Budapest University of Technology and Economics

Faculty of Economic and Social Sciences

Institute of Business
Department of Management and Corporate Economics

Zsuzsanna Eszter Tth Tams Jns

QUALITY MANAGEMENT
teaching material

Budapest
2014
Table of contents
I. Introduction ....................................................................................................................5
I.1. Evolution of quality concepts ...................................................................................5
I.2. Defining quality .......................................................................................................5
I.3. Evolution of quality management ...........................................................................10
I.4. Comparing schools of quality: Europe, Japan, USA ................................................ 14
I.5. Gurus of the quality movement ............................................................................... 15
II. Development of quality management systems ............................................................... 21
II.1. Conformance to requirements ................................................................................. 21
II.2. Good manufacturing practice GMP......................................................................21
II.3. Military standards ................................................................................................... 21
II.4. BS5750 and ISO 9000 ............................................................................................ 22
II.5. HACCP .................................................................................................................. 22
II.6. QS-9000 ................................................................................................................. 24
II.7. VDA 6.1 ................................................................................................................. 24
II.8. ISO/TS 16949 ........................................................................................................ 24
II.9. AS9000 .................................................................................................................. 25
II.10. ISO/IEC 17025 ................................................................................................... 26
II.11. Six Sigma ...........................................................................................................26
II.12. ISO 14000 ..........................................................................................................27
II.13. EFQM................................................................................................................. 28
II.14. Common Assessment Framework ....................................................................... 28
III. ISO 9000 standards .................................................................................................... 30
III.1. Quality management system ............................................................................... 30
III.2. ISO 9000 ............................................................................................................ 31
III.3. ISO 9000 family of standards .............................................................................. 31
III.4. Quality management principles ...........................................................................34
III.5. ISO 9001 requirements - Quality management system (Clause 4)........................ 38
III.6. ISO 9001 requirements Management responsibility (Clause 5) ......................... 39
III.7. ISO 9001 requirements Resource management (clause 6)................................. 41
III.8. ISO 9001 requirements Product realization (clause 7) ......................................42
III.9. ISO 9001 requirements Measurement, analysis and improvement (clause 8) .... 46
IV. Total Quality Management ......................................................................................... 51

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 IV.1. Introduction to TQM ........................................................................................... 51
IV.2. Applying quality concepts ................................................................................... 54
IV.3. Customer focus ................................................................................................... 61
IV.4. Mechanisms for understanding customers ........................................................... 72
IV.5. Managing key processes ..................................................................................... 75
IV.6. Six steps to process improvements ......................................................................78
IV.7. Measuring performance ...................................................................................... 85
IV.8. Leadership ..........................................................................................................89
IV.9. Empowered workforce ........................................................................................ 97
V. EFQM Excellence Model............................................................................................ 108
V.1. Fundamental concepts .......................................................................................... 108
V.2. Enablers ............................................................................................................... 110
V.3. Results ................................................................................................................. 111
V.4. Radar logic ........................................................................................................... 112
VI. Six Sigma ................................................................................................................ 115
VI.1. DMAIC Process ................................................................................................ 115
VII. Quality management tools and methods ................................................................... 120
VII.1. What causes defectives? .................................................................................... 120
VII.2. Diagnosis of processes ...................................................................................... 121
VII.3. How to obtain data ............................................................................................ 122
VII.4. Check sheets ..................................................................................................... 123
VII.5. What are Pareto Diagrams? ............................................................................... 124
VII.6. How to make Pareto diagram? .......................................................................... 124
VII.7. Cause-and-effect diagram ................................................................................. 128
VII.8. Distributions and histograms ............................................................................. 132
VIII. Application of Statistical Process Control ............................................................. 140
VIII.1. What is SPC? ................................................................................................ 140
VIII.2. Selecting the Appropriate SPC Method ......................................................... 140
VIII.3. Overview of Control Charts........................................................................... 142
VIII.4. Defining Control Charts ................................................................................ 142
IX. Capability Assessment ............................................................................................. 154
IX.1. Short-term data vs. long-term data .................................................................... 155
IX.2. Capability Assessment for Quantitative Process Characteristics ........................ 155

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X. Introduction to measurement system analysis mathematical basis ............................ 161
X.1. Notation ............................................................................................................... 161
X.2. Analysis of Variance (ANOVA) ........................................................................... 161
XI. Measurement Systems.............................................................................................. 177
XI.1. Categories of Measurement Systems ................................................................. 177
XI.2. Analysis of Quantitative Measurement Systems ................................................ 177
XI.3. Analysis of Qualitative Measurement Systems (Attribute Gauge Study) ............ 189
XII. Appendix ................................................................................................................. 193
XII.1. The F Probability Distribution........................................................................... 193
XIII. References ............................................................................................................ 196

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I. Introduction

The word quality has many different definitions, ranging from the conventional to those that
are more strategic. Conventional definitions of quality usually describe a quality item as one
that wears well, is well constructed, and will last a long time. Still another definition conveys
the image of excellence, first-rate, the best. However, managers competing in the fierce of the
international marketplace are increasingly concerned with the strategic definition of quality:
meeting the needs of the customers.

I.1. Evolution of quality concepts

David Garvin, in his book Managing Quality, describes five major approaches to quality:
1. Transcendent: quality is understood only after exposure to a series of objects that
develop its characteristics. For example, the quality of a particular artist only becomes
apparent when a number of his or her works have been viewed. The idea here is that
quality cannot be defined, and you recognize it only when you see it.
2. Product-based: quality is based on the presence or absence of a particular attribute. If
an attribute is desirable, greater amounts of that attribute, under this definition, would
label that product or service as one of higher quality.
3. Manufacturing-based: quality in manufacturing is defined as the conformance of a
product or service to a set of predetermined requirements or specifications. Failure to
meet these requirements is, by definition, a deviation, as such, represents a lack of
quality. This approach assumes that the specification is a valid surrogate for a
customer requirement and that, if met, it would satisfy the customer.
4. User-based: Quality lies in the eye of the beholder. The ability to satisfy the
customers requirements, expectations or wants is the sole criterion by which quality
will be determined. The ultimate aim of the organization is the complete satisfaction
of the customer.
5. Value-based: quality under this definition consists of offering product or service to a
customer with certain characteristics at an acceptable cost or price. This definition
combines the idea of worth or value with the offering.

I.2. Defining quality

The common element of the wide-ranging definitions used in business is that the quality of a
product or service refers to the perception of the degree to which the product or service meets
the customer's expectations. Quality has no specific meaning unless related to a specific
function and/or object. Quality is a perceptual, conditional and somewhat subjective attribute.
The business meanings of quality have developed over time. Various interpretations are given
below:
1. American Society for Quality: "A combination of quantitative and qualitative
perspectives for which each person has his or her own definition; examples of which

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 include, "Meeting the requirements and expectations in service or product that were
committed to" and "Pursuit of optimal solutions contributing to confirmed successes,
fulfilling accountabilities". In technical usage, quality can have two meanings:
a. The characteristics of a product or service that bear on its ability to satisfy stated
or implied needs;
b. A product or service free of deficiencies."
2. Philip B. Crosby: "Conformance to requirements." Requirements may not fully
represent customer expectations; Crosby treats this as a separate problem.
3. W. Edwards Deming: concentrating on "the efficient production of the quality that the
market expects," and he linked quality and management: "Costs go down and
productivity goes up as improvement of quality is accomplished by better management
of design, engineering, testing and by improvement of processes."
4. Peter Drucker: "Quality in a product or service is not what the supplier puts in. It is
what the customer gets out and is willing to pay for."
5. ISO 9000: "Degree to which a set of inherent characteristics fulfils requirements."
The standard defines requirement as need or expectation.
6. Joseph M. Juran: "Fitness for use." Fitness is defined by the customer.
7. Noriaki Kano and others, present a two-dimensional model of quality: "must-be
quality" and "attractive quality." The former is near to "fitness for use" and the latter is
what the customer would love, but has not yet thought about. Supporters characterize
this model more succinctly as: "Products and services that meet or exceed customers'
expectations."
8. Six Sigma: "Number of defects per million opportunities."
9. Genichi Taguchi gives two definitions: "Uniformity around a target value." The idea
is to lower the standard deviation in outcomes, and to keep the range of outcomes to a
certain number of standard deviations, with rare exceptions. "The loss a product
imposes on society after it is shipped." This definition of quality is based on a more
comprehensive view of the production system. 1

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In the followings we give some interesting examples how the readers of Quality Digest magazine define
quality:
The word "quality" represents the properties of products and/or services that are valued by the
consumer.
Reducing the variation around the target".
The degree to which something meets or exceeds the expectations of its consumers.
Definition of quality: "WOW"
When the customer returns and the product doesn't.
Quality is the expression of human excellence.
Never having to say you're sorry.
That we shall get the right product to the right place at the right time while exceeding our customers
expectations.

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Examples for dimensions of quality in different areas of society:
Airlines: on-time, comfortable, low-cost service
Health care: correct diagnosis, minimum wait time, lower cost, security
Food services: good product, fast delivery, good environment
Postal service: fast delivery, correct delivery,
University: proper preparation for the future, on-time knowledge delivery
Insurance: payoff on time, reasonable costs,
Automotive: defect free
IT: clearer, faster, cheaper service

I.2.a. What are the difficulties in defining quality?

You know quality when you see it

You probably know of some things products, services, etc. that you feel are excellent,
because they meet your needs, do what they are supposed to do, make your life easier, taste
great, whatever. These things are identified by you as being very positive and if you stop to
think about why they are positive, the word "quality" probably comes to mind.
This view of quality lacks any concrete way of measuring the quality of something, because it
is based on a specific person's judgment. People judge quality on many factors; most of these
factors are specific, and many of those are probably being used without the person ever being
aware of it.
Quality is a function of brand
Brand names can be a sign of quality, either as a result of personal experience with the brand
or from judgments driven by advertising. Most people have faith in some brands or
companies. A brand is a great way to set expectations, so for example you can go to any
McDonald's restaurant in the world and get a Big Mac that's going to taste just about exactly
the same.
The problem with this definition of quality is that you may have a hard time understanding
just what about the brand marks quality. If you don't love McDonalds Big Mac, you will be
hard-pressed to explain just what it is about them that makes Big Mac such a good sandwich.

Quality means providing customer with innovative products or services characteristics/attributes and
defects free which provide fitness for use.
Quality is in the eyes of the beholder. And in a business environment, the beholder is always the
customer or client. In other words, quality is whatever the customer says it is.
A degree of excellence.
Quality is a "system" which produces a product, service, information or delivery, on target with
minimal variance which meet or exceeds the customers needs, now and in the future.
Quality is meeting customer expectations.
Quality is not something extraordinary. It is something ordinary extraordinarily well.
Quality is not achieved by doing different things. It is achieved by doing things differently.

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And if you disagree with the quality signaled by a specific brand, perhaps because of bad
experiences with the product or brand, then that brand sure won't signal quality to you.
Quality is a passing grade
Perhaps the most common understanding of quality is that quality corresponds to a passing
grade. If you've ever bought a piece of clothing that had one of those little paper tags saying
that this piece had passed inspector something-or-other, you know that your clothes were
tested and received a passing grade.
Your experience with class grades is similar. You spend a semester studying a topic, attending
lectures, doing your reading, turning in papers, and taking tests, and your understanding of the
topic is evaluated by the teacher. Your teacher assigns you a grade, and this grade is used to
help determine whether you pass the class and move ahead.
This definition has several problems, though, when it comes to understanding the meaning of
quality. First, you can't always be certain about what exactly the test and the passing grade
actually measure. With the class example, the teacher could be measuring your
comprehension of the class's topic or your ability to master the class itself; haven't you ever
taken a class where somebody who doesn't understand the material passes because they meet
the minimum work requirement? Second, the teacher is often using his/her subjective views to
set the milestones measured by the tests, so the tests are not necessarily objective evaluations.
Third, this view doesn't help you understand the differences in grades that pass. Say you have
two students who pass a class, one of whom gets a grade of "5", the other gets a "3". Both
pass the class, but one apparently did better than the other. If quality is passing this class, is
there any difference between the performance and understanding of the satisfactory (3)
student and that of the excellent (5) student? From a testing point of view, passing a test
would seem to imply quality, but you need to know a lot more about the big picture to get any
value from a passing grade.
Quality is perfection
Perfection is good; actually, perfection is better than good, it's the best. If something is the
best, then it must be overflowing with quality. But who decides that something is perfect, and
who decides what perfection means? Who or what is it perfect for? The problem with this
definition is that it tells you where you want to go, but not how to get there.
Quality is the absence of problems
Something doesn't cause me any problems, and I have no complaints about it, it doesn't get in
the way of work or play, it's always held up, never breaks, never dies, it's "old reliable"
that's a sure sign of quality. Saying that quality is the absence of problems doesn't go far
enough, because it doesn't address the big picture around problems: problems for whom?
Take something like a software program you can expect different people to be different
kinds of users, with different needs that involve using the software with different goals in
mind, and probably using different tools within the software. Say the software has a function
that most people will never need to use, like the old "convert the file to Sanskrit" command; if
that function does not work, but most users won't come across that failure, does the problem
nonetheless exist?

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Quality is zero defect code
Quality is code that has no bugs that's a great goal to have, but it's usually impractical.
Quality is acceptable performance
You have something that overall does what it's supposed to do, and failures are within
acceptable limits. The majority of students pass the class, the spread of grades looks like it's
supposed to. It may not be perfect, but it's certainly good enough.
Quality is meeting goals
This definition also describes quality as reflecting what something does. You set goals for
something, say a web site, and if the web site meets these goals then it has quality. But is
there a scale, so that there is an amount or level of quality that is a function of how much or
how well the goals are met?
Quality is meeting requirements
If you define quality as meeting requirements, then you have specific indicators of quality. If
the requirements are testable, then you can test the success of meeting the requirements. And
you can verify the quality repeatedly, by testing at intervals. You can say that whatever you're
testing is good, and that it was good the last time you ran the tests, and the time before that,
etc. You can measure quality, and measure it over time.

A widely used definition of quality is: "The totality of features and characteristics of a
product or service that bear upon its ability to satisfy stated or implied needs" This
highlights that the service/product must satisfy a given need, and that is the need of the
customer. Quality is providing a product or service that is "fit for the purpose". In many areas
the popular choice of purchase is not the cheapest but it is chosen because its quality and
reliability are perceived by the customer as being the best value for money. An alternative
definition could be: "Quality is the sum of all the factors that enable ownership
satisfaction and bring customers back to buy a product or service again and again."

Quality could therefore include:

a) Knowing the customer's needs: If the customer's needs are not identified they can only be
achieved by accident, and any amount of trial and error causes delay and additional cost.
b) Designing to meet them: If the customer's needs are to be satisfied, they must be
documented to clarify the extent of the contract and, if appropriate, agreed with the customer.
c) Reliable bought-in equipment and materials: The equipment and materials must be fit for
the intended purpose if the customer is to be satisfied and the company is to avoid
rectification and warranty costs. The choice of suppliers is an important factor in avoiding
these costs.
d) Clear and precise instructions: Many people and organizations are involved in fulfilling a
contract, and each one requires communication of clear instructions. Production personnel
cannot be expected to achieve the correct results first time if they do not possess clear
instructions. Anything less causes unproductive rectification costs.

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e) Punctual Delivery: Poor delivery is a major cause of customer dissatisfaction.
f) Faultless production: Quality of production not only requires good instructions and
equipment, it demands staff capable of performing a professional service. Training and
experience is vital to ensure faultless production.
g) Effective support services: This is the company operating as a team! If one person is unsure
of their objectives, others come to their aid in order to avoid lost time due to shortage of
correct information, tools, materials, equipment, etc.
h) Feedback of field experience: If things go wrong they should be regarded as an opportunity
to learn for the future, and represent the best method for identifying improvements in the
company's performance.

I.3. Evolution of quality management

I.3.a. Quality inspection

The main principle is that prefixed quality requirements should be fulfilled all the time. The
primary goal was to unfold defects through measurements and standardization. In this period
of quality evolution the department of quality inspection was responsible for quality in the
whole organization.
During the early days of manufacturing, an operatives work was inspected and a decision
was made whether to accept or reject it. As businesses became larger, so too did this role and
full time inspection jobs were created.
In the era of Taylors scientific management (in the early 1900s) the function of planning and
the function of production were separated. It was the first time when the early initiatives of
different management methods were used in order to increase efficiency. This meant that the
work or process leaders were got rid of controlling end products in the production processes.
Instead of them qualified and independent quality controllers were responsible for this duty.
This was the time when controlling quality became a separate discipline and profession.
The main disadvantage of pure quality inspection was that it didnt assure the improvement of
the process as there were no feed-backs into the production process itself. There were always
conflicts of interest between the production and quality department. Top managers got very
far away from the issue of quality, they got less and less information, and their knowledge
about quality was quite dissatisfactory.
These changes led to the birth of a separate inspection department with a chief inspector,
reporting to either the person in charge of manufacturing or the manager. With the
establishment of this new department the question of new services and other issues, e.g,
standards, training, recording of data and the accuracy of measuring equipment arose. It
became clear that the responsibilities of the chief inspector were more than just product
acceptance and the need to address defect prevention emerged. Hence the quality control
department evolved, in charge of which was a quality control manager with responsibility
for the inspection services and quality control engineering.

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Accompanying the formation of inspection functions, other problems arose:
More technical problems occurred, requiring specialised skills, often not possessed by
production workers,
The inspectors lacked training,
Inspectors were ordered to accept defective goods to increase output,
Skilled workers were promoted into other roles, leaving less skilled workers to
perform the operational jobs such as manufacturing.
Until the 1920s quality was essentially inspection, the know-how of inspection was the
know-how of quality. Better quality meant a better and extensive inspection activity.

I.3.b. Quality control

In the 1920s statistical theory began to be applied effectively to quality control, and in 1924
Shewhart made the first sketch of a modern control chart. His work was later developed by
Deming and the early work of Shewhart, Deming, Dodge and Romig constitutes much of
what today comprises the theory of statistical process control (SPC). However, there was little
use of these techniques in manufacturing companies until the late 1940s.
After mass-production had started up, most industries arrived at the period of statistical
quality control. Technologies, the way of working, the profession of quality inspection
developed, and the spread of mass production laid the foundation for the application of
statistical based quality control. During the production process measures were put through,
and with this kind of in-process control it could be assured that the features of products would
meet the requirements. By controlling a random sample taken from the population (i.e. the
production process) it was possible to collect enough information based on few pieces of
products rather than controlling all products as the random sample taken out of the process
could represent the specific features of the whole process in a quantitative way. Quality was
therefore the correct application of statistic methods in production in this period of quality
evolution.
The main aim of this period was controlling and regulating the process. The production and
engineering departments were responsible for quality. The process control based on statistical
methods assured that quality was not only controlled into the products, but the whole
production process (and not only end products) was under control.

I.3.c. Total quality control

At that time Japans industrial system was virtually destroyed and it had a reputation for
cheap imitation products and an illiterate workforce. The Japanese recognised these problems
and set about solving them with the help of some notable quality gurus Juran, Deming and
Feigenbaum. In the early 1950s quality management practices developed rapidly in Japanese
plants and become a major theme in Japanese management philosophy, by 1960 quality
control and management had become a national preoccupation. By the late 1960s Japans
imports into the USA and Europe increased significantly, due to its cheaper, higher quality
products compared to the Western counterparts.

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In 1969 the first international conference on quality control, sponsored by Japan, America and
Europe, was held in Tokyo. In a paper given by Feigenbaum, the term total quality was
used for the first time, and referred to wider issues such as planning, organisation and
management responsibility. Ishikawa gave a paper explaining how total quality control in
Japan was different, meaning companywide quality control, and describing how all
employees, from top management to the workers must study and participate in quality control.
Companywide quality management was common in Japanese companies by the late 1970s.

I.3.d. Quality management systems

The assurance of quality became a separate function in most European countries and
organizations stepped towards the era of quality management systems. All departments and
functions participating in the fulfillment of customer needs and expectations take part in the
establishment and operation of quality management systems. The main aim is to manage the
whole quality management system and to reach an operational optimum.
The 1960s and 70s are fundamental years for quality management; quality broke through the
complete structure and hierarchy of organizations. It was cheaper to manage the quality of an
organization than control the quality of single products. At that time quality assurance was
born.
There are several ways of building up a quality management system, one of the most
widespread systems is ISO 9000, but there are several others (see in later chapters). The
common feature of these systems is that they give only basic guidelines, milestones to
establish and manage such a system.
At the end of the 1970s quality becomes customer satisfaction. The main concept at the
beginning of the 1980s is that competitiveness means higher quality at a lower cost, the goal
is the continuous improvement of organizational processes. This approach to quality leads to
TQM.

I.3.e. Total Quality Management

The quality revolution in the West was slow to follow, and did not begin until the early
1980s, when companies introduced their own quality programmes and initiatives to counter
the Japanese success. Total quality management (TQM) became the centre of these drives in
most cases. In a Department of Trade & Industry publication in 1982 it was stated that
Britains world trade share was declining and this was having a dramatic effect on the
standard of living in the country. There was intense global competition and any countrys
economic performance and reputation for quality was made up of the reputations and
performances of its individual companies and products/services. The British Standard (BS)
5750 for quality systems had been published in 1979, and in 1983 the National Quality
Campaign was launched, using BS5750 as its main theme. The aim was to bring to the
attention of industry the importance of quality for competitiveness and survival in the world
market place.

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Since then the International Standardisation Organisation (ISO) 9000 has become the
internationally recognised standard for quality management systems. It comprises a number of
standards that specify the requirements for the documentation, implementation and
maintenance of a quality system. TQM is now part of a much wider concept that addresses
overall organisational performance and recognises the importance of processes. There is also
extensive research evidence that demonstrates the benefits from the approach. As we move
into the 21st century, TQM has developed in many countries into holistic frameworks, aimed
at helping organisations achieve excellent performance, particularly in customer and business
results. In Europe, a widely adopted framework is the so-called Business Excellence or
Excellence Model promoted by the European Foundation for Quality Management
(EFQM).
I. Table: Main features of the different eras in the evolution of quality management

Feature Quality inspection Statistical quality Quality Total quality

control management management
(assurance) systems
Primary goal detection of defects control harmonization strategic pressure
Way of reaching Solving quality Assuring stable
quality problems competitive
position
The aim of Homogeneous Homogeneous Focusing on Market and
activities products products with less preventing defects customer needs and
control and on the expectations
production process
in a wider sense
Methods Standardization and Statistical tools and Quality projects and Strategic planning,
measurement techniques systems subsuming goals,
mobilization of the
total system
The tasks of quality control, sorting, trouble shooting, quality planning, education,
professionals and calculuses, applying statistical quality programs, trainings,
quality function qualification methods valuation of quality supporting other
system departments,
planning quality
projects, setting
quality goals and
objectives
Responsible for quality inspection production and all departments Every employee
quality other engineering with the
functions contribution and
total commitment
of management
The approach of Inspection Control Establish and Prime management
quality, orientation manage a quality system
system

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 1. Figure: Evolution of quality management

I.4. Comparing schools of quality: Europe, Japan, USA

Based on the quality evolution presented above three different schools of quality can be
separated: the Japanese, the North-American and the European quality culture. Though, these
schools of quality have much in common, important differences have to be highlighted when
comparing them regarding the spread of quality approach within the organization, the base of
quality movement in the organization, the special features and the key elements. The
following table summarizes the main features of the three different schools of quality.
II. Table: Main features of the different schools of quality

Feature Japan USA Europe

spread multitudinous, bottom-up top-down strategy, production and
strategy snowball principle technology management
bearing group quality circles top management middle management
special features totality, simple tools and management environment standardization,
techniques regulation
key element quality circles management climate documented shadowing

One of the basic features of the American school of quality is that the management is quite
strong and manages organizations self-confidently with tough methods. The American answer
to the unbelievable development of Japan was the TQM which aimed at gaining the top
management over quality issues and followed a top-down approach. The base of TQM is a
long term strategic perspective and an integrated approach typical of management. Besides
the powerful management environment, TQM delegates responsibilities and decisions down
in the organizational hierarchy. This kind of empowerment was such a new element that has
had an impact on the development of other schools as well.
In contrary to the American approach, the Japanese schools main characteristic is the bottom-
up approach which means a high involvement of employees in the form of quality circles.

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These quality circles are initiatives for solving quality problems and improving the quality of
products and processes. Individualism is behind collectivism, the Japanese share success
which is the cultural reason for the effectiveness of quality circles. In a Japanese organisation
quality is a collective issue which means that every employee is empowered and feel free to
take part. Another main feature is the widespread application of quite simple management
tools and techniques. Continuous improvement is an everyday issue.
The European school of quality is based on punctuality, documentation, standardization and
on the observation of rules and execution of duties. This school evolved at the latest and took
over totality from other schools, but the focus is on quality assurance. The main goal is to
cover the whole system and processes with systematic exploration of defects and corrective
actions. This philosophy quantifies the level of control and capability of processes which
needs a well-established measurement background. The European model is strongly
formalized; the middle management is the flagship of quality issues within the organization.
The focus is on traceability and on corrective and preventive actions, the model prefer
standardized systems which are regularly revised and certified by independent institutions.
The main conclusions are the followings. The momentous milestones of the evolution of
quality management can be linked to the worlds developed industrial regions. Not only do
the special features of a given school owe to the impacts deriving from the global economic
competition, but the economic, political and cultural circumstances of a region influences
them as well. The quality philosophies, the schools and applied methods are strongly
influenced by cultural aspects. While the top management and success-orientation is strong in
the USA, in Japan the culture-rooted public spirit and in Europe the skills, qualifications and
the follow of formal rules are dominant.
The presented quality schools influence each other which has never been a simple copying,
rather the integration of new elements into their own culture which has been fulfilled by the
application of management and motivation tools and techniques that characterize a given
region. The TQM philosophy has spread in Japan and in Europe as well, both the Japanese
and European systems converge to TQM, but at the same time TQM enriches with the
application of the Japanese and the European quality toolbar as well.

I.5. Gurus of the quality movement

I.5.a. Taylor

Frederick W. Taylor (1856-1915) is credited with being one of the firsts to implement new
approaches to improve the work of unskilled workers in industrial organizations. Taylor as a
chief engineer developed a series of concepts that laid a foundation of work improvement for
the 20th century. The systematic approach of analysis and the application of some basic
concepts to manual work earned Taylor the title of father of scientific management. In his
book, The Principles of Scientific Management, Taylor reveals a few elements of his
management theory:

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 A daily task: each person in every organization should have a clearly defined, large
task which should take one day to complete.
Standard conditions: the worker should have standard tools and conditions to complete
the task.
High pay for success: significant rewards should be paid for the successful completion
of the task.
High loss for failure: failure for completing the tasks should be personally costly.
Tasks in large sophisticated organizations should be made difficult so as to require
skilled, accomplished workers.

Taylor's scientific management consisted of four principles:

1. Replace rule-of-thumb work methods with methods based on a scientific study of the
tasks.
2. Scientifically select, train, and develop each employee rather than passively leaving
them to train themselves.
3. Provide "Detailed instruction and supervision of each worker in the performance of
that worker's discrete task".
4. Divide work nearly equally between managers and workers, so that the managers
apply scientific management principles to planning the work and the workers actually
perform the tasks.

He also isolated the activity of planning from work improvement. This initiative deprived the
worker of his responsibility to improve work. This resulted in the set-up of a separate
department of inspectors to monitor the quality of the output. At the same time this lateral
thinking diffused the responsibility of quality within the organization. This group of
inspectors, reporting to a chief inspector, became known later as the quality assurance
department.

I.5.b. Shewart

Walter A. Shewart (1891-1967) was a statistician employed by Bell Labs during the 1920s
and 30s. His book The Economic Control of Quality of Manufactured Products was
considered by statisticians as a landmark contribution to the effort to improve quality of
manufactured goods. Shewart reported that variations exist in every facet of manufacturing
but that variations could be understood through the application of simple statistical tools such
as sampling and probability analysis.
Shewarts techniques taught that work process could be brought under control by defining
when a process should be left alone and when intervention was necessary. He was able to
define the limits of random variation that occur in completing any task and said that
intervention should occur only when these limits had been exceeded. He developed control
charts to monitor performance over time, thereby providing workers with the ability to
monitor their work and predict when they were about to exceed limits and possibly produce
waste.

16
Shewarts work in sampling and control charts attracted the interest of another statistician, W.
Edwards Deming.

I.5.c. Deming

As a statistician, W. Edwards Deming (1900-1993) trained Japanese engineers in the 1950s.

He significantly assisted in Japans remarkable recovery from the devastation of World War
II.
He learned that quality is not determined on the shop floor but in the executive suite. In 1950,
the Union of Japanese Scientists and Engineers invited Deming to come to Japan and deliver a
series of lectures on quality. Deming has summarized his concepts and principles in a series
of fourteen points and seven deadly diseases. His approach can be described as follows:
Quality is primarily the result of senior managements actions and decisions and not the result
of actions taken by workers. Deming stresses that it is the system of work that determines how
work is performed and only managers can create the system. Only managers can allocate
resources, provide trainings to workers, select the equipment and tools that workers use, and
provide the plant and the environment to achieve quality. Only senior managers determine the
markets in which the firm will participate and what products or services will be sold.
The worker, in turn, is responsible for the solution of those special problems caused by
actions or events directly under his or her control. Deming attempts to separate the common
from the special causes that contribute to the variation in product or service quality and
thereby allocate correctly the task of improving quality between the manager and the worker.
He advocates the use of statistical quality control, since he believes it is the statistical
understanding of systems that allows accurate diagnosis and solution of problems.
Seven deadly diseases:
1. Lack of constancy of purpose;
2. Emphasis on short term profits;
3. Evaluation of performance, merit rating or annual review;
4. Mobility of management;
5. Management by use of visible figures;
6. Excessive medical costs;
7. Excessive costs of liability.
Demings 14 points:
1. Create and publish to all employees a statement of the aims and purposes of the
company or other organization. The management must demonstrate constantly their
commitment to this statement.
2. Learn the new philosophy, top management and everybody.
3. Understand the purpose of inspection, for improvement of processes and reduction of
cost.
4. End the practice of awarding business on the basis of price tag alone.
5. Improve constantly and forever the system of production and service.
6. Institute trainings (for skills).
17
 7. Teach and institute leadership.
8. Drive out fear, create trust, create a climate for innovation.
9. Optimize toward the aims and purposes of the company the efforts of teams, groups,
staff areas, too.
10. Eliminate exhortations for the workforce.
11. Eliminate numerical quotas for production. Instead, learn and institute methods for
improvement. Eliminate management by objectives. Instead, learn capabilities of
processes and how to improve them.
12. Remove barriers that rob people of pride of workmanship.
13. Encourage education and self-improvement for everyone.
14. Take action to accomplish transformation.

I.5.d. Juran

Joseph M. Juran (1904-2008) worked within the Bell System until the start of the World War
II. Juran was also familiar with Shewarts work and was personally involved in applying these
and other statistical approaches in the production of telephone equipment.
Juran like Deming also assisted Japanese leaders in taking charge of restructuring their
industries so they could export products to world markets. Working independently of Deming
(who focused on the use of statistical process control), Juran who focused on managing for
quality went to Japan and started courses (1954) in quality management. The training
started with top and middle management. He was able to help the Japanese to adapt the
quality concepts and tools designed primarily for the factory into a series of concepts that
would become the basis for an overall management process.
Juran in his famous book titled Quality Control Handbook (published in 1951) documented
three fundamental managerial processes that were originally used to manage the finances of
an organization financial planning, financial control and financial improvement and has
applied this approach to the task of managing quality. The three elements of the Juran Trilogy
are as follows:
1. Quality planning: a process that identifies the customers, their requirements, the
product and service features the customers expect, and the processes that will deliver
those products and services with correct attributes and then facilitates the transfer of
this knowledge to the production department of the organization.
2. Quality control: A process in which the product is actually examined and evaluated
against the original requirements expressed by the customer. Problems detected are
then corrected.
3. Quality improvement: A process in which the sustaining mechanisms are put in place
so that quality can be achieved on a continuous basis. This includes allocating
resources, assigning people to pursue quality projects, and in general establishing a
permanent structure to pursue quality and maintain the gains secured.

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I.5.e. Crosby

Crosbys (1926-2001) approach to quality is also summarized in fourteen steps but built
around the following four fundamental beliefs, which he calls absolutes:
1. Crosby defines quality as conformance to requirements, not elegance. This differs
from the conventional definition of quality on that it does not reference the manner in
which the item is constructed or the method by which a service is provided. Rather,
this definition is strategic, in that it focuses on trying to understand the full array of
expectations that a customer has and drives organizations to meet these expectations.
Clearly, this external view of quality is energizing, because it establishes targets that
may be far more demanding and realistic than those established internally.
2. Do it right for the first time focusing on prevention, not inspection. This notion
attempts to correct the problem created by Taylor by ensuring that the worker
manufacturing the product or providing the service does not pass defective work.
There will be few, if any, inspectors in a quality organization, since everyone has the
responsibility for his or her own work. There is no one else to catch errors.
3. The performance standard is zero defects. Crosby has advocated the notion that zero
errors can and should be the target.
4. The measurement of quality is the cost of quality. Costs of imperfection, if corrected,
have an immediate beneficial effect on bottom-line performance as well as on
customer relations. To that extent, investments should be made in training and other
supporting activities to eliminate errors and recover costs of waste.
III. Table: Crosbys Quality Management

Quality absolutes Quality improvement

process
Conventional Reality
wisdom
Definition Goodness Conformance to Management
requirements commitment
System Appraisal Prevention quality
improvement
Standard Thats close enough Zero defects team
Measure Indices Price of measurement
nonconformance cost of quality
quality
awareness
corrective action
zero defects
planning
employee
education
zero defects day
goal setting
error cause
removal

19
 recognition
quality councils
do it all over
again

I.5.f. Feigenbaum

A. V. Feigenbaum (1920-), a former manager of manufacturing operations and quality control

for GE, has contributed significantly to the worldwide quality movement by developing the
approach that the responsibility for quality extends well beyond the manufacturing
department. He developed the concept that quality in manufacturing could not be achieved if
the products were poorly designed, inefficiently distributed, incorrectly marketed, and
improperly supported in the customers site. Thus, Feigenbaums idea that every function
within the organization is responsible for quality was developed and became known as total
quality control. "Total quality control is an effective system for integrating the quality
development, quality maintenance, and quality improvement efforts of the various groups in
an organization so as to enable production and service at the most economical levels which
allow full customer satisfaction.
Feigenbaum also originated the concept known as the cost of quality as a means of
quantifying the benefits of adopting a total quality management approach.
He also refers to the concept of a "hidden" plant the idea that so much extra work is
performed in correcting mistakes that there is effectively a hidden plant within any factory.
He emphasized the accountability for quality: because quality is everybody's job, it may
become nobody's job the idea that quality must be actively managed and have visibility at
the highest levels of management.

The common thrust behind the teachings of these quality gurus is the concept of continuous
improvement. Although their approaches differ in technique, emphasis, and application, the
objective is the same continuous improvement of every output, whether it is a product or a
service, by removing unwanted variation and by improving the underlying work processes.

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II. Development of quality management systems

II.1. Conformance to requirements

Products and services have to meet the requirements set by laws, regulations, or standards
regulating the specific features, characteristics or parameters of the product or service. In
several cases the details of the contract between the supplier and customer include similar
requirements.

II.2. Good manufacturing practice GMP

A good manufacturing practice (GMP) is a production and testing practice that helps to ensure
a quality product. Many countries have legislated that pharmaceutical and medical device
companies must follow GMP procedures, and have created their own GMP guidelines that
correspond with their legislation. Basic concepts of all of these guidelines remain more or less
similar to the ultimate goals of safeguarding the health of the patient as well as producing
good quality medicine, medical devices or active pharmaceutical products.
GMP regulations require a quality approach to manufacturing, enabling companies to
minimize or eliminate instances of contamination, mix-ups, and errors. This in turn, protects
the consumer from purchasing a product which is not effective or even dangerous.
GMP regulations address issues including recordkeeping, personnel qualifications, sanitation,
cleanliness, equipment verification, process validation, and complaint handling. Most GMP
requirements are very general and open-ended, allowing each manufacturer to decide
individually how to best implement the necessary controls. This provides much flexibility, but
also requires that the manufacturer interpret the requirements in a manner which makes sense
for each individual business.
GMP guidelines are not prescriptive instructions on how to manufacture products. They are a
series of general principles that must be observed during manufacturing. When a company is
setting up its quality program and manufacturing process, there may be many ways it can
fulfill GMP requirements. It is the company's responsibility to determine the most effective
and efficient quality process.

II.3. Military standards

Defence standards evolved from the need to ensure proper performance, maintainability and
repairability, and logistical usefulness of military equipment. The latter two goals favour
certain general concepts, such as interchange ability, standardization (of equipment and
processes, in general), cataloguing, communications, and training (to teach people what is
standardized, what is at their discretion, and the details of the standards). In the late 18th
century and throughout the 19th, the American and French militaries were early adopters and
long time developmental sponsors and advocates of interchange ability and standardization.

21
By World War II (1939-1945), virtually all national militaries and transnational alliances of
the same were busy standardizing and cataloguing. The U.S. AN- cataloguing system (Army-
Navy) and the British Defence Standards (DEF-STAN) provide examples.
For example, due to differences in dimensional tolerances, in World War II American screws,
bolts, and nuts did not fit British equipment properly and were not fully interchangeable.
Defence standards provide many benefits, such as minimizing the number of types of
ammunition, ensuring compatibility of tools, and ensuring quality during production of
military equipment.

II.4. BS5750 and ISO 9000

ISO 9000 was first published in 1987. It was based on the BS 5750 series of quality assurance
standards from British Standard Institution (BSI) that were proposed to ISO in 1979.
However, its history can be traced back some twenty years before that, to the publication of
the United States Department of Defense MIL-Q-9858 standard in 1959. MIL-Q-9858 was
revised into the NATO AQAP series of standards in 1969, which in turn were revised into the
BS 5179 series of guidance standards published in 1974, and finally revised into the BS 5750
series of requirements standards in 1979 before being submitted to ISO.
ISO 9000 is a series of standards, developed and published by the International Organization
for Standardization (ISO), that define, establish, and maintain an effective quality assurance
system for manufacturing and service industries. Revised in 1994, 2000 and then in 2008, the
international quality management systems standard has proved a global success with more
than 1 million ISO 9001 certificates (2000 and 2008 combined) issued in 178 countries and
economies by the end of 2009.
The ISO 9000 standards are available through national standards bodies. ISO 9000 deals with
the fundamentals of quality management systems, including the eight management principles
upon which the family of standards is based. ISO 9001 deals with the requirements that
organizations wishing to meet the standard must fulfill.
We are going to get acquainted with the ISO 9001 requirements in the next chapter.

II.5. HACCP

Hazard analysis and critical control points (HACCP), is a systematic preventive approach to
food safety and allergenic, chemical, and biological hazards in production processes that can
cause the finished product to be unsafe, and designs measurements to reduce these risks to a
safe level. In this manner, HACCP is referred as the prevention of hazards rather than finished
product inspection. The HACCP system can be used at all stages of a food chain, from food
production and preparation processes including packaging, distribution, etc.
HACCP itself was conceived in the 1960s when the US National Aeronautics and Space
Administration (NASA) asked Pillsbury to design and manufacture the first foods for space
flights. Since then, HACCP has been recognized internationally as a logical tool for adapting
traditional inspection methods to a modern, science-based, food safety system. Based on risk-

22
assessment, HACCP plans allow both industry and government to allocate their resources
efficiently in establishing and auditing safe food production practices.
Hence, HACCP has been increasingly applied to industries other than food, such as cosmetics
and pharmaceuticals. This method, which in effect seeks to plan out unsafe practices based on
science, differs from traditional "produce and sort" quality control methods that do nothing to
prevent hazards from occurring and must identify them at the end of the process. HACCP is
focused only on the health safety issues of a product and not the quality of the product, yet
HACCP principles are the basis of most food quality and safety assurance systems.
Seven principles of HACCP:
Principle 1: Conduct a hazard analysis. Plans determine the food safety hazards and
identify the preventive measures. A food safety hazard is any biological, chemical, or physical
property that may cause a food to be unsafe for human consumption.
Principle 2: Identify critical control points. A critical control point (CCP) is a point, step,
or procedure in a food manufacturing process at which control can be applied and, as a result,
a food safety hazard can be prevented, eliminated, or reduced to an acceptable level.
Principle 3: Establish critical limits for each critical control point. A critical limit is the
maximum or minimum value to which a physical, biological, or chemical hazard must be
controlled at a critical control point to prevent, eliminate, or reduce to an acceptable level.
Principle 4: Establish critical control point monitoring requirements. Monitoring
activities are necessary to ensure that the process is under control at each critical control
point.
Principle 5: Establish corrective actions. - These are actions to be taken when monitoring
indicates a deviation from an established critical limit. The final rule requires a plant's
HACCP plan to identify the corrective actions to be taken if a critical limit is not met.
Corrective actions are intended to ensure that no product injurious to health or otherwise
adulterated as a result of the deviation enters commerce.
Principle 6: Establish procedures for ensuring the HACCP system is working as
intended. Validation ensures that the plants do what they were designed to do; that is, they
are successful in ensuring the production of a safe product. Verification ensures the HACCP
plan is adequate, that is, working as intended. Verification procedures may include such
activities as review of HACCP plans, CCP records, critical limits and microbial sampling and
analysis. Verification also includes 'validation' the process of finding evidence for the
accuracy of the HACCP system (e.g. scientific evidence for critical limitations).
Principle 7: Establish record keeping procedures. The HACCP regulation requires that
all plants maintain certain documents, including its hazard analysis and written HACCP plan,
and records documenting the monitoring of critical control points, critical limits, verification
activities, and the handling of processing deviations.

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II.6. QS-9000

QS-9000 is the name given to the Quality System Requirements of the automotive industry
which were developed by Chrysler, Ford, General Motors and major truck manufacturers
issued in 1994.
The QS-9000 Quality System requirements are divided into three sections.
Section 1: Common requirements, includes the exact text of ISO 9001 with the
addition of automotive / heavy trucking requirements.
Section 2: Additional Requirements, includes requirements beyond the scope of ISO
9001, common to all three manufacturers.
Section 3: Customer Specific Sections, contains requirements unique to either Ford,
General Motors, or Chrysler.

II.7. VDA 6.1

VDA 6.1 is a German quality management system standard initiated by the automobile
industry. Based on ISO 9001:1994, the quality management system includes all elements of
QS 9000, with an additional four requirements specific to VDA 6.1 as follows:

Recognition of Product Risk: This is the risk of the product, failing to fulfil its
stipulated function, and its effect on the whole assembly.
Employee Satisfaction: This covers the perception of the company employees, as
well as their needs and expectations that will be met through the company's quality
system.
Quotation Structure: A customer or market is offered products for purchase or made
available to own or to use.
Quality History: This section covers the quality history of customer-supplied
products and gives an overview of the situation during a particular period.

The VDA standard is broken into two parts:

Management
Products and Processes.

II.8. ISO/TS 16949

The ISO/TS16949 is an ISO technical specification (and not a standard) aiming to the
development of a quality management system that provides for continual improvement,
emphasizing defect prevention and the reduction of variation and waste in the supply chain. It
is based on the ISO 9001 and the first edition was published in March 2002 as ISO/TS
16949:2002.
ISO/TS 16949:2009, in conjunction with ISO 9001:2008, defines the quality management
system requirements for the design and development, production and, when relevant,
installation and service of automotive-related products.

24
ISO/TS 16949:2009 is applicable to sites of the organization where customer-specified parts,
for production and/or service, are manufactured.

II.9. AS9000

When the ISO 9000 standard was first introduced, the aerospace industry started reforming
their quality management systems to comply with the standard. The ISO standard did not go
far enough in addressing the additional safety, risk management, and regulatory requirements
of their business, so they augmented it with additional quality standards of their own.
AS 9000 (Aerospace Standard) is the aerospace version of ISO 9000. AS 9000 contains ISO
9001 embedded verbatim plus 27 clarifications or qualifiers and 8 notes to the existing twenty
elements of ISO 9001. The intent is to standardize and streamline many other aerospace
quality management standards. Compared to most other industries, the aerospace sector is
considerably more demanding in terms of safety and quality. The standard embodies a
significant streamlining of all the current aerospace quality standards.
The final result was the AS9100 standard, published by the Society of Automotive Engineers
(SAE) International in 1999. It was the first comprehensive standard written for the aerospace
industry. Beyond the ISO portion, some of the requirements specific to the aerospace industry
included in AS9100 are:

o Subcontractor performance approval and review

o Maintenance, reliability, and safety
o Configuration management
o First article inspection
o Verification of design, validation and testing processes
o Purchased product verification
o Product identification throughout its life cycle
o Production machinery, tools and numerical control programs compliance
o Work performed at an outside suppliers facility
o Special processes
o Technical documentation reporting and control

AS 9100 has undergone two revisions since it was first published. The last rewrite was
designed to coincide with the release of ISO 2001:2008, and is known as AS9100C. The most
notable changes in AS9100C are the addition of new requirements for project management
and risk management, two of the biggest concerns facing the industry today. The project
management requirements were included to ensure that stakeholders had a say in the changes
proposed by a company, as well as ensure that continuous improvement efforts followed
along with the project management process. As for risk management and assessment, it has
now been implemented as its own process, weaving in business, supply chain, cost, technical,
program constraint and quality considerations. Each business must undergo a risk
management review any time a new project is undertaken, a process is changed, or a product
is modified. Acceptable programs, along with each assessed action item, must include a
responsible party, mitigation criteria, completion of the criteria, and final acceptance to each
line item.
25
II.10. ISO/IEC 17025

ISO/IEC 17025 General requirements for the competence of testing and calibration
laboratories is the main ISO standard used by testing and calibration laboratories.
There are many commonalities with the ISO 9000 standard, but ISO/IEC 17025 is more
specific in requirements for competence. It applies directly to those organizations that produce
testing and calibration results.
The ISO/IEC 17025 standard itself comprises five elements: Scope, Normative References,
Terms and Definitions, Management Requirements and Technical Requirements. The two
main sections in ISO/IEC 17025 are Management Requirements and Technical Requirements.
Management requirements are primarily related to the operation and effectiveness of the
quality management system within the laboratory. Technical requirements include factors
which determine the correctness and reliability of the tests and calibrations performed in
laboratory.
In common with other ISO quality standards, ISO/IEC 17025 requires continual
improvement. Regular internal audits are expected to indicate opportunities to make the test
or calibration better than it was. Additionally, the laboratory will be expected to keep abreast
of scientific and technological advances in relevant areas.
In common with other accreditation standards of the ISO 17000 series (and unlike most ISO
standards for management systems), third party auditing (assessment) of the laboratory is
normally carried out by the national organization responsible for accreditation. Laboratories
are therefore accredited under ISO/IEC 17025, rather than certified or registered (c.f. ISO
9000 series).

II.11. Six Sigma

Six Sigma is a set of techniques and tools for process improvement. It was developed by
Motorola in 1986. Six Sigma seeks to improve the quality of process outputs by identifying
and removing the causes of defects (errors) and minimizing variability in manufacturing and
business processes. It uses a set of quality management methods, including statistical
methods, and creates a special infrastructure of people within the organization ("Champions",
"Black Belts", "Green Belts", "Yellow Belts", etc.) who are experts in the methods. Each Six
Sigma project carried out within an organization follows a defined sequence of steps and has
quantified value targets, for example: reduce process cycle time, reduce pollution, reduce
costs, increase customer satisfaction, and increase profits.
The term Six Sigma originated from terminology associated with manufacturing, specifically
terms associated with statistical modeling of manufacturing processes. The maturity of a
manufacturing process can be described by a sigma rating indicating its yield or the
percentage of defect-free products it creates. A six sigma process is one in which 99.99966%
of the products manufactured are statistically expected to be free of defects (3.4 defective
parts/million), although, as discussed below, this defect level corresponds to only a 4.5 sigma

26
level. Motorola set a goal of "six sigma" for all of its manufacturing operations, and this goal
became a by-word for the management and engineering practices used to achieve it.
Organizations need to determine an appropriate sigma level for each of their most important
processes and strive to achieve these. As a result of this goal, it is incumbent on management
of the organisation to prioritize areas of improvement.

Six Sigma methodology asserts that:

Continuous efforts to achieve stable and predictable process results (i.e., reduce
process variation) are of vital importance to business success.
Manufacturing and business processes have characteristics that can be measured,
analyzed, controlled and improved.
Achieving sustained quality improvement requires commitment from the entire
organization, particularly from top-level management.

Features that set Six Sigma apart from previous quality improvement initiatives include:

A clear focus on achieving measurable and quantifiable financial returns from any Six
Sigma project.
An increased emphasis on strong and passionate management leadership and support.
A clear commitment to making decisions on the basis of verifiable data and statistical
methods, rather than assumptions and guesswork.
In recent years, some practitioners have combined Six Sigma ideas with lean manufacturing
to create a methodology named Lean Six Sigma. The Lean Six Sigma methodology views
lean manufacturing, which addresses process flow and waste issues, and Six Sigma, with its
focus on variation and design, as complementary disciplines aimed at promoting "business
and operational excellence". Companies such as GE and IBM use Lean Six Sigma to focus
transformation efforts not just on efficiency but also on growth. It serves as a foundation for
innovation throughout the organization, from manufacturing and software development to
sales and service delivery functions.
The International Organisation for Standards (ISO) has published ISO 13053:2011 defining
the six sigma process.

II.12. ISO 14000

ISO 14000 is a family of standards related to environmental management that exists to help
organizations (a) minimize how their operations negatively affect the environment (i.e. cause
adverse changes to air, water, or land); (b) comply with applicable laws, regulations, and
other environmentally oriented requirements, and (c) continually improve in the above.
ISO 14000 is similar to ISO 9000 quality management in that both pertain to the process of
how a product is produced, rather than to the product itself. As with ISO 9000, certification is

27
performed by third-party organizations rather than being awarded by ISO directly. The ISO
19011 audit standard applies when auditing for both 9000 and 14000 compliance at once.

II.13. EFQM

The EFQM Excellence Model is a non-prescriptive framework for organizational

management systems, promoted by EFQM (formerly known as the European Foundation for
Quality Management) and designed for helping organizations in their drive towards being
more competitive. The Model is regularly reviewed and refined: the last update was published
in 2013. Regardless of sector, size, structure or maturity, organizations need to establish
appropriate management systems in order to be successful. The EFQM Excellence Model is a
practical tool to help organizations do this by measuring where they are on the path to
excellence; helping them understand the gaps; and then stimulating solutions.
The EFQM Model acts as a common reference tool helping organisations move towards
Excellence. Thus, the Model provides its users with a set of performance improvement tools
in order for them to achieve and sustain results and Excellence.

The Model can be used to understand the relations of cause and effects between what
organisations do and the results they get. There are 3 components of the Model:

Fundamental concepts, representing eight core values or key management principles

that drive sustainable success
Nine criteria, separated in to categories of enablers and results
RADAR logic, continuous improvement cycle used by EFQM. It was originally
derived from the PDCA cycle.

We are going to get to know the model in details in a later chapter.

II.14. Common Assessment Framework

The Common Assessment Framework (CAF) is the common European quality management
instrument for the public sector. It is a free tool to assist public sector organisations to
improve their performance. The CAF helps the organisations to perform a self-assessment
with the involvement of all staff, to develop an improvement plan based on the results of the
self-assessment and to implement the improvement actions. The model "is based on the
premise that excellent results in organisational performance, citizens/customers, people and
society are achieved through leadership driving strategy and planning, people, partnerships
and resources, and processes. It looks at the organisation from different angles at the same
time, the holistic approach of organisation performance analysis."

The CAF has four main purposes:

To introduce public administrations to the principles of TQM and gradually guide

them, through the use and understanding of self-assessment, from the current Plan-
Do sequence of activities to a full fledged Plan-Do-Check-Act (PDCA) cycle;

28
 To facilitate the self-assessment of a public organisation in order to arrive at a
diagnosis and improvement actions;
To act as a bridge across the various models used in quality management;
To facilitate bench learning between public-sector organisations.

29
III. ISO 9000 standards

III.1. Quality management system

An organisation will benefit from establishing an effective quality management system

(QMS). The cornerstone of a quality organisation is the concept of the customer and supplier
working together for their mutual benefit. For this to become effective, the customer-supplier
interfaces must extend into and outside of the organisation, beyond the immediate customers
and suppliers.
A QMS can be defined as:
A set of co-ordinated activities to direct and control an organisation in order to continually
improve the effectiveness and efficiency of its performance.
These activities interact and are affected by being in the system, so the isolation and study of
each one in detail will not necessarily lead to an understanding of the system as a whole. The
main thrust of a QMS is in defining the processes, which will result in the production of
quality products and services, rather than in detecting defective products or services after they
have been produced
A fully documented QMS will ensure that two important requirements are met:
The customers requirements confidence in the ability of the organisation to deliver
the desired product and service consistently meeting their needs and expectations.
The organisations requirements both internally and externally, and at an optimum
cost with efficient use of the available resources materials, human, technology and
information.
QMS enables an organisation to achieve the goals and objectives set out in its policy and
strategy. It provides consistency and satisfaction in terms of methods, materials, equipment,
etc, and interacts with all activities of the organisation, beginning with the identification of
customer requirements and ending with their satisfaction, at every transaction interface.
Management systems are needed in all areas of activity, whether large or small businesses,
manufacturing, service or public sector. A good QMS will:
Set direction and meet customers expectations
Improve process control
Reduce wastage
Lower costs
Increase market share
Facilitate training
Involve staff
Raise morale

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III.2. ISO 9000

ISO is the International Organization for Standardization, a worldwide federation of national

standards organizations, which serves as a link between the standards of various national
organizations. It has a membership of 160 national standards institutes from all over the world
and ISOs portfolio consists of more than 17 800 standards and related documents.
ISO develops voluntary technical standards which add value to all types of business
operations. They contribute to the dissemination of technology and good business practice.
They support the development, manufacturing and supply of more efficient, safer and cleaner
products and services. They make trade between countries easier and fairer. ISO standards
also safeguard users and consumers, and make many aspects of their lives simpler. Published
under the designation of International Standards, ISO standards represent an international
consensus on the state of the art in the technology or good practice concerned. The benefits of
having common international standards are significant. Manufacturers of raw materials,
processed materials, parts, components, and subassemblies in one country can much more
easily compete against suppliers in the home country of the customer, assuming that they have
achieved internationally recognized ISO 9000 quality systems certification.

III.3. ISO 9000 family of standards

The ISO 9000 quality standards were introduced in 1987 as an umbrella set of quality system
standards by the International Organization for Standardization.
The ISO 9000 family addresses various aspects of quality management and contains some of
ISOs best known standards. The standards provide guidance and tools for companies and
organizations who want to ensure that their products and services consistently meet
customers requirements, and that quality is consistently improved. The ISO 9000 family of
international quality management standards and guidelines has earned a global reputation as a
basis for establishing effective and efficient quality management systems.
Standard Title Edition
ISO 9000:2005 Quality management systems Fundamentals Third
and vocabulary
ISO 9001:2008 Quality management systems Requirements Fourth
ISO 9004:2000 Quality management systems Guidelines for Second
performance improvements
ISO 19011:2002 Guidelines for quality and/or environmental First
management systems auditing

The ISO 9000 standard provides the fundamentals and vocabulary used in the entire ISO
9000 family of standards. It sets the stage for understanding the basic elements of quality
management as described in the ISO standards. ISO 9000 introduces users to the eight Quality

31
Management Principles (see later) as well as the use of the process approach to achieve
continual improvement.
ISO 9001 is used when you are seeking to establish a quality management system that
provides confidence in your organizations ability to provide products that fulfil customer
needs and expectations. It is the standard in the ISO 9000 family against whose requirements
your quality management system can be certified by an external body. The standard
recognizes that the term product applies to services, processed material, hardware and
software intended for your customer. There are five sections in the standard that specify
activities that need to be considered when you implement your system:
Overall requirements for the quality management system and documentation
Management responsibility, focus, policy, planning and objectives
Resource management and allocation
Product realization and process management, and
Measurement, monitoring, analysis and improvement.

Continual improvement of the quality

management system

Customers Management Customers

and other responsibility and other
interested interested
parties parties
Measurement,
Resource
analysis and Satisfaction
management
improvement

Product
Requirements Product
realization
Input Output

2. Figure: Structure of ISO 9001

The requirements in four of the sections are applicable to all organizations Quality
management system, Management responsibility, Resource management, and Measurement,
analysis and improvement. The Product realization section may be tailored to meet the needs
of the organization. The quality manual or other documentation will demonstrate how an
organization meets the ISO 9001 requirements.
Together, the five sections of ISO 9001 define what an organization should do to consistently
provide product that meets customer and applicable statutory and regulatory requirements. In
addition, an organization will seek to enhance customer satisfaction by continual
improvement of its quality management system.

32
ISO 9004 is used to extend the benefits obtained from ISO 9001 to all parties that are
interested in or affected by the operations of an organization. Interested parties include
employees, owners, suppliers, partners and society in general.
ISO 9001 and ISO 9004 are compatible and can be used separately or in combination to meet
or exceed expectations of customers and interested parties. Both standards apply a process
approach. Processes are recognized as consisting of one or more linked activities that require
resources and must be managed to achieve predetermined output. The output of one process
may directly from the input to the next process and the final product is often the result of a
network or system of processes. The eight Quality Management Principles provide the basis
for the performance improvement.
ISO 9004 gives guidance on a wider range of objectives of a quality management system than
does ISO 9001, particularly in managing for the long-term success of an organization. ISO
9004 is recommended as a guide for organizations whose top management wishes to extend
the benefits of ISO 9001 in pursuit of systematic and continual improvement of the
organizations overall performance. However, it is not intended for certification or contractual
purposes.
ISO 19011 covers the area of auditing of quality management systems and environmental
management systems. It provides guidance on the audit programmes, the conduct of internal
or external audits, and information on auditor competence. ISO 19011 provides an overview
of how an audit programme should operate and how management system audits should take
place.
Effective audits ensure that an implemented QMS meets the requirements specified in ISO
9001.

III.3.a. Implementing and maintaining a quality management system based

on the ISO 9001 standard

The implementation process is important in achieving the full benefits of the quality
management system (QMS). Most new users will obtain measurable payback early in the
process. For a successful implementation of your QMS, these seven steps are recommended:
1. Fully engage top management to
Define why an organization want to implement ISO 9001
Define the organizations mission, vision, and values
Define the organizations stakeholders: customers, suppliers, stockholders,
employees, society, etc.
Define quality policy, and
Define and align organizational objectives and related product/service quality
objectives.
2. Identify key processes and the interactions needed to meet quality objectives
3. Implement and manage the QMS and its processes (using process management
techniques)
4. Build the ISO 9001-based QMS

33
 Identify ISO 9001 requirements
Map these requirements with the implemented QMS, where applicable
Make a gap analysis : identify where in the existing system the requirements are
fulfilled, and where they are not
Include in the QMS processes the activities, procedures and controls needed.
5. Implement the system, train company staff and verify effective operation of the
processes
6. Manage the QMS
Focus on customer satisfaction
Monitor and measure the operation of the QMS
Strive for continual improvement
Consider implementing business excellence models in the company operations
7. If necessary, seek third party certification/registration of the QMS or
alternatively, issue a self-declaration of conformity

III.4. Quality management principles

This chapter introduces the eight quality management principles on which the quality
management system standards of the ISO 9000 series are based. These principles can be used
by senior management as a framework to guide their organizations towards improved
performance.
The eight quality management principles are dened in ISO 9000:2005 (Quality management
systems Fundamentals and vocabulary), and in ISO 9004:2009 (Managing for the sustained
success of an organization A quality management approach).
Principle 1 Customer focus
Organizations depend on their customers and therefore should understand current and future
customer needs, should meet customer requirements and strive to exceed customer
expectations.
Key benefits:
Increased revenue and market share obtained through exible and fast responses to
market opportunities
Increased effectiveness in the use of the organizations resources to enhance customer
satisfaction
Improved customer loyalty leading to repeat business.
Applying the principle of customer focus typically leads to:
Researching and understanding customer needs and expectations
Ensuring that the objectives of the organization are linked to customer needs and
expectations
Communicating customer needs and expectations throughout the organization
Measuring customer satisfaction and acting on the results

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 Systematically managing customer relationships
Ensuring a balanced approach between satisfying customers and other interested
parties (such as owners, employees, suppliers, nanciers, local communities and
society as a whole).
Principle 2 Leadership
Leaders establish unity of purpose and direction of the organization. They should create and
maintain the internal environment in which people can become fully involved in achieving the
organizations objectives.
Key benefits:
People will understand and be motivated towards the organizations goals and
objectives
Activities are evaluated, aligned and implemented in a unied way
Miscommunication between levels of an organization will be minimized.
Applying the principle of leadership typically leads to:
Considering the needs of all interested parties including customers, owners,
employees, suppliers, nanciers, local communities and society as a whole
Establishing a clear vision of the organizations future
Setting challenging goals and targets
Creating and sustaining shared values, fairness and ethical role models at all levels of
the organization
Establishing trust and eliminating fear
Providing people with the required resources, training and freedom to act with
responsibility and accountability
Inspiring, encouraging and recognizing peoples contributions.
Principle 3 Involvement of people
People at all levels are the essence of an organization and their full involvement enables their
abilities to be used for the organizations benet.
Key benefits:
Motivated, committed and involved people within the organization
Innovation and creativity in furthering the organizations objectives
People being accountable for their own performance
People eager to participate in and contribute to continual improvement.
Applying the principle of involvement of people typically leads to:
People understanding the importance of their contribution and role in the organization
People identifying constraints to their performance
People accepting ownership of problems and their responsibility for solving them
People evaluating their performance against their personal goals and objectives

35
 People actively seeking opportunities to enhance their competence, knowledge and
experience
People freely sharing knowledge and experience
People openly discussing problems and issues
Principle 4 Process approach
A desired result is achieved more efciently when activities and related resources are
managed as a process.
Key benefits:
Lower costs and shorter cycle times through effective use of resources
Improved, consistent and predictable results
Focused and prioritized improvement opportunities.
Applying the principle of process approach typically leads to:
Systematically dening the activities necessary to obtain a desired result
Establishing clear responsibility and accountability for managing key activities
Analysing and measuring of the capability of key activities
Identifying the interfaces of key activities within and between the functions of the
organization
Focusing on the factors such as resources, methods, and materials that will
improve key activities of the organization
Evaluating risks, consequences and impacts of activities on customers, suppliers and
other interested parties.
Principle 5 System approach to management
Identifying, understanding and managing interrelated processes as a system contributes to the
organizations effectiveness and efciency in achieving its objectives.
Key benefits:
Integration and alignment of the processes that will best achieve the desired results
Ability to focus effort on the key processes
Providing condence to interested parties as to the consistency, effectiveness and
efciency of the organization.
Applying the principle of system approach to management typically leads to:
Structuring a system to achieve the organizations objectives in the most effective and
efcient way
Understanding the interdependencies between the processes of the system
Structured approaches that harmonize and integrate processes
Providing a better understanding of the roles and responsibilities necessary for
achieving common objectives and thereby reducing cross-functional barriers
Understanding organizational capabilities and establishing resource constraints prior
to action

36
 Targeting and dening how specic activities within a system should operate
Continually improving the system through measurement and evaluation.
Principle 6 Continual improvement
Continual improvement of the organizations overall performance should be a permanent
objective of the organization.
Key benefits:
Performance advantage through improved organizational capabilities
Alignment of improvement activities at all levels to an organizations strategic intent
Flexibility to react quickly to opportunities.
Applying the principle of continual improvement typically leads to:
Employing a consistent organization-wide approach to continual improvement of the
organizations performance
Providing people with training in the methods and tools of continual improvement
Making continual improvement of products, processes and systems an objective for
every individual in the organization
Establishing goals to guide, and measures to track, continual improvement
Recognizing and acknowledging improvements.
Principle 7 Factual approach to decision making
Effective decisions are based on the analysis of data and information.
Key benefits:
Informed decisions
An increased ability to demonstrate the effectiveness of past decisions through
reference to factual records
Increased ability to review, challenge and change opinions and decisions.
Applying the principle of factual approach to decision making typically leads to:
Ensuring that data and information are sufciently accurate and reliable
Making data accessible to those who need it
Analysing data and information using valid methods
Making decisions and taking action based on factual analysis, balanced with
experience and intuition.
Principle 8 Mutually beneficial supplier relationships
An organization and its suppliers are interdependent and a mutually benecial relationship
enhances the ability of both to create value.
Key benefits:
Increased ability to create value for both parties
Flexibility and speed of joint responses to changing market or customer needs and
expectations

37
 Optimization of costs and resources.
Applying the principle of mutually beneficial supplier relationships typically leads to:
Establishing relationships that balance short-term gains with long-term considerations
Pooling of expertise and resources with partners
Identifying and selecting key suppliers
Clear and open communication
Sharing information and future plans
Establishing joint development and improvement activities
Inspiring, encouraging and recognizing improvements and achievements by suppliers.

III.5. ISO 9001 requirements - Quality management system (Clause 4)

III.5.a. General requirements

Establish, document, implement, and maintain a quality management system. Continually

improve its effectiveness in accordance with ISO 9001 requirements. Implement the system
to:
Determine processes needed for the quality management system (and their application
throughout the organization)
Determine process sequence and interaction
Determine criteria and methods for process operation and control
Ensure resources and supporting information are available
Monitor, measure where applicable, and analyze these processes
Implement actions to achieve planned results and continual process improvement
Manage these processes in accordance with ISO 9001 requirements. Define the type and
extent of control applied to any outsourced processes that affect product conformity to
requirements.

III.5.b. Documentation requirements

III.5.b.1 General requirements

Establish, document, implement, and maintain a quality management system. Continually
improve its effectiveness in accordance with ISO 9001 requirements. Implement the system
to:
Determine processes needed for the quality management system (and their application
throughout the organization)
Determine process sequence and interaction
Determine criteria and methods for process operation and control
Ensure resources and supporting information are available
Monitor, measure where applicable, and analyze these processes
Implement actions to achieve planned results and continual process improvement

38
Manage these processes in accordance with ISO 9001 requirements. Define the type and
extent of control applied to any outsourced processes that affect product conformity to
requirements.

III.5.b.2 Quality manual

Establish and maintain a quality manual with:
Scope of the quality management system
Details and justification for any exclusions
Procedures or references to the procedures
Description of interaction between processes

III.5.b.3 Control of documents

Control the documents required by the quality management system. Records are a special type
of document and must be controlled. Establish a documented procedure to:
Approve documents for adequacy prior to issue
Review, update as necessary, and re-approve documents
Identify the changes and current document revision status
Make relevant documents available at points of use
Ensure the documents remain legible and readily identifiable
Identify external documents and control their distribution
Prevent obsolete documents from unintended use
Apply suitable identification if obsolete documents are retained

III.5.b.4 Control of records

Establish and control records as evidence of conformity to requirements and to demonstrate
the effective operation of the quality management system.
Establish a documented procedure to define the controls needed for record:
Identification
Storage
Protection
Retrieval
Retention
Disposition
Keep records legible, readily identifiable, and retrievable.

III.6. ISO 9001 requirements Management responsibility (Clause 5)

III.6.a. Management commitment

Provide evidence of management commitment to develop and implement the quality

management system as well as continually improve its effectiveness by:
Expressing the importance of meeting requirements

39
 Establishing the quality policy and quality objectives
Conducting management reviews
Ensuring the availability of necessary resources

III.6.b. Customer focus

Ensure customer requirements are determined and met in order to improve customer
satisfaction.

III.6.c. Quality policy

Ensure the quality policy is:

Appropriate to the purpose of the organization
Focused on meeting requirements and continual improvement
Used as a framework for quality objectives
Communicated and understood at appropriate levels
Reviewed for continuing suitability

III.6.d. Planning

III.6.d.1 Quality objectives

Ensure quality objectives, including those needed to meet product requirements, are
established at the relevant functions and levels within the organization. Ensure quality
objectives are measurable and consistent with the quality policy.

III.6.d.2 Quality management system planning

Ensure that planning for the quality management system:
Meets the general requirements, as well as, quality objectives
Maintains the system integrity when changes are planned and implemented

III.6.e. Responsibility, authority, communication

Ensure responsibilities and authorities are defined and communicated within the organization.

III.6.e.1 Management representative

Appoint a member of your management who, irrespective of other duties, has the
responsibility and authority to:
Ensure the needed processes are established, implemented, and maintained
Report to top management on quality management system performance
Report to top management on any need for improvement
Ensuring the promotion of awareness of customer requirements

III.6.e.2 Internal communication

Ensure the appropriate communication processes are established and carried out within the
organization regarding the effectiveness of the system.

40
III.6.f. Management review

III.6.f.1 General
Review the quality management system at planned intervals to:
Ensure a suitable, adequate, and effective system
Assess possible opportunities for improvement
Evaluate the need for any changes to the system
Consider the need for changes to the quality policy and objectives
Maintain records of the management reviews.

III.6.f.2 Review input

Inputs for management review must include information on:
Results of audits
Customer feedback
Process performance and product conformity
Status of preventive and corrective actions
Follow-up actions from earlier reviews
Changes that could affect the quality system
Recommendations for improvement

III.6.f.3 Review output

Outputs from the management review must include any decisions and actions related to:
Improvement of the effectiveness of the quality management system and its processes
Improvement of product related to customer requirements
Resource needs

III.7. ISO 9001 requirements Resource management (clause 6)

III.7.a. Provision of resources

Determine and provide the resources necessary to:

Implement and maintain the quality management system
Continually improve the effectiveness of the system
Enhance customer satisfaction by meeting customer requirements

III.7.b. Human resources

III.7.b.1 General
Ensure people performing work affecting conformity to product requirements are competent
based on the appropriate education, training, skills, and experience.

III.7.b.2 Competence, training and awareness

The organization must:

41
 Determine the competency needs for personnel
Provide training (or take other actions) to achieve the necessary competence
Evaluate the effectiveness of the actions taken
Inform employees of the relevance and importance of their activities
Ensure they know their contribution to achieving quality objectives
Maintain education, training, skill, and experience records

III.7.c. Infrastructure

Determine, provide, and maintain the necessary infrastructure to achieve product conformity.
Infrastructure includes, as applicable:
Buildings, workspace, and associated utilities
Process equipment (both hardware and software)
Supporting services (such as transport, communication, or information systems)

III.7.d. Work environment

Determine and manage the work environment needed to achieve product conformity.

III.8. ISO 9001 requirements Product realization (clause 7)

III.8.a. Planning of product realization

Plan and develop the processes needed for product realization. Keep the planning consistent
with other requirements of the quality management system and document it in a suitable form
for the organization. Determine through the planning, as appropriate, the:
Quality objectives and product requirements
Need for processes, documents, and resources
Verification, validation, monitoring, measurement, inspection, and test activities
Criteria for product acceptance
Records as evidence the processes and resulting product meet requirements

III.8.b. Customer-related processes

III.8.b.1 Determination of Requirements Related to the Product

Determine customer requirements:
Specified for the product (including delivery and post-delivery activities)
Not specified for the product (but needed for specified or intended use, where known)
Determine:
Statutory and regulatory requirements applicable to the product
Any additional requirements considered necessary by the organization

42
III.8.b.2 Review of Requirements Related to the Product
Review the product requirements before committing to supply the product to the customer in
order to:
Ensure product requirements are defined
Resolve any requirements differing from those previously expressed
Ensure its ability to meet the requirements
Maintain the results of the review, and any subsequent follow-up actions. When the
requirements are not documented, they must be confirmed before acceptance.
If product requirements are changed, ensure relevant documents are amended and relevant
personnel are made aware of the changed requirements.

III.8.b.3 Customer communication

Determine and implement effective arrangements for communicating with customers on:
Product information
Inquiries, contracts, or order handling (including amendments)
Customer feedback (including customer complaints)

III.8.c. Design and development

III.8.c.1 Design and development planning

Plan and control the product design and development. This planning must determine the:
Stages of design and development
Appropriate review, verification, and validation activities for each stage
Responsibility and authority for design and development
The interfaces between the different involved groups must be managed to ensure effective
communication and the clear assignment of responsibility. Update, as appropriate, the
planning output during design and development.

III.8.c.2 Design and development inputs

Determine product requirement inputs and maintain records. The inputs must include:
Functional and performance requirements
Applicable statutory and regulatory requirements
Applicable information derived from similar designs
Requirements essential for design and development
Review these inputs for adequacy. Resolve any incomplete, ambiguous, or conflicting
requirements.

III.8.c.3 Design and development outputs

Document the outputs of the design and development process in a form suitable for
verification against the inputs to the process. The outputs must:
Meet design and development input requirements

43
 Provide information for purchasing, production, and service
Contain or reference product acceptance criteria
Define essential characteristics for safe and proper use
Be approved before their release

III.8.c.4 Design and development review

Perform systematic reviews of design and development at suitable stages in accordance with
planned arrangements to:
Evaluate the ability of the results to meet requirements
Identify problems and propose any necessary actions
The reviews must include representatives of the functions concerned with the stage being
reviewed. Maintain the results of reviews and subsequent follow-up actions.

III.8.c.5 Design and development verification

Perform design and development verification in accordance with planned arrangements (see
7.3.1) to ensure the output meets the design and development input requirements. Maintain
the results of the verification and subsequent follow-up actions.

III.8.c.6 Design and development validation

Perform validation in accordance with planned arrangements to confirm the resulting product
is capable of meeting the requirements for its specified application or intended use, where
known. When practical, complete the validation before delivery or implementation of the
product. Maintain the results of the validation and subsequent follow-up actions.

III.8.c.7 Control of design and development changes

Identify design and development changes and maintain records. Review, verify, and validate
(as appropriate) the changes and approve them before implementation. Evaluate the changes
in terms of their effect on constituent parts and products already delivered. Maintain the
results of the change review and subsequent follow-up actions.

III.8.d. Purchasing

III.8.d.1 Purchasing process

Ensure that purchased product conforms to its specified purchase requirements. The type and
extent of control applied to the supplier and purchased product depends upon the effect of the
product on the subsequent realization processes or the final product.
Evaluate and select suppliers based on their ability to supply product in accordance with the
requirements. Establish the criteria for selection, evaluation, and re-evaluation. Maintain the
results of the evaluations and subsequent follow-up actions.

III.8.d.2 Purchasing information

Ensure the purchasing information contains information describing the product to be
purchased, including the requirements for:
Approval of product, procedures, processes, and equipment

44
 Qualification of personnel
(Also include quality management system requirements in the purchasing information) Ensure
the adequacy of the specified requirements before communicating the information to the
supplier.

III.8.d.3 Verification of purchased product

Establish and implement the inspection or other necessary activities for ensuring the
purchased products meet the specified purchase requirements. If the organization or its
customer proposes to verify the product at the supplier location, state the intended verification
arrangements and method of product release in the purchasing information.

III.8.e. Production and service provision

III.8.e.1 Control of production and service provision

Plan and carry out production and service provision under controlled conditions to include, as
applicable:
Availability of product characteristics information
Availability of work instructions, as necessary
Use of suitable equipment
Availability and use of monitoring and measuring equipment
Implementation of monitoring and measurement activities
Implementation of product release, delivery, and post-delivery activities

III.8.e.2 Validation of processes for production and service provision

Validate any production or service provision where subsequent monitoring or measurement
cannot verify the output. This validation includes processes where deficiencies may become
apparent only after product use or service delivery. Demonstrate through the validation the
ability of processes to achieve the planned results.
Establish validation arrangements including, as applicable:
Criteria for process review and approval
Approval of equipment
Qualification of personnel
Use of defined methods and procedures
Requirements for records
Re-validation

III.8.e.3 Identification and traceability

Identify, where appropriate, the product by suitable means during product realization. Identify
the product status with respect to monitoring and measurement requirements throughout
product realization. Where traceability is a requirement, control the unique identification of
the product and maintain records.

45
III.8.e.4 Customer property
Exercise care with any customer property while it is under the control of, or being used by,
the organization. Identify, verify, protect, and safeguard customer property provided for use,
or for incorporation into the product. Record and report any lost, damaged, or unsuitable
property to the customer.

III.8.e.5 Preservation of product

Preserve the product during internal processing and delivery to the intended destination in
order to maintain conformity to requirements. As applicable, preservation includes:
Identification
Handling
Packaging
Storage
Protection
Also apply preservation to the constituent parts of the product.

III.8.f. Control of measuring and monitoring equipment

Determine the monitoring and measurements to be made, and the required equipment, to
provide evidence of product conformity. Use and control the monitoring and measuring
devices to ensure that measurement capability is consistent with monitoring and measurement
requirements.
Where necessary to ensure valid results:
Calibrate and/or verify the measuring equipment at specified intervals or prior to use
Calibrate the equipment to national or international standards (or record other basis)
Adjust or re-adjust as necessary
Identify the measuring equipment in order to determine its calibration status
Safeguard them from improper adjustments
Protect them from damage and deterioration
Assess and record the validity of prior results if the device is found to not conform to
requirements. Maintain records of the calibration and verification results.
Confirm the ability of software used for monitoring and measuring for the intended
application before its initial use (and reconfirmed as necessary).

III.9. ISO 9001 requirements Measurement, analysis and improvement

(clause 8)

III.9.a. General

Plan and implement the monitoring, measurement, analysis, and improvement processes
needed to:

46
 Demonstrate conformity to product requirements
Ensure conformity of the system
Continually improve effectiveness
Determine through planning the need for, and use of, applicable methods, including statistical
techniques, as well as, the extent of their use.

III.9.b. Monitoring and measurement

III.9.b.1 Customer satisfaction

Monitor information on customer perception as to whether the organization is meeting
requirements (as one of the performance measurements of the quality management system).
Define the methods for obtaining and using this information.

III.9.b.2 Internal audit

Conduct internal audits at planned intervals to determine if the quality management system:
Conforms to planned arrangements
Conforms to requirements of ISO 9001
Is effectively implemented and maintained
The organization must:
Plan the audit program
Consider the status and importance of the audited areas
Consider the results of prior audits
Define the audit criteria, scope, frequency, and methods
Select and use impartial and objective auditors (not audit their own work)
Establish a documented procedure to address responsibilities and requirements to:
Plan audits and conduct audits
Establish records and report results
Maintain records of the audits and their results.
Ensure management of the audited areas takes actions without undue delay to eliminate
detected nonconformities and their causes. Verify through follow-up actions the
implementation of the action and report the results.

III.9.b.3 Monitoring and measurement of process

Apply suitable methods for monitoring and, where applicable, measurement of the quality
management system processes. Confirm through these methods the continuing ability of each
process to satisfy its intended purpose. When the planned results are not achieved, take
correction and corrective action, as appropriate.

III.9.b.4 Monitoring and measurement of product

Monitor and measure product characteristics to verify product requirements are being met.
Carry out the monitoring and measuring at the appropriate stages of product realization in

47
accordance with planned arrangements. Maintain evidence of conformity with the acceptance
criteria.
Record the person responsible for authorizing release of product for delivery to the customer.
Product release and service delivery cannot proceed until all planned arrangements have been
satisfactorily completed, unless otherwise approved by a relevant authority, and where
applicable, the customer.

III.9.c. Control of nonconfirming product

Ensure any nonconforming product is identified and controlled to prevent its unintended use
or delivery. Establish a documented procedure to define the controls and related
responsibilities and authorities for dealing with nonconforming product.
Where applicable, deal with the nonconforming product by one or more of the following
ways:
Take action to eliminate the detected nonconformity
Authorize its use, release, or acceptance by concession
Take action to preclude its original intended use or application
Take action appropriate to the effects, or potential effects, of the nonconformity when
nonconforming product is detected after delivery or use has started
Maintain records of the nature of the nonconformity, and any subsequent actions, (including
any concessions). When the nonconformity is corrected, re-verify it to show conformity.

III.9.d. Analysis of data

Determine, collect, and analyze appropriate data to demonstrate the suitability and
effectiveness of the quality management system, as well as, evaluate where continual
improvement of the effectiveness of the quality management system can be made. Include in
the analysis the data generated by monitoring and measuring activities and from other relevant
sources. Analyze this data to provide information on:
Customer satisfaction
Conformity to product requirements
Characteristics and trends of processes and products, including opportunities for
preventive action
Suppliers

III.9.e. Improvement

III.9.e.1 Continual improvement

Continually improve the effectiveness of the quality management system through:
Quality policy
Quality objectives
Audit results

48
 Analysis of data
Corrective and preventive action
Management review

III.9.e.2 Corrective action

Take corrective action to eliminate the causes of nonconformities and prevent recurrence.
Corrective action must be appropriate to effects of the problem.
Establish a documented procedure for corrective action that defines requirements to:
Review nonconformities (including customer complaints)
Determine the causes of nonconformities
Evaluate the need for actions to prevent recurrence
Determine and implementing the needed action
Maintain records of the results of the action taken
Review the effectiveness of corrective action taken

III.9.e.3 Preventive action

Determine the action to eliminate the causes of potential nonconformities in order to prevent
their occurrence. Ensure preventive actions are appropriate to the anticipated effects of the
potential problem.
Establish a documented procedure for preventive action to define requirements to:
Determine potential nonconformities and their causes
Evaluate the need for actions to prevent occurrence
Determine and implementing the needed action
Maintain records of the results of the action taken
Review the effectiveness of preventive action taken

Organizations and companies often want to get certified to ISOs management system
standards (for example ISO 9001) although certification is not a requirement. The best reason
for wanting to implement these standards is to improve the efficiency and effectiveness of
company operations.
A company may decide to seek certification for many reasons, as certification may:
be a contractual or regulatory requirement
be necessary to meet customer preferences
fall within the context of a risk management programme, and
help motivate staff by setting a clear goal for the development of its management
system.
To become certified, a firm needs to do an enormous preparation, including assignment of
management responsibility; development of detailed operations descriptions; preparation of
quality control procedures, product identification and testing, procedures for handling storage,

49
packing and shipping of products, training procedures, description of inspection, measuring,
and test equipment, procedure for maintaining quality records, and numerous other processes
and procedures.
Upon completion of the firms preparatory activities for ISO 9000 quality systems
certification, the firms operations are evaluated by a registrar. The registrar is a third party
independent from the firm seeking ISO 9000 certification. The registrar is certified by a
national accreditation board.
If accredited, the firm must undergo periodic audits by independent registrars. ISO 9000
accreditation is not given permanently but is subject to suspension of the ISO 9000 certified
firm does not adhere to its certified process, procedures and quality systems and products.

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IV. Total Quality Management

IV.1. Introduction to TQM

At the conclusion of World War II, demand for consumer goods was so strong that U.S.
producers of goods and services had difficulty meeting market demands. The lessons learned
during the war about how to produce quality materials were ignored, and American
manufacturers went about the business of meeting the needs of the largest market in the world
with quantity, not quality. The huge production capability the US built to produce war
material was converted to the mass production of cars, refrigerators and other consumer
products.
Other countries recovering from the devastation of the war had little infrastructure left and a
much smaller market to serve. Starting with a clean state, they designed new, more
efficient, more flexible manufacturing capabilities, which enabled them to meet needs of their
smaller market and niches in our market. This new flexibility and capability, coupled with a
keen understanding of what customers desired, has led to an economic revolution in which
smaller countries such as Japan, Korea, Taiwan and Germany have captured large
segments of the US market and have also displaced US manufacturers as suppliers in
segments of world markets.
This postwar reversal in roles has caused US imports to overwhelm our exports, thereby
creating a huge trade imbalance and an outflow of US dollars to other countries.
As producers in Europe and Asia continued to gain market share in the US and displaced
domestic manufacturers in world markets, the question for American was, What they can do
about this? What they can do to stem the tide of imports and increase their ability to export
their goods and services and to compete internationally?
During the thirty-year period ending in 1980, the US dominated a number of industries and
world markets. The US supplied the majority of the worlds need for cars, radios, TVs,
cameras, and copiers because we they were the most efficient producer. Since the 1980s, they
have lost their role as supplier to the world.
More important, Americans may have lost the one advantage they prized most. They know
that Japanese, for example, have supplanted them not only in their traditional markets, such as
consumer electronics, but in what was once a unique American competitive advantage
know-how. Comparing the Japanese edge in manufacturing to their own capabilities, they
find that their Japanese competitor has bested them in a very critical dimension. For every
hour of labor the Japanese use to produce a product, the US required more labor to produce
the same item.
Many studies were completed in the US during the last decade on ways to improve their
international competitiveness. Since 1980, the US has been displaced in these markets by
foreign competitors that seem to be more innovative, more cost effective, and more capable of
meeting the consumers requirements.

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The result of this superior performance by foreign firms is that the US has been pushed out of
supplying the worlds major markets, some of which they developed and once dominated.
The post-World War II economy has given way to a new era in which consumers can choose
from a full array of good and services. The relative openness of US markets to all foreign
firms means that US-managed firms are subjected to increasingly intense competition from
emerging economies with lower wage rates, from economies that enjoy a lower cost of
capital, and from economies whose employees have a different work ethic. These conditions,
coupled with the fact that American consumers will always choose those goods and services
that best meet their full range requirements, mean that American managers must change the
way if they are to survive and if US as a nation are to maintain our standard of living.
The MIT Commission reported in Made in America that the problems plaguing American
industries are not just random events that, given time, will correct themselves but rather are
signs of systematic and pervasive ills that cannot be corrected by working harder to do the
same things that failed in the past. Efforts to improve quality were initiated in the US in the
early part of the 20th century by men like Shewart, Deming, Juran, Feigenbaum, Crosby and
others. Their approach as to move from the inspection of manufactures products to uncover
defects to the prevention of defects. This approach recognizes the expense and waste
associated with reworking defective products and emphasizes the need to improve the
fundamental processes employed by an organization.
Although perfected by the Japanese in the 1960s and 1970s, quality management returned to
North America in the 1980s, and the challenge for the USA was to extend these successful
manufacturing-improvement concepts to the service sector.

IV.1.a. Evolution of the TQM Concept

The concept of quality first began in manufacturing organizations producing physical,

tangible products. Indeed, it is clear that one worker might receive immediate feedback if the
subassembly being passed on were faulty. As a result, much progress has been made in the
pursuit of product- and user-based quality as firms pursued either the production or product
philosophy in their organizations. But it had to be recognized that the world moved in the
1980s to a new consumer-oriented economy that brings the concept of quality closer to the
user-based/value-based approach described by Garvin.
The quality gurus introduced above offer a variety of definitions of quality that organizations
can employ to describe the management approach they intend to use in order to achieve their
organizational objectives. Clearly, such a definition must account for the customer, but we
have come to realize that an organization must satisfy many different types of customers. To
accommodate the need to meet these varying requirements, TQM offer the following
definition:
Quality: A basic business strategy that provides goods and services that completely satisfy
both internal and external customers by meeting their explicit and implicit expectations.
This strategy utilizes the talents of all employees, to the benefit of the organization in
particular and society in general, and provides a positive financial return to shareholders.

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IV.1.b. What is a TQM System?

It has become clear that quality is not determined by the worker on the shop floor, nor it is
determined by the service technician working at the customers site. Quality is determined by
the senior managers of an organization, who by virtue of the positions they hold, are
responsible to customers, employees, suppliers, and shareholders for the success of the
business. These senior managers allocate resources, decide which markets the firm will enter,
and select and implement the management processes that will enable the firm to fulfil their
mission and their vision.
Combining various teachings of the quality gurus with practical experience has led to the
development of a simple but effective model for implementing TQM. This model build on
three fundamental principles of total quality focus on the customers (internal and external);
focus on improving work processes to produce consistent, acceptable outputs; and focus on
utilizing the talents of those with whom we work and six supporting elements.

Quality principles

Customer focus: quality is based on the concept that everyone has a customer and that
the requirements, needs and expectations of that customer must be met every time if
the organization as a whole is going to meet the needs of the external customer. This
concept requires a thorough collection and analysis of customer requirements, and
when these requirements are understood and accepted, they must be met.
Process improvement: the concept of continuous improvement is built on the premise
that work is the result of a series of interrelated steps and activities that result in an
output. Continuous attention to each of these steps in the work process in necessary to
reduce the variability of the output and improve the reliability of the process. The first
goal of continuous improvement is processes that are reliable reliable in the sense
that they produce the desired output each time with no variation. If variability has been
minimized and the results are still unacceptable, the second goal of process
improvement is to redesign the process to produce an output that is better able to meet
the customers requirements.
Total involvement: this approach begins with the active leadership of senior
management and includes efforts that utilize the talents of all employees in the
organization to gain a competitive advantage in the marketplace. Employees at all
levels are empowered to improve their outputs by coming together in new and flexible
work structures to solve problems, improve processes and satisfy customers. Suppliers
are also included, and over time, become partners by working with empowered
employees to the benefit of the organization.

Supporting elements

Leadership: senior management must lead this effort by example, by applying the
tools and language, by requiring the use of data and by recognizing those who
successfully apply the concepts of TQM. When installing TQM as the key
management process, the importance of the role of senior managers as advocates,
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 teachers, and leaders cannot be overstated. Businnes leaders must understand that
TQM is such a process and is composed of principles and supporting elements that
they must manage in order to achieve continuous quality improvement.
Education and training: quality is based on the skills of every employee and his or her
understanding of what is required. Educating and training all employees provides the
information they need on the mission, vision, direction and strategy of the
organization as well as the skills they need to secure quality improvement and resolve
problems. This core training ensures that a common language and a common set of
tools will be used throughout the firm. Additional training on benchmarking, statistics,
and other techniques is also required to pursue and achieve complete customer
satisfaction.
Supportive structure: senior managers may require support to bring about the change
necessary to implement a quality strategy. Such support may be provided by outside
consultants, but it is clearly far superior for an organization to be self-sufficient. To
gain this self-sufficiency, a small support staff can help the senior management team
understand the concepts of quality, assist by networking with other quality managers
in other parts of the organization, and serve as a resource on the topic of quality for the
senior management team.
Communications: communications in a quality environment may need to be addressed
differently in order to communicate to all employees a sincere commitment to change.
Reward and recognition: teams and individuals who successfully apply the quality
process must be recognized and possibly rewarded, so that the rest of the organization
will know what is expected. Failure to recognize that someone who achieves success
using the touted quality management process will convey the message that this is not
the true path to job success, possible promotion and overall personal success.
Recognizing successful quality practitioners provides role models for the rest of the
organization.
Measurement: the use of data becomes paramount in installing a quality management
process. To set the stage for the use of data, external customer satisfaction must be
measured to determine the extent to which customers perceive that their needs are
being met. The collection of customer data provides an objective, realistic assessment
of performance and is useful in motivating everyone to address real problems.

IV.2. Applying quality concepts

The TQM approach relies on understanding all works as a process. The continuous
improvement of work processes represents one of the key principles of TQM, but many
quality practitioners have struggled when applying this basic principle beyond the
manufacturing operations for which it was developed.
When comparing various types of work processes, manufacturing stands out as unique in (1)
its customers are isolated from production, (2) its outputs are tangible, and (3) its operations
are highly repetitive. By contrast, nonmanufacturing processes differ in one or more of these
key features. Customers are usually involved directly in the delivery of services, and the value

54
added by nonmanufacturing processes is often characterized as intangible. Further, some
nonmanufacturing processes are repeated infrequently, and their outputs can be unique every
time.
Although it sounds simple, overcoming of these key differences can be very difficult.

IV.2.a. Product vs Process

The traditional method focused on the product or output. Quality improvement required
tighter inspection of both incoming raw materials and outgoing finished products. With this
approach, better quality was achieved at the expense of increased waste and higher costs.
Quality is the responsibility of the QA department.

Traditional method
Product management
Suppliers Customers
I I
N N
S S
INPUT P Work process P
E OUTPUT
E
C C
T T

WASTE WASTE

3. Figure: Traditional method of product management

This is contrasted with modern, process-centred quality improvement, in which better quality
can be achieved without necessarily increasing costs. Improving quality through the process
relies on an integrated approach along the entire customer-supplier chain. Process
improvement is broader than just quality assurance or inspection. It is broader than just
operations and production alone. Furthermore, process improvement can be applied to
nonmanufacturing as well as manufacturing functions.
Modern method
Process management
Suppliers Customers

INPUT Work process OUTPUT

INFORMATION People processes INFORMATION

4. Figure: Modern approach of process management

The figure above shows the integrations of process management along the customer-supplier
chain. At its core are the work processes themselves, the processes on which product quality
improvement efforts had traditionally focused. Process management recognizes the value of
the line workers who produce and deliver products / services and integrates them into the

55
improvement processes. Process management also recognizes the role of customers and
suppliers and integrates systems that exchange information with them.

Requirements Requirements

WORK
SUPPLIER CUSTOMER
GROUP

Product / Product /
Service Service

Feedback Feedback

5. Figure: Visualization of the work process

This figure shows the basic elements of the work process model. The process begins with the
flow of information in the form of requirements from the customer to define the
characteristics of the desired output. The work group then integrates materials, equipment,
methods, and people within an environment to produce these outputs. Customer satisfaction
forms the feedback loop that drives corrective action to improve performance. This same
model is mirrored upstream to suppliers. This basic model serves as the foundation for
understanding and improving processes, regardless of the output.
Quality process management offers an inherent competitive advantage over alternative
practices, because it permits the improvement of quality while simultaneously reducing waste
and costs. This advantage is available to all organizations, regardless of whether their outputs
are manufactured products, marketing data, financial services, health care, engineering
designs, or administrative services. Since quality improvement techniques were developed for
manufacturing, successfully applying them to other functions requires identifying the inherent
differences between the work processes and adapting the techniques to the desired function.

IV.2.b. Manufacturing vs Nonmanufacturing processes

Nonmanufacturing processes differ from their manufacturing counterparts in a number of

ways.
IV. Table: Differences between manufacturing and nonmanufacturing processes

Comparing typical process Manufacturing Nonmanufacturing

attributes
Output properties tangible intangible or tangible
Production and delivery separate integrated
Customer interface focused: sales and marketing spread across line employees
Feedback through process through customer

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Organizational focus process efficiency customer relations
Process ownership clearly defined multiple
Process boundaries defined unclear
Process definition documented unclear
Control points defined none
Quality measures established and objective subjective
Corrective action preventive reactive

Consider the following differences: output properties that are tangible versus intangible;
processes that are well documented versus unclear; quality measures that are objective and
formally established versus subjective; and work processes that are separated from customers
versus subject to customer intervention. Quality improvement techniques were designed for
applications typified by the first rather than the second characteristic in each pair. Thus, the
following can be concluded about the attributes of applications that are best suited to classic
quality improvement techniques:
1. Tangible outputs that permit direct physical measurement, determination of objective
customer requirements, and translation into definitive engineering specifications.
2. Processes that are clearly documented, including raw material and equipment
specifications, product movement, operating procedures, and performance standards.
3. Functional delineation of production, sale, and delivery that clarifies organizational
boundaries, process ownership, and logical control points. Quality measures can be
established and controlled within each step of the process.

IV.2.c. Improving nonmanufacturing processes

The preceding array of differences in the attributes of manufacturing and nonmanufacturing

processes can be simplified to three key characteristics: coproduction, tangibility, and
repetition.
Coproduction: customer participation in your work
Customer participation in the production of the output is the first key characteristic that
distinguishes manufacturing from nonmanufacturing processes. Referred to as coproduction,
this characteristic is found in most nonmanufacturing functions.
As coproducers, customers frequently provide the material input into the service process.
Customers supply the automobiles, appliances, buildings on which maintenance and repair
service are performed. Customers supply their own bodies to the work processes in the health
care, travel, and entertainment fields. Customers supply the money managed and the data
processed in financial and information services. Customers supply the conceptual designs and
real estate used in construction.
The feature of coproduction brings the customer directly into the service process. As a result,
the process itself represents an experience of vital interest, importance, and value to the

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customer. Coproduction also exposes a broad array of employees in face-to-face contact with
customers. In fact, coproduction influences the basic design of service processes.
Tangibility and repetition
Tangibility and repetition are the other two key characteristics that distinguish manufacturing
from nonmanufacturing functions. Defining specifications and measuring conformance of
tangible outputs are relatively straightforward procedures that can rely on physical
characteristics such as size, weight, shape, volume, thickness, and material composition.
Repetitive processes generate large quantities of data over relatively short periods of time.
The combination of tangible outputs with repetitive processes facilitates the measurement,
comparison, analysis, and systematic improvement of operations, as well as the inspection,
grading, and sorting of outputs.
Overcoming obstacles
In order to apply quality tools beyond the manufacturing processes for which they were
designed, it is necessary to overcome the obstacles imposed by the three key differences. In
cases where the outputs are intangible, successful application requires the identification of
appropriate measures, either subjective or objective. In cases where the outputs are unique or
on which customers are coproducers, successful application requires the clarification of the
underlying work processes that are repeated. And in other cases, application requires taking
both of these steps.

IV.2.c.1 Measurement at three levels

The measurement of performance also becomes more difficult as business characteristics
diverge from those of the ideal applications. This obstacle to quality improvement can be
overcome by taking advantage of measurement at three levels: process, output, and outcome.
Unfortunately, when performance parameters are difficult to define or measure, the tendency
has been to substitute other measures without recognizing that they represent different levels.
1. Process measures define activities, variables, and operations of the work process
itself. Measures at the process level also include the measuring the products and
services that suppliers input to the work process. These measures represent parameters
that directly control the integration of people, materials, methods, machines, and the
environment within the work process. Although frequently understood and used in
manufacturing operations, measures at the process level are often absent from other
functions. Understanding and applying measures at the process level help to predict
the characteristics of the outputs before they delivered to customers.
2. Output measures define specific features, values, characteristics, and attributes of
each product or service. Furthermore, output measures can be examined from two
sides. One side represents the output characteristics desired by the customer, and the
other side represents the output characteristics actually delivered by the process. The
former is referred to as requirements, expectations, or the voice of the customer. The
latter is referred to as capability or the voice of the process. Measures at the output
reveal what is delivered to customers.

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 3. Outcome measures define the ultimate impact of the process on the customer and are
dependent on what the customer does with the product or service. Although this is the
most important level, outcome measures are the most difficult to define and analyse
because they are confounded by the customers work process. To simplify the array of
performance measures, customer satisfaction can be used as the key measurement of
outcome. Measures at the outcome level reflect the impact of outputs on the
customers processes and can only be determined after the product has been delivered
or the service provided.

Training division example of measurement levels

Participants in this example process include Carl Thoren, Michael Roberts and the companys
240 service representatives who attend the training program and apply its teachings. Thoren
and Roberts are both assigned to the training division. Thoren was responsible for developing
and designing the training program, and Roberts then delivered the course to the service
representatives.
Carl Thoren is an instructional designer in the training division of the customer service
department. He developed a four-hour training session to improve service representatives
ability to answer maintenance questions on a new household appliance. Although Michael
Roberts, the classroom instructor, is the direct customer of Thoren, attention must be paid to
the needs of customers all along the chain, and especially to the ultimate end users. Activities
in Thorens work included identifying the training needs of the service representatives,
developing the required training program, preparing an instructors guide, and producing
classroom material.
Measures at the process level of Thorens work are somewhat vague and only partly defined.
One obvious measure is the length of time required for each activity, but the training division
has not clarified any others. Instead, it focuses on output measures and develops internal
process measures as needed to understand and improve performance.
Outputs from Thorens work include the design of the four-hour course, a seventy-two-page
instructors guide, a twenty-six-page participants manual, and thirty-four visual aids for use
in the classroom. These items are the tangible outputs from Thoren, but their measurement
does not represent all of the most critically important parameters. Other output measures
relate to the intangible characteristics required for these outputs, such as accuracy,
completeness, clarity, and ease of use.
Michael Roberts, a classroom trainer, delivered ten sessions of the course that Thoren
designed to 20 customer service representatives.
The inputs into Roberts work process include outputs from Thoren. Furthermore, outputs
from Roberts work are outcomes of Thorens process. Activities within Roberts work
included lesson planning, classroom preparation, and representation of the actual course. As
with Thoren, a complete set of process and output measures has not been defined for Roberts.
As an outcome of the training process, service representatives are now able to answer twenty-
four additional customer inquiries each week. These additional calls are outputs of customer

59
service department. One outcome of these calls is an increase in sales of the new product by
$60000 per month. Another outcome is the improvement of customer satisfaction attributable
to the new skills of the service reps.
V. Table

Role Example measures

Instructional designer Process: time to develop a new course
Output: 72-page guide; 26-page manual; 34
visual aids; 4-hour design
Outcome: 10 classes delivered
Classroom instructor Process: time to plan lessons
Output: 10 classes delivered
Outcome: 5 skills gained by 240 reps
Service representative Process: 5 skills gained
Output: 24 contacts added weekly
Outcome: $60000/month higher sales;
happier customers

The figure shows how the level represented by any particular measurement is defined by its
frame of reference. To see how this works, examine one measurement from three reference
points. Training 240 service reps are an outcome of Thorens work as the course designer.
This same measure is an activity in the daily process of the service representatives. This
moving frame of reference shows how the measurement level is translated as
products/services flow along the customer-supplier chain.
Even though its set of measurements is incomplete, the training division is able to improve its
performance in the development and delivery of training programs through use of data from
all three levels. By measuring appropriate parameters and results, experiments can be
designed to test performance improvement hypotheses.
In order to apply the quality improvement concepts and tools beyond the manufacturing
processes for which they were designed, the obstacles imposed by three key differences
coproduction, tangibility, and repetition must be overcome. This can require clarifying the
underlying work processes and/or identifying appropriate measurements.
Capturing the full set of performance measures is often an idealized dream. Complete
measurement is not always practical, particularly when working outside of manufacturing and
with intangible, subjective performance characteristics or unique outputs or processes in
which customers are coproducers.
Use of measures at the process, output, and outcome levels provides a framework for
understanding performance in dimensions beyond those that are objectively measurable. This
approach can be thought of as an extension of high-school algebra with three equations and

60
three unknowns. The unknown values can be postulated and tested, derived through a
systematic application of formulas, or guessed through trial and error.
By recognizing the key differences among various types of work processes, and by
overcoming the obstacles imposed, the competitive advantage of TQM can be captured by all
organizations.

IV.3. Customer focus

IV.3.a. Identifying the customer

The key to gaining a long-term competitive advantage is to continually meet customers

expectations in ways that they recognize as adding value. To achieve this advantage, it is
necessary to know who your customers are, what they expect, and how well the organization
and its competitors are performing from the customers point of view. Focusing on the
customer, then, is the first of three basic quality management principles.

Who is the customer?

We need to know to whom we must talk to assess the level of customer service that we are
providing, and we need to identify what we must do in the future to improve. Obviously, to do
these things, we need to identify specific people with whom we work within each client
organization so that we can become more precise about what we must do to better meet their
needs.
If the task of identifying external customers is difficult, the task of identifying fellow
employees as potential customers may be even more complex, especially when dealing with
professional or senior-level employees.
The concept of internal customers is significant because it dramatically makes the case that an
organization cannot successfully meet the needs of its external customers if each output
passed between employees within the company is deficient. Mathematically it is easy to see
that the external customers requirements cannot be achieved 100 per cent of the time if each
handoff is less than 100 per cent. For example, a chain of only three internal suppliers who
each meet 90 per cent of their internal customers requirement may result in a 73 per cent
effective delivery from the organization to an external customer (0,9*0,9*0,9=0,73).
If however, we can identify the person to whom we pass the output of our work, then we can
secure from that person a list of needs, expectations and requirement that we as the supplier
must meet. Several guidelines on correctly identifying outputs are listed here:
Things that you supervise or approve but that are actually produced by others.
Examples are budgets that are developed by a staff but approved by a senior manager.
The budget is the output of the financial staff; the senior manager is a co-supplier.
Goals or outcomes for the organization. Examples are profits, customer satisfaction,
revenues, and market share increases. Like morale, these outcomes are the result of a

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 number of outputs produced by a number of individual people and are usually beyond
the capability of a single individual to impact or influence.
Steps in the work process. Generating a work plan or schedule is a step that an
individual takes as part of the effort to complete a project but is not an output that is
passed along others.
The overall function described by an individuals job title or responsibility. The
manager of the computer service department, in all likelihood, does not actually repair
computers, even though he or she is certainly responsible for the timely, accurate
repair of malfunctioning computers. Rather, the manager generates staffing plans,
forecasts, training plans, budgets, and a number of outputs that are passed to others.
The employees in the department actually perform the repair service because they visit
the customers site, diagnose the problems, and effect the repairs.
What outputs are:
The specific products or services that you produce, as part of your work process, and
that you pass to others, who, in turn, use them in their work process.

What do customers want?

Once we have identified the customers for the output we produce, we must determine from
the customer what he or she expects, requires, and needs from us, the supplier. We must
accept the concept that quality is defined by the customer and meeting the customers needs
and expectations is the strategic goal of TQM.
Sometimes, the customers are unsure of their precise needs and expect the supplier to assist in
the clarification of their requirements. This situation can be turned into an advantage, since it
creates opportunity to develop a partnership between customer and supplier that is beneficial
to both. In many TQM systems, the customer bring the supplier in early in the new product
development cycle to take advantage of the suppliers specialized skill.

Customer satisfaction

The objective of implementing this disciplined approach of determining outputs, identifying

customers, and identifying requirements is to enhance the suppliers ability to meet the
customers needs and expectations and thereby increase customer satisfaction. Clearly, as we
discussed it earlier, the only viable means for organizations to achieve their objectives is to
meet the requirements of their customers by continually improving work processes. Customer
needs and expectations are constantly escalating as customers have their requirements met
and learn of new possibilities from competitors. Any company that is too internally focused
and not mindful of the dynamics of the marketplace will eventually lose market share. The
task, then, is to pursue customer satisfaction in an organized, disciplined manner.

A word of caution

While internal suppliers are focusing on meeting the needs of their immediate customer (the
next person to whom they are providing a product or service), they should also be mindful of

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the final end user, the external customer who will eventually consume the product or service
and pay the bills. This awareness provides a reality check on an organization, in that all
individuals in the organization must understand how their products and services are being
accepted in the marketplace. Later, when customer satisfaction data are reported, everyone
sees his or her value in contributing to the success of the organization.

Summary

Identifying our customer is best started by determining the output we are producing and then
identifying the individual to whom we will pass our output. If we cannot identify an
individual who receives our output in his or her work process, we must stop as we are
producing a scrap!
Once we have identified our customers, and they agree that they are our customers, then we
must gather and clarify their requirements and build a complete understanding of what they
want, need and expect of us. If we go further as suppliers, and identify latent requirements
(features that our customers may not have been aware of but really want), then we begin to
become a more valued supplier and possibly, in the eyes of the customer, a partner.
Having identified the customers requirements, meeting those requirements every time 100
per cent of time is the essence of achieving quality.

IV.3.b. Understanding customer expectations

What do customers want? In essence, they want their expectations to be met completely and
consistently. Consumers tend to perceive quality of a service by comparing the actual service
experienced to what their expectations were before purchasing it. Service is judged to be
unsatisfactory when expectations are not met, satisfactory they are met, and more than
satisfactory when they are exceeded.
Successful organizations are able to diagnose the full set of customers expectations and
satisfy them completely, every time. World-class organizations have the uncanny ability of
understanding implicit and latent requirements. These latent requirement are features that
customers want but do not know are available and hence are unable to articulate in
discussions with their suppliers.
Once the customers are identified in the targeted market niche for a particular product or
service, their expectations can be determined by answering key questions:
1. What product/service characteristics do customers want?
2. What performance level in needed to satisfy their expectations?
3. What is the relative importance of each characteristic?
4. How satisfied are customers with performance at the current level?
Finding answer to these questions begins postulating a set of features and characteristics that
customers might want. This list of hypothetical criteria should next be tested by directly
asking customers. The process of learning customers needs, requirements, expectations, and
level of satisfaction is commonly called listening to the voice of the customers.

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IV.3.c. What are the characteristics of a quality service?

Customers expect to receive value in the products or services they purchase or use. In this
context, value can be defined as the relationship between what customers get in exchange for
what they give. Although this has often been considered as a trade-off between price and
quality, a detailed analysis shows that far more is involved. For example, what about
convenience? A customer may sacrifice convenience in search of lower price or higher
quality. Therefore, in a global sense, the characteristics of quality service are those that enable
customers to feel they have made a fair exchange and received value.
Scores of models and frameworks have been developed to help clarify how customers define
quality or value. In this chapter we introduce five models:
1. Faster, better, cheaper
2. Eight dimensions of quality
3. Ten determinants of service quality
4. Five rater criteria
5. Compendium of quality characteristics

Faster, better, cheaper

Value can be viewed most simply as getting things that are faster, better, and cheaper than
available elsewhere. The first dimension, time, represents how quickly, easily, or
conveniently a product or service can be obtained. The second dimension, cost, equates to
how expensive the item is. The third dimension, quality, is the most difficult one to
characterize.
To begin clarifying this complex dimension of quality, it is useful to subdivide it into two
major sets. The first is product quality and includes the tangible attributes that are retained by
the customer. The second is service quality and includes the characteristics observed or
experienced by the customer during the transaction.
As explained previously, customers are often involved directly in the service process.
Therefore, some portion of the value in service consists of how it is delivered. Service quality
is judged by the customer during the service. In air travel, for example, service quality
involves the behaviour of the cabin attendants and the comfort of the flight.
The product represents what is delivered and can be measured after the service has been
performed. Continuing with the air travel example, product quality includes safe delivery of
passengers and their luggage to the expected destination at the scheduled time.

Eight dimensions of quality

Garvin has defined eight dimensions that can be used at a strategic level to analyse quality
characteristics. Some of the dimensions are mutually reinforcing, whereas others are not
improvement in one may be at the expense of others. Understanding trade-offs desired by
customers among these dimensions can help build a competitive advantage.

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 1. Performance: The products primary operating characteristic. For example, a
performance of an automobile includes traits such as acceleration, handling, cruising
speed, and comfort. Performance of an airline includes on-time arrival.
2. Features: Secondary aspects of performance. These are the bells and whistles that
supplement the basic functions. Examples include free drinks on planes and sunroofs
on cars. The line separating primary characteristics from secondary features is often
difficult to draw. Further, customers define value in terms of flexibility and their
ability to select among available features, as well as the quality of those features.
3. Reliability: Probability of successfully performing a specified function for a specified
period of time under specified conditions. Reliability of durable goods is often
measured as the mean time to first failure or mean time between failures. These
measures, however, require a product to be in use for a specified period of time and
are not relevant in the case of products and services that are consumed instantly.
4. Conformance: Degree to which a products design and operating characteristics meet
established standards. Although this is sometimes defined as conformance to
requirements, a sounder analysis will be obtained by examining each characteristics
divergence from its target value. This more robust measure of conformance is built on
the teachings of a Japanese statistician, Taguchi.
5. Durability: A measure of product life. Durability can be defined as the amount of use
obtained from a product before it deteriorates to the point that replacement is preferred
over repair. Durability is closely linked to both reliability and serviceability.
Consumers weigh the expected costs of future repairs against the investment in and
operating expenses of a newer, more reliable model.
6. Serviceability: The speed, courtesy, competence, and ease of repair. The cost of
repairs includes more than the simple out-of-pocket costs. Serviceability covers this
full dimension by recognizing the loss and inconvenience due to downtime of
equipment, the nature of dealings with service personnel, and the frequency with
which repairs fail to correct the outstanding problems.
7. Aesthetics: How a product looks, feels, sounds, tastes, or smells. Aesthetics is largely
a matter of personal judgement and a reflection of individual preference; it is highly a
subjective dimension.
8. Perceived quality: Reputation. Consumers do not always have complete information
about a products or services attributes; indirect measures or perceived quality may be
their only basis for comparing brands.

Ten determinants of service quality

Research by Berry, Parasuraman and Zeithaml in the early 1980s provides a strong foundation
for understanding the attributes of service quality. Through interviews with business
executives and customer focus groups, Berry et al identified ten determinants of service
quality:
1. Reliability: Consistency of performance and dependability; performing the right
service right the first time; honouring promises; accuracy.
2. Responsiveness: Willingness or readiness of employees to provide service; timeliness.

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 3. Competence: Possession of the skills and knowledge required to perform the service.
4. Access: Approachability and ease of access; waiting time; hours of operation.
5. Courtesy: Politeness, respect, consideration, and friendliness of contact personnel.
6. Communication: Keeping customers informed in language they can understand;
listening to customers; adjusting language to different needs of different customers;
explaining the service itself, how much it will cost, and how problems can be handled.
7. Credibility: Trustworthiness, believability, honesty; company reputation; personal
characteristics of personnel.
8. Security: Freedom from danger, risk, or doubt; physical safety; financial security;
confidentiality.
9. Understanding the customer: Making the effort to understand the customers needs;
learning the customers specific requirements; providing individualized attention;
recognizing the regular customer.
10. Tangibles: Physical evidence of the service; physical facilities; appearance of
personnel; tools or equipment used to provide service; physical representation of the
service; other customers in the service facility.

Five rater criteria

As an outgrowth of their work in developing ten determinants of service quality, Berry et al

distilled their list to five broader categories:
1. Reliability: Ability to perform the promised service dependably and accurately.
2. Assurance: Knowledge and courtesy of employees and their ability to inspire trust and
confidence.
3. Tangibles: Physical facilities, equipment, and appearance of the personnel.
4. Empathy: Caring, individualized attention the firm provides its customers.
5. Responsiveness: Willingness to help customers and provide prompt service.

IV.3.d. Compendium of quality characteristics

By synthetizing the four previously described models, we are able to build a single
comprehensive set of quality characteristics. This compendium integrates Garvins eight
dimensions and Berry et al.s ten determinants into the macroset of faster, better, cheaper.
However, rather than distinguishing between elements of product and service quality, this set
reclassifies quality into two components: deliverables and interactions. The deliverables
define what attributes are provided to customers. Their interactions characterize how
behaviours and styles impact on customers while they are experiencing the service process.
Both elements apply to all products and services, and this description can be used to confirm
that all major characteristics have been considered.

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 VI. Table

Deliverables Interactions
Faster Availability Responsiveness
Convenience Accessibility
Better Performance Reliability
Features Security
Reliability Competence
Conformance Credibility
Serviceability Empathy
Aesthetics Communications
Perceived quality Style
Cheaper Price

IV.3.e. What performance level is needed to satisfy expectations?

Service quality features are often measured in subjective, qualitative terms based on
observations and comparisons. Product quality is usually measured in absolute, quantitative
terms based on physical or chemical properties.
VII. Table

Product quality Service quality

Attributes Objective Subjective
Tangible Intangible
Measures in absolute terms Observed in comparative
such as physical or chemical terms relative to expectations
properties or prior experience
Examples Size, weight, volume, Attitude, courtesy,
delivery time, material, cooperation, attentiveness,
count, colour reputation, dependability,
friendliness

In order to measure quality, we should begin by defining the characteristics that are important
to customers. The next step is to determine how to obtain meaningful data. This approach is
the same whether the feature is an element of product quality or service quality.

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IV.3.f. Implicit, explicit and latent requirements

The characteristics of products and services expected by customers can be viewed as a

progressive hierarchy of three levels: base expectations, specifications/requirements, and
delight. These three levels are often referred to implicit, explicit and latent. Delineation in this
fashion provides a model for understanding the level of performance needed to satisfy
customers expectations.

Level 3
Delight!
Value-added characteristics
and features that
customers did not expect

Level 2
Options and trade-
Specifications
offs available for
and
selection by
requirements
customers

Level 1
Minimum
performance levels Base expectations
always assumed
present

6. Figure

The customers base expectations form the lowest level. These are the characteristics (or
levels of performance) that are always assumed to be present, and if they are missing,
customers will always be dissatisfied. When buying a car, customers assume certain basic
attributes will be included without any discussion with the dealer, e.g. cornering stability,
collision protection, motor vehicle inspection, rustproofing.
The next level is presented by the specifications and requirements that are visible to
customers and are actively involved in their selection process. This is the level at which
explicit trade-offs are made and terms negotiated. Staying with cars as the example, this level
of performance covers the features that are advertised and those that are discussed with
dealers. They include such characteristics as fuel economy, horsepower, acceleration, color,
number of seats, body style, interior dcor, price, delivery, and warranty protection.
The highest level of performance is represented by the value-added features that the customer
did not even know about but is delighted to receive. Performance at this level can be
described as delivering all of the explicit requirements as well as latent ones. Latent
requirements are real but are not visible or obvious to the customer.
Some people define quality as simply conformance to requirements, whereas others argue
that this is an incomplete definition. The latter view is particularly evident when your
competition is able to ascertain and provide features that exceed expectations and delight
customers. Note, however, that performing at the level of delight is not simply a matter of
delivering more than specified.

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Application of the three expectation levels

Recognizing the performance level of any particular product/service characteristic offers three
advantaged. First, it clarifies which characteristics should be discussed in detail with current
or prospective customers. Second, it helps to predict how the level of customer satisfaction
might respond to a change in characteristics. Third, it indicates possible future trends in
expectations. This knowledge can be applied as follows:
Focus discussions with customers around characteristics that represent the
conspicuous specifications and requirements (level 2). Customers take the basic
expectations (level 1) for granted and assume that knowledgeable suppliers know this.
Similarly, customers cannot be expected to appreciate level 3 features until they are
experienced.
Meeting level 1 expectations is a defensive requirement that at best will help void
creating dissatisfied customers.
High levels of customer satisfaction can be expected by consistently delivering the
implicit base expectations (level 1) and every explicit specification (level 2), as well as
including the value-added features (level 3) that delight customers.
Customers expectations will escalate, and performance levels will migrate down
through the hierarchy over time.

Responding to complaints: the hidden level

There is one more level of performance a hidden one that is only discovered after unhappy
customers bring problems back to their suppliers.
One course of action available to a dissatisfied customer is to accept the problem
begrudgingly and not complain to the supplier. Unfortunately, this customer is likely to
complain to friends and influence them to avoid buying from this supplier.
The other course of action for a dissatisfied customer is to seek compensation from the
supplier (replacement, refund, repair, etc.). By providing convenient avenues for complaining,
dissatisfaction will be reduced. Depending on how the problem is handled, three outcomes are
possible:
1. If the suppliers corrective action does not meet the customers expectations, the
original feeling of dissatisfaction will be exacerbated.
2. If the suppliers corrective action meets the customers expectations, the original
feeling of dissatisfaction will likely be neutralized.
3. If the suppliers prompt, effective, complete, and courteous action exceeds the
customers expectations, the original feeling of dissatisfaction can potentially be
converted into delight.

What is the relative importance of each characteristic?

The relative importance of each quality characteristic varies in relation to the specific
expectations of the customer at any particular time.

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As evidence of variability in the relative importance of characteristics, consider something as
simple as your own purchase of groceries. Under one set of circumstances, the quality of the
food might be paramount to you, and at another time, the ambiance of the supermarket could
be of major importance. At another time, convenience might be the critical factor, as in the
case of running out of soda for a party you are giving late at night on a holiday weekend.
Finally, there may be situations when price alone dictates your shopping decisions.
Rather than attempting to prioritize customers needs on a global basis, we suggest that the
relative importance of performance characteristics should be determined with customers for
each product and service, and then updated frequently. The relative rating of importance can
be used to guide the allocation of resources for quality improvement efforts.
Unfortunately, building an understanding of how customers rank the relative importance of
quality characteristics is not a simple task and can be confounded by customers lack of
perspective. For example, how important is safety in selecting a flight on a commercial
airline? Although safety might be the single most important characteristic, the majority of
passengers take safety for granted.
Suppliers who understand the three levels of quality explained earlier can avoid
contaminating their findings by recognizing that characteristics like flight safety are among
customers base expectations. As long as base expectations are satisfied, they will not
command the attention or interest of customers. An airline with a pattern of safety incidents
will be shunned by passengers, since it has violated their implicit expectations.
Another degree of complexity occurs because customers will seemingly change their priorities
overnight. Whereas the types of features and characteristics expected by customers might
remain stable for long periods of time, their relative importance and level of expectation will
appear to change with headline news, weather, competitors advertising, and technology
advances. The word appear is emphasized to draw attention to the need to differentiate
between fads and fundamental beliefs, or between topical headlines and underlying values.
When asking customers about the importance of a characteristic, their reply might be
confused with their level of satisfaction.

IV.3.g. Quality Function Deployment

We have offered a process for listening to the voice of the customer in order to learn
expectations. Once those expectations are understood, the next step is to translate them into
product and service specifications. The concept of this translation was introduced in the
previous chapter through the establishment of two sets of measures at the output level:
customer requirements and process capability. However, the translation between this pair of
measures is sometimes complicated. Help is available through a technique known as quality
function deployment (QFD).
QFD can be used to translate customer requirements into appropriate technical specifications.
The technique helps in defining units of measurement, and it provides a framework for
evaluating trade-offs among various combinations of design features.

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QFD was formalized in 1972 at Mitsubishis shipyard in Kobe, Japan. It has been used to
reduce development time for introducing new products and to reduce disruptive and
expensive engineering changes. The heart of QFD is a large matrix that relates what
customers require with how products and services will be designed and produced in order to
satisfy those requirements.

IV.3.h. Summary

Customers tend to perceive the quality of services by comparing the actual level experienced
to their expectations. The process of satisfying customers therefore begins by fully
understanding their expectations. This process can be referred to as listening to the voice of
the customer and requires learning what features and characteristics customers want, the
performance level they expect, the importance they attach to each characteristic, and how
satisfied they are with performance at the current level.
Faster, better, cheaper is the most fundamental set of characteristics to describe how
customers define value and provides a springboard for understanding other, more complex
models. The array of quality features can be subdivided into the categories of product and
service or of deliverables and interactions.
All products and services contain some elements of service quality. For example, an
automobile includes elements of service quality in both the purchasing process and the
inevitable maintenance and repair. The value added by the dealer in the purchasing process
includes attributes as simple as availability of the desired vehicle in inventory and
convenience of the location. The overall quality perceived by the customer is also impacted
by interactions with the sales staff.
The level of performance expected by customers can be measured, although some data will be
obtained through subjective comparisons instead of objective measures against absolute
standards. The three-level hierarchy helps in the analysis of performance measures. At the
base level are the implicit expectations, which must never be violated. The intermediate level
contains the explicit specifications, which can be discussed and negotiated. The highest level
addresses latent requirements, which might not be evident to customers but which, when
provided, will lead to their delight. Furthermore, customers expectations escalate: features
that currently delight customers may eventually become embedded in their base expectations.
Building an understanding of customer satisfaction and the relative importance customers
attach to each quality characteristic is a complex and difficult task. For example, a customer
survey might tend to underrate the importance of a vital performance characteristic because
customers are satisfied with its current delivery and distracted by other irritants.
Knowledgeable suppliers are able to discern customers true underlying values.
Once understood, customers expectations must then be translated into product and service
specifications. QFD is a technique for accomplishing this translation.

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IV.4. Mechanisms for understanding customers

Understanding customers expectations is a prerequisite for improving quality and achieving

full customer satisfaction. Significant research has been conducted in understanding
customers expectations of products, but what has been done for service?
This chapter provides a two-dimensional framework for defining the mechanisms available
for understanding customers expectations. The first dimension classifies the approach
initiated by the supplier, moving from reactive to proactive. The second dimension indicates
the level of understanding likely to be achieved by each mechanism. Although this approach
was developed for service groups within large organizations, it can be used to understand the
requirements of any type of customer.
The reactive mode of waiting to hear complaint reveals only a minimal understanding of the
customers expectations. A better understanding will be gained by initiating more active
approaches to listening to customers. Examples include help desks, hot lines, analysis of sales
data, obtaining feedback from customer representatives, and conducting informal surveys.
Full understanding, however, can best be achieved through mechanisms specifically initiated
to listen to customers. These approaches include personal interviews, focus groups, structured
surveys, and benchmarking. The key is to build a profound understanding of your customers
needs and expectations. What are the distinguishing characteristics of the products and
services that are important to the customers? How satisfied are the customers with the product
and service characteristics delivered by the organization? By the competitors? By the best
available technology?
This chapter concludes by showing how one organization progressed through the framework
to build its level of understanding of its customers needs.

IV.4.a. Development of the framework

As shown by the work process model introduced in a previous chapter, two sets of
information flow from customers to suppliers: (1) requirements a description of the product
or service expected by customers before it is produced or delivered; (2) satisfaction
feedback on what the customers liked or did not like about the work that was performed form
them.
The figure shows a two-dimensional framework that has been developed for categorizing
mechanisms commonly used to gather information from customers. The first dimension
displays the degree of activity initiated by the supplier. The second dimension maps the level
of understanding that might be attained. Although actually following a continuum, the
framework is shown with three discrete levels to simplify its explanation.

Level 1

The reactive mode is likely to reveal only a minimal understanding of the customers
expectations. Approaches here are primarily ones of gathering complaints. Examples include

72
logging irate phone calls from dissatisfied customers and responding to letters to employees
bosses.
The effectiveness of learning customers expectations and satisfaction through these reactive
approaches is impeded by four factors. First, the data are obtained from a biased, non-
representative set of customers who are sufficiently unhappy to initiate complaints, frequently
in the form of a solution. Second, only limited samplings of these unhappy customers actually
volunteer information to suppliers through these mechanisms. Third, systems to synthetize
and analyse these data are often lacking. Fourth, employees receiving information through
these channels are often distracted by the need to fix their customers problems or defend
themselves against the accusations. However, actions can be taken to minimize these four
shortcomings and maximize the value of level 1 mechanisms.
Customers failure to complain is often the result of their not knowing how to complain or
where to direct a complaint, or feeling that complaining just is nor worth their efforts.
Organizations can reduce these barriers through several approaches. They can display clearly
the avenues available to customers, including toll-free phone numbers. They can make
complaining worthwhile to their customers by responding to their problems and trying to
create advantage out of adversity.
In addition, employees receiving complaints can be supported and rewarded for their role to
offset the distaste usually inherent in this task. Training programs and user-friendly systems
are examples of supporting systems.

Level 2

A higher level of understanding will be gained by initiating active approaches to listen to

customers. Mechanisms at level 2 are defined as those approaches that communicate with
customers but have listening to customer expectations as their secondary objective. Their
primary objective often includes answering customers questions or selling more/new
products. Although they are more effective than the previously discussed reactive approaches,
the ability of level 2 mechanisms to capture customers views is compromised because these
mechanisms are designed mainly to satisfy their primary objectives. Level 2 examples include
help desks or hot lines, analysis of sales data, feedback from customer representatives, and
unstructured surveys.
As with level 1, actions can be taken to maximize the effectiveness of level 2 mechanisms.
Additional resources can be allocated to gather and analyse information obtained, and systems
can be installed to minimize the effort required to satisfy the secondary objective. Employees
involved in these types of functions can be coached and trained to gather customer data in
addition to fulfilling their primary objectives, and they can be rewarded for doing so.

Level 3

Full understanding of customers expectations can only be attained through the use of
mechanisms specifically designed to extract this information. Approaches at this third level
include personal interviews, focus groups, and designed surveys. Another mechanism at this

73
highest level is the mystery hopper, which enables suppliers to take the viewpoint of their
customers by planting employees in positions to use their own services.
Focus groups can offer insights that are impossible to capture through surveys or even
through interviews with individual customers.
Interviewing and surveying former customers is a frequently neglected level 3 mechanism.
Unlike communications with prospective or current customers, communications with former
customers can provide specific, objective data on the shortcomings of the products and
services.

High Full customer

Level 3 understanding
Personal interviews, focus groups,
designed surveys, benchmarking,
mystery shopper

Maximum
level of Level 2
understanding Service desk, networks, hotline, sales data
analysis, unstructured surveys, customer
reps

Level 1
Unsolicited
Low complaints

Reactive Approach Proactive

7. Figure

IV.4.b. Benchmarking to understand expectations

Benchmarking is the process of continually researching for new ideas and methods, practices
and processes, and either adopting the practices or adapting the good features, and
implementing them to obtain the best of the best. Customers expectations are influenced by
what they learn through comparing shopping. Although they might settle for your particular
product or service now, what is to stop them from finding something better next time?
Benchmarking enables suppliers to establish performance targets based on best possible
practices and continuously improve toward those targets.
Benchmarking is the search for best practices. It is the search for what is best and for an
understanding hoe the best is achieved. There are four distinct types of benchmarking:
1. Internal: One of the easiest benchmarking investigations is to compare operations
among functions within your own organization. This type of investigation is
applicable to multidivisional or international firms. Data should be readily available
and reportable on a consistent basis.
2. Competitive: Direct product or service competitors are the most obvious to benchmark
against. Although this information may be difficult to obtain, its value is high.

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 3. Functional: It is not necessary to limit comparisons to direct competitors. In fact, a
narrow focus may risk missing potential breakthroughs. Functional benchmarking
investigates leaders in dissimilar industries. The relevance of comparison is
maintained by defining the performance characteristics that must be similar to your
own functions.
4. Generic: Some business functions and processes are the same regardless of
dissimilarities across industries. Generic benchmarking is the purest form of
benchmarking, in that it may uncover methods that are not implemented in the
investigators own industry. It extends functional benchmarking by removing the
constraints imposed by limiting the investigation to practices with similar
characteristics. It holds the potential for revealing the best of the best. It requires broad
conceptualization. Although it is the most difficult type of benchmarking to use, it
probably provides the highest potential payoff.

IV.5. Managing key processes

One key to breaking the view of fire fighting and building a long-term perspective is to
strengthen the underlying business processes instead of addressing each specific output and
deviation.

IV.5.a. What is a work process?

All products and services are delivered through work or business processes. Before explaining
how to manage and improve processes, it might be useful to review the basic terms and
concepts that define work processes.
A process can be defined as the sequential integration of people, materials, methods, and
machines in an environment to produce value-added outputs for customers. A process
converts measurable inputs into measurable outputs through an organized sequence of steps.
Four groups of people are involved in the operation and improvement of processes:
1. Customers: the people (or person) for whom the output (product or service) is being
produced. Customers are the people who will use the output directly or who will take
it as input into their work process.
2. Work group: the people (or person) who work in the process to produce and deliver
the desired output.
3. Supplier: the people (or person) who provide input to the work process. The people in
the process are in fact the customers of the supplier.
4. Owner: the person who is responsible for the operation of the process and for its
improvement.
Customers are the ones, who define the output desired from the process. This is accomplished
through two broad categories of information that flow from customers to the work group. The
first category consists of the requirements: a description of what the customers need, want and
expect. The second category of communication is feedback: an explanation how well the
output was delivered in comparison to the customers expectations. This feedback signal is

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vital for the improvement of the process for future operations. The flow of information and
products with suppliers appears as a mirror image of the process used to connect the work
group to its customers.

IV.5.b. Six ingredients of process management

There are six ingredients that are essential for process management:
1. Ownership: assign responsibility for the design, operation, and improvement of the
process.
2. Planning: establish a structured and disciplined approach to understand, define, and
document all major components in the process and their interrelationships.
3. Control: assure effectiveness: all outputs are predictable and consistent with
customers expectations.
4. Measurement: map performance attributes to customers requirements and establish
criteria for the accuracy, precision, and frequency of data acquisition.
5. Improvement: increase effectiveness of the process by permanently embedding
identified improvements.
6. Optimization: increase efficiency and productivity by permanently embedding
identified improvements.
These six ingredients are fundamental to the successful management of any type of process.
These ingredients are needed for the work processes that produce and deliver products and
services to customers, for the processes that clarify requirements and satisfaction along the
customer-supplier chain, and for the processes that support employees in their jobs.

IV.5.c. Defining key processes

Every organization can identify the key processes on which its success depend.
The way in which businesses define their organizational structure provides an inherent
advantage for the ownership and planning of processes that exactly align within formal
organizational boundaries. This generalization contains both good news and bad news. The
good news is that the processes that are complemented by the organizational structure tend to
have a history of successful control, measurement, improvement and optimization. The bad
news is that the processes that cross organizational boundaries are likely to be in poor
conditions.
For those interested in more bad news, the performance of the processes that cross
organizational boundaries and are in poor condition may be more important to customers than
the performance of some processes that fit neatly within administrative boundaries.
Furthermore, this importance to the customer may not just involve the outputs from these
processes, particularly in service functions, where the customers are active participants in the
delivery process. The good news behind all this is that the greatest short-term improvement
opportunities are likely to be found among these cross-functional processes.
Immunization against unhealthy cross-functional processes can be gained by systematically
searching for key business processes, regardless of organizational boundaries.

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There are six questions to help in the identification of key processes that have the greatest
impact on customers:
1. Which products and services are most important to customers?
2. What are the processes that produce these products and services?
3. What are the key ingredients that stimulate action in the organization, and what are the
processes that convert these stimuli to outputs?
4. Which processes have the highest visibility with customers?
5. Which processes have the greatest impact on customer-driven performance standards?
6. Which processes do performance data or common sense suggest have the greatest
potential for improvement?
Answers to these questions will differ for different types of organizations. No universal
formula or prescription has been found. Key processes at a hospital will be different from
those at a nationwide fast-food franchise or at an aircraft manufacturer. Nonetheless, all will
share some elements of commonality.
Once the key processes have been identified, their systematic and continuous improvement
can begin. First, assign ownership-responsibility for the design, operation, and improvement
of overall system. Next, plan a structured and disciplined approach to understand, define, and
document all major components and their interrelationships. Then, follow the process-
improvement road map presented in the next chapter.

IV.5.d. Summary

The importance of ownership should be reemphasized, particularly the ownership of

processes that cross functional boundaries. Process ownership can be identified through two
characteristics authority and responsibility. The owner of any process is the person at the
lowest level who has the authority to implement changes and who is responsible for the
consequences of these changes.
Many organizations have traditionally focused managers attention on functional goals and
fixing, maintaining, and running their respective operations. Instead, process owners should
focus on the overall system that delivers products and services to customers and on improving
the performance of that system. Ideally, compensation and promotion of process owners will
include consideration of their ability to continuously improve performance of their processes.
TQM achieves quality improvement through prevention and the systematic improvement of
key processes rather than through fire fighting and focusing on near-term results. Key
processes can be defined as the ones that have a material effect on the success of the
organization. Since organizations are often structured around their areas of specialization, key
processes sometimes cut across functional boundaries and receive less attention than they
deserve.
There are three typical failings that most frequently prevent organizations from systematically
improving business processes: (1) the failure to identify key processes and assign ownership;
(2) the failure to apply a robust improvement approach that builds an understanding of
fundamental root causes of problems, and (3) the failure to measure the right things.

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IV.6. Six steps to process improvements

The six-step process improvement model was prepared specifically to bridge the gap between
manufacturing and nonmanufacturing applications of quality methods. It can serve as a
universal road map for all applications.
It begins by identifying the outputs, customers and the work processes that produce these
outputs. The methodology continues by closely examining customer requirements and
defining gaps between them and the capabilities of the work processes involved. It next
stimulates exploring and analysing these processes to understand the root causes underlying
the gaps. It sparks development of new outputs and processes and requires that these new
ideas be tested with data. Appropriate changes are implemented, their effects are evaluated,
and the cycle is repeated to secure continuous improvement.
The six-step process offered in this chapter was developed through years of frustration and
failure, and its application requires discipline. Simpler approaches have been tried and have
been successful in some applications, but they have invariably encountered difficulties when
generalized to different types of problems. The six-step process has been designed as a
universal approach.

1. Define problem

2. Identify and
document process

3. Measure
performance

4. Understand why

5. Develop and test

ideas

6. Implement
solutions and
evaluate

8. Figure

The six-step improvement model introduces a systematic approach for applying quality
management to any type of process. It can be applied to any operation: information systems,
marketing, finance, administration, R&D, engineering, service, or manufacturing. It can be
applied to any system: those that exchange information with the customer, those used to
produce and deliver products and services, and those that create the work environment.
Universal application is possible because the approach helps build a fundamental
understanding of the business process before attempting to improve them. Continuous

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improvement requires knowing what these processes are, why they are performing the way
they are. This profound knowledge is built through application of the first four steps.
In some applications, one or more of these first four steps can be shortcut because they have
already been accomplished through the normal course of business. This does not mean that
these steps can be skipped, merely that their requirements are satisfied through existing
systems.

Step 1: Define the problem in the context of the process

Unlike manufacturing, service providers or knowledge workers sometimes do not recognize

that they are performing within a business system. The process improvement model begins by
clarifying which systems are involved, so that efforts can focus on processes, not outputs.
Specific activities within the first step are:
1. Identify the output.
2. Identify the customers.
3. Define the customers requirements.
4. Identify the processes producing these outputs.
5. Identify the owner(s) of the processes.
When customers needs and expectations are not well understood, special efforts must be
made to define them clearly and objectively. This lack of understanding is often encountered
when output properties are difficult to measure, as is commonly the case when the outputs are
intangible.
The owners of the processes involved should also be identified in this first step. Again, this
task is often taken for granted because of how clear ownership is in most manufacturing
operations. For example, in manufacturing, responsibility is usually defined clearly and
documented for daily operations, preventive maintenance, and individual manufacturing
blocks of process units. On the other hand, this clarity is often lacking in service processes.
Understanding who the owners are is an essential step in assuring that appropriate resources
are applied and that identified improvements can be authorized.

Step 2: Identify and document the process

In the absence of clearly defined work processes, work is needed to establish this basis. Since
manufacturing processes are usually well documented, this step has historically been taken for
granted. This second step in process improvement demands that the process be described in
understandable terms, which is usually accomplished with a picture or model, not merely
through a written or verbal description.
The flowchart is a commonly used tool for describing processes. The technical literature is
filled with methods for flowcharting, and several sources are listed as references at the end of
this chapter. Creating a flowchart enables you to perform the following four improvement
activities.
1. Identify the participants in the process, either by name, by position, or by organization.

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 2. Provide all participants in the process with a common understanding both of all steps
in the process and of their individual roles.
3. Identify inefficient, wasteful and redundant steps.
4. Offer a framework for defining process measurements.

Step 3: Measure performance

In the absence of documented performance standards, remedial work is needed to quantify

how well the system is performing. Further, these measures must be defined and evaluated in
the context of customer expectations. This step is of double importance in situations where
neither the output requirements nor processes have been defined previously.
One of the former chapters introduced the concept of measuring performance at three levels:
process, outputs, and outcomes. Process measures define activities, variables, and operations
of the work process itself. Output measures define specific features, values and attributes of
each product or service and can be examined from two sides. One side represents the output
characteristics desired by the customers requirements, and the other side represents the
output characteristics actually delivered by the process (capability). The former is referred to
as the voice of the customer and the latter as the voice of the process. Outcome measures
define the ultimate impact of the process and are dependent on what the customer does with
the product or service. Customer satisfaction represents the key measure of outcome.
VIII. Table

Outcome Customer satisfaction

Output Characteristics desired by customer
Characteristics delivered by process
Process Performance measures

In making decisions as to which brand of grade of gasoline to buy, customers are concerned
with how the product itself will perform in their car, the purchase price, and the attributes of
service at the point of purchase, such as convenience with regard to time and location,
appearance of the facilities, and behaviour of the attendants.
To focus on just one characteristic for the purpose of this example, consider the performance
of the product itself. The customers need for a smooth, quiet, trouble-free operation of his or
her cars engine has been translated into a set of technical specifications for gasoline. One of
these is octane, and one measure of the voice of the process is the actual octane of the
gasoline in a specific tank at a specific service station at a given time. Other related measures
include the variation of octane within this tank over time, the variation of octane among tanks
of various service stations, and the variation of octane for this grade of gasoline in the
blending tanks of the refinery.
Moving into the processes at the refinery, product specifications such as octane are translated
into other performance characteristics for the various feedstreams. One example might be the
temperature, pressure, and flow rate of one stream into a reactor.

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So what this example shown? It began by defining the desired outcome as smooth, quiet,
trouble-free operation of the customers car engine. Yet it somehow twisted around to define
one aspect of process measures as temperature, pressure, and flow rate into a reactor at a
particular refinery. This translation is of fundamental importance because the process is
actually controlled by measuring temperatures, pressures and flow rates in the refinery, not by
measuring octane in the service station tanks.
This translation was possible because all of the process involved were described, modelled
and understood. One model related the customers satisfaction to the performance of his or
her cars engine. A second model related the engines performance to product specifications
of gasoline. A third model related product specifications to refinery operating conditions.

1. Customer satisfaction to 2. Engine performance to 3. Fuel specifications to

engine performance fuel specifications refinery performance

9. Figure

One snapshot of example measures shown in the following table.

IX. Table

Outcome Customer survey regarding engine knock

67% pleased
31% satisfied
2% dissatisfied
Output Customer wants 89.0 Process delivers 89.3
octane octane
Process Feed to reactor A
flow rate: 37,000 barrels day
inlet temperature: 455 degrees F
inlet pressure: 725 psi

This snapshot offers one specific set of values for each level of measurement. In reality,
however, the picture is complicated because the variability of the data must also be
understood. Even for a single driver with one car, the required octane will vary with weather,
altitude, and condition of the engine (e.g. wear, deposits, and intake and cooling system
performance). Likewise, the process characteristics and performance will vary
simultaneously.

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Although this example relates to the product and its manufacturing conditions, it is analogous
to measurements required in service. As an alternative, this example could have defined the
voice of the process in service dimensions rather than along one characteristic of the product
itself.
Could the voice of the process in the service dimension be related to measuring the employee
selection, training, and compensation criteria for service station attendants? Could it be
related to the employees job satisfaction? Could it be related to process for determining the
design, location and hours of operation for the station?
How can the process that impact on the service characteristics be modelled and measured?
Answers to these questions are provided in the next chapter.

Step 4. Understand why

The lack of data increases the difficulty of understanding why the system is performing the
way it is. This problem is compounded when the outputs do not appear to be produced by a
repetitive system, as is the case for long-term process, such as research, development, and
engineering. The six-step process improvement model is designed to bridge this gap to assure
identification of the specific factors limiting the systems capability.
By defining problems in the context of their process (step 1), identifying all steps in the
process (step 2), and measuring performance in objective terms (step 3), the classic tools of
statistical analysis and quality can be applied to understand the root causes of the performance
gap. Four tools stand out for accomplishing this step: Pareto analysis, cause-and-effect
analysis, histograms and control charts.
Steps 2 and 3 of the process improvement model were designed to provide the base of
fundamental principles. This is accomplished through flowcharting, modelling and measuring.
Step 4 offers methods to acquire the next level of knowledge and to gain a profound
understanding of the process.
The following questions need to be answered: Why are people with good intentions often
frustrated in their efforts and seem to accomplish precious little that is of long-term benefit?
Why do problems recur for no apparent reason? Why do things go from bad to worse?
Answering three basic questions can help build a fundamental understanding of the process in
order to take effective and efficient steps toward permanent improvement.
Have we distinguished the vital few from the trivial many?
Juran believes that a fundamental law of nature dictates that 80 per cent of the problems are
the result of 20 per cent of the causes. One key improvement is to find those crucial 20 per
cent and focus attention on them. Juran named this concept, which represents a
maldistribution of quality losses, in honor of Vilfredo Pareto, a nineteenth century Italian
economist (Pareto found that a large share of wealth was owned by a relatively few people
maldistribution of wealth). The Pareto analysis is a method for categorizing and
recategorizing causes until the vital few are found.

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 100 100

80

Interesting many

20
Vital few
0
0
Causes Effect

10. Figure

Have we designed the root causes?

Ishikawa suggests that the first signs of a problem are its symptoms, not its causes. Actions
taken on symptoms cannot be permanently effective. It is necessary to understand and act on
the underlying root causes. Cause-and-effect diagrams, fishbone charts, and Ishikawa
diagrams are synonyms for a basic tool that can be used to help differentiate among
symptoms, causes and root causes.
X. Table

Level Observation Action Outcome

Symptom Car does not start Call tow truck $25 bill for jump start
Cause Dead battery Recharge by driving Arrive at work (late)
Cause Broken fan belt Call tow truck (again) $50 bill for jump start
and replacement
Root cause Inadequate Implement Problem eliminated
preventive manufacturers
maintenance recommended service

Do we understand the sources of variation?

Deming explains that all variation is caused and the causes can be classified. Common causes
are inherent within the system and yield random variation within predictable bounds. Special
causes are assignable to specific reasons or events and result in sporadic variation that defies
prediction.
Taking correct action to control variation requires knowing its type, since appropriate actions
differ according to the type of variation. Common causes can be solved by addressing the
underlying system. On the other hand, special causes are addressed by eliminating their
specific, identifiable source. Control charts help to distinguish between common and special
causes of variation.

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After the special causes are identified, the remaining inherent variation is attributable to the
common causes. The capability of the process is defined by comparing this range of variation
to the specifications or customer requirements. Capability can be calculated and can be
visualized by plotting the data as a histogram.
Understanding variation and process capability are the preferred first activities in step 4.
However, when outputs are intangible and not frequently repeated, data for this analysis might
not be available. In these cases, the question posed in step 4 will need to be answered in
parallel or in an iterative way.

Step 5. Develop and test ideas

The first 4 steps built the foundation for understanding the critical dimensions of the process.
They assured knowing what the processes are, measuring how well they are performing, and
understanding why they are performing the way they are. These steps led to identifying the
underlying causes of the principal problem. Developing ideas for improvement begins with
step 5.
Ideas for improvement must address the root causes of the problem. Step 5 is the point at
which development for new ideas and potential solutions should be encouraged. What are
new and different ways to design and operate the process to eliminate the root causes?
A complementary approach for developing improvements is through experimentation. Design
and conduct experiments to test the hypotheses developed in step 4. Also, design experiments
to test the ideas developed in step 5 before implementing them.
When tests fail to produce the desired results, determine the cause. Was the test valid? Was
the improvement idea effective? Were you mistaken about the root causes of the problem?
Was the process completely identified? Were the customers requirements misunderstood?
Recycle back to the appropriate step on the process improvement road map.

Step 6. Implement solutions and evaluate

The sixth step begins by planning and implementing the improvements identified and verified
in step 5. Step 6 continues to measure and evaluate the effectiveness of the improved process.
But these activities represent only one side of this step.
The other side is to evaluate the six-step process itself and to acknowledge and celebrate the
contributions of those who participated in this increment of process improvement. It makes no
difference whether this was the work of an individual or, as is more likely, a team effort.
Reward the contributors for the result achieved as well as for their discipline in applying the
six-step model.
Finally, return to step 1 begin the next increment in the ongoing process of continuous
improvement.

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Is this the only approach to process improvement?

The previously presented six-step process serves as a universal road map to process
improvement. It provides a systematic approach to build a fundamental understanding of
customers requirements, process capabilities, and the causes for gaps between them. A road
map differs from a prescription. People who are unfamiliar with the route use a route map as a
guide for getting from point A to point B. On the other hand, a prescription specified
requirements that must always be followed.
The six-step road map guides the application of a fundamental improvement strategy known
by any of four names: PDCA, plan-do-check-act, the Shewart cycle or Deming cycle. The
plan phase is guided by the first four steps along the road map. These steps help clarify
problems and develop hypotheses as to their root causes. Step 5 covers the do and check
phases by testing the previously developed hypotheses. Step 6 completes the cycle (act) by
implementing improvements to the process.
Numerous alternative guides for PDCA are available, and several organizations have
customized the six-step model for their own use. Some have modified the terminology to
incorporate their own jargon. Some have reduced the number of steps by combining elements,
and others have increased the number of steps by separating elements.

IV.6.a. Summary

Systematic process improvement relies on building fundamental understanding of customers

requirements, process capability, and the causes for gaps between them. Hypotheses are
developed and tested, and improvement gained through the continuous cycle of plan-do-
check-act. This systematic approach bears striking contrast to the classis short cut of problem
detection and subsequent solving, and approach resembling plan-act-plan-act.
The six-step road map was developed as a universal guide for systematic improvement. It can
be used to improve manufacturing as well as nonmanufacturing processes, and helps assure
application of the plan-do-check-act strategy.
Many quality improvement practitioners have focused on merely on the application of basic
tools such as flowcharts, control charts, and cause-and-effect diagrams. The six-step road map
offers a robust approach to improvement, and places the tools in their proper perspective.
Although they are valuable, the basic tools are merely techniques to help make the best
performance of work processes visible and by themselves are of relatively little benefit.

IV.7. Measuring performance

One element of TQM is to base decisions on data, not opinions. This chapter provides a
framework for defining the parameters that are needed to measure performance. Clarifying
which parameters can and should be measured will help in systematic and continuous
improvement of all products, services and processes.
First part establishes three levels of measures: this first one for controlling operations within
the process, the second for measuring the outputs delivered, and the third for quantifying the

85
outcomes. The second part of framework defines four dimensions of results: products and
services delivered to the users and customers, financial return for shareholders, job
satisfaction for employees, and social impact upon the community.

IV.7.a. Measure at three levels

The use of measurement is pervasive in systematic process improvements. Although

measurement was introduced in the third step of the process improvement model, various
measures are used in all steps. Four types of measures were introduced, and they represent
three distinct levels: process, output, and outcome. The relationship between the four types of
measures and the three levels is shown in the figure below.

Performance parameters
Process
Operations that control products/services produced
and delivered

Requirements Capability
Output
Features, values and Features, values and
characteristics desired by characteristics delivered
customer by process

Customer satisfaction
Outcome
Degree to which products / services are perceived to
meet expectations

11. Figure

Process

Performance parameters: measure each step/activity in the process and the characteristics of
inputs delivered by suppliers that control the desired output characteristics. Identify the
behaviours that govern each step, and use these measures to control operations and to predict
the outputs before they are produced or delivered. Performance parameters are analysed in
steps 4 and 5.

Output

Requirements: Define the specific features, values, characteristics and attributes desired by
customers for each product and service. These measures represent the voice of the customer
and are used in step 1 along the six-step road map. Requirements and expectations must then
be translated into product/service specifications.
Capability: In direct correspondence to every specific feature, value, characteristic and
attribute desired by customers, measure its level, value or presence in each product and
service actually delivered by the process. These measures represent the voice of the process
and define what the process has delivered. Process capability is measured in step 3 and tested
in step 5.

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Outcome

Customer satisfaction: This is the highest level of measurement and represents the ultimate
desired result. Measure how well each product and service satisfies the needs and
expectations of the customer, and recognize that these measures are based on vague,
idiosyncratic perceptions. Outcomes are beyond direct control of the supplier and rely on the
customers expectations and actions. These measures often trigger process improvement
initiatives (step 1) and can also be used to evaluate the results achieved (step 6).

IV.7.b. Measure in four dimensions

In addition to the output actually delivered to the end customer and the resultant outcome,
each process generates by-products and outcomes for other customers. One is financial
return for the shareholders. Another is job satisfaction for the employees. The third by-
product is the social impact on community.
The three levels of measures were described in the following figure with respect to the actual
output, but they also apply to each by-product. Satisfaction and desired characteristics of these
by-products are defined by their respective customers. These, in turn, represent three
additional sets of specifications against which process performance can be measured.
As shown in the figure, performance parameters can be defined in four dimensions. Each
dimension corresponds to the output or outcome desired by its respective customer: the end
user, the shareholder, the employee, or the community.
XI. Table

Dimensions Focus Example measures

1. actual product or services End user or customer specific features,
characteristics and attributes
defined by customer
2. Financial return Shareholder costs, profits, prices,
throughput, sales volume,
waste, productivity,
efficiency, cost of quality,
utilization, return on
investment
3. Job satisfaction Employees Specific needs and values
defines by employees,
employee satisfaction
4. Social impact Community regulatory compliance,
atmospheric emissions,
liquid discharge, waste
disposal and recycling, grants
and contributions,
presentations and
publications, taxes and fines

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Four dimensions of performance measured applied at three levels are offered as an antidote to
the deadly disease of running a company on visible figures alone. In essence, Western
companies have focused on themselves and the financial markets rather than on their
customers, employees or the community.
Organizations moving toward focusing on the customer can facilitate their transformation by
defining and using measures indicative of customer satisfaction. Similarly, organizations
striving for total involvement of their work force need to pay attention to the parameters that
directly relate to improving employees satisfaction with their jobs.
It should be obvious that a balanced approach is needed. None of the dimensions can be
ignored. To the extent that the shareholders objectives, the customers requirements, the
employees needs, and the communitys expectation all overlap with each other, the easier the
task becomes. Long-term success can be assured by selecting and leading a balanced attack to
improve systematically in all dimensions.
Shareholders

What are your values? Employees

Customers
Where is your focus?
Are they consistent?
Community

If this is Then this is who and these are key measures

your focus you need to please
Customer Customers Customer satisfaction
Output characteristics defined by
customers
Shareholder Bosses Financial indicators (costs, sales and
Owners profits, cost of quality)
Financial analysts Goals and objectives defined by
management
Employee Employees Employee satisfaction
Factors contributing to job satisfaction
Community Government agents Regulatory compliance
Social services Factors impacting on society
Professional societies
Academia
The press

12. Figure

IV.7.b.1 Summary
Many organizations are driven by performance measurement. The absence of meaningful
goals and measures can lead to useless meandering. Perhaps even worse, use of the wrong
measures can drive organizations in the wrong direction. To overcome these problems, this
chapter offers a two-part measurement framework. One part establishes three distinct levels of
measures: the first for controlling operations within the process, the second for assessing the
outputs delivered, and the third for quantifying the outcomes achieved. The second part of the

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framework defines the perspectives of four basic stakeholders: customers, employees,
shareholders, and the community at large.
Underlying these frameworks is a performance measurement paradigm that is provided as a
summary of measurement theory.
1. Every product and service can be characterized by a set of performance measures.
2. The job begins by understanding your customers and identifying the set of
characteristics that fully define their needs.
3. These customer-driven characteristics must be translated into process measures and
learn the performance level that your process is capable of delivering for each
characteristic.
4. Then it should be determined how satisfied customers are with performance at current
level, and the relative importance customers place on changing the level of each
characteristic.

IV.8. Leadership

Total involvement forms the third and final core concept of TQM. Through it, the idea of
winning loyal customers is mirrored into the organization, to build loyal employees and loyal
suppliers. Total involvement aligns and integrates the efforts of everyone: managers, workers
and suppliers. This chapter describes the transformation of managers into leaders and their
role in championing TQM.
The elements and characteristics of leadership have been described and defined many times in
many ways. Our intention is to discuss leadership as it applies to the understanding and
implementation of TQM. In this regard, leadership has specific implications for the senior
managers embarking on a quality journey. This chapter describes these implications and
suggests actions that senior managers can take to enhance the likelihood of success.

IV.8.a.1 What is leadership for TQM?

When implementing TQM, several fundamental activities must be accomplished by the senior
management team. These senior managers bear ultimate responsibility for the success of the
organization and, by virtue of their positions, have the authority to set direction, establish
policy, allocate resources, and select the markets in which the firm will participate. These
individuals are responsible to their customers, their employees, and ultimately their
shareholders for the success of the enterprise.
TQM requires skills in both leadership and management. The difference between these two
skill sets: leaders are people who do the right thing; managers are people who do things right.
The next figure offers a further clarification of the distinction between management and
leadership. To implement TQM, managing to get results will share center stage with leading
to improve systems. The old roles of planning, organizing, directing, coordinating, and
controlling will be diminished. In their place, we will find leaders who vision, align,
empower, coach and care.

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 Managing Leading

Plan Vision
Organize Align
Direct Empower
Coordinate Coach
Control Care

GETTING RESULTS IMPROVING SYSTEMS

13. Figure

Continuous improvement of all products, services and processes is accelerated if everyone

challenges the status quo every day. Leaders can set the stage for this challenge by developing
answers to six fundamental questions:
1. Why do we exist; what is our purpose? (mission)
2. What will we look like in the future? What do we want to become? (vision)
3. What do we believe in, and what do we want everyone to abide by? (values)
4. What guidance will we provide to the many individuals in our organization as to how
they should provide products and services to our customers? (policy)
5. What are the long- and short-term accomplishments that will enable us to fulfil our
mission and attain our vision? (goals and objectives)
6. How are we going to move toward our vision and accomplish our goals and
objectives? (methodology)
Answers to the first three of these questions form the cornerstones of the leadership
framework. The mission defines why the organization exists. The vision show what the
organization wants to create, and the core value explain how we want to act. Answers to the
remaining three questions fill in the details and build on these cornerstones.

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 Vision
What we will look like
in successful future
state
Implement Commitment Stlye
(actions)
Allocate resources consistent with Role model
leadership framework How we will behave

Objectives Methodology
Specific intent
What is to be achieved in How objectives will be achieved
scheduled period of time through strategy and plans

Goal Policy
Broad intent
What is to be achieved through sustained Statement of principles that guide how
effort over long time period all business activities are to function

Foundation Mission Values

(direction) The purpose of reason for the Define how we will behave by
existence of the business Delineating shared beliefs

Doing the right things Doing things right

(What to do) (How to do it)

14. Figure

These questions, while seeming simple and obvious, are enormously complex and difficult to
answer, especially when an organizations traditional products and services are buffeted by
new technologies, by competent and aggressive competitors, or by changes in customers
expectations. Nonetheless, failure to respond to each of these questions renders and
organization incapable of understanding and meeting its customers demands, unable to
allocate its resources effectively and efficiently, and incapable of capitalizing the talents of its
people.

IV.8.b. Why do we exist?

The question of why we exist is answered in the organizations mission statement. This
statement is comprehensive, easy to understand, usually one paragraph in length, and
describes why an organization was created and its primary function. The mission provides a
clear statement of purpose to all employees as they perform their daily tasks. The following
mission statements are offered as examples to illustrate answers to question Why do we
exist?
These statements, when published and disseminated to employees throughout the organization
and widely communicated to customers and the public at large, commit an organization

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internally and externally to a specific purpose. A well-articulated mission statement also
guides employees as to how they should manage their activities and sets a level of expectation
among customers as to what they should get from this organization.

IV.8.c. What type of organization do we want to become?

The vision provides a description of what the organization will evolve into in the future and,
like the mission statement, provides continuous guidance to employees at every level as to
how they should manage their respective responsibilities. Usually, the vision is drafted as
soon as the mission statement is completed and is developed through the same collaborative
process.
The vision need not be described in precise financial or market terms. Rather, the intent is to
provide a broad description of what an organization can become if everyones efforts are
focused and successful. The vision is less a dream, less a soft specification of what is
desirable, than a realistic picture of what is possible. The vision states what the organization
wants to become and where it wants to go. This direction may be based on data regarding
what is being achieved by others and what is possible for this organization.
Any of three flaws can be fatal to the process for building an inspirational vision: (1) failure to
have a genuine vision one that is important, challenging and at the same time realistic; (2)
failure to communicate the vision; (3) failure to rally everyones genuine support.

Develop an enabling and empowering vision

1. Effective visions are inspiring.

2. Effective visions are clear and challenging and involve excellence.
3. Effective visions make sense in the marketplace and, by stressing flexibility and
execution, stand test of time.
4. Effective visions must be stable but constantly challenged and changed at the
margin.
5. Effective visions are beacons and controls when all else is up for grabs.
6. Effective visions are aimed at empowering our own people first, customers second.
7. Effective visions prepare for the future but honour the past.
8. Effective visions are lived in details, not broad strokes.

IV.8.d. What is important to us?

Every organization operates with some behaviours being understood without ever being
explicitly stated. But why leave these things unstated if they are important to running the
business? Why not provide clear definitions of those important things, so everyone has a clear
sense of the values of the organization?

IV.8.e. How do we want everyone to work?

Organizations consist of many different individuals with many different opinions. The
quality level for the production and delivery of goods and services should not be left for

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everyone to determine individually. Instead provide a written quality policy and consider the
elements listed in the following table.
XII. Table

Element Example statement

Importance of quality Quality is first among equals
Quality competitiveness Best in class
Customer relations Meet customers needs
Internal customers Quality extends to all segments
Work force involvement Our policy is to provide 40
hours of quality training
annually to every employee
Quality improvement We will continuously improve
our services

IV.8.f. What do we have to do?

Leaders must next move from the broad direction provided by mission, vision, value and
policy statements to declare what must actually be accomplished. Unless these statements are
translated into measurable performance targets, they will be little more than nice sets of
words. Goals cover the organizations broad intent by defining what is to be attained through
sustained effort over the long term. By contrast, objectives define what is to be achieved in a
specified period of time.
Clear-cut, measurable objectives help spur everyone in the right direction and serve as
mileposts against which progress can be gauged. Five criteria help in framing effective
objectives:
1. Objectives should be definitive and specific.
2. Objectives should describe accomplishments or results, not activities or behaviours.
3. Objectives should be measurable (quantifiable).
4. Objectives should delineate a time frame or deadline.
5. Objectives should be challenging yet achievable (they should be within the control of
the responsible business unit and not rely on what might be accomplished by other
organizations.

IV.8.g. How are we going to accomplish these objectives?

Having established what is to be achieved through a sustained effort over a specific period of
time, the next step is to determine how these objectives are to be achieved. This is
accomplished through development of strategies and plans for specific courses of action: who
does what by when.
One element of the strategy is the adoption of TQM as a comprehensive management system
to achieve objectives by assuring that all work is performed in a systematic, integrated,

93
consistent manner. The installation of TQM becomes the work of senior management, and its
pursuit of TQM is a prime example of its leadership.

IV.8.h. How do we develop these statements?

Statements of mission, vision, values, policy, and objectives developed behind closed doors
by a single executive or by just a few top-level managers in isolation serve a useful purpose
but are limited in impact. In this case, the key advantage of developing these statements is
quickly lost once the task is completed.
The advantage of securing ownership, commitment, and involvement will accrue to
organizations that use a collaborative process to forge these key statements. Furthermore, the
benefits will last for an extended period of time. A senior manager who either establishes a
new vision or reaffirms an existing mission by involving others in a participative manner
garners ownership and commitment from all those who were involved in the process.
Three notes of caution: First, managers are often more preoccupied with complementing the
task of formulating these statements and moving on to new activity that they are with using
this exercise as a means of securing support from key managers, employees, and impacted
departments. Be aware of the task-oriented mentality, and recognize the value of the process
itself.
Second, using a participative decision-making process to develop fundamental statements
does not imply democracy or a need for total consensus. When making a major change in the
organizations culture, some individuals invariably disagree with the new direction.
Determine which views represent added value and which represent anchors holding the
organization to past practices that are inconsistent with the new vision.
Third, having stated that participation is important, be careful not to cross the fine line that
separates participation from abdication. Senior management is responsible for the direction of
the organization and for developing the enabling strategies. Participation is one way to
accomplish this task, but ultimate responsibility for deciding which course to take cannot be
delegated.

IV.8.i. Other elements of leadership

The last two elements of leadership framework cover managements actions in day-to-day
activities. Commitment relates to what is done by managers themselves and in the allocation
of resources. Style relates to how they do things.

Commitment

Although there are many additional examples that illustrate leadership in the installation of
TQM, one that remains as significant as the process of forgoing key statements is the
demonstration of commitment by senior managers. The demonstration of commitment takes
many forms and is evidenced by what managers do as well as by what they say.
The first opportunity to demonstrate commitment is often found in reallocating resources and
funding additional staff to implement the extensive training that is required to equip all
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employees with the skills and knowledge they need to pursue TQM. Will the resources be
provided? Will funds be made available from the redirection of traditional training programs?
Equally important are senior managers willing to demonstrate commitment by participating in
the same training that everyone else will undertake. Will senior managers use the tolls, jargon
and processes to pursue continuous improvement? Or will they merely instruct their
subordinates to do it?
Are senior managers willing to create structures to support TQM, such as boards and steering
committees? And are they willing to participate in these structures? Or are they going to
delegate this responsibility?
Are senior managers capable of demonstrating long-term commitment to implement
continuous improvement, even when improvement may be viewed as having high start-up
costs? Commitment means more than new procedures, policies, directives, letters and
speeches. Employees look for commitment from top management by observing their
behaviours and their style.
You should expect that employees will question and test the beliefs you now espouse. Leaders
must be committed to the following:
maintaining a long-term perspective in the face of short-term pressures
providing a focus on meeting customers needs and being sensitive to the markets in
which the organization participates
realizing that some returns are immediate but others will take three to five years of
dedication and hard work
stressing that improving the process is as important as attaining results and that both
must be accomplished
allocating resources to support TQM training and implementation
Instituting compensation, recognition, reward, and promotions based on the criteria
that support TQM
Fostering employee involvement and better relationships across functions and between
unions and management
Building partnerships with suppliers for mutual benefits
Acting as a role model; walking the talk using quality improvement tools and
jargon.

Style

In addition to what leaders do, how they do it is equally important.

Leaders base decisions on data. Opinions are interesting, but decisions should be based on
what you know, not what you think.
Leaders are resources, coaches, facilitators for the individuals with whom they work.
Employees who are looking to their leaders for direction, decisions, or approvals dont
understand the leaders new role. Have they explained the difference? Is the leaders style
consistent with the leaders intent?

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Leaders are actively involved. They learn new skills along with their employees. Being
proficient , leaders are then able to assist others in their pursuit of continuous improvement.
Leaders build commitment. They assure that everyone understands the organizations
mission, vision, values and goals. Furthermore, leaders assure that everyone knows his or her
individual role and is eager to contribute.
Leaders inspire confidence. They extract the best from everyone and encourage personal
development.
Leaders say thanks. They do so with every imaginable form of monetary and nonmonetary
incentive.

IV.8.j.Summary

TQM is a strategic process that is launched from the executive suite and requires both
management and leadership skills. This principle, when accepted, sets in motion a series of
activities by senior managers that shape the organizations future. These activities cannot be
delegated, and the process of how things are done is as important as what is actually
accomplished. That is to say, the right things must be done right.
Leaders will begin by addressing the basic questions about what the organization is and what
it is to become. Through a collaborative process, they will secure the cornerstones of the
organizations foundation: the mission, vision and core values. They will galvanize
commitment by all to this foundation and provide an environment within which the details
can be built. The degree to which these issues are resolved is the extent to which the
organization can meet its stated objectives in the short run and its vision in the longer run.
Leaders will be unrelenting in their pursuit of the organizations goals.
Finally, leaders must use their own style to reinforce the crusade toward the vision.

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IV.9. Empowered workforce

The work force has changed dramatically since the end of World War II. Work used to be a
series of simple, manual tasks performed by unskilled labourers, and those tasks could be
observed easily. For every ten to twelve workers driving spikes to lay railroad track, one crew
chief assured that work progressed smoothly and that everyone contributed his fair share. For
every ten crew chiefs, one foreman monitored the performance of the crew chiefs; and for
every ten foremen, one superintendent supervised the entire operation.
This hierarchical model, fashioned after the military organization, was necessary because
uneducated, unskilled labor toiled with mechanical tools on tasks that had to be observed to
assure that work was done, and done correctly. The boss dispatched and allocated tasks and
then monitored the work by being physically prevent to observe directly that all was
progressing as required.
Contrast that scene to one in a modern office where an individual sits in front of a computer
screen. Its not possible to know, simply through observation, whether the individual is
daydreaming or developing answers to the organizations most critical problems. In addition,
it is no longer possible to tell who is in charge since the old hallmarks of physical appearance
no longer apply. An administrative aide may dress as well as the CEO, drive a similar car,
dine at the same restaurants, and live in the same town. The distinction between blue collar
and white collar as well as other signs of social standing are pass.
More important, the education of subordinates may be similar if not superior to that of the
manager, especially in highly skilled areas of technology. Organizational distinctions are
blurred, and the simple mantle of authority may be insufficient to manage young, competent,
highly motivated employees. Most important, those people who are actually doing the work
are likely to know far more about it than managers.
So how does one supervise a large number of educated, competent, motivated employees?
Many US managers learned, during the 1970s and 80s, about participative practices by
visiting Japan or by reading about Japanese management techniques. Many grew certain that
employee participation was the answer they needed for improved productivity. There was a
great rush to establish quality circles in US plants, with some encouraging initial results.
Today, however, there is little to show for all this effort. If participation is the answer, and we
tried it without achieving the tremendous benefits we were seeking, where do we go from
here?

IV.9.a. What is empowerment?

The first dimension of empowerment is alignment. All employees need to know the
organizations mission, vision, values, policies, objectives and methodologies. Furthermore,
the broad direction of the overall organization must be sharpened as the message cascades to
define the role of work groups and individuals.
Fully aligned employees not only know their role, they are dedicated to supporting it. Leaders
have inspired them to contribute to the mutual benefit of the organization and themselves.

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This dedication is synonymous with commitment, and commitment can neither be brought nor
sold. It is earned. The traditional hierarchical organization did not require commitment, its
authoritarian style merely needed compliance.
Gaining true alignment requires bridging the subtle gap between compliance and
commitment. In essence, the difference between compliance and commitment is that people
who are committed the organizations direction truly want it. Although empowerment
requires commitment, in the near term, leaders may need to settle for compliance and work to
move people up the compliance ladder. Commitment cannot be enforced; efforts to do so will,
at best, build compliance. All that can be done is to establish an environment that is
favourable to the growth of commitment.
The second dimension is capability. Employees must have the ability, skills, and knowledge
needed to their jobs. They must also have the resources needed from the organization:
materials, methods, and machines. In our experience, many organizations have overachieved
in this dimension. Selection criteria bring in new hires who are overqualified, and investments
in facilities, equipment, and training have far outstripped growth in the other two dimensions
trust and alignment.
Mutual trust is the third dimension of empowerment. Once we have developed alignment and
capabilities, we are in a position to unleash the power, creativity and resourcefulness of the
work force. This will not happen, however, unless we have provided this third dimension.
Employees need to trust management and feel that management trusts them. Mutual trust
therefore completes the picture required to build an empowered work force.
Empowerment can therefore be seen as the natural consequence of effective leadership. If
empowerment relies on alignment, capability, and trust, it is reasonable to expect employees
to feel empowered if they dont feel trusted. It is so simple: treat people with the same respect
with which you would like to be treated.

IV.9.b. What is teamwork?

Teamwork is a group of individuals working together to reach a common goal. The goal may
be to increase market share, to boost customer satisfaction, or to improve overall performance
through cooperation and collaboration. Teamwork is at first sharing of responsibility and
eventually sharing of decision making that impacts the entire organization. Collaboration and
teamwork build a new level of capability, a new strength that the organization can harness to
increase its customers satisfaction.
Like empowerment, teamwork and team building have become popular terms in business
circles. Before the industrial revolution, a team usually consisted of horses, mules or oxen
drawing carts or plows. During the past century, a work team might more aptly have been
described as a gang or crew.
It is relatively recently that teams have become recognized in industry and discussed in the
context of collaboration, cooperation, competition and sporting events. But even now, the
terms are frequently misused. In traditional, hierarchical, autocratic organizations, teamwork

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has often meant compliance, and a team player is often a euphemism for a conformist who
suppresses his or her own goals for the sake of the organization.
Some managers mistakenly assume that a group cannot be called a high-performing team if is
doesnt fit some idealized model of total autonomy and equality. The optimum degree of
autonomy, control, interdependence and collaboration varies for different types of teams.
Different types of tasks demand different types of teams. For instance, consider the
differences in decision making, interdependence and collaboration required to perform the
following tasks: driving spikes into miles of railroad tracks, deciding on the guilt or innocence
of an alleged criminal, winning a football game, or improving the design of a data-processing
system.
Constructing miles of railroad track is an example of additive task, and the accomplishment of
the team equals the summation of individual contributions. In this type of task, the team will
accomplish more than any individual; however, the contribution of each member is frequently
below that of the same individual performing on his or her own. The maximum potential
capability of teams performing additive tasks is proportionate to the size of the team, but the
actual work accomplished will be less. The key to leading this type of team is to minimize this
gap.
A jury deciding on guilt or innocence represents a team performing a disjunctive task. Solving
problems and making decisions are common disjunctive tasks. In this type of task, the
performance of the team will approximate that of the most knowledgeable member. Teams
cannot perform beyond their available resources, and optimal performance will be realized
through identification and support of the most knowledgeable member. Popular corporate
team-building exercises such as desert survival or lunar landing games provide practice for
teams performing disjunctive tasks.
By contrast, playing a football game is a conjunctive task. Here, each member must perform
his or her own task, and the teams capability may be limited by the ability of the weakest
member, not the strongest.
A quality improvement team working to improve the design of a data-processing system is an
example of an optimizing task. Here, the goal is to produce some specific, most-preferred
outcome. Collaboration and cooperation among members result in the teams performance
potentially exceeding the summation of abilities of all the individuals. Furthermore, this
quality improvement team will likely address subtasks that are additive, disjunctive or
conjunctive. The mode of operation of the team should adjust for each subtask.
When forming teams, examine how the type of task will determine the teams needs for
autonomy and collaboration. Also evaluate the stake the members have in the outcome.

IV.9.c. Guidelines for building teamwork

Teamwork should be beneficial to all: employees, customers, and the shareholders. The
following guidelines are offered to help maximize likelihood of building successful teams.

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Management support

Managers are delegating responsibility, not abdicating, when embarking on a participative

management process. This requires managers to clarify expectations and boundaries. Team
members need to understand what is important to the manager and to the company. Members
need to know the issues that the organization is facing. In short, they need information. A sure
way for a nonsupportive manager to kill a team is to withhold information. Another surefire
killer is to withhold resources.

Clear charter

Information needed to clarify the direction and scope of a teams effort can be included in its
charter. Three essential elements are: (1) a general description of the problem or opportunity
to be addressed; (2) the expected outcome; and (3) the boundaries. Teams are formed to
resolve specific issues will benefit from clear and comprehensive charters. Teams that are
natural work groups will likely find that their charters are embedded in their mission
(description): vision, goals, and objectives (expected outcomes): and core values, policies,
strategies and plans (boundaries).

Benefits for team members

Organizations introduce teamwork to improve work processes and increase customer

satisfaction, and to do both of these at substantially lower cost. These benefits are part of the
organizations stated objectives. Yet where are the benefits of teamwork for employees
stated? Our employees are our most valuable resource. If this claim is to ring true, then
clear statements of how teamwork will benefit employees are needed. Benefits for employees
can include improves quality of work life, development of personal skills, rotational job
opportunities, and increased ability to make decisions that will influence the direction of the
organization. Benefits also include direct, specific and timely rewards and recognition.

Bias for action

Recommendations must be acted on in a timely manner. Managers should expect that teams
are aligned with the organization and that their recommendations will be of value. If
recommendations are not accepted, team members are owed an explanation from the highest-
level executive. The process of any successful team should be studied so that future teams
will not stumble. What were the root causes of the problem that derailed the team?

Skills

Although participation on most teams is voluntary, individuals may occasionally be drafted

because they possess unique skills that are required by the team. Such individuals might be
full-fledged team members, or they might merely participate during one phase of the work.
Regardless of their role, if expertise is required, get it.

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Training

Members need to be skilled in one or several of the disciplined processes used by teams.
Problem solving, benchmarking, or process improvement are examples of road maps that
teams may follow to reach their destination. Training in these techniques equips everyone on
the team with a common core of skills, regardless of dissimilarities in their work experience
or education. Training in group dynamics and meeting skills may also be required if members
have difficulty working in a group environment.

Facilitators

Even when individuals are trained in team dynamics, support may still be needed, particularly
in the early stages. Such assistance can be provided by an outsider who acts as a process
expert someone who will focus on the teams process and not the content.

Start small

Teams should begin with simple opportunities within their own function and, when
successful, branch out more effort, expertise, and resources to solve. They also often yield
bigger payoffs, but teams should develop some success, expertise, and confidence before
tackling more complex issues.

Life cycle

Teams are born, live, and die like natural organisms, and this cycle should be recognized.
When the problem is solved, then perhaps the team created to solve that problem should
disband. If, however, related opportunities are found, then the team may move from issue to
issue. If members are from the same group and are working to improve their normal work
processes, then that team should be encouraged to continue.

Celebrate

True teams succeed or fail together. Members of successful teams should be recognized and
rewarded. One form of recognition is to present their story to others during publicized events.
This not only serves to recognize the contributions of the team but also provides a learning
experience for other employees who may be struggling with similar issues. Communication of
these successes reinforces the drive to empower individuals. The value of appropriate
communications cannot be overstated with regard to fostering teamwork, empowerment, and
process improvement.

IV.9.d. Criteria for team performance

Teams are advocated to get results. However, the process of building teams provides value by
itself. To keep sight of this, six criteria, each of equal weight, are offered for evaluating the
performance of teams. Alternatively, results may become paramount, and other criteria may
diminish in perceived value. When this occurs, the organization has reverted the old way of

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doing things and is not following an approach that has been validated as essential to TQM.
Evaluate a teams success by considering how well it performs in each of the following areas:

Goals

Are goals understood and supported by all team members and by management?
Are goals realistic ambitious but achievable?
Are goals within the scope of ownership of the team members or the sponsoring
manager?
Do the goals contribute to the mission, vision, and objectives of the organization?

Roles

Do all members know and fulfil their responsibilities? Members responsibilities may
include allocating time to team meetings and performing specific roles as well as
working outside of meetings. If one member is not supporting the team, others have
the responsibility of asking that individual to leave the team.

Process

Has a structured, defined, disciplined process been followed by the team in pursuit of
its goal? Examples of such processes include problem solving, benchmarking, and the
six-step road map for process improvement.

Development

As a result of involvement on the team, have all members learned new concepts, tools,
or techniques that they can apply to their own work outside of the team?

Innovation

Did the team question conventional wisdom and traditional approaches?

Did the team find new ways to attack old problems?
Did the team recommend an entirely new approach that both improves customer
satisfaction and reduces costs?

Results

Did the team achieve its goal?

Does the solution permanently improve the underlying work process?

IV.9.e. Stages of team development

Stage 1: Forming

This is the initial stage in which new relationships are formed among team members. A great
deal of testing is going on as individuals seek to understand the reason for the team being
formed, the scope of responsibility, the legitimacy of the team, why various members were

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selected, the doability of the task, and what the task really is. This initial activity helps the
group to orient itself to the work to be done.
In this initial stage, the role of the sponsoring manager is critical to get the team started on a
positive and constructive manner. The sponsor must provide complete information, establish a
level of trust that enables the group to be open and honest, and explain roles and expectations.

Stage 2: Storming

This second stage is characterized by the interpersonal conflicts that arise among team
members while clarifying their tasks, roles, responsibilities, expectations, and organizational
issues. This phase is characterized by debate, arguments, conflict, and perhaps hostility and
open warfare.
Care must be taken by the sponsoring manager to assure that discussion remains constructive
and is directed at the issued and not at individuals, and that all issues are surfaced, debated,
and clarified. Managers at this stage will draw on their skills as facilitators. Objective
information gathering and decision making will be aided by techniques such as brainstorming,
weighted voting, and consensus building. During this second stage, little progress will be
made toward the teams goals; instead, energy will be directed toward the teams processes.
This stage, however, must be successfully completed before real work can begin.

Stage 3: Norming

This third stage is marked by a coming together of team members. Cohesion is exhibited
through a healthy flow of opinions, sharing of personal experience and data, cooperation, and
overall good work. At this point, members feel good about their involvement on the team and
feel that their work has purpose and value. The group of individuals starts to evolve into an
effective team and begins to work together toward achieving its goal.
The sponsoring manager at this point may feel that the team is self-sufficient, fully capable of
managing its activities. The role of the manager changes from being a director or referee to
being a participant or resource. The manager may even withdraw and allow the team to define
its own leaders and administrators.

Stage 4: Performing

This stage is the payoff. Team members are performing their roles. Work is characterized as
cooperative and collaborative, and the teams objectives are being achieved. Teams at this
stage are mature and self-directing and exhibit a natural sharing of roles and responsibilities.
They effectively use systematic processes. They achieve results and bring innovative
solutions to the organization.
The sponsoring manager in this phase may well see the makings of an autonomous work team
in which recommendations are developed and implemented without prior approval. Here, the
managers role is that of a coach. The manager helps the team improve the process by which
it works. The manager no longer needs to allocate and monitor work, since the team is fully

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capable of doing this itself. The manager works with the team on its process; the team works
on providing the results.

IV.9.f. Stages of application

The following table lists how employees can progress through phases of development as a
team addresses the need to improve quality or productivity. The task for managers is to foster
this progression among all employees.
XIII. Table

Process improvement Low involvement Degree of High involvement

step involvement
1. Define problem Managers defines Group proposes Team defines
customers, opportunity, manager opportunity as next
requirements, and approves stage in continuous
necessary processes improvement
2. Identify and Manager or staff Group works with Team documents and
document process documents processes staff to document flowcharts processes
processes
3. Measure Managers collect Manager defines data Team determines
performance data but shares little for group to collect what data to collect
and gets them
4. Understand why Manager analyses Manager suggests Team analyses data,
data and draw casual factors and determines root
conclusions group confirms causes, and
understands variation
5. Develop and test Manager defines Manager suggests Team identifies and
ideas improvements alternatives for group tests alternative
to evaluate solutions
6. Implement Manager drives Group implements Team has
solutions and implementation and solution and shares responsibility and
evaluate evaluates outcome evaluation with authority to
manager implement solution
and track results

When employees throughout the organization are trained in the tools and techniques of
process improvement, and when managers provide information, coaching, and resources, then
an organization begins to take on a different set of characteristics. These are displayed on the
following table for the entire organization and represent the macromodel of an organization
whose employees become empowered.

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 XIV. Table

Organizational phase Traditional Transitional High-involvement

Structure hierarchical less hierarchical flat
precise job loose job no job descriptions
descriptions descriptions self-directed teams
functional units matrix management
Focus internal targets competition Customers needs
preservation quality and Flexible, responsive
costs productivity customer satisfaction
problem solving adaptation process improvement
find-and-fix product service prevention
improvement
detection
Authority Top-down command special assignments consensus
inflexible open to challenge seeks challenge
controlling sharing trusting
rank and title committee knowledge
Idea sources work measurement staff studies work teams
suggestion systems quality circles customers and
employees
Stake apathetic compliant committed
no ownership some ownership full ownership

IV.9.g. Managers responsibilities

Managers should recognize that not every group will become a high-performing, autonomous
work team. Yet teams may still make valuable contributions as they progress through the
stages of forming, storming and norming. Team progress is attributable in part to the
sponsoring managers effectiveness in guiding and supporting his or her teams.
Managers must also understand that empowering others and delegating authority requires a
great deal of planning and hard work on their part. Building an environment to support
empowerment requires teamwork as well as leadership. However, providing both of these
ingredients may still not free teams and individuals to make decisions for themselves. If the
organization still does not respond, if middle managers are not being supportive, or if teams
are not confronting and resolving issues in their areas, then an additional stimulant is needed.
One form of stimulant can be provided by senior managers fabricating a minicrisis, if a
legitimate one does not already exist. This is simply done by increasing the span of control
and the responsibilities of managers at all levels. It soon becomes apparent, that the traditional
way of managing have to change.
Another stimulant to support change is to drive the organization to meet a new challenge
one that is specific, measurable, and of recognized importance. For example, achieving 100
per cent performance on every target should be the new goal. No defects, no errors, 100 per
cent accurate invoices, every product and service delivered on time, every time, 100 per cent
customer satisfaction are all targets that will at first appear to be impossible. But setting
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targets less than 100 per cent may artificially cap performance. More important, stretch targets
will signal to everyone that we have to change the way we do business because we cannot
achieve these stretch targets by doing the same old thing.

IV.9.h. What opportunities will teams address?

The generation of ideas on which teams would act has historically been in the domain of
managers and their supporting staffs and specialists. But what about tapping the reservoir of
ideas stored in the minds of those who are closest to the work and closest to the customers?
What about tapping the resources who are best positioned to see the reality of day-to-day
problems and who will be responsible for implementing improvements?
The empowered work force captures the ideas within the work group. Systems are designed to
stimulate the generation, development, and implementation of these ideas.
Toyota serves as a benchmark for employee suggestion systems. By the early 1980s, Toyota
was getting about 1.6 million ideas from employees annually. This represented an average of
about 30 ideas from every employee. Furthermore, about 95 per cent were implemented.
There are four simple guidelines for building effective suggestion programs:
1. Align: Employees who are committed to support the organizations goals are more
likely to contribute good ideas. Implementing these suggestions not only benefits the
organization but reinforces the suggestion-system process.
2. Implement: Dont analyze suggestions to death. Accepting peoples ideas will
encourage them to offer more. Dont expect that all ideas will be perfect; most will
require work to fine-tune and develop.
3. Reward: Contributors can be rewarded in two ways. The first is for people to see that
their own ideas are valued; they are acted on and implemented. The second is to
receive recognition, awards, and increased compensation. But act quickly, the value of
positive feedback diminishes as time increases.
4. Count: measure the performance of your suggestion system. How many ideas are
submitted? How many are implemented? Work to improve the performance of this
business process in the same way as you would improve any other. Post performance
numbers to bring the system to everyones attention.

IV.9.i. Summary

In the empowered work force, we will tap the discretionary effort of all employees. Everyone
will understand what the organization is trying to accomplish and what his or her role is in
this endeavour. Moreover, everyone will be committed to contribute toward these goals.
Aligned employees will have the requisite capabilities in an environment built on mutual
trust.
Teamwork will be supported. Team members, leaders and facilitators will understand the
factors that contribute to success and will recognize the natural evolution of teams through
four basic stages: forming, storming, norming and performing. The organizations senior

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members will shift from being commanders and controllers toward becoming coaches and
teachers.
Ideas will be generated from all levels and particularly from those who are closest to the work
processes and customers. These ideas will be consistent with the organizations needs, and an
overwhelming majority will find rapid implementation. Success will feed on success and
stimulate a chain reaction benefiting everyone.

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V. EFQM Excellence Model

EFQM (the European Foundation for Quality Management) is a not-for-profit membership

foundation in Brussels, established in 1989 to increase the competitiveness of the European
economy. The initial impetus for forming EFQM was a response to the work of W. Edwards
Deming and the development of the concepts of Total Quality Management.
What does business excellence mean?
Business excellence focuses on the client and requires inspirational leadership as well as
systems, processes and facts to manage an organisation. But for everything to happen there is
a need to maximise employees contribution by helping them to develop and grow. Business
excellence means that excellence is achieved in everything an organisation does including its:
customers, strategy, leadership, people, partners, society, processes, products and services.

V.1. Fundamental concepts

How does EFQM define excellence?

Excellent Organisations achieve and sustain outstanding levels of performance that meet or
exceed the expectations of all their stakeholders.

We can all think of organisations that we would recognise as being excellent. They may well
operate in different environments, with different stakeholder constituencies, and come in all
shapes and sizes but what they share a common mindset that is based on a number of
attributes and ways of working that separate them from the crowd.
The Fundamental Concepts of Excellence outline the foundation for achieving sustainable
excellence in any organisation. They can be used as the basis to describe the attributes of an
excellent organisational culture. They also serve as a common language for top management.
These eight Concepts have been identified through a rigorous process that included
benchmarking globally, searching extensively for emerging management trends and, last but
not least, a series of interviews with senior executives from a cross-section of industries
operating across Europe. Each of the Concepts is important in its own right but maximum
benefit is achieved when an organisation can integrate them all into its culture.
1. Adding Value for Customers
Excellent organisations consistently add value for customers by understanding, anticipating
and fulfilling needs, expectations and opportunities.
2. Creating a Sustainable Future
Excellent organisations have a positive impact on the world around them by enhancing their
performance whilst simultaneously advancing the economic, environmental and social
conditions within the communities they touch.
3. Developing Organisational Capability
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Excellent organisations enhance their capabilities by effectively managing change within and
beyond the organisational boundaries.
4. Harnessing Creativity & Innovation
Excellent organisations generate increased value and levels of performance through continual
improvement and systematic innovation by harnessing the creativity of their stakeholders.
5. Leading with Vision, Inspiration & Integrity
Excellent organisations have leaders who shape the future and make it happen, acting as role
models for its values and ethics.
6. Managing with Agility
Excellent organisations are widely recognised for their ability to identify and respond
effectively and efficiently to opportunities and threats.
7. Succeeding through the Talent of People
Excellent organisations value their people and create a culture of empowerment for the
achievement of both organisational and personal goals.
8. Sustaining Outstanding Results
Excellent organisations achieve sustained outstanding results that meet both the short and
long term needs of all their stakeholders, within the context of their operating environment.
The Fundamental Concepts of Excellence form the basis for the criteria of the EFQM
Excellence Model.

15. Figure

V.1.a. Model Criteria

The beauty of the Model is that it can be applied to any organisation, regardless of size, sector
or maturity. It is non-prescriptive and it takes into account a number of different concepts. It
provides a common language that enables our members to effectively share their knowledge
and experience, both inside and outside their own organisation. It ensures that all the
management practices used by an organisation form a coherent system that is continually
improved and delivers the intended strategy for the organisation.

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The EFQM Excellence Model is based on nine criteria. Five of these are "Enablers" and four
are "Results". The "Enabler" criteria cover what an organisation does and how it does it. The
"Results" criteria cover what an organisation achieves.

To achieve sustained success, an organisation needs strong leadership and clear strategic
direction. They need to develop and improve their people, partnerships and processes to
deliver value-adding products and services to their customers. In the EFQM Excellence
Model, these are called the Enablers. If the right Enablers are effectively implemented, an
organisation will achieve the Results they, and their stakeholders, expect.

The arrows emphasise the dynamic nature of the Model, showing learning, creativity and
innovation helping to improve the Enablers that in turn lead to improved Results.
Each of the nine criteria has a definition, which explains the high level meaning of that
criterion. To develop the high level meaning further each criterion is supported by a number
of criterion parts. Criterion parts are statements that describe in further examples of what,
typically, can be seen in excellent organisations and should be considered in the course of an
assessment. Finally, below each criterion part are guidance points. Many of these guidance
points are directly linked to the Fundamental Concepts. Use of these guidance points is not
mandatory. They are intended to give examples to aid interpretation of the criterion part.

16. Figure

V.2. Enablers

What an organisation does and how it does it

There are five Enablers, pictured on the left-hand side of the Model. These are the things an
organisation needs to do to develop and implement its strategy.

V.2.a. Leadership

Excellent organisations have leaders who shape the future and make it happen, acting as role
models for its values and ethics and inspiring trust at all times. They are flexible, enabling the

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organisation to anticipate and reach in a timely manner to ensure the on-going success of the
organisation.

V.2.b. Strategy

Excellent organisations implement their Mission and Vision by developing a stakeholder

focused strategy. Policies, plans, objectives and processes are developed and deployed to
deliver the strategy.

V.2.c. People

Excellent organisations value their people and create a culture that allows the mutually
beneficial achievement of organisational and personal goals. They develop the capabilities of
their people and promote fairness and equality. They care for, communicate, reward and
recognise, in a way that motivates people, builds commitment and enables them to use their
skills and knowledge for the benefit of the organisation.

V.2.d. Partnerships & Resources

Excellent organisations plan and manage external partnerships, suppliers and internal
resources in order to support their strategy, policies and the effective operation of processes.
They ensure that they effectively manage their environmental and societal impact.

V.2.e. Processes, Products & Services

Excellent organisations design, manage and improve processes, products and services to
generate increasing value for customers and other stakeholders.

V.3. Results

What an organisation achieves

There are four Results areas, shown on the right-hand side of the Model. These are the results
an organisation achieves, in line with their strategic goals. In all four results areas, we find
that excellent organisations:
Develop a set of key performance indicators and related outcomes to determine the
successful deployment of their strategy, based on the needs and expectations of the
relevant stakeholder groups
Set clear targets for key results, based on the needs and expectations of their business
stakeholders, in line with their chosen strategy
Segment results to understand the performance of specific areas of the organisation
and the experience, needs and expectations of their stakeholders
Demonstrate positive or sustained good business results over at least 3 years
Clearly understand the underlying reasons and drivers of observed trends and the
impact these results will have on other performance indicators and related outcomes

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 Have confidence in their future performance and results based on their understanding
of the cause and effect relationships established
Understand how their key results compare to similar organisations and use this data,
where relevant, for target setting

V.3.a. Customer Results

Excellent organisations achieve and sustain outstanding results that meet or exceed the need
and expectations of their customers.

V.3.b. People Results

Excellent organisations achieve and sustain outstanding results that meet or exceed the need
and expectations of their people.

V.3.c. Society Results

Excellent organisations achieve and sustain outstanding results that meet or exceed the need
and expectations of relevant stakeholders within society.

V.3.d. Business Results

Excellent organisations achieve and sustain outstanding results that meet or exceed the need
and expectations of their business stakeholders.

V.4. Radar logic

17. Figure

Structured approach to questioning the performance on an organisation.

The RADAR logic is a dynamic assessment framework and powerful management tool that
provides a structured approach to questioning the performance of an organisation.
At the highest level, RADAR logic states that an organisation needs to:
Determine the Results it is aiming to achieve as part of its strategy

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 What are we trying to achieve?
Plan and develop an integrated set of sound Approaches to deliver the required results both
now and in the future
How do we try to achieve this?
Deploy the approaches in a systematic way to ensure implementation
How / Where / When was this implemented?
Assess and Refine the deployed approached based on monitoring and analysis of the results
achieved and ongoing learning activities.
How do we measure whether it is working?
What have we learning and what improvements can be made?
RADAR is a simple but powerful management tool that can be applied in different ways to
help drive continuous improvement:
Assessing the maturity of the approaches you have implemented
Assessing the excellence of the results achieved
Helping to structure improvement projects
To help support robust analysis, the RADAR elements can be broken down into a series of
attributes which contain guidance on what we expect the organisation to demonstrate.

18. Figure

V.4.a. Assessing Enablers

When assessing Enablers, we look at the approaches adopted, how they have been deployed
and how the organisation assesses and refines their efficiency & effectiveness over time. In
practical terms, this means we look for:
Sound and integrated approaches that support the achievement of the organisation's
strategy

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 Structured deployment within all relevant areas of the organisation that enables
refinements to be implemented within appropriate timescales
Measurement being carried out so the organisation can understand how well the
approach is working and how effectively it has been implemented
Learning activities being undertaken to identify alternative or new ways of working
Improvements being implemented as a result of measurement and learning (closing the
loop)

V.4.b. Assessing Results

When assessing Results, we first look at their Relevance to the organisation's strategy and
how useful they are in reviewing progress against these key objectives. When then look at the
performance of the results themselves. In practical terms you should be looking for:
Results which clearly show how the organisation is progressing against its key
strategies for the criterion
Reliable data that can be segmented to give a clear understanding of what's happening
in relation to different stakeholder groups, products or processes.
Positive trends over a 3 year period
Targets, which are appropriate for the strategic objectives, being achieved
Appropriate comparisons and benchmarks to put the results in context within the
organisation's operating environment
Evidence to show that the organisation understands the underlying drivers of the
results and effectively managing them to ensure that performance levels will be
sustained into the future

19. Figure

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VI. Six Sigma

The Six Sigma is a statistically based approach which reduces variability, removes defects
and prevents products to be waste. Hence, the statistical methods have a big role to play in
this. It uses a set of quality management method including statistical methods to find a group
of experts which are familiar with these very complex methods. Each Six Sigma project has a
sequence of steps defined and all experts should follow the sequence to achieve the financial
target of the project. This target can be different like reducing cost or increasing profit.
Actually, Six Sigma originally defined to reduce defects in output products, but nowadays it
extended to other businesses and defects can be defined as any process output which does not
meet customer specifications. In Six Sigma approach, the goal is to have 99.99966% of the
products free of defects (3.4 defects per million).
Six sigma projects typically last 4-6 months and during this time, it uses a specific five-step
methodology known as DMAIC. DMAIC process breaks down the project into five phases:
Define opportunity
Measure performance
Analyze opportunity
Improve performance
Control performance
DMAIC is coming from the first letters of these five steps. This methodology guides the
whole team from the beginning to the end result. The important point is that Six Sigma is
applied on a specific part or characteristic and improves the performance of that special part.
So the total product is not the goal of Six Sigma project.

VI.1. DMAIC Process

DMAIC is an acronym for Define, Measure, Analyze, Improve and Control. DMAIC is a
separate concept and can be apply in any different approaches, meaning that it is not just for
Six Sigma projects. However, almost all of Six Sigma projects use DMAIC for improvement.
This is a general approach to help people to gather all tools and get the quality improved.

VI.1.a. Define

In Define step the project opportunity should be identified. In this step the team needs to
provide a project charter and an action plan. The project charter is a short document up to two
pages which contains a description of the project and its scope, the start and the anticipated
completion dates, an initial description of both primary and secondary metrics that will be
used to measure success and how those metrics align with business unit and corporate goals,
the potential benefits to the customer, the potential financial benefits to the organization,
milestones that should be accomplished during the project, the team members and their roles,
and any additional resources that are likely to be needed to complete the project. To prepare

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the project charter the project sponsor has a significant role. Generally, it takes 2-4 days to
prepare this document.
As mentioned before, the team should also prepare an action plan for moving forward to the
other DMAIC steps specially Measure step which is going to be done in the next step. It
contains individual work assignments and tentative completion dates. Finally, in Define step
the team should focus on the following:
Does the problem statement focus on symptoms, and not on possible causes or
solutions?
Are all the key stakeholders identified?
Does the potential financial impact make the project worth doing?
Has the scope of the project been verified to ensure that it is neither too small nor too
large?
Has a high-level process map been completed?
Have any obvious barriers or obstacles to successful completion of the project been
ignored?
Is the teams action plan for the Measure step of DMAIC reasonable?

VI.1.b. Measure

The goal of this step is to evaluate and find the current state of the process, so this involves
collecting data. KPIV and KPOV concepts are abbreviations for key process input variables
and key process output variables, respectively and this is important to develop a list of all of
them. They may have been identified in Define step but must be carefully define and measure
during Measure step.
For understanding and analysis of current process performance, we need to have sufficient
data and deciding what and how much data to collect is an important task. Data may be
collected by examining historical records, but this may not always be satisfactory, as the
history may be incomplete, the methods of record keeping may have changed over time, and,
in many cases, the desired information may not have been retained. Consequently, it is often
necessary to collect current data through an observational study, or it may be done by
sampling from the relevant data streams. The data that are collected are used as the basis for
determining the current state or baseline performance of the process. Additionally, the
capability of the measurement system should be evaluated to make sure the team is not trying
to solve an imaginary problem in which the process performance is fine, but the measurement
system is faulty.
At the end of the Measure step, the team should update the project charter (if necessary), re-
examine the project goals and scope, and re-evaluate team makeup. The team may consider
expanding to include members of downstream or upstream business units if the Measure
activities indicate that these individuals will be valuable in subsequent DMAIC steps. Any
issues or concerns that may impact project success need to be documented and shared with the
process owner or project sponsor. Finally, it is necessary to prepare the followings at the end
of Measure step:

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 There must be a comprehensive process flow chart or value stream map. All major
process steps and activities must be identified, along with suppliers and customers. If
appropriate, areas where queues grow and work-in-process accumulates should be
identified and queue lengths, waiting times, and work-in-process levels reported.
A list of KPIVs and KPOVs must be provided, along with identification of how the
KPOVs related to customer satisfaction or the customers CTQs (CTQ= Critical to
Quality).
Measurement systems capability must be documented.
Any assumptions that were made during data collection must be noted.
The team should be able to respond to requests such as, Explain where that data came
from and questions such as, How did you decide what data to collect?, How valid
is your measurement system?, and Did you collect enough data to provide a
reasonable estimate of process performance?

VI.1.c. Analyze

In the Analyze step, the objective is to use the data from the Measure step to begin to
determine the cause-and-effect relationships in the process and to understand the different
sources of variability. That is, in the Analyze step the objective is to determine the potential
causes of the defects, quality problems, customer issues, cycle time and throughput problems,
or waste and inefficiency that motivated the project. It is important to separate the sources of
variability into common causes and assignable causes. Removing a common cause of
variability usually means changing the process, while removing an assignable cause usually
involves eliminating a specific problem. A common cause of variability might be inadequate
training of personnel processing insurance claims, while an assignable cause might be a tool
failure on a machine. There are many statistical tools that are potentially useful in the Analyze
step. Among these are graphical data displays, control charts, hypothesis testing and
confidence interval estimation, regression analysis, designed experiments, and failure modes
and effects analysis. The Analyze tools are used with historical data or data that was collected
in the Measure step. These data are often very useful in providing clues about potential causes
of the problems that the process is experiencing. Sometimes these clues can lead to
breakthroughs and actually identify specific improvements. In most cases, however, the
purpose of the Analyze step is to explore and understand tentative relationships between and
among process variables and to develop insight about potential process improvements. A list
of specific opportunities and root causes that are targeted for action in the Improve step
should be developed here. Improvement strategies will be further developed and actually
tested in the Improve step. To finish the Analyze step, the team should consider the following
issues and potential questions:
What opportunities are going to be targeted for investigation in the Improve step?
What data and analysis supports that investigating the targeted opportunities and
improving/eliminating them will have the desired outcome on the KPOVs and
customer CTQs that were the original focus of the project?
Are there other opportunities that are not going to be further evaluated? If so, why?

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 Is the project still on track with respect to time and anticipated outcomes? Are any
additional resources required?

VI.1.d. Improve

In the Measure and Analyze steps, the team decides which KPIVs and KPOVs to study,
determines what data to collect and how to display and analyze them, identifies potential
sources of variability, and determines how to interpret the data they obtained. In the Improve
step, they turn to creative thinking about the specific changes that can be made in the process
and other things that can be done to have the desired impact on process performance.
A broad range of tools can be used in the Improve step. Designed experiments are probably
the most important statistical tool in the Improve step. Designed experiments can be applied
either to an actual physical process or to a computer simulation model of that process, and can
be used both for determining which factors influence the outcome of a process and for
determining the optimal combination of factor settings.
The objectives of the Improve step are to develop a solution to the problem and to pilot test
the solution. The pilot test is a form of confirmation experiment; it evaluates and documents
the solution and confirms the solution attains the project goals. This may be an iterative
activity, with the original solution being refined, revised, and improved several times as a
result of the pilot tests outcome. The Improve step should provide the following:
Adequate documentation of how the problem solution was obtained.
Documentation on alternative solutions that were considered.
Complete analysis results for the pilot test.
Plans to implement the pilot test results on a full-scale basis. This should include
dealing with any regulatory requirements, legal issues, personnel concerns (such as
additional training requirements), or the impact on other business standard practices.
Analysis of any risks of implementing the solution, and appropriate risk-management
plans.

VI.1.e. Control

The objectives of the Control step is to complete all remaining work on the project and to
deliver the improved process to the process owner along with a process control plan and other
necessary procedures to ensure that the gains from the project will be institutionalized.
The process owner should receive before-and-after data on key process metrics, operations
and training documents, and updated current process maps. The financial benefits of the
project should be quantified. The process control plan should be a system for monitoring the
solution that has been implemented, including methods and metrics for periodic auditing.
Control charts are an important statistical tool used in the control step of DMAIC; many
process control plans involve control charts on critical process metrics. The transition plan for
the process owner should include a validation check several months after project completion.
It is important to ensure that the original results are still in place and stable so that the positive
financial impact will be sustained. It is not unusual to find that something has gone wrong in

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the transition to the improved process. The ability to respond rapidly to unanticipated failures
should be factored into the plan. The Control step typically includes the following issues:
Data illustrating that the before and after results are in line with the project charter
should be available. (Were the original objectives accomplished?)
Is the process control plan complete? Are procedures to monitor the process, such as
control charts, in place?
Is all essential documentation for the process owner complete?
A summary of lessons learned from the project should be available.
A list of opportunities that were not pursued in the project should be prepared. This
can be used to develop future projects; it is very important to maintain an inventory of
good potential projects to keep the improvement process going.
A list of opportunities where the results of the project can be used in other parts of the
business.

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VII. Quality management tools and methods

VII.1.What causes defectives?

One after another, products are arriving on the conveyor. At the end of the conveyor, there is
a packaging machine which continuously packs up the incoming products and sends them to
the product warehouse. A closer look reveals a man standing between the conveyor and the
packaging machine. He is keeping a watchful eye on the flow of the products, and
occasionally picks up products and casually throws them into a basket behind him. Those
products are defective.
This kind of thing is commonly seen in many factories. At first, those thrown-away products
seemed to be waste of goods, but soon they are accepted as a routine process. But becoming
accustomed to defectives do not solve the problem but rather a steps backward from the
solution.
How are defectives made in the first place? What should be done to reduce their occurrence?
In order to decrease the number of defectives, one need to believe that defectives can
definitely be reduces. There are peculiar causes for any given defective product, and
defectives can be got rid of those causes are discovered and removed. Most people feel about
defectives is that because their products must satisfy very strict quality standards and have
numerous defect-causing factors, defective products are unavoidable. However, regardless of
types of products or kinds of production method used, causes of defectives are universal.
Variation: this is the cause. What will happen if we make products using materials of the
exact same quality, identical machines and work methods and inspect these products in
exactly the same manner? No matter how many products are made, they must all be identical
as long as the above four conditions are identical. That is, the products will be either all
conforming or all non-conforming. All of them will be defective if materials, machinery
method of work or that of inspection is not proper. In such a case, exactly identical defectives
will invariably be produced. As long as there is no failure in the aforementioned four
conditions, the resulting products must all be identically non-defective ones.
As far as the products we make are concerned, it is almost impossible that every product turns
out to be defective. Of the products made, some are defective while others are not. In other
words, defective and non-defective products come mixed together. Why are defectives and
non-defectives produced together? The cause, as we stated before, is variation. Variations in
materials, in machinery conditions, in work methods and in inspections are the causes of
defectives. If none of these variations existed, all products would be identical and there would
be no varying of quality like the occurrence of defectives and non-defectives.
Looking at the problem, we can see that in the process of making one product there are
countless factors which affect the quality characteristics of that product. When we regard
manufacturing process from the viewpoint of quality variation, we can think of the process as
an aggregate of the causes of variation. These causes are the explanation of the changes in

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quality characteristics of products, making defectives or non-defectives. A product is judged
to be non-defective if its quality characteristics meet certain standard and defective if they do
not. Therefore, even non-defectives have variations within their standard. This means that
these are not the exactly equal products which we discussed earlier.
Defectives are caused by variations. If these variations are reduced, defectives will certainly
decrease. This is a simple, strong principle which holds true regardless of types of product or
kinds of production method involved.

VII.2.Diagnosis of processes

Although causes of quality variations are countless, not every cause affects quality to the
same degree. Some of them actually affect quality greatly while others, although considered
to be very important in theory, have very little effect on quality variation when they are
properly controlled.
The countless conceivable causes can be categorized into two groups first of which consists of
a small number of causes which nevertheless give a great effect (the vital few), and a second
group which is made up of many causes giving only minor effects (the trivial many). Usually,
there are not many factors which really cause defects. This fact is called the principal of
Pareto because it applies to many instances.
By applying the aforementioned principle variation and this principle of Pareto, the problem
of reducing defectives becomes considerably easier to tackle with. What we need to do first is
to find the vital few causes of defectives, and remove these causes after they have been clearly
identified.
The procedure of finding the causes of defectives from among many other factors is called the
diagnosis of process. In order to reduce the number of defectives, the first necessary action is
to make a correct diagnosis to see what the true causes of defectives are. If this is not done
correctly, defectives cannot be reduced.
How do we make a correct diagnosis? There are various methods. Some employ intuition,
others depend on experience. Still others involve statistical analyses on data, while one can
also use experimental research. The intuitive method is often used because it can be done very
quickly. In fact, there is something beyond ordinary mans ability in the intuition of a true
expert. The difficulty of in the problem of reducing defectives is that it is not always clear
who a real expert is. Moreover, in the time of rapid progress, it is difficult to remain an expert
in all the problems whose nature is constantly and undergoing change. As problems of
defectives are often found in areas where previous experience is lacking, what is needed is not
so much the years of experience as a strong will to reduce defectives and an attitude of
observing the real situation in an objective way. The statistical way of looking at things and
use of statistical methods are a most effective means for this observation.
Statistical methods provide a very effective means for the development of new technology
and quality control in manufacturing processes.

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VII.3.How to obtain data

VII.3.a. How to collect data

Have clear defined objectives

Data is a guide for our actions. From data we learnt pertinent facts, and take appropriate
actions based on such facts. Before collecting data, it is important to determine what we are
going to do with is.
In a machine factory, a sampling inspection was made in a certain type of incoming purchased
part. A lot which should be rejected in itself was accepted as a special exception to keep the
production schedule. However, they didnt do anything special about the accepted lot. This
means that both the lots which conform to specifications and those which do not went to the
next process. These data were certainly being taken to determine the acceptability of lots, but
they were not utilized at all. In quality control, the objectives of collecting data are:
controlling and monitoring the production process
analysis of non-conformance
inspection.

What is the purpose?

Once the object for collecting data is defined, the types of comparison which need to be made
are also determined, and this in turn identifies the type of data which should be gathered. For
example, suppose that there is a question involving variation on a quality characteristic of a
product. If only one datum is gathered per day, it is impossible to determine the variation
within a day. Or, if you want to know in what ways defectives are produced by two workers,
it is necessary to take their samples separately so that the performance of each worker can be
compared. If comparing one against the other reveals a clear difference, a remedial measure
which will eliminate the difference between workers will also reduce the variation in the
process.
Dividing a group in this way into several subgroups on the basis of certain factor is called
stratification. Stratification is very important, it is necessary to make it a habit to apply
stratification in your thinking in all kinds of situations.
Then, suppose you want to know the relationship between the amount of ingredient and the
hardness of the product. In a case like this, where you want to know whether there is a
relationship between the values of two characteristics, the data have to be available in pairs.

Are measurements reliable?

Even if the samples have been taken properly, a wrong judgement will be made if the
measurement itself is unreliable. For example, inspections made by a certain inspector
showed a fraction defective which was very different from the rest, and careful examination
later revealed that a measuring instrument had gone wrong.

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In the case of a sensory measurement such as visual inspection, differences due to individual
inspectors are very common. This fact must be taken into account when collecting and
analysing data.

Find right ways to record data

Once data is gathered, various statistical methods are used for analysing them, so that it will
become a source of information. When collecting data, it is important to arrange it neatly to
facilitate later processing. First of all, the origin of the data must be clearly recorded. Data
whose origin is not clearly known becomes dead data. Quite often, little useful information is
obtained despite the fact that a week was spent gathering data on quality characteristics,
because people forgot on what days of the week the data was collected, which machines did
the processing, who the workers were, which material lots were involved and so on.
Secondly, data should be recorded in such a way that it can be used easily. Since data is often
used later to calculate statistics such as means and ranges, it is better to write it down in a
manner which facilitate computations.
A set of standard recording forms should be prepared beforehand if data is to be collected on a
continuous basis.

VII.4.Check sheets

As stated in the preceding section, if data is to collected at all, it is essential to make the
purpose clear and to have data which clearly reflects the facts. In addition to these premises,
in actual situations it is important that the data should be gathered in a simple way and in an
easy-to-use form. A check sheet is a paper form on which items to checked have been printed
already so that data can be collected easily and concisely. Its main purposes two-fold:
1. to make data gathering easy;
2. to arrange data automatically so that they can be used easily later on.
The collecting and recording data seems easy but actually is difficult. Usually, the more
people process the data, the more writing errors are likely to arise. Therefore, the check
sheets, on which data can be recorded by means of check marks or simple symbols and on
which data is arranged automatically without further copying by hand, becomes a powerful
data recording tools.

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 20. Figure

VII.5.What are Pareto Diagrams?

Quality problems appear in the form of loss (defective items and their cost). It is extremely
important to clarify the distribution pattern of the loss. Most of the loss will be due to a very
few types of defect, and these defects can be attributed to a very small number of causes.
Thus, if the causes of these vital few defects are identified, we can eliminate almost all the
losses by concentrating on these particular causes, leaving aside the other trivial many defects
for the time being. By using the Pareto diagram, we can solve this type problem efficiently.
In 1897, the Italian economist V. Pareto presented a formula showing that the distribution of
income is uneven. A similar theory was expressed diagrammatically by the U.S. economist
M.C Lorenz in 1907. Both of these scholars pointed out that by far the largest share of income
or wealth is held by a very small number of people. Meanwhile, in the field of quality control,
Juran applied Lorenzs diagram method as a formula in order to classify problems of quality
into the vital few and the trivial many, and named this method Pareto Analysis. He pointed
out that in many cases, most defects and the costs of these arise from a relatively small
number of causes.

VII.6.How to make Pareto diagram?

Step 1
Decide what problems are to be investigated and how to collect the data.
Decide what kind of problems you want to investigate. (Example: defective items,
losses in monetary terms, accidents occurring.)
Decide what data will be necessary and how to classify them. (Example: by type of
defect, location, processes, machine, worker, method.)
Determine the method of collecting the data and the period during which it is to be
collected.
Step 2

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Design a data tally sheet listing the items, with space to record their totals.
XV. Table

Type of defect Tally Total

Crack ///// ///// 10
Scratch ///// ///// ///// // 42
Strain ///// / 6
Stain ///// ///// ///// ///// //// 104
Gap //// 4
Pinhole ///// ///// ///// ///// ///// 20
Others ///// ///// //// 14
Total 200

Step 3
Fill out the tally sheet and calculate the totals.
Step 4
Make Pareto diagram data sheet listing the items, their individual totals, cumulative totals,
percentages of overall total, and cumulative percentages.
Type of defect Number of Cumulative total Percentage of Cumulative
defects overall total percentage
strain (D) 104 104 52 52
scratch (B) 42 146 21 73
pinhole (F) 20 166 10 83
crack (A) 10 176 5 88
stain (C) 6 182 3 91
gap (E) 4 186 2 93
others 14 200 7 100
total 200 - -

Step 5
Arrange the items in the order of quantity and fill out the data sheet. The item others should
be placed in the last line, no matter how large it is. This is because it is composed of a group
of items each of which is smaller than the smallest item listed individually.
Step 6
Draw two vertical axes and horizontal axis.

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Vertical axes:
Left-hand vertical axes: mark this axis with a scale from 0 to the overall total.
Right-hand vertical axes: mark this axis with a scale from 0% to 100%.
Horizontal axis: Divide this axis into the number of intervals to the number of items
classified.
Step 7
Construct a bar diagram.

Pareto Diagram by defective items

120 104
100
80
60 42
Number of
40 20
10 14 defective units
20 6 4
0

21. Figure

Step 8
Draw the cumulative curve (Pareto curve).
Mark the cumulative values (cumulative total or cumulative percentage), above the right-hand
intervals of each item, and connect the points by a solid line.

Pareto Diagram by defective items

100 100
91 93
88
80 83
73
60
52
40 Cumulative
percentage
20

22. Figure

Step 9
Write any necessary items on the diagram (items concerning the diagram and items
concerning the data).

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VII.6.a. Pareto Diagrams by phenomena and Pareto Diagrams by causes

As already mentioned, a Pareto-diagram is a method of identifying the vital few, and there
are two types.

Pareto diagrams by phenomena

This is a diagram concerning the following undesirable results, and is used to find out what
the major problem is.
Quality: defects, faults, complaints, returned items, repairs
Cost: amount of loss, expenses
Delivery: stock shortages, defaults in payments, delays in delivery
Safety: accidents, mistakes, breakdowns

Pareto diagrams by causes

This is a diagram concerning causes in the process, and is used to find out what the major
cause of the problem is.
Operator: shift, group, age, experience, skill, individual person
Machine: machines, equipment, tools, organizations, models, instruments.
Raw material: manufacturer, plant, lot, kind.
Operation method: conditions, orders, arrangements, methods.

VII.6.b. Notes on Pareto diagrams

Hints on making Pareto diagrams

Check various classifications and construct many kinds of Pareto diagrams. You can
grasp the essence of various angles, and it is necessary to try out various methods of
classification until you identify the vital few, which is the aim of Pareto analysis.
It is undesirable that others represent a higher percentage. If this happens, it is
because the items for investigation are not classified appropriately and too many items
fall under this heading. In this case, a different method of classification should be
considered.
If a monetary value can be assigned to the data, it is best to draw the Pareto diagrams
with the vertical axis showing this. If the financial implications of a problem are not
properly appreciated, the research itself may end up as ineffective. Cost is an
important scale of measurement in management.

Hints on using Pareto diagrams

If an item is expected to be amenable to a simple solution, it should be tackled right

away even if it is of relatively small importance. Since a Pareto diagram aims at
efficient problem solving, it basically requires us to tackle only the vital few.
However, if an item which appears to be of relatively small importance is expected to

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 be solved by a simple countermeasure, it will serve as an example of efficient
problem-solving, and the experience, information and incentives to morale obtained
through this will be of great assets for future problem-solving.
Do not fail to make a Pareto diagram by causes. After identifying the problem by
making a Pareto diagram by phenomena, it is necessary to identify the causes in order
to solve the problem. It is therefore vital to make a Pareto diagram by causes if any
improvements are to be effected.

VII.7.Cause-and-effect diagram

The output or result of the process can be attributed to a multitude of factors, and a cause-and-
effect relation can be found among those factors. We can determine the structure or a multiple
cause-and-effect relation by observing it systematically. It is difficult to solve complicated
problems without considering this structure, which consists of a chain of causes and effects,
and a cause-and-effect diagram is a method of expressing it simply and easily.
A cause-and-effect diagram is a diagram which shows the relation between a quality
characteristic and factors.
The diagram is used not only for treating the quality characteristic of products, but also in
other fields, and has found application worldwide.

VII.7.a. How to make cause-and-effect diagrams?

Making a useful cause-and-effect diagram is no easy task. It may safely be said that those who
succeed in a problem-solving in quality control are those who succeed in making a useful
cause-and-effect diagram. There are many ways of making the diagram, but there are two
typical methods. Prior to introducing the procedures, the structure of the cause-and-effect
diagram is explained with an example.

Structure of cause-and-effect diagrams

A cause-and-effect diagram is also called a fishbone diagram since it looks like the skeleton
of a fish, as shown in the following figure.

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 Big bone

Small bone

Medium-sized bone
Characteristic

Characteristic
(effect)

Factors (causes)

23. Figure

Procedures for making cause-and-effect diagrams for identifying causes

1. Procedure
Step 1
Determine the quality characteristic.
Step 2
Choose one quality characteristic and write it on the right-hand side of a sheet of paper, draw
in the backbone from left to right, and enclose the characteristic in a square. Next, write the
primary causes which affect the quality characteristic as big bones also enclosed by squares.
Step 3
Write the causes (secondary causes) which affect the big bones (primary causes) as medium-
sized bones, and write the causes (tertiary causes) which affect the medium-sized bones as
small bones.
Step 4
Assign an importance to each factor, and mark the particularly important factors that seem to
have a significant effect on the quality characteristic.
Step 5
Record any necessary information.
2. Explanation of the procedure
You may often find it difficult to proceed when you practice this approach. The best method
in such a case is to consider the variation. For example, consider variation in the quality
characteristic when you are thinking about the big bones. If the data shows that such a

129
variation exists, consider why it exists. A variation in the effect must be caused by variation in
the factors. This kind of switch-over of thought is extremely effective.
When you are making a cause-and-effect diagram relating to a certain defect, for example,
you may discover that there is a variation in the number of defects occurring on different days
of a week. If you find that the defect occurred more frequently on Monday than on any other
day of the week, you can change your thinking as follows: Why did the effect occur? Why
did the effect occur more frequently on Monday than on any other day of the week? This will
lead you to look for factors which make Monday and other days different, eventually leading
to discover the cause of the effect.
By adopting this method of thinking at each stage of examining the relation between the
characteristic and the big bones, the big bones and the medium-sized bones, and the medium-
sized bones and the small bones, it is possible to construct a useful cause-and-effect diagram
on a logical basis.
Having completed the cause-and-effect diagram, the next step is to assign an importance to
each factor. All the factors in the diagram are not necessarily closely related to the
characteristic. Mark those factors which seem to have a particularly significant effect on the
characteristics.
Finally, include any necessary information in the diagram, such as the title, the name of the
product, process or group, a list of participants, the date, etc.

Procedure for making cause-and-effect diagrams for systematically listing causes

a) Procedure
Step 1
Decide on quality characteristic.
Step 2
Find as many cause as possible which are considered to affect the quality characteristic.
Step 3
Sort out the relations among the causes and make a cause-and-effect diagram by connecting
those elements with the quality characteristic by cause-and-effect relations.
Step 4
Assign an importance to each factor, and mark the particularly important factors which seem
to have a significant effect on the quality characteristic.
Step 5
Write any necessary information.
b) Explanation of the procedure
This approach is characterized by linking two different activities: picking up as many causes
as possible and arranging them systematically.

130
For picking up causes, open and active discussion is required, and an effective method of
conducting a meeting held for this purpose is brainstorming.
In making the cause-and-effect diagram, the causes should be arranged systematically by
proceeding from the small bones to the medium-sized bones, and then from the medium-sized
bones to the big bones.

VII.7.b. Notes on cause-and-effect diagrams.

Hints on making cause-and-effect diagrams

Identify all the relevant factors through examination and discussion by many people.
The factors most strongly influencing the characteristic must be determined among
those listed in the diagram. If a factor is left out in the initial discussion stage before
the diagram is constructed, it will not appear at a later stage. Consequently, discussion
by all the people concerned is indispensable to the preparation of a complete diagram
which has no omissions.
Express the characteristic as concretely as possible. Characteristic expressed in an
abstract term will only result in a cause-and-effect diagram based on generalities.
Although such a diagram will contain no basic mistakes from the point of view of
cause-and-effect relations, it will not be very useful for solving actual problems.
Make the same number of cause-and-effect diagrams as that of characteristic. Errors in
the weight and the length of the same product will have different cause-and-effect
structures, and these should be analysed in two separate diagrams. Trying to include
everything in one diagram will result in a diagram which is unmanageably large and
complicated, making problem-solving very difficult.
Choose a measurable characteristic and factors. After completing a cause-and-effect
diagram, it is necessary to grasp the strength of the cause-and-effect relation
objectively using data. For this purpose, both the characteristic and the casual factors
should be measurable. When it is impossible to measure them, you should try to make
them measurable, or find substitute characteristics.
Discover factors amenable to action. If the cause you have identified cannot be acted
upon, the problem will not be solved. If improvements are to effected, the causes
should be broken down to the level at which they can be acted upon, otherwise
identifying them will become a meaningless exercise.

Hints on using cause-and-effect diagrams

Assign importance to each factor objectively on the basis of data. Examination of

factors on the basis of your own skill and experience is important, but it is dangerous
to give importance to them through subjective perceptions or impressions alone. Most
of the problems which can be solved by such an approach might have already been
solved, and consequently, most of the problems remaining unsolved cannot be solved
by this approach. Assigning importance to factors objectively using data is both more
scientific and more logical.

131
 Try to improve the cause-and-effect diagram continually while using it. Actually using
a cause-and-effect diagram will help you see those parts which should be added. You
should make repeated efforts to improve your diagram, and eventually a really useful
diagram will be obtained. This will be useful in solving problems, and at the same
time, will help improve your own skill and to increase your technological knowledge.
Various methods should be applied in combination in solving problems, and the combination
of a Pareto diagram and cause-and-effect diagram is particularly useful.

VII.8.Distributions and histograms

VII.8.a. Variation and distribution

If we could collect data from a process in which all factors (man, machine, material, method,
etc.) were perfectly constant, all the data would have the same values. In reality, however, it is
impossible to keep all factors in a constant state all the time. Strictly speaking, even some
factors which, we assume, are in a constant state cannot be perfectly constant. It is inevitable
for the values in a given set of data to have a variation. The values of the data are not the same
all the time, but this does not mean that they are determined in a disorderly fashion. Although
the values change every time, they are governed by a certain rule, and this situation is referred
to as data following a certain distribution.

VII.8.b. Populations and distributions

In quality control, we try to discover facts by collecting data and then take the necessary
action based on those facts. The data is not collected as an end itself, but as a means of finding
out the facts behind the data.
For example, consider a sampling inspection. We take a sample from a lot, carry out
measurements on it, and then decide whether we should accept the whole or not. Here our
concern is not the sample itself, but the quality of the whole lot. As another example, consider
the control of a manufacturing process using an x R control chart. Our purpose is not to
determine the characteristics of the sample taken for drawing the x R control chart, but to
find out what the state the process is in.
The totality of items under consideration is called the population. In the first example above,
the population is the lot, and in the second it is the process.
Some people may feel it difficult to regard a process as a population because while a
lot is indeed a group of finite individual objects, a process itself is not a product at all, but
is made up of the 5Ms (man, machine, material, method and measurement). When we turn
our attention to product-making function, we will recognize that the process produces
unmistakably a group of products. Moreover, the number of products is infinite unless the
process stops producing them, and for this reason, a process is considered to be an infinite
population.

132
One or more items taken from a population intended to provide information on the population
is called a sample. Since a sample is used for estimating the characteristics of the entire
population, it should be chosen in such a way as to reflect the characteristics of the
population. A commonly-used sampling method is to choose any member of the population
with equal probability. This method is called random sampling, and a sample taken by
random sampling is called a random sample.
We obtain data by measuring the characteristics of a sample. Using this data, we draw an
inference about the population, and then take some remedial action. However, the measured
value of a sample will vary according to the sample taken, making it difficult to decide what
action is necessary. Statistical analysis will tell us how to interpret such data.

VII.8.c. Histograms

The data obtained from a sample serves as a basis for a decision on the population. The larger
the sample size is, the more information we get about the population. But an increase of
sample size also means an increase in the amount of data, and it becomes difficult to
understand the population from these data even when they are arranged into tables. In such a
case, we need a method which will enable us to understand the population at a glance. A
histogram answers our needs. By organizing many data into a histogram, we can understand
the population in an objective manner.

How to make histograms

Step 1: Calculate the range (R)

Obtain the largest and the smallest values and calculate R.
R= (the largest observed value) (the smallest observed value)
Step 2: Determine the class interval
The class interval is determined so that the range, which includes the maximum and the
minimum of values, is divided into intervals of equal breadth. To obtain the interval breadth,
divide R by 1, 2 or 5 (or 10, 20, 50; 0.1, 0.2, 0.5, etc.) so as to obtain from 5 to 20 class
intervals of equal breadth. When there are two possibilities, use the narrower interval if the
number of measured values is 100 or over and the wider interval, if there are less then 100
observed values.
Step 3: Prepare the frequency table form
Prepare a form, on which the class, mid-point, frequency marks, frequency etc. can be
recorded.
Step 4: Determine the class boundaries
Determine the boundaries of the intervals so that they include the smallest and the largest of
values, and wrote these down on the frequency table.
Step 5: Calculate the mid-point of class
Step 6: Obtain the frequencies

133
How to read histograms

VII.8.d. Types of histograms

It is possible to obtain useful information about the state of a population by looking at the
shape of the histogram. The followings are typical shapes, and we can use them as clues for
analysing the process.
General type (symmetrical or bell-shaped)
The mean value of the histogram is in the middle of the range of data. The frequency is the
highest in the middle and becomes gradually lower towards the end. The shape is
symmetrical. This is the shape which occurs most often.

a) General type

24. Figure

Comb type (multi-modal type)

Every other class has a lower frequency. This shape occurs when the number of units of data
included in the class varies from class to class or when there is a particular tendency in the
way the data is rounded off.

b) Comb type

25. Figure

134
Positively skew type
The mean value of the histogram is located to the left of the centre of the range. The
frequency decreases somewhat abruptly towards the left, but gently towards the right. This
shape occurs when the lower limit is controlled either theoretically or by a specification value
or when values lower than a certain value do not occur.

c) Positively skew type

26. Figure

Left-hand precipice type

The mean value of the histogram is located far to the left of the centre of the range. The
frequency decreases abruptly on the left, and gently toward the right. This is a shape which
frequently occurs when a 100% screening has been done because of low process capability,
and also when positive skewness becomes even more extreme.

d) Left-hand precipice type

27. Figure

135
Plateau type
The frequency in each class forms a plateau because the classes have more or less the same
frequency except for those at the ends. This shape occurs with a mixture of several
distributions having different mean values.

e) Plateau type

28. Figure

Twin-peak type (bimodal type)

The frequency is low near the middle of the range of data, and there is a peak on either side.
This shape occurs when to distributions with widely different mean values are mixed.

f) Twin-peak type

29. Figure

Isolated peak-type
There is a small isolated peak in addition to a general-type histogram. This is a shape which
appears when there is a small inclusion of data from a different distribution, such as in the
case of process abnormality, measurement error, or inclusion of data from a different process.

136
 g) Isolated-peak type

30. Figure

VII.8.e. Comparing histograms with specification limits

If there is a specification, draw lines of the specification limits on the histogram to compare
the distribution with the specification. Then see if the histogram is located well within the
limits. The following figures represent five typical cases.
When the histogram satisfies the specification:
a) Maintenance of the present state is all that is needed, since the histogram amply
satisfies the specification.
b) The specification is satisfied, but there is no extra margin. Therefore, it is better to
reduce the variation by a small degree.
LSL USL

a)

31. Figure

137
 LSL USL

b)

32. Figure

When the histogram does not satisfy the specification:

c) It is necessary to take measures to bring the mean closer to the middle of the
specification.
d) This requires action to reduce the variation.
e) The measures described in c) and d) are required.
LSL USL

c)

33. Figure

138
 LSL USL

d)

34. Figure

LSL USL

e)

35. Figure

139
VIII. Application of Statistical Process Control

Before going into SPC specific details there has to be a common agreement / decision whether
SPC is applicable in a particular practical case or not. There is no one clear definition
available supporting this decision but there are several points, which have to be considered
before the decision of process control is taken.
Is the actual process critical (based on: customer satisfaction and/or QP, and/or cost
consequence)?
Can the process be made mistake proof? If yes, then do so, and do not use SPC.
Is the expected result significant?
Do we have the appropriate resource - like reliable measurement system, trained
personnel, enough time available? If any of these is not available then is there
enough money and time to close the gap?
The evaluation of the points above requires a multidisciplinary team including quality,
engineering, production and CFT leader. If the team decides to use SPC then SPCS has to
start and lead the process according to instructions described in the following chapters.

VIII.1. What is SPC?

All processes have natural variability (due to common causes) and unnatural variability (due
to special causes). We use SPC to monitor and/or improve the process. Attentive use of SPC
can allow us to detect special cause variation through out of control signals. Control charts
cannot tell you why the process is out of control, only that it is.
Control charts are the means through which process and product parameters are tracked
statistically over time. Control charts incorporate upper and lower control limits that reflect
the natural limits of (random) variability in the process. These limits should NOT be
compared to customer specification limits.
Based on statistical principles, control charts allow for the identification of unnatural (non-
random) patterns in process variables. When the control chart signals a nonrandom pattern,
we know that special cause variation has changed the process. The actions we take to attack
non-random patterns in control charts are the key to successful SPC usage.

VIII.2. Selecting the Appropriate SPC Method

This decision tree can be used as a guideline to select the most appropriate SPC method.

140
 Start

Select the process

step, for which you
want to select an
appropriate SPC
method.

Is the process
No characteristic a No Do you want Yes
continuous to control an Input?
variable?

Yes

Is the StDev easily Yes Use Xbar and S

computable? chart.

Do you want to
No Yes
weight the historical
No data?

Use Xbar and R

chart.

Use EWMA
Use I-MR chart.
chart.

Can you measure

Yes Is the sample size No
more than one defect
constant?
per unit?

Use U chart.
No
Yes

No Is the sample size Yes

Use C chart.
constant?

Use p chart. Use np chart.

36. Figure

141
VIII.3. Overview of Control Charts

VIII.3.a. Control Charts Used to Monitor Output Variables

Charts for Continuous Output (Y)

Xbar & R charts, or Xbar & S: An Xbar chart measures the central tendency of Y
over time. R charts measure the gain or loss of uniformity within sub-groups, which
represents the variability in Y over time. R charts are based on the range of values
within each sub-group. Sigma charts track the variability based on the standard
deviation within sub-group, not the range.

Charts for Attribute Output (Y)

nP charts: A simple chart used to track the number of non-conforming units

(defective parts). Use when the sample size is constant.
P charts: A simple chart used to track the percentage of non-conforming units
(percentage of defective parts). Use when the sample size is NOT constant.
C charts: A simple chart used to track the number of defects produced (not the
number of defectives). Use when the sample size is constant.
U charts: A simple chart used to track the number of defects per unit produced (not
the % defectives). Use when the sample size is NOT constant.

VIII.3.b. Control Charts Used to Monitor Input Variables

Charts for Continuous Input (X)

I-MR chart: Also known as an individuals and moving range chart. This is similar to
the Xbar & R chart. Instead of charting the sub-group average and range over time,
this chart plots each individual reading (sub-group size = 1) and a moving range.
EWMA chart: (Exponentially Weighted Moving Average). Used when a process is
known to be under statistical control. The user of this chart is looking to detect
sustained shifts in the process mean. Exponentially weighs past data with respect to
current data. It is a complicated chart and should be used only with automation.

VIII.4. Defining Control Charts

VIII.4.a. Charts for Continuous Output (Y)

Xbar & R Chart

An Xbar chart measures the central tendency of the Y over time. R charts measure the gain or
loss of uniformity within sub-group, which represents the random cause variability in the Y
over time. R charts are based on the range of values within each sub-group. Sigma charts
track the variability based on the standard deviation within sub-group, not the range.

142
These types of charts are the most sensitive (powerful) charts for tracking process excursions
in the mean and the variation over time. An assumption of normally distributed individuals
exists. Sub-group means will tend to produce normal distribution because of the central limit
theorem. Three sigma limits used are based on the sample size. The minimum number of
samples recommended to establish control limits is 30.

Gather the Data

i. Select the subgroup size ( n ). Typical subgroup sizes are 4 to 5. The concept of
rational sub-grouping should be considered. The objective is to minimize the amount
of variation within a subgroup. This helps us "see" the variation in the averages chart
easier.
ii. Select the frequency, with which the data will be collected. Data should be collected in
the order in which it is generated (in most cases).
iii. Select the number of subgroups ( k ) to be collected before control limits are
calculated. You can start with initial control limits after ten subgroups, but recalculate
the limits each time until you get to twenty subgroups.
iv. For each subgroup, record the individual, independent sample results.
v. For each subgroup, calculate the subgroup average:
n

X i
X i 1
, where n is the subgroup size, xi ' s are the observations in the
n
subgroup.
vi. For each subgroup, calculate the subgroup range:
R X max X min , where X max is the maximum individual sample result in the
subgroup and X min is the minimum individual sample result in the subgroup.

Plot the Data

i. Select the scales for the x and y axes for both the X and R charts.
ii. Plot the subgroup ranges on the R chart and connect consecutive points with a straight
line.
iii. Plot the subgroup averages on the X chart and connect consecutive points with a
straight line.

Calculate the Overall Process Averages and Control Limits

i. Calculate the average range ( R ):
k

R i
R i 1
, where k is the number of subgroups, and Ri is the range of i th
k
subgroup.
ii. Plot R on the range chart as a solid line and label.
iii. Calculate the overall process average ( X ):

143
 k

X i

X i 1
where k is the number of subgroups, and X i is the range of i th
k
subgroup.
iv. Plot X on the Xbar chart as a solid line and label.
v. Calculate the control limits for the R chart. The upper control limit is given by UCLR .
The lower control limit is given by LCLR .
UCLR D4 R , LCLR D3 R , where D3 , D4 are control chart constants that
depend on subgroup size (see the table below).
vi. Plot the control limits on the R chart as dashed lines and label.
vii. Calculate the control limits for the Xbar chart. The upper control limit is given by
UCLX . The lower control limit is given by LCLX .
UCLX X A2 R , LCLX X A2 R , where A2 is a control chart constant that
depends on subgroup size (see the table below).
viii. Plot the control limits on the Xbar chart as dashed lines and label.

Interpret Both Charts for Statistical Control

i. Always consider variation first. If the R chart is out of control, the control limits on
the Xbar chart are not valid since you do not have a good estimate of. All tests for
statistical control apply to the Xbar chart. Points beyond the limits, number of runs
and length of runs tests apply to the R chart.

Calculate the Process Standard Deviation, If Appropriate

i. If the R chart is in statistical control, the process standard deviation, S , can be
calculated as:
R
S , where d 2 is a control chart constant that depends on subgroup size (see
d2
the table below).

To calculate control limits and to estimate the process standard deviation, you must use the
control chart constants D4 , D3 , A2 , and d 2 . These control chart constants depend on the
subgroup size ( n ). These control chart constants are summarized in the table below. For
example, if your subgroup is 4, then D4 = 2.282, A2 = 0.729, and d 2 = 2.059. There is no
value for D3 . This simply means that the R chart has no lower control limit when the
subgroup size is 4.
XVI. Table

Subgroup
A2 D3 D4 d2
Size (n)
2 1.880 3.267 1.128

144
 3 1.023 2.574 1.693
4 0.729 2.282 2.059
5 0.577 2.114 2.326
6 0.483 2.004 2.534
7 0.419 0.076 1.924 2.704
8 0.373 0.136 1.864 2.847
9 0.337 0.184 1.816 2.970
10 0.308 0.223 1.777 3.078

Xbar & S Chart

The practical use of Xbar and S chart is difficult because computing of standard deviation is
much more time consuming than computing the range. Therefore it is recommended to use the
Xbar & R chart instead.

VIII.4.b. Charts for Continuous Input (X)

I-MR Chart

IndividualMoving range charts should be used for true X's like temperature, humidity,
concentration of a solution, or gas flow per minute. Typical applications are:
The production volumes are low, where only one piece is produced per day or
sometimes longer.
High-cost testingwhen the cost of testing is very expensive, time consuming,
destructive, or otherwise prohibitive.
Chemical processing, where only one measurement per batch is taken.

Defining the Initial Settings

i. Select the subgroup size ( n ). This is the length of moving range.
ii. Select the frequency with which the data will be collected.
iii. Select the number of subgroups ( k ) to be collected before the chart center line is
calculated.
iv. Collect the data of first k subgroups. (altogether nk individuals): X 1 , X 2 ,..., X nk
v. Calculate the center line of Individuals as
nk

X i
X i 1

nk
vi. Calculate the center line for Moving Range as
k

R i
R i 1
, where R1 , R2 ,..., Rk are the ranges of first k subgroups.
k

145
Calculate the Control Limits
i. The upper ( UCLX ) and lower ( LCLX ) limits for individuals are calculated as:

UCLX X E2 R ,
LCLX X E2 R .
ii. The upper ( UCLMR ) and lower ( LCLMR ) limits for moving range are calculated as:

UCLMR D4 R ,
LCLMR D3 R
D3 , D4 , E 2 are constants that vary according to subgroup size, n .2
XVII. Table

n 2 3 4 5 6 7 8 9 10
D4 , 3.267 2.574 2.282 2.114 2.004 1.924 1.864 1.816 1.777
D3 * * * * * 0.076 0.136 0.184 0.223
E2 2.66 1.77 1.46 1.29 1.18 1.11 1.05 1.01 0.98
* There is no lower control limit for ranges for subgroup sizes below 7

EWMA Chart

Unfortunately, it takes time for the patterns in the data to emerge because individual
violations of the control limits do not necessarily point to a permanent shift in the process.
The EWMA (exponentially weighted moving average) control chart is suited for detecting
small shifts and trends.
The Exponentially Weighted Moving Average (EWMA) is a statistic for monitoring the
process that averages the data in a way that gives less and less weight to data as they are
further removed in time from the current measurement.
i. Defining the Initial Settings
ii. Select the subgroup size ( n ). Typical subgroup sizes are 4 to 5.
iii. Select the frequency with which the data will be collected.
iv. Select the number of subgroups ( k ) to be collected before the chart center line is
calculated.
v. Collect the data of first k subgroups.
vi. For each subgroup, calculate the subgroup average:
n

X i
Xt i 1
, where n is the subgroup size, X i ' s are the observations in
n
the i th subgroup. ( X t is the average of the t th subgroup.)
vii. Calculate the center line as

2
The values of D3 and D4 in this table are same as the ones shown for Xbar and R chart.

146
 k

X i

X i 1

k , where k is the number of subgroups, X i is the average of i th

subgroup.

Calculate the Control Limits and EWMA Data

i. The upper ( UCL ) and lower ( LCL ) limits are computed based on historical data:

UCL X sK
2

LCL X sK
2 , where s is the standard deviation of the historical
data; the function under the radical is a good approximation to the
component of the standard deviation of the EWMA statistic that is a
function of time; and K is the multiplicative factor, which is usually taken
to be 3.
ii. Initialize EWMA0 :

EWMA0 X
iii. Specify the weighting factor . 0 1 . When =1, the chart is equivalent to the
X-bar or X-individual chart (depending on the subgroup size). Higher values
produce smoother chart, which is less sensitive to sudden changes.
iv. The point of the chart (EWMA statistic) at time t is computed recursively:
EWMAt X t 1 EWMAt 1 , where X t is the average of the t th subgroup, and
EWMAt 1` is the t -1th value of EWMA .

The chart below is an example that demonstrates how EWMA is making the trend visible.

37. Figure

147
VIII.4.c. Charts for Attribute Output (Y)

P Chart

P chart is a simple chart used to track the percentage of non-conforming units (percentage of
defective parts). Use when the sample size is NOT constant. The definition of conformance
and nonconformance must exist in advance. Each component, part or item being checked is
recorded as either conforming or nonconforming even if an item has several specific
nonconformities, it is only tallied once as nonconforming item.

Gather the Data

i. Select the subgroup size ( n ). For the chart to show analyzable patterns, the subgroup
size should be large enough to have several nonconforming items per subgroup (e.g.,
n p 5 ). Note, however, that large subgroup sizes can be disadvantage if each
subgroup represents a long period of process operation.
n1 p1 n2 p2 ... nk pk
p = average proportion nonconforming = , where
n1 n2 ... nk
n1 p1 , n2 p2 ,, nk p k and n1 ,..., nk are the number of nonconforming items
and number of items inspected in each subgroup.
ii. Let p denote the probability that an item has the attribute being counted. The value
p must be the same for all n items in any one sample.
iii. Subgroup frequency should make sense in terms of production periods to aid analysis
and correction of problems found.
iv. Select the number of subgroups ( k ) to be collected before control limits are
calculated. The data collection period should be long enough to capture all likely
sources of variation affecting the process. Generally, it should also include 25 or more
subgroups to give a good test for stability and, if stable, a reliable estimate of process
performance.

Plot the Data

i. Select the scales for the x and y axes in the way the x axis refers to the subgroup
identification (hour, day, etc.), the y axis refers to the proportion (or percent)
nonconforming. The vertical scale should extend from zero to about 1-1/2 to 2 times
the highest proportion nonconforming noted in the initial data readings.
o
ii. pi i , where oi is the number of nonconforming items, and ni is the total number
ni
of items in the i th subgroup. 1 i k For practical reasons, ni s are usually set to
be identical, so n1 n2 ... nk n , however this is not a requirement.
iii. Plot the values of p i for each subgroup. It is usually helpful to connect the points with
lines to help visualize patterns and trends.

148
Calculate Control Limits
3 p(1 p)
UCL p p
n

3 p(1 p)
LCL p p
n
where n is the constant sample size.

Note: When p is low and/or n is small, the LCL p can sometimes be calculated as a negative
number. In these cases there is no lower control limit, since even a value of p 0 for a
particular period is within the limits of random variation.

Plot process average ( p ) as a solid horizontal line and control limits ( UCL p , LCL p ) as
dashed horizontal lines.

Note: The control limit calculations given above are appropriate when the subgroup sizes are
all equal (as they would be in a controlled sampling situation). Theoretically, whenever the
sample size changes (even for a single subgroup), the control limits change, and unique limits
would be calculated for each subgroup having a unique sample size. However, for practical
purposes, control limits calculated with an average sample size ( n ) are acceptable when the
individual subgroup size varies from the average by no more than +/- 25%. When subgroup
sizes are vary by more than this amount, separate control limits are required in the way the
formula has to contain ni instead of n , where ni is the sample size of the particular subgroup.

If possible select constant sample size.

Interpret the Chart for Statistical Control

i. Any point beyond the control limits is evidence of instability at that point so we
presume a special cause behind. The special cause can be either unfavorable or
favorable but the point has to be marked anyway.
A point above the upper limit (higher proportion nonconforming) is generally sign of one or
more of the following:
The control limit or plot point are in error;
The process performance has worsened, either at that point in time or as part of a
trend;
The evaluation system has changed (e.g. inspector, gage);
A point bellow the lower limit (lower proportion nonconforming) is generally sign of one or
more of the following:

149
 The control limit or plot point are in error;
The process performance has improved;
The measurement system has changed;
Patterns or trends within the control limits:
The presence of unusual patterns or trends, even when all points are within the control limits,
can be evidence of non-control or change in the level of performance during the period of the
pattern or trend. This can give advance warning of conditions, which if left uncorrected, could
cause points beyond the control limits.

Note: When the average number of nonconforming items per subgroup ( n p ) is moderately
large (9 or more), the distribution of the subgroup p s is nearly normal.

ii. Runs: In process under control, with n p moderately large, approximately equal
numbers of points should fall on either side of the average. Either of the following
could be a sign that a process shift or trend has begun:
7 points in a raw on one side of the average
7 points in a raw that are consistently increasing or consistently decreasing
Runs above the process average or runs up, generally signify one or both of the following:
The process performance has worsened and may still be worsening
The evaluation system has changed
Runs below the process average or runs down, generally signify one or both of the following:
The process performance has improved
The measurement system has changed

iii. Obvious nonrandom patterns: Other distinct patterns, such as trends, cycles, unusual
spread of points within the control limits and relations among values within
subgroups, may indicate the presence of special causes of variation, although care
must be taken not to over-interpret the data. One test for unusual spread is the
following:
Distance of points from the process average: In case a process under statistical control, with
only common-cause variation present and n p is moderately large, about 2/3 of the data points
will be within the middle third of the region between the control limits, about 1/3 of the points
will be in the outer two-thirds of the region and about 1/20 will lie relatively close to the
control limits.
If substantially more than 2/3 of the points lie close to the process average this could mean
one or more of the following:
The control limit or plot point are in error;

150
 The process or the sampling method are stratified, each subgroup systematically
contains measurements from two or more process streams that have very different
average performance (e.g. mixed output of two parallel production lines)
The data have been edited;
If substantially fewer than 2/3 of the points lie close to the process average this could mean
one or both of the following:
The calculation or plotting are in error;
The process or the sampling method cause successive subgroups to contain
measurements from two or more process streams that have very different average
performance (e.g. performance differences between shifts).
If several process streams are present, they should be identified and tracked separately.

nP Chart

The np chart is a simple chart used to track the number of non-conforming units (number of
defective parts). Use when the sample size is constant. It is identical to the p chart except that
the actual number of nonconforming items, rather than their proportion of the sample, is
recorded. Both p and np charts are appropriate for the same basic situations, with the choice
going to the np chart if (a) the actual number of nonconformities is more meaningful or
simpler to report than the proportion, and (b) the sample size remains constant from period to
period. The details of instructions for the np chart are virtually identical to those for the p
chart; exceptions are noted bellow.

Gather the Data

i. The inspection sample sizes must be equal. The period of sub-grouping should make
sense in terms of production intervals and feedback systems, and samples should be
large enough to have several nonconforming items per subgroup. Record the sample
size on the form.
ii. Record and plot the number nonconforming items in each subgroup (np).

Calculate Control Limits

i. Calculate the process average number nonconforming ( n p ):
n1 p1 n p2 ... npk
np= , where np1 , np2 ,, np k are the number of
k
nonconforming items in each of the k subgroups.
ii. Calculate the upper and lower control limits:
UCLnp n p 3 n p(1 p)

LCLnp n p 3 n p(1 p)
, where n is the subgroup sample size.
All other details are identical to those for the p chart.

151
c Chart

A c chart is a simple chart used to track the number of defects produced (not the number of
defective). Use when the sample size or amount of the material inspected is constant. It is
applied in two major types of inspection situations:
i. Where the nonconformities are scattered through a continuous flow of product, and
where the average rate of nonconformities can be expressed (e.g. misplacements per
100 boards).
ii. Where the nonconformities from many different potential sources may be found in a
single inspection unit (e.g. failed boards).
The details of instructions for the c chart are virtually identical to those for the p chart;
exceptions are noted bellow.

Gather the Data

i. The inspection sample sizes must be equal. So the plotted values of c will reflect
changes in quality performance. Record the sample size on the form.
ii. Record and plot the number nonconforming in each subgroup (c).

Calculate Control Limits

i. Calculate the process average number nonconformities ( c ), which is the process
capability:
c c2 ... ck
c= 1 , where c1 , c2 ,, c k are the number of nonconformities in
k
each of the k subgroups.
ii. Calculate the upper and lower control limits:

UCLc c 3 c

LCLc c 3 c

All other details are identical to those for the p chart.

u Chart

A u chart is a simple chart used to track the number of defects per unit produced (not the %
defective). Use when the sample size is NOT constant. It is similar to c chart except that the
number of defects is expressed on a per unit basis. U chart must be used if the sample size can
vary from period to period.
The details of instructions for the u chart are virtually identical to those for the p chart;
exceptions are noted bellow:

Gather the Data

i. Sample sizes do not need to be constant from subgroup to subgroup, although
maintaining them within 25% above or bellow the average simplifies the calculation
of control limits.

152
 ii. Record and plot the nonconformities per unit in each subgroup ( u ).
c
u
n
where c is the number of nonconformities found, and n is the sample size (number of
inspection reporting units) of the subgroup; c and n should also be recorded on the
form.

Calculate Control Limits

i. Calculate the process average nonconformities per unit ( u ):
c c2 ... ck
u= 1 , where c1 , c2 , c k and n1 , n 2 ,, n k are the number of
n1 n2 ... nk
nonconformities and sample size of each of the k subgroups.
ii. Calculate the upper and lower control limits:
u
UCLu u 3
n
u
LCLu u 3
n , where n is the average sample size.

Note: If any individual subgroup size is more than 25% above or bellow the average sample
size, the control limits must be recalculated, but use of variable control limits cumbersome
and potentially confusing so it is much better using constant subgroup sample sizes wherever
possible.
All other details are identical to those for the p chart.

VIII.4.d. Out of Control Action Plans

If SPC is used, one of the most important things is to properly act in cases when the SPC tool
gives a warning signal. To have a consequent and structured way of acting Out of Control
Action Plans (OOCAP) are applied. We do not discuss these tools in details here. We just
would like to emphasize their importance.

SPC and Process Improvement

There are (at least) two applications of SPC charts in process improvement:
These tools can be used as data sources to identify where the problems are.
SPC charts are powerful tools for controlling processes after improvements are done.
These are the cases when SPC tools are used to sustain the gains of process
improvements.

153
IX. Capability Assessment

A capability assessment:
Allows us to quantify the nature of the problem.
Allows the organization to predict its true quality levels for all goods and services.
Capability can be assessed for either variable or attribute data collected either in the short-
term or in long-term. Variable data represent a quantitative process characteristic, while
attribute data are usually used to characterize the goodness of a process by counting the
number of defects of defective parts. The next flowchart shows how to conduct the capability
assessment studies.
Start

No Is the process Yes

characteristic quantitative?
Use the CADT to decide.

Check the
Take a sample.
specification limits.

Take a sample on
No Do the data represent Yes
the process
a short term?
variable.

Compute the PPM Compute the PPM

rate. rate.

No Do the data represent Yes

a short term?

Compute the long Compute the short Calculate the Pp, Calculate the Cp,
term z-score. term z-score. Ppk indices. Cpk indices.

Estimate the Ppk Estimate the Cpk Estimate the PPM Estimate the PPM
index. index. rate. rate.

Store the results in

the corresponding
line of CA result form.
(Use the ID for
appropriate
identification.)

38. Figure

154
IX.1. Short-term data vs. long-term data

The processes usually show different performance on short and long-term. This is simply due
to the fact that there are less assignable causes or there are no assignable causes at all, which
might be impacting the processes over a short term. However, the likelihood of experiencing
assignable causes is getting higher as the process is observed over a longer term.
Here we summarize the characteristics of short and long-term data samples.

IX.1.a. Short-term Data

We may assume that a data set represents a short-term sample, if this data set is a subset of the
population that is taken over a short enough time to eliminate the special causes of variation.
Its main properties are:
Free of assignable causes,
Represents the effect of random causes only,
Collected across a narrow inference space,
Across one shift of production,
Using only one machine,
With one operator,
Using raw components from only one lot of raw material, etc

IX.1.b. Long-term Data

A data set can be considered as a long-term one, if it is presumable that the process is not free
of assignable effects. Main properties of long-term samples are:
Reflects the influence of random causes as well as assignable phenomena,
Taken across a broad inference space,
Across many shifts of production,
Using many machines,
With many operators,
Using many lots of raw material, etc.

IX.2. Capability Assessment for Quantitative Process Characteristics

We conduct a capability study on a quantitative process characteristic (variable) through the

next steps.
Setp1: Check the specification given for the process variable.
Step2: Take a sample on the process variable.
Step3: Decide if the sample represents either a short-term or a long-term production.
Step4: Calculate the C p , C pk , Sigma Level indices to express the short-term
capability, and compute the Pp , Ppk indices to evaluate the long-term capability.
Step5: Estimate the PPM rate.

155
IX.2.a. The C p , C pk and Sigma Level Indices

These indices are used to express the short-term capability of a process. Let be a key
characteristic of a process, and let LSL and USL be the lower and upper specification limits
of respectively. Lets take a short- term sample on and compute the empirical mean X
and the corrected empirical standard deviation S shortterm from the sample.

1 n
X i
n i 1 ,

2
1 n
S shortterm i X
n 1 i 1

where 1 ,..., n are the elements of the sample, and n is the sample size.

Cp
The index

C p is the capability potential of the process assuming that the process is free of nonrandom
variability, that is there are no assignable effects. C p is estimated by the next equation

USL LSL
Cp
6 * S shortterm

Since C p is independent of X the C p index does not provide any information about how
central the process is. That is why we use the C pk indicator, which expresses how far the
expected value is from the center of the specification interval.

C pk
The index

USL X X LSL
C pk (USL) C pk LSL
3 * S short term 3 * S shortterm
The C pk index is calculated as

C pk min C pk LSL , C pkUSL .

C
It means that the pk index measures how far the mean is from the nearest specification limit
in terms of the triple of short-term standard deviation. Please note that the equation above is
C
an estimation of pk because its formula contains the estimated mean and estimated standard
deviation.

156
The Sigma Level

The sigma level is calculated in a very similar way as the C pk index, the only one difference
is that we use S shortterm in the denominator instead of its tripled value. Therefore, the sigma
level equals to the triple of C pk .

Sigma Level 3 * C pk

IX.2.b. Estimation of PPM Rate

When we already have the values of estimated mean X and estimated standard deviation
S , we can estimate that fraction of the total population, which is outside the specification.
For this estimation, we assume that the process characteristic as a random variable has
normal probability distribution with mean and standard deviation . This assumption is a
rightful one because most of the physical characteristics as random variables have normal
probability distribution. Since these two parameters are unknown the best what we can do is
to estimate them with X and S respectively.
When we are looking for an estimation of the PPM rate, we need to compute the
P LSL or USL
probability. Since LSL and LSL are mutually exclusive events

P LSL or USL P LSL P USL .

The Z-transformation (Standardization)

If is a random variable with normal probability distribution and mean and standard
deviation , then the

z

random variable has normal probability distribution with mean of zero and standard deviation
of one. This probability distribution is called standard normal and its values are available from
statistical tables or can be calculated by MS Excel.
Now, we can standardize LSL and USL , and than based on those, we can compute the
probability we are looking for.

LSL X USL X
z LSL zUSL
S S
P LSL or USL P LSL P USL Pz z LSL Pz zUSL

Pz z LSL 1 Pz zUSL z LSL zUSL 1 ,

where is the probability distribution function of standard normal probability distribution.

157
Since P LSL or USL P LSL P USL represents the likelihood that is
outside the specification, if we multiply this by million, we get the estimation of PPM rate.
PPM z LSL zUSL 1 *10 6

Please note that depending on if X and S are calculated from short-term or long-term
samples, the appropriate PPM rate can be calculated by using the previous expression.

Pp Ppk
IX.2.c. The , Indices

These two indices are used to express the long-term capability of a process that is usually
referred to as process performance. Thus, these two indices are called performance potential
indices. To calculate Pp and Ppk , we need to have estimations of the long-term mean X and
long-term standard deviation S longterm , which can be computed based on a long-term
sample.
USL LSL
Pp
6 * S shortterm

USL X X LSL
Ppk (USL) Ppk LSL
3 * S longterm 3 * S longterm

Ppk min Ppk LSL , PpkUSL

IX.2.d. Capability Assessment for Qualitative Process Characteristics

The most common qualitative characteristics have the values of good/not good, so they
qualify the product. If we have such a qualitative characteristic, then we can calculate the
PPM rate for the whole population, if 100% inspection is applied. Now, we discuss how to
estimate the C pk , Ppk and sigma level indices when the PPM rate is given. We do that
through the next steps.
Step1: Decide if the sample represents either a short-term or a long-term production.
number of defective products
Step2: Compute the PPM rate as PPM .
total number of products produced
Step3: Compute the so-called z-scores (short-term and long-term z-scores).
Step4: Estimate the C pk , Ppk and Sigma Level indices.

The z-score

When we know the PPM rate, we can derive the probability to have bad products.
PPM
p
10 6
The z-score is calculated as

158
 z 1 1 p
This z-score is either the short-term or the long-term one, depending on what type of sample
we used. Based on empirical data the following equations show the relation between the
short-term and long-term z-scores.
If we have short-term data, then z 1 1 p z ST is the short-term z-score, and the long-
term z LT z-score is computed as z LT z ST 1.5 .

If we have long-term data, then z 1 1 p z LT is the long-term z-score, and the short-
term z ST z-score is computed as z ST z LT 1.5 .

XVIII. Table

z-score we want to know

Short-term Long-term
Type of sample

Short-term OK -1.5

Long-term +1.5 OK

Estimation of Sigma Level

z ST is an estimator of the short-term sigma level, and z LT is and estimator of the long-term
sigma level.

C pk Ppk
Estimation of and

z ST z LT
C pk Ppk
3 3

IX.2.e. Acceptance Guideline

Here we provide a short acceptance guideline that is based on the industrial experience.
Therefore, the particular acceptances may differ from that because customers requirements
result different acceptance levels.
XIX. Table

C pk Sigma Level (short-term)

World Class Level >1.33 >4

159
 Acceptable, depends
1 to 1.33 3 to 4
on criticality and cost

Poor
<1 <3
capability/performance

IX.2.f. Trainings

Effective usage of SPC process is possible only in case of all the involved personnel have
sufficient knowledge at least about the pertinent process step.
Operators are filling in the SPC charts and technicians or engineers are analyzing
results must be qualified for SPC on the required level.
The SPCS is responsible to organize the necessary trainings.
The training matrix has to refer to the SPC training.

160
X. Introduction to measurement system analysis mathematical
basis

As you will see that, we are going to characterize the performance of a measurement system
by determining its repeatability and reproducibility. Since one of the most reliable methods to
do it is the so-called analysis of variance, we will take a closer look at that at first.

X.1. Notation

We will use certain notations in this chapter. Most of them are commonly used in many
mathematical writings. The sign stands for the end of a unit such as definition, theorem,
proof, etc.

X.2. Analysis of Variance (ANOVA)

The analysis of variance is one of the most powerful methods to investigate the significance
of impact of different factors. The fundamental idea behind the ANOVA method is simple. It
is to measure the difference of means of subgroups determined by different levels of the
participating factors. Depending on how many factors are considered in our models, we can
differentiate between one-, two- or multiply ways of ANOVA. In our first step, we are going
to go through the mathematics of one-way ANOVA.

X.2.a. One-way ANOVA

Let f be a factor with k possible levels. Let C be a set that contains the x1 , x2 ,..., xn
numbers. Grouping C by levels of f , we get the C1 , C2 ,..., Ck sets, which we will refer to as
groups. Due to the method how we got the C1 , C2 ,..., Ck groups, they have the next properties.

i. Ci C j i j, i, j 1,2,..., k
k
ii. C i C
i 1

These mean that the groups are representing a disjoint decomposition of set C .
Our basic idea is to characterize the significance of factor f by expressing the difference
between the means of groups. Hence, let us use the following definitions.
Definition
Let I be the index set of all elements of set C , and let I j be the index set of the C j
group, and let n j N be the number of elements of group C j j 1,2,..., k .

161
Definition
1
x j :
nj
x , that is
I j
x j is the average of elements in group C j .

Definition
1
x : x , that is x is the total average of all elements in C , where n is the total
n I
number of elements in set C .

1 k
Sometimes, we will also use the x : x expression that is identical with the original
n j 1 I j

definition of x .

Now, we defined the average of elements in each group x j , j 1,2,..., k and the total

average of all elements in set C x . As you probably might assume, now we have to define
those characteristics, which will inform us about the significance of factor f .

Definition

S T : x x
I

2

S T is the quantity that is in the literature commonly referred to as sum of squared totals. This
quantity measures the total variation on C , and it is n 1 times greater than the empirical
variance of x1 , x2 ,..., xn numbers.

Definition
k
S B : n j x j x
j 1

2

S B is the sum of squares between the averages of elements of groups and the total average of
elements of C .
The differences between groups are getting more significant as S B is increasing, or with other
wording, S B can be considered as that part of the total variation, which we can explain as the
impact of factor f .

162
Definition

k 2

SW : x x j
j 1 I j

SW is the sum of squares within the groups. It represents that natural variation, which cannot
be interpreted as the effect of f . SW is also known as sum of square of residuals.

The next theorem summarizes the above-mentioned properties of S T , S B and SW .

Theorem
S T S B SW

Proof
Using the definitions up to now and applying simple transformations on S T :

k 2 k
2 2
S T x x x x x x j x j x
I j 1 I j j 1 I j

k

x x j
j 1 I j

2
2

x j x 2 x x j x j x


k

x j x x x j
j 1 I j
2 k

j 1 I j
2 x
2
k

j 1 I j

xj xj x

k

2
n j x j x SW 2 x x j x j x
j 1
k

j 1 I j

k
S B SW 2 x j x x x j

j 1

I j

S B SW 2 x j x x x j
I

j 1
j I j

S B SW 2 x j x x n j x j
I

j 1
j

163
 x

j 1
k
S B SW 2 x j x x n j
I j
I j

nj
S B SW 0 S B SW

The biggest practical advantage of this theorem is that it is enough to compute any two of S T ,
S B , SW , and the third one can be easily determined. On the other hand, it might be still
cumbersome to calculate the sum of squares in the above shown way. The next two lemmas
help us to simplify the calculation of S T and S B .

Lemma
2
S T x2 n x
I

Proof

Using the definition of x , and applying simple transformations:

2
2

ST x x x2 2 x x x x2 2 x x x
I I I I I
2

2 x 2 2
x2 2 x x n x x2 2 xn n x x2 2 xn x n x
I I I I n I

2
x2 n x
I

Lemma
k

SB n j x j nx
j 1
2 2

Proof

Using the definition of S B , x j and x , S B can be rewritten according to the next steps:
k

j 1
2
k
2
j 1
2

S B n j x j x n j x j 2x j x x

164
 k

j 1
k

j 1

j 1
2

n j x j 2 n j x j x n j x
2

x
k
k

n j x 2 x n j x j n x
2
j
2 k
k
n j x 2 x n j
2
j
j 1
I j

nj
2
nx

j 1 j 1 j 1

k
k 2 k k
1


n j x j 2 x x n x n j x j 2 xn x n x
2 2

j 1 n I j

2

j 1 j 1 I j j 1

k
2
n j x j 2 xn x n x n j x j n x
j 1
2
k

j 1
2 2

Mean Square Variances

Each of the S T , S B , SW statistics has an associated quantity that is called degree of freedom.

The degree of freedom of S T is n 1 , that is it equals the total number of elements in the
sample minus one. The degree of freedom of S B equals k 1 , that is it equals the number of
possible levels of factor f minus one, which is less by one than the number of groups. The
degree of freedom of SW is defined as the difference between the degree of freedom of S T
and degree of freedom of S B , so, it equals n 1 k 1 n k .

For example, if factor f has three different levels, and each group contains five elements,
then the degrees of freedom of S T , S B , SW are d f ST 15 1 14 , d f S B 3 1 2 ,
d f SW 14 2 12 .

Definition
The mean square of variance is defined as the sum of squares divided by the
corresponding degree of freedom. So, the mean square variances of S T , S B , SW are
the
ST S S
MT , M B B , M W W statistics.
n 1 k 1 nk

Balanced ANOVA
k
It follows the definitions of n j that n
j 1
j n . (Remember that n j indicates the number of

elements in the j th group, and the groups are representing a disjoint decomposition of set C

165
.) In most of the practical applications data are collected so that each group contains the same
number of data. This version of ANOVA is known as balanced ANOVA.

Hypothesis Test

We would like to decide if the grouping by levels of factor f causes significant differences in
means of groups. Thus, our null hypothesis is
H 0 : the f factor based disjoint decomposition of population results groups which all
have the same mean;
while the alternative hypothesis is
H a : there are at least two groups having different means.

The test is based on that the

SB
k 1 ratio follows F probability distribution with k 1, n k degrees of
MB
F
MW SW
nk
freedom, if the x j x j 1,2,...k , I
j residuals have normal probability distribution
with mean of zero. Normal distribution of residuals is an assumption of ANOVA. The F-test
is robust in the face of violations of this assumption. If there is extreme skewness or extreme
kurtosis, then the reliability of the F-test becomes questionable.

Procedure of ANOVA Test

i. Choose an appropriate significance level. The most commonly used values are
0.1; 0.05; 0.01 . The confidence level of our test equals 1 .
ii. Take a sample, and create the groups according to the levels of factor f .
iii. Calculate the S T , S B , and SW statistics.
SB
Calculate the F B k 1 test statistic.
M
iv.
MW SW
nk
v. Determine F k 1,nk 1 , where F k 11,nk is the inverse function of F
1

probability distribution function with k 1, n k degrees of freedom. F is usually

referred to as critical value, and its particular values are accessible from tables, or can
be calculated by using the MS Excel or some statistical programs.
vi. Accept H 0 , if F F , otherwise reject H 0 .

The ANOVA Table

The information from a test can be summarized in a table known as an ANOVA table.

166
 XX. Table

Source of Sum of Degree of Mean F ratio P value

Square
variation Squares Freedom
Variance
Between SB k 1 SB SB SB

k 1 k 1 1 k 1,n k k 1
groups
SW SW

nk nk
Within SW nk SW
groups nk
Total ST n 1 ST
n 1

SB

There is a so-called p value associated to the F ratio. It is calculated as 1 k 1,n k k 1
SW

nk
where k 1,nk is the F probability distribution function with k 1, n k degrees of freedom.

It is known that the decision on the null hypothesis can be based on the p value as well.
Namely, H 0 is accepted, if p , otherwise H 0 must be rejected.

Acceptance of H 0 means that the grouping by different levels of factor f , results groups
which have the same mean. That is, f does not contribute significantly to the total variation
of the population being investigated. Thus, we can summarize it using the p value so that f
is significant, if p .

Example

Three operators measure the length of five shafts using a calibrated caliper rule. Each operator
measures each shaft once. The results are collected in the next table. (Data are in mms.)
XXI. Table

Operator1 Operator2 Operator3

10.25 10.27 10.32

10.29 10.26 10.33

10.19 10.21 10.34

167
 10.23 10.25 10.29

10.20 10.22 10.28

Test the null hypothesis that the means of measured values are the same in case of each
operator.
To perform an ANOVA test, we need to calculate the S T , S B , and SW statistics. Using the
notation used up to now, n 15 , k 3 , n1 n2 n3 5 .

x 10.26200 ,

x1
1
10.25 10.29 10.19 10.23 10.20 10.23200
5

x2
1
10.27 10.26 10.21 10.25 10.22 10.24200
5

x3
1
10.32 10.33 10.34 10.29 10.28 10.31200
5
n

x
i 1
2
i 1579.66050

n 2
ST xi2 n x 1579.66050 15 *10.26200 2 0.03084
i 1

3
2
S B n j x j n x 5 *10.23200 2 5 *10.24200 2 5 *10.31200 2 15 *10.26200 2
j 1
2

0.01900 .

SW ST S B , SW 0.03084 0.01900 0.01184 .

Now, we calculate the F statistic, and determine the F critical value.

SB 0.01900
F k 1 3 1
0.009500
9.62805
SW 0.01184 0.0009867
nk 15 3

F can be determined by using the Tables of F Critical Values in the Appendix. Let be
0.05. k 1 2 (degree of freedom for the numerator), n k 12 (degree of freedom for the
denominator), so the critical value is 3.88529 that is less than the calculated F statistic, thus
we must reject the null hypothesis.

168
The ANOVA table

Source of Sum of Degree of Mean Square F ratio P value

variation Squares Freedom Variance

Between groups 0.01900 2 0.00950 9.62805 0.003

Within groups 0.01184 12 0.000987

Total 0.03084 14

The practical conclusion is that the operator as a factor significantly impacts onto the
measured values, so this way of measuring is not proper enough.

Exercise

You have got three testers, which among other things measure the output voltage of an
electrical circuit. You would like to decide whether your testers are identical in terms of the
measured averages, or there is a significant difference between them. You take 5 circuits and
make measure the output voltage of each circuit by each tester. Your data sheet looks like
this.

Tester1 Tester2 Tester3

4.95 5.31 4.98

5.02 5.23 5.03

5.13 5.34 5.15

5.27 5.38 5.26

4.83 5.22 4.87

Complete the appropriate ANOVA table, and give the practical interpretation of results!

X.2.b. Two-way ANOVA

We learnt how to conduct a one-way ANOVA test to characterize the significance of one
factor. In many practical applications, we need to consider the joint effect of two or more
factors. Now, we are going to study the case, when we consider the common effect of two
factors in our ANOVA model. For instance, in the example of previous chapter we
investigated the effect of operators on the measured length of shafts. We may assume that the
observed values vary not only due to the different operators but the lengths themselves are not
exactly the same, they represent a source of variability as well. It means that we face two
sources of variability: the part-to-part difference among the parts and the variability caused by

169
imprecision of operators. Later on, we will discuss the meaning of imprecision more exactly.
The part-to-part variation is something that can be considered as a natural variation, while the
variation caused by the measurement system is something undesirable what we wish to avoid
as much as possible. The two-way ANOVA method gives us a powerful tool to identify the
sources of variation as well as quantifies their strength.
In two-way ANOVA we have two factors, let them be f and g . Let f have k1 and g have
k 2 different levels. It means that the joint grouping by levels of f and g results k1 k 2
different groups. Now, we introduce the necessary notations and definitions.
Definition

Let C be a set that contains the x1 , x2 ,..., xn numbers and let C1 f , g , C2 f , g ,..., Ck1fk,2g
be the groups generated by grouping the elements of C by levels of both of f and
g.

Definition

Let I be the index set of all elements of set C , and let I j f , g be the index set
of the C j f , g group, and let n j f , g N be the number of elements of group
C j f , g j 1,2,..., k1k 2 .

Definition
1
x : x , that is x is the total average of all elements of set C , where n is the
n I
total number of elements in set C .

Notice that x has the same definition as in case of one-way ANOVA.

Definition

x j f , g : x j f , g is the average of elements in group

1
nj f ,g x , that is
I j f , g

C j f , g . j 1,2,..., k1k 2

You can see that the definition of x j f , g is analogous with the definition of x j that we
defined in one-way ANOVA method. Similar analogies are visible in the next definitions of
S T , S B f , g and SW f , g .

Definition

170
 S T x x
I
2

S T is the sum of square total that characterizes the total variation of data in set C .
Definition

x f , g x
k1k 2 2

SB f ,g
nj f ,g
j
j 1

S B f , g is the sum of squares between the averages of elements of groups and the total average
of elements of set C . It expresses the impact of grouping by f and g onto the total
variation.
Definition

x x f , g
k1k 2 2

SW f ,g
j
j 1 I j f , g

SW f , g like in case of one-way ANOVA represents the natural part of variation that cannot
be interpreted as the effect of grouping by f and g .

There is an important property of the joint grouping by f and g . Namely, we can always
find a factor with k1 k 2 levels that can generate the same grouping as the joint grouping by
levels of both of f and g . This observation means that the ST S B f , g SW f , g equation
2
remains valid for the two-way ANOVA as well. Furthermore, the S T x2 n x , and
I
k1k 2

S B f , g n j f , g x j f , g n x computations remain correct as well.
j 1
2 2

So, we can separate the variation caused by the joint effect of factors from the natural
variation of data. We might ask it with good reason, if there is any way to separate the effect
of f and g in terms of the variation with which they separately contribute to the total
variation. The answer is positive. Now, we introduce those quantities, which characterize the
effect of each factor.
Definition

Let C1 f , C2 f ,..., Ck1f be the groups generated by grouping the elements of C by

levels of factor f . Let I1 f , I 2 f ,..., I k1f be the index sets of elements of

171
 C1 f , C2 f ,..., Ck1f sets respectively, and let n1 f , n2 f ,..., nk1f be the number of
elements of C1 f , C2 f ,..., Ck1f sets.

Definition

x j f : f x , that is x j f is the average of elements in group C j .

1 f
n j I j f
j 1,2,..., k1

Definition

x f x
k1 2

SB n j
f f
j
j 1

S B f is the sum of squares between the averages of elements of groups generated by levels of
f . This is the same quantity as we used in one-way ANOVA method to characterize the
effect of one factor.
Definition

Let C1 g , C2 g ,..., Ck2g be the groups generated by grouping the elements of C by

levels of factor g . Let I1 g , I 2 g ,..., I k2g be the index sets of elements of
C1 g , C2 g ,..., Ck2g sets respectively, and let I1 g , I 2 g ,..., I k2g be the number of
elements of C1 g , C2 g ,..., Ck2g sets.

Definition

x j g : g x , that is x j g is the average of elements in group C j .

1 g
n j I j g
j 1,2,..., k 2

Definition

k2 2

S B n j x j g x
g g
j 1

172
S B g is the sum of squares between the averages of elements of groups generated by levels of
g.

Interaction of Factors

It can be proven that S B f , g S B f S B g S f *g where the S f *g quantity is the so-called sum

of squares for interaction.
An interaction is the variation among the differences between means for different levels of
one factor over different levels of the other factor. It means that the effect of one factor
depends on the current level of the other one. For example, suppose that two operators, A and
B measure two parts, 1 and 2 with the next accuracy results.
XXII. Table

Operator / Part 1 2

A Good Bad

B Bad Good

Accuracy
Operator A

Operator B

Part
1 2
39. Figure

Which operator measures more accurately? We cannot decide that because their accuracy
depends on the measured part as well. So, these two factors interact to each other. It is even
visible better, if we put the results into the next chart.

Since there are usually several different levels of each factor, their interaction might cause a
considerable variation.

We do not prove the S B f , g S B f S B g S f *g equation, it would be beyond the purpose of

this document. Since the S B f and S B g quantities are easily computable, we use this equation
to define S f *g : S f *g S B f , g S B f S B g .

173
Two-way ANOVA model with interaction

We discussed that ST S B f , g SW f , g and S B f , g S B f S B g S f *g , so our model is

ST S B f S B g S f *g SW f , g . Thus, the two-way ANOVA with interactions separates four
sources of the variation, and these sources are characterized by the S B f , S B g , S f *g and
SW f , g statistics.

Similarly to the one-way ANOVA, each of S T , S B f , S B g , S f *g and SW f , g has its degree of

freedom. We summarize them in the next table.
XXIII. Table

Sum of Squares Degree of Freedom

S B f k1 1

S B g k2 1

S f *g k1 1k 2 1

SW f , g n k1k 2

ST n 1

The mean square variances are calculated so as we discussed earlier. There is an F ratio for
each of the S B f , S B g , S f *g statistics and its defined as a fraction with numerator of the
corresponding mean square variance and denominator of the mean square variance of SW f , g .
The p values are computed as in the case of one-way ANOVA as well.

The Two-way ANOVA Table with Interaction

XXIV. Table

Source of Sum of Degree of Mean Square F ratio P value

variation Squares Freedom Variance

Factor f S B f k1 1 f S B f M B f M B f
MB 1 k 1,n k f , g
k1 1 M W f , g MW

Factor g S B g k2 1 g S B g M B g M g
MB 1 k 1,n k Bf , g
k1 1 M W f , g MW

174
 Interaction S f *g k1 1k 2 1 S f *g M f *g M f *g
M f *g 1 k 1,n k f , g
of f and
g
k1 1k 2 1 MW f ,g
MW

Error SW f , g n k1k 2 f ,g SW f , g
MW
n k1 k 2

Total ST n 1 ST
n 1

Note that the above shown calculations of F ratios are used when the factors are not random
variables. We will see another possibility to calculate the F ratio for factors, which have
random values rather than fixed ones.

Two-way ANOVA without Interaction

When we perform a two-way ANOVA considering the interaction of factors, it can happen
that the p value of the interaction term indicates that it is not significant. We account the
interaction not significant, if its p value is greater than 0.25. In such a case we can reduce our
model. We do it so that we add the sum of square of interaction to the sum of square of error,
and we simply drop the interaction term from the model. It yields the new SW f ,g sum of
*

square of errors that is calculated as SW f , g SW f , g S f *g . Therefore, the sum of square totals

*

remains the same and the reduced model is ST S B f S B g SW f ,g . The degree of freedom
*

of SW f ,g is calculated as n (k1 k 2 1) . The new F ratios and p values are calculated

*

using the SW f ,g quantity.

*

The Two-way ANOVA Table without Interaction

XXV. Table

Source Sum of Degree of Mean Square F ratio P value

of Squares Freedom Variance
variation

Factor S B f k1 1 S B f M B f M B f
f M B f 1 k 1,n k
k1 1 M W f ,g M f , g *
*

Factor S B g k2 1 g S B g M B g M B g
g MB 1 k 1,n k
k1 1 f ,g * M f , g *
MW W

175
Error SW f ,g
*
n k1 k 2 1 f , g * SW f , g
*

MW
n k1 k 2 1

Total ST n 1 ST
n 1

176
XI. Measurement Systems

XI.1. Categories of Measurement Systems

A measurement system is used to get information about a product or process characteristic.

This characteristic can be either quantitative or qualitative. If a characteristic can be
quantified and expressed in numbers, then we call it quantitative. On the other hand, if a
characteristic expresses one or more attributes of a product or process, then we call it
qualitative characteristic. For example, the length of a shaft is a quantitative characteristic,
because it can always be expressed in numbers. At the same time, if we just need to decide if
a product is good or not, then this characteristic is an attribute of the product.
The quantitative variables can be furthermore categorized into the categories of discrete and
continuous variables. A variable is continuous, if it can have infinite different values from a
finite or infinite interval. E.g. the length of shafts is a quantitative variable, which is
continuous. A variable is discrete, if it can have finite or countable infinite different values.
E.g. the number of failures on a product is a quantitative and discrete variable.
Based on the characteristic that measurement systems are to measure, we differentiate
between quantitative and qualitative measurement systems. There are two subcategories of
quantitative measurement systems depending on if the measured variable is continuous or
discrete. The next chart summarizes the categories mentioned above.

Measurement Systems

Qualitative (attribute) Quantitative (variable)

Discrete

Continuous

40. Figure

XI.2. Analysis of Quantitative Measurement Systems

Our fundamental purpose is to evaluate the goodness of a measurement system. We use a

simple approach to decide if a measurement system is good or not. The less the measurement
system distorts the observed values, the better its goodness is. The goodness of a
measurement system can be expressed through the categories of accuracy and precision.

177
Let be a variable of a process or product. We assume that is a random variable with
mean and 2 variance. When we measure , our measurement system distorts the observed
figures and we get the Observed and Observed
2
values that usually differ from their real values.
This can be modeled by the next equations.
Observed Product Measurement System

Observed
2
Product
2
Measuremen
2
t System

The Measurement System quantity is commonly referred to as measurement offset. This can be
caused by improper linearity, stability and accuracy of the measurement instrument.

Measuremen
2
t System is known as the imprecision of the measurement system. It represents that

undesirable variation of observed data, which is caused by the measurement system, and
which we want to identify and separate from the total variation in order to find how much the
measurement system contributes to the total variation. We consider the repeatability and
reproducibility as the main components of imprecision. So, we will characterize the
imprecision by expressing the repeatability and reproducibility, which we commonly call
gauge R&R. The next chart summarizes the possible sources of observed variation.

Observed process or product

variation

Process or product Measurement variation

variation

Due to operator Due to measurement

device

Reproducibility Repeatability
Precision
(Gauge R&R)
Accuracy

Stability

Linearity
Measurement
offset
(Accuracy)
41. Figure

178
XI.2.a. Measurement Offset (Accuracy)

The measurement offset is usually called as accuracy, because all its components are strongly
related to the accuracy of the measurement device (gauge). Do not mislead you that we use
the accuracy as an individual measurement offset component as well. This is so because the
other two components, the linearity and stability can be considered as subcategories of
accuracy. Now, we define and explain the components of measurement system offset.

Gauge Accuracy

Accuracy is the difference applied between the observed average of measurements and the
true value.

42. Figure

An adequate calibration program can ensure the accuracy of the device is maintained. A
gauge calibrated well is always considered as an accurate one.

Gauge Stability

Stability is the difference in the accuracy obtained on the same parts taken at different times.

43. Figure

Gauge Linearity

Linearity is the difference in the accuracy of values throughout the expected operating range.

179
 44. Figure

45. Figure

The calculation of accuracy, stability or linearity is not difficult. However, it might be

challenging because to obtain the true value is usually not easy. It requires a high accurate
gauge, which we can trust in. Normally, it should be a master gauge from a laboratory or a
calibrated one, whose accuracy is guaranteed.

XI.2.b. Quantitative Gauge R&R (Precision)

As we discussed, we are going to express the precision (or imprecision) of a measurement

system by expressing its repeatability and reproducibility. According to the

Observed
2
Product
2
Measuremen
2
t System

model, we wish to separate the part of variation, which is caused by the measurement system
from the total observed variation. As we discussed earlier, we will look for Measuremen
2
t System as

the sum of variances due to the repeatability and reproducibility:

Measuremen
2
t System Repeatability Reproducibility
2 2

Thus our model is

Observed
2
Product
2
Repeatabil
2
ity Reproducibility .
2

Now, it is time to define the meanings of repeatability and reproducibility.

Repeatability

Repeatability of a gauge is a measure of the variation when one operator uses the same device
to repeatedly measure the identical characteristic on the same part. Repeatability must also
account an automated piece of test equipment.

180
 46. Figure

Reproducibility

Reproducibility is the variation in the averages of measurements caused by different operators

using the same device when measuring identical characteristics of the same parts.
Reproducibility must be accounted for variation between different measuring devices as well.

47. Figure

The Gauge R&R Methodology

To conduct a gauge R&R study, we need to define a unique identifier for each part we want to
measure. We call it part ID. We also need to select the operators (testers) we wish to evaluate.
The next procedure defines how to collect the necessary data to evaluate the measurement
system.
i. Collect a minimum of 10 samples that represent the full range of products.
ii. Identify the operators who use the measuring instrument daily, or choose the testers,
which you want to evaluate.
iii. Calibrate the gauge or verify if the last calibration date is valid.
iv. Create a data collection sheet that looks like this

Part ID Operator Trial Measurement

v. Ask the first operator to measure all the parts once in random order. Blind sampling, in
which operator does not know the identity of each part.
vi. Have the second operator measure all the samples once in random order, and continue
until all the operators have measured the samples once.

181
 vii. Repeat step v.) and vi.) for the required number of trials.
viii. Put the data into the collection sheet.
ix. Analyze the results by using an appropriate mathematical method.

Mathematical methods for Gauge R&R Studies

There are two well-known mathematical methods used commonly to conduct a gauge R&R
study. These are the so-called X-bar and range and the ANOVA methods. We will use the
ANOVA method.

Two-way ANOVA in the Gauge R&R Study

Now, we have two factors, the operator and the part ID. These two factors are considered in
our two-way ANOVA. The ANOVA table looks like this.
XXVI. Table

Source of Sum of Degree of Mean Square F ratio P value

variation Squares Freedom Variance

Part ID S B f k1 1 f S B f M B f M f
MB 1 k 1,n k B
(Factor f ) k1 1 M f *g M
f *g

Operator S B g k2 1 g S B g M B g M g
MB 1 k 1,n k B
(Factor g ) k1 1 M f *g M
f *g

Operator* S f *g k1 1k 2 1 S f *g M f *g M f *g
M f *g 1 k 1,n k f , g
Part ID
k1 1k 2 1 MW f ,g
MW
Interaction
of f and g

Repeatability SW f , g n k1k 2 SW f , g
M W f , g
n k1 k 2

Total ST n 1 ST
n 1
If you look at this table attentively, you can see that it differs from the one we have introduced
in chapter 1. The difference is in the computation of F ratios for the operator and part ID.
This is so because now both factors are random variables, and in this case, the mean square
variance of interaction is used in the denominator for calculating the F ratios for random
factors. (Remember, if a factor is fixed, then the mean square variance of error is used in the
denominator to calculate the F ratio.) Of course, the corresponding p values are re-
calculated according to the new F ratios as well.

182
The ANOVA table immediately informs us whether the operator and the operator*part ID are
significant as well as we can see how much the sum of squares of repeatability contributes to
the total variation.

Variance components
The mean square variances are used to calculate the variance components. The formulas
depend on whether the p value for the operator*part ID interaction is greater than 0.25. If it
is so, then this term is dropped from the model because it is not significant.
According to the notation used in the ANOVA table k1 is the number of parts, k 2 is the
number of operators. Let r be the number of replicates, that is the number of trials.
Calculation of variance components when the operator*part ID term is included in the
model.
XXVII. Table

Variance Definition Comment

component

Part M B f M f *g
2
ID
MSPart ID - MSOperator*Part ID
k2r number of operators* number of replicates

Operator
2
M B g M f *g MSOperator - MSOperator*Part ID
k1 r number of parts* number of replicates

Operator
2
* Part ID M f *g M w f , g MSOperator*Part ID - MSRepeatability
r number of replicates

Repeatabil
2
ity M W f , g MSRepeatability

Reproducib
2
ility Operator
2
Operator
2
* Part ID

Gauge
2
R &R Repeatabil
2
ity Reproducibility
2

2
Measurement System
Total
2
Part
2
ID Gauge R &R
2

Calculation of variance components when the operator*part ID term is not included in

the model.
XXVIII. Table

Variance Definition Comment

component

183
 Part
2
M B f M W f , g
*
ID
MSPart ID - MSRepeatability
k2r number of operators* number of replicates

Operator M B g M W f , g
2 *
MSOperator - MSRepeatability
k1 r number of parts* number of replicates

Repeatabil M W f ,g
2 *

ity
MSRepeatability

Reproducib
2
ility Operator
2

Gauge
2
R &R Repeatabil
2
ity Reproducibility
2

2
Measurement System
Total
2
Part
2
ID Gauge R &R
2

Measurement System Metrics

We introduce the metrics can be used to evaluate the precision of a measurement system. We
also provide a guideline for acceptance of a measurement system. That is we provide
information on how to decide if a measurement system is acceptable, marginal or
unacceptable using different metrics.

Total Gauge R&R % Contribution

The % contribution is the percentage of total variation that is accounted for by each variance
component. It expresses how much the variance components contribute to the total variance.

The total gauge R&R % contribution is the % contribution of Measuremen

2
t System to Total , so it is
2

calculated as:

Measuremen
2

total gauge R&R % contribution

t System
*100 .
Total
2

The Study Variation

The study variation of each variance component is calculated as X times the root square of
the variance component. The most common value for X is 5.15. There is a statistical reason
behind this value. Namely, approximately 99% of the measurements are in the interval, which
is centered to the observed mean of the measurements and has the width of 5.15 times the
standard deviation on both sides of the mean. Specially, if the measurement has normal
probability distribution, then 99.97% of the data are in the Observed 5.15 Observed interval.

We can calculate the so-called % study variation quantity for each variance component as the
standard deviation of the component divided by the total standard deviation.

184
The Precision to Total Variation Ratio (P/TV)
The study variation for the gauge R&R component is known as the precision to total variation
ratio (P/TV). It is calculated as

Gauge
2
R &R
P/TV
Total
2

The Precision to Tolerance Ratio (P/T)

The precision to tolerance ratio is used to express what percent of the process tolerance is
taken up by imprecision of the measurement system.

5.15 Gauge
2
R &R
P/T = , where USL is the upper and LSL is the lower specification limit.
USL LSL

Number of Distinct Categories

The number of distinct categories is the number of groups within the process data that the
measurement system can discern.

Total
2
Number of distinct categories 2 2 1 3
Gauge R &R

If the number of distinct categories is fewer than two, the measurement system is unable to
distinguish any part from any other one.

Acceptance guideline
Here we summarize the guiding principles to qualify a measurement system. We use the %
contribution, % study variation and the number of distinct categories as metrics.
XXIX. Table

% Contribution % Study Variation Distinct Categories

(P/TV%)

No issues with the

<5% <10% >10
measurement system

Depends on criticality
5% to 15% 10% to 30% 4 to 9
and cost

Reject the measurement

>15% >30% <4
system
Notice that the above shown qualification is just a recommendation. In practice, there must be
a regulation, which specifies the acceptance considering the process specific factors as well.

3
The sign stands for the round down function.

185
Example (Quantitative Gauge R&R)

We have a laser microscope that is used for measuring the height of soldering paste printed by
a stencil printer. Two operators use the microscope. We collected a sample having 10 parts,
and we asked the first operator to measure the paste height on each part in random order first.
After that we asked the second operator to do the same. Finally, we asked them to repeat the
measuring once more. Data were collected in the next data sheet.
Part ID Operator Trial Measurement (microns)
1 1 1 121
2 1 1 118
3 1 1 117
4 1 1 122
5 1 1 128
6 1 1 131
7 1 1 112
8 1 1 132
9 1 1 115
10 1 1 117
1 2 1 133
2 2 1 125
3 2 1 121
4 2 1 128
5 2 1 135
6 2 1 137
7 2 1 121
8 2 1 139
9 2 1 122
10 2 1 124
1 1 2 125
2 1 2 121
3 1 2 127
4 1 2 126
5 1 2 131
6 1 2 135
7 1 2 118
8 1 2 136
9 1 2 126
10 1 2 129
1 2 2 125
2 2 2 126
3 2 2 131
4 2 2 119
5 2 2 137
6 2 2 128
7 2 2 121
8 2 2 135
9 2 2 118
10 2 2 131

186
We will perform a gauge R&R study by computing the % contribution, % study variation and
number of distinct categories.

ANOVA Table
Two-Way ANOVA Table With Interaction
Source DF SS MS F P
Part ID 9 1201.03 133.447 15.5523 0
Operator 1 119.03 119.025 13.8715 0.005
Part ID * Operator 9 77.23 8.581 0.3835 0.929
Repeatability 20 447.5 22.375
Total 39 1844.78

The p value of interaction indicates that the interaction term is not significant, so we reduce
the model.
Two-Way ANOVA Table Without Interaction
Source DF SS MS F P
Part ID 9 1201.03 133.447 7.37523 0
Operator 1 119.03 119.025 6.57816 0.016
Repeatability 29 524.72 18.094
Total 39 1844.78

Variance components
Using the notation we used up to know:
k1 10 (number of parts),

k 2 2 (number of operators),
r 2 (number of replicates),
factor f is the Part ID, factor g is the Operator.

M B f M W f , g 133.447 18.094
*

2
Part ID 28.8383
k2r 2*2

M g M W f , g 119.025 18.094
*

2
Operator B 5.0465
k1r 10 * 2

f ,g
Repeatabil
*

ity M W 18.094
2

Reproducib
2
ility Operator 5.0465
2

187
 Gauge
2
R &R Repeatability Reproducibility 18.094 5.0465 23.1405
2 2

Total
2
Part
2
ID Gauge R &R 28.8383 23.1405 51.9788
2

% Contribution
Source Variance Component Contribution %
Part ID 28.8383 55.48
Operator 5.0466 9.71
Repeatability 18.094 34.81
Reproducibility 5.0466 9.71
Total Gage R&R 23.1405 44.52
Total Variation 51.9788 100

% Contribution

100
100
90
Contribution in %

80
70
60 55.48
50 44.52
40 34.81
30
20 9.71 9.71
10
0

tI
D or ilit
y lit
y R io
n
r at b bi & t
Pa er a uc
i R ria
p at ag
e
Va
O e od l
ep pr lG ta
R e ta o
R T
To
Source of Variation

According to the acceptance guideline, the Total Gauge R&R contribution of 44.52%
indicates that the measurement system is unsuitable.

% Study Variation
Study Variation
Source Variance Component Std. Deviation Study Variation %
(5.15*Std. Dev.)
Part ID 28.8383 5.3701 27.6562 74.49%
Operator 5.0466 2.2465 11.5693 31.16%

188
Repeatability 18.094 4.2537 21.9066 59.00%
Reproducibility 5.0466 2.2465 11.5693 31.16%
Total Gage R&R 23.1405 4.8105 24.7739 66.72%
Total Variation 51.9788 7.2096 37.1296 100.00%

% Study Variation

100.00%
100.00%
90.00%
Study Variation in %

80.00% 74.49%
66.72%
70.00% 59.00%
60.00%
50.00%
40.00% 31.16% 31.16%
30.00%
20.00%
10.00%
0.00%
D

R
or

n
ilit
lit
tI

io
&
t
ra

bi

t
ib

R
r

ia
Pa

ta
pe

uc

ar
ea

ag
O

lV
ro
ep

lG

ta
ep
R

To
ta
R

To

Source of Variation

The P/TV ratio of 66.72% (% study variation for the total gauge R&R) means, that the
measurement system is very imprecise.

Number of Distinct Categories

2 51.9788
Number of distinct categories 2 2 Total 1 2 * 1 1
Gauge R &R 23.1405

The number of distinct categories of 1 also shows the poor performance of the measurement
system.

XI.3. Analysis of Qualitative Measurement Systems (Attribute Gauge

Study)

A qualitative measurement system is one that compares each part to a standard and accepts
the part if this standard is met. Commonly, it is a kind of inspection done by operators or a
pass/fail gauge. An attribute measurement system provides pass/fail or other types of
categorical data such as good, not good or 1, 0.
The effectiveness of screening of an attribute measurement system is the ability to
differentiate between good and bad parts. There are two types of errors: good parts are
189
rejected or bad parts are accepted. The first error type is called customer bias, while the
second one is known as producer bias. An attribute measurement system is as good as much it
is free of these two biases.
Now, we review the so-called attribute gauge R&R tool that is used to evaluate the precision
of qualitative measurement systems.

XI.3.a. Purpose of the Attribute Gauge R&R

Since the inspectors (or a pass/fail gauge) make decisions on their own it is extremely
important to have the same criteria to make right judgments. It means that each of the
inspectors has to be well trained, and has to be able to precisely apply the known standards on
making decisions. This kind of desired precision also means that they have to have the ability
to accurately repeat their inspection decisions.
The main purposes of an attribute gauge R&R study are to identify how well
inspectors/gauges conform to a known master, and how well they conform to their own and to
the others decisions.

XI.3.b. The Attribute Gauge R&R Methodology

i. Select a minimum of 30 parts to do the study4

ii. ~ 50% of the parts should have defects,
iii. ~ 50% of the parts should be defect free,
iv. ~ if possible, select borderline good and bad parts, too.
v. Identify the inspectors (who should be qualified and experienced) and the gages.
vi. Have each inspector, independently and in random order, assess these parts and
determine whether or not they pass or fail.
vii. Repeat step iii.) for the required number of replicates.
viii. Enter the data into the attribute R&R spreadsheet to report the effectiveness of the
measurement system.
ix. Evaluate the results and define actions, if necessary.
x. Re-run the study to verify the fix.

4
The number of parts is arbitrary. More samples result higher confidence of the study.

190
Attribute R&R Spreadsheet for Three Inspectors

Attribute Gage R & R Effectiveness

SCORING REPORT
DATE:
5
Attribute Legend (used in computations) NAME:
1 pass PRODUCT: All operators
2 fail BUSINESS: agree within and All Operators
between each agree with
Other standard
Known Population Operator #1 Operator #2 Operator #3 Y/N Y/N
Sample # Attribute Try #1 Try #2 Try #1 Try #2 Try #1 Try #2 Agree Agree
1 pass pass pass pass pass fail fail N N
2 pass pass pass pass pass fail fail N N
3 fail fail fail fail pass fail fail N N
4 fail fail fail fail fail fail fail Y Y
5 fail fail fail pass fail fail fail N N
6 pass pass pass pass pass pass pass Y Y
7 pass fail fail fail fail fail fail Y N
8 pass pass pass pass pass pass pass Y Y
9 fail pass pass pass pass pass pass Y N
10 fail pass pass fail fail fail fail N N
11 pass pass pass pass pass pass pass Y Y
12 pass pass pass pass pass pass pass Y Y
13 fail fail fail fail fail fail fail Y Y
14 fail fail fail pass fail fail fail N N

Statistical Results
% Appraiser1 %Score vs Attribute2
Source Operator #1 Operator #2 Operator #3 Operator #1 Operator #2 Operator #3
Total Inspected 14 14 14 14 14 14
# Matched 14 11 14 11 9 10
False Negative (operator rejected good product) 1 1 3
False Positive (operator accepted bad product) 2 1 1
Mixed 0 3 0
95% UCL 100.0% 95.3% 100.0% 95.3% 87.2% 91.6%
Calculated Score 100.0% 78.6% 100.0% 78.6% 64.3% 71.4%
95% LCL 76.8% 49.2% 76.8% 49.2% 35.1% 41.9%

Screen % Effective Score3 Screen % Effective Score vs Attribute4

Total Inspected 14 14
# in Agreement 8 6
95% UCL 82.3% 71.1%
Calculated Score 57.1% 42.9%
95% LCL 28.9% 17.7%

% Appraiser Score
This quantity is calculated for each inspector. It expresses the % of occasions when an
inspector agrees with him/herself on both trials, so it indicates the repeatability of the
inspector (operator) in percentage. You can also see a confidence interval calculated for each
% appraiser score. The limits of confidence intervals are calculated as

191

log10
2

1 10 n
, if k 0
*

UCL = k11,n k 1 , if 0 k n
2
1, if k n

0, if k 0
*
1
LCL = n 1 k ,k 1 , if 0 k n
2
log
10
2
10 n , if k n

where k is the number of agreements, n is the number of parts, ,1 is the inverse function
of Beta probability distribution function with , parameters, and * is the significance
level (we use * 0.05 ).

% Score vs. Attribute

This metric tells for each inspector the % of occasions when the inspector agrees on both
trials with the known standard.

Screen % Effective Score

This quantity expresses the % of occasions when all inspectors agreed within and between
themselves.

Screen % Effective Score vs. Attribute

This metric is used to express the % of occasions when all inspectors agreed within and
between themselves, and agreed with the known standard.
There are confidence intervals calculated for the screen % effective score and the screen %
effective score vs. attribute indices. These are calculated in the same way as the confidence
intervals for the appraiser scores.

Interpretation of Results
The metrics introduced can tell us how good our attribute measurement system is, as well as
they show at the same time where the weaknesses are. Therefore, these metrics can be used to
draw the appropriate conclusions. (E.g. we can highlight, if we face a lack of training or
experience of inspectors.)

192
XII. Appendix

XII.1.The F Probability Distribution

Let 1 , 2 ,..., n and 1 , 2 ,..., m be independent random variables with standard normal

1 2
1 22 ... m2
probability distribution. Then Fm,n m is a random variable that has F

n
1 2 ... n
1 2 2 2

distribution with m , n degrees of freedom.

XII.1.a. Tables of F critical values

0.1
Degrees of freedom for numerator
1 2 3 4 5 6 7 8 9 10
1 39.86361 49.50016 53.59334 55.83297 57.23996 58.20448 58.90615 59.43912 59.85748 60.19491
2 8.52634 9.00002 9.16179 9.24342 9.29265 9.32550 9.34909 9.36677 9.38053 9.39156
3 5.53831 5.46240 5.39077 5.34266 5.30915 5.28473 5.26620 5.25168 5.24000 5.23042
4 4.54477 4.32456 4.19087 4.10725 4.05058 4.00975 3.97897 3.95494 3.93567 3.91988
5 4.06041 3.77972 3.61948 3.52020 3.45298 3.40451 3.36790 3.33928 3.31628 3.29740
6 3.77595 3.46330 3.28876 3.18076 3.10752 3.05455 3.01446 2.98304 2.95774 2.93694
7 3.58943 3.25744 3.07407 2.96053 2.88335 2.82739 2.78493 2.75158 2.72468 2.70251
8 3.45791 3.11312 2.92380 2.80642 2.72644 2.66834 2.62413 2.58935 2.56124 2.53804
9 3.36030 3.00645 2.81286 2.69268 2.61061 2.55086 2.50531 2.46941 2.44034 2.41631
10 3.28501 2.92447 2.72767 2.60534 2.52164 2.46058 2.41396 2.37715 2.34731 2.32260
Degree of freedom for denominator

11 3.22520 2.85951 2.66023 2.53619 2.45118 2.38906 2.34157 2.30400 2.27350 2.24823
12 3.17655 2.80679 2.60552 2.48010 2.39402 2.33102 2.28278 2.24458 2.21353 2.18776
13 3.13621 2.76317 2.56027 2.43371 2.34672 2.28298 2.23410 2.19535 2.16382 2.13764
14 3.10222 2.72647 2.52222 2.39469 2.30694 2.24256 2.19313 2.15390 2.12195 2.09540
15 3.07318 2.69517 2.48979 2.36143 2.27302 2.20808 2.15818 2.11853 2.08621 2.05932
16 3.04811 2.66817 2.46181 2.33275 2.24376 2.17833 2.12800 2.08798 2.05533 2.02814
17 3.02623 2.64464 2.43743 2.30775 2.21825 2.15239 2.10169 2.06133 2.02839 2.00094
18 3.00697 2.62395 2.41601 2.28577 2.19583 2.12958 2.07854 2.03789 2.00468 1.97698
19 2.98990 2.60561 2.39702 2.26630 2.17596 2.10936 2.05802 2.01710 1.98364 1.95573
20 2.97465 2.58925 2.38009 2.24894 2.15823 2.09132 2.03970 1.99853 1.96485 1.93674
21 2.96096 2.57457 2.36489 2.23334 2.14231 2.07512 2.02325 1.98186 1.94797 1.91967
22 2.94858 2.56131 2.35117 2.21927 2.12794 2.06050 2.00840 1.96680 1.93273 1.90425
23 2.93736 2.54929 2.33873 2.20651 2.11491 2.04723 1.99492 1.95313 1.91888 1.89025
24 2.92712 2.53833 2.32739 2.19488 2.10303 2.03513 1.98262 1.94066 1.90625 1.87748
25 2.91774 2.52830 2.31702 2.18424 2.09216 2.02406 1.97138 1.92924 1.89469 1.86578
26 2.90913 2.51909 2.30749 2.17447 2.08218 2.01389 1.96104 1.91876 1.88407 1.85503
27 2.90119 2.51061 2.29871 2.16546 2.07298 2.00452 1.95151 1.90909 1.87427 1.84511
28 2.89384 2.50276 2.29060 2.15714 2.06447 1.99585 1.94269 1.90014 1.86520 1.83593
29 2.88703 2.49548 2.28307 2.14941 2.05658 1.98781 1.93452 1.89184 1.85679 1.82741
30 2.88070 2.48872 2.27607 2.14224 2.04925 1.98033 1.92692 1.88412 1.84896 1.81949
40 2.83535 2.44037 2.22609 2.09095 1.99682 1.92688 1.87252 1.82886 1.79290 1.76269
60 2.79107 2.39326 2.17741 2.04098 1.94571 1.87472 1.81939 1.77483 1.73802 1.70701
120 2.74781 2.34734 2.12999 1.99230 1.89587 1.82381 1.76748 1.72196 1.68425 1.65238

193
 0.05
Degrees of freedom for numerator
1 2 3 4 5 6 7 8 9 10
1 161.44622 199.49948 215.70668 224.58335 230.16037 233.98752 236.76694 238.88424 240.54316 241.88193
2 18.51276 19.00003 19.16419 19.24673 19.29629 19.32949 19.35314 19.37087 19.38474 19.39588
3 10.12796 9.55208 9.27662 9.11717 9.01343 8.94067 8.88673 8.84523 8.81232 8.78549
4 7.70865 6.94428 6.59139 6.38823 6.25607 6.16313 6.09421 6.04103 5.99880 5.96435
5 6.60788 5.78615 5.40945 5.19216 5.05034 4.95029 4.87586 4.81833 4.77246 4.73506
6 5.98737 5.14325 4.75706 4.53369 4.38737 4.28386 4.20667 4.14681 4.09901 4.05996
7 5.59146 4.73742 4.34683 4.12031 3.97152 3.86598 3.78705 3.72572 3.67667 3.63653
8 5.31764 4.45897 4.06618 3.83785 3.68750 3.58058 3.50046 3.43810 3.38812 3.34717
9 5.11736 4.25649 3.86254 3.63309 3.48166 3.37376 3.29274 3.22959 3.17890 3.13727
10 4.96459 4.10282 3.70827 3.47805 3.32584 3.21718 3.13547 3.07166 3.02038 2.97824
Degree of freedom for denominator

11 4.84434 3.98231 3.58743 3.35669 3.20388 3.09461 3.01233 2.94798 2.89622 2.85362
12 4.74722 3.88529 3.49030 3.25916 3.10587 2.99612 2.91335 2.84857 2.79638 2.75339
13 4.66719 3.80557 3.41053 3.17912 3.02543 2.91527 2.83210 2.76691 2.71436 2.67102
14 4.60011 3.73889 3.34389 3.11225 2.95825 2.84773 2.76420 2.69867 2.64579 2.60216
15 4.54307 3.68232 3.28738 3.05557 2.90130 2.79046 2.70663 2.64080 2.58763 2.54371
16 4.49400 3.63372 3.23887 3.00692 2.85241 2.74131 2.65720 2.59109 2.53767 2.49351
17 4.45132 3.59154 3.19677 2.96471 2.81000 2.69866 2.61430 2.54796 2.49429 2.44992
18 4.41386 3.55456 3.15991 2.92775 2.77285 2.66130 2.57672 2.51016 2.45628 2.41170
19 4.38075 3.52189 3.12735 2.89511 2.74006 2.62832 2.54354 2.47677 2.42270 2.37793
20 4.35125 3.49283 3.09839 2.86608 2.71089 2.59898 2.51401 2.44707 2.39282 2.34787
21 4.32479 3.46679 3.07247 2.84010 2.68478 2.57271 2.48758 2.42046 2.36605 2.32095
22 4.30094 3.44336 3.04912 2.81671 2.66127 2.54906 2.46377 2.39650 2.34193 2.29669
23 4.27934 3.42213 3.02800 2.79554 2.64000 2.52766 2.44223 2.37481 2.32011 2.27472
24 4.25968 3.40283 3.00879 2.77629 2.62065 2.50819 2.42263 2.35508 2.30024 2.25474
25 4.24170 3.38520 2.99124 2.75871 2.60299 2.49041 2.40473 2.33706 2.28210 2.23648
26 4.22520 3.36901 2.97516 2.74260 2.58679 2.47411 2.38831 2.32053 2.26545 2.21972
27 4.21001 3.35413 2.96035 2.72777 2.57189 2.45911 2.37321 2.30531 2.25013 2.20430
28 4.19598 3.34039 2.94668 2.71407 2.55812 2.44526 2.35926 2.29127 2.23598 2.19004
29 4.18297 3.32766 2.93403 2.70140 2.54538 2.43244 2.34634 2.27825 2.22288 2.17685
30 4.17089 3.31583 2.92228 2.68963 2.53355 2.42052 2.33435 2.26616 2.21070 2.16458
40 4.08474 3.23173 2.83875 2.60597 2.44947 2.33585 2.24902 2.18017 2.12403 2.07725
60 4.00119 3.15041 2.75808 2.52521 2.36827 2.25405 2.16654 2.09697 2.04010 1.99259
120 3.92012 3.07178 2.68017 2.44724 2.28985 2.17501 2.08677 2.01643 1.95876 1.91046

194
 0.01

Degrees of freedom for numerator

1 2 3 4 5 6 7 8 9 10
1 4052.18452 4999.33958 5403.53358 5624.25703 5763.95541 5858.95032 5928.33385 5980.95357 6022.39743 6055.92504
2 98.50191 99.00032 99.16403 99.25134 99.30227 99.33137 99.35684 99.37503 99.38958 99.39686
3 34.11606 30.81641 29.45671 28.71002 28.23708 27.91057 27.67138 27.48948 27.34487 27.22845
4 21.19759 17.99981 16.69423 15.97709 15.52189 15.20675 14.97574 14.79884 14.65924 14.54600
5 16.25813 13.27408 12.05990 11.39188 10.96714 10.67224 10.45555 10.28934 10.15769 10.05105
6 13.74519 10.92485 9.77957 9.14838 8.74593 8.46603 8.26003 8.10167 7.97604 7.87418
7 12.24635 9.54651 8.45125 7.84667 7.46036 7.19137 6.99288 6.84008 6.71878 6.62010
8 11.25863 8.64907 7.59098 7.00607 6.63181 6.37067 6.17763 6.02881 5.91058 5.81429
9 10.56151 8.02152 6.99197 6.42206 6.05689 5.80178 5.61283 5.46709 5.35113 5.25654
10 10.04423 7.55949 6.55234 5.99437 5.63637 5.38580 5.20015 5.05668 4.94242 4.84914
Degree of freedom for denominator

11 9.64610 7.20570 6.21674 5.66831 5.31600 5.06918 4.88603 4.74449 4.63154 4.53929
12 9.33028 6.92660 5.95253 5.41195 5.06435 4.82055 4.63950 4.49938 4.38752 4.29606
13 9.07380 6.70093 5.73937 5.20532 4.86159 4.62035 4.44101 4.30208 4.19107 4.10029
14 8.86166 6.51494 5.56389 5.03542 4.69498 4.45584 4.27787 4.13996 4.02969 3.93942
15 8.68317 6.35885 5.41695 4.89320 4.55560 4.31828 4.14155 4.00445 3.89480 3.80493
16 8.53095 6.22629 5.29224 4.77257 4.43742 4.20164 4.02594 3.88957 3.78043 3.69093
17 8.39975 6.11215 5.18503 4.66895 4.33596 4.10148 3.92674 3.79094 3.68226 3.59307
18 8.28550 6.01290 5.09192 4.57902 4.24791 4.01462 3.84063 3.70542 3.59705 3.50815
19 8.18500 5.92593 5.01029 4.50024 4.17077 3.93857 3.76525 3.63053 3.52250 3.43380
20 8.09598 5.84896 4.93822 4.43072 4.10267 3.87143 3.69874 3.56442 3.45668 3.36820
21 8.01663 5.78041 4.87404 4.36881 4.04214 3.81175 3.63957 3.50565 3.39816 3.30982
22 7.94535 5.71902 4.81663 4.31345 3.98796 3.75832 3.58665 3.45304 3.34578 3.25761
23 7.88111 5.66371 4.76484 4.26354 3.93919 3.71023 3.53901 3.40569 3.29862 3.21060
24 7.82290 5.61363 4.71806 4.21846 3.89508 3.66671 3.49593 3.36286 3.25599 3.16805
25 7.76981 5.56804 4.67548 4.17742 3.85495 3.62718 3.45676 3.32392 3.21722 3.12940
26 7.72127 5.52632 4.63655 4.13996 3.81834 3.59108 3.42101 3.28839 3.18181 3.09410
27 7.67670 5.48812 4.60091 4.10563 3.78475 3.55800 3.38821 3.25582 3.14938 3.06176
28 7.63566 5.45293 4.56811 4.07402 3.75388 3.52756 3.35808 3.22586 3.11954 3.03200
29 7.59769 5.42047 4.53781 4.04486 3.72540 3.49948 3.33026 3.19821 3.09200 3.00452
30 7.56245 5.39035 4.50973 4.01786 3.69903 3.47347 3.30451 3.17263 3.06653 2.97911
40 7.31416 5.17849 4.31260 3.82829 3.51383 3.29101 3.12377 2.99298 2.88756 2.80053
60 7.07712 4.97744 4.12589 3.64906 3.33887 3.11869 2.95304 2.82327 2.71845 2.63175
120 6.85088 4.78650 3.94908 3.47953 3.17354 2.95586 2.79177 2.66292 2.55858 2.47208

195
XIII. References

Automotive Industry Action Group, American Society for Quality Control. Supplier Quality
Requirements Task Force: Fundamental statistical process control: reference manual, AIAG,
1991, p. 161
Automotive Industry Action Group, Chrysler Corporation, Ford Motor Company, General
Motors Corporation: Statistical process control (SPC): reference manual, AIAG, 1995, p. 161
http://www.iso.org/iso/home.html
http://www.efqm.org/
Kanji, G. K., Arif, H. O.: Statistical Process Control, Wisdom House, 2010, p. 202
Forrest W. Breyfogle III: Implementing Six Sigma: Smarter Solutions Using Statistical
Methods. Wiley and Sons, Inc., New York, 1999
Lawrence D. Brown, T. Tony Cai and Anirban DasGupta. Interval Estimation for Binomial
Proportion Statistical Science 2001, Vol. 16, No. 2, 101-133,
Douglas Downing, Ph.D., and Jeffery Clark. Ph.D. Business Statistics. Barrons Educational
Series. Inc. 1997.
Six Sigma Black Belt Training Books. Six Sigma Qualtec. 1996-2003,
Tenner, A.R., DeToro, I.J. (1993): Total Quality Management, Three Steps to Continuous
Improvement, Addison-Wesley Publishing Company, Reading, Massachusetts
Kvesi. J., Topr, J. (szerk) (2006): A minsgmenedzsment alapjai. Typotex, Budapest
Measurement Systems Analysis Reference Manual, 2nd ed., (1995). Chrysler Corp., Ford
Motor Corp., General Motors Corp.
Pegels, C.C. (1995): Total Quality Management, A survey of its important aspects, Boyd &
Fraser Publishing Company, Danvers, Massachusetts
Prkopa Andrs. Valsznsgelmlet. Mszaki Kiad 1974
Meszna Gyrgy-Ziermann Margit. Valsznsgelmlet s matematikai statisztika.
Kzgazdasgi s Jogi Kiad 1981.
Tandori Kroly. Valsznsgszmts. Jzsef Attila Tudomnyegyetem, Szeged 1973.
(Egyetemi jegyzet),
gnes Szendrei. Diszkrt Matematika. (Logika, Algebra, Kombinatorika) Polygon Jegyzettr,
1997.

196