Quality CHAPTER FIVE

Chapter

Quality

A. Quality: A Management Philosophy

q Two competitive priorities that deal with quality
High performance design
Consistent quality
q Firms today must bridge the gap between consumer expectations of quality and
operating capabilities [Emphasize that quality is not just a manufacturing
issue. Mention The Parkroyal Christchurch, opening vignette.]
q Quality, as an essential competitive priority, must be based on some operational
definition
1. Customer-driven definitions of quality
q Quality has multiple dimensions.
q One or more definitions of quality may apply.
[Ask the students for examples of good and poor quality.]
a. Conformance to specificationsdoes the product or service meet or exceed
advertised levels of performance? [Mention Seagate disk drives.]
b. Valuedoes the product serve the customers purposes considering this price?
c. Fitness for useappearance, style, durability, reliability, craftsmanship,
serviceability how well does the product perform its intended purpose?
d. Supporteven when the product performs as expected, if service after the sale is
poor, the customers view of quality diminishes.
e. Psychological impressionsatmosphere, image, or aesthetics
f. Factors that influence a customers perception of service on the Internet:
q Web page
q Product availability
q Delivery performance
q Personal contact

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Quality CHAPTER FIVE

2. Quality as a competitive weapon [Mention companies that have used quality as a

competitive weapon.]
a. Perception plays as important a role, as does performance.
b. Producers that can match their operating capabilities with consumer preferences
have a competitive advantage.
c. Good quality can also pay off in higher profits.
q Increased volume
q Increased price
q Reduced production cost
It is important to note that when one considers all of the costs of poor quality, it
actually can be less costly to produce a good product than to produce an
inferior one.
1.

The Costs of Poor Quality

q Four major categories of costs are associated with quality management
Prevention
Appraisal
Internal failure
External failure
1. Prevention
Costs in this category include time, effort, and money to:
a. Redesign the processes to remove causes of defects
b. Redesign the product to make it simpler, easier to produce
c. Train employees
d. Train suppliers
2. Appraisal
a. Costs incurred to identify and assess quality problems
b. Inspection
c. Quality audits
d. Statistical quality control programs
3. Internal failure
q Costs from defects discovered before the product or service is sold
a. Yield lossesthe material costs associated with scrap losses
b. Reworktime, space, and capacity to store, reroute to correct defects
4. External failure
q Costs when a defect is discovered after the customer has received the product
or service
a. Loss of market share
b. Warranty service
c. Litigation
d. Increased regulation

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5. What are the hidden costs of internal and external failures?

a. More labor
b. More machine capacity
c. Increased work-in-process inventory
d. Extended lead times
e. Increased chance of defects reaching the customer
f. Increased pressure to produce more to make up for defects
g. Reduced employee morale
h. More defects
1.

Employee Involvement
q A key element of Total Quality Management
1. Cultural change
a. Top management must motivate cultural change.
b. Everyone is expected to contribute.
c. External customers buy the product or service.
d. Internal customers are employees in the firm who rely on output of other
employees.
An assembly line is a chain of internal customer-supplier relationships, with an
external customer purchasing the finished goods.
[Mention Kawaski, Photo 5.2]
2. Teams
a. Differ from more typical working group
q Common commitment to overarching purpose.
q Shared leadership roles.
q Performance judged by collective efforts.
q Open-ended discussion is valued in meetings.
q Team members do real work together rather than delegate.
b. Managements role in successful teams
q Assign meaningful projects.
q Create positive environment for meetings.
q Team members should create clear rules.
q Set some immediate performance-oriented tasks and goals for early successes.
q Consult people outside the team for ideas, inspiration.
q Team members should spend lots of time together.
q Have ways other than direct compensation to give the team positive
reinforcement.
c. Three approaches to teamwork
q Problem-solving teams (quality circles)
q Special-purpose teams
q Self-managing teams, the highest level of worker participation

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Quality CHAPTER FIVE

2.

Continuous Improvement
q Based on the Japanese concept, kaizen
q The philosophy of continually seeking ways to improve operations.
q Not unique to quality. Applies to process improvement as well.
1. Getting started with continuous improvement
a. SPC training
b. Make SPC a normal aspect of daily operations.
c. Build work teams and employee involvement.
d. Utilize problem-solving techniques within the work teams.
e. Develop operator process ownership.
2. Problem-solving process: The Deming Wheel
a. Planselect a process needing improvement, document process, analyze data, set
improvement goals, discuss alternatives, assess benefits and costs, develop a plan
and improvement measures.
b. Doimplement plan, monitor improvements.
c. Checkanalyze data to evaluate effectiveness of the plan.
d. Actdocument and disseminate improved process as a standard procedure.
E. Improving Quality Through TQM [Mention The TQM Wheel. Emphasize its cyclical
nature, i.e., it never ends]
1. Purchasing considerations
a. Buyer must emphasize quality, delivery, and price.
b. Work with the supplier to obtain defect-free parts.
c. Specifications must be clear and realistic.
d. Allow time to identify qualified suppliers.
e. Improve communication between purchasing, engineering, quality control, and
other departments
2. Product and service design
a. Design changes can increase defect rates.
b. Stable designs reduce quality problems.
c. Stable designs may become obsolete in the marketplace
Use Application 5.1: Reliability Analysis (AP 5.1) for a reliability example. The short
answers are 74.48% for the old car and 68.52% for the new car.
3. Process design [Mention First National Bank of Chicago.]
a. New equipment can overcome quality problems.
b. Concurrent engineering ensures that production requirements and process
capabilities are synchronized. [Mention Teradyne, Photo 5.2.]

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Quality CHAPTER FIVE

4. Quality function deployment (QFD)

Six questions for using QFD:
a. Voice of the customerWhat do customers need and want?
b. Competitive analysisRelative to competitors, how well are we serving
customers?
c. Voice of the engineerWhat technical measures relate to our customers needs?
d. CorrelationsWhat are the relationships between the voice of the customer and
the voice of the engineer?
e. Technical comparisonHow does our product or service performance compare to
that of our competition?
f. Trade-offsWhat are the potential technical trade-offs?
5. Benchmarking
Four basic steps of benchmarking [Mention competitive, functional, internal types.]
a. Planningidentify process, leader, performance measures.
b. Analysismeasure gap, identify causes.
c. Integrationestablish goals and resource commitments.
d. Actiondevelop teams, implement plan, monitor progress, return to Step 1.
6. Tools for improving quality
q Nine tools for organizing and presenting data [Carefully go through the
cause-and-effect diagram.]
a. Flow diagrams (Chapter 2)
b. Process charts (Chapter 2)
c. Checklistsrecord the frequency of occurrence
d. Histogramssummarizes data measured on a continuous scale
e. Bar chartsbar height represents the frequency of occurrence
f. Pareto chartsa bar chart organized in decreasing order of frequency
g. Scatter diagramsa plot of two variables showing whether they are related
h. Cause-and-effect, fishbone, or Ishakawa diagram
i. Graphsa variety of pictorial formats, such as line graphs and pie charts
F. Statistical Process Control (SPC)
1. Examples of Problems Detected by SPC
[Define SPC and relate to other tools in the chapter.]
a. An increase in the proportion of defective components
b. An increase in the average number of service complaints
c. A process frequently fails to conform to design specifications

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Quality CHAPTER FIVE

G. Variation in Outputs
q All sources of variation can be attributed to one of two source categories: common
causes and assignable causes.
1. Common causes
a. Random, or unavoidable sources of variation within a process
b. Characteristics of distributions
q Meanthe average observation
q Spreadthe dispersion of observations around the mean
q Shapewhether the observations are symmetrical or skewed
c. Common cause variation is normally distributed (symmetrical) and stable (the
mean and spread do not change over time).
2. Assignable causes
a. Any cause of variation that can be identified and eliminated.
b. Change in the mean, spread, or shape of a process distribution is a symptom that an
assignable cause of variation has developed.
c. After a process is in statistical control, SPC is used to detect significant
change, indicating the need for corrective action. [Emphasize this point.]
3. Quality measurements
a. Variablesa characteristic measured on a continuous scale
q Advantage: if defective, we know by how muchthe direction and magnitude
of corrections are indicated.
q Disadvantage: precise measurements are required.
b. Attributesa characteristic counted in discrete units, (yes-no, integer number)
q Used to determine conformance to complex specifications, or when measuring
variables is too costly
q Advantages:
Quickly reveals when quality has changed, provides an integer number of
how many are defective
Requires less effort and fewer resources than measuring variables
q Disadvantages:
Doesnt show by how much they were defective, the direction and
magnitude of corrections are not indicated
Requires more observations, as each observation provides little information

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Quality CHAPTER FIVE

4. Sampling
a. Complete inspection
q Used when
Costs of failure are high relative to costs of inspection
Inspection is automated
b. Sampling plans
q Used when
Inspection costs are high
Inspection destroys the product
q Some defectives lots may be purchased and some good lots may be rejected
when
The sample does not perfectly represent the population
Testing methods are imperfect
q Sampling plans include
Sample size, n random observations
Time between successive samples
Decision rules that determine when action should be taken
c. Sampling distributions
q Sample means are usually dispersed about the population mean according to
the normal probability distribution (reference the central limit theorem
described in statistics texts). [It is important to distinguish between the
distribution of sample means and the process distribution itself.]
5. Control charts
a. Used to judge whether action is required
b. A sample characteristic measured above the upper control limit (UCL) or
below the lower control limit (LCL) indicates that an assignable cause
probably exists. [Be sure that the student understands that the UCL
and LCL are not product or service specifications.]
c. Steps for using a control chart:
q Take a random sample, measure the quality characteristic, and calculate a
variable of attribute measure.
q Plot the statistic; if it falls outside the control limits, look for assignable causes.
q Eliminate the cause if it degrades quality. Incorporate the cause if it improves
quality. Recalculate the control chart.
q Periodically repeat the procedure.
d. Indicators of out of control conditions
q A trend in the observations (the process is drifting)
q A sudden or step change in the observations
q A run of five or more observations on the same side of the mean (If we flip a
coin and get heads five times in a row, we become suspicious of the coin or
of the coin flipping process.)
q Several observations near the control limits (Normally only 1 in 20
observations are more than 2 standard deviations from the mean.)

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Quality CHAPTER FIVE

H. Statistical Process Control Methods

q Measure current quality.
q Detect whether the process has changed.
1. Control charts for variables
q Quality characteristics include variables, which are measured over a continuum.
a. Range charts
q Monitor process variability
First remove assignable causes of variation.
While process is in control, collect data to estimate the average range of
output that occurs.
To establish the upper and lower control limits for the R-chart, we use Table 7.1,
which provides two factors; D3 and D4 . These factors establish the UCLR and
LCLR at three standard deviations above and below R .
UCLR D4 R
LCLR D3 R
b. x - charts
q The process average is plotted on the x - chart after the process variability is in
control.
q The upper and lower control limits can be established in two ways.
If the standard deviation of the process distribution is known, we could
place UCL and LCL at z standard deviations away from the mean,
depending on the desired confidence interval.
UCLx x z x
LCLx x z x

where

Or we could use Table 5.1 to find A2, which when multiplied by the
previously determined R, places UCL and LCL three standard deviations
above and below the mean.
UCLx x A2 R
LCLx x A2 R

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Quality CHAPTER FIVE

c. Using x - and R-charts to monitor a process

q Construct the R-chart.
q Compute the range for each sample.
q Plot the ranges on the R-chart.
q Construct x -chart.
q Compute the mean for each sample.
q Plot the sample means on the x -chart.
q Use Application 5.2: Control Charts for Variables (AP 5.2) to
demonstrate the construction of R- and x-bar charts. Because the range is
out of control, the x-bar calculation is moot. Consider dropping sample 6
because of an inoperative scale. The resulting control charts indicate that
the process is actually in control.
2. Control charts for attributes [Mention examples from banking and manufacturing.
Emphasize that defects can be counted.]
a. p-chartpopulation proportion defective
q Take a random sample of n units.
q Count the number of defectives.
q Proportion defective = number of defectives sample size
q Plot sample proportion defective on a chart. If it is outside the range between
the upper and lower control limits, search for an assignable cause. If cause is
found do not use these data to determine the control limits.
UCLp p z p
LCLp p z p
where

p1 p
n

Two things to note:

The lower control limit cannot be negative.
When the number of defects is less than the LCL, then the system is out of
control in a good way. We want to find the assignable cause. Find what was
unique about this event that caused things to work out so well.
q Use Application 5.3: p-Chart for Attributes (AP 5.3) for an example of a pchart problem. The short answers are: p 0.025 ; UCLp 0.064 ; LCLp 0;
IN CONTROL
q

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Quality CHAPTER FIVE

b. c-chartmore than one defect per unit

q Take a random sample of one.
q Inspect the quality attribute.
q Count the number of defects.
UCLc c z c
LCLc c z c

where

c c
Plot the number of defectives on a chart. If it is outside the range between the
upper and lower control limits, search for the assignable cause. If cause is
found, do not use these data to determine the control limits.
c. The Poisson distribution mean and standard deviation are both described using the
same number, c . The mean equals c , and the standard deviation equals c .
d. We set upper and lower control limits in a manner similar to p-charts.
e. Use Application 5.4: c-Chart for Attributes (AP 5.4) for an example of a cchart.
q

I. Process Capability
q Control limits are based on the mean and variability of the sampling
distribution, not the design specifications. [This is an important point that is
difficult for the students.]
1. Defining process capability
A process is capable when
q The specified tolerance width is greater than range of actual process outputs
and
q The process is centered near the nominal or target value
a. Process capability ratio
q Compares the tolerance width (upper spec lower spec) to the range of actual
process outputs. The portion of a distribution within 3 of the mean will
include the vast majority (99.74%) of the actual process outputs.
q The process is capable when the ratio
Cp
q

Upperspecification Lowerspecification
1.00
6

Process capability ratios greater than one (say 1.33) allow for some shift in the
process distribution before bad output is generated.

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b. Process capability index

q Indicates whether the process is sufficiently centered by measuring the distance
between the process center and the specification limits and then comparing that
to 3 .
q The process capability index is
Cpk Minimum of

L
x Lower specification Upper specification x O
,
M
P
3

3
M
P
N
Q

If the process capability index is less than one, the process center is too close to
one of the specification limits and will generate too many defects.
2. Determining the capability of a process using continuous improvement
Step 1. Collect data, calculate mean and standard deviation for the process.
Step 2. Construct the process control charts.
Step 3. Compare the random samples to the control limits. Eliminate the assignable
causes and recalculate the control limits as appropriate until 20 consecutive
random samples fall within the control limits. This indicates that the process is
in statistical control.
Step 4. Calculate the process capability ratio and the process capability index. If the
process is capable, document changes to the process and monitor the output
using control charts. If it is not capable, eliminate the causes of variation and
recalculate the control limits. Return to step 3.
Use Application 5.5: Process Capability Analysis (AP 5.5) to bring together the
concepts of statistical control and process control.
3. Quality engineering
q An approach combining engineering and statistical methods to optimize
product design and manufacturing processes
q Before Taguchi, managers assumed the goal was to produce products falling
anywhere between their design tolerances.
q Quality loss function is optimum (zero) when the products quality measure is
exactly on the target value.
q Continually search for places ways to reduce all variability
q

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Quality CHAPTER FIVE

J. International Quality Documentation Standards

1. What is ISO 9000?
a. Certified companies are listed in a directory.
b. Compliance with ISO 9000 standards indicates quality claims can be documented.
2. ISO 14000an environmental management system
a. Standards require that companies keep track of their raw materials use and the
generation, treatment, and disposal of hazardous wastes.
b. Companies must prepare a plan for ongoing improvement in environmental
performance.
c. Standards cover the following areas:
q Environmental management system
q Environmental performance evaluation
q Environmental labeling
q Life cycle assessments
3. Benefits of ISO Certification
a. Externalpotential sales advantage
b. Internalprovides guidance in starting the TQM journey
K. Malcolm Baldrige National Quality Award
[Mention well-known companies who have received the award.]
1. Established in 1987
2. Named for Secretary of Commerce Malcolm Baldrige
3. Improved quality as a means of reducing the trade deficit
4. Learn strengths and weaknesses and find ways to improve operations
5. Seven criteria
a. Leadership
b. Strategic planning
c. Customer and market focus
d. Information analysis
e. Human resource focus
f. Process management
g. Business results
L. TQM Across the Organization
q Discuss Merrill Lynch Credit Corporation
Malcolm Baldrige winner
Communication from top to bottom in the organization
Employees are empowered to take initiative and responsibility
Voice of the client approach

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