Part 6 (chapters 12 and 13)

Quality management
Introduction
Business of any kind can not afford to ignore quality. Quality is vast and
encompasses the entire organisation i.e. Manufacturing, mining, banking,
medicine etc.
Business has come to the realisation that quality can become a significant
competitive advantage. In the past quality management was seen to be reactive
in nature however in recent times quality management is much more proactive
with programs such as ISO 9000 and TQM

Is the idea of quality management universal?

If an operation is to meet or supersede customer expectations in a consistent
manner, then it needs to take a universal approach to quality. By adopting a
universal approach means that an understanding if why quality is important and
how quality can be improved permeates the entire organisation
Why is quality important
Quality has a direct influence on the revenue and cost of any business operation.
With better quality, revenue can be improved with better sales and enhanced
prices in the market. Costs can be brought down by improving efficiency.
Does quality apply to all parts of the organisation?
For quality management to be effective, every process would need to work in an
integrated fashion. The business would need to create a culture and systems
such that within the origination and processes, internal customer and supplier
relationships are formed. The thinking behind this philosophy is such that, in
order to satisfy external customers, the business would first need to satisfy
internal customers.
Service level agreements
Service level agreements (SLA) are a procedure to formalise the internal
customer concept by requiring processes to agree service level agreements with
each other. SLAs are formal definitions of the service and relationship between
two processes.
A service level agreement would typical cover response time, the range of
services, dependability of service supply etc. SLAs are best thought of as an
approach to deciding service priorities between processes and as a basis for
improving process performance from the internal customers perspective.

Operating /operational level agreements (OLAs)

Often OLAs are confused with SLAs. An OLAs is an agreement that defines how
various groups within an operation propose to work together to deliver what has
been specified in the service level agreement. The difference between a SLA and
an OLA agreement lies in where the boundary is drawn between the internal
provider of a service and the internal customer.
Is quality adequately defined?
Quality is consistent conformance to customers expectation. Quality needs to be
understood from a customers point of view because, to the customer, the
quality of a particular product of service is whatever he or she perceives it to be.
Closing the gaps alignment in quality
When expectation > perception

perceived quality is poor

When expectation = perceptions

When expectation < perceptions

perceived quality is poor

perceived quality is acceptable

Both customers expectations and perceptions are influenced by a number of

factors. Figure 12.3 in the text book shows some of the factors that will influence
the gap between expectations and perceptions and the potential gaps between
some of these factors.
Gap 1: the customers specification operations specification gap
Gap 2: the concept specification gap
Gap 3: the quality specification actual quality gap
Gap 4: the actual quality communicated image gap
Is quality adequately measured?
Quality can be difficult to quantify especially if the parameters cannot be
compared against a unit of measure, for example, it is difficult to measure
appearances.
The measures use to describe quality characteristics are of two types, variables
and attributes.

Variable measures are those that can be measured on a continuously

variable scale.
Attributes are those that are assessed by judgement and have two states,
for example , right or wrong, works or does not work

Table 12.2 in the text book has more examples

The costs associated with quality

Prevention cost those costs incurred in trying to prevent problem,

failures and errors from occurring in the first place
Appraisal cost those costs associated with controlling quality to check to
see if problems or errors have occurred during and after the creation of
the product or service
Internal failure cost failure costs that are associated with errors dealt
with inside the operation
External failure costs failure costs that are associated with errors being
experienced by customers

TQM
TQM is a system that focuses on how to reduce all known and unknown failure
cost. In other words, TQM places less emphasis on ensuring bad products and
services get through to the customer, it emphasises prevention, stopping errors
happening in the first place.
Is quality adequately controlled?
After quality has been defined and measured processes have been formulated.
Quality conformance does not necessarily mean checking every single item,
sampling may be appropriate.
There are many reasons why checking everything may not be sensible:

It could be dangerous to check everything a doctor will only take a

sample of blood rather than sample every last drop of blood
Checking of everything might destroy the product or interfere with the
service it would not be appropriate for a waiter to check whether
customers are enjoying the meal every 30 seconds
Checking everything may be too costly to check the feelings of every
single bus passenger every day

Even 100% checking will not always guarantee that all defects or problems will
be identified:

Checks may be inherently difficult although a doctor may undertake all

the correct testing procedures to check for a particular disease, he or she
may not necessarily be certain to diagnose it.
Staff may become fatigued inspecting repetitive items where it is easy to
make mistakes
Information may be unreliable although all the customers in a restaurant
may tell the head waiter that everything is fine, they may actually have
reservations about the experience.

Type 1 and Type 2 errors

There are two types of incorrect decisions.

Type 1 errors are those which occur when a decision was made to do
something and the situation did not warrant it.
Type 2 errors are those which occur when nothing was done, yet a
decision to do something should have been taken as the situation did
indeed warrant it.

Statistical process control (SPC)

SPC is concerned with sampling the process of goods or the delivery of services.
Based on this sample, decisions are made as to whether the process is in
control that is, operating as it should be. If there seems to be any problems with
the processes, then it can be stopped and the problem identified and rectified.
Control charts
The value of SPC is not just to make checks of a single event or sample but to
monitor the result of many samples over a period of time. Control charts are
used to form a graphical representation of SPCs. Controls charts trends quality
over a period of time to see if the process seems to be performing as it should or
not.
Process control, learning and knowledge
Process control leads to learning which enhances process knowledge and builds
difficult to imitate process capability
1. SPC is based on the idea that process variability indicates whether a
process is in control or not
2. Processes are brought into control and improved by progressively reducing
process variability
3. One cannot eliminate assignable causes of variations without gaining a
better understanding of how the process operates (hence learning the
process)
4. This learning means that process knowledge is enhanced, which in turn
means that operations managers are able to predict how the process will
perform under different circumstances. It also means that the process has
a greater capability to carry out its tasks at a higher level of performances
5. This increase process capability is particularly difficult for competitors to
copy. Therefore, process capability leads to strategic advantages.
Does quality management always lead to improvement?

No amount of quality initiatives can guarantee improvement in process

performance. Improvements in process performance are very much dependent
on systems and procedures embedded in the organisation.
A quality system is the organisational structure, responsibilities, procedures,
processes and resources for implementing quality management. It should cover
all facets of a businesss operations and processes and define the
responsibilities, procedures and processes that ensure the implementation of
quality improvement. The best known quality system is ISO 9000.