Chapter Three

By: Mulachew Haile

 Meaning of Quality
 Total Quality Management
 Quality Improvement and Role of
Employees
 Strategic Implications of TQM
 Six Sigma

By: Mulachew Haile

 TQM in Service Companies
 Cost of Quality
 Quality Management and Productivity
 Identifying Quality Problems and
Causes
 Quality Awards and Setting Quality
Standards
 ISO 9000 QMS and ISO 14000 EMS

By: Mulachew Haile

???Look at the following slogans and reflect on
it???
“Quality is our Job”- Motorolla
Quality is “when our products do not come back;

but our customers do.”

Total customer satisfaction – Motorolla
Customers are the center of our universe- AT&T
A customer is the most important visitor on our premises.
He is not dependent on us; we are dependent on him. He
is not an interruption in our work; He is the purpose of it.
He is not an outsider in our business ; he is part of it. We
are not doing him a favor by serving him ; He is doing us a
favor by giving us an opportunity to do so.
Mahatma GandhiBy: Mulachew Haile
 Globalization and competition resulted in
paradigm shift of quality.
 Quality was viewed as a defensive function
rather than as a competitive weapon for use
in developing new markets and increasing
market share.
 the quality emphasis was quality control:
reducing number of customer complaints that
were received.
 there was a heavy reliance on inspection
(sorting the good from the bad) rather than
By: Mulachew Haile
 Involves identifying defective out put
and either fixing it (rework) or
disposing of it (scrap), which incurred
cost.
 It was therefore, believed that higher
quality must be more costly.
 However, it is found that achieving
quality is not exorbitantly high with
prevention.
By: Mulachew Haile
 Managing quality supports
differentiation, low cost, and response
strategies.
 Quality helps firms increase sales and
reduce costs.
 But, building a quality organization is a
demanding task.
??What efforts your
organization do to improve
quality of the product or
service delivered?
By: Mulachew Haile
 “ Quality is in the eye of the beholder”
 Webster’s Dictionary:
• degree of excellence of a thing.
 American Society for Quality
 The totality of features and
characteristics of a product or service
that bears on its ability to satisfy stated
or implied needs of the customer.
 Quality could be defined from
different perspectives:
By: Mulachew Haile
 Is fitness for intended
use.
• how well product or service
does what it is supposed to.
• designs quality characteristics
into a product or service to
meet d/t needs of consumers
for what s/he is willing to pay.
 E.g. A Mercedes and a Ford
are equally “fit for use,”
but with different design
dimensions.
 Therefore, it is about better
performance, more
features
as per the demand.
 Is Quality of Conformance
 Making sure a product or
service is produced
according to
design(conformance to
standards, making it right
the first time).
 Product or service design
results in design
specifications that should
achieve the desired
quality.
By: Mulachew Haile
 From Producer perspective,
quality is how effectively the
production process is able to
conform to the specifications
required by the design.
 E.g.
if new tires do not conform
to specifications, they
wobble.
if a hotel room is not clean
when a guest checks in,
the hotel is not functioning
according to specifications
of its design.
By: Mulachew Haile
 Achieving quality of conformance
depends on a number of factors:
i. Design of the production process
( distinct from product design)
ii. Performance level of machinery,
equipment and technology, materials
used, training and supervision of
employees, and the degree to which
SQC techniques is used.

By: Mulachew Haile

 Product based perspective views
quality as a precise and measurable
variable.
 In this view, for example, really good
ice cream has high butterfat levels;
Good edible oil is colorless, odorless.

By: Mulachew Haile

Note: The three perspectives are not independent
 The characteristics that connote quality must

first be identified through research (a user-based

approach to quality).
 These characteristics are then translated into

specific product attributes (a product-based

approach to quality).
 Then, the manufacturing process is organized to

ensure that products are made precisely to

specifications (a manufacturing-based approach
to quality).
• A process that ignores anyone of these steps
will not result in a quality product.
By: Mulachew Haile
 Consumer’s and producer’s
perspectives depend on each other :
 Consumer’s perspective: PRICE
 Producer’s perspective: COST
 Consumer’s view must dominate, b/s

it is consumer who makes the final

judgment regarding quality.

By: Mulachew Haile

 Meaning
Meaning of
of Quality
Quality

Producer’s
Producer’s Perspective
Perspective Consumer’s
Consumer’s Perspective
Perspective

Quality
Quality of
of Conformance
Conformance Quality
Quality of
of Design
Design

Production
Production
• Conformance to • Quality characteristics Marketing
Marketing
specifications • Price
• Cost

Fitness
Fitness for
for
Consumer Use- dominates
Consumer Use- dominates

By: Mulachew Haile

 Quality has many implications at a country as well as
organizational level.
1. Company reputation – Quality affects :
 Perception of new products … can easily
penetrate the market
 Employment practices… easy to pull excellent
talents
 Supplier relations… Collaboration can be created
with reliable suppliers
2. Product liability- Quality reduce risk
 Impure foods that cause illness, nightgowns that burn,
tires that fall apart, or auto fuel tanks that explode on
all lead to huge legal expenses, large settlements or
By: Mulachew Haile
losses, and terrible publicity.
3. Global implications - Improves ability to compete.
 Quality is an international, as well as OM, concern.
 For both a company and a country to compete
effectively in the global economy, products must
meet global quality, design, and price expectations.
 Inferior products harm a firm's profitability and a
nation's balance of payments.
 Remember the case of Ethiopian coffee export to
Japan before some 10 years, where Japan halted
importing Ethiopian coffee due to quality concerns
like adulteration.
?? Can you mention some other cases where quality
problems have affected the nations foreign trade??
By: Mulachew Haile
 Dimensions of quality primarily for
manufactured products include:
 Performance
• basic operating characteristics of a product; how
well a car is handled or its gas mileage
 Features
• “extra” items added to basic features, such as a
stereo CD or a leather interior in a car
 Reliability
• probability that a product will operate properly
within an expected time frame; that is, a TV will
work without repair for about seven years.
By: Mulachew Haile
 Conformance
• degree to which a product meets pre–
established standards(requirements).
 Durability
• how long product lasts before replacement.
 Serviceability
• ease of getting repairs, speed of repairs,
courtesy and competence of repair person.
 Aesthetics
• how a product looks, feels, sounds, smells, or
tastes.
By: Mulachew Haile
 Safety
• assurance that customer will not suffer
injury or harm from a product; an especially
important consideration for automobiles
 Perceptions
• subjective perceptions based on brand
name, advertising, and the like
These cxs are weighed by customers relative to cost
of product.
In general, customers will pay for the level of quality
they can afford. If they feel they are getting what
they paid for (or more), then they tend to be
satisfied with the quality of the product.
By: Mulachew Haile
 Service quality is more directly related to
time and the interaction b/n employees and
customers. Dimensions by Evans and
Lindsay:
 Time and Timeliness
• How long must a customer wait for service,
and is it completed on time?
 Is an overnight package delivered overnight?
 Completeness:
• Is everything (complete pack) customer
asked for provided ?
 Is a mail order from a catalogue
By: Mulachew Haile company
 Courtesy:
• How are customers treated by
employees?
 Are catalogue phone operators nice and are
their voices pleasant?
 Consistency
• Is the same level of service provided to
each customer each time?
 Is your newspaper delivered on time every
morning?
By: Mulachew Haile
 Accessibility and convenience
• How easy is it to obtain service?
• Does a service representative answer your calls
quickly?
 Accuracy
• Is the service performed right every time?
 Is your bank or credit card statement correct
every month?
 Responsiveness
• How well does the company react to unusual
situations?
 How well is a telephone operator able to respond to a
customer’s questions?
By: Mulachew Haile
By: Mulachew Haile
 Various individuals have contributed to the development of quality
including:

 Walter Shewart
• In 1920s, he developed control charts
• Introduced the term “quality assurance” to improve quality.
 W. Edwards Deming – disciple of Shewart, known for 14 principles for
management.
• Changed the focus of quality assurance from the technical aspects to
more of a managerial philosophy.
• Developed courses during World War II to teach statistical quality-
control techniques to engineers and executives of companies that
were military suppliers; but By:
later rejected
Mulachew Haile by US Companies and moved
to Japan.
 After the war, he began teaching statistical
quality control to Japanese companies; in
Japan he is frequently referred to as the
father of quality control.
 He is the most famous of all quality gurus.
 He introduced statistical quality control to

the Japanese, which served as the catalyst

for a worldwide quality movement.

By: Mulachew Haile

 Deming’s approach to quality management
advocated continuous improvement of the
production process to achieve conformance
to specifications and reduce variability.
 Identified two sources of process
improvements: (a)eliminating common
causes of quality problems, such as poor
product design and insufficient employee
training and (b) eliminating special causes,
such as specific machinery and operator.

By: Mulachew Haile

 Dismisses the use of final product inspection as
coming too late to reduce product defects.
 His emphasis was the use of SQC technique to
reduce variability in production process.
 Primary responsibility for quality improvement
is employees’ and managements’- not
technicians’.
 He Promoted extensive employee involvement
in the quality improvement programs and
recommends training for workers in QC
techniques and methods.
By: Mulachew Haile
Deming’s overall philosophy for achieving improvement
is embodied in his 14 points summarized as:
1. Create constancy of purpose for long term goal
achievement
2. Adopt philosophy of prevention instead of
acceptable level of poor quality as necessary to
compete globally.
3. Cease mass inspection by relying on SQC to
improve product and process design.
4. Select a few suppliers based on quality
commitment rather than competitive prices only
5. Constantly improve production process by
focusing on two sources of quality problems:
- the system and workers, thus increasing
By: Mulachew Haile
productivity and reducing cost.
6. Institute worker training-focusing on prevention and
the use of SQC techniques.
7. Instill leadership among supervisors to help workers
perform better
8. Encourage employee involvement by eliminate fear
among employees for reprisal for asking questions
or identifying quality problems.
9.Eliminate barriers between departments, and
promote cooperation and team approach for
working together.
10.Eliminate slogans and numerical targets that urge
workers to achieve higher performance levels w/o
showing them how to do it.
11.Remove numerical quotas that employees attempt
By: Mulachew Haile
12. Enhance worker pride by improving
supervision and the production process so
that workers can perform to their capabilities.
13. Institute vigorous training and education
programs in methods of quality improvement
throughout the org from top mgt down, so
that continuous improvement can occur.
14. Develop a commitment from top
management to implement above 13 points
 Note: These “14 points” were the
foundation
 for modern TQM and QMS processes.
By: Mulachew Haile
 Deming is also credited for
propagation of Deming Wheel ( plan-
Do- check -act)
 PDCA is a four stage process for
continuous quality improvement that
is used in implementing Deming’s 14
points.

By: Mulachew Haile

1. Plan- a process or situation is
studied, identifying problems and
planning how to solve them.
• Customer expectations is determined and
goals to measure quality improvement are
established.
2. Do. Plan is implemented on a test
basis, improvement is measured and
results documented.
By: Mulachew Haile
3. Check/Study –originally called check. It is
called as study to reflect a more thorough
analysis of the plan than a simple check.
- Plan is assessed to see if it is achieving
goals established in earlier stages and see
if any new problem is developed.
4. Act. Plan is implemented and quality
improvement (QI) is made part of the
normal operation (Institutionalization).
 The process then returns to stage 1 to start the cycle over
again to identify new quality problems and develop plans to
solve them- the continuous improvement of a committed
quality mgt program. By: Mulachew Haile
By: Mulachew Haile
 Is a philosophy that involves everyone in
an organization in a continual effort to
improve quality and achieve customer
satisfaction.
 Encompasses on entire organization, from
supplier to customer to improve quality.
 Stresses a commitment by management
to have a continuing, company-wide drive
toward excellence in all aspects of
products and services that are important
to the customer. By: Mulachew Haile
 Emphasizes that quality is strategic
issue.
 The org must decide what customers
want in terms of quality and then use
strategic planning encompassing all
functional areas to achieve goals of
quality.
 For this perspective, quality is the
most important company issue.
By: Mulachew Haile
 Nowadays the term continuous process
improvement(CPI) has been used to identify
from TQM as many are using CPI to TQM..
 It embodies the same principles as TQM
except it reflects a trend of focusing
management attention on business process
than functions.
 Considers all the tasks and activities in the
business are part of a process or a group of
interacting processes that are done over
and over; a business is not just a group of
separate function.By: Mulachew Haile
 Involves a set of mgt principles that focus on quality
improvements as a deriving force in all functional areas
and all levels in a company.
 Principles of TQM
• Customer-oriented – customer defines quality and
customer satisfaction is top priority.
• Leadership – top mgt must provide leadership for
quality.
• Strategic planning- quality is strategic issue and
requires strategic plan.
• Employee responsibility- quality is the responsibility of
all employees at all levels.
• Continuous improvement- all functions must focus on
continuous improvement to achieve
By: Mulachew Haile strategic goal.
• Cooperation – quality problems are solved by
cooperation b/n mgt and employees.
• Statistical methods- problem solving and
continuous quality improvement use SQC
methods.
• Training and education – T&E is basis for
continuous quality improvement.

By: Mulachew Haile

 Continuous improvement
 Six Sigma
 Partnering
 Employee empowerment
 Benchmarking
 Just-in-time (JIT)
 Taguchi concepts
 Knowledge of TQM tools

By: Mulachew Haile

 Represents continual improvement
of all processes; No end for
improvement.
 Involves all operations and work
centers including suppliers and
customers
 People, Equipment, Materials,
Procedures

By: Mulachew Haile

1. Find out what the customer wants
2. Design a product or service that meets or exceeds
customer wants.
3. Design processes that facilitates doing the job
right the first time – ( Poka yoke) - error proofing or
safe system.
4. Keep track of results and always go for kaizen-
continuous improvement, i.e. no end for
improvement; Shwart’s /Deming model is
applicable.
5. Ensure the commitment of management
6. Build teams of employees who are motivated,
trained and willing.
7. Extend these concepts to suppliers too.
By: Mulachew Haile
 Originally developed by Motorola, adopted and
enhanced by Honeywell and GE
 Two meanings;
i. A program designed to reduce defects, lower costs,
and improve customer satisfaction.
ii. Statistical definition of a process that is
99.99966% capable, 3.4 defects per million
opportunities (DPMO) (as close to zero defects as
possible”) which is the goal of 6.
 Measure of how much a process deviates
from perfection or zero defects.
 A process for developing and delivering
near perfect By:
products
Mulachew Haile and services
Six Sigma…
Lower
Twolimits
meanings Upper limits
Defects per
 Statistical definition of a process
2,700 defects/million
million
that is
3.4 defects/million 99.9997% capable, 3.4
for :±3
'vs. ±6
defects per million opportunities
(DPMO)
 A program designed to reduce
Mean
defects, lower costs, and improve
±3
customer satisfaction
±6
Note: ± 3 provides
99.73% accuracy, While ± 6
By: Mulachew Haile
Is 99.99966%.
 Highly structured approach to
process improvement: It is-
 A strategy
 A discipline – DMAIC

By: Mulachew Haile

i. It is a strategy because it focuses on
total customer satisfaction.
ii. It is a discipline because it follows the
formal Six Sigma Improvement Model
known as DMAIC - a step -by- step, problem -
solving approach to lead a well-defined improvement
projects by the team.
Inachieving the Six Sigma goal, the
overall performance of the company will
be improved and significant overall cost
savings will be realized.
By: Mulachew Haile
 Six Sigma follows four basic steps—
align, mobilize, accelerate, and govern.
1. Align - senior executives create a balanced
scorecard of strategic goals, metrics and
initiatives to identify the areas of
improvement that will have the greatest
impact on the company’s bottom line.
 Process owners (i.e, the senior executives
who supervise the processes) “champion”
the creation of high-impact improvement
projects that will achieve the strategic goals.
By: Mulachew Haile
2. Mobilize - project teams are formed
and empowered to act.
The process owners select “black

belts” to lead well-defined

improvement projects.
The teams follow a step - by- step,

problem-solving approach referred to

as DMAIC as indicated below.

By: Mulachew Haile

1. Define: The problem is 4. Improve: The team brainstorms
defined, including who the to develop solutions to problems;
customers are and what changes are made to the process,
they want, to determine and the results are measured to
what needs to see if the problems have been
improve(identify gaps for eliminated.
If not, more changes may be
improvement)
necessary.
2. Measure: The process is 5. Control: If the process is
measured, data are operating at the desired level of
collected, and compared performance, it is monitored to
to the desired state. make sure the improvement is
3. Analyze: The data are sustained and no unexpected and
DMAIC
analyzed in order to undesirable changes occur.
Approach
determine the cause of
the problem. By: Mulachew Haile
 Green Belts:
project team
members.
Black Belt:
the project
leader.
Master Black
Belt:
a teacher and
mentor for Black
Belts.

By: Mulachew Haile

By: Mulachew Haile
3. Accelerate - improvement teams made
up of black belt and green belt team
members with appropriate expertise use
an action-learning approach to build their
capability and execute the project.
Combines training and education with

project work and coaching.

Ongoing reviews with project champions

ensure that projects progress according to

an aggressive timeline.
By: Mulachew Haile
4. Govern - executive process owners
monitor and review the status of
improvement projects to make sure
the system is functioning as expected.
Leaders share the knowledge gained

from the improvement projects with

other parts of the organization to
maximize benefit.

By: Mulachew Haile

a) Partnering with suppliers
• a relationship between a company and its
supplier based on mutual quality standards.
b) Partnering with Customers
• TQM requires a system to measure customer
satisfaction, such as:
 survey.
Information Technology
infrastructure of hardware, networks, and software
necessary to support a quality program.

By: Mulachew Haile

 Best Practice Justification
 Make it easy for clients to  It is free market
complain. research.

 Respond quickly to complaints.  It adds customers and

loyalty.
 Resolve complaints on the first  It reduces cost
contact.
 Discover trends, share
 Use computers to manage them, and align your
complaints. services.
 It should be part of
formal training and
 Recruit the best for customer career advancement
service jobs.
By: Mulachew Haile
 Getting employees involved in product and
process improvements and make decisions
whenever necessary.
 Techniques
 Build communication networks
that include employees.
 Develop open, supportive supervisors
 Move responsibility to employees
 Build a high-morale organization.
 Create formal team structures

By: Mulachew Haile

Participative problem solving
direct involvement in quality mgt process

• Mgt and employees need cooperate and have

equally strong commitment to quality.
• Failure to address employee lead to failure to
total quality efforts.
• every employee has undergone extensive training
to provide quality service.
• Job training and employee dev’t are major
features of a successful TQM program.
• Customer (internal and external) satisfaction is
overriding objective in TQM
 Commitment and cooperation are not
possible when mgt dictates quality to
employees.
 Cooperation in QM program is
achieved when employees are allowed
to participate in the QM process-when
they are given a voice.

By: Mulachew Haile

 Benefits of Employee participation in
identifying a quality problems include:
i. Improving quality
ii. Improving employee satisfaction and
morale
iii.Improving job skills
iv.Reducing job turnover and absenteeism
v. Increase productivity
 Participative problem solving is usually
within Employee involvement(EI)
program, with team approach which
may be achievedBy: through
Mulachew Haile
quality circles.
A)Quality circle- a small voluntary group of
workers and supervisors from the same
area who address production problems.
 Trained in planning, problem solving, and
statistical methods.
 Brainstorming is used to generate ideas
and evaluated later.
B) Process/Quality improvement team-
includes members from the interrelated
functions or departments that make up a
process.
 Focuses on cross- functional or business
process than separate
By: Mulachewcpny
Haile functions.
 Organization
8-10 members
Same area
Supervisor/moderator

Training
Presentation 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

By: Mulachew Haile

 Essential conditions for success of quality
circle are:
i. Well educated workforce( competent,
motivated)
ii. Employees are willing to exchange views
iii.Employees see themselves as working for the
good of the organization
iv. Management who are willing to share
information about operations
v. Senior management who implement the
suggested improvements.
QC is very effective when
By: Mulachew Haile done properly
Employee suggestions -
“suggestion box” is an example of
a way to include employees in
quality improvement as
individuals, not as part of a group.
-key to ES is a strong commitment
and reinforcement from
management at all levels.
By: Mulachew Haile
 Selecting best practices to use as a
standard for performance. It could be
internal or external.
r n al
 Determine what to benchmark inte rking
e
Us chmae big
n r
 Form a benchmark team b e y ou’ ug h
if n o
e
 Identify benchmarking partners

 Collect and analyze benchmarking

information
 Take action to match or exceed the
benchmark By: Mulachew Haile
 JIT systems are designed to produce or deliver
goods just as they are needed and aimed at
reducing costs.
 Relationship to quality:
 JIT cuts the cost of quality- Scrap, rework,
investment
 JIT improves quality as it shorten the lead time.
 Better quality means less inventory and better,
easier-to-employ JIT system.
 Allows reduced inventory levels
 Inventory costs money and hides process
and material problems.
 Encourages improved process and product quality
By: Mulachew Haile
 Work in process
inventory level
(hides problems)

Unreliable Capacity
Vendors Scrap
Imbalances
By: Mulachew Haile
Reducing inventory level reveals problems so
they can be solved

Unreliable Capacity
Vendors Scrap
Imbalances

By: Mulachew Haile

 According to Taguchi, most quality
problems are the result of poor product and
process design.
 Identify key component affecting product
and process variables variation.
 Taguchi Concepts are based on three
concepts aimed at improving both product
and process quality:
 Quality robustness
 Target-oriented quality
 Quality loss function
By: Mulachew Haile
i. Quality Robustness
Products that are consistently built to meet
customer needs in spite of adverse conditions
in the production process.
States remove the effects of adverse

conditions instead of removing the causes.

Suggests that removing the effects is often

cheaper than removing the causes and more

effective in producing a robust product
Remove the effects of adverse conditions
Small variations in materials and process
should not destroyBy:product
Mulachew Haile
quality.
ii. Target- oriented quality is a philosophy of
continuous improvement to bring the product
exactly on target.
iii. Quality loss function(QLF)- A mathematical
function that identifies all costs connected with poor
quality and shows how these costs increase as
product quality moves from what the customer
wants.
Shows that costs increase as the product moves
away from what the customer wants.
Costs include customer dissatisfaction, warranty
and service, internal scrap and repair, and costs to
society
By: Mulachew Haile
 High L = D2C
Loss (to
loss
where
producing
organization, L = loss to
customer, society
and society) D= distance
from target
value
Low loss Target-oriented quality
C =cost of
yields moredeviation in
product
the “best” category

Target-oriented
quality brings
product toward
Frequency the target value
Conformance-
oriented
quality keeps
products within
Lower Target Upper 3 standard
deviations
Specification
By: Mulachew Haile
 Tools for Generating Ideas
Check sheets
Scatter diagrams
Cause-and-effect diagrams
 Tools to Organize the Data
Pareto charts
Flowcharts
Tools for Identifying Problems
Histogram
Statistical process control chart
By: Mulachew Haile
 used to identify
quality problems  Check Sheet
and causes.  Pareto Analysis
 Are also called:  Histogram
Magnificent seven,  Flow Chart
Seven QC tools,  Scatter Diagram
Seven process  SPC Chart
improvement tools.  Cause-and-Effect
Diagram

By: Mulachew Haile

 Frequently used in conjunction with
histograms and Pareto diagrams.
 A list of causes of quality problems
with the number of defects resulting
from each cause; used to develop
histograms and Pareto diagrams up
on completion of tallying.
 Fact finding tool.

By: Mulachew Haile

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 |

By: Mulachew Haile

 Most quality problems & cost result from a fewer
causes(80/20 rule).
 Applied by tallying the no of defects for each
possible cause of poor quality and developing
frequency disn from the data.
 The frequency distribution is called Pareto
diagram 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
By: Mulachew Haile
Surface abrasions 3 2
 Percent from each cause

10
20
30
40
50
60
70

0
Po
or
W De
ro si
ng gn
(64)

di
m
en
De si
fe on
ct s
iv
(13)
e
pa
M rts
ac
hi
ne
(10)
ca
l ib
Op ra
er tio
at ns
(6)

or
er

By: Mulachew Haile

ro
De rs
fe
ct
(3)

iv
e

Causes of poor quality

m
Su at
er
rfa ia
ce ls
(2)

ab
ra
si
on
s
(2)
 A diagram showing the frequency of data
related to a quality problem.
20

15

10

0
1 2 6 13 10 16 19 17 12 16 2017 13 5 6 2 1

By: Mulachew Haile

 Is a diagram of the steps in a job,
operation or process.
 Help to identify quality problems by
helping the problem solver better
understand the process.
 Helps focus on where in a process a
quality problem might exist.

By: Mulachew Haile

Start/
Finish Operation Operation Decision Operation

Operation Operation

Decision Start/
Finish

By: Mulachew Haile

 A graph showing how process variables relate to
each other. Identifies a pattern that may cause
quality problems.
Y

X
By: Mulachew Haile
 A chart with statistical upper and
lower limits; if the process stays
within these limits over time, it is in
control and problem does not exist.

By: Mulachew Haile

 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
By: Mulachew Haile
 Also called fishbone /Ishikawa
diagram; a graph of the cause of
quality problem divided in to
categories (Man, employee,
management, machine, material,
environment).
 Is developed as part of participative
problem solving, which is common in
quality circles.
By: Mulachew Haile
 Measurement
Measurement Human
Human Machines
Machines
Faulty
testing equipment Poor supervision Out of adjustment

Incorrect specifications Lack of concentration Tooling problems

Improper methods Inadequate training Old / worn

Quality
Quality
Inaccurate Problem
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
Environment Materials
Materials Process
Process

By: Mulachew Haile

By: Mulachew Haile
 Svs sector is increasing in its volume
and employment.
 Customers directly interact with
production process consuming while
the service is being produced.
 Svs tend to be customized provided at
the convenience of the customer.
 Are labor intensive, thus human
contacts and its ramifications are an
important part of the process of
producing svs. By: Mulachew Haile
 SERVICES
MANUFACTURED PRODUCTS

 Are physical items-  Svs can’t be held, felt,

observed, held, felt, stored stored and used again.
and used again.  Dimension- timeliness,
 If defect exists, it can be courtesy, consistency,
felt or seen and counted accuracy, convenience,
or measured. responsiveness and
 Dimensions- performance, completeness-all hard to
features, reliability, measure beyond a
conformance and subjective assessment by
durability w/c can be customer.
quantitatively measured.

By: Mulachew Haile

 Regardless of these differences,
principles of TQM apply equally well to
service and mfg.
 Quality service-how well the svs does
what the customer thinks it is supposed
to do- same as fitness for use in mfg.
 Quality mgt in svs must focus on
employee performance related to
intangible, difficult-to-measure quality
dimensions. i.e. how quickly, correctly
and pleasantly employees are able to
provide services.
By: Mulachew Haile
• are those costs incurred to achieve good quality
and to satisfy the customer, as well as costs
incurred when quality fails to satisfy the customer.
Cost of
Quality

Control
Failure
costs
costs

Preventio Internal failure

n Appraisal
failure Cost
costs
costs Cost External

By: Mulachew Haile

 Quality planning costs  Training costs
• costs of developing and • costs of developing
implementing quality and putting on quality
management program training programs for
 Product-design costs employees and
• costs of designing management
products with quality  Information costs
characteristics • costs of acquiring and
 Process costs maintaining data
• costs expended to related to quality, and
make sure productive development of
process conforms to reports on quality
quality specifications performance
By: Mulachew Haile
 Inspection and testing
• costs of testing and inspecting materials,
parts, and product at various stages and
at the end of a process.
 Test equipment costs
• costs of maintaining equipment used in
testing quality characteristics of products.
 Operator costs
• costs of time spent by operators to gather
data for testing product quality, to make
equipment adjustments to maintain
quality, and to stop work to assess quality.

By: Mulachew Haile

 Scrap costs  Process downtime
• costs of poor-quality costs
products that must • costs of shutting
be discarded, down productive
including labor, process to fix
material, and indirect problem.
costs  Price-downgrading
 Rework costs costs
• costs of fixing • costs of discounting
defective products to poor-quality
conform to quality products—that is,
specifications selling products as
 Process failure costs “seconds”
• costs of determining
why production
process is producing
poor-quality products .
By: Mulachew Haile
 Customer complaint  Product liability costs
costs • litigation costs
• costs of investigating resulting from product
and satisfactorily liability and customer
responding to a injury
customer complaint  Lost sales costs
resulting from a poor- • costs incurred
quality product. because customers
 Product return costs are dissatisfied with
• costs of handling and poor quality products
replacing poor-quality and do not make
products returned by additional purchases
customer.  Loss of Good will
 Warranty claims costs • Note: External failure costs
• costs of complying are the most expensive of
all.
with product
warranties By: Mulachew Haile
 Costs of Training, inspection and testing , scrap ,
product return, warranty claims, liability costs are
usually measured. But, cost of lost sales, customer
complaints, process downtime, operator testing,
quality infn, …are difficult to measure but must be
estimated by mgt.
 Mgt want quality costs to be reported in a manner
that can easily be interpreted and meaningful. One
format is Index numbers:
 Index numbers
• ratios that measure quality costs against a base
value.
i. labor index- ratio of quality cost to labor hours
ii.cost index- ratio of quality cost to manufacturing
cost
iii.sales index -ratio of quality cost to sales
iv.production index-ratio of quality
By: Mulachew Haile cost to units of
 Index numbers will not directly show
how good or poor quality of a product
is ; are informative only when they
are compared to some standard or
other index.
 Increase in the expenditure of
prevention cost results in decrease in
all other quality cost category. ( See
Taylor pp86 )
By: Mulachew Haile
By: Mulachew Haile
By: Mulachew Haile
 As prevention and appraisal costs increase,
internal and external failure costs decrease.
 Prevention and appraisal costs are costs of

achieving good quality; while failure costs are

costs of poor quality.
 Note: Focus on preventing poor quality and

concentrating in new product dev’t stage than

production process , w/c reduces appraisal
costs.

By: Mulachew Haile

 Quality and profitability are highly related.
 Two ways quality improves Profitability:
Sales Gains via
 Improved response
 Improved reputation
 Flexible pricing/Premium price
Improve Increased
d Reduced Costs via Profits
Quality  Increased productivity
 Lower rework and scrap costs
 Lower warranty costs

By: Mulachew Haile

 Productivity
• ratio of output to input-number of units
produced from available input.
• It is measure of effectiveness in converting
inputs in to output.
• improving quality by reducing defects will
increase good outputs and reduce inputs.
• Improving product design and production
process, improving quality of parts and
materials, and improving job design and
work activity increase productivity.
 Yield: a measure of productivity
 a measure of out put;
 It can be computed for entire production
process or one stage in the process as:

Yield=(total
Yield=(total input)(%
input)(% good
good units)
units) ++ (total
(total input)(1-%good
input)(1-%good units)(%
units)(% reworked)
reworked)

or
or
Y=(I)(%G)+(I)(1-%G)(%R)
Y=(I)(%G)+(I)(1-%G)(%R)

Note: Any increase in the %ge of good products

through improved quality will increase product
By: Mulachew Haile
yield.
By: Mulachew Haile
 The manufacturing cost per (good)
product is computed by dividing the
sum of total direct manufacturing
cost and total cost for all reworked
units by the yield, as follows:

By: Mulachew Haile

 ( K d )( I )  ( K r )( R)
Product Cost 
Y

where:
Kd = direct manufacturing cost per unit
I = input
Kr = rework cost per unit
R = reworked units
Y = yield

By: Mulachew Haile

By: Mulachew Haile
 Y = (I)(%g1)(%g2) … (%gn)

where:
I = input of items to the production process that will
result in finished products
gi = good-quality, work-in-process products at stage i

By: Mulachew Haile

By: Mulachew Haile
-is another measure of the effect of quality
on productivity, w/c combines the concept
of quality index numbers and product
yield.
QPR
• productivity index that includes productivity
and quality costs.

non-defective units or Good quality products

QPR =
(input) (processing cost) + (defective units) (reworked cost)

By: Mulachew Haile

By: Mulachew Haile
 A set of procedures  ISO 9001:2015
and policies for • Quality Management
international quality Systems—Requirements
certification of  standard to assess
ability to achieve
suppliers customer satisfaction
Standards  ISO 9004:2000
 ISO 9000:2015 • Quality Management
• Quality Management Systems—Guidelines for
Systems— Performance
Fundamentals and Improvements
Vocabulary • guidance to a company
 defines for continual
fundamental terms improvement of its
and definitions used quality-management
in ISO 9000 family system

By: Mulachew Haile

 Many overseas companies
will not do business with a
supplier unless it has ISO
9000 certification.
 ISO 9000 accreditation
 ISO registrars
 A total commitment to
quality is required
throughout an
organization
Core Elements:
 Environmental management
 Auditing
 Performance evaluation
 Labeling
 Life cycle assessment

Food Safety Management system(ISO 22000) –

Hazard control and critical point certification(Hccp)

By: Mulachew Haile
 Provide reputation, sets of guidelines to help
companies implement an effective quality
management system (QMS), and winners provide
quality standards, or “benchmarks,” for other
companies to emulate, decreased costs and
increased profits.

By: Mulachew Haile

 Established recently to encourage
organizations to excel in quality.
 Emulated from European Foundation
for quality management(EEFQM).
 It awards organizations each year
based on 1000pts as indicated in the
next page.

By: Mulachew Haile

By: Mulachew Haile
…END…

By: Mulachew Haile