Quality

Manageme
nt
Quality
Manageme
nt
Perspectiv
es

Japanese
s
Approach
es to
Quality
American
Approach
es to
Quality
Quality
Circles

Taguchi
Methods
Quality
Function
Deployme
nt

Benchmarkin
g*

Quality in
Service*
The
Malcolm
Baldrige
National
Quality
Award

ISO 9000
and
14000*

Process
Capability

Statistical
Quality
Control
Constructi
ng Control
Charts

Introduction
In 1991, the West Babylon school district of Long Island, New York, began
applying continuous improvement and quality to its administrative and
education processes. The objectives of these initiatives were to affirm the
districts commitment to providing high-quality education, to emphasize the
importance of lifelong learning, and to provide students with opportunities to
take pride in their work. Given these objectives, the district adopted the term
total quality education (TQE) to describe the initiatives. Initially, the districts
superintendent and board of education agreed to apply W. Edwards Demings
14 Point for Management to the administration process. To facilitate this,
the superintendent attended quality training programs taught by two of the
leading experts in quality management, Joseph Juran and Deming himself.
Numerous improvements were made throughout the district, ranging from
creating more appealing lunch menus to placing less emphasis on exams to
changing students report cards in order to better evaluate actual learning
(Manley and Manley 1996).
National Semiconductor wan an early proponent of total quality. Its first
quality circles were created in 1981; it began a preventive maintenance
program in 1982; it began using statistical process control in 1983; it used
design of experiment techniques in 1984; and in 1986 it implemented design
for manufacturing techniques. In the 1990s, National Semiconductor initiated
a second stage of total quality by submitting an application to be considered
for the Malcolm Baldrige National Qulaity Award. During its second stage,
National Semiconductor focused its attention on customer-supplier
relationships, customers satisfaction, developing scorecards for customers,
analyzing its processes, empowering its employees, and developing team
strategies, problem-solving techniques, and visioning. Also, National
Semiconductor worked on becoming ISO 9000-certified during this period. In
its third and current stage, National Semiconductor is focusing on becoming
a learning organization. In this phase company is concerned with concepts
such as personal mastery, shared vision, systems thinking, and team
learning (Rau 1995).
Quality management is clearly one of the most timely topics in
business today, as the introduction illustrates. Furthermore, quality
management is applicable to all organizations, whether they exist to make a
profit (National Semiconductor), or are nonprofit organizations (West Babylon
school district), and whether or not tangible output is produced.

Table 3.1 Four Categories of Quality Costs

Category 1: Prevention costs. These costs are incurred to the process of
trying to prevent defects and errors from occurring. They consist of such
elements as:

Planning the quality control process

Training for quality
Educating the firms suppliers
Designing the product for quality
Designing the production system for quality
Preventive maintenance

Category 2: Appraisal costs. These are the costs of determining the current
quality of the production system. They consist of factors such as:

Measuring and testing parts and materials

Running special test laboratories
Acquiring special testing equipment
Conducting statistical process control programs
Receiving inspection
Reporting on quality

Category 3: Internal costs of defects. These costs are incurred when defects
and errors are found before shipment or delivery to the customer. They
consist of elements such as:

Labor and materials that go into scrap

Engineering change notices
Reworking and retesting to correct defects
Lost profits on downgraded products and services
Lost yield from malfunctioning equipment or improperly trained workers
Downtime of equipment and labor sitting idle while waiting for repairs
Expediting to get orders of appropriate quality on time

Category 4: External costs of defects. These are the costs of trying to correct
defects and errors after receipt by the customer. They include items such as:

Quick response to complaints

Adjustments to correct the problem
Lost goodwill
Recalls to correct the problem for other customers
Warranties, insurance, and settlements of lawsuits

QUALITY MANAGEMENT PERSPECTIVES

Two primary sets of costs are involved in quality: control costs and
failure costs. The aggregate of these costs run between 15 and 35 percent of
sales for many U.S. firms. Traditionally, these costs are broken down into four
categories, as shown in Table 3.1: prevention costs, appraisal costs, internal

costs of defects, and external costs of defects. The first two costs are
incurred in attempting to control quality, and the last two are the costs of
failing to control quality. Costs of defects (or nonconformance) can run from
50 to 90 percent of the total cost of quality.
We will overview some of the more common quality programs here and
describe the benefits. Before doing so, however, let us first look more closely
at the difference between traditional attitudes toward quality in American
and Japanese management.
Japanese Approaches to Quality
Japan was an entirely different story. Its products had a reputation for
poor quality, and after it lost the war its economy was a shambles. As a
result, Japanese manufacturers were eager for help related to quality
improvement. In 1950 the Japanese government invited W. Edwards Deming
(then a professor at New York University) to give a series of lectures on
quality control to help Japanese engineers reindustrialize the country. But
Deming insisted that the heads of the companies attend the talks too. As a
result, the top Japanese managers were also invited, and they all showed up.
Perhaps the contribution that Deming is most associated with his 14 points,
summarized and illustrated in Table 3.2. Deming believed that improvements
in quality created a chain reaction. Accordingly, improved quality leads to
lower costs, which then translate into higher productivity. The resulting
better quality and lower prices lead to increased market share. Higher
market share means that the company can stay in business and create more
jobs.

Table 3.2 Application of Demings 14 Points to Services

Demings 14 point
1. Create a
constancy of
purpose toward
improvement of
product and
service, with a
plan to become
competitive, stay
in business, and
provide jobs.
2. Adopt the new
philosophy. We
can no longer live
with commonly

School District
Law Firm
Developed a mission
Committed to quality for
statement for the school long term.
district.

Cross-functional teams
set up as quality circles.

Recognized a need for

better management.

accepted levels of
delays, mistakes,
defective
materials, and
defective
workmanship.
3. Cease
dependence of
mass inspection.
Require, instead,
statistical
evidence that
quality is built in
to eliminate the
need for
inspection on a
mass basis.
4. End the practice
of awarding
business on the
basis of price
tags. Instead,
depend on
meaningful
measures of
quality, along the
price.
5. Improve
constantly and
forever the
system of
production and
service, to
improve quality
and productivity,
and thus
constantly
decrease costs.
6. Institute modern

Less emphasis on
exams.

Emphasized quality of
inputs and improved
processes.

Suppliers who delivered

poor quality were taken
off list of bidders.

Applied this to
purchases of computer
systems and office
supplies.

Quality circles continued

to work toward
improving the delivery
of services.

Improved all processes,

measured them by
maintaining records,
and reduced variation.

Quality circles used to

Improved training

methods of
training.

7. Institute modern
methods of
supervision.

8. Drive out fear so

that everyone
may work
effectively for the
company.
9. Break down
organization
barriers-everyone
must work as a
team to foresee
and solve
problems.
10.
Eliminate
arbitrary
numerical goals,
posters and
slogans for the
work force, which
seek new levels of
productivity
without providing
the methods
11.
Eliminate
work standards
and numerical
quotas.
12.
Remove

help select training

materials. Teachers
trained in use of new
classroom technologies.
All supervisors received
training five times a
year on advanced
techniques in
cooperative supervision.
Emphasis was that
leading means helping
others do their jobs
better.
Developed new
solutions and
encouraged
experimentation.

material and facilities.

Reduced amount of job
training by coworkers.

Superintendents quality
council created with
representative from
personnel, student
service, testing, finance,
transportation, and
lunch program
Transportation staff was
given responsibility for
reducing waste and
accidents.

Created teams of
partners, associates,
secretaries, and support
staff.

Bell-shaped curve was

not used to force grade
distribution.

Placed less emphasis on

billable hours. Rewarded
employees for client
services.
Improved

Focused on how to

Managed more by
coaching and
mentoring.

Made staff feel secure.

Didnt manage by fear.

Provided employees
with the means,
including training and
equipment, to do the
job.

barriers that rob

employees of
pride of
workmanship.
13.
Institute a
vigorous program
of education and
training.
14.
Create a
structure that will
push 13 prior
points every day.

prevent defects, not fix

them after the fact.

Teachers received
regular training in
computer technology
and multimedia
technology.
Each semester,
employees developed
one to three goals and a
plan to accomplish
these goals.

communications.
Recognized that staff
wanted to do a good
job.
Emphasized education
and training. Trained
staff on teamwork and
problem solving.
Management pushed
plans and vision.

The Deming Prize was established in 1950 and is still administered by

the Japanese Union of Scientists and Engineers (JUSE). The prize is actually a
medal and is used to recognize organizations that have excelled in total
quality management (TQM). It is open to all organizations regardless of their
national origin. The Deming Prize is based on the following 10 criteria:
1. Policies and objectives: the methods used to develop policies and
objectives, the use of statistical methods, and the implementation
and assessment of objectives.
2. Operation of the organization: whether lines of responsibility are
clearly defined, how well activities are delegated, the extent to
which divisions cooperate with one another, and the use of quality
circles.
3. Education: the educational plans, the education of workers and
suppliers in statistical methods, the activities of quality circles, and
how well a suggestion system is used.
4. Information management: information-gathering activities, the
dissemination of information throughout the organizations, and the
speed with which information is collected and used.
5. Analysis: the methods that are used to select problems, the
analytical tools used to solve these problems, and the organizations
openness to suggestion for improvement.
6. Standardization: the methods used to adopt and update standards,
the actual content of the standards, the use of the standards, and
the record keeping associated with maintaining standards.
7. Control: the organizations quality control systems, the use of
statistical methods, the location of control points in the process, the
items that are controlled, and activities of quality circles related to
control.

8. Quality assurance: the procedures for developing new products,

ensuring product safety, process design, use of statistical methods,
and issues related to measurement and inspection.
9. Results: the visible and the invisible results obtained; also, the gap
between predicted and actual results in assessed.
10. Future plans: the organizations plan for promoting quality in the
future and the relationship between short-range and long-range
planning.
But the Japanese did not stop there. They tied the concepts of quality
control directly into their production system-and now they have even
tied in to their entire economy through inspections to guarantee the
quality of exports. The natural inclinations of Japanese culture and
traditions were exploited in this quality crusade:

Quality circles (described shortly), were based on natural

teamwork procedures and individual workers responsibility for
results. Behavioral and attitudinal factors were considered of
primary importance in improving quality levels.
Extensive training for all levels of workers, as well as suppliers,
helped instruct them in the use of quality control procedures.
Cross-training and job rotation were used to demonstrate the
importance of quality.
Lifetime employment made clear the necessity of living with the
products reputation.
The disinclination to store unneeded materials fostered the
development of just-in-time operations, which furthered the
quality concepts through immediate inspection, processing, and
use. If a product was defective, that was immediately clear.
Patience was exercised is testing and checking components
extensively before installing them in products-and then in taking
the time to check the products again before shipping them to
customers.

After nearly two decades of a national emphasis on quality, Japans

reputation for producing shoddy goods was totally reserved. And, when high
quality is combined with competitive pricing-another strength of the
Japanese system-the result is extremely strong competition for existing
producers.
American Approaches to Quality
A number of programs and awards, some successful and some
unsuccessful, have been instituted in the United States over the years to
help improve quality. Typical of such programs in zero defects, a program
developed in the aerospace industry in 1962. This program attempted to

prevent errors by eliminating their cause, rather than remedying them after
the had been made.
A more recent concepts, similar to zero defects that the Japanese and
some American firms have embraced, is called total quality management
(TQM) or total quality control (TQC). The basic idea of TQM is that it is
extremely to inspect quality into a companys outputs and much more
efficient and effective to produce them right in the first place. As a result,
responsibility for quality has been taken away from the quality control
department and placed where it belongs-with the workers who produced the
parts or provide the service in the first place.
The beginning of TQM dates back to the 1930s, when Dr. W. W. Shewart
began using statistical control at the Bell Institute. In fact, both Juran and
Deming were students of Shewarts. in 1951 Juran wrote the Quality Control
Handbook, which was considered by many to be the bible of quality and
continuous to be a useful reference to this day. In 1954 Juran made his first
trip to Japan. In 1956 Japan adopted quality as its national slogan.
Just as Deming is probably best remembered for his 14 points, Juran is
probably best remembered for his quality trilogy.
1. Quality planning. This is the process of preparing to meet quality goals.
During this process customers are identified and products that meet
their needs are developed.
2. Quality control. This is the process of meeting quality goals during
operations. Quality control involves five steps: (1) deciding what should
be controlled, (2) deciding on the units of measure, (3) developing
performance standards, (4) measuring performance, and (5) taking
appropriate actions based on an analysis of the gap between actual
and standard performance.
3. Quality improvement. This encompasses the activities directed toward
achieving higher levels of performance.
In 1952 the concepts of quality assurance was proposed. Its proponents
argued that in contrast to quality control, which relies on inspection, quality
assurance is better because it develops a system that can produce highquality products in the first place. Quality control and TQM are further
contrasted in Table 3.3.

Table 3.3 Quality Control Versus TQM

Quality Control
Inspection after the fact
Focus on
quality

consequences

of

Total Quality Management

Design quality into the product and
production system
poor Focus on identifying and eliminating
causes of poor quality

Customer is purchaser
Some number of defects is normal
Responsibility for quality control
assigned
to
individuals
or
departments
Improving quality increases cost

Customer is user
Goal is zero defects
Quality is the responsibility
everyone

of

Improving quality typically pays for

itself.

Thus, the word total is meant to signify that the quality of the organizations
outputs is the concern of all employees. Furthermore, because competition is
a moving target, continuous improvement programs that provide a steady
stream of incremental improvement to the current business processes are an
important component of TQM. In general, TQM typically includes the
following five steps:
1. Determining what the customers want.
2. Developing products and services that meet or exceed what the
customers want (and even delight the customers).
3. Developing a production system that permits doing the job right the
first time.
4. Monitoring the system and using the accumulated data to improve the
system.
5. Including customers and suppliers in this process.
Quality Circles
Traditionally, the Japanese tend to work together in teams for
production, so term analysis was a natural way to attack production
problems. These teams, known as quality circles, focus not solely on quality
but on all problems facing the workers and are often a key component of an
organizations continuous improvement program. The first quality circles
were created in Japan in 1957 and in the United States in 1974. Circles are
composed of natural work groups and range from a few employees to more
than a dozen. In some firms, the concepts is not limited to shop workers but
includes the clerical staff and even the managers. A trained facilitator usually
leads the circle, perhaps the supervisor or even a coworker or team leader.
The circle spends a couple of hours per week, usually on company time,
analyzing and discussing its problems and brainstorming solutions. It then
works on implementing the solutions on the job. An important element of the
problem analysis is a set of continuous improvement tools and skills that are
taught to the employees. Some of these are illustrated in Figure 3.1 and
described as follows.

Process analysis. This is basically a flow chart of how a system or

process works, showing inputs, operations, and outputs. By depicting

the process visually, the workers can often spot the source of a
problem they are facing, or identify where more information is needed
to solve a problem.
Run chart. This graph shows a variable has changed over time. By
analyzing the data points, an operator can determine if the operation is
doing what it is supposed to do. There may be excessive variation in
the data, a disturbing trend, or random unacceptable points.
Control chart. By putting control limits on a chart of sample data, the
operator can determine if the operation or activity is out of control or
experiencing natural variation. However, the natural variation may still
not be acceptable, so that a better or improved operation may be
needed to reduce variation to acceptable limits.
Pareto chart. This chart, a type of bar chart, is based on a natural
tendency for the majority of problems to be due to a minority of
causes. Typically, 80 percent of the symptoms (problems) are due to
20 percent of the causes. By concentrating on the primary problems,
most of the difficulties can be resolved.
Histogram. This type of bar chart shows the statistical frequency
distribution of a variable of interest. From this chart it can be
determined how often some variable it too low or too high and
whether further action is required.
Scatter diagram. These chart shows the correlation between two
variables and can be used for problem investigation. If defects occur
primarily on days when the temperature is over 50 C, for instance, the
temperature-sensitive aspects of the operation (including the workers)
should be looked into.
Fishbone chart. A fishbone chart is also known as a cause-effect
diagram. It lays out the process as a convergence of activities that
result in the final product, or event. Major activity lines are plotted
along the result line, and minor activities that make up the major
activities are plotted as short lines along the major lines. The result
looks like a fishbone. As with the process flow chart, the source of
problems can often be identified on the basis of events and inputs in
the diagram.

A good example of the use of a fishbone diagram is illustrated by the

West Babylon school district, where it was widely perceived by the teachers
that insufficient time was being spent covering the curriculum. To help
understand and analyze the problem, a quality circle developed the fishbone
chart.

Presentation skills. Not all the training for circles involves charts.
Attention is also paid to facilitating good communication and
presenting analyses clearly, both orally and in writing.

Analysis skills. Time is also spent the workers about the concepts of
statistical quality control and the collection and analysis of data.
Collecting invalid data, or making inferences on inappropriate
information, can be more damaging than helpful.
Brainstorming. Finally, time is spent training the employees how to
brainstorm and use other methods of attacking problems.

Benchmarking
In conjunction with their efforts to improve products and key
processes, many organizations are engaging in a relatively new activity
called benchmarking. Essentially, benchmarking involves comparing an
organizations performance with the performance of the best.
Benchmarking generally involves three steps. The first step is
concerned with preparing for the benchmarking study. In this phrase it is
important to get the support of senior management and its input on what
should be benchmarked. Problems areas, activities related to serving the
customer better, and activities related to the mission of organization are all
appropriate candidates for inclusion in the benchmarking study.
The second phrase of benchmarking consists of collecting data. There
are two general sources of benchmarking data. One source is published data.
These are often available from universities, financial filings, consultants,
periodicals, trade journals, and books. The other source of data is original
research conducted by the organization itself. If this approach is employed, a
list of organizations to benchmark might include companies that have
recently received quality awards or other business awards, are top-rated by
industry analysts, have been the subject of recent business articles, or have
a track record of superior financial performance. Once the companies have
been identified, data can be collected in a variety of ways including
interviews, site visits, and surveys.
The third and final phrase of benchmarking involves using what has
been learned to improve organizational performance. Once the second
phrase has been completed, identified gaps in performance can be used to
set challenging but realistic goals (often called stretch goals). Also, the
results of the benchmarking study can be used to overcome and eliminate
complacency within the organization.
The Malcolm Baldrige National Quality Award
In response to Japans Deming Prize, in 1987 the United States established
the Malcolm Baldrige National Quality Award. The award is given in three
categories: manufacturing, service, and small business. Also, up to two
organizations may receive the award in each category each year. The 1997
criteria for the award are summarized in Table 3.4.

Table 3.4 Criteria for the Malcolm Baldrige Award of 1997

Category
1
1.1

Items
Leadership

Part of items
Leadership
System
Company
Responsibility
and
Citizenship

1.2

2
2.1

Strategic Planning
Strategy
Development
Process
Company
Strategy

2.2
3

Customer
Market Focus

3.1

3.2

Information
Analysis

4.1

4.2

4.3

Human

&

Point values
110
80
30

80
40

40
80

Customer and 40
Market
Knowledge
Customer
40
Satisfaction
and
Relationship
Enhancement
&
80

Selection and 25
Use
of
Information
and Data
Selection and 15
Use
of
Comparative
Information
and Data
Analysis and 40
Review
of
Company
Performance
Resource
100

Development
Management
5.1
5.2

5.3

Process
Management

6.1

6.2

6.3

7
7.1

7.2

7.3

7.4

7.5

Business Results

&
Work Systems 40
Employee
30
Education,
Training, and
Development
Employee
30
Well-Being
and
Satisfaction
100
Management
60
of
Product
and
Service
Processes
Management
20
of
Support
Processes
Management
20
of
Supplier
and
Partnering
Processes
450
Customer
130
Satisfaction
Results
Financial and 130
Market
Results
Human
35
Resource
Results
Supplier and 25
Partner
Results
Company130
Specific
Results

Total Points is 1000.

ISO 9000 and 14000
Unlike the Deming Prize or the Baldrige Award, ISO 9000 is not an
award for which companies must compete. Rather, ISO 9000 was developed
as a guideline for designing, manufacturing, selling and servicing products.
In fact, in contrast to the Deming Prize and the Baldrige Award, which
recognize organizations for excellent performance, ISO 9000 is intended as
more of a checklist of good business practices. Thus, the intent if the ISO
9000 standard is that, if an organization selects a supplier that is ISO 9000certified, it has some assurance that the supplier follows accepted business
practices in the areas specified in the standard.
ISO 14000 is a series of standards covering environmental
management systems, environmental auditing, evaluation of environmental
performance, environmental labeling, and life-cycle assessment. Like ISO
9000, ISO 14001 (a subset if the ISO 14000 series) is a standard ion which
organizations can become certified.

Table 3.5 Elements of ISO 9000

1. Management responsibility
2. Quality system
3. Contract review
4. Design control
5. Document and data control
6. Purchasing
7. Control of customer-supplied product
8. Product identification and traceability
9. Process control
10.
Inspection and testing
11.
Control of inspection, measuring, and test equipmet
12.
Inspection and test status
13.
Control of nonconforming product
14.
Corrective and preventive action
15.
Handling, storage, packaging, preservation, and delivery
16.
Control of quality audits
17.
Internal quality audits
18.
Training
19.
Servicing
20.
Statistical techniques