Fundamentals of Quality Control 4

Statistical Quality Control
Prof. Mahmoud M. El-Sherbiny

Chairman of Operations Research Department
Institute of Statistical Studies and Research
Cairo University
msherbiny@cu.edu.eg
m_sherbiny@yahoo.com
To Accompany Russell and Taylor, Operations Management, 4th Edition, 2003 Prentice-Hall, Inc. All rights reserved.
Outline
What is quality ?
Dimensions of Quality
The Meaning of Quality
The Deming Cycle
Total Quality Management
Cost of Quality
The Quality Circle Process
Quality Improvement
Seven Quality Control Tools
Process capability
Design of Experiments (DOE)
What Is Quality?

The degree of excellence of a thing
(Websters Dictionary)

The totality of features and
characteristics that satisfy needs (ASQ)

Fitness for use
Quality of design
Dimensions of Quality (Garvin)

1. Performance
Basic operating characteristics
2. Features
Extra items added to basic features
3. Reliability
Probability product will operate over
time

4. Conformance /
Meeting pre-established standards
5. Durability
Life span before replacement
6. Serviceability
Ease of getting repairs, speed &
competence of repairs

7. Aesthetics /
Look, feel, sound, smell or taste
8. Safety
Freedom from injury or harm
9. Other perceptions /
Subjective perceptions based on
brand name, advertising, etc

Service Quality

1. Time & Timeliness
Customer waiting time, completed on time

2. Completeness
Customer gets all they asked for

3. Courtesy
Treatment by employees
Service Quality

4. Consistency
Same level of service for all customers

5. Accessibility & Convenience
Ease of obtaining service

6. Accuracy
Performed right every time

7. Responsiveness
Reactions to unusual situations

Quality of Conformance

Ensuring product or service produced
according to design

Depends on
Design of production process

Performance of machinery
Materials
Training


Producers Perspective Consumers Perspective

Quality of Conformance Quality of Design

Production Conformance to Quality characteristics

Marketing
specifications

Price
Cost
Fitness for
Consumer Use
Figure 14.1
Quality on the Web

Internet creates new rules doing business

Key factors in differentiating firms

B2B largest part of Internet business
B2B
Direct sales more visible

Internet removes the human dimension

Dimensions of Web Quality
Ease of use
Clarity of information and instructions

Server reliability
Speed of page loading
Transaction time
Aesthetics
Privacy and security
Domain name
Transaction reliability
Quality Costs

Quality Cost Control

If you dont measure results, you cant tell success
from failure

If you cant see success, you cant reward it and
if you cant reward success, you are probably
rewarding failure
-

If you cant recognize failure, you cant correct it

Quality Costs
Quality Costs

Assurance costs
Failure costs

Internal Failure Costs
External Failure Costs Appraisal Costs Prevention Costs
Cost of Quality
Cost of achieving good quality(Assurance cost)

Prevention
Planning, Product design, Process, Training,
Information

Appraisal
Inspection and testing,
Test equipment,
Operator
Prevention Cost

Costs associated with designing,
installing, maintaining and auditing plans
for control of manufacturing products and
services to prevent the creation of defects
and failures or the creation of process
wastes.

.
Prevention Cost--Examples
Personnel associated with preventing
poor quality
Quality training and education

Contract reviews

Design reviews
Defect prevention activities (Quality ) (
improvement)
Reliability engineering and testing
Process Capability studies
Preventive efforts with supplier
Supplier evaluation
Supplier selection
Supplier surveillance
Appraisal Cost
Costs associated with the measuring,
evaluating, or auditing of goods, components,
services and purchased materials to verify
conformance with quality standards and
performance requirements. the cost of
evaluating processes and their outputs to
ensure quality

.

Appraisal Cost--Examples
Inspection and Test
Set-up
Materials
Personnel
Equipment/tools /
Energy
Product quality audits
Any activities
associated with
checking previously
performed work
Cost of Quality
Cost of poor quality (Failure cost )
Internal failure costs
Scrap, Rework, Process failure, Process
downtime, Price-downgrading

External failure costs
Customer complaints,
Product return,
Warranty, Product
liability, Lost sales

Internal Failure Cost
Costs associated with defective products,

components, and materials which fail to
meet quality requirements and found
before delivery to the customer, namely
costs incurred to correct an identified
defect before the customer receives the
product

Internal Failure Cost--examples
Scrap and Rework
Material
Labor
Failure investigations
Overtime to correct internal
failures
Downtime, Delay Time
Corrective action to
eliminate the internal
failures /
Design and development of
rework/repair techniques
External Failure Cost
Costs associated with deficiencies found

to the customer and with customer
dissatisfaction

Costs that relate to all errors not detected
and corrected before delivery to the
customer

External Failure Cost--Examples
Repair, Replacement
Expenses under
Warranty

customer complaint

Product liability claims

Failure investigations

Corrective actions

Downtime charges

Modification delays and
costs

Product recalls

10
100

( : )100:10:1 1
10 100
( )
Calculating the Total Quality Cost
Total
Prevention Appraisal Failure
Quality = Cost
+ Cost
+ Cost
Cost

= + +

Taguchi Quality Loss
Function
(TQLF)
The Taguchi Quality Loss Function
(TQLF)
The traditional zero defects definition
assumes that hidden quality costs exist only
for units that fall outside the upper and
lower specification limits.
The TQLF assumes that any variation from
the target value of a quality characteristic
causes hidden quality costs.
Furthermore, the hidden quality costs
increase quadratically as the actual value
deviates from the target value.
(TQLF)
L( y ) k ( y T ) 2
Where
y is the critical performance parameter value,
L is the loss associated with a particular parameter y,
T is the Target value of quality characteristic,
k is a constant that depends on the cost at the specification limits
(can be determined conservatively by dividing the cost of scrap in
$, by the square of the lower or higher tolerance values).
(TQLF)
The Taguchi Quality Loss Function (TQLF)
Example
for, that k = $400 and T= 10 inches in diameter. Exhibit 15-2
illustrates the computation of the quality loss for four units. Notice
that the cost quadruples when the deviation from the target doubles
(from units 2 to 3). Notice also that the average deviation squared
and the average loss per unit can be computed. These averages can
be used to compute the total expected hidden quality costs for a
product. If, for example, the total units produced are 2,000 and the
average squared deviation is 0.025, then the expected cost per unit
is $10 = (0.025 $400), and the total expected loss for the 2,000
units would be $20,000 = ($10 2,000). To apply the TLF, you must
estimate k. The value for k is computed by dividing the estimated
cost at one of the specification limits by the squared deviation of the
limit from the target value:
k = c/d2
where
c : Loss at the lower or upper specification limit
d : Distance of limit from target value
Exhibit 15-2
Exhibit 15-3
Relative Distribution of Quality Costs
Letting 2004 be year 0, 2005 be year 1, and so on, the trend graph is shown
in Exhibit 15-7. Years of time are plotted on the horizontal axis and
percentages of sales on the vertical axis.
The ultimate quality cost objective of 3 percent, the target percentage, is
represented as a horizontal line on the graph.
The graph reveals that there has been a steady downward trend in quality
costs expressed as a percentage of sales.
The graph also reveals that there is still ample room for improvement
toward the long-run target percentage.
Exhibit 15-7
Quality
Quality Costs
Cost in $
Total cost
Failure cost
Control cost
0% Minimum 100%
Optimal
Acceptable Quality Level
Defective Rate
Amount of Inspection
Effects of poor Quality

Low customer satisfaction
Low productivity, sales & profit
Low morale of workforce
More re-work, material & labor
costs

High inspection costs
Delay in shipping
High repair costs

Higher inventory costs
Greater waste of material
Benefits of Quality

Higher customer satisfaction
Reliable products/services /
Better efficiency of operations
More productivity & profit
Better morale of work force
Less wastage costs

Less Inspection costs

Improved process

More market share
Spread of happiness & prosperity .
Better quality of life for all.
Measuring and Reporting Quality

Labor index
Quality cost / labor hours
Cost index
Quality cost / manufacturing cost
Sales index
Quality cost / sales
Production index
Quality cost / units produced
Quality Costs and Index
YEAR
1999 2000 2001 2002
Quality Costs
Prevention $ 27,000 41,500 74,600 112,300
Appraisal 155,000 122,500 113,400 107,000
Internal failure 386,400 469,200 347,800 219,100
External failure 242,000 196,000 103,500 106,000
Total $ 810,400 829,200 639,300 544,400
Accounting Measures
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

Trend Analysis
$1000 x
46
Quality Costs and Index
total quality costs

Quality index = (100)
base
$810,400(100)
Quality cost per sale = = 18.58
4,360,000
QUALITY QUALITY MANUFACTURING
YEAR SALES INDEX COST INDEX
1999 18.58 46.04
2000 18.63 45.18
2001 12.66 34.00
2002 10.49 28.80
Pareto analysis based on quality failure cost types
Failure types Annual loss Percentage in total
for quality quality failure cost
failure
Proportion Accumulated
1000$
(100%) prop. (100%)
Rework 5560 61 61
Customer complaint 1220 14 75
Scrap 780 9 84
Material quality problem 670 7 91
Sales discount 370 4 95
Failure investigation 280 3 98
Downtime 190 2 100
Total Cost 9070 100
Pareto analysis of Rework based on product types
Product types Annual rework Proportion Accumulated

loss1000$ (100%) prop. (100%)
A 1320 24 24
B 960 17 41
C 720 13 54
D 680 12 66
E 470 8 74
F 330 6 80
Other kinds 1080 20 100
Total cost 5560 100
Pareto Chart for C1
100
5000
80
4000
Percent
Count
60
3000
40
2000
1000 20
0 0
Other kinds

Defect A B C D E F
Count 1320 960 720 680 470 330 1080

Percent 23.7 17.3 12.9 12.2 8.5 5.9 19.4
Cum % 23.7 60.4
41 73.4
53.9 66.1
85.6 94.1
74.6 100.0
80.5 43.2
100
100
Setting up proper quality cost subjects
Quality failure costs collecting table
1st 2nd 3rd Sum ($)
Last year This year Growth rate
Scrap failure
Internal failure
Repair failure
cost
Failure analysis and

Quality failure costs
recheck
Downtime failure
Guarantee fee
External failure cost
Failure analysis and

recheck
Lawsuit fee
Claim fee
Sales discount
QualityCost Relationship

Increased prevention costs lead to decreased
failure costs

Improved quality leads to increased sales and
market share

Quality improvement at the design stage

Higher quality products can command higher
prices

Profitability
Deming Prize winners showed higher than
average results on financial performance
indicators
Baldrige Award winners consistently exceed
industry averages on financial performance
Quality leads to improved profitability and ROI
Quality is ... a profit--maker
In the long run, quality and profitability are
closely related
Quality and Productivity

output
Productivity =
input
Fewer defects increase output

) (
Quality improvement reduces inputs

Measuring Yield and Productivity

Yield = (total input) (% good units) +
(total input)(1 - % good units)(% reworked)
Y = I (%G) + I (1 - %G)(%R)
where
Y = yield
I = number of units started in production

% G = percentage of good units

% R = percentage of defective units reworked

Product Yield
Start 100 motors per day
80% are good
50% of poor quality units can be reworked
Yield = I (%G) + I (1 - %G)(%R)
Y = 100(0.80) + 100(1 - 0.80)(0.50)
= 90 motors
If product quality is increased to 90% good,
Y = 100(0.90) + 100(1 - 0.90)(0.50)
= 95 motors
Example 14.2
Product Cost
(direct manufacturing cost per unit)(input) +
(rework cost per unit)(reworked units)
Product cost =
yield
(Kd) I + (Kr) R
Product cost =
Y
where
Kd = direct manufacturing cost per unit

I = input
Kr = rework cost per unit
R = reworked units
Y = yield
Product Cost
Direct mfg cost = $30, Rework cost = $12
100 motors started, 20% defective
50% of defective motors can be reworked
(Kd) I + (Kr) R
Product cost =
Y
($30)(100) + ($12)(10)
Product cost = 90 motors= $34.67 per motor
The manufacturing cost after quality improvement is
($30)(100) + ($12)(5)
Product cost = = $32.21 per motor
95 motors
Example 14.3
Multistage Product Yield
Y = I (%g1)(%g2)...(%gn)
where
I = input batch size
%gi = percent good at stage i
Multistage Process Yield

AVERAGE PERCENTAGE
STAGE GOOD QUALITY
1 0.93
Start with 2 0.95
100 motors 3 0.97
4 0.92
Y = (I) (%g1)(%g2)...(%gn)
= (100)(0.93)(0.95)(0.97)(0.92)
Y = 78.8 motors
Solve for I
Y 100
I= = = 126.8 motors
(%g1)(%g2)...(%gn) (0.93)(0.95)(0.97)(0.92)
Example 14.4
Quality Productivity Ratio (QPR)

Includes productivity and quality costs
Increases
if processing or rework costs decrease
if process yield increases
Good-quality units
QPR = (100)
(input)(processing cost) +
(defective units)(rework cost)
QPR Example
Direct cost = $30/unit Rework cost = $12/unit
Start with 100 motors per day
80% are good, 50% of defective units can be reworked
Company studies 4 changes

1. Increase production to 200 units/day
2. Cut processing cost to $26 & rework cost to $10
3. Increase yield to 95%
4. Combine 2 and 3
QPR Example
Direct cost = $30/unit Rework cost = $12/unit
Start with 100 motors per day
80% are good, 50% of defective units can be reworked
Base case:
80 + 10
QPR = (100) = 2.89
(100)($30) + (10)($12)
Case 1: Increase input to capacity of 200 units
160 + 20
QPR = (100) = 2.89
(200)($30) + (20)($12)
QPR Example
Case 2: Reduce processing cost to $26 and rework to $10
80 + 10
QPR = (100) = 3.33
(100)($26) + (10)($10)
Case 3: Increase initial good-quality to 95%

95 + 2.5
QPR = (100) = 3.22
(100)($30) + (2.5)($12)
Case 4: Decrease costs and increase initial good-quality
95 + 2.5
QPR = (100) = 3.71
(100)($26) + (2.5)($10)
Employees and Quality
Improvement
Employee involvement
Quality circles
Process improvement teams
Employee suggestions
Statistical Process
Control
Take periodic samples from process

Plot sample points on control chart
Determine if process
is within limits UCL
Prevent quality
problems LCL
Variation
Common Causes
Variation inherent in a process
Can be eliminated only through
improvements in the system
Special Causes
Variation due to identifiable factors
Can be modified through operator or
management action
Types of Data
Attribute data
Product characteristic
evaluated with a discrete choice
Good/bad, yes/no
Variable data
Product characteristic that
can be measured
Length, size, weight, height,
time, velocity
SPC Applied to Services
Nature of defect is different in

services
Service defect is a failure to meet
customer requirements
Monitor times, customer
satisfaction
Service Quality Examples
Hospitals
Timeliness, responsiveness,
accuracy of lab tests
Grocery Stores
Check-out time, stocking, cleanliness
Airlines
Luggage handling, waiting times,
courtesy
Fast food restaurants
Waiting times, food quality,
cleanliness, employee courtesy
Service Quality Examples
Catalog-order companies
Order accuracy, operator
knowledge and courtesy,
packaging, delivery time,
phone order waiting time
Insurance companies
Billing accuracy, timeliness of claims
processing, agent availability and
response time
Statistical Process Control (SPC)
SPC is a collection of tools that

when used together can result in
process stability and variability
reduction
Seven Quality Control Tools
Pareto Analysis 1
Process
Flow Chart
2
3
1 2 3 4 4
Dirt 5
Check Sheet
Old
Temp
Fault
Histogram x xx
x
x x x
Scatter Diagram
x x
x x x
x UCL
x x x
SPC Chart LCL
Cause-and-Effect Diagram
Pareto Chart
NUMBER OF
CAUSE DEFECTS PERCENTAGE
Poor design 80 64 %
Wrong part dimensions 16 13
Defective parts 12 10
Incorrect machine calibration 7 6
Operator errors 4 3
Defective material 3 2
Surface abrasions 3 2
125 100 %
Pareto
Chart 70
(64)
60
Percent from each cause
50
40
30
20
(13)
(10)
10 (6)
(3) (2) (2)
0
Causes of poor quality

Flow Chart
Start/
Finish Operation Operation Decision Operation
Operation Operation
Decision Start/
Finish
Check Sheet
Components Replaced By Lab

Time Period: 22 Feb To 27 Feb 2002
Repair Technician: Bob
TV Set Model 1013

Integrated Circuits ||||
Capacitors |||| |||| |||| |||| |||| ||
Resistors ||
Transformers ||||
Commands
CRT |
Histogram
25
20
15
10
0
1 2 6 13 10 16 19 17 12 16 20 17 13 5 6 2 1
Scatter Diagram
Y
X
27
Control Chart
24
UCL = 23.35
21
Number of defects
18 c = 12.67
15
12
6
LCL = 1.99
3
2 4 6 8 10 12 14 16
Sample number
Cause-and-Effect Diagram
Measurement Human Machines
Faulty
testing equipment Poor supervision Out of adjustment
Incorrect specifications Lack of concentration Tooling problems
Improper methods Inadequate training Old / worn
Quality
Inaccurate Problem
temperature
control Defective from vendor Poor process design
Ineffective quality
Not to specifications management
Dust and Dirt Material- Deficiencies
handling problems in product design
Environment Materials Process
Figure 14.6
Quality Awards and
Certifications
The Malcolm Baldrige Award
The Deming Prize
RIT/USA Today Quality Cup
European Quality Award
Presidents Quality Award
Excellence in Productivity Improvement
NASA
Implications Of ISO 9000
Truly international in scope
Certification required by many foreign
firms
U.S. firms export more than
$150 billion annually to Europe
Adopted by U.S. Navy,
DuPont, 3M, AT&T, and others
ISO Family of Standards
ISO 9001:2000 Basis for certification
ISO 9004:2000 to prepare for national quality
award
ISO 10006 for project management
ISO 10007 for configuration management
ISO 10012 for measurement systems
ISO 10013 for quality documentation
ISO/TR 10014 managing economics of Q
ISO 10015 for training
ISO/TS 16949 for automotive suppliers
ISO 19011 for auditing
Certificatio
n Structure
ISO Accreditation
European registration
3rd party registrar assesses quality program
European Conformity (CE) mark authorized
United States 3rd party registrars
American National Standards Institute (ANSI)
American Society for Quality (ASQ)
Registrar Accreditation Board (RAB)
Quality Philosophers

Walter Shewhart
W. Edwards Deming
Joseph Juran
Philip Crosby
Armand Feigenbaum
Demings 14 Points
14
1. Create constancy of purpose
2. Adopt philosophy of prevention
3. Cease mass inspection
4. Select a few suppliers based on quality

5. Constantly improve system and workers

6. Institute worker training
Demings 14 Points
7. Instill leadership among supervisors

8. Eliminate fear among employees

9. Eliminate barriers between departments

10. Eliminate slogans
11. Remove numerical quotas

Demings 14 Points
12. Enhance worker pride
13. Institute vigorous training and
education programs

14. Develop a commitment from top
management to implement these 13
points
13
The Deming Wheel
(or PDCA Cycle)
4. Act 1. Plan
Institutionalize Identify the
improvement; problem and
continue the develop the
cycle. plan for
improvement.
3. Study/Check 2. Do
Assess the plan; Implement the
is it working? plan on a test
basis.
Figure 14.2
The Quality Organization
Circle 8-10 members

Same area
Supervisor/moderator
Process Presentation
Training
Group processes
Implementation Data collection
Monitoring Problem analysis
Problem
Solution Identification
Problem results List alternatives
Consensus
Brainstorming
Problem
Analysis
Cause and effect
Data collection
and analysis
Figure 14.3
Total Quality Management
1. Customer defined quality
2. Top management leadership
3. Quality as a strategic issue
4. All employees responsible for quality

5. Continuous improvement
6. Shared problem solving
7. Statistical quality control
8. Training & education for all employees

TQM Throughout the
Organization
Marketing, sales, research
Engineering
Purchasing
Human resources
Management
Packing, storing, shipping
After-sale support
Malcolm Baldrige National Quality
Award
Named after the late secretary of commerce, a strong proponent of
enhancing quality as a means of reducing the trade deficit. The award
promotes, recognizes, and publicizes quality strategies and
achievements.
1. Category 1 Leadership 120 points

2. Category 2 Strategic Planning 85 points
3. Category 3 Customer and Market Focus 85 points
4. Category 4 Measurement, Analysis, and
Knowledge Management 90 points
5. Category 5 Human Resource Focus 85 points
6. Category 6 Process Management 85 points
7. Category 7 Business Results 450 points
TQM and External Suppliers

Support of suppliers required to satisfy
customer expectations

Single-sourcing /
Partnering
Suppliers may be required to adopt quality
programs or meet specific standards

TQM and Customer Satisfaction

Requires some form of measurement system

Customer surveys widely used

Total customer satisfaction is often an
organizations overriding objective

TQM and Information Technology (IT)

Critical to monitoring and controlling quality in an organization

IT systems must be structured to satisfy the requirements of TQM
systems

IT systems tie together all the organization's functions and
processes

IT systems must be able to apply appropriate tools to drive
improvement

IT systems must be able to store and access relevant data for
analysis

Strategic Implications of TQM

Quality is key to effective strategy

Clear strategic goal, vision, mission

High quality goals
Operational plans & policies

Feedback mechanism
Strong leadership
TQM in Service Companies

Inputs similar to manufacturing

Processes & outputs are different

Services tend to be labor intensive

Quality measurement is harder

Timeliness is important measure

TQM principles apply to services


Fundamentals of Quality Control 4

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Statistical Quality Control

Prof. Mahmoud M. El-Sherbiny

Producers Perspective Consumers Perspective

Quality of Conformance Quality of Design

Production Conformance to Quality characteristics

Cost of achieving good quality(Assurance cost)

Costs associated with defective products,

Costs associated with deficiencies found

High repair costs

total quality costs

Product types Annual rework Proportion Accumulated

Count 1320 960 720 680 470 330 1080

Last year This year Growth rate

Failure analysis and

Failure analysis and

Fewer defects increase output

Quality improvement reduces inputs

The manufacturing cost after quality improvement is

Company studies 4 changes

Case 1: Increase input to capacity of 200 units

Case 3: Increase initial good-quality to 95%

Case 4: Decrease costs and increase initial good-quality

Take periodic samples from process

Nature of defect is different in

SPC is a collection of tools that

SPC Chart LCL

Causes of poor quality

Components Replaced By Lab

TV Set Model 1013

Incorrect specifications Lack of concentration Tooling problems

Improper methods Inadequate training Old / worn

Environment Materials Process

Circle 8-10 members

1. Category 1 Leadership 120 points

Requires some form of measurement system

Operational plans & policies

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