Fourth Edition

MANAGING QUALITY

INTEGRATING THE SUPPLY CHAIN

GLOBAL EDITION

S. Thomas FosterBrigham Young University

Boston Columbus Indianapolis New York San Francisco Upper Saddle RiverAmsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto

Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

CONTENTS

Preface 21

Part I Understanding Quality Concepts 27Chapter 1 Differing Perspectives on Quality 28

Recognizing Different Perspectives on Quality 28• A CLOSER LOOK AT QUALITY 1-1: Which Is Better, Digital

or Analog? 29

What Is Quality? 29

Product Quality Dimensions 29

Service Quality Dimensions 32

Why Does It Matter That Different Definitionsof Quality Exist? 33

Differing Functional Perspectives on Quality 34

A Supply Chain Perspective 34

An Engineering Perspective 35

An Operations Perspective 37

A Strategic Management Perspective 39

• QUALITY HIGHLIGHT 1-1: Quality Strategy at GE 41

A Marketing Perspective 42

A Financial Perspective 43

The Human Resources Perspective 45Is Quality Management Its Own Functional

Discipline? 46

The Three Spheres of Quality 47• QUALITY HIGHLIGHT 1-2: Federal Express Corporation 49

Other Perspectives on Quality 50

The Value-Added Perspective on Quality 50

Cultural Perspectives on Quality 50

Arriving at a Common Understanding of Quality Usinga Contingency Perspective of Quality 50

Summary 51 • Key Terms 51 • DiscussionQuestions 52

• CASE 1-1: FedEx: Managing Quality Day and Night 53• CASE 1-2: Granite Rock Company: Achieving Quality through

Employees 55

Chapter 2 Quality Theory 56What Is Theory? 56

Is There a Theory of Quality Management? 58

• A CLOSER LOOK AT QUALITY 2-1: The Product That IsQuality 58

8 Contents

History of Quality Management 60

Leading Contributors to Quality Theory: W. EdwardsDem ing 60

Deming's 14 Points for Management 62

The Deadly Diseases 66

Leading Contributors to Quality Theory:Joseph M. Juran 67

The Juran Trilogy 67

Control versus Breakthrough 68

Project-by-Project Improvement 68

• A CLOSER LOOK AT QUALITY 2-2: Juran on the Past Centuryof Quality 69

Pareto Analysis 70

Leading Contributors to Quality Theory:Kaoru Ishikawa 71

The Basic Tools of Quality 71

Ishikawa's Quality Philosophy 71

Leading Contributors to Quality Theory: ArmandFeigenbaum 72

The 19 Steps of TQC 73

Leading Contributors to Quality Theory: Philip Crosby 73

Leading Contributors to Quality Theory: GenichiTaguchi 75

Definition of Quality 75

Quality Loss Function 75

Robust Design 76

Leading Contributors to Quality Theory: The Rest ofthe Pack 76

Robert C. Camp 76

Stephen R Covey's " 8 " Habits 76

Tom Peters 77

Michael Hammer and James Champy 78

• A CLOSER LOOK AT QUALITY 2-3: Hammer Recants (Sort of), or InSearch of the Lost Product to Sell 78

Viewing Quality Theory f rom a ContingencyPerspective 79

Resolving the Differences in Quality Approaches:An Integrative View 80

Leadership 81

Employee Improvement 82

Quality Assurance 82

Customer Focus 82

Quality Philosophy 82

Contents

Information Analysis 82

Strategic Planning 82

Environment or Infrastructure 83

Team Approach 83

Focus of the Quality Department 83

Breakthrough 83

Theoretical Framework for Quality Management 83

Summary 84 • Key Terms 85 • DiscussionQuestions 85

• CASE 2-1: Rheaco, Inc.: Making a Quality Turnabout by Asking forAdvice 86

• CASE 2-2: Has Disney Developed a Theory of Quality Guest ServicesManagement? 87

Chapter 3 Global Supply Chain Quality and InternationalQuality Standards 89Managing Quality for the Multinational Firm (MNF) 90

• QUALITY HIGHLIGHT 3-1: Supply Chain Quality in the GlobalContext 94

Quality Improvement: The American Way 95

The Malcolm Baldrige National Quality Award 95

The Baldrige Process 99

• A CLOSER LOOK AT QUALITY 3-1: Who Was Malcolm Baldrige? 100

Baldrige Scoring 101

Being a Baldrige Examiner 103

• QUALITY HIGHLIGHT 3-2: Harland Clarke, Inc. 104

State Awards 105

Quality Improvement: The Japanese Way 106

Deming Prize 106

Other Japanese Contributions to Quality Thought 107

Lean Production 107

Japanese Total Quality Control (TQC) 108

Quality Improvement: The European Way 110

European Quality Award 110

ISO 9000:2008 111

Quality Management Principles UnderlyingISO 9000:2008 115

Selecting a Registrar 116

The ISO 9000-2008 Process 116

ISO 14000 117

Quality Improvement: The Chinese Way 119

Does Chinese Quality Management Exist? 119

• A CLOSER LOOK AT QUALITY 3-2: Outsourcing Woes 120

10 Contents

Are Quality Approaches Influenced by Culture? 121Summary 122 • Key Terms 123 • DiscussionQuestions 123

• CASE 3-1: University of Wolverhampton: Becoming an ISO 9000University 124

• CASE 3-2: Wainwright Industries: An Entirely New Philosophyof Business Based on Customer Satisfactionand Quality 125

Part II Designing and AssuringQuality 127

Chapter 4 Strategic Quality Planning 128Strategy Content 128

The Importance of Time in Quality Improvement 128

• A CLOSER LOOK AT QUALITY 4-1: Problems with MeasuringEducational Performance 130

Leadership for Quality 131

Leadership Dimensions 132

Quality and Ethics 133

• QUALITY HIGHLIGHT 4-1: Solectron Corporation 134

Quality as a Strategy 135

Costs of Quality 135

PAF Paradigm 136

Accounting for Quality-Related Costs 137

Lundvall-Juran Quality Cost Model 139

Differentiation through Quality 139

Focus through Quality 140

Order Winners 140

Quality as a Core Competency 141

Quality Strategy Process 142

Forced-Choice Model 142

Deploying Quality (Hoshin Kanri) 143

• A CLOSER LOOK AT QUALITY 4-2: A Mature StrategicPlanning Process 143

Does Quality Lead to Better Business Results? 144

Quality and Price 146

Quality and Cost 146

Quality and Productivity 146

Quality and Profitability 147

Quality and the Environment 147

Supply Chain Strategy 148

Summary 149 • Key Terms 150 • DiscussionQuestions 150 • Problems 151

Contents 11

• CASE 4-1: Ames Rubber Corporation: Realizing Multiple Benefitsthrough Improved Quality 152

• CASE 4-2: Make No Mistake—At Eastman Chemical, Quality Is aStrategic Issue 154

Chapter 5 The Voice of the Customer 156

Customer-Driven Quality 157• A CLOSER LOOK AT QUALITY 5-1: Customer Service

on the Internet 157

The Pitfalls of Reactive Customer-DrivenQuality 158

Customer-Relationship Management 160

Complaint Resolution 161

Feedback 162

Guarantees 162

Corrective Action 163

The "Gaps" Approach to Service Design 163

Segmenting Customers and Markets 165

Strategic Supply Chain Alliances between Customersand Suppliers 168

The Role of the Customer in the SupplyChain 168

Communicating Downstream 169

Actively Solicited Customer-FeedbackApproaches 170

Telephone Contact 170

Focus Groups 171

Customer Service Surveys 171

• A CLOSER LOOK AT QUALITY 5-2: Misusing Surveys 172

Passively Solicited Customer-FeedbackApproaches 175

Customer Research Cards 176

Customer Response Lines 176

Web Site Inquiries 177

Managing Customer Retention and Loyalty 177

Customer-Relationship Management Systems(CRMS) 179

A Word on Excellent Design 181Summary 182 • Key Terms 183 • DiscussionQuestions 183 • Problems 184

• CASE 5-1: Customer Quality Feedback at Apple Computer 185• CASE 5-2: Chaparral Steel: Achieving High Quality through a

Commitment to Both External and InternalCustomers 186

12 Contents

Chapter 6 The Voice of the Market 188

What Do We Mean by the Voice of the Market? 188

Gaining Insight through Benchmarking 189

Process Benchmarking 190

Financial Benchmarking 190

Performance Benchmarking 191

Product Benchmarking 191

Strategic Benchmarking 191

• QUALITY HIGHLIGHT 6-1: Pal's Sudden Service 191

Functional Benchmarking 193

Purposes of Benchmarking 193

Difficulties in Monitor ing and MeasuringPerformance 193

Commonly Benchmarked Performance Measures 197

Why Collect All These Measures? 198

Key Business Factors 198

Business Process Benchmarking 199

Robert Camp's Business Process BenchmarkingProcess 200

Leading and Managing the Benchmarking Effort 202

• A CLOSER LOOK AT QUALITY 6-1: Toyota: Benchmarking AmericanAuto Companies (Before It Was Called Benchmarking) 202

Training 203

Baselining and Reengineering 203

• A CLOSER LOOK AT QUALITY 6-2: The Legal Environment ofBenchmarking 204

Problems wi th Benchmarking 206Summary 207 • Key Terms 207 • DiscussionQuestions 207 • Problems 208

• CASE 6-1: Amgen Corporation: Using Benchmarking as a Meansof Coping with Rapid Growth 211

• CASE 6-2: At&TTeleholdings: Making Benchmarking a Part of theProcess Improvement Tool Kit 213

Chapter 7 Quality and Innovation in Product and ProcessDesign 215

Designing Products for Quality 215

The Design Process 216

• QUALITY HIGHLIGHT 7-1: A Turnaround at Kellogg's Cereals: Drivenby Design 218

Quality Function Deployment (QFD) 220

Technology in Design 226

Other Design Methodologies 228

Organizing the Design Team 228

The Product Life Cycle 229

Contents 13

Product Families and the Product Life Cycle 229

• A CLOSER LOOK AT QUALITY 7-1: Ski Design 229

Complementary Products 230

Designing Products That Work 231

• A CLOSER LOOK AT QUALITY 7-2: Why It Takes a Rocket Scientistto Design a Golf Ball 231

Design for Manufacture Method 233

Design for Maintainability 234

Designing for Reliability 235

Reliability Analysis Tools 235

Failure Modes and Effects Analysis 235

• QUALITY HIGHLIGHT 7-2: Designing Reliable Luxury atVuitton 236

How FMEA Works 237

Fault-Tree Analysis 238

Failure Modes, Effects, and CriticalityAnalysis 240

Product Traceability and Recall Procedures 240

Environmental Considerations in Design 241Summary 242 • Key Terms 243 • DiscussionQuestions 243 • Problems 244

• CASE 7-1: Designing the Ford Taurus: Why Quality Had toBe Job 1 246

• CASE 7-2: Nucor Corporation: Producing Quality Steel by StressingSound Management Practices 248

Chapter 8 Designing Quality Services 250Differences between Services and Manufacturing 250

Internal versus External Services 252

Voluntary versus Involuntary Services 252

How Are Service Quality Issues Different f rom Thoseof Manufacturing? 253

• A CLOSER LOOK AT QUALITY 8-1: Service Warranties: Profitableor a Rip-Off—You Decide 254

How Are Service Quality Issues Similar toManufacturing? 254

What Do Services Customers Want? 254

• QUALITY HIGHLIGHT 8-1: Ritz-Carlton Hotels 256

SERVQUAL 257

Expectations 257

Perceptions 259

Gap Analysis 259

Assessing Differences in Expectationsand Perceptions by Using the DifferencingTechnique 262

14 Contents

Designing and Improving the Services Transaction 265

Services Blueprinting 265

Moments of Truth 266

• A CLOSER LOOK AT QUALITY 8-2: Quality in HealthCare 267

Poka-yoke 268

The Customer Benefits Package 269

Service Transaction Analysis 271

Improving Customer Service in Government 273

• A CLOSER LOOK AT QUALITY 8-3: Government Service Quality:A Stop-and-Go Process 274

Quality in Health Care 275

Supply Chain Quality in Services 275

A Theory for Service Quality Management 276Summary 277 • Key Terms 277 • DiscussionQuestions 278 • Problems 278

• CASE 8-1: Yahoo! Designs Quality Services with Customersin Mind 280

• CASE 8-2: UPS: Delivering the Total Package in CustomerService 281

Chapter 9 Managing Supplier Quality in the SupplyChain 283The Value Chain 283

The Chain of Customers 284

Managing the Supply Chain 284

Supplier Partnering 286

• A CLOSER LOOK AT QUALITY 9-1: Supply Chainsand Terrorism 287

Single-Source Examples 288

• QUALITY HIGHLIGHT 9-1: Supplier Partnershipsat Mercedes-Benz 289

Supplier Development 290 <

• QUALITY HIGHLIGHT 9-2: Integrating Forward Along the SupplyChain: 3M Dental Products Division 291

Supplier Awards 292

Supplier Relationship Management Systems(SRMS) 293

Applying the Contingency Perspective to SupplierPartnering 293

A Supplier Development Program:\SOfTS 16949 294

ISO/TS 16949 294

Quality Management System 294

Management Responsibility 295

Resource Management 296

Contents 15

Product Realization 296

Measurement, Analysis, and Improvement 296

Acceptance Sampling and Statistical SamplingTechniques 296

Is Acceptance Sampling Needed? 296

• A CLOSER LOOK AT QUALITY 9-2: For RFID to Take Hold, ReliabilityNeeds to Improve 297

Building an Understanding of Supply Chain QualityManagement 298

Summary 298 • Key Terms 299 • DiscussionQuestions 299

• CASE 9-1: AT&T: Setting High Standards for Suppliers and RewardingSupplier Performance 300

• CASE 9-2: Managing the Supply Chain at Honeywell 301

Appendix Acceptance Sampling Fundamentals 303

Part III Implementing Quality 315Chapter 10 The Tools of Quality 316

Improving the System 316

Ishikawa's Basic Seven Tools of Quality 317

Process Maps 318

• A CLOSER LOOK AT QUALITY 10-1: Extended Process Mappingof Supply Chains 322

Check Sheets 324

Histograms 326

Scatter Diagrams 327

Control Charts 329

Cause-and-Effect (Ishikawa) Diagrams 329

Pareto Charts 331

The Seven New Tools for Improvement 334

The Affinity Diagram 335

The Interrelationship Digraph 337

Tree Diagrams 340

Prioritization Grid 340

Matrix Diagram 344

Process Decision Program Chart 345

Activity Network Diagram 346

Reflections on the Managerial N7 Tools 346

Other Tools for Performance Measurement 347

Spider Charts 347

Balanced Scorecards 348

Dashboards 348Summary 349 • Key Terms 350 • DiscussionQuestions 350 • Problems 350

16 Contents

• CASE 10.1: Corporate Universities: Teaching the Tools ofQuality 354

• CASE 10.2: Lanier: Achieving Maximum Performance by SupportingQuality Products with Quality Services 356

Chapter 11 Statistically Based Quality Improvementfor Variables 358Statistical Fundamentals 358

What Is Statistical Thinking? 358• QUALITY HIGHLIGHT 11-1: Statistical Tools

in Action 359

Why Do Statistics Sometimes Fail in theWorkplace? 360

What Do We Mean by the Term Statistical QualityControl? 361

Understanding Process Variation 361

Process Stability 362

Sampling Methods 362

Random Samples 363

Systematic Samples 363

Sampling by Rational Subgroups 363

Planning for Inspection 364

Process Control Charts 364

Variables and Attributes Control Charts 364

A Generalized Procedure for DevelopingProcess Charts 365

Understanding Control Charts 365

x and R Charts 367

Interpreting Control Charts 369

Using Excel to Draw x and R Charts 373

Xand Moving Range (MR) Charts forPopulation Data 374

Using Excel to DrawXand MR Charts 376

Median Charts 377

Using Excel to Draw Median Charts 380

x and s Charts 380

Using Excel to Draw s and x Charts 381

Other Control Charts 381

Moving Average Chart 381

Cusum Chart 382

Some Control Chart Concepts for Variables 383

Choosing the Correct Variables ControlChart 383

Corrective Action 383

Contents 17

How Do We Use Control Charts to ContinuouslyImprove? 385

Tampering with the Process 385

Process Capability for Variables 385• A CLOSER LOOK AT QUALITY 11-1: A Justification for Meeting

Standards in Software Quality 386

Population versus Sampling Distributions 387

Capability Studies 388

Ppk 389

The Difference between Capability andStability 391

Other Statistical Techniques in Quality Management 391Summary 392 • Key Terms 392 • DiscussionQuestions 392 • Problems 393

• CASE 11-1: Ore-Ida Fries 397

Chapter 12 Statistically Based Quality Improvement forAttributes 399Generic Process for Developing Attributes Charts 400

Understanding Attributes Charts 400

p Charts for Proportion Defective 400

Using Excel to Draw p Charts 403

np Charts 403

Using Excel to Draw np Charts 405; cand uCharts ,405

Using Excel to Draw c and u Charts 408

Attributes Charts Summary 408

Choosing the Right Attributes Chart 408

Reliability Models 408

Series Reliability 411

Parallel Reliability 412

Measuring Reliability 413

Mean Time to Failure (MTTF) 413• A CLOSER LOOK AT QUALITY 12-1: Is Quality on the

Decline? 414

System Availability 415Summary 416 • Key Terms 416 • DiscussionQuestions 416 • Problems 417

• CASE 12-1: Decision Sciences Institute NationalConference 421

Chapter 13 Six Sigma Management and Lean Tools 424What Is Six Sigma? 424

Organizing Lean-Six Sigma 427

Packing Lean with Six Sigma 428

18 Contents

DMAIC Overview 429

• A CLOSER LOOK AT QUALITY 13-1: DMAIC In Action 430

Define Phase 431

Developing the Business Case 431

Project Evaluation 432

Pareto Analysis 432

Problem Definition 432

Measure Phase 435

Selecting Process Outcomes 435

FMEA 437

Verifying Measurements 437

Gauge R&R 439

Using Excel to Perform Gauge R&R Analysis 442

Analyze Phase 443

Defining Objectives 443

Identifying Xs 443

Analyzing Sources of Variation 443

Improve Phase 444

Control Phase 444

Taguchi Design of Experiments 445

Robust Design 445

Background of the Taguchi Method 446

Taguchi Definition of Quality 446

Quality Loss Function 447

The Taguchi Process 448

Using Excel t o Solve Taguchi Experiments 451

Design for Six Sigma 453

Lean-Six Sigma from a Contingency Perspective 453Summary 454 • Key Terms 454 • DiscussionQuestions 454 • Problems 455

• CASE 13-1: The Neiman-Marcus Cookie 459

Part IV Forever Improving the Quality System 461Chapter 14 Managing Quality Improvement Teams and

Projects 462Why Employees Enjoy Teams 463

Leading Teams for Quality Improvement 463

Employee Empowerment and Involvement 463

Flattening Hierarchies for Improved Effectiveness 465

• A CLOSER LOOK AT QUALITY 14-1: Empowerment in Action 466

Team Leader Roles and Responsibilities 466

Team Roles and Responsibilities 468

Contents 19

Team Formation and Evolution 468

Team Rules 469

Types of Teams 470

Process Improvement Teams 470

Cross-Functional Teams 470

Tiger Teams 471

Natural Work Groups 471

Self-Directed Work Teams 471

Virtual Teams 471

• A CLOSER LOOK AT QUALITY 14-2: Lessons from Effective TeamsOutside the Business World 472

Implementing Teams 473

Meeting Management 473

Conflict Resolution in Teams 475

Saving Quality Teams f rom Failure: Diagnosing Problemsand Intervening before It Is Too Late 478

Managing and Controlling Projects 478

Qualifying Projects 479

Project Charters 480

Force-Field Analysis 480

Work Breakdown Structure (WBS) 481

Identifying Precedence Relationships 483

Identifying Outcome Measures 483

Identifying Task Times 483

Activity Network Diagrams 484

Arrow Gantt Charts 488

Managing Multiple Projects 488

Summary 489 • Key Terms 490 • DiscussionQuestions 491 • Problems 491

• CASE 14-1: Whole Foods: Using Teamwork as a Recipe forSuccess 494

• CASE 14-2: The Boeing 777: Designing and Building an AirplaneUsing Virtual Teams 496

Chapter 15 Implementing and Validating the QualitySystem 498Building Blocks for the System of Quality

Improvement 499

People 499

Organizational Learning and Knowledge 500

Culture 501

Closeness to Customers 501

Information and Finance 502

20 Contents

Appendix 521

Glossary 524

Index 536

The Three Spheres of Quality 503

The Integrative Approach 503

Alignment between the Quality System andStrategy 503

Internal Validation: Documenting and Assessing the QualitySystem 504

• QUALITY HIGHLIGHT 15-1: Back to Basics at Ford 504

• A CLOSER LOOK AT QUALITY 15-1: A Simple Self-Assessment Tool 507

Quality Audits 510

Quality Audi t Process 511

Types of Audits 512

Operational Audits 512

Performance Audits 512

• A CLOSER LOOK AT QUALITY 15-2: Quality Audits in Action 514

Qualitative and Quantitative Elements in Audits 516

Validating the Quality System 516Summary 517 • Key Terms 518 • DiscussionQuestions 518 • Problems 518

• CASE 15-1: Setting Priorities Using the Baldrige Criteria 518