Recent Issues in ManagementRecent Issues in Management

Dr. Syed Mohammad Tariq Zafar

Chapter 3 - Total Quality Management Chapter 3 - Total Quality Management (Continued)(Continued)

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X Lecture OutlineX Lecture Outline

Quality Gurus and their ContributionQuality Gurus and their Contribution TQM in Service CompaniesTQM in Service Companies Cost of QualityCost of Quality Tools of Quality ManagementTools of Quality Management

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Quality GurusQuality Gurus

Walter ShewartWalter Shewart In 1920s, developed control chartsIn 1920s, developed control charts Introduced the term “Introduced the term “quality assurance” quality assurance”

W. Edwards DemingW. Edwards Deming Developed courses during World War II to teach Developed courses during World War II to teach

statistical quality-control techniques to engineers and statistical quality-control techniques to engineers and executives of companies that were military suppliersexecutives of companies that were military suppliers

After the war, began teaching statistical quality control After the war, began teaching statistical quality control to Japanese companiesto Japanese companies

Joseph M. JuranJoseph M. Juran Followed Deming to Japan in 1954Followed Deming to Japan in 1954 Focused on strategic quality planning Focused on strategic quality planning

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Armand V. FeigenbaumArmand V. Feigenbaum In 1951, introduced concepts of total quality control In 1951, introduced concepts of total quality control

and continuous quality improvementand continuous quality improvement Philip Crosby Philip Crosby

In 1979, emphasized that costs of poor quality far In 1979, emphasized that costs of poor quality far outweigh the cost of preventing poor qualityoutweigh the cost of preventing poor quality

In 1984, defined absolutes of quality management—In 1984, defined absolutes of quality management—conformance to requirements, prevention, and “zero conformance to requirements, prevention, and “zero defects”defects”

Kaoru IshikawaKaoru Ishikawa Promoted use of quality circlesPromoted use of quality circles Developed “fishbone” diagram Developed “fishbone” diagram Emphasized importance of internal customerEmphasized importance of internal customer

Quality Gurus (cont.)Quality Gurus (cont.)

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Deming Wheel: PDCA Deming Wheel: PDCA CycleCycle

1. PlanIdentify problem and develop plan for improvement.

2. DoImplement plan on a test basis.

3. Study/CheckAssess plan; is it working?

4. ActInstitutionalize improvement; continue cycle.

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Six SigmaSix Sigma

A process for developing and delivering A process for developing and delivering near perfect products and servicesnear perfect products and services

Measure of how much a process Measure of how much a process deviates from perfectiondeviates from perfection

3.4 defects per million opportunities3.4 defects per million opportunities ChampionChampion

an executive responsible for project successan executive responsible for project success

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3.4 DPMO3.4 DPMO

67,000 DPMOcost = 25% of

sales

67,000 DPMOcost = 25% of

sales

DEFINEDEFINE CONTROLCONTROLIMPROVEIMPROVEANALYZEANALYZEMEASUREMEASURE

Six Sigma: DMAICSix Sigma: DMAIC

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Quality Attributes in Quality Attributes in ServiceService

BenchmarkBenchmark ““best” level of quality best” level of quality

achievement one achievement one company or company or companies seek to companies seek to achieveachieve

TimelinessTimeliness how quickly a service how quickly a service

is providedis provided ““quickest, friendliest, most quickest, friendliest, most accurate service accurate service

available.”available.”

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Cost of QualityCost of Quality

Cost of Achieving Good QualityCost of Achieving Good Quality Prevention costsPrevention costs

costs incurred during product designcosts incurred during product design Appraisal costsAppraisal costs

costs of measuring, testing, and analyzingcosts of measuring, testing, and analyzing Cost of Poor QualityCost of Poor Quality

Internal failure costsInternal failure costs include scrap, rework, process failure, downtime, include scrap, rework, process failure, downtime,

and price reductionsand price reductions External failure costsExternal failure costs

include complaints, returns, warranty claims, include complaints, returns, warranty claims, liability, and lost salesliability, and lost sales

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Prevention CostsPrevention Costs

Quality planning costsQuality planning costs costs of developing and costs of developing and

implementing quality implementing quality management programmanagement program

Product-design costsProduct-design costs costs of designing costs of designing

products with quality products with quality characteristicscharacteristics

Process costsProcess costs costs expended to make costs expended to make

sure productive process sure productive process conforms to quality conforms to quality specificationsspecifications

Training costsTraining costs costs of developing and costs of developing and

putting on quality training putting on quality training programs for employees programs for employees and managementand management

Information costsInformation costs costs of acquiring and costs of acquiring and

maintaining data related maintaining data related to quality, and to quality, and development of reports on development of reports on quality performancequality performance

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Appraisal CostsAppraisal Costs

Inspection and testingInspection and testing costs of testing and inspecting materials, parts, and costs of testing and inspecting materials, parts, and

product at various stages and at the end of a product at various stages and at the end of a processprocess

Test equipment costsTest equipment costs costs of maintaining equipment used in testing costs of maintaining equipment used in testing

quality characteristics of productsquality characteristics of products Operator costsOperator costs

costs of time spent by operators to gear data for costs of time spent by operators to gear data for testing product quality, to make equipment testing product quality, to make equipment adjustments to maintain quality, and to stop work to adjustments to maintain quality, and to stop work to assess qualityassess quality

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Internal Failure CostsInternal Failure Costs

Scrap costsScrap costs costs of poor-quality costs of poor-quality

products that must be products that must be discarded, including labor, discarded, including labor, material, and indirect costsmaterial, and indirect costs

Rework costsRework costs costs of fixing defective costs of fixing defective

products to conform to products to conform to quality specificationsquality specifications

Process failure costsProcess failure costs costs of determining why costs of determining why

production process is production process is producing poor-quality producing poor-quality productsproducts

Process downtime costsProcess downtime costs costs of shutting down costs of shutting down

productive process to fix productive process to fix problemproblem

Price-downgrading costsPrice-downgrading costs costs of discounting poor-costs of discounting poor-

quality products—that is, quality products—that is, selling products as selling products as “seconds”“seconds”

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External Failure CostsExternal Failure Costs

Customer complaint costsCustomer complaint costs costs of investigating and costs of investigating and

satisfactorily responding to a satisfactorily responding to a customer complaint resulting customer complaint resulting from a poor-quality productfrom a poor-quality product

Product return costsProduct return costs costs of handling and replacing costs of handling and replacing

poor-quality products returned poor-quality products returned by customerby customer

Warranty claims costsWarranty claims costs costs of complying with costs of complying with

product warrantiesproduct warranties

Product liability costsProduct liability costs litigation costs litigation costs

resulting from product resulting from product liability and customer liability and customer injuryinjury

Lost sales costsLost sales costs costs incurred costs incurred

because customers because customers are dissatisfied with are dissatisfied with poor quality products poor quality products and do not make and do not make additional purchasesadditional purchases

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Some Tools of Quality Some Tools of Quality ManagementManagement

Pareto AnalysisPareto Analysis Flow ChartFlow Chart HistogramHistogram

Cause-and-Effect Cause-and-Effect DiagramDiagram

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NUMBER OFNUMBER OFCAUSECAUSE DEFECTSDEFECTS PERCENTAGEPERCENTAGE

Poor designPoor design 8080 6464 %%Wrong part dimensionsWrong part dimensions 1616 1313Defective partsDefective parts 1212 1010Incorrect machine calibrationIncorrect machine calibration 77 66Operator errorsOperator errors 44 33Defective materialDefective material 33 22Surface abrasionsSurface abrasions 33 22

125125 100100 %%

Pareto AnalysisPareto Analysis

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Per

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rom

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ause

Per

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ause

Causes of poor qualityCauses of poor quality

Mac

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cal

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Mac

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cal

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tions

Defec

tive

parts

Defec

tive

parts

Wro

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sion

s

Wro

ng d

imen

sion

s

Poor D

esig

n

Poor D

esig

n

Ope

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r err

ors

Ope

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r err

ors

Defec

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Surfa

ce a

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ions

Surfa

ce a

bras

ions

00

1010

2020

3030

4040

5050

6060

7070(64)(64)

(13)(13)(10)(10)

(6)(6)(3)(3) (2)(2) (2)(2)

Pareto ChartPareto Chart

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Flow ChartFlow Chart

Operation DecisionStart/ Finish

Start/ Finish

Operation

OperationOperation

Operation

Decision

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HistogramHistogram

0

5

10

15

20

1 2 6 13 10 16 19 17 12 16 2017 13 5 6 2 1

Practice Problem 1Practice Problem 1

A Shoe company has Following defects while producing 10,000 shoes:A Shoe company has Following defects while producing 10,000 shoes:

1. Poor Design – 321. Poor Design – 32

2. Stitching Problem – 242. Stitching Problem – 24

3. Defective parts - 123. Defective parts - 12

4. Incorrect machine calibration - 84. Incorrect machine calibration - 8

5. Operator errors - 45. Operator errors - 4

6. Defective material - 166. Defective material - 16

Draw a neat Pareto Chart with the help of above Draw a neat Pareto Chart with the help of above information. information.

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