Chapter 4

Chapter 4 – Managing quality 4.1 – Quality defined Quality can be defined in two ways: the value prespective and conformance prespective 1. Value prespective: the charectaristics of a product/service that bears on its ability to satisfy stated or implied needs 2. Conformance prespective: A product or service free of deficies Value presepctive: it is a quality presepctive that must be judged, in part, by how well the charectarisitcs of a particular product or service align with the needs of a specific user. …fitness for use… Quality can vary in many situations, there are 8 dimensions in genereal which users evaluate the quality of a product/service 1. Performance: basic operating charectaristics of a product/service? 2. Features: what are some extra charectaristics the product/service has apart from the standard ? 3. Reliability: how long can a product last without repairing etc… 4. Durability: what is the useful life for the product ? how will it hold under extreme use ? 5. Conformance: was the product made under the specifications mentioned ? 6. Aesthetics: how well does the product/service appeal to the senses? 7. Serviceability: how easy is it to repair, maintain, or support the product/service? 8. Percieved quality: what is the reputation/image of the product/service? Conformance perspective: it is a quality perespective that focuses on wheter or not a product was made or a service was performed as intended(errors?). This is evaluated by measuring the actual product/service against some preestablished standards Using these two perspectives on quality, in order for a firm to product high-quality products/services they then must: 1. Understand what dimesnsions of quality are most important to users 2. Develop products/services that will meet the user’s requirments 3. Put in a place business processes capable of meeting the specifications driven by users’ requirments 4. Verify that the business processes are indeed meeting the specifications 4.2 – Total cost of quality There are four quality-related costs to take in account: internal failure costs, external failure costs, appraisal costs, and prevention costs 1.

Internal failure costs: these are costs caused by defects that occur prior to delivery to the customer, including money spent on

2. 3. 4.

repairing or reqorking defective products, as well as time wasted oon these activities External failure costs: these are costs incurred by defects that are not detected until a product/service reaches the customer Appraisal costs: costs a company incurs to asses its quality levels e.x inspections Prevention costs: these are the costs an organization incurs to actually prevent defect occuring to begin with

/!\ book has slight different graph! Total cost of quality curve: a curve that suggests there is some optimal quality level Q*. this curve is caluclated by adding costs of internal and external failures, prevention costs, and appraisal costs for defect levels higher than this level, exponentially increasing failure costs cause quality costs to raise for defect levels below Q*, increases in prevention costs outstrip decreases in failure costs TCQC (zero deffects): graphs to come TCQC (Quality costs improvments overtime): graphs to come 4.3 – Total quality management Again… the in order to address both the value and the conformance perspective quality a firm must: 1. Understand what dimesnsions of quality are most important to users 2. Develop products/services that will meet the user’s requirments 3. Put in a place business processes capable of meeting the specifications driven by users’ requirments

4. Verify that the business processes are indeed meeting the specifications To accomplish this all individuals withing an organization must adress quality within all of an organization’s business processes… from design  purchasing, manufacturing, and distribution The approach mentioned above is called TQM (total quality management) Total quality management (TQM): it is a managerial approach in which the entire organization is managed so that it excels in all quality dimensions that are important to customers. There are seven principles around this method: 1. Customer focus – looking at something from the customer point of view 2. Leadership involvment – if a company is serious about implement TQM there are 14 point to follow… 3. Continous improvement: this means thinking there will allways be room fro imporvment, no matter how well an organization is doing 4. Employee empowerment: about giving employees the responsibility, authority, training, and tools necessary to manage quality 5. Quality assurance: this refers to specific actions firms take to ensure that their products, services, and processes meet the quality requirments of their customers. This normally take place throughout the Orgz: a. E.x During design phase  quality function deployment (QFD) is used: a technique used to translate customer requirments into technical requirments for each stage of product development and production b. Statistical quality control (SQC): the application of statistical techniques to quality control. 6. Supplier partnerships: to include supply chain partners into TQM for ensured performance… 7. Strategic quality plan: it is an organizational plan which provides the vision, guidance, and measurments to drive the quality effort forward and shift the organization’s course when necessary. Every quarter it should be reviewed, by process owners: which is a team or individual who has the authority and responsibility for improving the organization’s busiess processes and who is rewarded accordingly TQM and the Six Sigma methodology TQM and Six sigma are quite similar methods, however they have some major differences: 1. TQM is a mangerial approach where the entire organization is managed so it excels in all quality dimensions that are important to customers. (e.x “seven core prinicples”and 14 points of denning) 2. The Six sigma approach is made up of TWM nad makes use of the TWM philosophy and continous improvement tools 3. Six Sigma includes specific processes for guding process improvement and new process/product development efforts. The first DMAIC (chapter 3), and the second DMADV (chapter 6)

4. The SIX sigma approach defines specific organizational roles and career paths...: champions, master black belts, black belts, green belts, and team members 5. Six Sgima has an expanded tool kit providing: computer simulation, optimization modeling, data mining and other techniques. (Master black belts and black belts provide teams with the expertse the required tools) 4.4 – Statisitcal Quality Control Regarding back to the start of the chapter, Statistical quality control (SQC) aims at “Verifying that the business processes are indeed meeting the specifications” of the four point and organization must do to adress quality and costs issues. Process Capability A way a business can know wheter or not its business processes are capable of meeting certain quality standards is through the process capability ratio (Cp). Process capability ratio (Cp): this is a mathematical determination of a process's capability to meet certain quality standards → Cp >= 1 means the process meets the standards being measured Cp = UTL – LTL/ 6* UTL = upper tolarence limit LTL = Lower tolerance limit * = process standard devitation for the variable of interest Upper tolerance (UTL): this is the highest acceptable value for some measure of interest (e.x weight, temperature, or time) Lower tolerance limit (LTL): This is the lowest acceptable value for some measure of interest How to calculate * *=

√

∑ x mean− xi 2 n−1

x mean = sample mean xi = value for the i th combination n = sample size A wider tolerance limits or/ smaller values of * = Higher Cp values (more capable process) A narrower tolerance limits or/ larger values of * = Lower Cp values In order to graphically state it, use knowledge of both QM1 And QM2 from normal distribution section

Six Sigma Quality Six Sigma Quality: this term indicates that a process is well controlled. e.x usgin the tolerance limits. The main point is to reduce the variability of a process so that 12 standard deviations can be narrowd in between tolerance limits. This can be expressed in the following way: Six Sigma Cp =

UTL −LTL 12 ×deviation >= 1

UTL = upper tolerance limit LTL = lower tolerance limit Deviation (*) = Standard deviation A perfectly cnetered proces (=1) makes up fro 2 defects per billion. However in realty this is not possible, which results in a higher number of observations falling outside tolerance limits. By shifting the process mean of +- 1.5 standard deviations, this increases the defect level to 3.4 defects per million (working definition of Six Sigma) Control Charts Control charts: These are specialized run charts that helps an organization track changes in key measure. Using control charts an organization is able to quickly determine wheter a process is “in control” and take action if its not. Using a control chart requires the concepts of sampling and variable types (Review): Sampling: This is all about taking selected samples in order to determine an overal view of how a process is doing Variable types: Most measures fall into two types: continous variables or attributes 1. Continous variables: a variable that can be measured along a continous scale, such as weight, length, height and temepratures. There are two key measures: a. Sample Average (X mean): a measure which represents the central tendency of a measure of interest in specific sample. This is used in conjuction with range (R) b. Range (R): this measure represents the variation of a specific sample group; this is used in conjuction with sample average (X mean) 2. Attributes: it's a charectaristics of an outcome/item that is accounted for by its presence or absence, such as “defective”vs. “good” or “late vs. on time” Sample average for a continous variable = X mean = n = number of observations in the sample Xi = value of the i th observation

∑ Xi n

Sample range for a continous variable = R = (highest value in the sample) – (lowest value in the sample) Proportion: a measure of the percent of the sample that does or does not have a particular charectaristic. (P) P=

∑ ai n

n = number of observations in the sample ai = 0 if the attribute is not present for the i th observation and 1 if it is Control limits: this are the upper and lower limits of the control chart. They are calculated in a way that if a sample result falls inside the control limits the process is considered under control and vice versa Finally the the process of setting up control charts: 1. Take m samples of size n each while the process is under control 2. Use the sample results to set up the control chart using the tables or formulas provided 3. Continue to take samples of size n, and plot them against control charts 4. Interpret the results and take appropriate action /!\ two points which should not be emphasized about control charts: 1. control charts should NOT be employed until the process is capable of providing acceptable performance on a regular basis 2. control chart by themselves, will NOT result in improved quality levels … in general control charts are used to catch problems early, or before they get out of hand! Qualitative defintion of the X mean, R, and P charts: X mean and R charts (for continous variables):  X mean chart: this is used to track average value for future samples (equation above)  R chart: this is used to track how much the individual observations within each sample vary (equation above) The p chart:  P chart: this type of control chart for attributes is used to track sample proportions . . . . finish Acceptance Sampling Acceptance sampling: the process of sampling a portion of goods for inspection rather than examining the entire lot. There are several terms part of this:

 Acceptable quality level (AQL): a cutoff value, representing the maximum defect level at which a consumer would allways accept a lot  Lot tolerance percent defective (LTPD): this represents the highest defect level a customer is willing to tolerate  Consumer's risk (Beta): this term represents the probability of accepting a lot with quality lower than LTPD level  Producer's risk (alpha): this represents the probability of rejecting a lot with quality equal or better than AQL level  Operating charectaristics (OC) curve: this shows the probability of accepting a lot, given the actual fraction defective in the entire lot and the sampling plan being used. (different sampling plans will result in different OC level) Acceptence sampling allows for a less time consuming and cheaper process to determine the quality of the goods. Organizations will accept or reject the production of goods if a prefixed ratio of goods is faulty or non-faulty.

Taguchi's Quality Loss Function

 Failure costs are indicated as Loss; Taguchi's Quality loss function reflects the idea that any deviation from the target value results in additional costs  as displayed by the parabloic shape, losses grow exponentially in respect to deviation from target value

Note: As long as there is variability in the process, there is room for improvement 4.5 – Managing quality across the supply chain ISO 9000: A family of standards, supported by the International Organization for Standardization, representing an international consensus on good quallity management practices. ISO 9000 addresses business processes, rather than specific outcomes ISO 9000 seeks to help organizations deliver products or services that:    

meet the customer's qulity requirements applicable regulatory requirements, while aiming to enhance customer satisfaction and achieve continual improvement of their performance in pursuit of these objectives

An ISO 9000 certificate is either required to run a specific business or indicates high quality standards for potential supply chain partners ISO 9000 (since 1987) ISO 9001:2000 Companys that want to set up a management system that provides confidence in the conformance of their products and services to established or specified requirements

ISO 9004:2000

→ extended the benefits of ISO 9001:2000 to all parties who are interested in or affected by a business's operations

External failures in the supply chain defective products in the supply chain: Quick reaction of the company is needed to keep extra costs low → Examples of solutions that are employed: Tracking systems, lot identification numbers, explicit procedures for returning or destroying defective goods