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HISTORY OF QUALITY
MANAGEMENT
Rooted in Post-World war II Japan
Japanese in an effort to build their nation adopted
the US manufacturing practices
HISTORY OF QUALITY
MANAGEMENT
By 1970s and 1980s, US market was invaded by
Japanese electronic and automobile products
Toyota was already using advanced quality
management system, and TPS became the
international superstar of manufacturing practice
In late 1980s, Motorola developed the Six Sigma
(SS) approach, others (GE, Seagate, AlliedSignal)
adopted SS
TQM, another well-known method adopted by
industry
PERFORMANCE AND
CONFORMANCE
Successful quality management requires
managers to understand what constitutes quality
for the customer
Firms need to identifying the needs of the
customers and provide a product or service that
will satisfy or exceed their expectations
WHAT IS QUALITY?
Degree to which performance of a product
or service meets or exceeds customers
needs and expectations
DIMENSIONS OF QUALITY:
MANUFACTURED PRODUCTS
Product quality is often judged on eight dimensions:
Performance primary product characteristics
Features secondary characteristics
Reliability How often does the product fail?
Consistency of performance
Conformance to standards meeting design
specifications
Durability How long the product lasts; its life span
before replacement
Serviceability ease of repair, speed of repair
Aesthetics sensory characteristics (sound, feel, look)
Perceived Quality past performance, reputation,
recognition
ARTICLE KEY
POINTS
Eight dimensions of quality
Companies need not pursue all eight dimensions
If pursued, products become very costly
Companies need to scan the environment and find
what dimensions customers care for and work on
those dimensions
WHAT IS QUALITY
MANAGEMENT?
Set of activities that an organization
performs to maintain and improve the
quality of its products and services
PERFORMANCE AND
CONFORMANCE QUALITY
Different kinds of quality
Performance quality
Refers to the ability of the product to excel along
one or more performance dimensions
(attributes)
Conformance quality
Because of inherent variability in production
processes, nothing is produced exactly
according to specifications. The degree of
match between specifications and the actual
product or service is what we call as
conformance quality
KEY CONTRIBUTORS TO
QUALITY MANAGEMENT
Shewart
Control Charts
Deming
Juran
Quality is fitness-for-use
Feigenbaum
Crosby
Ishikawa
Cause-and-effect diagrams
Taguchi
Continuous improvement
MODERN DEFINITION
OF QUALITY
Quality is inversely proportional to variability
Reduction of variability is the fundamental idea in
quality control.
DESCRIBING VARIABILITY
Measures of variability (or spread out)
Range
Variance and the standard deviation
Coefficient of variation
QUALITY IMPROVEMENT
Quality improvement is the reduction of
variability in processes and products
COEFFICIENT OF
VARIATION
Coefficient of Variation, c = /
Where = standard deviation
= mean
If c<0.75 , low variability
COSTS OF QUALITY
1. Appraisal Costs
2. Prevention costs
COSTS OF QUALITY
Appraisal Costs (assessing the condition of
materials and processes at various points in
process)
COSTS OF QUALITY
Prevention Costs (costs associated with tasks
intended to prevent defects from occurring)
Quality Planning
Process monitoring
Training
Purchasing better equipment that produces less variation
Working with vendors to increase the quality of input materials
Process redesign to reduce errors
Quality data acquisition and analysis
Quality improvement projects
COST OF QUALITY
Internal failure costs (defects discovered before shipment)
Scrap
Rework
Process downtime
Retest
Failure analysis
Disposition
External failure costs (defects discovered after shipment)
Customer complaint
Warranty charges
Liability costs
Returned product/material
External and internal failure costs together accounted for 50%-80% of COQ
Juran
THE COSTS OF
QUALITY
COST OF QUALITY
Ce + Ci + Ca + Cp
Cost of Quality= -------------------------------------Cb + Ce + Ci + Ca + Cp
Ce = External failure cost
Ci = Internal failure cost
Ca = appraisal cost
Cp = prevention cost
Cb = measured base production cost ( no costs for
quality)
AN EVALUATION OF
QUALITY COSTS
2006
2007
2008
2009
--Prevention
$27,000
41,500
74,600
112,300
--Appraisal
$155,000
122,500
113,400
107,000
--Internal
failure costs
$386,400
469,200
347,800
219,100
--External
failure Costs
$242,000
196,000
103,500
106,000
TOTAL
$810,400
$829,200
$639,300
$544,400
--Sales
$4,360,000
4,450,000
5,050,000
5,190,000
--Mfg. costs
$1,760,000
1,810,000
1,880,000
1,890,000
QUALITY
COSTS
ACCOUNTING
MEASURES
QUALITY INDEX
NUMBER
Year
2006
18.58
46.04
2007
18.63
45.18
2008
12.66
34.00
2009
10.49
28.80
COST OF QUALITY
It is estimated that the cost to fix a problem at the customer end is about 5 times the
cost to fix a problem at the design stage
CONSEQUENCES OF POOR
QUALITY
Loss of business
Liability
Productivity
Costs
6. Run chart
7. Fish-bone diagram or Cause-and Effect
diagram
January
February
March
April
Lost Luggage
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Departure
Delay
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Mechanical
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Overbooked
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PARETO CHART
HISTOGRAM
RUN CHART
SCATTER DIAGRAM
FISHBONE DIAGRAM
FLOW CHART