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Module 1

Introduction to Quality Concepts

Course Outcome (CO) 1


The student will be able to analyze the dimensions of Quality
and apply quality systems for effective quality improvement.

MBA Semester 3
Course – OM2: Quality Toolkit for Managers

Topics Covered
1. Dimensions of Quality
2. Cost of Quality
3. Quality philosophies
4. Quality systems
5. Contribution of Quality gurus

Quality Toolkit for Managers (Module 1) – Compiled by Prof. Devendra Bisen 1


Module – 1
Introduction to Quality Concepts

1. Dimensions of Quality

Introduction to Quality Concepts: It is widely recognized that consumers only buy the goods
with good quality, desired functions, and accepted price. Therefore, industries always adopt
several management practices, or even develop some management systems to design and
produce the products so as to meet customers’ needs and expectations showcasing good
quality and lower costs. But the management practices or systems adopted by the industries
are always changed due to the changes of the quality concepts as time goes by. This occurs as
several quality gurus give the pragmatic definitions of “quality” over different time periods,
thus causing industries to implement different practices or systems to control overall product
quality.

In the first three decades of the last century, quality was defined as “conforming to the
standards and specifications of a product”. Thus, the commonly adopted quality practices by
industries were the standardization of quality, inspection, and rework.

Hence, the meaning of quality was gradually changed to a “customer‐focused” perspective.


Enterprises, therefore, committed themselves to satisfy customers’ needs and expectations.
Their aim was to pursue customer's satisfaction and loyalty.

Dimensions of Quality: The most fundamental definition of a quality product are one that
meets the expectations of the customer. However, even this definition is too high level to be
considered adequate. In order to develop a more complete definition of quality, we must
consider some of the key dimensions of a quality product or service.

Dimension 1: Performance

Does the product or service do what it is supposed to do, within its defined tolerances?

Performance is often a source of contention between customers and suppliers, particularly


when deliverables are not adequately defined within specifications. The performance of a
product often influences profitability or reputation of the end-user. As such, many contracts
or specifications include damages related to inadequate performance.

Dimension 2: Features

Does the product or services possess all of the features specified, or required for its intended
purpose?

While this dimension may seem obvious, performance specifications rarely define the
features required in a product. Thus, it’s important that suppliers designing product or
services from performance specifications are familiar with its intended uses, and maintain
close relationships with the end-users.

Dimension 3: Reliability

Will the product consistently perform within specifications?

Reliability may be closely related to performance. For instance, a product specification may

Quality Toolkit for Managers (Module 1) – Compiled by Prof. Devendra Bisen 2


define parameters for up-time, or acceptable failure rates. Reliability is a major contributor to
brand or company image, and is considered a fundamental dimension of quality by most end-
users.

Dimension 4: Conformance

Does the product or service conform to the specification?

If it’s developed based on a performance specification, does it perform as specified? If it’s


developed based on a design specification, does it possess all of the features defined.

Dimension 5: Durability

How long will the product perform or last, and under what conditions?

Durability is closely related to warranty. Requirements for product durability are often
included within procurement contracts and specifications.

For instance, fighter aircraft procured to operate from aircraft carriers include design criteria
intended to improve their durability in the demanding naval environment.

Dimension 6: Serviceability

Is the product relatively easy to maintain and repair?

As end users become more focused on Total Cost of Ownership than simple procurement
costs, serviceability (as well as reliability) is becoming an increasingly important dimension
of quality and criteria for product selection.

Dimension 7: Aesthetics

The way a product looks is important to end-users. The aesthetic properties of a product
contribute to a company’s or brand’s identity. Faults or defects in a product that diminish its
aesthetic properties, even those that do not reduce or alter other dimensions of quality, are
often cause for rejection.

Dimension 8: Perception

Perception is reality. The product or service may possess adequate or even superior
dimensions of quality, but still fall victim to negative customer or public perceptions.

As an example, a high-quality product may get the reputation for being low quality based on
poor service by installation or field technicians. If the product is not installed or maintained
properly, and fails as a result, the failure is often associated with the product’s quality rather
than the quality of the service it receives.

2. Cost of Quality

Cost of quality (COQ) is defined as a methodology that allows an organization to determine


the extent to which its resources are used for activities that prevent poor quality, that appraise
the quality of the organization’s products or services, and that result from internal and
external failures. Having such information allows an organization to determine the potential
savings to be gained by implementing process improvements.

WHAT IS COST OF POOR QUALITY (COPQ)?

Cost of poor quality (COPQ) is defined as the costs associated with providing poor quality
products or services. There are three categories:

Quality Toolkit for Managers (Module 1) – Compiled by Prof. Devendra Bisen 3


1. Appraisal costs are costs incurred to determine the degree of conformance to quality
requirements.

2. Internal failure costs are costs associated with defects found before the customer
receives the product or service.

3. External failure costs are costs associated with defects found after the customer
receives the product or service.

Quality-related activities that incur costs may be divided into prevention costs, appraisal
costs, and internal and external failure costs.

Appraisal costs

Appraisal costs are associated with measuring and monitoring activities related to quality.
These costs are associated with the suppliers’ and customers’ evaluation of purchased
materials, processes, products, and services to ensure that they conform to specifications.
They could include:

• Verification: Checking of incoming material, process setup, and products against agreed
specifications

• Quality audits: Confirmation that the quality system is functioning correctly

• Supplier rating: Assessment and approval of suppliers of products and services

Internal failure costs

Internal failure costs are incurred to remedy defects discovered before the product or service
is delivered to the customer. These costs occur when the results of work fail to reach design
quality standards and are detected before they are transferred to the customer. They could
include:

• Waste: Performance of unnecessary work or holding of stock as a result of errors, poor


organization, or communication

• Scrap: Defective product or material that cannot be repaired, used, or sold

• Rework or rectification: Correction of defective material or errors

• Failure analysis: Activity required to establish the causes of internal product or service
failure.

External failure costs

External failure costs are incurred to remedy defects discovered by customers. These costs
occur when products or services that fail to reach design quality standards are not detected
until after transfer to the customer. They could include:

 Repairs and servicing: of both returned products and those in the field
 Warranty claims: Failed products that are replaced or services that are re-performed
under a guarantee.
 Complaints: All work and costs associated with handling and servicing customers’
complaints.

Quality Toolkit for Managers (Module 1) – Compiled by Prof. Devendra Bisen 4


 Returns: Handling and investigation of rejected or recalled products, including transport
costs.

Prevention Costs

Prevention costs are incurred to prevent or avoid quality problems. These costs are associated
with the design, implementation, and maintenance of the Quality Management System. They
are planned and incurred before actual operation, and they could include:

• Product or service requirements: Establishment of specifications for incoming


materials, processes, finished products, and services

• Quality planning: Creation of plans for quality, reliability, operations, production, and
inspection

• Quality assurance: Creation and maintenance of the quality system

• Training: Development, preparation, and maintenance of programs

COST OF QUALITY AND ORGANIZATIONALOBJECTIVES

The costs of doing a quality job, conducting quality improvements, and achieving goals must
be carefully managed so that the long-term effect of quality on the organization is a desirable
one.

These costs must be a true measure of the quality effort, and they are best determined from
an analysis of the costs of quality. Such an analysis provides a method of assessing the
effectiveness of the management of quality and a means of determining problem areas,
opportunities, savings, and action priorities.

Cost of quality is also an important communication tool. Philip Crosby demonstrated what a
powerful tool it could be to raise awareness of the importance of quality. He referred to the
measure as the "price of nonconformance" and argued that organizations choose to pay for
poor quality.

Many organizations will have true quality-related costs as high as 15-20% of sales revenue,
some going as high as 40% of total operations. A general rule of thumb is that costs of poor
quality in a thriving company will be about 10-15% of operations. Effective quality
improvement programs can reduce this substantially, thus making a direct contribution to
profits.

The quality cost system, once established, should become dynamic and have a positive impact
on the achievement of the organization’s mission, goals, and objectives.

3. Quality Philosophies

Quality Toolkit for Managers (Module 1) – Compiled by Prof. Devendra Bisen 5


The philosophy of quality has traditionally focused upon the development and
implementation of a corporate wide culture that emphasizes a customer focus, continuous
improvement, employee empowerment, and data-driven decision making. The drivers of this
philosophy are rooted in the alignment of product and service systems design with customer
expectations, along with focusing on quality during all phases of development, production,
and delivery. The philosophy is process centric and emphasizes the reduction of variability as
well as a continuous improvement in the functionality of the final product or service.

The philosophy of Quality has traditionally focused upon the development and
implementation of a corporate wide culture that emphasizes a customer focus, continuous
improvement, employee empowerment, and data driven decision making. The drivers of this
philosophy are rooted in the alignment of product and service systems design with customer
expectations, along with the focusing on quality during all phases of development, production,
and delivery. The philosophy is process centric and emphasizes the reduction of variability as
well as a continuous improvement in the functionality of the final product or service.

It is widely recognized that quality cannot be inspected into a product or service; it needs to
be planned for and design into the product or service system. If this exercise is performed
incorrectly, a quality result cannot be achieved. In an investigation of the relationships
between Total Quality Management (TQM) practices, plant performance, and customer
satisfaction there was found a strong direct linkage between quality management practices
and customer satisfaction. They also found that a good design helps the firm to develop and
produce new products more quickly, while simultaneously minimizing engineering changes
and costs.

Frederick W. Taylor was the first to advocate that the most efficient method for the
accomplishment of work was to standardize work methods, He also espoused that
management was responsible for the design of the processes and methods used by the firm to
produce its products and services. In 1939, Walter Shewhart advanced the importance of
understanding variation and the usage of the scientific method for performance improvement.
Many others introduced tools and methodologies based upon these principles. All of which
lead to many firms within the USA to improve efficiencies and higher productivity.

After World War II, the USA was virtually the only country with a developed and intact
industrial base. Because of this situation, businesses had few worries about competitive
pressures, and focused their innovative efforts on optimizing internal operations. Quality was
not a paramount issue. But, by the middle 1980’s, the paradigm had shifted towards an
organizational wide, team based, customer focused philosophy. This change was driven by the
blending of western industrial management tools and methodologies, with Japanese
innovative production techniques developed during the post-world war II rebuilding.

After the end of World War II, the Japanese industry base recovered much of their industrial
base. However, Japanese industry not only recovered but was extremely competitive in the
international marketplace. Soon, the Japanese over took the United States by offering products
that were more reliable and of higher quality. The result was that U.S. companies started
losing market share. What really confused U.S. managers was that not only were the Japanese
products smaller (or had fewer features), they were also higher priced.

How did this happen? After the war, the U. S. sent industry experts to Japan to educate their
industry leaders on tools and principles of management used in Western industry. What
transpired was a blending of those tools and principles with the cultural philosophies of
Japanese society. The result was a new management philosophy that was based upon such
principles as respect for individuals, teamwork, extensive planning before execution. The
overall result of this blending was a new management philosophy focused on customer needs
and quality product and services that meet those needs. Even with the successes of Japanese
companies in the world markets, the philosophy originally remained specific isolated to Japan.

Quality Toolkit for Managers (Module 1) – Compiled by Prof. Devendra Bisen 6


In order to remedy this situation, quality management experts, such as W. Edwards Deming,
Joseph Juran, Philip Crosby, Armand Feigenbaum, Kaoru Ishikawa and others often travelled
across the USA educate American based executives with this new management philosophy
that was created in Japan.

The Foundational Theories of Quality Management W. Edward Deming

Deming espoused that higher quality leads to higher levels of productivity, which in turn leads
to increased long-term competitiveness. The main components of Deming’s philosophy on
total quality management were his chain reaction theory, the fourteen-points of TQM, and the
theory of profound knowledge. Though Deming’s original audience was the manufacturing
industries, the principles of total quality management soon transcend industry boundaries:
reaching into services, health care, government, and more.

Deming’s Chain Reaction Theory

The application of Deming’s chain reaction theory implies two basic sets of reactions. The first
reaction is that as a company improved its transformation processing quality, work would
increasingly be performed correctly on the first pass, resulting in lower costs because of less
scrap, rework and warranty costs, fewer delays and snags in material flows, and an overall
better use of time and materials. This, in turn, would result in increased productivity. As the
company’s cost structure decreased, its profit margins would increase, leading to greater
market shares. The second reaction is that as the company improved the quality of its
products and services, its customers would perceive a greater value proposition that would
increase market demand allowing the company to increase its pricing. Both these factors
would lead to higher market share. Thus, the company could be more competitive within its
sector and continuously extend its life and thus provide a steady stream of employment
opportunities.

Both reaction chains are driven by top management focusing on the management of quality
throughout the organization. Deming’s fourteen points provide a checklist for this focus.
Though decision-making in both reaction chains are customer driven, the understanding of
customer needs and how to achieve satisfaction is greatest in the first reaction chain because
product/service design decisions must be governed by an understanding of how product
features and service attributes will be perceived by the customer.

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Deming’s Fourteen Points of Total Quality Management

Deming articulated for management fourteen organizational objectives that he believed


formed the foundation for the transformation of any organization into a total quality
competitor. These fourteen pillars are

• Create a constancy of purpose: Management must create a constancy of purpose within


the organization for continual improvement of products and service to society. Thus, all
resources would be allocated to provide for long-range needs rather than only short-term
profitability. This is consistent with the goal of improving competitive, staying in business,
and providing jobs.

• Adopt the new philosophy: Management must awaken to the challenges facing us in
today’s world. They must learn their responsibilities to the organization and the customer,
and undertake leadership for change.

• Plan for quality: Management must eliminate the need for mass inspection as the way
of life to achieve quality. Inspections are only good for sorting good output from bad, and for
collecting information. If the goal is to produce a quality output, it must be planned for and the
appropriate philosophy built into the product creating process.

• End the practice of awarding business based on price: Management’s focus should be on
the minimization of total cost and not on the lowest cost for a single item. When long-term
relationships are established between business partners several things happen. First, they
start working together towards mutual goals. Second, information is shared more readily,
resulting in a decrease in uncertainty. Third, work and processing activities can be aligned
between different partners to better leverage organizational capabilities leading to greater
value creation. The end result is that quality is continually improved while total costs are
decreased.

• Continuous improvement: Nothing in our world stays static; everything changes. If a


program or company is to stay competitive, it must improve its processes at least as fast of its
competitors are changing. Management has a responsibility to evaluate how fast the
marketplace is changing and to continually align (and re-align) resources to drive
improvements at that rate or faster. A continuous improvement in every process involved in
the production of products and services is there- fore essential. Organizations must also
develop their workforces to continually search for problems in order to improve all activities
with- in the company, thereby enhancing quality and productivity and also lowering overall
costs.

• Institutional training: People are at their most productive when they have the requisite
skills and knowledge for the performance of tasks they have been assigned. As processes and
methodologies are improved or changed, the workforce needs to be trained with the new
skills and knowledge. Additional training on skills and knowledge on tasks peripheral to their
primary tasks, makes workers more flexible and consequently improves the versatility of the
organization. The greater the versatility of the organization, the leaner it can run and still
deliver the products and services demanded by its customers in a cost-effective manner.

• Institutional leadership: Leadership is an important factor in the effective directing and


motivating of a workforce. Leadership is also a characteristic that can be exercised by different
employees at every level. By adopting and instituting leadership aimed at helping people do a
better job, a proactive organizational culture can be created were everyone in the organization
will take responsibility for the processes affecting the customer. In order to build the trust
needed for this out- come, management must ensure that immediate action is taken on re-
ports of inherited defects, maintenance requirements, poor tools, fuzzy operational
definitions, and all conditions detrimental to quality. At the same time, management must also
be aware of competitive product in the market place and strive to ensure that their own
Quality Toolkit for Managers (Module 1) – Compiled by Prof. Devendra Bisen 8
offerings provide better value to the customer.

• Drive out fear: Management is responsibility for the design, monitoring and controlling
of the organizations processes, as well as the planning of future activities and organizing of
resources for the carrying out of those plans. The work force is responsible for the execution
of management’s plans. When problems occur, as first responders, the work force will be the
ones to first notice them and understand their implications. Without an organizational culture
that encourages workers to instantly recognize potential problems and elevate relevant is-
sues, management may never become aware of possible hitches, until it is too late to prevent
them from affecting the customer. Thus, management needs to encourage effective two-way
communication and other means of driving out fear throughout the organization so that
everybody may work effectively and more productively for the company.

• Break down barriers between functional areas: In today’s fast paced world companies
are being driven to making decisions and delivering products and service at an ever increase
rate. One of the best tools for analyzing and maturing decisions that meet requirements on the
first pass is cross- functional teams. In most organizations, knowledge is specific to managed
function related departments. Often bureaucratic barriers stifle the communications between
these departments. This impeding of the information flow degrades decision making, which
can result in unanticipated problems. Cross-functional teams (i.e.; people from different areas,
such as Leasing, Maintenance, Administration, and other departments) circumvent these
barriers by bringing all of the necessary people together to tackle problems that may be
encountered with products or service.

• Eliminate exhortations: The practices of using slogans, posters and exhortations for the
work force, demanding Zero Defects and new levels of productivity, without providing the
appropriate methods and re- sources frequently result in failed initiatives and lowered moral.
These methods of exhortation generally create adversarial relationships be- tween
management and its work force by solely focusing on meeting goals that were not realistically
set in the first place Deming believed that eighty-five percent of low quality and low
productivity problems were caused by poorly designed and managed systems (i.e., area of
management responsibilities), and thus are beyond the capabilities of the work force to fix.

• Eliminate quotas: Work standards that prescribe quotas for the work force and
numerical goals for people in management rarely result in the production of quality products
and services. If management has not designed its processes with the appropriate capacity
levels and quality- based capabilities, the work force will not be able to meet quotas or goals
the system’s parameters. Instead management needs to replace quotas and numerical goals
with aids and helpful leadership in order to achieve continual improvement of quality and
productivity.

• Remove barriers that rob people pride of workmanship: No one likes go to bed at night
knowing that the next day will be characterized by either unproductive boredom or
frustration. They would much prefer to go home at the end of the day feeling that they have
not just wasted eight hours of their life. Management can make this happen by re- moving the
barriers that rob hourly workers as well as and people in management of their right to pride
of workmanship.

• Encourage education and self-improvement: By instituting a vigorous program of


education, and encouraging self-improvement for every- one, management can help create, or
reinforce, a continuous improvement culture as well as a culture open to innovation. Total
quality focused organizations need more than just good people; they need people that keep
improving with education, because advances in competitive position are rooted in the
acquisition and application of knowledge.

• Everyone in the company must work to accomplish the transformation: Quality is a team

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effort, facilitated by clearly defined and permanent commitment of top management to the
continuous improvement of quality and productivity along with their obligation to implement
all of these principles. It is not enough that top management commit them- selves for life to
quality and productivity. The work force must also need to know what it is that they are
committed to and that their commitment is supported and appreciated.

• Only top management can create a structure that will push every day on the preceding
13 Points, and take action in order to accomplish the transformation. Support this philosophy
is not enough, action is necessary!

Deming’s System of Profound Knowledge: In order to improve an existing system, it is


necessary to back away from it and view from an objective third party perspective. Given that
all work is accomplished through the application of a process, and that organizations are
essentially a system of processes, it is essential for onto develop an understanding of how a
given organization truly works in order to develop theories on improving the organization.
One of the key issues in theory development in the quality management field is the articulation
of the distinction between quality management practices (input) and quality management
performance (output). Deming’s “system of profound knowledge”, consists of four
interrelated parts; appreciation of the system, understanding variation, the theory of
knowledge, and psychology.

• Systems: Work within organizations is accomplished through a series of interdependent


processes. Systems governance in the typical organization is aligned according to functional
skill sets (i.e.: departments). When interactions occur between processes, or other parts of the
system, managers cannot effectively manage the system by focusing of individual parts. They
must understand the processes that constitute the system as well as their cross functional
boundaries. They must then realign these processes towards organizational goals and
optimize their interactions.

• Variation: Every process has variances in output. The degree of variability is inherent to
the basic design of the process. Variability can also be incurred when factors outside the basic
design interact with the operations of the process. Excessive amounts of variability will make
predicting the process output increasingly more difficult. This will lead to more wastage and
also need the process to be reworked. Deming stressed that management must first
understand the process and the nature of variability, and then work to reducing variations in
process out- put through improvements in technology, process design, and training.

• Theory of Knowledge: Recognizing the works of Clarence Lewis, Deming stressed two
underlying facts about the creation of knowledge: 1) that knowledge was not possible without
theory, and 2) experience alone does not establish theory.

“There is no knowledge without interpretation. If interpretation, which represents and


activity of the mind, is always subject to the check of future experience, how is knowledge
possible at all? ... An argument from past to future at best is probable only, and even this
probability must rest upon principles which are themselves more than probable”.

“Experience without theory teaches nothing. In fact, experience cannot even be recorded
unless there is some theory, however crude, that leads to a hypothesis and a system by which
to catalog observations”.

• Psychology: The application of psychological theories, principles, and methods helps us


understand people, the interactions of people and circumstances, the interactions between
leaders and employees, and a given system of management. In order for management to lead
the push for quality improvement, they must be aware of the difference between the people
that they are leading, and work towards optimizing everyone’s abilities and performance. An
insightful leader understands that people learn in difference ways and at different speeds, and

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will manage the system accordingly. By applying psychology, leaders can nurture and
preserve the innate, positive attributes of their people.

Joseph Juran
Is it better to continuously improve every process all of the time? What about in situations
when the cost of fixing a problem is significantly greater than the cost of reworking only the
specific faulty items that were produced? What if the problem is of lesser strategy value than
another problem and there are only enough resources available to fix one of the problems?
These situations are common in business, and if the goal of being in business is to make money
so you can stay in business, then decisions must be prioritized.

The center piece of Juran’s philosophy was that there was an optimal level of quality, based
upon a trade- off between quality costs. He believed that because of the nature of these costs,
this optimal level would be less than 100 percent product conformance to specification.
Juran’s perspective on the cost of quality is show in Figure 4-2

Juran’s model fails to account for the effects of technological innovations and competitive
pressures. Others have noted that costs tend to increase at a constant rate, or remain flat, or
even slightly decline in production environments where there is a strong learning curve,
automated inspections, and other new quality practices. Furthermore, Juran’s assumption
that appraisal and prevention costs could be combined has been questioned. It has been
observed that when prevention costs increase, defects will go down causing failure costs to
decrease and diminishing the need for investments in appraisal activities. Finally, it has been
noted that when appraisal cost increase, external failures can decline while internal failures
will typically increase. The new perspective for the cost of quality is show in Figure 4-3.

Quality Toolkit for Managers (Module 1) – Compiled by Prof. Devendra Bisen 11


Phillip Crosby
Crosby’s philosophy focused upon reducing cost through quality improvement. He stressed
that both high-end and low-end products could have high levels of quality. His philosophy
emphasized;

1. Quality means conformance to requirements.

2. There is no such thing as a quality problem.

3. There is no such thing as the economics of quality; doing the job right the first time is
always cheaper.

4. The only performance measurement is the cost of quality, which is the expense of non-
conformance.

5. The only performance standard is “Zero Defects”.

Crosby’s Cost of Quality:

Critical-for-Quality (CoQ) is frequently characterized as the sum of costs associated with


insuring conformance to standards and the costs associated failing creating a quality product
or service on the first pass (e.g. non-conformance). Thus, every time a defective product is
produced, or a less than satisfactory service is delivered, the cost of quality increases.
Examples include reworking a manufactured item, retesting an assembly, rebuilding a tool,
correction of a bank statement, or the reworking of a service, such as the reprocessing of a
loan operation or the replacement of a food order in a restaurant. In other words, any cost
incurred as the result of failing to produce a quality item the first time, contributes to the cost
of quality.

There have been several approaches to the measuring of. . Feigenbaum classified quality costs
into three main categories: prevention, appraisal, and failure. The basic premise of this P-A-F
model is that investments in prevention and appraisal activities will reduce failures, and that
continued investments in prevention activities will lead to reduction in appraisal costs. The
costs categories in the P-A-F model are generally described as follow;

Prevention costs are those costs associated with all activities designed to prevent poor
quality. Examples include;

• New product reviews

• Quality planning

• Supplier capability surveys and certification programs

• Process capability evaluations

• Quality improvement projects and associated team meetings

• Quality education and training

Appraisal costs are those costs associated with the measuring, evaluating or auditing to
assure conformance to quality standards and performance requirements. Examples include;

• Incoming and source inspection/test of purchased material

• In-process and final inspection/test

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• Product, process or service monitoring and control systems and audits

• Maintenance and calibration of measuring and test equipment

• Associated supplies and materials

Internal failure costs are those costs resulting from not conforming to specifications. Here,
the defect is caught prior to delivery of the product, or the furnishing of a service, to the
customer. Examples include;

• Scrap and its associated opportunity costs

• Rework

• Re-inspection

• Re-testing

• Material review

• Downgrading of materials or services

External failure costs are those costs associated with the defect being caught after delivery
of the product. In these cases, an additional service has to be provided to the customer.
Examples include;

• Processing customer complaints

• Customer returns

• Warranty claims

• Product recalls

• Lost sales (typically unknowable)

Accepting Crosby’s definition of quality as “conformance to requirements”, CoQ’s can be


calculated as the sum of the price of conformance and the price of non-conformance. The
principle differences of this calculation form the P-A-F model is that price is defined as
including all the benefits, overheads, and whatever else that is associated with the real costs
of the company.

The British Standards Institute, in an effort to extend the concept of quality costing to all
functions of an enterprise and to non-manufacturing organizations, published a model
focused on process costs (BS 6143: Part 1, 1992). In this model, the CoQ’s are collected for a
specific process, supposed to the whole company. This model pursues a continuous
improvement approach to process management that is reflective of both the Kaizen approach
and to Deming’s (1986) Plan-Do-Check-Act (PDCA) cycle.

Armand Feigenbaum
Feigenbaum believed that TQM was the most effective method for integrating the various
quality activities of multiple groups in an organization while enabling production and services
to deliver customer satisfaction at its most economical level. Furthermore, he believed that in
the typical non- TQM manufacturing environment there was so much extra work being
performed in correcting mistakes that there was essentially a “hidden” plant within the
factory. Most importantly, he believed that quality was everyone’s job, and without upper
management actively and visibly involved, no one would do it.

Feigenbaum stressed that quality did not mean the best performing, or the best technical
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option. Instead, it means the best for the customer’s usage. In the system that he envisioned,
quality control was a four (4) step management tools involving: setting of quality standards,
appraising conformance to those standards, acting when standards were not meet or were
exceeded, and planning for improvements in the standards. The following tenets sum up the
essences of Feigenbaum’s system of TQM;

• Quality is a companywide process.

• The customer defines quality.

• Effective quality requires both individual and team effort.

• Quality is a management philosophy.

• Quality and innovations are mutually dependent.

• Quality is an ethical standard.

• Quality requires continuous improvement.

• Quality is the most cost-effective method for improving productivity.

• For quality to work properly it must be implemented as a total system and involving
both customers and suppliers.

Kaoru Ishikawa
Even though Deming, Joseph Juran, and Phillip Crosby are the most famous of the quality
gurus, it was Kaoru Ishikawa that laid the foundations of TQM by initiating a company-wide
quality control (CWQC) system. His vision for CWQC held that quality was not just about the
conformance/performance of the product, but also included after sales service, quality of
management, the company itself and human life. He believed that quality improvement was a
continuous process that could always be taken one step further. He emphasized that quality
was important throughout the product’s life cycle.

Ishikawa felt that the creation of standards was important, but did not believe that they were
the ultimate source of decision making; customer satisfaction was. Thus, he endorsed that
standards should be constantly evaluated and changed to ensure customer satisfaction.

Ishikawa is most noted for his contributions in simplifying statistical techniques for quality
control through the development of simple tools for the application of statistics such as
control charts, run charts, histograms, scatter diagrams, Pareto diagrams, and flowcharts. In
addition to these tools, he invented quality circles, and created the cause-and-effect diagram.

Evolving the Philosophy of Quality-


The development of a TQM program is a multi-phased process. As can be seen from the
discussion of the foundations of TQM, there is a consistent emphasis of customer satisfaction,
customer focus, and customer driven quality. These concepts are unfortunately not well
defined in the literature in this field. Thus, most organizations are stuck in the third phase of
their TQM evolution (see Fig. 4-4). In short, many of them have not developed a cogent
philosophy of the quality of their final product that emanates from a deep understanding of
the targeted consumer. For an organization to reach its full potential, it’s understanding of the
philosophy of Quality must evolve beyond a technical understanding of customer focus,
continuous improvement, employee empowerment, and data driven decision making, to a
deeper understand of how customers will perceive various actions. In addition, the firm must
try and ascertain what the true desires of customers and strive to deliver products and
services that provide their customers with a visceral level of satisfaction.

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Fig: The Four Phases of TQM Evolution

4. Quality Systems

A quality management system (QMS, alternatively “quality system”) is a mechanism for


managing and continuously improving core processes to “achieve maximum customer
satisfaction at the lowest overall cost to the organization”. By bringing together philosophies,
standards, methodologies and tools, the QMS helps an organization achieve its quality-related
goals.
A quality system is a specific implementation of quality philosophies/concepts, standards,
methodologies and tools, for the purpose of achieving quality-related goals. When
implemented, a quality system will be unique to an organization. Its structure, however,
maybe similar to quality systems in other organizations.
A quality management system (QMS) is defined as a formalized system that documents
processes, procedures, and responsibilities for achieving quality policies and objectives. A
QMS helps coordinate and direct an organization’s activities to meet customer and regulatory
requirements and improve its effectiveness and efficiency on a continuous basis.

BENEFITS OF QUALITY MANAGEMENT SYSTEMS

Implementing a quality management system affects every aspect of an organization's


performance. Benefits of a documented quality management system include:
• Meeting the customer’s requirements, which helps to instill confidence in the
organization, in turn leading to more customers, more sales, and more repeat business.
• Meeting the organization's requirements, which ensures compliance with regulations
and provision of products and services in the most cost- and resource-efficient manner,
creating room for expansion, growth, and profit?

These benefits offer additional advantages, including:

• Defining, improving, and controlling processes

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• Reducing waste
• Preventing mistakes
• Lowering costs
• Facilitating and identifying training opportunities
• Engaging staff
• Setting organization-wide direction
• Communicating a readiness to produce consistent results

1. Customer Focus

This almost goes without saying. An organization that doesn’t focus on customers won’t be
around for long. Although a customer focus is critical, many times this can be lost in the
priorities of a quality system and the various processes involved.
The focus should include current—and future—customers. Besides continuously meeting or
exceeding customer expectations, companies should measure customer satisfaction.
Conversely, failing to meet customer expectations should also be tracked. Every function and
department should be involved.

2. Leadership

As with any quality idea, support must start at the top. Without good leadership, an
organization will suffer. Leaders should set a vision and goals for the company. Think back to
an inspiring leader you’ve met. Perhaps this was at work or even at a quality event.

3. Engagement of People

An engaged workforce is one that you want to have. This means the abilities of the staff are
used and valued. It also enables continuous improvement, learning, and discussion of any
issues. With an engaged workforce, staff are held accountable for their actions. Rather being
seen as a passive place to clock in every morning, the job requires everyone in the
organization to be active and engaged in their work.

4. Process Approach

As with so many things in quality, a process approach outlines the steps for success.
This means activities are managed as processes, measured, and connections between
activities are identified. Opportunities for improvement are tracked. Quality doesn’t just

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happen. It requires processes behind the scenes to ensure the success of the organization.

5. Improvement

A strong quality system requires change. Without improvement, companies will eventually be
outshined by the competition. Aiming to maintain the status quo does not inspire anyone.

This means the company’s performance and capabilities should be developed on an ongoing
basis. These improvement activities should align with goals, and staff should be encouraged
and empowered to make improvements. When improvements are made, these should be
measured. And finally, celebrated! When things go well, it’s important to acknowledge it.
Quality isn’t all stressful audits and data analysis. Sometimes it’s formal recognition and
praise.

6. Evidence-based decision making

As you may have guessed, gut feelings are not the way forward. Rather, data is king. Of course,
this should be no surprise to the quality professional. Organizations should make sure data is
accessible, accurate, and reliable. It should be analyzed and decisions made based on it. Still,
data analysis should be balanced with practical experience. The numbers tell the story, but it
is important not to discount experience as well.

7. Relationship management

Finally, the people are the important part of any organization, and the relationships between
suppliers and other partners are critical. Suppliers should be selected carefully based on the
ability to create value as well as manage costs. Partners should be aware of plans and
information that would help them in their work. A spirit of collaboration should be the goal.
Coordinating improvement activities can help both parties. Recognizing supplier successes
will also go a long way to maintaining a strong relationship.

5. Contribution of Quality gurus

Philip Crosby:

The Four Absolutes of Quality Management:


• Quality is conformance to requirements
• Quality prevention is preferable to quality inspection
• Zero defects is the quality performance standard
• Quality is measured in monetary terms – the price of non-conformance.
14 Steps to Quality Improvement:
1. Management is committed to quality – and this is clear to all
2. Create quality improvement teams – with (senior) representatives from all departments.
3. Measure processes to determine current and potential quality issues.
4. Calculate the cost of (poor) quality

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5. Raise quality awareness of all employees
6. Take action to correct quality issues
7. Monitor progress of quality improvement – establish a zero defects committee.
8. Train employees in quality improvement
9. Hold “zero defects” days
10. Encourage employees to create their own quality improvement goals
11. Encourage employee communication with management about obstacles to quality
12. Recognize participants’ effort
13. Create quality councils
14. Do it all over again – quality improvement does not end.

Dr. EdwardsDeming

Deming’s Fourteen Obligations of Top Management


1. Create constancy of purpose for improvement of product and service. Allocate resources
to provide for long range needs rather than only short term profitability
2. Adopt the new philosophy. We can no longer live with commonly accepted levels of
delays, mistakes, defective materials, and defective workmanship.
3. Cease dependency on mass inspection to achieve quality. Quality is achieved by building
quality into the product in the first place.
4. End the practice of awarding business on the basis of price tag alone. The aim is to
minimize total cost, not merely initial cost. Establish long term relationship with suppliers to
develop loyalty and trust.
5. Improve constantly and forever every process for planning, production, and service. It is
management’s job to work continually on improving total system.
6. Institute training on the job for all, including management, to make better use of every
employee. New skills are required to keep up with changes in products and processes.
7. Adopt and institute leadership aimed at helping people do a better job. Management must
ensure that immediate action taken on issues that are detrimental to quality.
8. Drive out fear so that everybody may work effectively and more productively for the
company.
9. Break down barriers between departments and staff areas. Everyone must work together
to tackle problems that may be encountered with products or service.
10. Eliminate slogans and exhortations for the work force as they create adversarial
relationships. Also, bulk of the causes of low quality & productivity belong to the system and lie
beyond the power of the work force.
11. Eliminate arbitrary numerical targets for the workforce and management. Substitute aids
and helpful leadership in order to achieve continual improvement.

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12. Remove barriers that rob people of pride of workmanship. This includes the annual
appraisal of performance and Management by Objective.
13. Encourage education. Institute a vigorous program of education and self- improvement
for everyone
14. Clearly define top management’s permanent commitment to ever improving qualityand
productivity. Put everybody in the company to work to accomplish the transformation. Support
is not enough, action is required.

Dr. Armand Feigenbaum

• Developed Total Quality Control (TQC) philosophy


• Quote: “Quality is everybody’s job, but because it is everybody’s job, it can become
nobody’s job without the proper leadership and organization.”
Steps to quality:
• Quality leadership
• Modern quality technology
• Organizational commitment

Dr. Kaoru Ishikawa

• Known as father of Japanese quality control effort


• Established concept of Company Wide Quality Control (CWQC) – participation from the
top to the bottom of an organization and from the start to the finish of the product life cycle
• Started Quality Circles – bottom up approach – members from within the department and
solve problems on a continuous basis.
• The fishbone diagram is also called Ishikawa diagram in his honour.
• Introduced concept that the next process is your customer.

Dr. Joseph Juran

Juran’s Quality Trilogy (compared to financial management):


• Quality planning (financial budgeting) – create process that will enable one to meet the
desired goals
• Quality control (cost control) – monitor and adjust the process
• Quality improvement (profit improvement) – move the process to a better and improved
state of control through projects
Key points of Juran’s approach to quality improvement:
• Create awareness of the need for quality improvement
• Make quality improvement everyone’s job

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• Create infrastructure for quality improvement
• Train the organization in quality improvement techniques
• Review progress towards quality improvement regularly
• Recognize winning teams
• Institutionalize quality improvement by including quality
• Concentration on both external and internal customers

Dr. Walter Shewhart

• Shewhart’s control charts are widely used to monitor processes. Problems are framed in
terms of special cause (assignable cause) and common cause (chance-cause).
• The Shewhart Cycle – PDCA Problem Solving Process:
• Plan – what changes are desirable? What data is needed?
• Do – carry out the change or test decided upon
• Check – observe the effects of the change or the test
• Act – what we learned from the change should lead to improvement or activity
• Referred to as the “Father of Statistical Quality Control”

Dr. Genichi Taguchi

• The lack of quality should be measured as function of deviation from the nominal value of
the quality characteristic. Thus, quality is best achieved by minimizing thedeviation from target
(minimizing variation).
• Quality should be designed into the product and not inspected into it. The productshould
be so designed that it is immune to causes of variation.
Taguchi recommends a three-stage design process:
System Design (Stage 1):
• Development of a basic functional prototype design.
• Determination of materials, parts and assembly system.
• Termination of the manufacturing process involved.
Parameter Design (Stage 2):
• Selecting the nominal’s of the system by running statistically planned experiments
(DFSS/DOE)
Tolerance Design (Stage 3):
• Deals with tightening tolerances and upgrading materials.

Quality Toolkit for Managers (Module 1) – Compiled by Prof. Devendra Bisen 20

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