service quality and consistency

 Correct and on-time delivery
 Speed of response
 New product development
 Correctness of billing
 Waste, rejects or errors
 Inventory levels
 Costs of operation
 Staff turn-over
STEPS IN BENCHMARKING

 PLAN THE STUDY

 COLLECT DATA AND INFORMATION
 ANALYZE THE DATA
 ADAPT THE APPROACHES
 REVIEW PERFORMANCE AND THE STUDY
WHAT IS SERVICE QUALITY?
 Common perspectives of
QUALITY follow the
manufacturing-based approach.
 BUT, the nature of SERVICES
require a distinctive approach in
defining and measuring Service
Quality
 In SERVICES, the Customer is
usually involved in the service
production.
 It includes the PROCESS of
service delivery (called the
functional quality) and the actual
OUTPUT of the service (called
the technical quality)
 SERVICE QUALITY-PRODUCTIVITY AND
 HIGHER SERVICE QUALITY OFTEN LEADS TO HIGHER
PROFIT
CUSTOMER TRIANGLERESULTING TO
SATISFACTION
IMPROVEMENTS IN PROFITABILITY such as Repeat Sales,
Higher Share of Wallet and Referrals.
 HIGHER PRODUCTIVITY MAY LEAD TO HIGHER OR
LOWER CUSTOMER SATISFACTION. If improved
productivity means having a leaner process, then Service Quality/
Customer Satisfaction may increase. However, it may also mean
increased workload for the Employee which may diminish Service
Quality and Customer Satisfaction.
THE SERVICE QUALITY-PRODUCTIVITY-PROFIT TRIANGLE
SERVICE QUALITY-PRODUCTIVITY
AND PROFIT TRIANGLE

 The RELATIONSHIP between PRODUCTIVITY and

SERVICE QUALITY/ CUSTOMER SATISFACTION can
be POSITIVE, NEGATIVE or NEUTRAL.
 QUALITY usually focuses on the benefits created for
the CUSTOMER and PRODUCTIVITY addresses the
financial costs to the COMPANY.
 IF NOT PROPERLY INTEGRATED, these can be in
conflict.
THE GAPS MODEL IN SERVICE DESIGN AND DELIVERY:
BY ZEITHAML, PASARURAMAN AND BERRY
SERVICE QUALITY GAPS
GAP 1: KNOWLEDGE GAP: Difference between what Senior Management expects
and what Customers actually need and expect
GAP 2: POLICY GAP: Difference between Management’s service expectations and the
standards they set for delivery.
GAP 3: DELIVERY GAP: Difference between specified standards and the Service Delivery
team’s actual performance based on these standards.
GAP 4: COMMUNICATIONS GAP: Difference between what the Company communicates
and what the Customer understands from what the Company communicates; Included both
INTERNAL and EXTERNAL
GAP 5: PERCEPTIONS GAP: Difference between what is actually delivered and what
Customers feel they have received.
GAP 6: SERVICE QUALITY GAP: Difference between what Customers expect to receive
and their perception of the service that is actually delivered.
 SAMPLE SERVICE QUALITY FORM

Dimension OF A SERV
EXAMPLE Definition
QUAL ASSESSMENT Sample Question (Can be rated 1 to 5; 1
being Highly Satisfied and 5 being Highly
Dissatisfied)
RELIABILITY (On- Ability to perform the promised Was service turnaround time met? Was the
time, Consistently, service dependably and accurately bill free of any errors?
Error-free, Every
time)
RESPONSIVENESS Willingness to help customers and Did the Customer Service staff provide a
provide prompt service specific delivery time? Was the staff willing to
answer my questions?
ASSURANCE
a) COMPETENCE Possession of skills and knowledge to Is Frontliner aware of the Product, Processes
do the job and Procedures? Is the information I need
readily available and answered?
b) CREDIBILITY Trustworthiness, Believability, Does institution have a good reputation? Do I
Honesty get positive feedback from past customers?
Dimension
EXAMPLE OFDefinition Sample Question (Can be rated 1 to 5; 1
A SERV QUAL ASSESSMENT
being Highly Satisfied and 5 being Highly
Dissatisfied)
ASSURANCE
c) SECURITY Freedom from danger, risk or doubt Is it safe to use this bank’s ATM at night? Is my
credit card protected against unauthorized use?
Can I be sure that my insurance policy provides
the complete coverage and will be paid on time?
d) COURTESY Politeness, Respect, Consideration and Does Flight Attendant have a pleasant demeanor?
friendliness of Contact personnel Do Call Centers greet you with standard
greetings? Are they polite?
EMPATHY (Access, Approachability, Listening and keeping How easy is it for me to talk to a Manager when I
Communication, customers informed in a language that have a problem? Does the airline have a 24-hour
Understanding the is understandable, Making the effort to hotline if I have a problem? Is website on-line?
Customer) know the customers needs
TANGIBLES Appearance of physical facilities, Is the reception area clean and attractive? Is the
personnel, equipment and materials front-line staff properly dressed? Are materials
clear?