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Ch 3 - Quality Management

1. Introduction (Items preceded with an * are most appropriate for class participation.)  
   1. *Def - Quality - the degree to which a product meets specified standards. These standards occur in four categories:
      1. User-based - concerned with fitness for intended use, such as performance, safety, appearance, reliability, durability, maintainability (p80).
         • 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 (p80).
         • 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 (p82).
         • 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.
      4. Support-based - concerned with appropriate after sales support (p80).
         • Ex. - car has 7 year warrantee, with 24 hour road side assistance.
   2. Discussion Item (Be prepared to discuss during class.  See Example I.C below.):
      1. Identify a service that you may produce or manage within the next 5 years.
      2. Identify 2 user-based quality standards for this service.
      3. Identify 2 design-based quality standards for this service consistent with the standards you identified in item 2 above.
      4. Identify 2 production-based quality standards for this service consistent with the standards you identified in item 3 above.
      5. Identify 2 support-based quality standards for this service consistent with the standards you identified above.
   3. Example of 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 5% 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 1% interest
                   Savings account with 3% interest when at least $4,000 is on deposit
                   Mutual funds with 8% 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.
      5. Support-based quality standards that I may establish (in order to satisfy the design-based standards) are:
                   Waiting time for 95% of all in bank inquires < 10 min
                   Waiting time for 95% of all online inquires < 30 sec.
2. Total Quality Management (TQM) (p83)
   1. Def - TQM - the mgt of quality thru out the organization at all mgt levels and across all areas with emphasis on customer needs.
   2. Components of a typical TQM program
      1. Philosophy of Continuous Improvement (p86)
      2. *Employee Empowerment - empowering employees to make more decisions - quality circles (p89)
      3. *Benchmarking - selecting a demonstrated (external) standard of performance that represents the best and taking action to achieve it.
         Ex. - Other firms benchmark Federal Express for human resource mgt, "People, Service, Profit", p97
      4. *Just-In-Time (Lean Production) - central idea is to eliminate waste (Ch 15)
      5. Statistical Process Control - (p86, and Ch 4)
   3. *The Cost of Quality - the objective of TQM is to maximize total profit by adjusting (p99):
      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 3.1, p84)
      1. W. Edwards Deming
      2. Joseph M. Juran,
      3. Philip B. Crosby, book, Quality is Free
   5. Some of Deming’s 14 Points  (p85)
        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.
3. Malcolm Baldrige National Quality Award (p112)
   1. Established in 1987 to publicize successful quality strategies (named after former Secretary of Commerce)
   2. Previous winners - Motorola, Xerox, Federal Express, Cadillac, AT&T
4. International Standards (p116)
   1. *ISO 9000 - a series of quality management procedures established by the European Community. Some firms require suppliers to be ISO 9000 certified.
   2. *ISO 14000 - a series of environmental management procedures established by the European Community (Ch5, p199).
                           (This page was last edited on August 16, 2006 .)