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Ch 6 - Managing Quality

Definitions (Items preceded with an * are appropriate for class participation.)
1. *Quality - the degree to which a product meets specified standards. These standards occur in three categories: (p195)
  1. User-based - concerned with fitness for use, such as performance, safety, appearance, reliability, durability, maintainability.
    Ex. - user wants a safe, family car with 20 mpg, $20,000 price, $500 maintenance/year.
  2. Design-based - concerned with specific characteristics designed into the product.
    Ex. - car design has 4 doors, air bags, 3 liter engine.
    This is consistent with above user-based standards.
  3. Production-based - concerned with conformance of the produced product with the design.
    Ex. - produced car has 0.05" door clearance, 0.0004" piston to cylinder clearance, $17,000 production cost, 33 labor hour production time.
    This is consistent with above design-based standards.
2. Example of Quality Definition for a Service
  1. Within the next 5 years, I may manage a branch office producing banking services for families.
  2. User-based quality standards: my customers may desire safe reliable banking with 4% growth when their total deposits are at least $20,000.
  3. Design-based quality standards that I may establish for my customers:
              No fee checking with 0% interest
              Savings account with 2% interest when at least $4,000 is on deposit
              Mutual funds with 4% return when at least $12,000 is on deposit.
  4. Production-based quality standards that I may establish (in order to satisfy the design-based standards) are:
              Check clearing - error rate .01%, cost $.044/check
              95% of all in bank deposits made within 5 min
              95% of all PC deposits processed within 30 sec.
3. Discussion Item
  1. Identify a service that you will produce or manage within five years of graduation.
  2. Identify two user-based quality standards for this service.
  3. Identify two design-based quality standards for this service consistent with the two standards identified in part 2.
  4. Identify two production-based standards for this service consistent with the two standards identified in part 3.
4. ISO 9000 - a series of quality management procedures established by the European Community. Some firms require suppliers to be ISO 9000 certified (p198).
5. ISO 14000 - a series of environmental management procedures established by the European Community

Total Quality Management (TQM) (p198)
1. Def - TQM - management of an entire organization so that it excels in all aspects of products that are important to the customer.
2. Components of a typical TQM program
  1. Continuous Improvement
  2. *Employee Empowerment - giving employees power to make more decisions - quality circles
  3. *Benchmarking - selecting a demonstrated (external) standard of performance that represents the best and taking action to achieve it.
    Ex. - Xerox benchmarked L. L. Bean for order filling, p202.
  4. *Just-In-Time (JIT) - central idea is to eliminate waste (more in Ch 16)
  5. *Statistical Process Control - (more in Ch 6 Supplement, p208)
3. *The Cost of Quality - the objective of TQM is to maximize total profit by adjusting: (p196)
  1. Prevention costs - product design, process development, training, information systems.
  2. Appraisal costs - inspection during production.
  3. Internal failure costs - before customer contact - scrap, rework, wasted labor, process downtime.
  4. External failure costs - after customer contact.
    - Rough rule of thumb - One dollar spent on prevention, saves $10 in appraisal costs, which saves $100 in internal failure costs, which saves $1000 in external failure costs.
4. Important People in TQM (Table 6.1, p197)
  W. Edwards Deming, J. M. Juran, Philip B. Crosby
5. Some of Deming’s 14 Points - Table 6.2 - p199
  3. Cease mass inspection. Use statistical evidence that quality is built into the product.
  8. Drive out fear, so people will feel secure to point out problems.
  9. Break down barriers between departments, suppliers, and customers.
  14. Put everybody (including top mgt) to work on the transformation.
6. "It's not enough to do your best; you must know what to do and then do your best." (W. Edwards Deming)
Malcolm Baldrige National Quality Award (p 195)
1. Established in 1988 to publicize successful quality strategies (named after former Secretary of Commerce)
2. Previous winners - Motorola, Xerox, Federal Express, Cadillac, AT&T
3. See www.quality.nist.gov for more info.
The Role of Inspection (p208)
1. When and Where to Inspect
  1. At supplier's plant
  2. Upon receipt of goods
  3. *Before costly or irreversible process
  4. *After significant value added
  5. Upon completion
  6. Before shipment
  7. At point of customer contact
2. How to Inspect (p 210)
  1. Inspection by Attributes - characteristic is either present or not. Example, light bulb burns or it doesn't.
  2. Inspection by Variables - characteristic is measured in varying degrees. Example, light bulb uses 94 watts.
3. Discussion Item - consider the product of preparing a tax return.
  1. Identify one characteristic of a tax return that could be inspected by attributes.
  2. Identify one characteristic of a tax return that could be inspected by variables.
    (This page was last edited on January 13, 2010 .)