CHAPTER 1: BOTTOM LINE: QUALITY & BUSINESS PERFORMANCE

QUALITY ASSURANCE 2: EBQAS2A/ EBKVA2B/ EYTKU3A

Content
1.Understand the basic concepts of quality
2.Know the various definitions of quality
3.Know the relationships between quality, productivity, cost, cycle
time, and value
4.Differentiate between chronic and sporadic quality problems.
5.Practice Questions
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1.Understand the basic concepts of
• quality
Quality is a word with multiple meanings. Customers often use it when they like the product,
companies use it as part of their mission statement and is also used as means to improve business
performance.
• There are various approaches to quality from which the best methods are chosen. A quality
frameworks is then adopted to fit the business needs. The various quality frameworks include:
 US Malcolm Baldrige National Award for Excellence (and similar frameworks around the world)
 Juran Quality Management (QMS)
 ISO Quality Management
• Quality has Impact on both sales revenue and costs
• If businesses focus on the relentless pursuit of quality, they will attain a sustainable business
performance and positive global competition

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1.Understand the basic concepts of
quality
There are various quality concepts, activities and ideas that emerged in the 20 th Century and have
been used to sustain business performance such as:

Quality Control; Continuous Quality Improvement; Defect Prevention; Statistical Process Control;
Reliability Engineering; Quality Cost Analysis; Zero Defects; Total Quality Management; Supplier
Certification; Quality Circles; Quality Audit; Quality Assurance; Quality Function Deployment;; Taguchi
Methods; Competitive Benchmarking; Lean and Six Sigma

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 1.Understand the basic concepts of quality
Some of the major contributors to the body of knowledge on achieving superior quality include:
J.M Juran: Emphasises the importance of a balanced approach using managerial, statistical, and technological concepts of
quality. He recommended an operational; framework of three quality processes, quality planning, quality control and quality
improvement.
W. Edwards Deming: He summarises quality in 14 points aimed at management of an organisation. The 14 points are based on a
“system of knowledge” with 4 parts: The system approach, understanding of statistical variation, the nature and scope of
knowledge and psychology to understand human behaviour.
A.V Feigenbaum: Emphasises the concept of Total Quality Control throughout all functions of an organisation. Where Total
Quality Control means both Planning and Control. He urges creating a quality system to provide technical and managerial
procedures that ensure customer satisfaction and an economical cost of quality.
Philip Crosby: Defines Quality as “conformance to requirements” and stresses that the only performance standard is zero
defects. His activities demonstrated that all employees can be motivated to pursue improvement when provided with tools to
show how they can improve.
Kaoru Ishikawa: Shows how to integrate the many tools of quality improvement, particularly the simpler tools of analysis and
problem solving.
These quality experts/gurus and others, have similarities and differences-particularly in the relative emphasis on managerial,
statistical, technological, and behavioural elements.
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 2. Know the various definitions of quality
There are various definitions of quality, including from the dictionary:

International Organisation for Standards (ISO) defines quality as the “Totality of characteristics of an entity that bear on its
ability to satisfy stated and implied needs.”

Some of the short hand definitions of quality include:

i. Customer satisfaction and loyalty
ii. Fitness for use (Juran)
iii. Fit for purpose
iv. Conformance to specification (Crosby)
v. Loss to society (Taguchi)
vi. Predictable degree of uniformity (Deming)

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 2. Know the various definitions of quality
To further unfold the definitions, the words customer and product also need to be defined.
A customer is either internal or external, and these are often called stakeholders.
External customers are the ultimate users (current and potential) and intermediate processors, as well as retailers. Other
customers with no direct connection to the product include government regulatory bodies, shareholders, suppliers, partners,
investors, the media and the general public.
Internal customers or functions and processes include other divisions of a company that are provided with information or
components for an assembly and departments or persons that supply products to each other.

A product is the output of any process which can be in the form of goods, software or services.
1. Goods: e.g., automobiles. Circuit boards, reagent chemicals
2. Software: e.g., a computer program, a report, an instruction
3. Services: e.g., banking, insurance, transportation

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 3. Know the relationships between quality, productivity, cost, cycle time, and value

Quality and Productivity

Productivity is the ratio of sellable output to resources use.
The resources can either include labor, raw materials, and capital or the total of all these.
McCracken and Kaynak define productivity and its relationship with quality and conclude that as quality increases,
productivity increases.
Labour Productivity is a common Productivity measure (number of sellable units per hour of direct labor)
When quality is improved by identifying and eliminating the causes of errors and rework, more usable output is available for
the same amount of labour input. Thus the improvement in quality results directly in an increase in productivity.
Quality and Costs
As the quality of design (features) increases, costs typically increase. As the quality of conformance increases, the reduction
in rework, complaints, scrap, and other deficiencies results in a significant decrease in costs. An ideal strategy calls for using
the savings from reduced deficiencies to pay for any increase in features without increasing the selling price, thus resulting in
higher customer satisfaction and increased sales revenue.

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 3. Know the relationships between quality, productivity, cost, cycle time, and value

Quality and Cycle time

Cycle time refers to the time to complete a specific set of activities (in manufacturing industry) or provide a transaction
(response time in service industry).
When a quality improvement effort reduces rework, redundant operations, and other deficiencies, a simultaneous reduction
in cycle time occurs.
Quality and Value
Value is defined as quality divided by price.
Improvements in quality that can be provided to customers without an increase in price result in better “value.”
Quality, productivity, cost, cycle time, and value are interrelated. Quality activities must try to detect quality problems early
enough to permit action without requiring a compromise in cost, schedule, or quality. Improving quality can be the driving
force to improve results in the other parameters.

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 4. Differentiate between chronic and sporadic quality problems
Quality Management involves the process of identifying and administering the activities needed to achieve the customer
driven objectives of an organisation to sustain performance. Another management concept related to Quality Management
is Financial Management.
Financial Management is accomplished by the use of three managerial processes: Planning, Control and Improvement.
Sporadic problems are detected and acted upon by the process of Control and Chronic problems require Improvement.
Dr J. M Juran calls improvement, breakthrough improvement (it was a precursor to six sigma).
DeFeo and Bernard identify six types of breakthroughs:
• Leadership
• Organisation
• Current Performance
• Management
• Adaptability
• Culture

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 4. Differentiate between chronic and sporadic quality problems

In the context of the Juran Trilogy, design for six sigma (DMADV) and other design methodologies are for Planning.
Lean six sigma (DMAIC), Lean, and such methodologies are for Improvement. Lean concepts can also be applied in the
design or planning efforts.
Control is needed upon conclusion of either planning or improvement. This is evident from the Juran Trilogy Diagram below.
For the trilogy process to be successful, it must occur in an environment of inspirational leader.

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5. Practice Questions

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 Practice Question 1

A foundry has just started to make flat steel products. For each 150 units of product manufactured, the
production process yields 84% conforming units, 4% that must be scrapped, and the remaining products can be
reprocessed.
Each unit scrapped results in a R350 loss; each reprocessed unit requires an extra 20 minutes of processing time.
The resource time of producing the original 150 units is 30 hours.
a) Use this information to calculate the following:

I) Scrap cost [2]

II) Reprocessing time [2]
III) Productivity per hour (i.e. conforming units per hour) of the first time to yield [2]
IV) Productivity per hour of the final yield (after processing) [2]

b) What is the main advantage of sampling compared to 100% inspection? [2]

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 Practice Question 1

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 Practice Question 2

A porter made 30 teapots, 15 cups and 15 saucers in 20 hours. All her pottery conformed to her design specifications except for 2 cups which had to be
scrapped, and 8 teapots to be reworked.
Each cup scrapped resulted in a R5 loss; each reprocessed piece of pottery requires an extra 10 minutes of processing time.
 
a) Use this information to calculate the following:
 
i. Scrap cost (2)
ii. Reprocessing time (2)
iii. Productivity per hour (i.e. conforming units per hour) of the first time to yield
(2)
iv. Productivity per hour of the final yield (after processing) (2)
 
The porter decided to automate part of her production process in an effort to improve the quality of her work. For 60 units of pottery she makes in 20 hours, the
process now yields 57 conforming units 1 teapot to be scrapped and 3 saucers for rework.
Each teapot scrapped resulted in a R6 loss; each reprocessed piece of pottery still requires an extra 10 minutes of processing time

 
v. Repeat the calculation in (a) Calculate the benefits of the quality effort in terms of conforming, non-conforming, scrapped, reprocessed, and productivity with
and without processing. (8)

vi. Does the automation indicate improvement in quality or not? (1)

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 Practice Question 2

Answer
Quality can be defined as “conformance to specification.” In theory, creating the proper specifications and then
manufacturing a product that conforms to those specifications should lead to customer satisfaction.

However, in practice the design may fail to satisfy the customer and be perceived to be of low quality. (3)

Quality can therefore also be defined as “customer satisfaction and loyalty” (or “fitness for use”). Any product or
product feature that satisfies the customer and retains customer loyalty is of quality. If customers are not satisfied, the
product is of poor quality. (3)

Fitness for use, freedom from deficiencies are also other ways in which a product or service can be considered of high
quality. (2)

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 Practice Question 2
Answer

vi. Yes, the productivity for 1st time yield and final yield increased to 0.35 and 0.18285 units/hour respectively. (1)

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 Practice Question 3

For each 300 units of product manufactured, the production process yields 78% conforming units, 4% that must be scrapped,
and the remaining products can be reprocessed.
Each unit scrapped results in a R200 loss; each reprocessed unit requires an extra 25 minutes of processing time. The
resource time of producing the original 300 units is 21 hours.
1. Use this information to calculate the following:
 
i. Scrap cost (2)
ii. Reprocessing time (2)
iii. Productivity per hour (i.e. conforming units per hour) of the first time to yield (2)

iv. Productivity per hour of the final yield (after processing) (2)
 
2. What are hidden quality costs? (2)

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 Practice Question 3
Answer

Quality costs which are difficult to identify, notice or estimate. e.g., cost of changing software for a production process. (2)

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 Practice Questions

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 THE END

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