WCM

WORLD CLASS MANUFACTURING
Sub Code 399
Developed by
Prof. Mr. Hemkant Deshpande
On behalf of
Prin. L.N. Welingkar Institute of Management Development & Research
!  
Advisory Board
Chairman
Prof. Dr. V.S. Prasad
Former Director (NAAC)
Former Vice-Chancellor
(Dr. B.R. Ambedkar Open University)
Board Members
1. Prof. Dr. Uday Salunkhe  2. Dr. B.P. Sabale  3. Prof. Dr. Vijay Khole  4. Prof. Anuradha Deshmukh 
Group Director  Chancellor, D.Y. Patil University, Former Vice-Chancellor  Former Director 
Welingkar Institute of Navi Mumbai  (Mumbai University) (YCMOU)
Management Ex Vice-Chancellor (YCMOU)
Program Design and Advisory Team
Prof. B.N. Chatterjee Mr. Manish Pitke

Dean – Marketing Faculty – Travel and Tourism
Welingkar Institute of Management, Mumbai Management Consultant
Prof. Kanu Doshi Prof. B.N. Chatterjee

Dean – Finance Dean – Marketing
Welingkar Institute of Management, Mumbai Welingkar Institute of Management, Mumbai
Prof. Dr. V.H. Iyer Mr. Smitesh Bhosale

Dean – Management Development Programs Faculty – Media and Advertising
Welingkar Institute of Management, Mumbai Founder of EVALUENZ
Prof. B.N. Chatterjee Prof. Vineel Bhurke

Dean – Marketing Faculty – Rural Management
Prof. Venkat lyer Dr. Pravin Kumar Agrawal

Director – Intraspect Development Faculty – Healthcare Management
Manager Medical – Air India Ltd.
Prof. Dr. Pradeep Pendse Mrs. Margaret Vas

Dean – IT/Business Design Faculty – Hospitality
Welingkar Institute of Management, Mumbai Former Manager-Catering Services – Air India Ltd.
Prof. Sandeep Kelkar Mr. Anuj Pandey

Faculty – IT Publisher
Welingkar Institute of Management, Mumbai Management Books Publishing, Mumbai
Prof. Dr. Swapna Pradhan Course Editor

Faculty – Retail Prof. Dr. P.S. Rao
Welingkar Institute of Management, Mumbai Dean – Quality Systems
Welingkar Institute of Management, Mumbai
Prof. Bijoy B. Bhattacharyya Prof. B.N. Chatterjee

Dean – Banking Dean – Marketing
Mr. P.M. Bendre Course Coordinators

Faculty – Operations Prof. Dr. Rajesh Aparnath
Former Quality Chief – Bosch Ltd. Head – PGDM (HB)
Welingkar Institute of Management, Mumbai
Mr. Arun Gokhlay Ms. Kirti Sampat

Faculty – International Business Assistant Manager – PGDM (HB)
Ex Director of Quality and Safety – OTIS Elevators Welingkar Institute of Management, Mumbai
Mr. A.S. Pillai Mr. Kishor Tamhankar

Faculty – Services Excellence Manager (Diploma Division)
Ex Senior V.P. (Sify) Welingkar Institute of Management, Mumbai
COPYRIGHT © by Prin. L.N. Welingkar Institute of Management Development & Research.

Printed and Published on behalf of Prin. L.N. Welingkar Institute of Management Development & Research, L.N. Road, Matunga (CR), Mumbai - 400 019.
 
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NOT FOR SALE. FOR PRIVATE CIRCULATION ONLY. 1st Edition, May 2014
CONTENTS
Contents
Chapter No. Chapter Name Page No.
1 Introduction 4-9
2 Just -in-time (JIT) 10-29
3 5S 30-43
4 Poka-yoke 44-56
5 SMED (Single Minute Exchange of Die) 57-68
6 Kanban 69-80
7 Total Productive Maintenance (TPM) 81-100
8 Benchmarking 101-115
9 Total Quality Management 116-147
10 Kaizen 148-163
11 7 QC Tools 164-187
12 Six Sigma (6σ) 188-224
13 Lean Production System 225-251
14 Quality at Source 252-265
15 Supplier Partnership 266-284
16 Cost of Quality 285-307
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INTRODUCTION
Chapter 1
Introduction
Introduction
World Class Manufacturing Organisations consistently deliver exceptional

performance, frequently in excess of expectations.
! !4
INTRODUCTION
What is WCM?
World Class Manufacturing is one of the most known production system

in the world.
It is a different set of concepts, principles, policies and technique for

managing and operating a manufacturing unit.
It is driven by results achieved to gain a competitive edge.
Primarily focuses on continual improvements in quality, cost, lead time,

flexibility and customer focus. Japaneses are pioneers of this system and
evolved after World war II.
It refers to practice followed in a manufacturing organisation, in order to

consistently deliver exceptional performance, frequently in excess of
expectation.
World Class Manufacturers are those that demonstrate industry best

practice.
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INTRODUCTION
Criteria
There are two overriding criteria to judge whether a company can be

regarded as world class.
1. How does the company compare with its best competition?
2. Has the company increased its score since last year?
Principles
1. World Class Safety is the foundation of World Class Performance.
2. WCM leader have a passion for standards.
3. In a World Class Company, voice of customer can be heard in the

plant.
4. WCM does not accept losses of any kind. (Goal is always zero:
accident, service and quality defects, inventory, and breakdowns)
5. A rigorous application of WCM method guarantees the elimination of

losses.
6. Plant all abnormalities are immediately visible.
7. WCM takes place in the workplace, not in the office.
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INTRODUCTION
8. WCM is most effectively learnt by practicing the techniques with the

plant teams.
9. The power of WCM comes from the involvement of people.
10. World Class companies create the energy of a crisis in the face of
continued success.
Essential Concept
! !7
INTRODUCTION
The Most Essential Pillars
Keys of WCM
1. Reduce lead times
2. Speed time-to-market
3. Cut operations costs
4. Exceed customer expectations
5. Manage the global enterprise
6. Streamline outsourcing processes
7. Improve business performance visibility
! !8
INTRODUCTION
REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter
Summary
PPT
MCQ
Video Lecture 
! !9
JUST-IN-TIME (JIT)
Chapter 2
Just-in-Time (JIT)
Objectives
After completing this chapter, you will be able to understand:
Meaning of total Just-in-time (JIT)
History and evolution of JIT
Elements and goals of JIT
Advantages and disadvantages of JIT
Structure:
2.1 Introduction
2.2 Definition of JIT
2.3 History of JIT
2.4 Elements of JIT
2.5 Goals of JIT
2.6 JIT - Strategy and System
2.7 Advantages and Disadvantages of JIT
2.8 Precautions and Issues of JIT
2.9 Summary
2.10 Self Assessment Questions
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JUST-IN-TIME (JIT)
2.1 Introduction
Just-in-time manufacturing was a concept introduced by the Ford Motor

Company. It works on a demand-pull basis, contrary to hitherto used
techniques, which worked on a production-push basis.
To elaborate further, under just-in-time manufacturing (colloquially referred

to as JIT production systems), actual orders dictate what should be
manufactured, so that the exact quantity is produced at the exact time that
is required.
Just-in-time manufacturing goes hand in hand with concepts such as

Kanban, continuous improvement and total quality management (TQM).
Just-in-time production requires intricate planning in terms of procurement

policies and the manufacturing process if its implementation is to be a
success.
Highly advanced technological support systems provide the necessary

back-up that Just-in-time manufacturing demands with production
scheduling software and electronic data interchange being the most sought
after.
!
Reassuring... but expensive
! !11
JUST-IN-TIME (JIT)
When is the best time to have an inventory part ready for production?
– Just-in-time.
When is the best time to have an item ready for the next step in
production?
– Just-in-time.
When is the best time to have a product ready for delivery to a customer?
– Just-in-time.
So why do manufacturers build inventory of both finished goods and raw

materials?
– Just-in-case!
A buffer of inventory on hand is comforting – and costly.
If you hold a lot of items in inventory, you’re locking away a huge amount
of cash unnecessarily. These items can be lost, stolen, or damaged, or they
can deteriorate. They occupy space, which could otherwise be devoted to
operations. And they can become obsolete, particularly when products are
improved or changed often. All of these represents financial loss to the
business.
In the 1970s, when Japanese manufacturing companies were trying to

perfect their systems, Taiichi Ohno of Toyota developed a guiding
philosophy for manufacturing that minimised waste and improved quality.
Called Just-in-time (JIT), this philosophy advocates a lean approach to
production, and uses many tools to achieve this overall goal.
When items are ready just in time, they aren't sitting idle and taking up
space. This means that they aren’t costing you anything to hold onto them,
and they're not becoming obsolete or deteriorating. However, without the
buffer of having items in stock, you must tightly control your
manufacturing process so that parts are ready when you need them.
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JUST-IN-TIME (JIT)
When you do (and JIT helps you do this) you can be very responsive to
customer orders – after all, you have no stake in “forcing” customers to
have one particular product, just because you have a warehouse full of
parts that need to be used up. And you have no stake in trying to persuade
customers to take an obsolete model just because it’s sitting in stock.
Just-in-time is a companywide philosophy oriented toward eliminating

waste throughout all operational functions and improving materials
throughput. The goal of JIT is to eliminate any function in the
manufacturing system that causes overhead, slows productivity, or adds
unnecessary expense. It is mostly characterized by a pull production
system, which supplies a component only on demand without the
intervention of inventory. Thus, JIT is characterised by “zero” inventory
philosophies.
To implement the philosophy in manufacturing, JIT techniques provide “the

cost- effective production and delivery of only the necessary quality parts
in the right quantity, at the right time and place, while using a minimum of
facilities, equipment, materials, and human resources”.
Just-in-time techniques can be applied to the full cycle of procurement,

manufacturing, and delivery. Characteristics of Just-in-time techniques are
as follows: improved workplace organisation, visibility of operations and
outcomes, Kanban production control, steady-rate timing, flexibility, and
development of simple manufacturing processes.
Material related costs are reduced by reducing the number of suppliers a

company deals with and developing long-term contracts, eliminating the
need to count individual parts, reducing order scheduling, eliminating
expediting, simplifying receiving systems, eliminating receiving inspection,
eliminating most unpacking, eliminating the stocking of inventory, and
eliminating excess material spoilage.
Manufacturing related costs are reduced by design for manufacture and

design for assembly techniques where unnecessary parts or processes are
eliminated. They are also reduced through the elimination of excess
material handling, inspections, and storage of parts. The primary thrust is
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JUST-IN-TIME (JIT)
to eliminate non-value adding tasks. Quick change over techniques replace

long set-up times, and cells replace traditional assembly lines.
Visual controls are often used to schedule the production of parts in place
of virtual systems such as MRP. Statistical process control is used to assure
that the outcome of production is consistently met with desired results.
Just-in-time Manufacturing (JIT) is one of the main principles of lean

manufacturing. It is the idea of producing exactly what the customer
wants, in the quantities they want, where they want it, when the customer
wants it without it being delayed or held up in inventory.
JIT is One of the Main Pillars of Lean
JIT is One of the Supporting Pillars of Any Lean Implementation
Along with Jidoka (Built-in Quality) and respect for people, JIT forms Lean
manufacturing. Built on a stable foundation of repeatable and predictable
processes, these pillars help you achieve customer satisfaction and thus
business success.
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JUST-IN-TIME (JIT)
2.3 History of JIT
Just-in-time is a Japanese manufacturing management method developed

in 1970s. It was first adopted by Toyota manufacturing plants by Taiichi
Ohno. The main concern at that time was to meet consumer demands.
Because of the success of JIT management, Taiichi Ohno was named the
Father of JIT.
After the first introduction of JIT by Toyota, many companies followed up

and around mid-970s, it gained extended support and widely used by
many companies.
One motivated reason for developing JIT and some other better production
techniques was that after World War II, Japanese people had a very strong
incentive to develop a good manufacturing techniques to help them
rebuilding the economy. They also had a strong working ethnic which was
concentrated on work rather than leisure, seek continuous improvement,
life commitment to work, group conscious rather than individualism and
achieved common goal. These kind of motivation had driven Japanese
economy to succeed.
Because of the natural constraints and the economy constraints after World
War II, Japanese manufacturers looked for a way to gain the most efficient
use of limited resources. They worked on “optimal cost/quality
relationship”.
Before the introduction of JIT, there were a lot of manufacturing defects for
the existing system at that time. According to Hirano, this included
inventory problem, product defects, risen cost, large lot production and
delivery delays. The inventory problems included the unused accumulated
inventory that was not only unproductive, but also required a lot of effort
in storing and managing them. Other implied problems were parts storage,
equipment breakdowns, and uneven production levels.
For the product defects, manufacturers knew that only one single product
defects can destroy the producer’s creditability. They must create a
“defect-free” process.
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JUST-IN-TIME (JIT)
Instead of large lot production – producing one type of products, they

awared that they should produce more diversified goods. There was also a
problem of rising cost, the existing system could not reduce cost any
further but remember improvement always leads to cost reduction.
Lastly, the existing system did not manage well for fast delivery request.
So, there was a need to have a faster and reliable delivery system in order
to handle customers’ needs.
Thus, JIT manufacturing management was developed based on these

problems.
The Origins of JIT

Toyota got the idea for JIT from of all places a supermarket when they
visited America. They observed that a supermarket would only have to
restock shelves with what the customers were actually taking. They did not
keep ordering the same quantities each week and have some shelves
overflowing and others empty. Each shelf had a fixed quantity of products
from which the customers would select and this would then be replenished
at the end of each day.
Many JIT and Kanban systems are very much based around the
supermarket principle; the customer is supplied from a finished goods
supermarket and the factory then works to restock that supermarket. Care
is taken to maintain the stock levels within the supermarket to the
minimum levels.
2.4 Elements of JIT
The basic elements of JIT manufacturing are:
People Involvement
Plants
System
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JUST-IN-TIME (JIT)
People Involvement
Maintaining a good support and agreement from people involved in

production. This not only reduce the time and effort in implementation of
JIT, but also minimise the chance of creating implementation problem. The
attempt to maximise people’s involvement may carry through the
introduction of quality circle and total involvement concept.
Manufacturers can gain support from four sources.
1. Stockholders and owners of the company – should maintain a good

long-term relationship among them.
2. Labour organisation – All labours should be well-informed about the

goals of JIT. This is crucial in gaining support from the them.
3. Management support – Support from all levels of management. The

ideas of continuous improvement should spread all over the factory,
managers and all shop-floor labour.
4. Government support – Government can show their support by extending

tax and other financial help. This can enhance the motivation, and also
help in financing the implementation of JIT.
Plants
Certain requirements are needed to implement JIT. These are:
1. Plant layout – The plant layout mainly focus on maximising working

flexibility.
2. Demand-pull production – It means to produce when the order is

received. This can manage the quantity and time more appropriately.
3. Kanban – A Japanese term for card or tag. Special inventory and

process information are written on the card. This helps tying and linking
the process more efficiently.
4. Self-inspection – It is carried out by the workers and catches mistakes

immediately.
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JUST-IN-TIME (JIT)
5. Continuous improvement – This concept should be adopted by every

members in the organization in order to carry out JIT. This is the most
important concept of JIT. This can allow an organisation to improve its
productivity, service, operation and even customer satisfaction on an
ongoing basis.
System
This refers to the technology and process that combines the different
processes and activities together. Two major types are MRP (Material
Requirement Planning) and MRP II (Manufacturing Resource Planning).
MRP is a computer-based and bottom-up manufacturing approach. This

involves two plans, production plan and master production schedule.
Production plan involves the management and planning of resources
through the available capacity. Master production schedule involves what
products to be produced in what time.
MRP II mainly involves the management or planning of financial resources

in order to carry out the operation.
The above three factors formed the elements of JIT.
2.5 Goals of JIT
There are three main objectives:
1. Increasing the organisation’s ability to compete with others and remain

competitive over the long run. The competitiveness of the firms is
increased by the use of JIT manufacturing process as they can develop
a more optimal process for their firms.
2. Increasing efficiency within the production process. Efficiency is

obtained through the increase of productivity and decrease of cost.
3. Reducing wasted materials, time and effort. It can help to reduce the
costs.
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JUST-IN-TIME (JIT)
Other short-term and long-term objectives are:
1. Identify and response to consumers needs. Customers’ needs and wants

seem to be the major focus for business now. This objective will help
the firm on what is demanded from customers, and what is required of
production.
2. Optimal quality/cost relationship. The organisation should focus on zero-

defect production process. Although it seems to be unrealistic, in the
long run, it will eliminate a huge amount of resources and effort in
inspecting, reworking and the production of defected goods.
3. Reduce unwanted wastes. Wastes that do not add value to the products
itself should be eliminated.
4. Develop a reliable relationship between the suppliers. A good and long-

term relationship between organisation and its suppliers helps to
manage a more efficient process in inventory management, material
management and delivery system. It will also assure that the supply is
stable and available when needed.
5. Plant design for maximising efficiency. The design of plant is essential in

terms of manufacturing efficiency and utility of resources.
6. Adopt the work ethnic of Japanese workers for continuous improvement.

Commit a long-term continuous improvement throughout the
organisation. It will help the organisation to remain competitive in the
long run.
2.6 JIT — Strategy and System
The JIT Strategy

By taking a JIT approach to inventory and product handling, companies can
often cut costs significantly. Inventory costs contribute heavily to the
company expenses, especially in manufacturing organisations. By
minimising the amount of inventory you hold, you save space, free up cash
resources, and reduce the waste that comes from obsolescence.
! !19
JUST-IN-TIME (JIT)
JIT Systems
To facilitate a JIT approach, you need a variety of systems in place. The
most notable is a Kanban. This is a Japanese approach to ensuring a
continuous supply of inventory or product. Kanbans were designed to
support the JIT philosophy.
A kanban is a visual signal that indicates it is time to replenish stock and

possibly reorder. For instance, as the supply of bolts in a bin on the
assembly line falls below a certain number, it may uncover a yellow line
painted around the inside of the storage bin. This yellow line indicates to
the foreman that he needs to prepare a requisition for more bolts. That
requisition is given to the purchasing department, which processes the
order. This prevents the supply of bolts from dropping below a critical
amount and allows production continuous to flow smoothly.
JIT also exists in concert with continuous improvement systems. Total

Quality Management and Six Sigma are overarching programs that help
you take a detailed look at every point of the production process and
identify ways to make improvements. By applying JIT, you are continuously
monitoring the production process. This gives you opportunities for making
the production process smoother and more efficient.
Because JIT is intended to spread throughout the organisation, it can have

an impact on many areas through improvements in processes. When the
emphasis is on lean production, systems tend to be made simpler and
more predictable. From how a product moves through the building to ways
to increase worker involvement in system design, JIT improves efficiency.
JIT and Stakeholder Relationships
With JIT, it is necessary that you build strong ties with your supply chain.
This will ensure that you have access to the supplies you need when you
need them.
With a secure source of supplies, you can continue to make improvements

in your production and inventory systems. This helps you to increase your
responsiveness to customer demand. If you need to ramp up production,
you can be confident knowing your suppliers will help you.
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JUST-IN-TIME (JIT)
If your customers demand a newer technology, you can switch product

quite easily, without worrying about writing off a large stock of obsolete
supplies and finished goods. This means that you can meet changing
customer needs more quickly.
Custom orders are simpler with a JIT system. Instead of the customer's
widget being built six months in advance and waiting on a shelf, it is built
when it’s ordered. By delivering product “just-in-time,” you allow for last-
minute changes.
Essentially, JIT allows your company to get the right products to the right
customers at the right time.
In many industries, this can give you a huge competitive advantage. At

the same time, it helps you save a large amount of money.
2.7 Advantages AND Disadvantages of JIT
Advantages
Following are the advantages of adopting Just-in-time Manufacturing

Systems:
Just-in-time manufacturing keeps stock holding costs to a bare minimum.

The release of storage space results in better utilisation of space and
thereby bears a favourable impact on the rent paid and on any insurance
premiums that would otherwise need to be made.
Just-in-time manufacturing eliminates waste, as out-of-date or expired

products do not enter into this equation at all.
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JUST-IN-TIME (JIT)
! !22
JUST-IN-TIME (JIT)
As under this technique, only essential stocks are obtained, less working
capital is required to finance procurement. Here, a minimum re-order
level is set, and only once that mark is reached, fresh stocks are ordered
making this a boon to inventory management too.
Due to the aforementioned low level of stocks held, the organisation’s

return on investment (referred to as ROI, in management parlance)
would generally be high.
As just-in-time production works on a demand-pull basis, all goods made

would be sold, and thus it incorporates changes in demand with
surprising ease. This makes it especially appealing today, where the
market demand is volatile and somewhat unpredictable.
Just-in-time manufacturing encourages the ‘right first time’ concept, so

that inspection costs and cost of rework is minimized.
High quality products and greater efficiency can be derived from

following a just-in-time production system.
Close relationships are fostered along the production chain under a just-
in-time manufacturing system.
Constant communication with the customer results in high customer

satisfaction.
Overproduction is eliminated when just-in-time manufacturing is

adopted.
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JUST-IN-TIME (JIT)
JIT Reduces the Order to Payment Timeline
One of the biggest problems that many businesses face is cash flow. If
they have to wait for their customers to pay, then they do not have cash
to pay for their suppliers to build more products. Many companies have
to spend a huge amount of their time balancing their cash flow and their
production because of this.
Implementing JIT does not just reduce your lead times, it also reduces
the time that is taken from receiving an order to you actually getting the
cash in your hands. This is vital if you want to reinvest that cash back
into your business to satisfy more customers.
! !24
JUST-IN-TIME (JIT)
Disadvantages
Following are the disadvantages of adopting Just-in-time Manufacturing

Systems:
Just-in-time manufacturing provides zero tolerance for mistakes, as it

makes re-working very difficult in practice, as inventory is kept to a bare
minimum.
There is a high reliance on suppliers, whose performance is generally

outside the purview of the manufacturer.
Due to there being no buffers for delays, production downtime and line
idling can occur which would bear a detrimental effect on finances and on
the equilibrium of the production process.
The organisation would not be able to meet an unexpected increase in

orders due to the fact that there are no excess finished goods.
Transaction costs would be relatively high as frequent transactions would

be made.
Just-in-time manufacturing may have certain detrimental effects on the

environment due to the frequent deliveries that would result in increased
use of transportation, which in turn would consume more fossil fuels.
2.8 Precautions and issues of JIT
Precautions
Following are the things to remember when implementing a Just-in-time

Manufacturing System:
Management buy-in and support at all levels of the organisation are

required, if a just-in-time manufacturing system is to be successfully
adopted.
Adequate resources should be allocated, so as to obtain technologically

advanced software that is generally required if a just-in-time system is to
be a success.
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JUST-IN-TIME (JIT)
Building a close, trusting relationship with reputed and time-tested

suppliers will minimise unexpected delays in the receipt of inventory.
Just-in-time manufacturing cannot be adopted overnight. It requires

commitment in terms of time and adjustments to corporate culture would
be required, as it is starkly different to traditional production processes.
The design flow process needs to be redesigned and layouts need to be

re-formatted, so as to incorporate just-in-time manufacturing.
Lot sizes need to be minimised.
Workstation capacity should be balanced whenever possible.
Preventive maintenance should be carried out, so as to minimise

machine breakdowns.
Set-up times should be reduced wherever possible.
Quality enhancement programs should be adopted, so that total quality

control practices can be adopted.
Reduction in lead times and frequent deliveries should be incorporated.
Motion waste should be minimised. So, the incorporation of conveyor

belts might prove to be a good idea when implementing a just-in-time
manufacturing system.
Issues
JIT is often viewed in direct conflict with Material Requirements Planning
(MRP) since JIT uses pull scheduling and MRP uses a push methodology.
JIT is best suited for repetitive production environments. Just like anything
else, Just-in-time is no panacea, nor should it be embraced as a religion. It
is an operational strategy that, if implemented properly, will provide a new
dimension to competing: quickly introducing new customerised high quality
products and delivering them with unprecedented lead times, swift
decisions, and manufacturing products with high velocity.
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JUST-IN-TIME (JIT)
2.9 Summary
Just-in-time manufacturing is a philosophy that has been successfully

implemented in many manufacturing organisations.
It is an optimal system that reduces inventory whilst being increasingly

responsive to customer needs, this is not to say that it is not without its
pitfalls.
However, these disadvantages can be overcome with a little forethought

and a lot of commitment at all levels of the organisation.
In short:
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JUST-IN-TIME (JIT)
1. What is JIT and who is the father of JIT?
2. JIT manufacturing goes hand in hand with which concepts?
3. Which country and who developed JIT?
4. Which philosophy JIT advocates?
5. To which function JIT technique can be applied in manufacturing

organisation?
6. Which company first adopted JIT?
7. What are the elements of JIT? Explain.
8. What are the goals of JIT?
9. Explain the role of suppliers in JIT?
10.Explain advantages and disadvantages of JIT.
11.What precautions organisation should take while implementing JIT?
References
1. www.Tutorialspoints.com/managementconcept
2. www.rockfordconsulting.com
3. www.mindtools.com
4. www.tejc.tripod.com
5. www.leaqnman.hubpages.com
6. wwww.transtutors.com
7. Wikipedia
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JUST-IN-TIME (JIT)
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
Video Lecture - Part 1
! !29
5S
Chapter 3
5s
Objectives
Meaning of 5S
5S methodologies
Implementing 5S
Advantages of 5S
Structure:
3.1 What is 5S?
3.2 Discovery of 5S
3.3 5S Principles
3.4 5S Methodology/Process
3.5 Implementing 5S
3.6 Advantages of 5S
3.7 Pitfalls of 5S
3.8 Litmus Test of 5S
3.9 Summary
! !30
5S
3.1 What is 5S?
What problems do we commonly encounter at the manufacturing

workplace
High Absenteeism
High turnover
Demotivated employees
Disordered/cluttered environment
Mistakes/errors
The Solution to all these problems is 5s it is:
Housekeeping Technique
Productivity and Safety Enhancement Technique
Idea behind 5S
In order to achieve high levels of quality, safety, and productivity, workers
must have a conducive working environment.
What is 5S?
Developed by the Japanese
Housekeeping system
Helps create a better working environment and a consistently high

quality process
! !31
5S
3.2 Discovery of 5S
Thirty years ago, researchers started studying the secret of success of

Japanese manufacturing companies.
5S turned out to be the most impressive “secret”.
The factories were so well organised that abnormal situations were readily
apparent.
Equipments were so clean and well maintained that any problem such as a
loose bolt or leaking oil could be easily seen.
This passion of cleanliness and orderliness became a hallmark of Japanese

organisations.
3.3 Principle of 5S
1. SEIRI – Organisation/Sort out, Tidiness

2. SEITON – Orderliness/Systemize
3. SEISO – The Cleaning/Shining
4. SEIKETSU – Standardize
5. SHITSUKE – Sustain/Discipline
3.4 5S Methodology/Process
The 5S Process, or simply “5S”, is a structured program to systematically

achieve total organisation, cleanliness, and standardisation in the
workplace. A well-organised workplace results in a safer, more efficient,
and more productive operation. It boosts the morale of the workers,
promoting a sense of pride in their work and ownership of the
irresponsibilities.
“5S” was invented in Japan, and stands for five (5) Japanese words that
start with the letter ‘S’: Seiri, Seiton, Seiso, Seiketsu, and Shitsuke. Table
3.1 shows what these individual words mean. An equivalent set of five ‘S’
words in English have likewise been adopted by many, to preserve the “5S”
acronym in English usage. These are Sort, Set (in place), Shine,
! !32
5S
Standardise, and Sustain. Some purists do not agree with these English
words.
They argue that these words have lost the essence of the original 5
Japanese words.
Table 3.1: 5S Definitions
Japanese English
Meaning in Japanese Context
Term Equivalent
Seiri Tidiness Throw away all rubbish and unrelated
materials in the workplace
Seiton Orderliness Set everything in proper place for quick

retrieval and storage
Seiso Cleanliness Clean the workplace; everyone should be a
janitor
Seiketsu Standardization Standardize the way of maintaining

cleanliness
Shitsuke Discipline Practice ‘Five S’ daily — make it a way of
life; this also means ‘commitment’
! !33
5S
1. Seiri
The first step of the “5S” process, Seiri, refers to the act of throwing away
all unwanted, unnecessary, and unrelated materials in the workplace.
People involved in Seiri must not feel sorry about having to throw away
things. The idea is to ensure that everything left in the workplace is related
to work. Even the number of necessary items in the workplace must be
kept to its absolute minimum. Because of Seiri, simplification of tasks,
effective use of space, and careful purchase of items follow.
2. Seiton
Seiton, or orderliness, is all about efficiency. This step consists of putting
everything in an assigned place so that it can be accessed or retrieved
quickly, as well as returned in that same place quickly. If everyone has
quick access to an item or materials, work flow becomes efficient, and the
worker becomes productive. The correct place, position, or holder for every
tool, item, or material must be chosen carefully in relation to how the work
will be performed and who will use them. Every single item must be
allocated its own place for safekeeping, and each location must be labelled
for easy identification of what it’s for.
3. Seiso
Seiso, the third step in “5S”, says that ‘everyone is a janitor’. Seiso consists
of cleaning up the workplace and giving it a ‘shine’. Cleaning must be done
by everyone in the organisation, from operators to managers. It would be a
good idea to have every area of the workplace assigned to a person or
group of persons for cleaning. No area should be left uncleaned. Everyone
should see the 'workplace' through the eyes of a visitor - always thinking if
it is clean enough to make a good impression.
! !34
5S
! !35
5S
4. Seiketsu
The fourth step of “5S”, or seiketsu, more or less translates to
‘standardised clean-up’. It consists of defining the standards by which
personnel must measure and maintain ‘cleanliness’. Seiketsu encompasses
both personal and environmental cleanliness. Personnel must therefore
practice ‘seiketsu’ starting with their personal tidiness. Visual management
is an important ingredient of seiketsu. Color coding and standardized
coloration of surroundings are used for easier visual identification of
anomalies in the surroundings. Personnel are trained to detect
abnormalities using their five senses and to correct such abnormalities
immediately.
5. Shitsuke
The last step of “5S”, Shitsuke, means ‘Discipline.’ It denotes commitment
to maintain orderliness and to practice the first 4S as a way of life. The
emphasis of Shitsuke is elimination of bad habits and constant practice of
good ones. Once true shitsuke is achieved, personnel voluntarily observe
cleanliness and orderliness at all times, without having to be reminded by
management.
! !36
5S
3.5 Implementing 5S
As 5S are fundamental prerequisite for industrial methods, implementing

them in a formal way is a major task.
First Step: Training Managing Staff
The first training is to be given to managers, foremen and line leaders. In

addition to the course, frequent visits on the shop floor will reveal
numerous examples of lack of order, tidiness, dust, obsolete parts or
documents still lying around.
Taking pictures to keep in mind original state and by collecting more

picture makes a nice before/after album.
Second Step: Effective Starting of 5S

Managers, foremen and line leaders to taught the 5S spirit and techniques
to their teams, top-down.
! !37
5S
The plant is to be sliced into sectors and responsibility of 5S split among

the sections. Top management to issue basic 5S rules, a kind of table of
laws, stating about stacking heights, stacking zones and so on.
Over five months, one S per month, sections had to turn ideas (e.g.,
planned actions) into reality.
First actions is mainly in cleaning, sorting and marking inventory zones,

corridors…
Progress and compliance to rules is to be monitored by a monthly 5S

patrol.
5S Patrol
Some managers, foremen or line leaders were entitled both as responsible
for 5S in their area and and patrolman.
To involve everybody, two different workers were chosen each month, to

join the patrol.
Evaluation sheet to be filled in by patrol team. Patrol planning is to be done

in such a way so that each sector was checked over the months.
At the end of each audit (patrol), evaluation sheets with notes and remarks
are to be gathered and discussed.
The 5S committee chairman (Quality Assurance manager) gathers the

sheets and calculates a global result. A chart with all results to be finally
displayed.
5S Improvement plan is to be issued to some responsible person,

requesting a concrete answer to some specific point. This person should
respond quickly, proposing a deadline for clearing that troublesome point.
Third Step: Turn 5S into Daily Task

When 5S were kicked off and this system understood, it was ready to be
turned into regular job.
! !38
5S
Yearly 5S target are to be assigned to divisions, as a part of their quality

targets. Average result of all monthly 5S audits should meet that target.
So, patrols were kept after kick-off period.
3.6 Advantages of 5S
If tools and materials are conveniently located in uncluttered work areas:
Operators spend less time looking for items. This leads to higher
workstation efficiency, a fundamental goal in mass production.
A clean and tidy workplace leads to greater well being and increased
motivation.
Company image improves.
Health and safety is ensured.
Machine maintenance, quality and productivity is ensured.
Results in a place easier to manage.
Smooth working—No obstruction.
No deviation, no problem.
Everyone knows where the things are to be, resulting into:

- Time saving
- Quick retrieval
- Accidents and mistakes minimised
- Increased space
- Creates workplace ownership
Visual management System, resulting into:

- Visual control to see abnormalities
- Simple signal that provide an understanding of the condition (Normal/
abnormal)
- A look at the process reveals its direction (Right/wrong)
! !39
5S
3.7 Some Pitfalls
An essential condition for long-term success of 5S is management’s

commitment.
Managing staff must keep pressure to avoid natural behaviours to ruin the
first achievements.
Themselves must behave like examples.
To admit twists to 5S rules will poison them, making longterm commitment

questionable.
Evaluation standard criterion must adapt to specific conditions. For

example, to avoid production staff to claim about constraints office workers
don’t have, cleanliness and tidiness is easier to keep in office than
workshop.
3.8 Litmus test of 5S
30 second rule.
One must locate the item with in 30 seconds if 5S is properly implemented.
Also applies to the electronic records retrieval.
! !40
5S
3.9 Summary
5S is for everyone.
Clean up and organise your work area every day so that each new day is
easier and safer than the day before.
5S audits helps in finding weak areas for improvements.
Take a good look around...Imagine zero waste/zero confusion!
Followings can be harnessed from the 5S at the end of the day:
1. Neat and Clean Workplace
2. Smooth Working
3. No Obstruction
4. Safety Increases
5. Productivity Improves
6. Quality Improves
7. Wastage Decrease
8. Machine Maintenance
9. Visual Control System
10.Employees Motivated
11.Workstations Become Spacious
! !41
5S
1. Explain the importance of 5S.
2. Which country implemented it first and what was the reason?
3. List the principles/steps of 5S.
4. Explain in detail each step?
5. How to implement 5S? Explain?
6. What are the advantages of 5S?
7. How to evaluate effectiveness of 5S?
References
1. www.siliconfareast.com
2. www.webcrawler.com
3. www.profsite.um.ac.ir
4. www.tocforme.com/ppt/5s.ppt
! !42
5S
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
! !43
POKA-YOKE
Chapter 4
Poka-Yoke
Objectives
What is Poka-Yoke?
Its importance
Its implementation
Structure:
4.1 History of Poka-Yoke
4.2 Types of Errors
4.3 Poka-Yoke – What is it?
4.4 Functions of Poka Yoke
4.5 Why is it Important?
4.6 When to Use it and How to Use it?
4.7 Implementation in Manufacturing
4.8 Summary
! !44
POKA-YOKE
4.1 History of Poka-Yoke
Poka-yoke ( ?) [poka yoke] is a Japanese term that means

“mistake-proofing”. A poka-yoke is any mechanism in a lean manufacturing
process that helps an equipment operator avoid (yokeru) mistakes (poka).
Its purpose is to eliminate product defects by preventing, correcting, or
drawing attention to human errors as they occur. The concept was
formalised, and the term adopted, by Shigeo Shingo as part of the Toyota
Production System. It was originally described as baka-yoke, but as this
means “fool-proofing” (or “idiot-proofing”) the name was changed to the
milder poka-yoke.
Literally translated:
Yokeru: to avoid
Poka: inadvertent errors
Target of zero defects and elimination of QC inspection
Shingo distinguished between the concepts of inevitable human mistakes

and defects in the production. Defects occur when the mistakes are allowed
to reach the customer. The aim of poka-yoke is to design the process so
! !45
POKA-YOKE
that mistakes can be detected and corrected immediately, eliminating

defects at the source.
4.2 Types of Errors
Main types of error:
Processing
1. Omitted Processing – Step in process not carried out, e.g., form not
checked, discount not included, invoice not sent, hole not drilled, part
not cleaned.
2. Processing Errors – Step in process carried out incorrectly, e.g., invoice

sent to wrong address, hole drilled in wrong place.
Materials
1. Missing materials/information, e.g., form not filled out completely, screw

left out.
2. Wrong materials/information, e.g., wrong form filled out, wrong screw

used.
Human Error
Humans make mistakes (errors) because of……

- Forgetfulness – Misunderstanding
- Lack of experience/skills – Lack of concentration
- Laziness – Lack of standards
- Rushing – Taking shortcuts
- Malicious intent (deliberate action)
Errors (can) lead to defects. Defects are not inevitable and can be
eliminated by the use of simple, low-cost methods – zero defects.
Mistake-proofing should take over repetitive tasks that depend on

vigilance or memory.
! !46
POKA-YOKE
“Be More Careful” Not Effective
The old way of dealing with human error was to scold people, retrain them,
and tell them to be more careful … but you can’t do much to change
human nature, and people are going to make mistakes. If you can’t
tolerate them ... you should remove the opportunities for error.
Training and motivation work best when the physical part of the system is
well designed. If you train people to use poorly designed systems, they’ll
be OK for a while. Eventually, they’ll go back to what they’re used to or
what’s easy, instead of what’s safe.
You’re not going to become world class through just training, you have to
improve the system so that the easy way to do a job is also the safe, right
way. The potential for human error can be dramatically reduced.
Rule for Defect Reduction
Your Supplier – Don’t accept defects

You – Don’t make a defect
Your Customer – Don’t pass on a defect
Poka-Yoke – Don’t allows any defects to occur in the first place
4.3 Poka-Yoke – What is it?
The main objective of poke-yoke is to achieve zero defects. In fact, it is

just one of the many components of Shingo’s Zero Quality Control (ZQC)
system, the goal of which is to eliminate defective products.
Poka-yoke is more of a concept than a procedure. Thus, its implementation

is governed by what people think they can do to prevent errors in their
workplace, and not by a set of step-by-step instructions on how they
should do their job.
Poka-yoke is implemented by using simple objects like fixtures, jigs,

gadgets, warning devices, paper systems, and the like to prevent people
from committing mistakes, even if they try to! These objects, known as
poka-yoke devices, are usually used to stop the machine and alert the
operator if something is about to go wrong.
! !47
POKA-YOKE
Anybody can and should practice poka-yoke a in the workplace. Poke-yoke

does not entail any rocket science– sometimes it just needs common sense
and the appropriate poka- yoke device.
Poka-yoke devices should have the following characteristics:
1. Useable by all workers
2. Simple to install
3. Does not require continuous attention from the operator. Ideally, it

should work even if the operator is not aware of it.
4. Low-cost.
5. Provides instantaneous feedback, prevention, or correction.
Of course, error-proofing can be achieved by extensive automation and

computerisation. However, this approach is expensive and complicated, and
may not be practical for small operations. Besides, it defeats the original
purpose of poka-yoke, which is to reduce defects from mistakes through
the simplest and lowest-cost manner possible.
Poka-yoke is at its best when it prevents mistakes, not when it merely

catches them. Since human errors usually stem from people who get
distracted, tired, confused, or demotivated, a good poka-yoke solution is
one that requires no attention from the operator. Such a poka-yoke device
will prevent the occurrence of mistake even if the operator loses focus in
what she is doing.
! !48
POKA-YOKE
Examples of ‘Attention-free’ Poke-Yoke Solutions
1. A jig that prevents a part from being misoriented during loading.
2. Non-symmetrical screw hole locations that would prevent a plate from

being screwed down incorrectly.
3. Electrical plugs that can only be inserted into the correct outlets.
4. Notches on boards that only allow correct insertion into edge

connectors.
5. A flip-type cover over a button that will prevent the button from being
accidentally pressed.
In short, Poka-yoke is:
Mistake-proofing systems.
Does not rely on operators catching mistakes.
Inexpensive Point of Origin inspection.
Quick feedback 100% of the time.
1-10-100 Rule
The 1-10-100 rule states that as a product or service moves through the
production system, the cost of correcting an error multiplies by 10.
Activity Cost
Order entered correctly Rs. 10
Error detected in billing Rs. 1
Error detected by customer Rs. 100
Dissatisfied customer shares the experience
with others
! !49
POKA-YOKE
Rules of Poka-yoke
1. Don’t wait for the perfect POKA-YOKE. Do it now!
2. If your POKA-YOKE idea has better than 50% chances to succeed, do it!
3. Do it now….improve later!
4.4 Functions of Poka-Yoke
! !50
POKA-YOKE
4.5 Why is it Important
1. Poka-yoke helps people and processes work right the first time.
2. Poka-yoke refers to techniques that make it impossible to make

mistakes. These techniques can drive defects out of products and
processes and substantially improve quality and reliability.
3. It can be thought of as an extension of FMEA (failure mode effect

analysis).
4. It can also be used to fine-tune improvements and process designs from

six-sigma Define-Measure-Analyse-Improve-Control (DMAIC) projects.
The use of simple poka-yoke ideas and methods in product and process
design can eliminate both human and mechanical errors.
5. Poka-yoke does not need to be costly.
4.6 When to use it?
Poka-yoke can be used wherever something can go wrong or an error can

be made. It is a technique, a tool that can be applied to any type of
process be it in manufacturing or the service industry. Errors are of many
types:
1. Processing error: Process operation missed or not performed as per

the standard operating procedure.
2. Setup error: Using the wrong tooling or setting machine adjustments

incorrectly.
3. Missing part: Not all parts included in the assembly, welding, or other
processes.
4. Improper part/item: Wrong part used in the process.
5. Operations error: Carrying out an operation incorrectly; having the

incorrect version of the specification.
! !51
POKA-YOKE
6. Measurement error: Errors in machine adjustment,test measure

mentor dimensions of a part coming in from a supplier.
How to Use it?
Step by step process in applying poka-yoke:
1. Identify the operation or process based on a pareto.
2. Analyse the 5-whys and understand the ways a process can fail.
3. Decide the right poka-yoke approach, such as using a shut out type
(preventing an error being made), or an attention type (highlighting
that an error has been made) poka-yoke take a more comprehensive
approach instead of merely thinking of poka-yokes as limit switches, or
automatic shutoffs. A poka-yoke can be electrical, mechanical,
procedural, visual, human or any other form that prevents incorrect
execution of a process step.
4. Determine whether a:
✦ contact – use of shape, size or other physical attributes for detection,
✦ constant number – error triggered if a certain number of actions are

not made and
✦ sequence method – use of a checklist to ensure completing all process

steps is appropriate.
4.7 Implementation in Manufacturing
Poka-yoke can be implemented at any step of a manufacturing process

where something can go wrong or an error can be made.For example, jig
that holds pieces for processing might be modified to only allow pieces to
be held in the correct orientation,or a digital counter might track the
number of spot welds on each piece to ensure that the worker executes the
correct number of welds.
Shigeo Shingo recognized three types of poka-yoke for detecting and

preventing errors in amass production system:
! !52
POKA-YOKE
1. The contact method identifies product defects by testing the product’s

shape, size, colour, or other physical attributes.
2. The fixed-value(or constant number) method alerts the operator if a

certain number of movements are not made.
3. The motion-step(or sequence) method determines whether the

prescribed steps of the process have been followed.
Either the operator is alerted when a mistake is about to be made, or the

poka-yoke device actually prevents the mistake from being made. In
Shingo’s lexicon, the former implementation would be called a warning
poka-yoke, while the latter would be referred to as control poka-yoke.
Shingo argued that errors are inevitable in any manufacturing process, but
that if appropriate poka-yokes are implemented, then mistakes can be
caught quickly and prevented from resulting in defects.
By eliminating defects at the source, the cost of mistakes within a company

is reduced.
! !53
POKA-YOKE
4.8 Summary
Poka-yoke is a Japanese term that means “mistake-proofing”. The concept

of Poka- Yoke was formalised by Shigeo Shingo and its goal is to eliminate
defective products.
It is implemented by using simple objects like jig, gadgets, warning devices

to prevent people from committing mistakes, even if they try to.
Poka-yoke devices should be useable by all workers, simple to install, low

cost, does not require continuous attention and provide instantaneous
feedback.
It helps people and processes to work right the first time thereby
improving quality and reliability. It is a technique, a tool that can be
applied to any type of process be it in manufacturing or service industry.
1. What is poka-yoke.
2. Who developed this concept and what is its goal?
3. What should be the characteristic of poka-yoke devices?
4. Explain how human errors can occur.
5. Explain the different types of poka-yoke methods.
6. Explain process in applying poka-yoke.
7. Explain what all types of errors that can occur in manufacturing or

service industry.
! !54
POKA-YOKE
References
1. Lean Six Sigma Operations by BSI.
2. Poka-yoke by LEAN Ohio.
3. www.en.wikipedia
4. www.thequalityportal.com
5. www.siliconfareast.com
! !55
POKA-YOKE
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
Video Lecture
! !56
SMED (SINGLE MINUTE EXCHANGE OF DIE)
Chapter 5
SMED
(Single Minute Exchange of Die)
Objectives
Meaning and basic of SMED
Purpose of SMED
Basic steps and implementation
Process and benefits of SMED
Structure:
5.1 What is SMED?
5.2 Basic of SMED
5.3 History of SMED
5.4 Why Use SMED?
5.5 Basic Steps to Reduce Changeover
5.6 Implementation
5.7 SMED Process
5.8 Benefits
5.9 Summary
! !57
5.1 What is SMED?
Single Minute Exchange of Die (SMED) is one of the many lean production
methods for reducing waste in a manufacturing process. It provides a rapid
and efficient way of converting a manufacturing process from running the
current product to running the next product. This rapid changeover is key
to reducing production lot sizes and thereby improving flow (Mura).
The phrase “single minute” does not mean that all changeovers and start-
ups should take only one minute, but that they should take less than 10
minutes (in other words, “single-digit minute”). Closely associated is a yet
more difficult concept, One Touch Exchange of Die (OTED), which says
changeovers can and should take less than 100 seconds.
Both are rapid changeover techniques. SMED is a concept to reduce

changeover time (i.e., minimise the time lost in changing over from one
size to another, or one product to another, or one service type to another,
etc). A die is a tool used in manufacturing. However, SMED’s utility is not
limited to manufacturing.
Single Minute Exchange of Dies helps make those actions that create value
flow without interruption, detours, back flows, waiting or scrap.
The essence of the SMED system is to convert as many changeover steps

as possible to “external” (performed while the equipment is running), and
to simplify and streamline the remaining steps.
5.2 Basic of SMED
In SMED, changeovers are made up of steps that are termed “elements”.

There are two types of elements:
Internal Elements (elements that must be completed while the

equipment is stopped)
External Elements (elements that can be completed while the equipment

is running)
The SMED process focuses on making as many elements as possible

external, and simplifying and streamlining all elements.
! !58
5.3 History of SMED
It is developed by Shigeo Shingo over a period of almost 20 years. The

development involved intensive study and improvement of set-up
operations in many factories and industries.
Facilitated by the recognition that set-up operations can be categorized:
Internal Setup (machine must stop to perform the operation)
External Setup (machine can be kept running whilst operations

performed)
SMED aims to minimise internal set-up time.
! !59
Dr. Shigeo Shingo is known as the father of SMED (developed in the late
1950s) and Poka-yoke, and is also known for developing the Just-in-Time
(JIT) concept. He used SMED to reduce the lot size of Toyota Cars and the
set-up time of Hull Assembly on a 65,000 ton super tanker, setting a record
in shipbuilding in 1956.
5.4 Why Use SMED?
The Lean Principles
Define Value from the customer’s perspective.
Identify the Value Stream needed to go from customer request to

requirement delivered.
Ensure the product Flows through the value stream without delays.
Use Pull scheduling so that product is made only when the customer
wants it (Just- in -time).
Strive continuously to eliminate Waste from processes.
Uses of SMED
SMED is used for:
(A) Large Lot Production Waste
Large batches are produced to reduce the number of ‘changeovers’ as set-

up times are usually long leading to:
Overproduction and Excess Inventory (unsold product, raw material and

work-in-progress).
Waiting Time (customers wait for entire batches to be complete, rather

than just what they need now).
Defects (storage risks damage and deterioration of product).
! !60
Transport/Motion (can be affected by the need to manage large batches

of raw material, WIP or product.
(B) Changing Customer Needs
Customers are seeking an ever-increasing variety of products that are

available when they want them (product diversity, not mass production).
Product life cycles are being compressed as innovation becomes a key.
Shorter timescales are required to facilitate these needs in both the

design/ development cycle and in production.
(C) The Concept of Time
From a logistical standpoint, a company looks to deliver On Time In Full

(OTIF) to customers.
Economically, it is advantageous if process lead time or the duration

required to produce the product is short.
Many time-consuming activities, however, do not add value to products.
SMED can facilitate the removal of NVA (in set-up) or at least ensure that
necessary NVA activity occurs concurrently with VA activity.
! !61
5.5 Basic Steps to reduce Changeover
There are seven basic steps to reducing changeover using the SMED
system:
1. OBSERVE the current methodology (A).
2. Separate the INTERNAL and EXTERNAL activities (B). Internal activities

are those that can only be performed when the process is stopped,
while External activities can be done while the last batch is being
produced, or once the next batch has started. For example, go and get
the required tools for the job BEFORE the machine stops.
3. Convert (where possible) Internal activities into External ones (C) (pre-
heating of tools is a good example of this).
4. Streamline the remaining internal activities, by simplifying them (D).

Focus on fixings. Shigeo Shingo observed that it’s only the last turn of a
bolt that tightens it the rest is just movement.
5. Streamline the External activities, so that they are of a similar scale to

the Internal ones (D).
! !62
6. Document the new procedure, and actions that are yet to be completed.
7. Do it all again. For each iteration of the above process, a 45%

improvement in set-up times should be expected, so it may take several
iterations to cross the ten-minute line.
5.6 Implementation
Shigeo Shingo recognizes eight techniques that should be considered in

implementing SMED.
1. Separate internal from external set-up operations.

2. Convert internal to external setup.
3. Standardise function, not shape.
4. Use functional clamps or eliminate fasteners altogether.
5. Use intermediate jigs.
6. Adopt parallel operations.
7. Eliminate adjustments.
8. Mechanisation.
External set-up can be done without the line being stopped whereas
internal set-up requires that the line be stopped.
He suggests that SMED improvement should pass through four conceptual

stages:
A. Ensure that external set-up actions are performed while the machine
is still running,
B. Separate external and internal set-up actions, ensure that the parts
all function and implement efficient ways of transporting the die and
other parts.
C. Convert internal set-up actions to external.
D. Improve all set-up actions.
! !63
5.7 SMED Process
✦ For some set-up operations, a piece of machinery has to be

stopped (internal), e.g., the attachment of a new die to a press
✦ For other set-up operations, it can remain running (external),

e.g., the attach bolts of the die can be sorted and assembled
✦ For SMED aims to minimise internal operations by elimination or

conversion to external
Stage 1: 
Stage 2:  Stage 3: 
Preliminary:  Internal and
Internal are Set-up
No differentiation external  
converted   operations are  
between internal   set-up
to external if streamlined  
and external operations  
possible (internal first)
are separated
! !64
5.8 Benefits
Flexibility – without the need to hold stock.
Quicker delivery – reduced lead time and customer waiting.
Improved quality – less storage related defects.
Greater equipment productivity – shorter downtime and changeovers

(linked with OEE, overall equipment effectiveness)
Smoother start-ups (standardised changeover processes improve

consistency and quality).
Lower manufacturing cost (faster changeovers mean less equipment

downtime).
Lower inventory levels (smaller lot sizes result in lower inventory levels).
OEE and SMED
Overall equipment effectiveness
Availability (Concerns Downtime)
1. Equipment breakdowns
2. Set-up and adjustment of equipment
Performance (Concerns Reduced Speed Losses)
1. Idling/minor stoppages of equipment
2. Equipment continually running at a reduced speed
Quality (Concerns Defects)
1. Reduced quality start-up period losses
2. Overall quality losses due to equipment
! !65
‘Aim to reduce all of the Six Big Losses’
5.9 Summary
SMED is an ideal tool which can be used to reduce the changeover time/
set-up time in many industries (including manufacturing, logistics, and
service). It increases the flexibility of the company to produce the right
number of products (hence less inventory, carrying costs, etc.) at the right
time and eliminates or minimises bottlenecks to increase flow.
In short:
SMED is about inventory reduction and equipment efficiency.
SMED enables a more controlled, safer and less arduous set-up process
The use of SMED will facilitate:
- an ability to produce smaller batches economically
- lower inventory and work-in-progress
- greater floor space
- an increase in OEE and reduced NVA (non-value activities) trials and

adjustments on start up.
! !66
1. What is SMED?
2. Who invented it and where it is practised?
3. Why use SMED?
4. What are the steps to reduce changeover time?
5. Explain the technique of implementing SMED?
6. List the major benefits of SMED.
References
1. wikipedia.org
2. Raising Standards Worldwide by BSI.
3. Quick Changeover Programme by David McBridge.
4. SMED by Khwaja Moinudin.
5. Quality Support Group.
! !67
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
Video Lecture
! !68
KANBAN
Chapter 6
Kanban
Objectives
Meaning of Kanban
History
Rules and types of Kanban.
How it works
Structure:
6.1 Introduction
6.3 Origin of Kanban
6.4 Rules of Kanban and Kanban Cards
6.5 What Kanban Do
6.6 Types of Kanban
6.7 Types of Kanban Signals
6.8 How Kanban Works and Kanban Calculator
6.9 Summary
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KANBAN
6.1 Introduction
Kanban (literally signboard or billboard) is a scheduling system for lean

and just-in-time (JIT) production.
Kanban is a system to control the logistical chain from a production point

of view, and is not an inventory control system.
Kanban was developed by Taiichi Ohno, at Toyota, to find a system to

improve and maintain a high level of production.
Kanban is one method through which JIT (Just-in-time) is achieved.
6.2 Definition
Kanban is a visual signal that’s used to trigger an action. The word Kanban
is Japanese. Roughly translated, it means “card you can see.”
Toyota introduced and refined the use of Kanban in a relay system to

standardise the flow of parts in their production lines in the 1950s. Kanban
was one of several tools Toyota developed to ensure that inventory was
based on actual customer orders rather than managerial forecasts.
Kanban starts with the customer’s order and follows production

downstream. Because all requests for parts are pulled from the order,
Kanban is sometimes referred to as a “pull” system.
At its simplest, Kanban is a card with an inventory number that’s attached

to a part. Right before the part is installed, the Kanban card is detached
and sent up the supply chain as a request for another part.
A part is only manufactured (or ordered) if there is a Kanban card for it.
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KANBAN
6.3 Origin of Kanban
In the late 1940s, Toyota started studying supermarkets with the idea of
applying store and shelf-stocking techniques to the factory floor. In a
supermarket, customers obtain the required quantity at the required time,
no more and no less. Furthermore, the supermarket stocks only what it
expects to sell within a given time frame, and customers take only what
they need, since future supply is assured. This observation led Toyota to
view a process as being a customer of one or more preceding processes,
and the preceding processes are viewed as a kind of store. The customer
“process” goes to the store to obtain required components which in turn
causes the store to restock. Originally, as in supermarkets, signboards
were used to guide “shopping” processes to specific shopping locations
within the store.
Kanban aligns inventory levels with actual consumption; a signal is sent to

produce and deliver a new shipment when material is consumed. These
signals are tracked through the replenishment cycle, bringing visibility to
both the supplier and the buyer. Kanban uses the rate of demand to control
the rate of production, passing demand from the end-customer up through
the chain of customer-store processes. In 1953, Toyota applied this logic in
their main plant machine shop.
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KANBAN
6.4 Rules of Kanban and Kanban cards
Visualise ❖ The workflow of knowledge work is inherently invisible.

Visualising the flow of work and making it visible is core to
understanding how work proceeds. Without understanding
the workflow, making the right changes is harder.
❖ A common way to visualise the workflow is to use a card wall

with cards and columns. The columns on the card wall
represent the different states or steps in the workflow.
Limit WIP ❖ Limiting work-in-process implies that a pull system is

implemented on parts or all of the workflow. The pull system
will act as one of the main stimuli for continuous,
incremental and evolutionary changes to your system.
❖ The pull system can be implemented as a Kanban system.

The critical elements are that work-in-process at each state
in the workflow is limited and that new work is “pulled” into
the new information discovery activity when there is
available capacity within the local WIP limit.
Manage flow ❖ The flow of work through each state in the workflow should
be monitored, measured and reported. By actively managing
the flow, the continuous, incremental and evolutionary
changes to the system can be evaluated to have positive or
negative effects on the system.
Make policies ❖ Until the mechanism of a process is made explicit, it is often

explicit hard or impossible to hold a discussion about improving it.
Without an explicit understanding of how things work and
how work is actually done, any discussion of problems tends
to be emotional, anecdotal and subjective. With an explicit
understanding it is possible to move to a more rational,
empirical, objective discussion of issues. This is more likely
to facilitate consensus around improvement suggestions.
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KANBAN
Implement ❖ Collaboration to review flow of work and demand versus

feedback loops capability measures, metrics and indicators coupled with
anecdotal narrative explaining notable events is vital to
enabling evolutionary change. Organisations that have not
implemented the second level of feedback – the operations
review – have generally not seen process improvements
beyond a localised team level. As a result, they have not
realised the full benefits of Kanban observed elsewhere.
Improve ❖ The Kanban method encourages small continuous,
collaboratively, incremental and evolutionary changes that stick. When
evolve teams have a shared understanding of theories about work,
experimentally workflow, process, and risk, they are more likely to be able
(using models to build a shared comprehension of a problem and suggest
and the improvement actions which can be agreed by consensus.
scientific
methods)
The Kanban method suggests that a scientific approach is used to

implement continuous, incremental and evolutionary changes. The method
does not prescribe a specific scientific method to use.
Kanban Cards
Kanban cards are a key component of Kanban and signal the need to move
materials within a manufacturing or production facility or move materials
from an outside supplier into the production facility. The Kanban card is, in
effect, a message that signals that there is a depletion of product, parts, or
inventory that, when received, the Kanban will trigger the replenishment of
that product, part, or inventory. Consumption therefore drives demand for
more production, and demand for more product is signalled by the Kanban
card. Kanban cards therefore help create a demand-driven system.
It is widely held by proponents of lean production and manufacturing that

demand-driven systems lead to faster turnarounds in production and lower
inventory levels, thereby helping companies implementing such systems to
be more competitive.
In the last few years, systems sending Kanban signals electronically have
become more widespread. While this trend is leading to a reduction in the
use of Kanban cards in aggregate, it is still common in modern lean
production facilities to find widespread usage of Kanban cards. Kanban is
! !73
KANBAN
used for signalling demand to vendors through e-mail notifications. When

stock of a particular component is depleted by the quantity assigned on
Kanban card, a “Kanban trigger” is created (which may be manual or
automatic), a purchase order is released with predefined quantity for the
vendor defined on the card, and the vendor is expected to dispatch
material within a specified lead time. Kanban cards, in keeping with the
principles of Kanban, simply convey the need for more materials. A red
card lying in an empty parts cart conveys that more parts are needed.
Three-bin System
An example of a simple Kanban system implementation might be a “three-
bin system” for the supplied parts, where there is no in-house
manufacturing. One bin is on the factory floor (the initial demand point),
one bin is in the factory store (the inventory control point), and one bin is
at the supplier. The bins usually have a removable card containing the
product details and other relevant information — the classic Kanban card.
When the bin on the factory floor is empty (because the parts in it were
used up in a manufacturing process), the empty bin and its Kanban card
are returned to the factory store (the inventory control point). The factory
store replaces the empty bin on the factory floor with the full bin from the
factory store, which also contains a Kanban card. The factory store sends
the empty bin with its Kanban card to the supplier. The supplier’s full
product bin, with its Kanban card, is delivered to the factory store; the
supplier keeps the empty bin. This is the final step in the process. Thus,
the process will never run out of product, and could be described as a
closed loop in that it provides the exact amount required, with only one
spare bin so there will never be an oversupply. This ‘spare’ bin allows for
the uncertainties in supply, use, and transport that are found in the
inventory system.
The secret to a good Kanban system is to calculate just enough Kanban

cards required for each product. Most factories using Kanban use the
coloured board system. This slotted board was created especially for
holding the cards.
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KANBAN
6.5 What Kanban do?
Controls the amounts of raw material and of material in work-In-process
Smoothes out flow, if sized properly
Tells when and where there is a problem in the process
Assures there is always just enough material on hand to make what is

needed
6.6 Types of Kanban
Raw Material Kanban – tells suppliers when to send how much of a

particular item to a particular place.
In-process Kanban – determines the amount of WIP (Work-in-process)

that can be kept between any two operations in a process.
Finished Goods Kanban – determines the amount of a product to be kept

on hand at any given time. Removal of material from the Finished Goods
Kanban acts as a signal for more of that product to be manufactured.
6.7 Types of Kanban Signals
A calculated amount of material kept in a designated space, such as a

bin or between lines on workbench or on the floor.
A card that is used to tell the amount of material to be made or ordered.

The markings on a bin that determine when more material needs to be
ordered or made.
Any other clear visual signal that indicates it is time to get more material.
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KANBAN
6.8 How Kanban works?
Material Resupply Kanban
1. All of the parts used to manufacture a particular product are identified

as well as the number used in each product.
2. Lead time is calculated, that is the amount of time it takes for the parts
to be ordered and delivered.
3. The demand for the product over a specific length of time is then
determined.
4. The number of parts used in the product is multiplied by the number of

the products demanded over the length of time that it takes to order
and receive the parts.
5. The goal is to order parts at the point when the number of parts on
hand reach the amount that will be used up during the time it takes to
order and get the needed parts delivered. Usually, because of variability
in lead time, the amount of reordered parts occurs is usually a bit more
than the amount of parts needed to cover order lead time. Common
signals used as Kanban include two-bin resupply systems and card
systems.
Work-in-process Kanban
A one piece flow, when products move one at a time from one process step
to another, and where there are no Kanban at all is the ideal production.
However, one piece flow demands a very well balanced manufacturing line,
meaning that each process station uses approximately the same amount of
time to do the necessary work. Since that is often not possible, Kanban are
used to help manage the flow.
1. First, the process times at each station are calculated.

2. Then, when one station has to take significantly more time to do its
work than previous stations, Kanban are put in to keep material
batching to a minimum. Usually, if a station takes twice as long as the
station before, a Kanban half again the size is put in place. This allows
the person previous to the station where work has bunched up to help
the person at the more work intensive station.
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KANBAN
Finished Goods Kanban
1. The demand for a particular product is tracked over time.
2. Based upon the demand, the safety stock is calculated, that is an

amount of product to have on hand to satisfy most orders within a
specific window of time (e.g., a day or a week).
3. Based upon the demand, it is then calculated how many of the product
needs to be made per day.
4. Finished Goods Kanban are set up in the shipping area with the amount
of product that has been determined as required safety stock.
5. When orders are filled by pulling product from the Finished Goods
Kanban, a signal, such as a bin or a card, is sent to the manufacturing
floor. That signal tells production to complete the number of products
needed to replenish the Finished Goods Kanban.
6. The assumption is that production has the capacity to make the

necessary amount of the product in the required time to keep the
Finished Goods Kanban filled.
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KANBAN
6.9 Summary
Kanban is a scheduling system and is used to control logistic chain from

production point of view. It is one of the method through which JIT is
achieved. It assures enough material at the point of use. It works on Pull
system and is based on demand and not on management forecasting. It
smoothes the process and tells when and where there is a problem in the
process. It is used to control material from supplier, work-in-process and
finished goods. Kanban cards are a key component of Kanban and signal
the need to move materials within a manufacturing or production facility or
move materials from an outside supplier into the production facility. The
Kanban card is, in effect, a message that signals that there is a depletion
of product, parts, or inventory that, when received, the Kanban will trigger
the replenishment of that product, part, or inventory. Consumption
therefore drives demand for more production, and demand for more
products is signalled by the Kanban card. Kanban cards therefore help
create a demand-driven system.
1. What is Kanban, and who developed it?
2. What is Kanban Card? And what is its significance?
3. What are the Kanban signals?
4. What are the rules of Kanban?
5. How many types of Kanban are there and how they are used?
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KANBAN
References
1. http://en.wikipedia.org/wiki/Kanban_(development)
2. http://whatis.techtarget.com/definition/kanban
3. www.stoweconsultingcompany.com
4. http://kanbantool.com
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KANBAN
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
Video Lecture
! !80
TOTAL PRODUCTIVE MAINTENANCE (TPM)
Chapter 7
Total Productive Maintenance (TPM)
Objectives
Meaning and definition of TPM (JIT)
Overview, philosophy and history of TPM
Essentials and pillars of TPM
Steps for implementation
Structure:
7.1 What is TPM? — Introduction
7.2 Definition and Objective of TMP
7.3 Overview, Philosophy and History
7.4 Distinctive Features of TPM
7.5 Essentials of TPM
7.6 Pillars pf TPM
7.7 Implementation of TPM
7.8 Measuring Effectiveness
7.9 Summary
! !81
7.1 What is TPM — Introduction
TPM (Total Productive Maintenance) is a holistic approach to equipment

maintenance that strives to achieve perfect production:
• No breakdowns
• Small stops or slow running
• No defects
In addition, it values a safe working environment:
No accidents
TPM emphasises proactive and preventative maintenance to maximise the

operational efficiency of equipment. It blurs the distinction between the
roles of production and maintenance by placing a strong emphasis on
empowering operators to help maintain their equipment.
The implementation of a TPM program creates a shared responsibility for

equipment that encourages greater involvement by plant floor workers. In
the right environment, this can be very effective in improving productivity
(increasing up time, reducing cycle times, and eliminating defects).
Like TQC, which is companywide total quality control, TPM is equipment

maintenance performed on a companywide basis.
In order for an organisation to function properly, every running process,

activity and resource should be properly maintained for their quality,
effectiveness and other productivity factors.
TPM is the process which brings the maintenance aspect of the

organization under the spotlight. Although maintenance was regarded as a
non-profit activity by the traditional management methodologies, TPM puts
a brake on it.
With the emphasis on TPM, downtime for maintenance has become an

integral part of the manufacturing or production process itself. Now, the
maintenance events are properly scheduled and executed with organised
plans.
! !82
By practicing TPM, the organisations can avoid unexpected interrupts to the

production and avoid unscheduled maintenance.
7.2 Definition and Objective of TPM
Total Productive Maintenance (TPM) is a system of maintaining and

improving the integrity of production and quality systems through the
machines, equipments, processes and employees that add business value
to the organisation.
TPM focuses on keeping all equipment in top condition to avoid breakdowns

and delays in the manufacturing process.
One of the main objectives of TPM is to increase the productivity of plant

and equipment with a modest investment in maintenance. By investing in,
for example, equipment maintenance, equipment losses can be prevented.
There are six preventable losses.
1. Breakdown losses caused by the equipment

2. Set-up and adjustment losses
3. Minor stoppage losses
4. Speed losses
5. Quality defect and rework losses
6. Yield losses
The first two losses affect the availability of a piece of equipment, the third
and fourth losses affect equipment efficiency, and the fifth loss results in
reduced quality from output.
7.3 Overview, Philosophy and History
TPM is the new direction in production. In this age, when robots produce
robots and 24-hour automated production is a reality, the unmanned
factory has become a realistic possibility. In discussing quality control,
people often say that quality depends on process. Now, with increasing
robotisation and automation, it might be more appropriate to say that
quality depends on equipment. Productivity, cost, inventory, safety and
health, and production output – as well as quality – all depends on
equipment.
! !83
Production equipment has become unimaginably sophisticated. We see

equipment for automation, such as robots and unmanned production; we
also see equipment for super precise processing of micron-size objects and
processing that requires speeds, pressures, and temperatures challenging
current technology.
Increased automation and unmanned production will not do away with the
need for human labour – only operations have been automated;
maintenance still depends heavily on human input. Automated and
technologically advanced equipment, however, requires skills beyond the
competence of the average maintenance supervisor or worker, and to use it
effectively requires an appropriate maintenance organisation. TPM, which
organises all employees from top management to production line workers,
is a companywide equipment maintenance system that can support
sophisticated production facilities.
The primary goals of TPM are zero breakdowns and zero defects. When
breakdowns and defects are eliminated, equipment operation rates
improve, costs are reduced, inventory can be minimised, and as a
consequence, labour productivity increases. One firm reduced the number
of breakdowns to 1/50 of the original number. Some companies show
17-26 per cent increases in equipment operation rates while others show a
90 per cent reduction in process defects. Labour productivity generally
increased by 40-50 per cent.
Of course, such results cannot be achieved overnight. Typically, it takes an

average of three years from the introduction of TPM to achieve prize-
winning results. Furthermore, in the early stages of TPM, the company
must bear the additional expense of restoring equipment to its proper
condition and educating personnel about the equipment. The actual cost
depends on the quality of the equipment and the quality of maintenance.
As productivity increases, however, these costs are quickly replaced by
profits. For this reason, TPM is often referred to as “profitable PM”.
! !84
Philosophy
History
The parent of TPM is TQM. TQM was evolved after the quality concerns the
Japan had after the Second World War.
As a part of TQM, the plant maintenance was examined. Although TQM is

one of the best quality methodologies for organisations, some of the TQM
concepts did not fit or work properly in the area of maintenance.
Therefore, there was a need to develop a separate branch of practices in

order to address unique conditions and issues related maintenance. This is
how TPM was introduced as a child of TQM.
Although there is a story behind the origin on TPM, the origin itself is
disputed by many parties.
! !85
Some believe that the concepts of TPM were introduced by American

manufacturers about forty years ago and other believe TPM been
introduced by the Japanese manufacturers of automotive electrical devices.
Regardless of the origin, TPM can now be used across the globe.
In 1971, Nippon Denso Co. Ltd. first introduced and successfully

implemented TPM in Japan. They won the Japan Institute of Plant
Maintenance (JIPM) PM Excellent Plant Award for their activities.
This was the beginning of TPM in Japan. Since then, TPM has spread
progressively throughout the world and established itself as a renowned
cultural improvement program.
The first example of TPM used in Europe to deliver world-class performance

was by Volvo in Ghent, Belgium, who won the PM prize for their work in the
paint shop. This was quickly followed in the early 1990s by other European
automotive companies trying to close the productivity and quality gap to
their Japanese competitors.
Since the JIPM TPM awards were founded, over 3000 organizations have
won awards, including Unilever, Wrigley, Tetra Pak, Heineken and Arcelor
Mittal.
The Japan Institute of Plant Maintenance (JIPM) Approach to TPM
The JIPM definition of TPM is:
T = Total. Must involve all employees at all levels of the organization.
P = Productive. Effective utilization of all resources.
M = Maintenance. Keeping the Man-Machine-Material system in optimum

condition.
! !86
7.4 Distinctive Features of TPM
The first principal feature of TPM, “total effectiveness” or “profitable PM”, is

also emphasised in predictive and productive maintenance.
The second feature, a “total maintenance system,” is another concept first

introduced during the productive maintenance era. It establishes a
maintenance plan for the equipment’s entire lifespan and includes
maintenance prevention (MP: maintenance-free design), which is pursued
during the equipment design stages.
Once equipment is assembled, a total maintenance system requires

preventive maintenance (PM: preventive medicine for equipment) and
maintainability improvement (MI: repairing or modifying equipment to
prevent breakdowns and facilitate ease of maintenance).
The last feature, “autonomous maintenance by operators” (small group

activities), is unique to TPM.
In American-style PM (also in India), the maintenance department is

generally responsible for carrying out PM. This reflects the concept of
division of labour, an important feature of American labour unions,
Japanese-style PM, or TPM, on the other hand, relies on everyone’s
participation, particularly autonomous maintenance by operators.
If a company is already practicing productive maintenance, TPM can be

adopted easily by adding autonomous maintenance by operators to the
existing system.
If a company has not yet implemented preventive or productive

maintenance, however, a sudden shift from breakdown maintenance to
TPM will be extremely difficult, although not impossible.
! !87
7.5 Essentials of TPM
Nine Essentials of TPM
1. Self-maintained workplace
2. Elimination of the 6 big losses (refer 7.2)
3. Zero breakdowns
4. Zero defects
5. Optimal life and availability of tools
6. Self-improvement
7. Short production-development time and low machine life cost
8. Productivity in indirect departments
9. Zero accidents
7.6 Pillars of TPM
The eight pillars of TPM are mostly focused on proactive and preventative
techniques for improving equipment reliability.
Pillar What is it? How Does it Help?

Autonomous Places responsibility Gives operators greater “ownership” of
Maintenance for routine their equipment.
maintenance, such
Increases operators’ knowledge of their
as cleaning,
equipment.
lubricating, and
inspection, in the Ensures equipment is well-cleaned and
hands of operators. lubricated.
Identifies emergent issues before they

become failures.
Frees maintenance personnel for
higher-level tasks.
Planned Schedules Significantly reduces instances of

Maintenance maintenance tasks unplanned downtime.
based on predicted
Enables most maintenance to be
and/or measured
planned for times when equipment is
failure rates.
not scheduled for production.
! !88
Reduces inventory through better

control of wear-prone and failure-prone
parts.
Quality Design error Specifically targets quality issues with
Maintenance detection and improvement projects focused on
prevention into removing root sources of defects.
production
Reduces number of defects.
processes. Apply
root cause analysis Reduces cost by catching defects early
to eliminate (it is expensive and unreliable to find
recurring sources of defects through inspection).
quality defects.
Focused Have small groups Recurring problems are identified and

Improvement of employees work resolved by cross-functional teams.
together proactively
Combines the collective talents of a
to achieve regular,
company to create an engine for
incremental
continuous improvement.
improvements in
equipment
operation.
Early Directs practical New equipment reaches planned
Equipment knowledge and performance levels much faster due to
Management understanding of fewer star-tup issues.
manufacturing
Maintenance is simpler and more robust
equipment gained
due to practical review and employee
through TPM
involvement prior to installation.
towards improving
the design of new
equipment.
Training and Fill in knowledge Operators develop skills to routinely

Education gaps necessary to maintain equipment and identify
achieve TPM goals. emerging problems.
Applies to
Maintenance personnel learn techniques
operators,
for proactive and preventative
maintenance
maintenance.
personnel and
managers. Managers are trained on TPM principles
as well as on employee coaching and
development.
! !89
Safety, Health, Maintain a safe and Eliminates potential health and safety
Environment healthy working risks, resulting in a safer workplace.
environment.
Specifically targets the goal of an
accident-free workplace.
TPM in Apply TPM Extends TPM benefits beyond the plant
Administration techniques to floor by addressing waste in
administrative administrative functions.
functions.
Supports production through improved
administrative operations (e.g., order
processing, procurement, and
scheduling).
7.7 Implementation of TPM
An excellent way to get a deeper understanding of TPM is to walk through

an implementation example. This section provides a step-by-step roadmap
for a simple and practical TPM implementation.
Step One – Identify Pilot Area
! !90
Which
Pros Cons
Equipment?
Easiest to Best opportunity for a Less payback than improving
Improve “quick win”. constraint equipment.
More forgiving of limited Does not “test” the TPM process as

TPM experience. strongly as the other options.
Constraint/  Immediately increases Working on a critical asset as a trial
Bottleneck total output. project is a higher risk option.
Provides fastest May result in equipment being offline

payback. more than desired as it is improved.
Most Improving this Less payback than improving
Problematic equipment will be well constraint equipment.
supported by operators.
Solving well-known Unsolved problems are often unsolved

problems will strengthen for a reason – it may be challenging
support for the TPM to get good results.
project.
In this step, the target equipment for the pilot TPM program is selected. Above
are three logical ways to approach this selection.
Step Two – Restore Equipment to Prime Operating Condition
In this step, the equipment will be cleaned up and otherwise for improved
operation. Two key TPM concepts will be introduced:
5S
Autonomous Maintenance
! !91
First, a 5S program should be initiated (including both operators and

maintenance personnel).
Take photographs that capture the initial state of the equipment and post
them on the project board.
Clear the area of debris, unused tools and components, and any other
items that are not needed.
Organise remaining tools and components onto shadow boards (boards

containing outlines as visual cues).
Thoroughly clean the equipment and surrounding area (including residue

from any leaks or spills).
Take photographs that capture the improved state of the equipment and
post them on the project board.
Create a simple 5S Checklist for the area (creating standardized work for
the 5S process).
Schedule a periodic audit (first daily, then weekly) to verify that the 5S
Checklist is being followed. During the audit, update the checklist as
needed to keep it current and relevant. Keep audits positive and
motivational (treat them as a training exercise).
Next, an Autonomous Maintenance program should be initiated. Strive to

build a consensus between operators and maintenance personnel on
which recurring tasks can be productively performed by operators. In
many cases, light training will be required to bring up the skill level of
operators.
Identify and document key inspection points (all wear parts should be
included). Consider creating a map of inspection points as a visual aid.
Replace opaque guarding with transparent guarding in cases where

inspection points are obscured (where feasible and safe to do so).
! !92
Identify and document all set points and their associated settings.
Consider indicating settings directly on the equipment as a visual aid for
inspection and auditing.
Identify and document all lubrication points. Schedule lubrication to

occur during changeovers or other planned stops (in other words, avoid
creating new sources of downtime). Consider externalising lubrication
points that are difficult to access or that require stopping the equipment
(where feasible and safe to do so).
Train operators to bring any anomalies or emerging conditions to the

attention of the line supervisor.
Create a simple Autonomous Maintenance Checklist for all inspection, set

point, lubrication, and other operator-controlled maintenance tasks
(creating standardised work for the Autonomous Maintenance process).
Schedule a periodic audit (first daily, then weekly) to verify that the
Autonomous Maintenance Checklist is being followed. During the audit,
update the checklist as needed to keep it current and relevant. Keep
audits positive and motivational (treat them as a training exercise).
Step Three – Start Measuring OEE
In this step, a system is put into place to track OEE (overall equipment
efficiency) for the target equipment. This system can be manual but the
scope of the system must include downtime reason code tracking.
For most equipment, the largest losses are a result of downtime.

Therefore, it is strongly recommended to categorize each downtime event
to get a clear picture of where productive time is being lost.
It is also recommended to include a category for “unallocated” downtime

(i.e., downtime where the cause is unknown). Providing a category for
unallocated downtime is especially important with manually tracked OEE. It
improves accuracy by providing operators with a safe option when the
downtime reason is not clear.
! !93
Data should be gathered for a minimum of two weeks to identify recurring

reasons for equipment downtime, and to identify the impact of small stops
and slow cycles. Review the data during each shift to ensure that it is
accurate and to verify that the true causes of downtime are being
captured.
Step Four – Address Major Losses
In this step, the most significant sources of lost productive time are
addressed. The TPM concept of Focused Improvement (also known as
Kaizen) is introduced.
Based on equipment-specific OEE and downtime data, select one major

loss to address. In most cases, the major loss that is selected should be
the largest source of downtime.
Create a cross-functional team to address the problem. This team should

include four to six employees (operators, maintenance personnel, and
supervisors) with the best equipment knowledge and experience…and
that are likely to work well together.
Collect detailed information on symptoms of the problem, including

observations, physical evidence, and photographic evidence. Consider
using an Ishikawa (fishbone) diagram at the equipment to collect
observations.
Organise a structured problem-solving session to: (a) identify probable

causes of the problem, (b) evaluate probable causes against the
gathered information, and (c) identify the most effective fixes.
Schedule planned downtime to implement the proposed fixes. If there is

an existing change control process, be sure to utilise that process when
implementing fixes.
Restart production and determine the effectiveness of the fixes over an

appropriate time period. If sufficiently effective, document any changes
to procedures and move on to the next major loss. Otherwise, collect
additional information and organise another structured problem-solving
session.
! !94
During this step, OEE data should continue to be carefully reviewed each
shift to monitor the status of losses that have already been addressed, as
well as to monitor overall improvements in productivity.
Step Five – Introduce Proactive Maintenance Techniques
In this step, proactive maintenance techniques are integrated into the

maintenance program (thus introducing the TPM concept of Planned
Maintenance).
First, identify all components that are candidates for proactive

maintenance:
Identify and document all components that undergo wear (these should
have been established as inspection points in Step Two). Consider
replacing wear components with low-wear or no-wear versions.
Identify and document all components that are known to regularly fail.
Consider utilising thermography and/or vibration analysis to provide

additional insights as to equipment stress points.
Next, establish initial proactive maintenance intervals:
For wear components, establish the current wear level and a baseline
replacement interval (in some cases replacement may be triggered early
by an Autonomous Maintenance inspection as established in Step Two).
For failure-prone components, establish a baseline (predicted) failure

interval.
Create a baseline Planned Maintenance Schedule that schedules

proactive replacement of all wear and failure-prone components.
Consider using “Run Time” rather than “Calendar Time” as the interval
time base.
Create a standard process for generating Work Orders based on the

Planned Maintenance Schedule.
! !95
Next, create a feedback system for optimising the maintenance intervals:
Create a Component Log sheet for each wear and failure-prone

component. Record every instance of replacement, along with
information about the component condition at the time of replacement
(e.g., wear amount, “component failed”, “no observable issues”, etc.).
Perform a monthly Planned Maintenance audit: (a) verify that the

Planned Maintenance Schedule is being followed, (b) verify that the
Component Log sheets are being maintained, and (c) review all new
entries in the Component Log and adjust maintenance intervals where
appropriate. Keep audits positive and motivational (treat them as a
training exercise).
Anytime there is an unscheduled component replacement, consider

adjusting the maintenance interval. If the component is not on the
Planned Maintenance Schedule, consider adding it.
Consider plotting data over time from thermography and vibration

analysis to expose emerging problems and issues.
7.8 Measuring Effectiveness
A tool for measuring and evaluating the effectiveness of TPM can be found
in "Overall Equipment Effectiveness" (OEE). Measuring the effectiveness of
TPM is a crucial activity in TPM, but also a very time-consuming and costly
process.
The mathematical formula is as follows:
OEE = Availability*Performance Rate*Total Yield Rate
OEE (Overall Equipment Effectiveness) is a metric that identifies the

percentage of planned production time that is truly productive.
It was developed to support TPM initiatives by accurately tracking progress

towards achieving “perfect production”. 
! !96
An OEE score of 100% is perfect production.
An OEE score of 85% is world class for discrete manufacturers.
An OEE score of 60% is fairly typical for discrete manufacturers.
An OEE score of 40% is not uncommon for manufacturers without TPM

and/or lean programs.
OEE consists of three underlying components, each of which maps to one

of the TPM goals set out at the beginning of this topic, and each of which
takes into account a different type of productivity loss.
Component TPM Goal Type of Productivity Loss

Availability No Availability takes into account downtime Loss,
Breakdowns which includes all events that stop planned
production for an appreciable length of time
(typically several minutes or longer).
Performance No Small Performance takes into account Speed Loss,

Stops or Slow which includes all factors that cause production
Running to operate at less than the maximum possible
speed when running.
Quality No Defects Quality takes into account Quality Loss, which
factors out manufactured pieces that do not
meet quality standards, including pieces that
require rework.
OEE Perfect OEE takes into account all losses (downtime

Production Loss, Speed Loss, and Quality Loss), resulting in
a measure of truly productive manufacturing
time.
As can be seen from the above table, OEE is tightly coupled to the TPM
goals of No Breakdowns (measured by Availability), No Small Stops or Slow
Running (measured by Performance), and No Defects (measured by
Quality).
It is extremely important to measure OEE in order to expose and quantify

productivity losses, and in order to measure and track improvements
resulting from TPM initiatives.
! !97
7.9 Summary
Today, with increasing competition and tough markets, TPM may decide the
success or the failure of a company. TPM has been a proven program for
many years and organisations, especially into manufacturing, can adopt
this methodology without any risk.
Employees and the upper management should be educated in TPM by the

time it is rolled out. The organisation should have long-term objectives for
TPM.
Majority of world’s first class manufacturing companies follow TPM as an

integrated practice in their organizations. Ford, Harley Davidson and Dana
Corp. are just a few to mention. Many Indian companies have started using
this technique and have been benefited.
All these first class corporate citizens have reported high rates of
productivity enhancements after implementing TPM. As baseline, almost all
the companies, who have adopted TPM have reported productivity
enhancements close to 50% in many areas.
! !98
1. What is TPM?
2. What are the objective of TPM?
3. What is the philosophy of TPM?
4. What are the distinctive features of TPM?
5. What are the essentials of TPM?
6. Elaborate on pillars of TPM.
7. Elaborate implementation steps of TPM.
8. Which company introduced TPM first and in which country?
References
1. In Industry Forum Business excellence through Inspired People
2. TPM Implementing TPM in Baxter Aibonito
3. Wikipedia
4. TPM – Challenging Limits.
! !99
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
Video Lecture - Part 2 
! !100
BENCHMARKING
Chapter 8
Benchmarking
Objectives
Meaning of Benchmarking
Purpose and features of Benchmarking
Process and types of benchmarking
Advantages and disadvantages of benchmarking
Structure:
8.1 What is Benchmarking
8.2 Why Should I Benchmark
8.3 Features of Benchmarking
8.4 Process of Benchmarking
8.5 Types of Benchmarking
8.6 Tools of Benchmarking
8.7 Cost of Benchmarking
8.8 Advantages and Disadvantages of Benchmarking
8.9 Summary
! !101
BENCHMARKING
8.1 What is Benchmarking?
Benchmarking is the process of comparing ones business processes and

performance metrics to industry bests or best practices from other
industries.
Dimensions typically measured are quality, time and cost.
In the process of best practice benchmarking, management identifies the

best firms in their industry, or in another industry where similar processes
exist, and compares the results and processes of those studied (the
“targets”) to one's own results and processes.
In this way, they learn how well the targets perform and, more importantly,
the business processes that explain why these firms are successful.
Benchmarking is used to measure performance using a specific indicator

(cost per unit of measure, productivity per unit of measure, cycle time of x
per unit of measure or defects per unit of measure) resulting in a metric of
performance that is then compared to others.
The objective of benchmarking is to understand and evaluate the current

position of a business or organisation in relation to “best practice” and to
identify areas and means of performance improvement.
Most business processes are common throughout industries. For example,

HR process or customer satisfaction serves. These processes, albeit from
different industries, are all common and can be benchmarked very
effectively. It is called “getting out of the box”.
One of the biggest mistakes organisations make when first benchmarking

is that they limit their benchmarking activity to their own industry.
Benchmarking within your industry is essential. However, you already have

a pretty good idea how your industry performs. So it is imperative that you
reach outside and above your own industry into other industries that
perform a similar process but may have to perform this process extremely
well in order to succeed.
! !102
BENCHMARKING
At its simplest, benchmarking means: “improving ourselves by learning

from others”.
Definition
Benchmarking is the process of being humble enough to admit that
someone else is better at something and wise enough to try and learn how
to match and even surpass them.
8.2 Why should I benchmark
Traditional performance improvement trends seem not to be sufficient for

the highly competitive markets. In other words, external environment
and market conditions change rapidly.
Customers’ expectations are highly liquid and are driven by standards set
by best performer. Any product or service just below these standards
may not catch the eyes of customer.
Benchmarking gives us the chance of gaining:
Better Awareness of Ourselves (Us):
1. What we are doing?
2. How we are doing it?
3. How well we are doing it?
Better Awareness of the Best (Them)
1. What they are doing?
2. How they are doing it?
! !103
BENCHMARKING
How Well They are Doing it.
1. Benchmarking is a more efficient way to make improvements.
2. Managers can eliminate trials and errors.
3. Benchmarking speeds up organisation’s ability to make improvements.
4. Benchmarking has the ability to bring your performance up as a whole

significantly.
5. Learn from others’ experiences.
6. Set realistic but ambitious targets.
7. If the company’s QMS is not properly developed, documented and

implemented.
8. Company’s great strength and weakness areas are not measured.
9. If company’s great opportunities are not measured.
8.3 Features
Benchmarking has three main features:
1. Continuous method of measuring and comparing a firm’s business

processes against those of another firm.
2. Discover performance gaps between one’s own processes and those of

leading firms.
3. Incorporate leading firm’s processes into one’s own strategy to fill the
gaps and improve performance.
By benchmark, an organisation is recognized for its exemplary operational

performance.
! !104
BENCHMARKING
There are many benchmarks in the world, for example:
1. Toyota for Processes

2. Intel for Design
3. Motorola for Training
4. Scandinavian Airlines for Service
5. Honda for Rapid product development
Commonly Benchmarked Performance Measures
! !105
BENCHMARKING
8.4 Process of Benchmarking
Benchmarking involves looking outward (outside a particular business,

organisation, industry, region or country) to examine how others achieve
their performance levels and to understand the processes they use. In this
way, benchmarking helps explain the processes behind excellent
performance. When the lessons learnt from a benchmarking exercise are
applied appropriately, they facilitate improved performance in critical
functions within an organisation or in key areas of the business
environment.
Application of benchmarking involves four key steps:
1. Understand in detail existing business processes
2. Analyse the business processes of others
! !106
BENCHMARKING
3. Compare own business performance with that of others analysed
4. Implement the steps necessary to close the performance gap
Following is a detailed flow diagram for deeper understanding.
Benchmarking should not be considered a one-off exercise.
To be effective, it must become an ongoing, integral part of an ongoing

improvement process with the goal of keeping abreast of ever-improving
best practice.
! !107
BENCHMARKING
8.5 Types of Benchmarking
There are a number of different types of benchmarking, as summarized

below:
Most Appropriate for

Type Description the Following
Purposes
Strategic Where businesses need to improve Re-aligning business

Benchmarking overall performance by examining strategies that have
the long-term strategies and general become inappropriate.
approaches that have enabled high-
performers to succeed. It involves
considering high level aspects such
as core competencies, developing
new products and services and
improving capabilities for dealing
with changes in the external
environment.
Changes resulting from this type of

benchmarking may be difficult to
implement and take a long time to
materialise
Performance Businesses consider their position in Assessing relative level of

or Competitive relation to performance performance in key areas
Benchmarking characteristics of key products and or activities in
services. comparison with others
in the same sector and
Benchmarking partners are drawn finding ways of closing
from the same sector. This type of gaps in performance.
analysis is often undertaken through
trade associations or third parties to
protect confidentiality.
Process Focuses on improving specific critical Achieving improvements

Benchmarking processes and operations. in key processes to
Benchmarking partners are sought obtain quick benefits.
from best practice organisations that
perform similar work or deliver
similar services.
! !108
BENCHMARKING
Process benchmarking invariably

involves producing process maps to
facilitate comparison and analysis.
This type of benchmarking often
results in short-term benefits.
Functional Businesses look to benchmark with Improving activities or

Benchmarking partners drawn from different services for which
business sectors or areas of activity counterparts do not
to find ways of improving similar exist.
functions or work processes. This
sort of benchmarking can lead to
innovation and dramatic
improvements.
Internal Involves benchmarking businesses Several business units

Benchmarking or operations from within the same within the same
organisation (e.g., business units in organisation exemplify
different countries). The main good practice and
advantages of internal management want to
benchmarking are that access to spread this expertise
sensitive data and information is quickly, throughout the
easier; standardized data is often organisation.
readily available; and, usually less
time and resources are needed.
There may be fewer barriers to

implementation as practices may be
relatively easy to transfer across the
same organisation. However, real
innovation may be lacking and best
in class performance is more likely
to be found through external
benchmarking.
8.6 Tools of Benchmarking
Benchmarking software can be used to organise large and complex

amounts of information. Software packages can extend the concept of
benchmarking and competitive analysis by allowing individuals to handle
such large and complex amounts or strategies. Such tools support different
types of benchmarking and can reduce the costs significantly.
! !109
BENCHMARKING
Software are:
Publisher Platform Notes
Combo Compare to web-based This web-based database is suitable

Benchmark Compete database for groups of competitors to
Online benchmark individual performance
Benchmarking against group performance. All
process and performance
benchmarks can be processed in this
software, providing interesting
analysis tools and complete
benchmarking report.
GOBENCH INDEC GmbH Web-based The web-based database supports

and Co. KG database different kinds of benchmarking
categories (product, process,
competitor/customer, reverse
engineering, marketing, patents,
technologies, innovations, ...) and
allows reams of analysing
possibilities [2]
8.7 Benchmarking Cost
The three main types of costs in benchmarking are:
Visit Costs – This includes hotel rooms, travel costs, meals, a token gift,
and lost labor time.
Time Costs – Members of the benchmarking team will be investing time in

researching problems, finding exceptional companies to study, visits, and
implementation. This will take them away from their regular tasks for part
of each day so additional staff might be required.
Benchmarking Database Costs – Organisations that institutionalise

benchmarking into their daily procedures find it is useful to create and
maintain a database of best practices and the companies associated with
each best practice now.
! !110
BENCHMARKING
The cost of benchmarking can substantially be reduced through utilizing

the many internet resources that have sprung up over the last few years.
These aim to capture benchmarks and best practices from organisations,
business sectors and countries to make the benchmarking process much
quicker and cheaper.
8.8 Advantages and Disadvantages
Advantages
Benchmarking is a systematic method by which organisations can measure
themselves against the best industry practices. It promotes superior
performance by providing an organised framework through which
organisation learn how the “best in class” do things. It helps for continuous
improvement. Benchmarking inspire managers (and organization) to
compete. Through Benchmark process, organisation can borrow ideas,
adopt and refine them to gain competitive advantages.
Three Major Advantages of Benchmarking
A. Product and Process Improvement

By implementing benchmarking activity, organisations can improve their
operation process.
B. Time and Cost Reduction

Benchmarking is time and cost efficient because it involves imitation and
adaptation rather than pure invention.
C. Competitive Strategy
By implementing benchmarking activity, organizations can improve their
operation process
Build core competencies that will help to sustain competitive

advantage.
1. Access to a variety of markets
2. Perceived benefit of product or service will increase
3. Product or service is hard to imitate
! !111
BENCHMARKING
4. Low-cost leader
- Target-specific shift in strategy
1. Entering new markets
2. Developing new products
- To create a firm more adaptable to change.
Disadvantages
Most resistant criticism of Benchmarking comes from the idea of copying

others. It is not a strategy nor is it intended to be a business philosophy.
Therefore, it is a time taking technique.
Some of the other prominent disadvantages are as follows:
What is best for someone else may not suit you
Poorly defined benchmarks may lead to wasted effort and meaningless

results.
Incorrect comparisons
Reluctance to share information
! !112
BENCHMARKING
8.9 Summary
Now-a days many companies in the world uses this technique for fixing
their target for continuous improvement. For them, it is an important tool.
But to be effective, it must be used properly. It breakdown (waste of
money, time and energy and sometimes morale too) if process owners and
managers feel threatened or do not accept and act on the findings.
Finally, benchmarking is not a substitute for innovation; however, it is a

source of ideas from outside the organisation.
1. What is the benchmarking?
2. What is the purpose of Benchmarking?
3. What are the features of benchmarking?
4. Describe process of benchmarking.
5. Describe in details various types of benchmarking and its applications.
6. What are the various costs associated with benchmarking?
7. What are the advantages and disadvantages of benchmarking?
8. What are the parameters for which benchmarking is done commonly?
! !113
BENCHMARKING
References
1. Wikipedia
2. How to Use Benchmarking in Business? by F. John Reh
3. Benchmarking by Jim Riley
4. The Benchmarking Exchange by TBE
5. Benchmarking by Dr. Zargari
6. Benchmarking — A TQM Tool by Avadhut R. Jakhale
! !114
BENCHMARKING
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
Video Lecture
! !115
TOTAL QUALITY MANAGEMENT
Chapter 9
Total Quality Management
Objectives
Meaning of total quality management (TQM)
History and evolution of TQM
Principle and elements of TQM
Deming’s views on TQM
Guidelines for implementation
What TQM is not?
Structure:
9.1 Introduction
9.2 Brief History of TQM
9.3 Evolution of TQM
9.4 Principles of TQM
9.5 Elements of TQM
9.6 Implementation of TQM
9.7 Deming’s Points on Quality Management
9.8 What TQM is Not?
9.9 Summary
! !116
9.1 Introduction
Total Quality Management, (TQM) is a method by which management and

employees can become involved in the continuous improvement of the
production of goods and services. It is a combination of quality and
management tools aimed at increasing business and reducing losses due to
wasteful practices.
TQM is the way of managing for the future, and is far wider in its
application than just assuring product or service quality – it is a way of
managing people and business processes to ensure complete customer
satisfaction at every stage, internally and externally. TQM, combined with
effective leadership, results in an organisation doing the right things right,
first time.
TQM should be purpose-driven. Be clear on the organisation’s vision for the

future and stay focused on it. TQM can be a powerful technique for
unleashing employee creativity and potential, reducing bureaucracy and
costs, and improving service to clients and the community.
! !117
The core of TQM is the customer-supplier interfaces, both externally and

internally, and at each interface lie a number of processes. This core must
be surrounded by commitment to quality, communication of the quality
message, and recognition of the need to change the culture of the
organisation to create total quality. These are the foundations of TQM, and
they are supported by the key management functions of people,
processes and systems in the organisation.
! !118
The Essential Components of TQM – Commitment and Leadership

TQM is an approach to improving the competitiveness, effectiveness and
flexibility of an organisation for the benefit of all stakeholders. It is a way
of planning, organising and understanding each activity, and of removing
all the wasted effort and energy that is routinely spent in organisations. It
ensures the leaders adopt a strategic overview of quality and focus on
prevention not detection of problems.
Whilst it must involve everyone, to be successful, it must start at the top

with the leaders of the organisation.
All senior managers must demonstrate their seriousness and commitment

to quality, and middle managers must, as well as demonstrating their
commitment, ensure they communicate the principles, strategies and
benefits to the people for whom they have responsibility. Only then will the
right attitudes spread throughout the organisation.
A fundamental requirement is a sound quality policy, supported by plans

and facilities to implement it.
Leaders must take responsibility for preparing, reviewing and monitoring

the policy, plus take part in regular improvements of it and ensure it is
understood at all levels of the organisation.
Effective leadership starts with the development of a mission statement,

followed by a strategy, which is translated into action plans down through
the organisation. These, combined with a TQM approach, should result in a
quality organisation, with satisfied customers and good business results.
The five requirements for effective leadership are:
Developing and publishing corporate beliefs, values and objectives, often

as a mission statement
Personal involvement and acting as role models for a culture of total

quality
Developing clear and effective strategies and supporting plans for

achieving the mission and objectives
! !119
Reviewing and improving the management system
Communicating, motivating and supporting people and encouraging

effective employee participation.
The task of implementing TQM can be daunting. The following is a list of

points that leaders should consider; they are a distillation of the various
beliefs of some of the quality gurus:
The organisation needs a long-term commitment to continuous

improvement.
Adopt the philosophy of zero errors/defects to change the culture to right

first time.
Train people to understand the customer/supplier relationships.
Do not buy products or services on price alone – look at the total cost
Recognise that improvement of the systems must be managed
Adopt modern methods of supervising and training – eliminate fear
Eliminate barriers between departments by managing the process –

improve communications and teamwork
Get facts by studying processes
Constantly educate and retrain – develop experts in the organisation
Develop a systematic approach to manage the implementation of TQM
Culture Change
The failure to address the culture of an organisation is frequently the

reason for many management initiatives either having limited success or
failing altogether.
! !120
The important part of Quality Journey is to understand the culture of an

organisation, and use that knowledge to map the steps needed to
accomplish a change.
The culture in any organisation is formed by the beliefs, behaviours,

norms, dominant values, rules and the “climate”.
A culture change, e.g., from one of acceptance of a certain level of errors

or defects to one of right first time, every time, needs two key elements:
Commitment from the leaders
Involvement of all of the organisation’s people
There is widespread recognition that major change initiatives will not be

successful without a culture of good teamwork and cooperation at all levels
in an organisation.
The only point at which true responsibility for performance and quality can
lie is with the people who actually do the job or carry out the process, each
of which has one or several suppliers and customers.
! !121
An efficient and effective way to tackle process or quality improvement is

through teamwork. However, people will not engage in improvement
activities without commitment and recognition from the organisation’s
leaders, a climate for improvement and a strategy that is implemented
thoughtfully and effectively.
An appropriate documented Management Quality System will help an

organisation not only achieve the objectives set out in its policy and
strategy, but also, and equally importantly, sustain and build upon them. It
is imperative that the leaders take responsibility for the adoption and
documentation of an appropriate management system in their organisation
if they are serious about the quality journey.
Once the strategic direction for the organisation’s quality journey has been
set, it needs Performance Measures to monitor and control the journey,
and to ensure the desired level of performance is being achieved and
sustained. They can, and should be, established at all levels in the
organisation, ideally being cascaded down and most effectively undertaken
as team activities.
Some of the companies who have implemented TQM include Ford Motor
Company, Phillips Semiconductor, SGL Carbon, Motorola and Toyota Motor
Company.
! !122
9.2 Brief History of TQM
Total Quality Management is a management approach that originated in the

1950s and has steadily become more popular since the early 1980s.
In the late 1970s and early 1980s, the developed countries suffered
economically in the face of stiff competition from Japan's ability to produce
high-quality goods at competitive cost.
For the first time since the start of the Industrial Revolution, the United
Kingdom became a net importer of finished goods.
The United States undertook its own soul-searching, expressed most

pointedly If Japan Can... Why Can't We?
Firms began re-examining the techniques of control invented over the past
50 years and how those techniques had been so successfully employed by
the Japanese. It was in the midst of this economic turmoil that TQM took
root.
The exact origin of the term “total quality management” is uncertain. It is

almost certainly inspired by Armand V. Feigenbaum's multi-edition book
Total Quality Control and Kaoru Ishikawa's What is Total Quality Control?
The Japanese Way.
It may have been first coined in the United Kingdom by the Department of
Trade and Industry during its 1983 “National Quality Campaign”. Or it may
have been first coined in the United States by the Naval Air Systems
Command to describe its quality improvement efforts in 1985.
! !123
TQM Timeline
1950s W. Edwards Deming taught methods for statistical analysis and

control of quality to Japanese engineers and executives.
Joseph M. Juran taught the concepts of controlling quality and
managerial breakthrough.
Armand V. Feigenbaum’s book Total Quality Control, a forerunner for

the present understanding of TQM, was published.
Philip B. Crosby’s promotion of zero defects paved the way for quality
improvement in many companies.
1968 The Japanese named their approach to total quality companywide

quality control.
Kaoru Ishikawa’s synthesis of the philosophy contributed to Japan’s

ascendancy as a quality leader.
Today TQM is the name for the philosophy of a broad and systemic approach
to managing organisational quality.
Quality standards such as the ISO 9000 series and quality award
programs such as the Deming Prize and the Malcolm Baldrige National
Quality Award specify principles and processes that comprise TQM.
Further Development
In the spring of 1984, an arm of the United States Navy asked some of its
civilian researchers to assess statistical process control and the work of
several prominent quality consultants and to make recommendations as to
how to apply their approaches to improve the Navy’s operational
effectiveness.
The recommendation was to adopt the teachings of W. Edwards Deming.

The Navy branded the effort “Total Quality Management” in 1985.
The creation of the Malcolm Baldrige National Quality Award from the Navy,
TQM spread throughout the US Federal Government, resulting in the
following: 
! !124
The creation of the Malcolm Baldrige National Quality Award in August

1987.
The creation of the Federal Quality Institute in June 1988
The adoption of TQM by many elements of government and the armed

forces, including the United States Department of Defence, United States
Army, and United States Coast Guard.
The private sector followed suit, flocking to TQM not only as a means to
recapture market share from the Japanese, but also to remain competitive
when bidding for contracts from the Federal Government since “total
quality” requires involving suppliers, not just employees, in process
improvement efforts.
9.3 Evolution of Total Quality Management
The concept of quality has existed for many years, though its meaning has
changed and evolved over time. In the early twentieth century, quality
management meant inspecting products to ensure that they met
specifications. In the 1940s, during World War II, quality became more
statistical in nature. Statistical sampling techniques were used to evaluate
quality, and quality control charts were used to monitor the production
process.
In the 1960s, with the help of so-called “quality gurus,” the concept took
on a broader meaning. Quality began to be viewed as something that
encompassed the entire organisation, not only the production process.
Since all functions were responsible for product quality and all shared the
costs of poor quality, Quality was seen as a concept that affected the entire
organisation.
The meaning of quality for businesses changed dramatically in the late

1970s. Before then quality was still viewed as something that needed to be
inspected and corrected. However, in the 1970s and 1980s, many US
industries lost market share to foreign competition. In the auto industry,
manufacturers such as Toyota and Honda became major players. In the
consumer goods market, companies such as Toshiba and Sony led the way.
These foreign competitors were producing lower-priced products with
considerably higher quality.
! !125
To survive, companies had to make major changes in their quality

programs. Many hired consultants and instituted quality training programs
for their employees. A new concept of quality was emerging. One result is
that quality began to have a strategic meaning. Today, successful
companies understand that quality provides a competitive advantage. They
put the customer first and define quality as meeting or exceeding customer
expectations.
Since the 1970s, competition based on quality has grown in importance

and has generated tremendous interest, concern, and enthusiasm.
Companies in every line of business is focusing on improving quality in
order to be more competitive. In many industries, quality excellence has
become a standard for doing business. Companies that do not meet this
standard simply will not survive.
The term used for today’s new concept of quality is total quality
management or TQM. Figure below presents a timeline of the old and new
concepts of quality. You can see that the old concept is reactive, designed
to correct quality problems after they occur.
The new concept is proactive, designed to build quality into the product
and process design.
Next, we look at the individuals who have shaped our understanding of

quality.
! !126
Quality Gurus
To fully understand the TQM movement, we need to look at the
philosophies of notable individuals who have shaped the evolution of TQM.
Their philosophies and teachings have contributed to our knowledge and

understanding of quality today.
Their individual contributions are summarised:
9.4 Principles of TQM
The key principles of TQM are as follows:
Management Commitment
Plan (drive, direct)
Do (deploy, support, participate)
Check (review)
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Act (recognise, communicate, revise)
Employee Empowerment
Training
Suggestion scheme
Measurement and recognition
Excellence teams
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Fact Based Decision-making

SPC (statistical process control)
DOE (design of experiments)
FMEA (failure mode effect analysis)
The 7 statistical tools
8D (team-oriented problem solving)
Continuous Improvement
Systematic measurement
Excellence teams
Cross-functional process management
Attain, maintain, improve standards
Customer Focus
Supplier partnership
Service relationship with internal customers
Never compromise quality
Customer-driven standards
Concept of Continuous Improvement by TQM

TQM is mainly concerned with continuous improvement in all work, from
high level strategic planning and decision-making, to detailed execution of
work elements on the shop floor. It stems from the belief that mistakes can
be avoided and defects can be prevented. It leads to continuously
improving results, in all aspects of work, as a result of continuously
improving capabilities, people, processes, and technology and machine
capabilities.
Continuous improvement must deal not only with improving results, but
more importantly with improving capabilities to produce better results in
the future. The five major areas of focus for capability improvement are
demand generation, supply generation, technology, operations and people
capability.
A central principle of TQM is that mistakes may be made by people, but

most of them are caused, or at least permitted, by faulty systems and
processes. This means that the root cause of such mistakes can be
identified and eliminated, and repetition can be prevented by changing the
process.
! !129
There are three major mechanisms of prevention:
1. Preventing mistakes (defects) from occurring (mistake-proofing or poka-

yoke).
2. Where mistakes can’t be absolutely prevented, detecting them early to

prevent them being passed down the value-added chain (inspection at
source or by the next operation).
3. Where mistakes recur, stopping production until the process can be

corrected, to prevent the production of more defects (stop in time).
9.5 Elements of TQM
Total Quality Management (TQM) is a management approach that

originated in the 1950s and has steadily become more popular since the
early 1980s. Total quality is a description of the culture, attitude and
organisation of a company that strives to provide customers with products
and services that satisfy their needs. The culture requires quality in all
aspects of the company’s operations, with processes being done right the
first time and defects and waste eradicated from operations.
To be successful implementing TQM, an organisation must concentrate on

the eight key elements:
1. Ethics
2. Integrity
3. Trust
4. Training
5. Teamwork
6. Leadership
7. Recognition
8. Communication
! !130
Key Elements
TQM has been coined to describe a philosophy that makes quality the
driving force behind leadership, design, planning, and improvement
initiatives. For this, TQM requires the help of those eight key elements.
These elements can be divided into four groups according to their
functions. The groups are:
I. Foundation – It includes Ethics, Integrity and Trust.
II. Building Bricks – It includes Training, Teamwork and Leadership.
III.Binding Mortar – It includes Communication.
IV. Roof – It includes Recognition.
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I. Foundation (Ethics, Integrity and Trust)
!
TQM is built on a foundation of ethics, integrity and trust. It fosters
openness, fairness and sincerity and allows involvement by everyone. This
is the key to unlocking the ultimate potential of TQM. These three elements
move together, however, each element offers something different to the
TQM concept.
1. Ethics – Ethics is the discipline concerned with good and bad in any
situation. It is a two-faceted subject represented by organisational and
individual ethics. Organisational ethics establish a business code of
ethics that outlines guidelines that all employees are to adhere to in the
performance of their work. Individual ethics include personal rights or
wrongs.
! !132
2. Integrity – Integrity implies honesty, morals, values, fairness, and

adherence to the facts and sincerity. The characteristic is what
customers (internal or external) expect and deserve to receive. People
see the opposite of integrity as duplicity. TQM will not work in an
atmosphere of duplicity.
3. Trust – Trust is a by-product of integrity and ethical conduct. Without

trust, the framework of TQM cannot be built. Trust fosters full
participation of all members. It allows empowerment that encourages
pride ownership and it encourages commitment. It allows decision-
making at appropriate levels in the organisation, fosters individual risk-
taking for continuous improvement and helps to ensure that
measurements focus on improvement of process and are not used to
contend people. Trust is essential to ensure customer satisfaction. So,
trust builds the cooperative environment essential for TQM.
II.Bricks (Training, Teamwork and Leadership)
!  
! !133
Basing on the strong foundation of trust, ethics and integrity, bricks are
placed to reach the roof of recognition. It includes:
4. Training – Training is very important for employees to be highly

productive. Supervisors are solely responsible for implementing TQM
within their departments, and teaching their employees the philosophies
of TQM. Training that employees require are interpersonal skills, the
ability to function within teams, problem solving, decision-making, job
management performance analysis and improvement, business
economics and technical skills. During the creation and formation of
TQM, employees are trained so that they can become effective
employees for the company.
5. Teamwork – To become successful in business, teamwork is also a key

element of TQM. With the use of teams, the business will receive
quicker and better solutions to problems. Teams also provide more
permanent improvements in processes and operations. In teams, people
feel more comfortable bringing up problems that may occur, and can get
help from other workers to find a solution and put into place. There are
mainly three types of teams that TQM organizations adopt:
a. Quality improvement teams or excellence teams (QITs) – These are

temporary teams with the purpose of dealing with specific problems
that often recur. These teams are set up for period of three to twelve
months.
b. Problem solving teams (PSTs) – These are temporary teams to solve

certain problems and also to identify and overcome causes of
problems. They generally last from one week to three months.
c. Natural work teams (NWTs) – These teams consist of small groups of

skilled workers who share tasks and responsibilities. These teams use
concepts such as employee involvement teams, self-managing teams
and quality circles. These teams generally work for one to two hours
a week.
6. Leadership – It is possibly the most important element in TQM. It

appears everywhere in organisation. Leadership in TQM requires the
manager to provide an inspiring vision, make strategic directions that
are understood by all and to instil values that guide subordinates. For
! !134
TQM to be successful in the business, the supervisor must be committed

in leading his employees. A supervisor must understand TQM, believe in
it and then demonstrate their belief and commitment through their daily
practices of TQM. The supervisor makes sure that strategies,
philosophies, values and goals are transmitted down throughout the
organisation to provide focus, clarity and direction. A key point is that
TQM has to be introduced and led by top management. Commitment
and personal involvement is required from top management in creating
and deploying clear quality values and goals consistent with the
objectives of the company and in creating and deploying well-defined
systems, methods and performance measures for achieving those goals.
III.Binding Mortar (Communication)
7. Communication – It binds everything together. Starting from

foundation to roof of the TQM house, everything is bound by strong
mortar of communication. It acts as a vital link between all elements of
TQM. Communication means a common understanding of ideas between
the sender and the receiver. The success of TQM demands
communication with and among all the organisation members, suppliers
and customers. Supervisors must keep open airways where employees
can send and receive information about the TQM process.
Communication coupled with the sharing of correct information is vital.
For communication to be credible, the message must be clear and
receiver must interpret in the way the sender intended.
! !135
There are different ways of communication such as:
a. Downward communication – This is the dominant form of

communication in an organisation. Presentations and discussions
basically do it. By this, the supervisors are able to make the employees
clear about TQM.
b. Upward communication – By this, the lower level of employees are

able to provide suggestions to upper management of the Affects of
TQM. As employees provide insight and constructive criticism,
supervisors must listen effectively to correct the situation that comes
about through the use of TQM. This forms a level of trust between
! !136
supervisors and employees. This is also similar to empowering

communication, where supervisors keep open ears and listen to others.
c. Sideways communication – This type of communication is important

because it breaks down barriers between departments. It also allows
dealing with customers and suppliers in a more professional manner.
IV.Roof (Recognition)
8. Recognition – Recognition is the last and final element in the entire

system. It should be provided for both suggestions and achievements
for teams as well as individuals. Employees strive to receive recognition
for themselves and their teams. Detecting and recognizing contributors
is the most important job of a supervisor. As people are recognized,
there can be huge changes in self-esteem, productivity, quality and the
amount of effort exhorted to the task at hand. Recognition comes in its
best form when it is immediately following an action that an employee
has performed. Recognition comes in different ways, places and time
such as,
!  
! !137
Ways – It can be by way of personal letter from top management. Also

by award banquets, plaques, trophies etc.
Places – Good performers can be recognised in front of departments, on

performance boards and also in front of top management.
Time – Recognition can be given at any time like in staff meeting, annual
award banquets, etc.
It is very clear from the above discussion that TQM without involving
integrity, ethics and trust would be a great remiss, in fact it would be
incomplete. Training is the key by which the organization creates a TQM
environment. Leadership and teamwork go hand in hand. Lack of
communication between departments, supervisors and employees create a
burden on the whole TQM process. Last but not the least, recognition
should be given to people who contributed to the overall completed task.
Hence, lead by example, train employees to provide a quality product,
create an environment where there is no fear to share knowledge, and give
credit where credit is due is the motto of a successful TQM organisation.
9.6 Implementation of TQM
Why Should a Company Adopt TQM?
Adopting the TQM philosophy will:
make an organisation more competitive

establish a new culture which will enable growth and longevity
provide a working environment in which everyone can succeed
reduce stress, waste and friction
build teams, partnerships and co-operation
When Should a Company Adopt TQM?

TQM can be adopted at any time after executive management has seen the
error of its ways, opened its mind and embraced the philosophy. It cannot
be attempted if management perceives it as a quick fix, or a tool to
improve worker performance.
How Should a Company Adopt TQM?
! !138
Before TQM is even contemplated

TQM will force change in culture, processes and practice. These changes
will be more easily facilitated and sustained if there is a formal
management system in place. Such a system will provide many of the facts
on which to base change and will also enable changes to be implemented
more systematically and permanently.
The First Steps

In order to focus all efforts in any TQM initiative and to yield permanent
benefits, a company must answer some fundamental questions:
What is its purpose as a business?

What is its vision for the business?
What is its mission?
What are the factors upon which achievement of its mission depends?
What are its values?
What are its objectives?
A good way to accomplish this is to take top management off site for a day
or two for a brainstorming session. Until management shares the same
answers to these questions and has communicated them to the workforce,
there can be no guarantee that the changes made will propel the
organisation in the right direction.
Methodology
There are a number of approaches to take towards adopting the TQM
philosophy. The teachings of Deming, Juan, Taguchi, Ishikawa, Imai,
Oakland etc can all help an organisation realign itself and embrace the TQM
philosophy. However, there is no single methodology, only a bundle of tools
and techniques.
Examples of tools include:

flowcharting
statistical process control (SPC)
Pareto analysis
cause and effect diagrams
employee and customer surveys
! !139
Examples of techniques include:

benchmarking
cost of quality
quality function deployment
failure mode effects analysis
design of experiments
Measurements
After using the tools and techniques, an organisation needs to establish the
degree of improvement. Any number of techniques can be used for this
including self-assessment, audits and SPC.
Pitfalls
TQM initiatives have been prone to failure because of common mistakes.
These include:
allowing external forces and events to drive a TQM initiative

an overwhelming desire for quality awards and certificates
organising and perceiving TQM activities as separate from day-to-day
work responsibilities
treating TQM as an add-on with little attention given to the required
changes in organisation and culture
senior management underestimating the necessary commitment to TQM
In summary, first assess preconditions and the current state of the

organisation to make sure the need for change is clear and that TQM is an
appropriate strategy. Leadership styles and organisational culture must be
congruent with TQM. If they are not, this should be worked on or TQM
implementation should be avoided or delayed until favourable conditions
exist.
Remember that this will be a difficult, comprehensive, and long-term

process. Leaders will need to maintain their commitment, keep the process
visible, provide necessary support, and hold people accountable for results.
Use input from stakeholder (clients, referring agencies, funding sources,
etc.) as possible; and, of course, maximise employee involvement in
design of the system.
! !140
9.7 Deming’s points on Quality management
Core concept on implementing TQM
Set of management practices to help companies increase their quality and

productivity.
1. Create constancy of purpose for improving products and services.
2. Adopt the new philosophy.
3. Cease dependence on inspection to achieve quality.
4. End the practice of awarding business on price alone; instead, minimise

total cost by working with a single supplier.
5. Improve constantly and forever every process for planning, production

and service.
6. Institute training on the job.
7. Adopt and institute leadership.
8. Drive out fear.
9. Break down barriers between staff areas.
10.Eliminate slogans, exhortations and targets for the workforce.
11.Eliminate numerical quotas for the workforce and numerical goals for
management.
12.Remove barriers that rob people of pride of workmanship, and eliminate

the annual rating or merit system.
13.Institute a vigorous program of education and self-improvement for

everyone.
14.Put everybody in the company to work accomplishing the

transformation.
! !141
9.8 What TQM is not?
TQM is a way of thinking about goals, organisations, processes and people

to ensure that the right things are done right first time. This thought
process can change attitudes, behaviour and hence results for the better.
TQM applies to the whole organisation. Therefore, unlike an ISO 9000

initiative which may be limited to the processes producing deliverable
products, TQM applies to every activity in the organisation. Also, unlike ISO
9000, TQM covers the soft issues such as ethics, attitude and culture.
TQM is not a system, a tool or even a process. Systems, tools and

processes are employed to achieve the various principles of TQM.
! !142
9.9 Summary
Total Quality Management, (TQM) is a method by which management and

employees can become involved in the continuous improvement of the
production of goods and services. This is a way of managing people and
business processes to ensure complete customer satisfaction at every
stage, internally and externally. TQM, combined with effective leadership,
results in an organisation doing the right things right, first time.
TQM can be a powerful technique for unleashing employee creativity and

potential, reducing bureaucracy and costs, and improving service to clients
and the community.
The core of TQM is the customer-supplier interfaces, both externally and

internally, and at each interface lie a number of processes. This core must
be surrounded by commitment to quality, communication of the quality
message, and recognition of the need to change the culture of the
organisation to create total quality.
The important part of Quality Journey is to understand the culture of an

organisation, and use that knowledge to map the steps needed to
accomplish a change.
The culture in any organisation is formed by the beliefs, behaviours,

norms, dominant values, rules and the “climate”.
There is widespread recognition that major change initiatives will not be

successful without a culture of good teamwork and cooperation at all levels
in an organisation.
Total Quality Management is a management approach that originated in the

1950s and has steadily become more popular since the early 1980s.
Individuals like Shewhart, Deming, Juran, Feigenbaum, Crossby, Ishikawa

and Taguchi have shaped the evolution of TQM. Their philosophies and
teachings have contributed to our knowledge and understanding of quality
today.
! !143
Management commitment, Employee empowerment, Fact-based decision-

making, Continuous improvement and Customer focus are the key
principles of TQM. It is mainly concerned with continuous improvement in
all work, from high level strategic planning and decision-making, to
detailed execution of work elements on the shop floor. It stems from the
belief that mistakes can be avoided and defects can be prevented.
A central principle of TQM is that mistakes may be made by people, but

most of them are caused, or at least permitted, by faulty systems and
processes. This means that the root cause of such mistakes can be
identified and eliminated, and repetition can be prevented by changing the
process.
TQM without involving integrity, ethics and trust would be incomplete.

Training is the key by which the organisation creates a TQM environment.
Leadership and teamwork go hand in hand. Lack of communication
between departments, supervisors and employees create a burden on the
whole TQM process.
TQM can be implemented at any time after executive management has

seen the error of its ways, opened its mind and embraced the philosophy.
It cannot be attempted if management perceives it as quick fix or tool to
improve workers performance. There are a number of approaches to take
towards adopting the TQM philosophy. The teachings of Deming, Juan,
Taguchi, Ishikawa, Imai, Oakland etc. can all help an organisation realign
itself and embrace the TQM philosophy. However, there is no single
methodology, only a bundle of tools and techniques.
Leadership styles and organisational culture must be congruent with TQM.

If they are not, this should be worked on or TQM implementation should be
avoided or delayed until favourable conditions exist.
Deming has rolled out set of management practices (14 points) to help
organisation increase their quality and productivity.
! !144
1. What is TQM?
2. What is the role of leadership in TQM?
3. “TQM should be purpose-driven.” Explain
4. What is the core of TQM?
5. Explain the components of TQM.
6. Explain-Requirements for effective leadership
7. Why cultural change in the organisation is important?
8. When did the journey of TQM start?
9. What is Malcolm Baldrige National Quality Award? Explain.
10.Explain old and new concept of Quality.
11.Name the quality Gurus and their contribution.
12.Explain in details principles of TQM.
13.Why continuous improvement is important in TQM?
14.What are the key elements of TQM?
15.What is the foundation of TQM?
16.Explain the importance of communication in TQM.
17.What are the different ways of communication?
18.Explain the importance of element “Recognition”.
19.Why and when company adopt TQM?
! !145
20.What are the fundamental questions to be answered?
21.When we decide to adopt TQM?
22.What are the pitfalls in TQM implementation?
23.What is the contribution of Deming
24.What philosophy Deming propagated?
! !146
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
Video Lecture
! !147
KAIZEN
Chapter 10
Kaizen
Objectives
Meaning of Kaizen
History and evolution of Kaizen
Purpose and need of Kaizen.
Levels and characteristics of Kaizen
Prerequisites and implementation of Kaizen
Structure:
10.1 Introduction
10.2 Overview of Kaizen
10.3 History of Kaizen
10.4 Why Kaizen and Need for Kaizen
10.5 Elements and Aspects of Kaizen
10.6 Prerequisites of Kaizen
10.7 Levels and Characteristics of Kaizen
10.8 Conditions and Steps of Implementation
10.9 Summary
! !148
KAIZEN
10.1 Introduction
Kaizen ( ?), Japanese for “improvement” or “change for the best”, refers
to philosophy or practices that focus upon continuous improvement of
processes in manufacturing, engineering, and business management.
It has been applied in healthcare, psychotherapy, life-coaching,

government, banking, and other industries.
When used in the business sense and applied to the workplace, kaizen
refers to activities that continually improve all functions, and involves all
employees from the CEO to the assembly line workers.
It also applies to processes, such as purchasing and logistics, that cross

organizational boundaries into the supply chain.
By improving standardized activities and processes, kaizen aims to

eliminate waste.
Kaizen was first implemented in several Japanese businesses after the

Second World War, influenced in part by American business and quality
management teachers who visited the country. It has since spread
throughout the world and is now being implemented in environments
outside of business and productivity.
What is KAIZEN?
Thus, KAIZEN means “Change for the Better.”
In all, Kaizen suggests a humanized approach: "The idea is to nurture the

company's human resources as much as it is to praise and encourage
! !149
KAIZEN
It means, Carrying out small improvements in large numbers with total

employee involvement, on a continuous basis.
It must be achieved with 100% participation
It is better implemented by a person himself/herself who has created the

improvement idea and carried out in his/her own workplace.
10.2 Overview of Kaizen
Kaizen is a daily process, the purpose of which goes beyond simple

productivity improvement. It is also a process that, when done correctly,
humanises the workplace, eliminates overly hardwork (“muri”), and
teaches people how to perform experiments on their work using the
scientific method and how to learn to spot and eliminate waste in business
processes.
While kaizen (at Toyota) usually delivers small improvements, the culture
of continual aligned small improvements and standardisation yields large
results in the form of compound productivity improvement.
This philosophy differs from the “command and control” improvement

programs of the mid-twentieth century.
Kaizen methodology includes making changes and monitoring results, then

adjusting. Large-scale pre-planning and extensive project scheduling are
replaced by smaller experiments, which can be rapidly adapted as new
improvements are suggested.
It is a philosophy of never being satisfied with what was accomplished last

week or last year Improvement.
It is using common sense and is both a rigorous, scientific method using

statistical quality control and an adaptive framework of organisational
values and beliefs that keeps workers and management focused on zero
defects.
Kaizen Constituents are: 
! !150
KAIZEN
10.3 History of Kaizen
After World War II, to help restore Japan, American occupation forces
brought in American experts to help with the rebuilding of Japanese
industry while The Civil Communications Section (CCS) developed a
Management Training Program that taught statistical control methods as
part of the overall material.
This course was developed and taught by Homer Sarasohn and Charles
Protzman in 1949-50. Sarasohn recommended W. Edwards Deming for
further training in Statistical Methods.
The Economic and Scientific Section (ESS) group was also tasked with
improving Japanese management skills and Edgar McVoy was instrumental
in bringing Lowell Mellen to Japan to properly install the Training Within
Industry (TWI) programs in 1951.
! !151
KAIZEN
Prior to the arrival of Mellen in 1951, the ESS group had a training film to
introduce the three “J” programs (Job Instruction, Job Methods and Job
Relations) — the film was titled "Improvement in 4 Steps” (Kaizen eno Yon
Dankai). Thus, the original introduction of “Kaizen” to Japan.
For the pioneering, introduction, and implementation of Kaizen in Japan,

the Emperor of Japan awarded the 2nd Order Medal of the Sacred Treasure
to Dr. Deming in 1960.
Consequently, the Union of Japanese Science and Engineering (JUSE)

instituted the annual Deming Prizes for achievement in quality and
dependability of products.
On October 18, 1989, JUSE awarded the Deming Prize to Florida Power &
Light Co. (FPL), based in the US, for its exceptional accomplishments in
process and quality control management. FPL was the first company
outside Japan to win the Deming Prize.
10.4 Why kaizen and Need for Kaizen
Because people can easily accept the idea and suggest for improvement,
as a result the Kaizen mode of production will improve company’s
productivity through:
1. Quality improvement
2. Cost reduction
3. Shortened delivery
4. Reduced lead time
5. Inventory control improvement
6. Safety improvement
Kaizen techniques are not capital intensive and their implementation is not
difficult.
Kaizen implementation is to a large extent based upon training and not

formal education.
The management system helps in attaining high quality and high

productivity that could be easily transferred to benefit by making products
competitive within domestic and international markets.
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KAIZEN
Kaizen Contributes to National Finance:
Following comparison between Kaizen and other business operations

improvements methods like Benchmarking, ISO etc. underlines need of
Kaizen:
Kaizen’s Guiding Principles BPR/Benchmarking
Collaborative work among the top, Driven by top management and

middle managers and front-line executed by manager level personnel
employee
Kaizen relies on proactive and Intensive top-down effort with senior

spontaneous participation of front- management taking the lead
line employees throughout the process
Low-cost improvements Linked with big investments
Continuous and never-ending One-time improvement
Self-motivated workforce and self- Advocated (needs additional

innovative organisation management support)
! !153
KAIZEN
10.5 Elements and Aspects of Kaizen
!
Out of these elements,the following are three key factors.
A. Elimination of waste (muda): Following wastes are to be eliminated.

1. Overproduction
2. Waiting production
3. Transporting products
4. Inappropriate process
5. Unnecessary Inventory
6. Unnecessary/excess motion
7. Defects
! !154
KAIZEN
B. Kaizen Five S Framework to be followed:
Seiri – Tidiness
Seiton – Orderliness
Seiso – Cleanliness
Seiketsu – Standardised Clean-up
Shitsuke – Discipline
Standardisation
Standards are set by management, but they must be able to change when
the environment changes. Companies can achieve dramatic improvement
as reviewing the standards periodically, collecting and analysing data on
defects, and encouraging teams to conduct problem-solving activities.
Once the standards are in place and are being followed, then if there are
deviations, the workers know that there is a problem. Then employees will
review the standards and either correct the deviation or advise
management on changing and improving the standard. It is a never-ending
process and is better explained and presented by the PDCA cycle (plan-do-
check-act), known as Demasing cycle, in shown the following figure.
! !155
KAIZEN
Aspects of Kaizen
Gembakaizen
GEMBA means the place where the products are made, so GEMBAKAIZEN
is KAIZEN activities that take place in GEMBA.
GEMBAKAIZEN is to make continuous improvement at the real place,

where the action is going on, and that can make your organisation better.
Kaizen Blitz
Kaizen Blitz, or rapid improvement, is a focused activity on a particular
process or activity. The basic concept is to identify and quickly remove
waste.
Mini Kaizen
It is part of corporate culture. It requires both conscious and sub-conscious
thinking about improvements day by day and minute by minute on the part
of all employees.
It also requires that these same employees possess the skills for this type
of thinking.
10.6 Prerequisites of kaizen
1. Knowledge of KAIZEN concept and KAIZEN technology
KAIZEN culture is promoted by dissemination of KAIZEN concept and

technologies.
KAIZEN concept is not so difficult to understand.
KAIZEN technologies include easy to difficult techniques.
KAIZEN should be started by use of easy technologies such as 5S and

QC7 tools.
! !156
KAIZEN
2. Attitude with positive thinking
KAIZEN concept and technologies can build positive attitude.
KAIZEN culture is promoted by people and organisation with positive

attitude to KAIZEN.
3. Involvement or participation from top management to lower

level work
The top management commitment on KAIZEN is crucial success factor.

Participation from workers related to KAIZEN is essential for success and
continuity.
4. Zealous support for KAIZEN
KAIZEN can be promoted by paying zealous attention to it.
It looks like support for soccer which is source of power for the team.
5. Education on KAIZEN and KAIZEN technology
In KAIZEN, excellent result is achieved through the development of

human resource.
Thus, education and training to acquire the technology is crucial.
6. Never-ending KAIZEN activity
Don’t end KAIZEN if you aim to make great improvement after

consecutive small successes in KAIZEN.
7. Shift in Mindset
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KAIZEN
10.7 Levels of Kaizen
Kaizen is always small improvements in current processes.
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KAIZEN
It is characterised by:
1. Continuity
2. Participatory approach
3. Accumulation of small improvements
4. Improvements come up to with minimum investment
10.8 Conditions and steps of implementation
There are 7 conditions of implementation

1. Top Management commitment
4. Setting up an organisation dedicated to promote Kaizen
5. Appointing the best available personnel to manage the Kaizen process
6. Conducting training and education
7. Establishing a step-by-step process for Kaizen introduction
Steps of Implementation:
Following are the steps:
1. Identify specific point for improvement in one’s own work area.
2. Analyse the root cause of the problem and develop solution.
3. Implement the kaizen and quantify benefits.
4. Standardise the improvement through proper documentation.
5. See if there is scope for horizontal deployment. Deploy horizontally, if

applicable.
6. Fill in the improvements in the standard format and submit for

evaluation.
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KAIZEN
Guidelines for Implementation:
1. Think, rethink and then attempt kaizen, with 100% clarity and
understanding.
2. Collect all relevant data, analyse and then only think of solution.
3. Use only appropriate tools, while implementing.
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KAIZEN
10.9 Summary
Kaizen ( ?), Japanese for “improvement” or “change for the best”, refers
to philosophy or practices that focus upon continuous improvement of
processes in manufacturing, engineering, and business management.
Kaizen methodology includes making changes and monitoring results, then
adjusting. Large-scale pre-planning and extensive project scheduling are
replaced by smaller experiments, which can be rapidly adapted as new
improvements are suggested.
It is a philosophy of never being satisfied with what was accomplished last

week or last year Improvement.
For the pioneering, introduction, and implementation of Kaizen in Japan,

the Emperor of Japan awarded the 2nd Order Medal of the Sacred Treasure
to Dr. Deming in 1960.
Elimination of waste, 5S framework and standardisations of processes are

three main elements of Kaizen. It is always a small improvement in current
processes. It is characterised by (1) Continuity, (2) Participatory approach
(3) Accumulation of small improvement and 4) Minimum investment, In
order to implement kaizen, we need to have full clarity and understanding
of problem, collection and analysis of data to arrive at solution and use of
appropriate tools. Worldwide many companies are using Kaizen as very
important tool to achieve customer satisfaction.
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KAIZEN
1. What is Kaizen and when it was developed?
2. Who implemented Kaizen and when and where?
3. What are the guiding principles of Kaizen?
4. Explain key factors of Kaizen.
5. Explain prerequisites of Kaizen.
6. Explain the steps and guidelines of kaizen implementation.
7. What are the characteristics of kaizen?
8. What are the steps for implementation of Kaizen?
References
1. Kaizen — Wikipedia.
2. Kaizen by Belkau Worku Aligaz
3. Kaizen by Arthy A. and Jasper Jerome
4. www.michilolidis.gr.
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KAIZEN
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
Video Lecture
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Chapter 11
7 QC Tools
Objectives
Meaning of each QC tool
Procedure of using it
Application in problem solving
Benefits of each tool
Structure:
11.1 Introduction
11.2 Pareto Diagram
11.3 Cause and Effect Diagram
11.4 Histogram
11.5 Control Chart
11.6 Scattered Diagram
11.7 Graphs
11.8 Check Sheets and Stratification
11.9 Summary
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11.1 Introduction
The 7 QC Tools are simple statistical tools used for problem solving. These
tools were either developed in Japan or introduced to Japan by the Quality
Gurus such as Deming and Juran. In terms of importance, these are the
most useful. Kaoru Ishikawa has stated that these 7 tools can be used to
solve 95% of all problems.
These tools have been the foundation of Japan’s astonishing industrial

resurgence after the Second World War.
The following are the 7 QC Tools:
1. Pareto Diagram
2. Cause and Effect Diagram (also known as the “fishbone” or Ishikawa

diagram)
3. Histogram
4. Control Charts
5. Scatter Diagrams
6. Graphs
7. Check Sheets and Stratification
They are called basic because they are suitable for people with little formal
training in statistics and because they can be used to solve the vast
majority of quality-related issues.
Good Visual Aids make statistical and quality control more comprehendible.
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11.2 Pareto Diagram
Pareto Diagram is a tool that arranges items in the order of the magnitude
of their contribution, thereby identifying a few items exerting maximum
influence.
This tool is used in SPC and quality improvement for prioritising projects
for improvement, prioritising setting up of corrective action teams to solve
problems, identifying products on which most complaints are received,
identifying the nature of complaints occurring most often, identifying most
frequent causes for rejections or for other similar purposes.
The origin of the tool lies in the observation by an Italian economist

Vilfredo Pareto that a large portion of wealth was in the hands of a few
people.
He observed that such distribution pattern was common in most fields.

Pareto principle also known as the 80/20 rule is used in the field of
materials management for ABC analysis.
20% of the items purchased by a company account for 80% of the value.
These constitute the A items on which maximum attention are paid.
Dr. Juran suggested the use of this principle to quality control for
separating the “vital few” problems from the “trivial many” now called the
“useful many”.
In short, it is: bar chart arranged in descending order of height from left to
right.
Bars on left are relatively more important than those on right.
Separates the “vital few” from “trivial many” (Pareto principle).
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When is it Used and What Result will be Obtained?

Pareto Diagram
Method Usage Result
Used to identify a problem. Allows clarification of important

tasks.
! Used to identify the cause of Allows identification of a starting
a problem. point (which task to start with).
Used to review the effects of Allows projection of the effects

an action to be taken. of a measure to be taken.
Used to prioritise actions.

(Used during phases to
monitor the situations,
analyse causes, and review
effectiveness of an action.)
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Procedure:
The steps in the preparation of a Pareto Diagram are:
1. From the available data, calculate the contribution of each individual

item.
2. Arrange the items in descending order of their individual contributions.

If there are too many items contributing a small percentage of the
contribution, group them together as “others”. It is obvious that
"others" will contribute more than a few single individual items. Still it is
kept last in the new order of items.
3. Tabulate the items, their contributions in absolute number as well as in

per cent of total and cumulative contribution of the items.
4. Draw X and Y axes. Various items are represented on the X-axis. Unlike
other graphs, Pareto Diagrams have two Y-axes — one on the left
representing numbers and the one on right representing the per cent
contributions. The scale for X-axis is selected in such a manner that all
the items including others are accommodated between the two Y-axes.
The scales for the Y-axes are so selected that the total number of items
on the left side and 100% on the right side occupy the same height.
5. Draw bars representing the contributions of each item.
6. Plot points for cumulative contributions at the end of each item. A

simple way to do this is to draw the bars for the second and each
subsequent item at their normal place on the X-axis as well as at a level
where the previous bar ends. This bar at the higher level is drawn in
dotted lines. Drawing the second bar is not normally recommended in
the texts.
7. Connect the points. If additional bars as suggested in step 6 are drawn

this becomes simple. All one needs to do is – connect the diagonals of
the bars to the origin.
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8. The chart is now ready for interpretation. The slope of the chart
suddenly changes at some point. This point separates the ‘vital few’
from the ‘useful many’ like the A, B and C class items in materials
management.
11.3 Cause and Effect Diagram
A Cause and Effect Diagram is a tool that shows systematic relationship

between a result or a symptom or an effect and its possible causes.
It is an effective tool to systematically generate ideas about causes for

problems and to present these in a structured form.
This tool was devised by Dr. Kouro Ishikawa and as mentioned earlier is
also known as Ishikawa Diagram.
A graphic tool that helps identify, sort, and display possible causes of a
problem or quality characteristic.
To obtain a good work result, we must identify the effects of various factors
and develop measures to improve the results accordingly.
When is it Used and What Result Will be Obtained?
A cause and effect diagram is mainly used to study the cause of a certain
matter.
It is also effective in assessing measures developed and can be applied to

other fields according to your needs.
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Cause and Effects Diagram
Method Usage Result
Used when clarifying a Can obtain a clear overall

cause and effects picture of causal relation.
relationship. (Used (A change in the cause
during a phase to analyse triggers a variation in the
causes.) result.)
! Used to develop counter- Can clarify the cause and

measures. effect-srelationship.
Used during a phase to Can list up all causes to

plan countermeasures. identify important
causes.
Can determine the

direction of action
(countermeasure).
Structure
Another name for the tool, as we have seen earlier, is Fish-bone Diagram
due to the shape of the completed structure.
If we continue the analogy, we can term various parts of the diagram as

spine or the backbone, large bones, middle bones and small bones as seen
in the structure of cause-and effect diagram.
The symptom or result or effect for which one wants to find causes is put in
the dark box on the right. The lighter boxes at the end of the large bones
are main groups in which the ideas are classified. Usually four to six such
groups are identified.
In a typical manufacturing problem, the groups may consist of five Ms –

Men, Machines, Materials, Method and Measurement. The six M Money may
be added if it is relevant. In some cases, environment is one of the main
groups.
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Important subgroups in each of these main groups are represented on the

middle bones and these branch off further into subsidiary causes
represented as small bones. The arrows indicate the direction of the path
from the cause to the effect.
Cause and Effect diagram is a tool that provides best results if used by a
group or team. Each individual may have a few ideas for the causes and his
thinking is restricted to those theories. More heads are needed to make a
comprehensive list of the causes. Brainstorming technique is therefore very
useful in identifying maximum number of causes.
!  
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Benefits of Using a Cause and Effect Diagram
Helps determine root causes.

Encourages group participation
Uses an orderly, easy-to-read format
Indicates possible causes of variation
Increases process knowledge
Identifies areas for collecting data.
Procedure
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11.4 Histogram
Histograms or Frequency Distribution Diagrams are bar charts showing the

distribution pattern of observations grouped in convenient class intervals
and arranged in order of magnitude. Histograms are useful in studying
patterns of distribution and in drawing conclusions about the process based
on the pattern 
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When is it Used and What Result Will be Obtained?

A histogram is mainly used to analyse the process by examining the
location of mean value in graph or degree of variation, to find a problem
point that needs to be improved.
Procedure to prepare a Histogram consists of the following steps:
1. Collect data (preferably 50 or more observations of an item).
2. Arrange all values in an ascending order.
3. Divide the entire range of values into a convenient number of groups

each representing an equal class interval. It is customary to have
number of groups equal to or less than the square root of the number of
observations. However, one should not be too rigid about this. The
reason for this cautionary note will be obvious when we see some
examples.
4. Note the number of observations or frequency in each group.
5. Draw X-axis and Y-axis and decide appropriate scales for the groups on
X-axis and the number of observations or the frequency on Y-axis.
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6. Draw bars representing the frequency for each of the groups.
7. Provide a suitable title to the Histogram.
8. Study the pattern of distribution and draw conclusion.
11.5 Control Chart
Control charts was developed by Dr. Walter A. Shewhart during 1920s

while he was with Bell Telephone Laboratories.
Variability is inherent in all manufacturing processes. These variations may

be due to two causes:
i. Random/Chance causes (unpreventable).

ii. Assignable causes (preventable).
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These charts separate out assignable causes.
Control chart makes possible the diagnosis and correction of many

productions troubles and brings substantial improvements in the quality of
the products and reduction of spoilage and rework. It tells us when to
leave a process alone as well as when to take action to correct trouble.
Basic Concepts
Data is of two types:
i. Variable – measured and expressed quantitatively

ii. Attribute – qualitative
Mean and Range

_
X — Mean is the average of a sub-group
R Range is the difference between the minimum and maximum in a

subgroup
Control Charts for Variables

Charts depleting the variations in and R with time are known as and R
charts. and R charts are used for variable data when the sample size of
the subgroup is 2-5. When the subgroup size is larger, s Charts are used
instead of R charts where s is the standard deviation of the subgroup.
Control Charts for Attributes

The control charts for attributes are p-chart, np-chart, c-chart and u-chart.
Control charts for defectives are p and np charts. P charts are used when
the sample size is constant and np charts are used when the sample size is
variable. In the case where the number of defects is the data available for
plotting, c and u charts are used. If the sample size is constant, c charts
are used and u charts are used for variable sample sizes
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11.6 Scattered Diagram
When solving a problem or analysing a situation, one needs to know the

relationship between two variables. A relationship may or may not exist
between two variables. If a relationship exists, it may be positive or
negative, it may be strong or weak and may be simple or complex.
A tool to study the relationship between two variables is known as Scatter

Diagram.
It consists of plotting a series of points representing several observations

on a graph in which one variable is on X-axis and the other variable is on Y-
axis.
If more than one set of values are identical, requiring more points at the
same spot, a small circle is drawn around the original dot to indicate
second point with the same values.
The way the points lie scattered in the quadrant gives a good indication of
the relationship between the two variables.
Variable 2
! Variable 1  
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Constructing a Scatter Diagram
1. Collect two pieces of data and create a summary table of the data.
2. Draw a diagram labelling the horizontal and vertical axes.
3. It is common that the “cause” variable be labelled on the X-axis and the
“effect” variable be labelled on the Y-axis.
4. Plot the data pairs on the diagram.
5. Interpret the scatter diagram for direction and strength.
Let us see some common patterns seen in Scatter Diagrams and the
conclusions one can draw based on these patterns.
Diagram 1 shows a random distribution of points all over the quadrant.

Such a distribution or scatter indicates a lack of relationship between the
two variables being studied.
Diagram 2 shows a random distribution of points all over the quadrant.

Such a distribution or scatter indicates a lack of relationship between the
two variables being studied.
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In Diagram 2, the points appear scattered closely along a line (shown as a

dotted line in the diagram) travelling from the Southwest to the Northeast
direction indicating that if the variable on X-axis increases, the variable on
Y-axis also increases. This is a positive relationship. As the points are very
closely scattered around the straight line, the relationship is said to be
strong.
Diagram 3, in which the points are scattered closely around a line sloping
in Northwest to Southeast direction, indicates a strong negative
relationship. A negative relationship means that the variable on Y-axis goes
down as the variable on X-axis goes up.
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Diagrams 4 and 5 shows a scatter of points loosely spread around lines in

directions similar to Diagrams 5 and 3 respectively.
Hence scatter in Diagram 4 indicates a weak positive relationship and that

in Diagram /5 indicates a weak negative relationship.
Weak relationship means that the variables are related but there are
possibly other factors besides the variable on X-axis also affecting the
variable on Y-axis. If other factors are kept constant in a controlled
experiment and the data is again plotted, it would result in a scatter
showing a strong relationship.
Diagrams 2 to 5 showed a simple linear relationship between the two

variables over the entire range. Very often, the relationship is not that
simple. The variable on Y-axis may increase up to a point as the variable
on X-axis is increased but after that it may stay the same or even
decrease.
Diagram 6 shows one such complex scatter.
Diagram 6
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11.7 Graphs
What is Graph?
A graph is “a graphical representation of data, which allows a person to
understand the meaning of these data at a glance.” Unprocessed data
simply represent a list of numbers, and finding certain tendencies or
magnitude of situation from these numbers is difficult, sometimes resulting
in an interpretational error. A graph is a effective means to monitor or
judge the situation, allowing quick and precise understanding of the
current or actual situation.
A graph is a visual and summarised representation of data that need to be

quickly and precisely conveyed to others.
When is it Used and What Results Will be Obtained?
A graph, although it is listed as one of the QC tools, is commonly used in

our daily life and is the most familiar means of assessing a situation.
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Different types of graphs used are as follows:
Sr.
Type of Graph Purpose
No.
1 Bar Graph To compare sizes of data
2 Line Graph To represent changes of data
3 Gantt Chart To plan and schedule
4 Radar Chart To represent change in data (before and

after)
5 Band Graph Same as above
6 Pie Chart Used to indicate Comparative weights
7 ISO Graph To represent data using symbols
11.8 Check sheet and Stratification
As measurement and collection of data forms the basis for any analysis,
this activity needs to be planned in such a way that the information
collected is both relevant and comprehensive.
Check sheets are tools for collecting data. They are designed specific to the
type of data to be collected. Check sheets aid in systematic collection of
data. Some examples of check sheets are daily maintenance check sheets,
attendance records, production log books, etc.
A check sheet is also effective in performing stratification (categorisation).
Stratification
Data collected using check sheets needs to be meaningfully classified. Such

classification helps gaining a preliminary understanding of relevance and
dispersion of the data so that further analysis can be planned to obtain a
meaningful output. Meaningful classification of data is called stratification.
Stratification may be by group, location, type, origin, symptom, etc. 
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Check Sheet
Method Usage Result
Used to collect data Ensures collection of

required data
Used when performing a
thorough inspection. Allows a thorough
inspection of all check
Used during a phases to items.
!
monitor the situation,
analyse causes, review Can understand
effectiveness of an action, tendencies and variations.
perform standardisation, and
implement a selected control Can record required data.
measure
!  
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When is it Used and What Results Will be Obtained?

The “common and basic principle” of quality control is stratification, i.e., to
think a matter out by breaking it into smaller portions. Stratification has a
number of useful purposes. The table below shows only a few examples of
these purposes.
Stratification
Method Usage Result
Grouping by day,   Used to observe variations Allows observation of

time, place, among strata. variations among strata.
worker,  
or process Used to identify the By performing a cause
relationship between cause analysis using the
and effect. stratified data, the
following can be
Used to identify a purpose accomplished.
! and means to serve the
purpose 1. Identification and control
of a problem
Used during phases to
monitor the situation, 2. “Division of data
analyse causes, review (obtained by using each
effectiveness of an action, QC tool) into several
perform standardisation, and groups”
implement a selected control
measure.
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11.9 Summary
All the QC tools described are summarised as follows applications-

wise:
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1. Explain the importance of each of QC tools?

2. How cause and effect diagram is constructed?
3. How Pareto Diagram is developed?
4. Explain histogram and how they are interpreted.
5. Explain the application of each tool.
References
1. http://www3.ha.org.hk/qeh/wiser/doc/7bqt.pdf
2. http://www.slideshare.net/gurmukhsingh7/7-qc-tools-training-material1
3. http://www.productivity.in/knowledgebase/TQM/c.%20Tools%20and
%20Techniques/3.1.%207QC%20Tools/7%20QC%20TOOLS.pdf
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REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
Video Lecture
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SIX SIGMA
Chapter 12
Six Sigma (6σ)
Objectives
Meaning of Six Sigma
Concepts and core elements
Methodology and tools
Difficulties and criticism
Structure:
12.1 What is Six Sigma?
12.2 Definition of Six Sigma
12.3 History of Six Sigma
12.4 Core Concept and Key Elements of Six Sigma
12.5 Six Sigma Methodology
12.6 6σ Technical Tools
12.7 Defect Matrix and Six Sigma Belts
12.8 Benefits, Difficulties and Criticisms
12.9 Summary
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SIX SIGMA
12.1 What is Six Sigma?
Globalisation and instant access to information, products and services

continue to change the way our customers conduct business.
Today’s competitive environment leaves no room for error. We must delight

our customers and relentlessly look for new ways to exceed their
expectations. This is why Six Sigma Quality has become a part of our
culture.
First, what is Six Sigma?
First, what it is not. It is not a secret society, a slogan or a cliché.
Six Sigma is a highly disciplined process that helps us focus on developing

and delivering near-perfect products and services.
Why “Sigma”? The word is a statistical term that measures how far a given
process deviates from perfection. The central idea behind Six Sigma is that
if you can measure how many “defects" you have in a process, you can
systematically figure out how to eliminate them and get as close to “zero
defects” as possible.
To achieve Six Sigma Quality, a process must produce no more than 3.4
defects per million opportunities. An “opportunity” is defined as a chance
for non-conformance, or not meeting the required specifications. This
means we need to be nearly flawless in executing our key processes.
Six sigma is a set of techniques and tools for process improvement. It was
developed by Motorola in 1986 when Jack Welch made it central to his
successful business strategy at General Electric in 1995. Today, it is used in
many industrial sectors.
Six Sigma seeks to improve the quality of process outputs by identifying

and removing the causes of defects (errors) and minimising 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 organisation who are experts in the
methods.
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SIX SIGMA
Each Six Sigma project carried out within an organisation follows a defined
sequence of steps and has quantified value targets, for example: reduce
process cycle time, reduce costs, increase customer satisfaction, and
increase profits.
The term Six Sigma originated from terminology associated with

manufacturing, specifically terms associated with statistical modelling 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),
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.
The fundamental objective of the Six Sigma methodology is the

implementation of a measurement-based strategy that focuses on process
improvement and variation reduction through the application of Six Sigma
improvement projects.
Six Sigma is a data-driven methodology, and requires accurate data

collection for the processes being analysed. Six Sigma is about putting
results on Financial Statements.
Six Sigma is a business-driven, multi-dimensional structured approach to:

Improving processes
Lowering defects
Reducing process variability
Reducing costs
Increasing customer satisfaction
Increased profits.
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SIX SIGMA
12.2 Definition of Six Sigma
The answer is that Six Sigma is lots of things.
First, Six Sigma is arguably a very clever way of branding and packaging
many aspects of Total Quality Management that exist in their own right,
regardless of the development of Six Sigma.
Six Sigma is lots of different things because it had different meanings over
time, and also because it is now interpreted in increasingly different ways.
And Six Sigma is still evolving.
Motorola Inc., who first developed the methodology in the mid-late 1980's
and who provide extensive Six Sigma training and consultancy services,
provide the following definitions:
Six Sigma According to Motorola
Six Sigma has evolved over the last two decades and so has its definition.
Six Sigma has literal, conceptual, and practical definitions. At Motorola
University (Motorola's Six Sigma Training and Consultancy Division), we
think about Six Sigma at three different levels:
As a metric
As a methodology
As a management system
Essentially, Six Sigma is all three at the same time.
Six Sigma as a Metric:
The term “Sigma” is often used as a scale for levels of ‘goodness’ or

quality. Using this scale, ‘Six Sigma’ equates to 3.4 defects per one million
opportunities (DPMO). Therefore, Six Sigma started as a defect reduction
effort in manufacturing and was then applied to other business processes
for the same purpose.
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SIX SIGMA
Six Sigma as a Methodology:

As Six Sigma has evolved, there has been less emphasis on the literal
definition of 3.4 DPMO, or counting defects in products and processes. Six
Sigma is a business improvement methodology that focuses an
organisation on:
lUnderstanding and managing customer requirements
Aligning key business processes to achieve those requirements
Utilising rigorous data analysis to minimise variation in those processes
Driving rapid and sustainable improvement to business processes.
At the heart of the methodology is the DMAIC model for process

improvement. DMAIC is commonly used by Six Sigma project teams and is
an acronym for:
Define opportunity
Measure performance
Analyse opportunity
Improve performance
Control performance.
Six Sigma Management System:

Through experience, Motorola has learned that disciplined use of metrics
and application of the methodology is still not enough to drive desired
breakthrough improvements and results that are sustainable over time. For
greatest impact, Motorola ensures that process metrics and structured
methodology are applied to improvement opportunities that are directly
linked to the organisational strategy. When practiced as a management
system, Six Sigma is a high performance system for executing business
strategy. Six Sigma is a top-down solution to help organisations:
Align their business strategy to critical improvement efforts

Mobilise teams to attack high impact projects
Accelerate improved business results
Govern efforts to ensure improvements are sustained
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SIX SIGMA
The Six Sigma Management System drives clarity around the business
strategy and the metrics that most reflect success with that strategy. It
provides the framework to prioritise resources for projects that will improve
the metrics, and it leverages leaders who will manage the efforts for rapid,
sustainable, and improved business results
General Electric (GE), the first large-scale adopters and advocates of Six
Sigma after Motorola, and considered by most experts to have been
responsible for Six Sigma's rapidly achieved high profile, provide the
following definitions of Six Sigma:
Six Sigma According to General Electric

Six Sigma is a highly disciplined process that helps us focus on developing
and delivering near-perfect products and services.
Why ‘Sigma’? The word is a statistical term that measures how far a given
process deviates from perfection. The central idea behind Six Sigma is that
if you can measure how many ‘defects’ you have in a process, you can
systematically figure out how to eliminate them and get as close to ‘zero
defects’ as possible.
To achieve Six Sigma Quality, a process must produce no more than 3.4
defects per million opportunities. An ‘opportunity’ is defined as a chance for
non-conformance, or not meeting the required specifications. This means
we need to be nearly flawless in executing our key processes.
12.3 History of Six Sigma
Here’s a brief history of Six Sigma, and the Six Sigma name.
Since the 1920s the word ‘sigma’ has been used by mathematicians and
engineers as a symbol for a unit of measurement in product quality
variation. (Note it’s sigma with a small ‘s’ because in this context sigma is
a generic unit of measurement.)
In the mid-1980s engineers in Motorola Inc, in the USA used ‘Six Sigma’ as
an informal name for an in-house initiative for reducing defects in
production processes, because it represented a suitably high level of
quality. (Note here it'' Sigma with a big ‘S’ because in this context Six
Sigma is a 'branded' name for Motorola's initiative.)
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SIX SIGMA
(Certain engineers – there are varying opinions as to whether the very first
was Bill Smith or Mikal Harry – felt that measuring defects in terms of
thousands was an insufficiently rigorous standard. Hence, they increased
the measurement scale to parts per million, described as 'defects per
million', which prompted of use the the ‘six sigma’ terminology and
adoption of the capitalised ‘Six Sigma’ branded name, given that six sigma
was deemed to equate to 3.4 parts – or defects – per million.)
In the late – 1980s, following the success of the above initiative, Motorola
extended the Six Sigma methods to its critical business processes, and
significantly Six Sigma became a formalised in-house ‘branded’ name for a
performance improvement methodology, ie., beyond purely ‘defect
reduction’, in Motorola Inc.
In 1991, Motorola certified its first ‘Black Belt’ Six Sigma experts, which
indicates the beginnings of the formalisation of the accredited training of
Six Sigma methods.
In 1991 also, Allied Signal, (a large avionics company which merged with
Honeywell in 1999), adopted the Six Sigma methods, and claimed
significant improvements and cost savings within six months.
In 1995, General Electric’s CEO Jack Welch decided to implement Six

Sigma in GE, and by 1998 GE claimed that Six Sigma had generated over
three-quarters of a billion dollars of cost savings.
By the mid-1990s, Six Sigma had developed into a transferable 'branded'

corporate management initiative and methodology, notably in General
Electric and other large manufacturing corporations, but also in
organisations outside the manufacturing sector.
By the year 2000, Six Sigma was effectively established as an industry in

its own right, involving the training, consultancy and implementation of Six
Sigma methodology in all sorts of organisations around the world.
That is to say, in a little over ten years, Six Sigma quickly became not only
a hugely popular methodology used by many corporations for quality and
process improvement.
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Everything we do can be considered a process or a part of the process.
Every process can be characterised by average performance and variation.
General Electric (GE), the first large-scale adopters and advocates of Six
Sigma after Motorola, and considered by most experts to have been
responsible for Six Sigmas rapidly achieved high profile.
The International Organisation for Standardisation (ISO) has published ISO

13053:2011 defining the six sigma process.
12.4 Core Concept and Key elements of Six Sigma
Many people consider the model to be capable of leveraging huge

performance improvements and cost savings.
Teams and team leaders are an essential part of the Six Sigma
methodology.
Six Sigma is therefore a methodology which requires and encourages team

leaders and teams to take responsibility for implementing the Six Sigma
processes.
Significantly, these people need to be trained in Six Sigma's methods –

especially the use of the measurement and improvement tools, and in
communications and relationship skills, necessary to involve and serve the
needs of the internal and external customers and suppliers that form the
critical processes of the organization's delivery chains.
Training is, therefore, also an essential element of the Six Sigma

methodology, and lots of it.
Six Sigma teams and notably Six Sigma team leaders (‘Black Belts’) use a
vast array of tools at each stage of Six Sigma implementation to define,
measure, analyse and control variation in process quality, and to manage
people, teams and communications.
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When an organisation decides to implement Six Sigma, first the executive

team has to decide the strategy — which might typically be termed an
improvement initiative, and this base strategy should focus on the essential
processes necessary to meet customer expectations.
A team of managers (‘Black Belts’ normally) who ‘own’ these processes is

responsible for:
identifying and understanding these processes in detail, and also
understanding the levels of quality (especially tolerance of variation) that

customers (internal and external) expect, and then
measuring the effectiveness and efficiency of each process performance -

notably the ‘sigma’ performance – i. the number of defects per million
operations (pro-rate if appropriate of course).
The theory is entirely logical: understanding and then improving the most
important ‘delivery-chain’ processes will naturally increase efficiency,
customer satisfaction, competitive advantage, and profitability.
Concept
The Goal:
To produce goods and services at six sigma levels.
As organisation moves toward six sigma quality levels it will result:

1. Result in elimination of defects.
2. Reduce production and development costs.
3. Reduce cycle times and inventory levels .
4. Increase profit margin and improve customer satisfaction.
The Vision
Drive industries to design and produce products/services to Six Sigma
standards.
The Strategy
Use a data-driven structured approach to attack defects to improve the
sigma level of goods and services.
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Application
Useful in any enterprise that provides products or services for companies.
!
Key Elements
There are three key elements of Six Sigma Process Improvement.

1. Customers
2. Processes
3. Employees
The Customer
Customers define quality. They expect performance, reliability, competitive
prices, on-time delivery, service, clear and correct transaction processing
and more.
Today, delighting a customer is a necessity. Because if we don’t do it,

someone else will!
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The Processes
Defining Processes and defining Metrics and Measures for Processes is the
key element of Six Sigma.
Quality requires to look at a business from the customer’s perspective. In

other words, we must look at defined processes from the outside-in.
By understanding the transaction life cycle from the customer’s needs and
processes, we can discover what they are seeing and feeling. This will give
a chance to identify weak area within a process and then we can improve
them.
The Employees
The company must involve all employees in Six Sigma program. The
company must provide opportunities and incentives for employees to focus
their talents and ability to satisfy customers.
This is important to six sigma that all team members should have a well-
defined role with measurable objectives. 
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Statistical View of Six Sigma
12.5 Six Sigma Methodology
Six Sigma has following two key methodologies:
DMAIC
Refers to a data-driven quality strategy for improving processes. This
methodology is used to improve an existing business process.
DMADV
Refers to a data-driven quality strategy for designing products and
processes. This methodology is used to create new product designs or
process designs in such a way that it results in a more predictable, mature
and defect-free performance.
There is one more methodology called DFSS – Design For Six Sigma. DFSS
is a data-driven quality strategy for designing design or re-design a
product or service from the ground up.
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Sometimes, a DMAIC project may turn into a DFSS project because the
process in question requires complete redesign to bring about the desired
degree of improvement.
DMAIC
Define
Define the Problem or Project Goals that needs to be addressed.
There are five high-level steps in the application of Six Sigma to improve
the quality of output. The first step is Define.
During define phase, following four major tasks are undertaken.
1. Project team is formed
Perform two activities:
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Determine who needs to be on the team.

What roles each person will perform
Picking the right team members can be a difficult decision, especially if a

project involves a large number of departments. In such projects, it could
be wise to break them down into smaller pieces and work toward
completion of a series of phased projects.
2. Document Customers’ Core Business Processes
Every project has customers. A customer is the recipient of the product or

service of the process targeted for improvement. Every customer has one
or multiple needs from his or her supplier. For each need provided for,
there are requirements for the need. The requirements are the
characteristics of the need that determine whether the customer is happy
with the product or service provided. So, document customer needs and
related requirements.
A set of business processes is documented. These processes will be

executed to meet customer's requirements and to resolve their Critical to
Quality issues.
3. Develop a Project Charter
This is a document that names the project, summarizes the project by

explaining the business case in a brief statement, and lists the project
scope and goals. A project charter can have the following components:
Project Name
Business Case
Project Scope
Project Goals
Milestones
Special Requirements
Special Assumptions
Roles and responsibilities of the project team
4. Develop the SIPOC Process Map

A process is defined as the series of steps and activities that take inputs,
add value, and produce an output.
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SIPOC is a process map that identifies all the following elements of a

project:
Suppliers
Input
Process
Output
Customers
The SIPOC process map is essential for identifying:

The way processes occur currently.
How those processes should be modified and improved throughout the
remaining phases of DMAIC.
Conclusion
At the conclusion of the design phase, you should know who the customer
or end-user is, their resistance issues, and requirements. You should also
have a clear understanding of goals and the scope of the project including
budget, time constraints, and deadlines.
Measure
Measure the problem and process from which it was produced.
During Measure Phase, the overall performance of the Core Business

Process is measured.
There are three important part of Measure Phase.
1. Data Collection Plan and Data Collection

A data collection plan is prepared to collect required data. This plan
includes what type of data needs to be collected, what are the sources of
data etc., The reason to collect data is to identify areas where current
processes need to be improved.
You collect data from three primary sources: input, process, and output.
The input source is where the process is generated.
Process data refers to tests of efficiency: the time requirements, cost,

value, defects or errors, and labour spent on the process.
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Output is a measurement of efficiency.
2. Data evaluation
At this stage, collected data is evaluated and sigma is calculated. This gives
approximate number of defects.
A Six Sigma defect is defined as anything outside of customer

specifications.
A Six Sigma opportunity is the total quantity of chances for a defect.
First, we calculate Defects Per Million Opportunities (DPMO) and based on

that a Sigma is decided from a predefined table:
As stated above, here Number for defects is total number of defects found,
Number of Units is the number of units produced and number of
opportunities means the number of ways to generate defects.
For example: The food ordering delivery project team examines 50

deliveries and finds out the following:
Delivery is not on time (13)

Ordered food is not according to the order (3)
Food is not fresh (0)
So, now, DPMO will be as follows:
According to the Yield to Sigma Conversion Table given 106,666.7 defects

per million opportunities is equivalent to a sigma performance of between
2.7 and 2.8.
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This is the method used for measuring results as we proceed through a

project. This beginning point enables us to locate the cause and effect of
those processes and to seek defect point so that the procedure can be
improved.
3. Failure Mode and Effects Analysis – FMEA

The final segment of the measure phase is called FMEA. This refers to
preventing defects before they occur.
The FMEA process usually includes rating possible defects, or failures, in

three ways:
The likelihood that something will go wrong.

The ability to detect a defect.
The level of severity of the defect.
You may use a rating scale. For example, rate each of these three areas
from 1 to 10, with 1 being the lowest FMEA level and 10 being the highest.
The higher the level, the more severe the rating. So, a high FMEA would
indicate the need to devise and implement improved measuring steps
within the overall process. This would have the effect of preventing defects.
Clearly, there is no need to spend a lot of time on this procedure if the

likelihood of a defect is low.
Analyse
Analyse data and process to determine root causes of defects and

opportunities.
Six Sigma aims to define the causes of defects, measure those defects,
and analyse them so that they can be reduced.
We will consider five specific types of analysis that will help to promote the
goals of the project.
These are source, process, data, resource, and communication analysis.
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1. Source Analysis
This is also called root cause analysis and attempts to find defects that are
derived from the sources of information or work generation. After finding
the root cause of the problem, attempts are made to resolve the problem
before we expect to eliminate defects from the product.
The Three Steps to Root Cause Analysis
The open step: During this phase of root cause analysis, the project
team brainstorms all the possible explanations for current sigma
performance.
The narrow step: During this phase, the project team narrows the list
of possible explanations for current sigma performance.
The close step: During this phase, the project team validates the
narrowed list of explanations that explain sigma performance.
2. Process Analysis
Analyse the numbers to find out how well or poorly the processes are
working, compared to what’s possible and what the competition is doing.
Process analysis includes creating a more detailed process map and

analysing the more detailed map for where the greatest inefficiencies exist.
The source analysis is often difficult to distinguish from process analysis.

The process refers to the precise movement of materials, information, or
requests from one place to another.
3. Data Analysis
Use of measures and data (those already collected or new data gathered in
the analyse phase) to discern patterns, tendencies or other factors about
the problem that either suggest or prove/disprove possible cause of the
problem.
The data itself may have defect. There may be a case when product or
deliverable do not provide all the needed information. So, data is analysed
to find out the defects and attempts are made to resolve the problem
before we expect to eliminate defects from the product.
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4. Resource Analysis
We also need to ensure that employees are properly trained in all
departments that affect the process. If training is inadequate, you want to
identify that as a cause of defects.
Other resources include raw materials needed to manufacture, process,

and deliver the goods. For example, if the Accounting Department is not
paying vendor bills on time and, consequently, the vendor holds up a
shipment of shipping supplies, this becomes a resource problem.
5. Communication analysis
One problem common to most processes high in defects, is poor
communication. The classic interaction between a customer and a retail
store is worthy of study because many of the common communication
problems are apparent in this case.
The same type of problems occur with the internal customer as well, even
though we may not recognise the sequence of events as a customer
service problem.
The exercise of looking at issues from both points of view is instructive. A

vendor wants payment according to agreed-upon terms, but the
Accounting Department wants to make its batch processing uniform and
efficient. The disconnect between these type of groups demonstrates the
importance of communication analysis.
Conclusion
Analysis can take several forms. Some Six Sigma programs like to use a lot
of diagrams and worksheets, and others prefer discussion and list making.
There are many tools which can be used to perform analysis like Box Plot,
Cause and Effect Diagram, Progressive Analysis, Ranking, Pareto Analysis,
Prioritisation Matrix, Value Analysis etc. The proper procedure is the one
that works best for your team, provided that the end result is successful.
Improve
Improve the process by finding solutions to fix, diminish, and prevent

future problems.
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If the project team does a thorough job in the root causation phase of
Analysis, the Improve phase of DMAIC can be quick, easy, and satisfying
work.
The objective of Improve Phase is to identify improvement breakthroughs,

identify high gain alternatives, select preferred approach, design the future
state, determine the new Sigma level, perform cost/benefit analysis,
design dashboards/scorecards, and create a preliminary implementation
plan.
Identify Improvement Breakthroughs:
- Apply idea-generating tools and techniques to identify potential

solutions that eliminate root causes.
Identify/Select High Gain Alternatives:
- Develop criteria to evaluate candidate improvement solutions.
- Think systematically and holistically.
- Prioritise and evaluate the candidate solutions against the solution

evaluation criteria.
- Conduct a feasibility assessment for the highest value solutions.
- Develop preliminary solution timelines and cost-benefit analysis to aid

in recommendation presentation and future implementation planning.
Improvement can involve a simple fix once we discover the causes of

defects. However, in some cases, we may need to employ additional tools
as well. These include:
Solution alternatives
Experiments with solution alternatives
Planning for future change
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Control
Implement, control, and sustain the improvements solutions to keep the

process on the new course.
The last phase of DMAIC is control, which is the phase in which we ensure
that the processes continue to work well, produce desired output results,
and maintain quality levels. You will be concerned with four specific aspects
of control, which are:
1. Quality Control
The ultimate purpose in control is overall assurance that a high standard of

quality is met. The customers expectations depend on this, so control is
inherently associated with quality.
Since the purpose to Six Sigma is to improve overall process by reducing

defects, quality control is the essential method for keeping the whole
process on track; for enabling us to spot trouble and fix it; and for judging
how effectively the project was executed and implemented.
Quality is at the heart of the Six Sigma philosophy. Reducing defects has
everything to do with striving for perfection. Whether we reach perfection
or not, the effort defines our attitude toward quality itself.
2. Standardisation
One feature of smooth processing is to enable processes to go as smoothly

as possible. This usually means standardization. In a manufacturing
environment, the value of standardization has been proven over and over.
We need to devise a control feature to processes so that the majority of

work is managed in a standardized manner.
3. Control Methods and Alternatives
The development of a new process of any change to an existing process

requires the development of procedures to control work flow.
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When a process cannot be managed in the normal manner, we need to

come up with alternatives short of forcing compliance to the standardised
method.
4. Responding When Defects Occur
The final step in a control process is knowing how to respond once a defect
is discovered.
The weak links in the procedure, where defects are most likely to occur,
can and should be monitored carefully so that defects can be spotted and
fixed before the process continues.
The response to a defect may be to prevent a discovered flaw from

becoming a defect at all. In the best designed systems, defects can be
reduced to near zero, so that we may actually believe that Six Sigma can
be attained.
Conclusion
The project team determines how to technically control the newly improved
process and creates a response plan to ensure the new process maintains
the improved sigma performance.
DMADV
Define
Define the Problem or Project Goals that needs to be addressed.
Company must identify the customer and which type of a product and hope
from it. These are analyse by using flow causes and effect diagrams, check
sheets and pareto analysis.
Measure
Measure and determine customer’s needs and specifications.
Company will collect the baseline data to determine where the process
stands as compared to where it needs to be. And also see the critical to
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quality characteristics and estimate current process capability. Then find

out the current sigma level according to those identified characteristics that
are mostly important to the customer.
Analyse
Analyse the process for meet the customer needs.
This shows the amount of improvement necessary to make the Critical to

quality characteristics the best in the industry. For this phase, company use
some descriptive statistical methods like mean, mode, median, etc.
Design
Design a process that will meet customers’ needs.
Design details, optimise the design, and plan for design verification. This
phase may require simulations.
Verify
Verify the design performance and ability to meet customer needs.
Verify the design, set up pilot runs, implement the production process and
hand it over to the process owner(s).
12.6 Six Sigma Technical Tools
This section will give an overview of the ten most important technical tools
which a Six Sigma team member needs to master as they progress
through the DMAIC methodology.
While these tools are considered technical in nature, most of them are
relatively easy to learn and apply. They are covered in the order they are
used in the DMAIC methodology.
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Tool #1 The Critical to Quality (CTQ) Tree
The critical to quality tree is used during the Design Phase of DMAIC. It is
used to brainstorm and validate the needs and requirements of the
customer of the process targeted for improvement.
The steps in creating a CTQ tree are as follows:
Identify the customer of the process targeted for improvement.
Identify the need of the customer.
Identify the first level of requirements of the need, that is, some
characteristics of the need that determines whether the customer is
happy with the need.
Drill down to more detailed level(s) of the requirement, if necessary.
Tool #2 The Process Map
During the Define phase, the project team creates the first of several
process maps. A process map is a picture of the current steps in the
process targeted for improvement.
A process map has five major categories of work from the identification of
the suppliers of the process, the inputs the suppliers provide, the name of
the process, the output of the process, and the customers of the process.
Each of these steps is summarised as SIPOC to indicate to the team the
steps that must be conducted to complete a process map.
Tool #3 The Histogram
This tool will be used during the Analysis stage of DMAIC. The project team
will review data collected during the Measure stage of DMAIC.
It is often suggested that the data be organised into graphs or charts to

more easily understand what the data is saying about the process.
Data is of two types – Discrete data (go/no go, fail or pass) and continuous
data (time, hight etc.).
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Tool #4 The Pareto Chart
Histogram is useful for continuous data same way when the data is
discrete, most teams create a Pareto chart. Discrete data is counted data -
go/no-go, off/on, yes/no, and defect/no defect type data.
An Italian economist Vilfredo Pareto, in the sixteenth century proved

mathematically that 80% of the world’s wealth was controlled by 20% of
the population. This 80-20 rule eventually proved applicable in arenas
other than economics.
When dealing with discrete data, the project team should create reason
codes for why a defect occurs and count and categorize the data into these
reason codes and a pareto chart should be prepared.
Tool #5 The Process Summary Worksheet
The goal of a Six Sigma project team is to improve effectiveness and

efficiency. Efficiency is measured in terms of cost, time, labour, or value.
The process summary worksheet is a “roll-up” of the subprocess map

indicating which steps add value in the process and which steps don't add
value.
Tool #6 The Causes and Effect Diagram
The most important tool to assist the project team in determining root
causation is the cause-effect diagram. This tool captures all the ideas of
the project team relative to what they feel are the root causes behind the
current sigma performance and finally help in finding a root cause of the
problem.
Tool #7 The Scatter Diagram
Once ideas have been prioritised after use of the causes and effect
diagram, the most important thing the project team does is validate the
remaining ideas with fact and data.
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The scatter diagram takes an idea about root causation and tracks
corresponding data in the response the team is trying to improve. The
team can validate an idea about root causation through one of three
methods – using basic data collection, a designed experiment, or through
the scatter diagram.
Tool #8 The Affinity Diagram
An affinity diagram is used to help sort and categorise a large number of

ideas into major themes or categories. It is especially useful when the
team is ready to brainstorm solutions in the Improve stage of DMAIC. The
steps in creating an affinity diagram are:
Have each team member write one idea per Post-it note and post on a
wall randomly.
As ideas are read off for clarification, sort ideas into similar groups.
Create a ‘header’ card for each general category of ideas below it.
Tool #9 The Run Chart

We have discussed the histogram and Pareto chart. Think of both of these
tools as similar to a camera where a snapshot of the process has been
taken. But the run chart is similar to a camcorder, recording some process
element over time.
Tool #10 The Control Chart

Similar to a run chart, a control chart uses the data from a run chart to
determine the upper and lower control. The critical to quality tree is used
during the Design Phase of DMAIC. It is used to brainstorm and validate
the needs and requirements of the customer of the process targeted for
improvement.
Conclusion
We saw 10 major technical tools a project team member uses during the
time they are on a Six Sigma team. These are not the only tools a Six
Sigma team may use. However, the tools covered here are those that are
most common for every team member to be aware of and knowledgeable
about.
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There are generally four classes of software used to support Six Sigma:
Analysis tools, which are used to perform statistical or process analysis
Program management tools, used to manage and track a corporation’s

entire Six Sigma program
DMAIC and Lean online project collaboration tools for local and global
teams
Data Collection tools that feed information directly into the analysis tools
and significantly reduce the time spent gathering data.
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12.7 Defect Matrix and Six Sigma belts
Six Sigma defect is defined as anything outside of customer specifications.
A Six Sigma opportunity is the total quantity of chances for a defect.
Here are various formulae to measure different metrics related to Six

Sigma Defects
Defects Per Unit (DPU) Total Number of Defects

Number of Product Units
The probability of getting ‘r’ defects in a sample having a given DPU rate
can be predicted with the Poisson Distribution.
Total Opportunities (TO)
TO = Total Number of Product Units × Opportunities
Defects Per Opportunity (DPO)
DPO - Total Number of Defects

Total Opportunity
Defects Per Million Opportunities (DPMO)
DPMO = DPO × 1,000,000
Defects Per Million Opportunities or DPMO can be then converted to sigma

values using Yield to Sigma Conversion Table given below.
According to the conversion table,
6 Sigma = 3.4 DPMO
How to Find Your Sigma Level?

Clearly define the customer’s explicit requirements.
Count the number of defects that occur.
Determine the yield – percentage of items without defects.
Use the conversion chart to determine DPMO and Sigma Level.
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Simplified Sigma Conversion Table (Based on Conversion Table

Given Below)
If your yield is Your DPMO is Your Sigma is
30.9% 6,90,000 1.0
62.9% 3,08,000 2.0
93.3 66,800 3.0
99.4 6,210 4.0
99.98 320 5.0
99.9997 3.4 6.0
Yield to Sigma Conversion Table

Defects Per Million
Yield % Sigma
Opportunities
99.9997 6.00 3.4
99.9995 5.92 5
99.9992 5.81 8
99.9990 5.76 10
99.9980 5.61 20
99.9970 5.51 30
99.9960 5.44 40
99.9930 5.31 70
99.9900 5.22 100
99.9850 5.12 150
99.9770 5.00 230
99.9670 4.91 330
99.9520 4.80 480
99.9320 4.70 680
99.9040 4.60 960
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99.8650 4.50 1350
99.8140 4.40 1860
99.7450 4.30 2550
99.6540 4.20 3460
99.5340 4.10 4660
99.3790 4.00 6210
99.1810 3.90 8190
98.9300 3.80 10700
98.6100 3.70 13900
98.2200 3.60 17800
97.7300 3.50 22700
97.1300 3.40 28700
96.4100 3.30 35900
95.5400 3.20 44600
94.5200 3.10 54800
93.3200 3.00 66800
91.9200 2.90 80800
90.3200 2.80 96800
88.5000 2.70 115000
86.5000 2.60 135000
84.2000 2.50 158000
81.6000 2.40 184000
78.8000 2.30 212000
75.8000 2.20 242000
72.6000 2.10 274000
69.2000 2.00 308000
65.6000 1.90 344000
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61.8000 1.80 382000
58.0000 1.70 420000
54.0000 1.60 460000
50.0000 1.50 500000
46.0000 1.40 540000
43.0000 1.32 570000
39.0000 1.22 610000
35.0000 1.11 650000
31.0000 1.00 690000
28.0000 0.92 720000
25.0000 0.83 750000
22.0000 0.73 780000
19.0000 0.62 810000
16.0000 0.51 840000
14.0000 0.42 860000
12.0000 0.33 880000
10.0000 0.22 900000
8.0000 0.09 920000
Six Sigma Belts
3 levels (3 belts)
Based on level of competency in understanding and applying related tools.
1. Green Belt: Basic analytical tool, works on less complex projects
2. Black Belt: Emphasise on application and analysis, works projects with

the help from green belt.
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3. Master Black Belt: Understanding application and statistically theory

behind application, trains other belts, lead project review.
Actual definitions and competencies for each belt can vary by organisation
and training institutions.
12.8 Benefits, Difficulties and Criticisms
Benefits
1. Defined process for problem solving.
2. Proven methodology for problem solving.
3. Consistency with results.
4. Focus on bottom line which encourages credibility/support from top

management.
5. Significant financial results in 4-8 months.
6. Accelerating fast breakthrough performance.
7. Ensuring Six Sigma is an extension of the Corporate culture, not the

program of the month.
8. Results first, then culture change.
Difficulties
1. Adoption requires cultural change.
2. Top management must be patient-there is no quick fix.
3. Six sigma is about getting right answer, not just any answer.
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Criticism
1. There is nothing new. It only proves defects and defectives counts offer
tangible, measurable results.
2. It is corrective action system rather than taking a preventive and

proactive approach to problems.
3. It is merely about appraisal system and that appraisal programs aren’t

useful. In reality, appraisals are great tools for identifying and tracking
improvements, which is critical to any project.
4. Critics have suggested that Six Sigma did not bring quality improvement
in all the organisations where it was implemented.
Organisations Adopting Six Sigma
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12.9 Summary
We can summarise following points:
Six Sigma is a philosophy of quality improvement.
Six sigma is 3.4 defects in one million opportunities (DPMO).
Components of Six Sigma are Customer, Process and Employees.
Six Sigma implementation requires following roles:

- Business Leader
- Sponsor
- Black Belt
- Master Black Belt
- Green Belt
Six Sigma generic cycles includes Define, Measure, Analyse, Improve and
Control Phases.
Six Sigma is Customer focus, Customer focus, and Customer focus.
When applied correctly, DMAIC will produce consistently better results

than any other method,
“New Culture” at many organisations today.
A Six Sigma approach works.
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1. What is six sigma?
2. What are various definitions ?
3. Which company developed six sigma and which company implemented

it?
4. Describe core concept and basic elements of six sigma?
5. Describe six sigma methodologies.
6. Described SIPOC process mapping.
7. Describe DMADV.
8. Explain the various tools used in six sigma.
9. Describe various types of belts and their functions in six sigma.
10.Describe how to calculate DPMO.
11. What are the benefits and difficulties of six sigma?
! !222
SIX SIGMA
References
1. Six Sigma — GE
2. Six Sigma — Wikipedia
3. Six Sigma
4. Six Sigma Tutorial
5. Extracts Courtesy of Six Sigma Quality Group
6. Six Sigma System Principle by Joel Cutcher Greshenfeld
7. Six Sigma — business ball.com.
! !223
SIX SIGMA
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
Video Lecture - Part 2 
! !224
LEAN PRODUCTION SYSTEM
Chapter 13
Lean Production System
Objectives
Meaning of Lean production
Principles and key lean production technique
Lean Production system and implementation stages
Advantages and disadvantages
Structure:
13.1 Introduction
13.2 Overview and Purpose
13.3 Concept
13.4 Principles of Lean Production
13.5 Key Lean Production Methodology
13.6 Lean Production System
13.7 Implementation Stages and Process
13.8 Advantages and Disadvantages of Lean Production Systems
13.9 Summary
! !225
13.1 Introduction
Lean manufacturing, lean enterprise, or lean production, often simply,

“lean”, is a production practice that considers the expenditure of resources
for any goal other than the creation of value for the end customer to be
wasteful, and thus a target for elimination.
Working from the perspective of the customer who consumes a product or

service, “value” is defined as any action or process that a customer would
be willing to pay for.
Essentially, lean is centered on preserving value with less work.
Lean manufacturing is a management philosophy derived mostly from the

Toyota Production System (TPS) and identified as “lean” only in the 1990s.
TPS is renowned for its focus on reduction of the original Toyota seven
wastes to improve overall customer value, but there are varying
perspectives on how this is best achieved.
The steady growth of Toyota, from a small company to the world’s largest
automaker, has focused attention on how it has achieved this success.
The core idea is to maximize customer value while minimising waste.

Simply, lean means creating more value for customers with fewer
resources.
A lean organisation understands customer value and focuses its key

processes to continuously increase it.
The ultimate goal is to provide perfect value to the customer through a

perfect value creation process that has zero waste.
To accomplish this, lean thinking changes the focus of management from

optimizing separate technologies, assets, and vertical departments to
optimising the flow of products and services through entire value streams
that flow horizontally across technologies, assets, and departments to
customers.
! !226
Eliminating waste along entire value streams, instead of at isolated points,

creates processes that need less human effort, less space, less capital, and
less time to make products and services at far less costs and with much
fewer defects, compared with traditional business systems.
Companies are able to respond to changing customer desires with high

variety, high quality, low cost, and with very fast throughput times. Also,
information management becomes much simpler and more accurate.
Lean production system is the western term for Toyota Production System.
This production philosophy is now widely used in auto industry around the
world.
This system has been modified everywhere in the auto industry, adapted to
some extent on the local industrial situation or practices, however its core
principles remain the same.
This system is not only used in auto industry but also in other non-auto
industries involved in assembling process.
13.2 Overview and Purpose
Overview
Lean Manufacturing is sometimes called the Toyota Production System

(TPS) because Toyota Motor Company’s Eiji Toyoda and Taiichui Ohno are
given credit for its approach and innovations.
! !227
!
Lean principles are derived from the Japanese manufacturing industry. The
term was first coined by John Krafcik in his 1988 article, “Triumph of the
Lean Production System,” based on his master's thesis at the MIT Sloan
School of Management.
Krafcik had been a quality engineer in the Toyota-GM NUMMI joint venture
in California before coming to MIT for MBA studies. Krafcik’s research was
continued by the International Motor Vehicle Program (IMVP) at MIT.
For many, lean is the set of "tools" that assist in the identification and
steady elimination of waste (muda). As waste is eliminated, quality
improves while production time and cost are reduced.
A non-exhaustive list of such tools would include: SMED, Value Stream

Mapping, Five S, Kanban (pull systems), poka-yoke (error-proofing), Total
Productive Maintenance, elimination of time batching, mixed model
processing, Rank Order Clustering, single point scheduling, redesigning
working cells, multi-process handling and control charts (for checking
mura).
! !228
There is a second approach to lean manufacturing, which is promoted by

Toyota, called The Toyota Way, in which the focus is upon improving the
"flow" or smoothness of work, thereby steadily eliminating mura
(“unevenness”) through the system and not upon ‘waste reduction' per se.
Techniques to improve flow include production levelling, “pull” production

(by means of kanban). This is a fundamentally different approach from
most improvement methodologies, which may partially account for its lack
of popularity.
The difference between these two approaches is not the goal itself, but
rather the prime approach to achieving it. The implementation of smooth
flow exposes quality problems that already existed, and thus waste
reduction naturally happens as a consequence. The advantage claimed for
this approach is that it naturally takes a system-wide perspective, whereas
a waste focus sometimes wrongly assumes this perspective.
Both lean and TPS can be seen as a loosely connected set of potentially
competing principles whose goal is cost reduction by the elimination of
waste.
These principles include: Pull processing, Perfect first-time quality, Waste

minimization, Continuous improvement, Flexibility, Building and
maintaining a long-term relationship with suppliers, Autorotation, Load
levelling and Production flow and Visual control. Thus, what one sees today
is the result of a ‘need’ driven learning to improve where each step has
built on previous ideas and not something based upon a theoretical
framework.
Toyota's view is that the main method of lean is not the tools, but the
reduction of three types of waste: muda (“non-value-adding work”), muri
(“overburden”), and mura (“unevenness”), to expose problems
systematically and to use the tools where the ideal cannot be achieved.
From this perspective, the tools are workarounds adapted to different
situations, which explains any apparent incoherence of the principles
above.
! !229
Purpose of Lean
The purpose of lean is to remove all forms of waste from the value stream.
Waste includes cycle time, labour, materials, and energy.
The chief obstacle is the fact that waste often hides in plain sight, or is
built into activities.
13.3 Concept
At the base, we have operational stability, which means creating

consistency in methods and tasks, equipment, workplace organisation, and
output of work.
There are two pillars that we speak of as well. Just-in-time means

providing the next downstream customer with what they need, when they
need it and in the right quantity.
Built-in Quality or Quality at the Source, the second pillar, essentially

means never knowingly passing defective product or information to the
next downstream customer.
These concepts, combined with respect for people and a culture of

continuous improvement, lead to the best quality, lowest cost, and shortest
lead time products and services.
! !230
If production flows perfectly (meaning it is both “pull” and with no

interruptions), then there is no inventory; if customer valued features are
the only ones produced, then product design is simplified and effort is only
expended on features the customer values.
The other of the two TPS pillars is the very human aspect of autorotation,
whereby automation is achieved with a human touch. In this instance, the
“human touch” means to automate so that the machines/systems are
designed to aid humans in focusing on what the humans do best.
! !231
Lean implementation is therefore focused on getting the right things to the

right place at the right time in the right quantity to achieve perfect work
flow, while minimizing waste and being flexible and able to change.
These concepts of flexibility and change are principally required to allow

production leveling (Heijunka), using tools like SMED.
The flexibility and ability to change are within bounds and not open-ended,
and therefore often not expensive capability requirements. More
importantly, all of these concepts have to be understood, appreciated, and
embraced by the actual employees who build the products and therefore
own the processes that deliver the value.
The cultural and managerial aspects of lean are possibly more important
than the actual tools or methodologies of production itself.
Lean aims to make the work simple enough to understand, do and

manage.
13.4 Principles of Lean Production
The five-step thought process for guiding the implementation of lean

techniques is easy to remember, but not always easy to achieve:
1. Specify value from the standpoint of the end customer by

product family.
Any process that the customer would be prepared to pay for that adds
value to the product.
a. The customer defines the value of product in a lean supply chain.
b. Value-adding activities transform the product closer to what the

customer actually wants.
c. An activity that does not add value is considered to be waste.
2. Identify all the steps in the value stream for each product
family, eliminating whenever possible those steps that do not
create value.
! !232
a. The value stream is the sequence of processes from raw material to

the customer that create value.
b. The value stream can include the complete supply chain.
c. Value stream mapping is an integral aspect of Lean.
3. Make the value-creating steps occur in tight sequence so the

product will flow smoothly toward the customer.
a. Using one piece flow by linking of all the activities and processes into
the most efficient combinations to maximize value-added content
while minimizing waste.
b. The waiting time of work-in-progress between processes is

eliminated, hence adding value more quickly.
!
4. As flow is introduced, let customers pull value from the next
upstream activity.
a. Pull = response to the customer’s rate of demand, i.e., the actual

customer demand that drives the supply chain.
! !233
b. Based on a supply chain view from downstream to upstream

activities where nothing is produced by the upstream supplier until
the downstream customer signals a need.
5. As value is specified, value streams are identified, wasted steps

are removed, and flow and pull are introduced, begin the
process again and continue it until a state of perfection is
reached in which perfect value is created with no waste.
(Continuous Improvement of Quality and Productivity).
a. The journey of continuous improvement.
b. Producing exactly what the customer wants, exactly when,

economically.
c. Perfection is an aspiration, anything and everything is able to be

improved.
P
E
R
F
E
C
T
!  
! !234
Other important points to be remembered as a principles are as follows:
To reduce batch sizes and inventories.
To cross-train workers in order to deal with inherent variability.
Selective use of automation.
To instil a Continuous Improvement competence.
! !235
13.5 Key Lean Manufacturing Methodology
There are many tools and concepts that lean companies employ to support
the above principles.
1. Takt Time
The heartbeat of the customer; the average rate at which a company must
produce product or execute transactions based on customer requirements
and available working time.
2. Standardised Work
A description of methods, materials, tools, and processing times required
to meet takt time for any given job.
3. One Piece Flow or Continuous Flow

A methodology by which product or information is produced by moving at
a consistent pace from one value-added processing step to the next with
no delays in between.
4. Pull Systems and Kanban

A methodology by which a customer process signals a supplying process to
produce product or information or deliver product/information when it is
needed. Kanban are signals used within a pull system.
5. Five Why’s
A thought process by which the question “why” is asked repeatedly to get
to the root cause of a problem.
6. Quick Changeover/SMED
A 3-stage methodology developed by Shigeo Shingo that reduces the time
to changeover a machine by externalizing and streamlining steps. Shorter
changeover times are used to reduce batch sizes and produce just-in-time.
7. Mistake-Proofing/Poka yoke
A methodology that prevents an operator from making an error.
8. Heijunka/Leveling the Workload

The idea that, although customer order patterns may be quite variable, all
of our processes should build consistent quantities of work over time (day
to day, hour to hour).
! !236
9. Total Productive Maintenance (TPM)

A team-based system for improving Overall Equipment Effectiveness
(OEE), which includes availability, performance, and quality.
10.Five S
5S is a five step methodology aimed at creating and maintaining an
organised visual workplace.
11.A-3 Problem Solving / PDCA

A system for identifying and solving problems to their root cause and then
implementing countermeasures with monitoring. Typically, these are
reported using A-3 reports (on A-3 or 11 X 17 size paper).
13.6 Lean Production System
Lean was generated from the Just-in-time (JIT) philosophy of continuous

and forced problem solving
Just-in-time is supplying customers with exactly what they want and

when they want it.
With JIT, supplies and components are “pulled” through a system to

arrive where they are needed and when they are needed.
Pre-JIT: Traditional Mass Production
! !237
Post-JIT: “Lean Production”
Tighter coordination along the supply chain. Goods are pulled along
Only make and ship what is needed
!
Just-in-time means PRODUCING
a. only what is needed

b. in necessary quantity
c. at necessary time
Main Components of JIT

Levelled Production
Pull System
Continuous Flow Processing
Takt Time
Flexible Workforce (Shojinka)
3Ms
5S
1. Levelled Production
Levelled production means producing various models on the same
production line to cater the customer demand. See the following diagram.
The various products are shown in the form of different geometrical
shapes. Assume they are different models of vehicles being produced on
the same production line.
! !238
!
Levelled Production—Flexible Production Line
2. Pull System (Don’t Push)

Produce only when your customer demands the product in the required
quantity. Run the production according to this demand. Production
activities begins as a result of the pull generated by customer in form of
order confirmation by them.
3. Continuous Flow Production

In TPS, it means arranging work inside each process to flow smoothly from
one step to other. In continuous flow production, you cannot maintain
inventory. You pass through all the work station in a continuous manner so
that there is no chance of inventory management. If any defect Occurs and
remains undetected, it will remain limited to the same or very few
component. If it is detected, countermeasures are taken immediately
4. Takt Time: Takt is a German word meaning “meter”. It is the time to

finish a given amount of work-doing a single operation, making one
component, or assembling an entire car.
! !239
5. Flexible Workforce (Shojinka)
Flexible workforce or shojinka means to alter (decrease or increase) the

number of operators within a shop, to equip with demand changes.
Flexible workforce can be developed with continuous training and

development.
6. 3Ms
3Ms MUDA = Non-Value Added

MURA = Overburden
MURI = Unevenness
Let’s understand it with the help of an illustration. Assume that you have to
carry 12 tons of load in a truck having capacity of 4 tons maximum. You
can take this load in either of the following ways:
! !240
! !241
7. 5S
13.7 Implementation Stages and Progress
Stages
1. Three stages in the implementation of ‘Lean Manufacturing’
2. Data collection stage
3. Data analysis and development of solution stage
4. Implementation stage
Toyota Production System’s Four Rules.
1. All work shall be highly specified as to content, sequence, timing, and

outcome.
2. Every customer-supplier connection must be direct, and there must be

an unambiguous yes-or-no way to send requests and receive responses.
3. The pathway for every product and service must be simple and direct.
4. Any improvement must be made in accordance with the scientific

method, under the guidance of a teacher, at the lowest possible level in
the organisation.
! !242
Process of Implementation Lean Manufacturing
Action Plan
While every individual or company embarking on a lean journey will have
different challenges based on their particular set of circumstances, there
are several crucial steps that can help reduce resistance, spread the right
learning, and engender the type of commitment necessary for lean
enterprise.
Getting Started
Find a change agent, a leader who will take personal responsibility for
the lean transformation.
Get the lean knowledge, via a sensei or consultant, who can teach lean
techniques and how to implement them as part of a system, not as
isolated programs.
Find a lever by seizing a crisis or by creating one to begin the

transformation. If your company currently isn’t in crisis, focus attention
! !243
on a lean competitor or find a lean customer or supplier who will make

demands for dramatically better performance.
Forget grand strategy for the moment.
Map the value streams, beginning with the current state of how material
and information flow now, then drawing a leaner future state of how they
should flow and creating an implementation plan with timetable.
Begin as soon as possible with an important and visible activity.
Demand immediate results.
As soon as you’ve got momentum, expand your scope to link

improvements in the value streams and move beyond the shop floor to
office processes.
Creating an Organisation to Channel Your Value Streams
Reorganise your firm by product family and value stream.
Create a lean promotion function.
Deal with excess people at the outset, and then promise that no one will
lose their job in the future due to the introduction of lean techniques.
Devise a growth strategy.
Remove the anchor-draggers.
Once you’ve fixed something, fix it again.
“Two steps forward and one step backward is O.K.; no steps forward is
not O.K.”
! !244
Install Business Systems to Encourage Lean Thinking
Utilise policy deployment.
Create a lean accounting system.
Pay your people in relation to the performance of your firm.
Make performance measures transparent.
Teach lean thinking and skills to everyone.
Right-size your tools, such as production equipment and information

systems.
Completing the Transformation
Convince your suppliers and customers to take the steps just described.
Develop a lean global strategy.
Convert from top-down leadership to leadership based on questioning,

coaching, and teaching and rooted in the scientific method of plan-do-
check-act.
13.8 Advantages and Disadvantages
Advantages:
1. Productivity Improvement
2. Total manufacturing time saved
3. Less scrap
4. Low inventory
5. Quality improvement
6. Plant space saved
7. Better labour utilisation
8. Safety of operations
Transition to Lean is difficult since a company must build a culture where

learning and continuous improvement are the norm.
! !245
Success of lean requires the full commitment and involvement of all

employees and of the company’s suppliers.
How People Benefit from Lean?

Element Traditional Lean Improvement
Communication Slow and Fast and Positive Quality and
Uncertain Coordination
Teamwork Inhibited Enhanced Effective Teams

Motivation Negative, Extrinsic Positive, Intrinsic Strong Motivation
Skill Range Narrow Broad Job Enrichment

Supervision Difficult and Easy and Localized Fewer Supervisors
Fragmented
How Customers Benefit from Lean?

Element Traditional Lean Improvement
Response Weeks Hours 70-90%

Customisation Difficult Easy Competitive
Advantage
Delivery Speed Weeks-Months Days 70-90%

Delivery Erratic Consistent and Up to 90%
Reliability High
Delivery Large Shipments JIT as Required Locks in JIT

Quantities Customers
Quality Erratic Consistent and Delighted
High Customers
Economics
Reduction of Inventory
- Less space necessary to hold inventory
! !246
Reduced Waste
- Decreased production cost
Increased market share
- Able to provide what the customer wants quickly
Increased competitive advantage
- Faster response to the customer
- Lower cost
- Higher quality
Disadvantages
Difficulty involved with changing processes to implement lean principles
Long-term commitment required
Very risky process — expect supply chain issues while changing over to
lean
! !247
13.9 Summary
Lean manufacturing was developed by the Japanese.
Lean is a philosophy that seeks to eliminate waste in all aspects of a

firm’s production activities.
Lean is principally associated with manufacturing industries but can be

also equally applicable to both service and administration processes.
Works on five basic principles.
Cornerstone of Lean is the Toyota Production System.
Considers 7 Wastes (muda).
Business activities can contain enormous quantities of built-in waste

(muda, friction).
The greatest obstacle to the waste's removal is usually failure to

recognise it.
Lean manufacturing includes techniques for recognition and removal of

the waste.
This delivers an overwhelming competitive advantage.
Utilises 5S methodologies.
! !248
1. What are the two different views on lean?
2. Explain the role of Toyota in Lean manufacturing.
3. What is the basic concept of lean?
4. Explain principles of lean manufacturing.
5. What are the various methodologies used in lean?
6. Explain the importance of JIT in lean manufacturing.
7. Explain in brief main component of lean.
8. What are the stages of implementation?
9. Explain the basic four rules of Toyota manufacturing system.
10.List down the crucial steps of implementing lean manufacturing.
11.What are the advantages of lean
12.What are advantages from people and customer point of view
13.What are the economic benefits of lean?
14.Explain the disadvantages of lean.
! !249
References
1. Wikipedia
2. Lean Production System by TQM
3. Lean Enterprise Institute
4. Business dictionary.com
5. EMS Consulting Group
6. Lean Production System by SAE International
7. Lean Manufacturing by Dipjoy Das
! !250
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
Video Lecture
! !251
QUALITY AT SOURCE
CHAPTER 14
Quality at Source
Objectives
Meaning of Quality at source
Basic concepts and how it works
Implementation of quality at source
Mistake-proofing operations and source inspection
Advantages of quality at source
Structure:
14.1 Introduction
14.2 Concept of Quality at Source
14.3 How it Works?
14.4 Training, Visual Aids and Documentation
14.5 Mistake-proofing Operation – Several Strategies
14.6 What is Source Inspection?
14.7 Implementing Quality at Source
14.8 Advantages of Quality at Source
14.9 Summary
! !252
QUALITY AT SOURCE
14.1 Introduction
Pull systems, one-piece flow, elimination of waste – these are the concepts
most often discussed when lean is the topic. Quality at the Source, on the
other hand, is rarely front and center when lean improvement efforts are
presented.
Even though improved quality is a common outcome of lean

transformations every day, the glamorous lean concepts and tools seem to
get all the attention. However, just as 5S systems are credited with
productivity improvements of upto 10%, Quality at the Source (QATS) can
produce dramatic quality improvements in short order.
Quality at the Source can quickly improve quality by providing simple yet
powerful tools for employees to use to identify and reduce the waste of
defects throughout the value stream. And like many other lean concepts,
QATS depends on other lean tools for successful implementation.
Quality at the source is a lean manufacturing principle which defines that

quality output is not only measured at the end of the production line but at
every step of the productive process and being the responsibility of each
individual who contributes to the production or on time delivery of a
product or service. In a practical sense, it would involve each operator
checking his or her own work before the part/component or product is sent
to the next step in the process. This practice when first implemented within
the workforce will be a challenging change to company culture but will
highlight the relevance of the product's or service's conformance to
customer requirements and standards, thus also imparting the importance
of quality standards and customer satisfaction within the workforce.
14.2 Concept of Quality at Source
This concept of quality makes the production worker responsible for

inspection of his own work and takes corrective action.
Since inspection is done immediately after a job is done, the cause of the
error with clarity and aids in faster rectification.
Many times, some fundamental processing mistakes get identified and their
analyses improves the quality in the long run.
! !253
QUALITY AT SOURCE
Every worker has the authority to stop production, if he finds some serious
defect. This puts responsibility for quality on the workers and gives them
pride in their work.
Help should always be available from the Quality Control personnel to help
workers understand the implications of the above actions. This brings in
cooperation and improves the achievement of quality.
The information generated may be used to effect improvements at the

suppliers end also. The entire process brings in openness, commitment and
participation and helps in achieving quality.
Quality at the Source is predicated on the idea that you don’t want to
produce bad product at any work centre. Although this idea sounds
obvious, we all know of situations where bad product is manufactured at a
work centre and the problem is either swept under the rug, or ignored with
a volume of production. The solution to this situation can be surprisingly
simple. If we want to improve the product quality, we can employ the
techniques of Quality at the Source.
Quality is not just the responsibility of the quality control department. The
process in which the product is manufactured must be set up to allow
production line workers to recognise errors before they become defects.
The development of a proactive culture is needed in quality at the source,
and a mind-set of error prevention rather than reaction to problems should
be taught.
14.3 How it Works?
Quality at Source is composed of five key factors: Standardised Work, Self-

checks, Successive Checks, Visual Management and Mistake-proofing and
Continuous Improvement. The symbol of Quality at the Source is the
Andon light. This light at a work station is turned on when the quality drops
to a certain level or (even better, a bad product is made).
Work stops at the work center and a team of workers and engineers rushes
to the light and begins to address the problem to eliminate the cause of
the bad production.
! !254
QUALITY AT SOURCE
There are many production managers who would have apoplexy if a worker
stopped production because of a bad product. After all, production quotas
and deadlines must be met. We can’t stop the wheels because of a single
bad product!
However, let’s understand the five key factors of Quality at the Source:
Standardised Work
To eliminate variation in production quality, first make sure everyone is
making the product in the same manner. Document the work methods,
materials, tools, machinery settings and training of each worker and work
station. Focus on the methods, not on the output. If the methods are
consistent, the output will be consistent.
Self-checks
Design simple gauges to measure the key parameters of the production
output at the work station. Enable the workers to measure the output
themselves and if it is not to spec, raise the flag for help.
Successive Checks
Make regular checks of the output to ensure the work quality is consistent.
Then have the next downstream work station measure the input coming to
it to see if everything is to spec to continue the production stream.
Visual Management and Mistake-proofing

This is where the Andon light come in. But you don’t necessarily need
these lights. You only need a means of signalling that production quality is
not right. If a drop in production quality is detected, a team of engineers
and workers must immediately go to the work centre to analyse the
problem and implement corrective action.
This corrective action is not something done once a week or at convenient

intervals, the problem is addressed immediately when it is discovered. Why
wait and continue to waste time and material on bad production?
Mistake-proofing related to analysis of the causes of the poor quality. Using

root cause analysis, and other quality analysis tools you can determine the
real cause of the problem, and make real changes that affect a permanent
solution to the production quality.
! !255
QUALITY AT SOURCE
If a design has to be changed or a machine setting adjusted, there is no

justification for waiting. Make the proper change and start back on
production.
Continuous Improvement
This is probably the hardest technique for management to understand. It
incorporates a change in management style. As you introduce
improvements to the process and quality improves, you can’t rest on your
laurels.
You must have a system to continuously evaluate the quality and make
further improvements. In reality, you are always seeing production
stoppages, but they will be of shorter duration than you saw at the start of
this improvement process. You will see a constant improvement in quality
and output.
Quality at the Source can be a powerful tool, even without the Andon
lights, and should not be overlooked because you can’t stop to fix
problems.
14.4 Training, Visual aid and Documentation
While this concept may sound simple on the surface, it can be difficult if an
organisation consists of multi-skilled employees who are cross-trained for
numerous positions. And it becomes even more difficult if these multi-
skilled employees rotate through positions on short regular cycles.
The reason for this difficulty is largely due to the amount of knowledge that
may need to be transferred to each employee.
There may be anywhere from one to 10 or more critical quality points at

each process step in the value stream.
If there are 10 process steps, then there could be 100 or more different
quality points to examine in search of defects in a single value stream.
That is a lot of information to teach a workforce and then expect each

employee to remember.
! !256
QUALITY AT SOURCE
To overcome this potential problem, QATS uses a three-part structure using

other lean concepts and is designed to simplify the task of detecting and
correcting defects.
These three parts consist of training, visual aids and documentation.

Correct use of this three-part approach can greatly improve quality and
increase employee ownership of the process.
Training
The first step in successful Quality at the Source is training. Employees

must be trained not only how to do the job, but with QATS they must be
trained on what the critical quality points are at the step in the process
where they are working.
Additionally, they must be taught how to quickly inspect each item for
these quality points. Because lean is intended to increase throughput,
QATS inspections must be done quickly and then value-added activity can
be conducted.
The QATS inspection should be visual and fast, with the employee looking
for each quality point quickly and then moving on to the next point.
After all quality points have been inspected, any corrective action
necessary can then be initiated.
Visual Aids
The second step in creating Quality at the Source is the development of

visual aids.
The more common types of visual aids are simple tools used to show such
things as standards, examples of good and bad, and methods for
inspection.
These visual aids come in many different forms, and can be as creative as
necessary to produce the desired results.
To assist with visual inspection, poka – yokes - mistake-proofing devices –

can be used to speed up the inspection process.
! !257
QUALITY AT SOURCE
One point lessons, or short visual presentations on a single point, also are
commonly used with QATS as visual aids designed to show what should be
inspected and how to perform the inspection.
One point lessons are often created on paper or card stock from 8½ inches
by 11 inches up to poster board size. They rely heavily on photos with very
little writing. The concept is to use the visual picture to guide the employee
through the process.
In many manufacturing settings, sample boards showing bad, marginally

bad and good pieces may be used to help employees differentiate the
various levels of parts being inspected. This can make it easier to identify
and remove defects from the process.
Other types of visual aids include photographs, drawings, and samples of

substitute parts, go/no or go gages and simple electronic tests.
The concept behind these visual aids is to make it easier for employees to
identify defects before value is added.
Documentation
The third step for development of a Quality at the Source initiative is

documentation.
Employees should not be expected to be able to remember each and every

critical quality point throughout the value stream, particularly if there are
numerous points at each step.
To assist the workforce in remembering which items to inspect – and what

to look for –documentation is used to provide reinforcement to the quality
issues associated with the process.
This documentation should be simple quality checklists, not full-blown

quality manuals, work instructions or standard operating procedures
(SOPs).
This is not intended to suggest that these other very necessary documents
should be eliminated. In fact, each and every one of these documentation
tools relies on each other for success.
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QUALITY AT SOURCE
SOPs, which reside in the quality manual, can be used as a starting point
from which work instructions can be developed that provide the basic steps
associated with a task. Then from these work instructions, a simple quality
checklist can be created to quickly guide the employee through the quality
aspects of the task and into the value-added activities.
Bringing It All Together
As the three components of Quality at the Source come together, the

overall success of an organisation’s quality system will improve. Not just a
lean tool, QATS can provide great impact on any continuous improvement
initiative.
Additionally, QATS brings not just the quality team another tool, but all
employees receive a way to contribute to the quality movement of the
company. Employees gain ownership through this empowerment and the
number of quality contributors can then equal the number of employees in
the organisation.
14.5 Mistake-Proofing Operations Several Strategies
These are:
Implementing Pokayokes whenever possible. Built-in safeguards in

our tools that catch minor/oversight related errors allow fixes to be applied
in a way to benefit multiple customers.
Having a “stop and fix it” mentality. Much like an assembly line, by
pausing the process to make the necessary preventative changes when an
error is identified, we can prevent the same mistake being made
repeatedly. Sometimes, this “fix” can be as simple as correcting packaging
information on a part or as complex as reconsidering the way a route is
running.
Promoting standardised work. If the work is standardised, defects

become more obvious when they occur. Corrective measures can then be
implemented and standardised as well.
! !259
QUALITY AT SOURCE
Performing a root cause analysis. Problems may not have a simple

source, so using the 5-Why’s or a similar technique to question your way to
the answer can be necessary. A supply chain has many moving parts so
any number of inputs could be part of the problem.
One of the guiding values is “brilliant processes = brilliant results.” A

quality-at-the-source state of mind is a direct correlation of this.
14.6 what is Source Inspection?
A source inspection is a quality inspection in which buyer required the

quality check before the material received. So that he performed the
quality inspection at the vendor’s location. When requesting source
inspection, include the following information:
a. Purchase order number
b. Item number
c. Part number
d. Quantity of parts to be inspected
e. Date source inspection is required
f. Types of inspection required

- In-process
- Final
- Interim
- First Article Inspection (FAI)
g. Contact name and phone number.
! !260
QUALITY AT SOURCE
14.7 Implementing Quality at Source
In order to make the cultural shift within an operation’s workforce to

embrace quality at the source the following items should be considered:
Employee understanding of who the customer is and their requirements.
Internal quality audits
Employee and team awareness of quality standards and benchmarks.
Employee understanding of the customer's intended use of the product or

service.
Multi-skilled workforce which can provide support and help in different

process steps.
Required tools and technology to identify quality flaws and rectify them
in an efficient manner.
Proper data collection and tracking of quality faults.
Open communication of standards, performance and processes.
! !261
QUALITY AT SOURCE
14.8 Advantages of Quality at Source
1. Better informed employees
2. Cultural awareness of the importance of quality to the customer
3. Reduction in rework expenses
4. Reduction in production waste
5. Improvement in plant and processes
6. Most importantly, empowerment of employees in achieving the desired

quality standard required by customers.
! !262
QUALITY AT SOURCE
14.9 Summary
Quality at the Source can quickly improve quality by providing simple yet
powerful tools for employees to use to identify and reduce the waste of
defects throughout the value stream.
In a practical sense, it would involve each operator checking his or her own
work before the part/component or product is sent to the next step in the
process.
Quality is not just the responsibility of the quality control department. The
process in which the product is manufactured must be set up to allow
production line workers to recognise errors before they become defects.
The development of a proactive culture is needed in quality at the source,
and a mind-set of error prevention rather than reaction to problems should
be taught.
Quality at Source is composed of five key factors: Standardised Work, Self-

checks, Successive Checks, Visual Management and Mistake-proofing and
Continuous Improvement. The symbol of Quality at the Source is the
Andon light. This light at a work station is turned on when the quality drops
to a certain level or (even better, a bad product is made).
For development of quality at source, three things are essential: (1)

Training of people, (2) Visual aid at the workplace where actual operation is
going on and (3) Documentation of critical quality point throughout the
value chain. Particularly, there are numerous checkpoints at each stage.
Various strategies are used for mistake-proofing operation. Source

inspection is also useful to an organisation where vendor carries out
inspection before delivering the material.
For implementing quality at source, we need multi-skilled workforce, tools,

fixture and technology, proper data collection and open communication.
! !263
QUALITY AT SOURCE
1. What is quality at source?
2. How does it work?
3. Explain the key factors of quality at source.
4. Describe the structure to simplify the task of detecting and correcting

defects.
5. Describe the various methods of mistake-proofing operations.
6. Explain how quality at source is implemented for vendors.
7. What are the essential elements required for implementing quality at

source?
8. Explain the advantages of having quality at source.
References
1. Wikipedia
2. Leanmanufacture.net
3. Improving Quality through Lean Concept by Mark A. Nash and Sheila R.

Poling
4. Introduction to Kaizen by Chris A. Ortiz
5. Quality at the Source – How it Works? by James P. Tate
6. Quality at the Source b 
! !264
QUALITY AT SOURCE
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
Video Lecture
! !265
SUPPLIER PARTNERSHIP
Chapter 15
Supplier Partnership
Objectives
Definition of Supplier Partnership
Vision, mission and goals of supplier partnership
Reasons, principles, sourcing and selection of suppliers
Pitfalls and benefits of Supplier partnership
Structure:
15.1 Introduction
15.2 Definition of Supplier Partnership
15.3 Vision, Mission and Goals of Supplier Partnership
15.4 How to Sustain Successful Supplier/Buyer Partnership?
15.5 Reasons for Partnership
15.6 Principles of Customer/Supplier Relationship
15.7 Sourcing, Selection and Ratings of Suppliers
15.8 Potential Pitfalls and Benefits of Supplier Partnership
15.9 Summary
! !266
15.1 Introduction
The idea of a supplier as partner might sound like a fantasy promoted by

academics who have never experienced the tough conditions of real
business. But there are benefits to having a collaborative, collegial
relationship with your suppliers.
In today’s networked economy, few companies do everything on their own.

Suppliers help companies build better products and services.
A partnership can give suppliers greater visibility into how you operate,
enabling you and your suppliers to collaborate by reducing costs, improving
service and quality, and even innovating.
And as more work gets outsourced, a company’s dependency on suppliers

will increase. Holding a critical supplier at arm’s length doesn’t work, you
need a trusted partner to ensure quality of performance.
Investing in a Partnership allows companies to have visibility and

recognition throughout the calendar year. By providing 365 days of
visibility, company will have more opportunities to be recognised by owners
and employees at all levels.
Organisation and suppliers have the same goal – to satisfy the end-user.
Working with supplier in a partnering atmosphere will yield high quality

product and services.
In the 1980s, procurement decisions were based on price, awarding

contracts to the lowest bidder and sacrificing the quality and timely
delivery.
Deming suggested that long-term relationship of loyalty and trust should

be developed with the supplier to ensure improved products and
services.
Just-in-time (JIT) concept calls for raw materials and components to be

delivered in small quantities only when they are required and not before.
! !267
15.2 Definition of Supplier Partnership
A commitment over an extended time to work together to the mutual

benefit of parties, sharing relevant information and the risks and rewards
of the relationship.
These relationships require a clear understanding of expectations, open

communication and information exchange, mutual trust and a common
direction for the future.
Managing people is vitally important to building a collaborative customer-

supplier relationship.
It is imperative, therefore, to get the right people in the right positions.
Technology offers opportunities for increased visibility and speed of

information sharing.
In order to maintain pace with today’s increased competition, larger

organisations are becoming more dependent on suppliers.
Outsourcing has become a way of life at many companies as they are

looking toward suppliers for solutions.
There are varying definitions of collaboration and supplier development.

There are different viewpoints.
Though there are similarities between the definitions, each definition

covers something that the others do not.
Partnership sourcing is defined as:

Where customers and suppliers develop such a close and long-term
relationship that the two work together as partners. It isn’t philanthropy:
the aim is to secure the best possible commercial advantage. The principle
is that teamwork is better than combat. If the end customer is to be best
served, then the parties must work together – and both must win.
Partnership sourcing works because both parties have an interest in each
other’s success.
! !268
Collaboration is defined as:

The process by which partners adopt a high level of purposeful cooperation
to maintain a trading relationship over time. The relationship is bilateral;
both parties have the power to shape its nature and future direction over
time. Mutual commitment to the future and a balanced power relationship
are essential to the process. While collaborative relationships are not
devoid of conflict, they include mechanisms for managing conflict built into
the relationship.
Supplier development is defined as:

A bilateral effort by both the buying and supplying organisations to jointly
improve the supplier’s performance and/or capabilities in one or more of
the following areas: cost, quality, delivery, time-to-market, technology,
environmental responsibility, and managerial capability, and financial
viability.
15.3 Vision, Mission and Goals of Supplier Partnership
Vision
The Suppliers Partnership helps in providing economic value to the supply
chain through strategic action and engagement.
Mission
SP’s members work together to improve value throughout the supply
chain. SP provides a forum for small, mid-sized and large suppliers to work
to learn from each other and share best practices while also providing
economic value..
Goals
By working cooperatively within the supply chain, companies of all sizes

can achieve real improvements while providing value to the participants
Provide a mechanism where suppliers through the relationships developed

in SP can collect and share information, data and knowledge on ways to
improve their performance.
Develop, as appropriate, specific tools, reports or documents that address

the vision, mission and needs of the organisation.
! !269
Provide a foundation for future activities designed to recognise and

encourage new approaches.
15.4 How to Sustain Successful Supplier/Buyer

Partnerships?
Supplier relationship management strategies should emphasise:
1. Compliance
2. Conduct
3. Strategic financing.
The relationship between a supplier and buyer can be complex, because

each party wants to maximise its time, resources and cash investment.
These resources may be competing priorities that can strain the

relationship.
What’s required to sustain a mutually beneficial relationship is an

understanding of each other’s business needs.
That doesn’t mean “driving for the lowest possible price with no regard for
the true expense incurred,” “but rather recognising that the success of one
partner helps the success of the other.
To develop and subsequently maintain a positive supplier-buyer

relationship, manufacturers should regularly address compliance, conduct
and strategic financing concerns with their supply chain partners.
Followings are the guidelines to building a successful partnership.
Compliance
It’s important that you know with whom you are conducting business, and
that means knowing your customer, your supplier, and their suppliers and
customers.
! !270
It is incumbent upon the importer or exporter to take necessary steps to

ensure that all parties in the supply chain are approved and are not
restricted in any way.
There are multiple methods to accomplish the screening of restricted

parties, including subscribing to the issued lists and their corresponding
updates directly.
Many importers are adopting the best practice of screening all their
suppliers, both domestically and internationally.
By adopting such procedures, a company sends the message to its

partners (and the government) that it is serious about compliance and
takes responsibility for supply chain security.
In the past years, global and regional legislative bodies and governments
have introduced numerous changes to trade regulations that impact supply
chain operations: revised classification standards, tighter export controls
and new environmental packaging requirements. Safeguarding the
environment is now a global concern.
The USA’s wood packaging requirements, European Union’s REACH

initiative, and the China RoHS program have gained momentum in the past
year. It is critical for the suppliers to support these regulations.
Conduct
Suppliers for larger organisations are subject to more rigorous review than
ever.
As companies are more in tune with social responsibility, they are

cognizant of its presence (or lack thereof) throughout the supply chain,
and need to ensure goods are sourced from suppliers that are fulfilling
their codes of conduct and maintaining their own level of financial,
environmental and social responsibility.
To protect its interest, a company should scrutinise potential suppliers’

general and financial operational practices.
! !271
Such a review could start with a questionnaire concerning the company’s

business practices, employee benefit information and facility information.
Insight also can be gained through a site visit and by interviewing a
selection of the company’s employees.
The chosen supplier could then be placed on probation for a given time
frame until they have proven themselves to be an ethical, conscientious
and compliant member of the organization’s global supply chain.
From there, periodic physical audits are recommended to ensure conduct

remains at a consistently high level while giving you the opportunity to
further develop the relationship.
By having a supplier code of conduct in place, businesses demonstrate

their commitment to maintaining high ethical standards.
Strategic Finance
While the buyer is looking to get a fair (not always lowest) price, the
supplier has to ensure he is covering costs and, of course, making a profit.
It is not always in the buyer’s interest to negotiate down to the very lowest
price; the result can be less trust or loyalty from the vendor.
Many buyers and importers report that price is just one factor in the
negotiation; quality is huge, and they appreciate knowing they can demand
a lot from their supplier and it will be delivered.
This relationship extends to the payment terms.
Especially in retail, the payment terms are often very favourable to the
suppliers. These may include payment at sight of documents, payment at
FOB port, or sight plus 15 days.
For an international shipment, the goods are typically paid for well before
they arrive at the final destination. Days are tied up in international
transportation, as well as the journey through the inland transport, the
distribution center and the retail stockroom before finally getting to the
shelf and being purchased by the end consumer. Consequently, the
importer may have weeks or even months of cash outlay prior to selling
! !272
the goods, leading more importers to look for payment alternatives and
extended terms.
Alternative payment methods could include changing from a traditional

letter of credit to a Private Label Letter of Credit, or Open Account payment
process, and payment terms of 30, 45 or 60 days.
As with other aspects of the buyer/supplier relationship, changing payment

terms leads to trade-offs. One benefit of moving away from letters of credit
is lower transaction fees from the banking channel and less paperwork;
trade-offs include reduced access to financing for the supplier, as well as
increased transactional risk to both parties.
There are typically many options available for a business with good credit
and also for those with less-than-ideal credit. This is a conversation for the
treasury department to have with the company’s financial service
providers.
Another option is to reduce the risk of currency fluctuation by buying the

goods in local currency.
Typically, most buyers in North America purchase their goods in US dollars.

The recent decline of the dollar's strength has resulted in suppliers getting
less “real money” for their goods by the time they are paid. Contracts and
prices are negotiated months in advance; in some cases a negative
fluctuation could spell the difference between profit and loss for a supplier.
Some importers are choosing to manage the currency risk through their
own bank and remove the risk for the supplier/exporter.
An additional benefit is it gives the importer more control over their capital
and allows currency risk to be built into the product from the start, instead
of seeing the costs gradually creep up over subsequent seasons while the
supplier is trying to hedge risk.
! !273
15.5 Reasons for Partnership
An organisation (or customer) purchases its requirements, raw materials,

components, and services, from supplier.
Better supplier’s quality → Better product’s quality
A partnership between customer and supplier is one of the keys to

obtaining high quality products and services. Customers and suppliers have
the same goal – to satisfy the end-user.
They must work together as partners to maximise the return on

investment because they have limited resources.
Partnering is a long-term commitment between two or more organisations

for the purpose of achieving specific business goals and objectives.
Reasons for Partnership
1. Quality and timely delivery

2. JIT (Just-in-time) concept
3. Practice of continuous process improvement
4. Quality assurance systems (ISO 9000, etc.)
5. Increased efficiency
6. Lower cost
7. Increased opportunity for innovation
The three key elements of partnering are:
a. Long-term commitment.
b. Trust
c. Shared Vision
! !274
Long-term Commitment
Long-term commitment between supplier and buyer is very crucial and it

helps both the organisation in following manner:
1. Long-term commitment provides the needed environment for both

parties to work toward continuous improvement.
2. Total organisation involvement is necessary, CEO to the workers.
3. Each party contributes its unique strengths to the process.
4. A supplier may only take risks in a long-term commitment.
Dependency appears as a national consequence in a long-term

commitment; it is not a sign of weakness, but a sign of strength of the
relationship and is necessary for competitive advantage.
Trust
For sustainable relationship, this is important factor. It helps in the

following ways:
1. The strength of Partnering is based on fairness and parity.
2. Trust enables the resources and knowledge of each partner to be

combined to eliminate an adversarial relationship.
3. Mutual trust forms the basis for a strong working relationship.
4. Open and frequent communication avoids misdirection, disputes and

strengthens the relationship.
5. The parties may share or integrate resources such as training activities,

administrative systems and equipment.
Shared Vision
It is the responsibility of buying organisation to involve suppliers in their

business.
! !275
By sharing a vision with each other, both buyer and supplier are benefitted.
Following are the requirements for sharing:
1. Each of the partnering organisations must understand the need to

satisfy the final customer.
2. There should be an open and candid exchange of needs and

expectations.
3. Shared objectives and goals ensure a common direction aligned with

each parties’ mission.
Partners must understand each other’s business so that equitable decisions

are made.
These decisions must be formulated and implemented as a team.
15.6 Principles of Customer/Supplier Relations
Following principles are very important for mutually beneficial and

sustainable relationship.
1. Both the customer and the supplier are fully responsible for the control
of the quality.
2. Both the customer and the supplier should be independent of each other
and respect each other’s independence.
3. The customer is responsible for providing the supplier with clear and
sufficient requirements so that the supplier can know exactly what to
produce.
4. Both the customer and the supplier should enter a contract with respect
to quality, quantity, price, delivery method, and terms of payments.
5. The supplier is responsible for providing the quality that will satisfy the
customer and submitting necessary related with customer’s needs.
6. Product quality evaluation methods should be decided by the mutual

consent of both the parties.
! !276
7. Amicable settlement of disputes between customer and supplier should

be established in the contract.
8. Continuous information exchange will improve the product or service

quality.
9. To maintain an amicable relationship, both the parties should do

procurement, production, and inventory planning.
10.Best interest of the end-user should be considered while doing business

transactions.
11.When these principles are followed in right sprit, it develops very strong
emotional bond between customer and supplier that is essential for
growth.
15.7 Sourcing, Selection and ratings of Suppliers
Sourcing, selection and rating of suppliers is important from long-term

relation point of view.
Sourcing
There are three types of sourcing:
Sole sourcing
- Organisation is forced to use only one supplier.
- Technical specifications, patents, raw material location, etc. cause this

kind of sourcing.
- Partnering is a natural consequence, to benefit the end-user.
Multiple sourcing
- Two or more suppliers for an item are used.
- Competition will result in better quality, lower costs and better service.
! !277
- It eliminates disruption of supply due to strikes etc.
Single sourcing
- A planned decision by the organisation to select one supplier for an

item when several sources are available.
- Advantages for the organisations include reduced cost, complete

accountability, supplier loyalty, partnering and a better end product
with less variability.
- Advantages for the supplier include new business from the customer,
reduced cost of the business and production processes.
- It has allowed organisation to reduce their supplier base.
Supplier Selection
Following are the conditions for the selection and evaluation of suppliers:
1. Supplier knows management policy of the organisation.
2. Stable management system of supplier, respected by others.
3. Supplier has the capability of dealing with technological innovations.
4. Supplier can supply material meeting quality specifications.
5. Supplier has the capability to meet the amount of production.
6. Supplier can breach corporate secrets.
7. The supplier is easily accessible in terms of transpiration and

communication.
8. The supplier is sincere in implementing the contract provisions.
9. The supplier has an effective quality system (like ISO 9000) and
improvement program.
! !278
10.The supplier has a track record of customer satisfaction and

organisation credibility.
These conditions go beyond evaluating a supplier on the basis of quality,

price and delivery.
Supplier Rating
Supplier rating is a very effective measure of communicating his

performance over period of time (generally one year). This bring clarity
between supplier and customer about each other’s expectations.
Supplier rating system is based on quality, delivery and other added

services.
The objectives of a rating system are:
To obtain an overall rating of supplier performance.
To ensure communication with suppliers in the areas of quality, service,

delivery and other desired measures.
To provide supplier with a detailed and factual record of problems for

corrective action.
To enhance the relationship between the customer and the supplier.
Supplier Certification
American Society of Quality Control (ASQC) has developed following

certification criteria:
1. Customer and supplier shall have agreed on specifications which are

mutually developed, justifiable, and not ambiguous.
2. Supplier shall have no product-related lot rejection for a significant

period of time.
3. Supplier shall have no non-product-related rejections for a stated period

of time.
! !279
4. Supplier shall have no negative non-product-related incidents for a

stated period of time.
5. Supplier shall have a fully documented quality system (ISO 9000).
6. Supplier shall have successfully passed an on-site system evaluation.
7. Supplier must make inspections and tests (laboratory results and SPC
are used).
8. Supplier shall have the ability to timely provide inspection and test data.
Occasionally, it may be necessary to decertify a supplier as a result of a

major problem.
Benefits of certification include:
1. Customer/supplier partnership
2. Direct shipment to stock
3. Reduction of supplier numbers to a manageable level.
15.8 Potential Pitfalls and Benefits of Partnership
Potential Pitfalls
Following potential pitfalls are likely to affect relationship and therefore

must be taken care of before entering in relationship.
1. Fear of Unknown Concept

2. Starting Early
3. Poor Communication
4. Impatience
5. Mistrust
6. Overdependency
7. Time and Resources
! !280
Benefits of Partnership
Expanded recognition in variety of media and events throughout a calendar

year.
Being a supplier partner, it will increase:
1. Awareness of your company.
2. Elevate your corporate image.
3. Enhance your reputation as a company dedicated to positive

development of industry.
! !281
15.9 Summary
A partnership can give suppliers greater visibility into how you operate,
enabling you and your suppliers to collaborate by reducing costs, improving
service and quality, and even innovating.
Investing in a Partnership allows companies to have visibility and

recognition throughout the calendar year. By providing 365 days of
visibility, company will have more opportunities to be recognised by owners
and employees at all levels.
Definition of supplier partnership is a commitment over an extended time

to work together to the mutual benefit of parties, sharing relevant
information and the risks and rewards of the relationship. These
relationships require a clear understanding of expectations, open
communication and information exchange, mutual trust and a common
direction for the future.
Supplier relationship management strategies should emphasise: (1)

Compliance, (2) Conduct and (3) Strategic financing.
There are various reasons of partnership, however key elements are: (a)
Long-term commitment, (b)Trust and (c) Shared vision.
! !282
1. What is definition of supplier partnership?
2. Explain the various views held by the management.
3. Describe the various reasons for partnership and its key elements.
4. Describe principles of supplier partnership.
5. What are the different methods of sourcing?
6. Explain suppler selection criteria.
7. Explain the criteria for supplier rating.
8. Describe the methods of supplier certification and its benefits.
9. What are the pitfalls and benefits of partnering?
10.Describe the vision, mission and goals of supplier partnership.
11.Explain relationship management strategy.
References
1. Info@supplierpartnership.org
2. Executive champion by James Champy.
3. Supplier Partnership by Jill Jusko
4. Developing Collaborative Supplier Partnerships by Brian Fillard
5. TQM Supplier Partnership
! !283
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
Video Lecture
! !284
COST OF QUALITY
Chapter 16
Cost of Quality
Objectives
Meaning and definition of cost of quality
Various views on COQ
Elements, goals and uses of COQ
Benefits and advantages of COQ
Structure:
16.1 Introduction
16.2 Definition of COQ
16.3 Historical View of COQ
16.4 COQ — Overview
16.5 Goals of Quality Cost
16.6 Uses of Quality Cost
16.7 Strategy of Reducing Quality Cost
16.8 Benefits and Advantages
16.9 Summary
! !285
COST OF QUALITY
16.1 Introduction
In process improvement efforts, quality costs or cost of quality is a means

to quantify the total cost of quality-related efforts and deficiencies. It was
first described by Armand V. Feigenbaum in a 1956 Harvard Business
Review article
Prior to its introduction, the general perception was that higher quality
requires higher costs, either by buying better materials or machines or by
hiring more labour.
Furthermore, while cost accounting had evolved to categorise financial

transactions into revenues, expenses, and changes in shareholder equity, it
had not attempted to categorise costs relevant to quality, which is
especially important given that most people involved in manufacturing
never set hands on the product. By classifying quality-related entries from
a company’s general ledger, management and quality practitioners can
evaluate investments in quality based on cost improvement and profit
enhancement.
The central theme of quality improvement is that larger investments in

prevention drive even larger savings in quality-related failures and
appraisal efforts.
When confronted with mounting numbers of defects, organisations typically

react by throwing more and more people into inspection roles. But
inspection is never completely effective, so appraisal costs stay high as
long as the failure costs stay high. The only way out of the predicament is
to establish the “right” amount of prevention.
16.2 Definition of COQ
It’s a term that’s widely used – and widely misunderstood.
The “cost of quality” isn’t the price of creating a quality product or service.
It’s the cost of NOT creating a quality product or service.
Every time work is redone, the cost of quality increases. Obvious examples
include:
! !286
COST OF QUALITY
The reworking of a manufactured item

The retesting of an assembly
The rebuilding of a tool
The correction
There are many different definitions of the Cost of Quality available, and
many are lacking in scope or precision. One of the definitions is as follows:
Cost of Good Quality and Cost of Poor Quality
At the highest level, there are two different terms in the Cost of Quality
equation: the Cost of Good Quality (CoGQ) and the Cost of Poor Quality
(CoPQ). This can be understood in the formula below :
CoQ = CoGQ + CoPQ
Let's start with the Cost of Poor Quality. These are the traditional quality
costs companies measure. Examples would include scrap, rework, and
returned materials. To give this part of the equation more structure, we
think of Poor Quality costs as having two different terms: Internal Failure
Costs (IFC) and External Failure Costs (EFC). This can be understood by
the following equation:
CoPQ = IFC + EXC
where, IFC = Scrap Costs + Rework Costs
EFC = Returned Product Costs + Warranty Costs + Product Recall Costs
When it comes to the Cost of Good Quality, these are the costs that are
much less likely to be measured by a company.
Generally, these are the costs companies incur to ensure they are
producing quality products.
Again, we break the Cost of Good Quality calculation into two different
terms: Appraisal Costs (AC) and Prevention Costs (PC).
! !287
COST OF QUALITY
16.3 Historical View of COQ
Historically, business managers have assumed that increased quality is

accompanied by increased cost, higher quality and higher cost.
This concept was questioned by quality pioneers like Juran and

Feigenbaum.
Juran examined economies of quality and concluded the benefits

outweighed the costs.
Feigenbaum introduced “total quality control” and developed the principles

that quality is everyone’s job, thus expending the notion of quality cost
beyond the manufacturing function.
In 1979, Crosby introduced the new popular concept that “quality is free”.
Three Different Views Held by the Management Professionals about

Cost of Quality
Today view of quality cost among practitioners seems fall into three
categories:
Higher quality means higher cost: Quality attributes such as

performance and features cost more in terms of labour, material, design,
and other costly resources. The additional benefits from improved quality
do not compensate for the additional expenses.
The cost of improving quality is less than the resultant savings:

Deming promoted this view, which is still widely accepted in Japan. The
savings result from less rework, scrap, and other direct expenses related to
defects. This paved the way of continuous process improvement among
Japanese firms.
Quality costs are those incurred in excess of those that would have
been incurred if product were built or service performed exactly
right the first time: This view is held by adherents of the TQM
philosophy. Costs include not only those that are direct, but also those
resulting from lost customers, lost market share, and many hidden costs
! !288
COST OF QUALITY
and foregone opportunities not identified by modern cost accounting

systems.
16.4 COQ — Overview
The history of quality costs dates back to the first edition of Juran’s QC
Handbook in 1951.
Today, quality cost accounting systems are part of the quality improvement
strategy of every modern organisation. Indeed, quality cost accounting and
reporting are part of many quality standards.
Quality cost systems help management plan for quality improvement by

identifying opportunities for greatest return on investment. However, the
quality manager should keep in mind that quality costs address only half of
the quality equation.
The quality equation states that quality consists of doing the right things
and not doing the wrong things.
Doing the right things means including product and service features that
satisfy or delight the customer.
Not doing the wrong things means avoiding defects and other behaviours
that cause customer dissatisfaction.
Quality costs address only the latter aspect of quality. It is conceivable that
a firm could drive quality costs to zero and still go out of business.
A problem exists with the very name cost of quality.
By using this terminology, we automatically create the impression that

quality is a cost. However, our modern understanding makes it clear that
quality is not a cost.
Quality represents a driver that produces higher profits through lower costs
and the ability to command a premium price in the marketplace.
The fundamental principle of the cost of quality is that any cost that would
not have been expended if quality were perfect is a cost of quality.
! !289
COST OF QUALITY
This includes such obvious costs as scrap and rework, but it also includes
many costs that are far less obvious, such as the cost of reordering to
replace defective material.
Service businesses also incur quality costs; for example, a hotel incurs a
quality cost when room service delivers a missing item to a guest.
Specifically, quality costs are a measure of the costs specifically associated

with the achievement or non-achievement of product or service quality
including all product or service requirements established by the company
and its contracts with customers and society.
Requirements include marketing specifications, end-product and process

specifications, purchase orders, engineering drawings, company
procedures, operating instructions, professional or industry standards,
government regulations, and any other document or customer needs that
can affect the definition of product or service.
More specifically, quality costs are the total of the cost incurred by
a. Investing in the prevention of non-conformances to requirements;
b. Appraising a product or service for conformance to requirements; and
c. Failure to meet requirements
Quality Costs — General Description
Prevention Costs 
! !290
COST OF QUALITY
The costs of all activities specifically designed to prevent poor quality in

products or services.
Prevention costs are associated with design, implementation, maintenance,

and planning prior to actual operation, in order to avoid defects from
happening.
The emphasis is on the prevention of defects in order to reduce the

probability of producing defective products. Prevention activities lead to
reduction of appraisal costs and both type of failures (internal and
external). The motto is “Prevention rather than appraisal”.
! !291
COST OF QUALITY
Examples are the costs of:

Market research
Quality training programs
Contract review
Design review
Field trials
Supplier evaluation
Process plan review
Process capability review
Design and manufacture of jigs and fixtures
Preventive checks and maintenance
Appraisal Costs
!
The costs associated with measuring, evaluating or auditing products or
services to assure conformance to quality standards and performance
requirements.
Appraisal costs are spent to detect defects to assure conformance to

quality standards. Appraisal cost activities sums up to the “cost of checking
if things are correct”. The appraisal costs are focused on the discovery of
defects rather than prevention of defects. 
! !292
COST OF QUALITY
These include the costs of:
Proto type testing

Vendor surveillance
Incoming material inspection
Process inspection/control
Final inspection
Laboratory testing/measurement
Depreciation cost for measuring Quality audits.
Product, process or service audits
Internal Failure Costs
Failure costs occurring prior to delivery or shipment of the product, or the

furnishing of a service, to the customer.
! !293
COST OF QUALITY
Internal failure costs occurs when results of work fail to reach designated
quality standards, and are detected before transfer to the customer takes
place.
Design changes/corrective action

Scrap due to design changes
Excess inventory
Rectification/reject disposition of purchased material
Rework/rejection in manufacturing
Downgrading of end product
Downtime of plant and machinery
Trouble-shooting and investigation of defects
External Failure Costs
Failure costs occurring after delivery or shipment of the product — and

during or after furnishing of a service to the customer.
! !294
COST OF QUALITY
External failure costs occur when the product or service from a process
fails to reach designated quality standards, and is not detected until after
transfer to the customer.
Processing/investigation of customer complaint

Repair/replacement of sold goods
Warranty claims
Product liability and litigation costs
Interest charges on delayed payment due to quality problems
Loss of customer goodwill and sales
Product recalls
Total Quality Costs
The sum of the above costs.
This represents the difference between the actual cost of a product or

service and what the reduced cost would be if there were no possibility of
substandard service, failure of products or defects in their manufacture.
In more precise way, COQ can be understood as follows:
What?
COQ is financial measure of the quality performance of an organisation.
It is essentially measure of lack of quality and can be termed as cost of bad
quality.
Why?
Understanding cost of quality helps organisations to develop quality
conformance as a useful strategic business tool that improves their
product, services and brand image.
When COQ is primarily used to understand, analyse and improve the

quality performance. COQ can be used by shop floor personnel as well as a
management measure. It can be used as a standard measure to study an
organisations’ performance vis-à-vis another similar organisation and can
be used as a benchmarking indices.
! !295
COST OF QUALITY
How?
Costs associated with quality are divided into two categories:
1. Cost due to poor quality

2. Cost associated with improving quality
Prevention cost and appraisal cost are associated with cost of improving
quality, while failure cost results from poor quality
The Size of Various Cost Element:
Various studies have shown that quality cost in manufacturing companies

the world over range from 25% to 35% of turnover and in the case of
service companies it can go up to 40%.
! !296
COST OF QUALITY
1-10-100 Rule
Hidden Cost of Quality

There are additional costs of quality which are hidden and do not appear in
the account books of the company, as they are intangible and difficult to
measure. These additional costs could be as high as 20-25% of sales.
! !297
COST OF QUALITY
16.5 Goals of Quality Cost
The goal of any quality cost system is to reduce quality costs to the lowest
practical level.
This level is determined by the total of the costs of failure and the cost of
appraisal and prevention.
Juran and Gryna (1988) present these costs graphically as shown in Figure
below.  
! !298
COST OF QUALITY
In the figure, it can be seen that the cost of failure declines as

conformance quality levels improve toward perfection, while the cost of
appraisal plus prevention increases.
There is some optimum target quality level where the sum of prevention,
appraisal, and failure costs is at a minimum.
Efforts to improve quality to better than the optimum level will result in
increasing the total quality costs.
Juran acknowledged that in many cases the classical model of optimum

quality costs is flawed.
It is common to find that quality levels can be economically improved to

literal perfection.
For example, millions of stampings may be produced virtually error-free

from a well-designed and built stamping die.
! !299
COST OF QUALITY
The classical model created a mind-set that resisted the idea that
perfection was a possibility.
No obstacle is as difficult to surmount as a mind-set. The new model of

optimum quality cost incorporates the possibility of zero defects and is
shown in Figure below.
16.6 Use of Quality Cost
The principal use of quality cost data is to justify and support quality
performance improvement.
Quality cost data help identify problem areas and direct resources to these
areas. To be effective, the cost of quality system has to be integrated with
other quality information systems to assure that root causes will be
! !300
COST OF QUALITY
addressed. Statistical analysis can be used to correlate quality cost trends

with other quality data to help direct attention to problem causes.
One mission of the quality management function is to educate top

management about the long-range effects of total quality performance on
the profits and quality reputation of the company.
Management must understand that strategic planning for quality is as

important as strategic planning for any other functional area. When the
strategic plan addresses cost issues, quality cost consideration should be
prominent. Quality costs should be considered first because, since they are
waste costs, their reduction should always taken on priority.
The role of the quality manager in this process should be to:
Analyse major trends in customer satisfaction, defects or error rates, and

quality costs, both generally and by specific program or project. These
trends should also be used to provide inputs for setting objectives.
Assist the other functions to ensure that costs related to quality are
included in their analyses for setting objectives.
Develop an overall quality strategic plan which incorporates all functional

quality objectives and strategic action plans, including plans and budgets
for the quality function.
16.7 Strategy of Reducing Quality Cost
As a general rule, quality costs increase as the detection point moves

further up the production and distribution chain. The lowest cost is
generally obtained when non-conformances are prevented in the first
place.
If non-conformances occur, it is generally least expensive to detect them as

soon as possible after their occurrence. Beyond that point, there is loss
incurred from additional work that may be lost. The most expensive quality
costs are from non-conformances detected by customers.
In addition to the replacement or repair loss, a company loses customer

goodwill and their reputation is damaged when the customer relates his
! !301
COST OF QUALITY
experience to others. In extreme cases, litigation may result, adding even

more cost and loss of goodwill.
Another advantage of early detection is that it provides more meaningful

feedback to help identify root causes.
The time lag between production and field failure makes it very difficult to
trace the occurrence back to the process state that produced it.
Accounting Support
We have said it before, but it bears repeating, that the support of the
accounting department is vital whenever financial and accounting matters
are involved.
In fact, the accounting department is responsible for accounting matters,

including cost of quality systems. The role of the quality department in
development and maintenance of the cost of quality system is to provide
guidance and support to the accounting department.
The cost of quality system must be integrated into the larger cost
accounting system. It is, in fact, merely a subsystem.
Terminology, format, etc., should be consistent between the cost of quality

system and the larger system. This will speed the learning process and
reduce confusion.
Ideally, the cost of quality will be so fully integrated into the cost
accounting system that it will not be viewed as a separate accounting
system at all; it will be a routine part of cost reporting and reduction.
The ideal cost of quality accounting system will simply aggregate quality
costs to enhance their visibility to management and facilitate efforts to
reduce them. For most companies, this task falls under the jurisdiction of
the office of the controller.
Quality cost measurement need not be accurate to the penny to be

effective.
! !302
COST OF QUALITY
The purpose of measuring such costs is to provide broad guidelines for

management decision-making and action. The very nature of cost of
quality makes such accuracy impossible.
In some instances, it will only be possible to obtain periodic rough

estimates of such costs as lost customer goodwill, cost of damage to
reputation, etc.
These estimates can be obtained using special audits, statistical sampling,

and other market studies.
These activities can be jointly conducted by teams of marketing,

accounting, and quality personnel.
Since these costs are often huge, these estimates must be obtained.
However, they need not be obtained every month. Annual studies are
usually sufficient to indicate trends in these measures.
16.8 Advantages
Identifying COQ can have several benefits such as:
It provides standard measures across the organisation and also inter-

organisation.
It builds awareness about importance of quality.
It identifies improvement opportunities.
Being a cost measure, it is useful at shop floor as well as management

level.
Reducing the cost of poor quality is one of the best ways to increase a
company's profit.
Aligns quality and goals.
Prioritises problems and provides a means to measure change/

improvement.
! !303
COST OF QUALITY
Promotes the effective use of resources.
Provides incentives for doing the job right every time.
16.9 Summary
Cost of quality is a means to quantify the total cost of quality-related

efforts and deficiencies. The general perception was that higher quality
requires higher costs, either by buying better materials or machines or by
hiring more labour is no longer valid.
The “cost of quality” isn’t the price of creating a quality product or service.
It’s the cost of NOT creating a quality product or service. At the highest
level, there are two different terms in the Cost of Quality equation: the
Cost of Good Quality (CoGQ) and the Cost of Poor Quality (CoPQ).
The fundamental principle of the cost of quality is that any cost that would
not have been expended if quality were perfect is a cost of quality. This
includes such obvious costs as scrap and rework, but it also includes many
costs that are far less obvious, such as the cost of reordering to replace
defective material.
Quality costs are the total of the cost incurred by:
a. Investing in the prevention of non-conformances to requirements;
b. Appraising a product or service for conformance to requirements; and
c. Failure to meet requirements
Various studies have shown that quality cost in manufacturing companies

the world over range from 25% to 35% of turnover and in the case of
service companies it can go up to 40%. Costs of rectifying a defect is
highest than cost of preventing defect from occurring.
There are additional costs of quality which are hidden and do not appear in
the account books of the company, as they are intangible and difficult to
measure. These additional costs could be as high as 20-25% of sales.
! !304
COST OF QUALITY
The goal of any quality cost system is to reduce quality costs to the lowest
practical level. This level is determined by the total of the costs of failure
and the cost of appraisal and prevention. There is some optimum target
quality level where the sum of prevention, appraisal, and failure costs is at
a minimum.
The principal use of quality cost data is to justify and support quality
performance improvement. Quality cost data help identify problem areas
and direct resources to these areas. To be effective, the cost of quality
system has to be integrated with other quality information systems to
assure that root causes will be addressed. Statistical analysis can be used
to correlate quality cost trends with other quality data to help direct
attention to problem causes.
There are many advantages of identifying COQ which help organisations to

plan improvements in the various functions thereby enhancing the bottom
line.
1. Define cost of quality.
2. Explain various elements of COQ.
3. Explain various views on COQ.
4. Explain hidden costs of quality.
5. Describe 1-10-100 rule of COQ.
6. What is the goal of COQ?
7. Explain optimum level of quality.
8. Explain new model of optimum model of quality cost.
9. What are the strategies to reduce quality costs?
10.Explain advantages and benefits of identifying quality costs.
! !305
COST OF QUALITY
References
1. Wikipedia
2. Cost of Quality by ASQ
3. Cost of Quality by TQM
4. COQ by Mathew Lifflefield, LNS Research
5. COQ by TQM School
6. COQ by Quality America.com
7. www.slideshare.net/mohitsingla
! !306
COST OF QUALITY
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
! !307

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WORLD CLASS MANUFACTURING

Sub Code 399

Program Design and Advisory Team

Prof. B.N. Chatterjee Mr. Manish Pitke

Prof. Kanu Doshi Prof. B.N. Chatterjee

Prof. Dr. V.H. Iyer Mr. Smitesh Bhosale

Prof. B.N. Chatterjee Prof. Vineel Bhurke

Prof. Venkat lyer Dr. Pravin Kumar Agrawal

Prof. Dr. Pradeep Pendse Mrs. Margaret Vas

Prof. Sandeep Kelkar Mr. Anuj Pandey

Prof. Dr. Swapna Pradhan Course Editor

Prof. Bijoy B. Bhattacharyya Prof. B.N. Chatterjee

Mr. P.M. Bendre Course Coordinators

Mr. Arun Gokhlay Ms. Kirti Sampat

Mr. A.S. Pillai Mr. Kishor Tamhankar

COPYRIGHT © by Prin. L.N. Welingkar Institute of Management Development & Research.

Chapter No. Chapter Name Page No.

World Class Manufacturing Organisations consistently deliver exceptional

World Class Manufacturing is one of the most known production system

It is a different set of concepts, principles, policies and technique for

It is driven by results achieved to gain a competitive edge.

Primarily focuses on continual improvements in quality, cost, lead time,

It refers to practice followed in a manufacturing organisation, in order to

World Class Manufacturers are those that demonstrate industry best

There are two overriding criteria to judge whether a company can be

1. How does the company compare with its best competition?

2. Has the company increased its score since last year?

1. World Class Safety is the foundation of World Class Performance.

2. WCM leader have a passion for standards.

3. In a World Class Company, voice of customer can be heard in the

5. A rigorous application of WCM method guarantees the elimination of

6. Plant all abnormalities are immediately visible.

7. WCM takes place in the workplace, not in the office.

8. WCM is most effectively learnt by practicing the techniques with the

9. The power of WCM comes from the involvement of people.

The Most Essential Pillars

After completing this chapter, you will be able to understand:

Meaning of total Just-in-time (JIT)

History and evolution of JIT

Elements and goals of JIT

Advantages and disadvantages of JIT

2.2 Definition of JIT

2.3 History of JIT

2.4 Elements of JIT

2.5 Goals of JIT

2.6 JIT - Strategy and System

2.7 Advantages and Disadvantages of JIT

2.8 Precautions and Issues of JIT

2.10 Self Assessment Questions

Just-in-time manufacturing was a concept introduced by the Ford Motor

To elaborate further, under just-in-time manufacturing (colloquially referred

Just-in-time manufacturing goes hand in hand with concepts such as

Just-in-time production requires intricate planning in terms of procurement

Highly advanced technological support systems provide the necessary

So why do manufacturers build inventory of both finished goods and raw

A buffer of inventory on hand is comforting – and costly.

In the 1970s, when Japanese manufacturing companies were trying to

2.2 Definition of JIT

Just-in-time is a companywide philosophy oriented toward eliminating

To implement the philosophy in manufacturing, JIT techniques provide “the

Just-in-time techniques can be applied to the full cycle of procurement,

Material related costs are reduced by reducing the number of suppliers a

Manufacturing related costs are reduced by design for manufacture and