Managing Quality
Chapter 5
Chapter Objectives
Be able to:
 Discuss the various definitions and dimensions of quality and
why quality is important to operations and supply chains.
 Describe the different costs of quality, including internal and
external failure, appraisal, and prevention costs.
 Describe what TQM is, along with its seven core principles.
 Calculate process capability ratios and indices and set up
control charts for monitoring continuous variables and
attributes.
 Describe the key issues associated with acceptance sampling, as
well as the use of OC curves.
 Distinguish between Taguchi’s quality loss function and the
traditional view of quality.
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Quality Defined
 Quality – The characteristics of a product or service
that bear on its ability to satisfy stated or implied
needs; a product or service that is free of
deficiencies.
 Value perspective – A quality perspective that holds that
quality must be judged, in part, by how well the
characteristics of a particular product or service align with
the needs of a specific user.
 Conformance perspective – A quality perspective focused
on whether or not a product was made or a service was
performed as intended.
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Eight Dimensions of Quality
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Performance
Features
Reliability
Durability
Conformance
Aesthetics
Serviceability
Perceived Quality
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Quality Dimension Examples
Table 5.1
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Total Cost of Quality
 Prevention costs – Costs an organization incurs to
actually prevent defects from occurring to begin
with.
 Appraisal costs – Costs a company incurs for
assessing its quality levels.
 Internal failure costs – Costs caused by defects that
occur prior to delivery to the customer.
 External failure costs – Costs incurred by defects
that are not detected until a product or service
reaches the customer.
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Total Cost of Quality
Traditional View
Figure 5.2
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Total Cost of Quality
Zero Defects View
Figure 5.3
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Total Quality Management
Total Quality Management A managerial approach in which an
organization is managed so that it excels in all
quality dimensions that are important to
customers.
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Total Quality Management
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Customer focus
Leadership involvement
Continuous improvement
Employee empowerment
Quality assurance
Strategic partnerships
Strategic quality plan
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Total Quality Management
 Customer focus
 Each employee has a customer whether internal
or external to the company.
 Leadership involvement
 Must be ‘top’ down, throughout the company.
 If not, major cause of TQM failures.
 Continuous improvement
 There is always room for improvement.
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Total Quality Management
 Employee empowerment
 Giving employees the responsibility for managing quality.
 Quality assurance
 Quality Function Deployment (QFD) discussed in Chapter
15
 Statistical quality control (SQC), also called statistical
process control (SPC)
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Total Quality Management
 Supplier Partnerships
 The commitment between firms and supply chain
partners must be the same.
 Strategic Quality Plan
 Sets a broad set of objectives.
 Should establish measurable goals for the shortterm.
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Process Capability
Answers the Question:
Can the process provide
acceptable quality consistently?
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Process Capability Ratio (Cp)
Process Capability Ratio (Cp) – Measures whether or not a process is potentially capable of
meeting certain quality standards
Cp =
Upper Tolerance Limit – Lower Tolerance Limit
6σ
Where σ is the estimated
standard deviation
for the individual observations
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Normal Distribution
Figure 5.4
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Process Capability Values
Figure 5.5
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Process Capability Index
Process Capability Index (Cpk) – Measures whether or not a process is capable of
meeting certain quality standards and is centered between the specification limits.
   LTL UTL   
Cpk  min
,
3 
 3
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Six Sigma Quality
To achieve Six Sigma quality, the variability
of a process must be reduced to the point
that the process capability ratio is greater
than or equal to 2.
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Six Sigma Quality
Figure 5.6
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Control Charts
 Control Chart – A specialized run chart that
helps an organization track changes in key
measures over time.
 Continuous variable – A variable that can be
measured along a continuous scale.
 Attribute – The presence or absence of a
particular characteristic.
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Sampling
 Sampling – Using carefully selected samples
to get a fairly good idea of how well a process
is working.
 Good sample:
 Every outcome has an equal chance of being
selected into the sample.
 The sample size is large enough to not be swayed
by any single observation.
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Continuous Variable
Measurements

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Control Charts
 X chart - A specific type of control chart for a
continuous variable that is used to track the
average value for future samples.
 R chart – A specific type of control chart for a
continuous variable that is used to track how much
the individual observations within each sample
vary.
 p chart – A specific type of control chart for
attributes that is used to track sample proportions.
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Step 1 – Sampling the Process
Observation
Sample
1
2
3
4
5
1
136
137
144
141
138
2
143
138
140
140
139
3
140
141
144
137
135
4
139
140
141
139
141
5
137
138
143
140
138
6
142
141
140
139
138
7
143
141
143
140
140
8
139
139
141
140
136
9
140
138
143
141
139
10
139
141
142
140
136
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Step 2 – Calculate the Mean
and Range for each sample
Sample
𝑋
R
1
139.2
8
2
140
5
3
139.4
9
4
140
2
5
139.2
6
6
140
4
7
141.4
3
8
139
5
9
140.2
5
10
139.6
6
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Step 3 –
Calculate control limits
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Step 3 –
Calculate control limits
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Step 4 – Plot the Data
Sample
𝑋
R
11
141.2
8
12
142
9
13
144
12
14
140
5
15
139.6
4
16
140.8
5
Figure 5.8
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Sampling by Attribute
 Gonzo Pizza is interested in tracking the
proportion (%) of late deliveries
 Like before, you take several samples of say, 50
observations each when things are “typical”
 For each sample, you calculate the proportion of
late deliveries and call this value p. For example:
p = (8 late)/(50 deliveries) = 0.16
 Average all of the 15 sample proportions. For
example:
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Sampling by Attribute
 Calculate the standard deviation for the p
chart as follows:
Sp 
p  (1  p)
 0.042
n
Where n = size of each sample = 50
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Sampling by Attribute
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Sampling by Attribute
 Although text says to go ahead with control charts,
consider that it is probably too early to develop them
since the process is not yet in control (i.e., late
deliveries are too high a percentage at present).
 A more practical approach would be:
 First, fix the more obvious problem(s)
 Then take new samples
 Then put in place control charts
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Acceptance Sampling
Some definitions
 Acceptable quality level (AQL)
 Maximum defect level for 100% customer acceptance
 Lot tolerance percent defective (LTPD)
 Highest defect level customer will tolerate
 Consumer’s risk
 Probability of accepting a bad lot
 Producer’s risk
 Probability of rejecting a good lot
 Operating characteristics (OC) curve
 Probability of accepting a lot given the actual fraction defective in the
entire lot and the sampling plan being used
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Producer’s and Consumer’s Risk
Figure 5.10
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Traditional View of
the Cost of Variability
There is no failure cost associated with units that fall within the
tolerance limits, while units outside the tolerance limits immediately
result in failure costs.
Figure 5.12
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Taguchi’s Quality
Loss Function
Any deviation from the target value results in some failure cost.
As long as there is variability in the process, there is room for
improvement.
Figure 5.13
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ISO 9000 Family
 ISO 9000- A family of standards supported by
the International Organization for
Standardization.
 Goals:
 Meet the customer’s quality requirements and
applicable regulatory requirements.
 Enhance customer satisfaction.
 Achieve continual improvement of performance in
pursuit of these objectives.
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Managing Quality
Case Study
Dittenhoefer’s Fine China
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