Chapter 12: Total Quality Management (Six Sigma Quality)

“Quality product/service”
meeting quality expectations as defined by the customer.
TQM
-Integrated organizational effort designed to improve quality of products and services at every business level.
-Ensuring that the organization’s systems can consistently produce the quality of “Build-In Quality”
Statistics about TQM
-more than 90% of dissatisfied customers never do business with the offending organization
-The average customer who has a problem tells 9 others
-attracting a new customer costs 5-6 times as much as keeping the current customer.
-65% of the average organization’s business comes from current customers.
Defining Quality (5)
-Conformance to specifications
-fitness of use
-value for price paid
-support services
-psychological
Conformance to specifications
does product/service meet targets and tolerances defined by designers?
Fitness for use
Evaluates performance for intended use
Value for price paid
Evaluation of usefulness vs. price paid
Support services
Quality of support after sale
Psychological
Ambiance, prestige, friendly staff, etc.
Dimensions of Quality (6)
-Performance
-Features
-Reliability/Durability
-Serviceability
-Aesthetics
-Perceived quality
Product Quality
-Conformance to specifications
-Performance
-Reliability
-Durability
-Features
-Serviceability
Service Quality
-Responsiveness to customer needs
-Completeness
-Timeliness/promptness
-Consistency
-Courtesy/friendliness
-Atmosphere
Cost of Quality
-To achieve high levels of conformance, it’s going to cost $$
-2 categories:
Cost of achieving good quality: appraisal costs and prevention costs
Cost of achieving bad quality: internal failure costs and external failure costs
Cost of Achieving good quality (quality control costs)
-Appraisal costs: cost of measuring and evaluating quality. inspection of incoming material form suppliers, calibration of measurement equipment, cost of collecting data and testing at all stages of production.

-Prevention Costs: cost of making it right the first time. Quality planning in product design and in production process. Training workforce.

Cost of achieving bad quality (quality failure costs)
-Internal failure costs: Cost of poor quality found prior to receipt by customer. Scrap, rework, process failure, production downtime, price downgrading.

-External failure costs: Cost of poor quality after receipt by customer. customer complaints, returned products, warranty claims, liability costs, lost sales, loss of reputation, lost market share.

Six Sigma Quality Definition
-Philosophy and methods to eliminate defects
-Defects- any characteristic/component of the product that fails to satisfy the customers specifications
-To eliminate defects also means to eliminate variation but completely eliminating defects/variation isn’t possible.
Six Sigma Quality (Realistically)
-Method to reduce the variation in processes.
-Method telling you how good your process is.
-Provides a metric to compare processes
-goal is to reduce defects to no more than 4 defects per million units.
-4000 defects per billion units
DPMO
-Defects per million opportunities.
(# of defects/ # of opportunities for error per unit*#of units)*1,000,000

ex. out of 1500 parts, 1477 were produced free from defects. Based on six sigma theory, how would you rate this performance?
1500-1477=23
(23/1*1500)*1,000,000=15,333
There are 15,333 defects per million units therefore not efficient according to six sigma theory.

Six Sigma Methodology
-Systematic process to eliminate variation
-Based on Deming’s PDCA cycle to continually improve the process: Plan, Do, Check, Act. Don’t stop once you have control, then begin the process again to eliminate more defects
-DMAIC: Define, Measure, Analyze, Improve, Control
Six Sigma Tools
DMAIC
-Define: flowcharts
-Measure: run charts, Pareto charts, Checksheets
-Analyze: cause and effect diagrams (fishbone diagrams)
-Improve: opportunity flow diagrams
-Control: control charts
Quality Standards
-Provide accepted global guidelines for quality
-certification involved documenting and implementing systems for quality management followed by verification of compliance by an independent accredited third-party
Quality Awards
-Malcolm Baldridge National Quality Award: intended to reward and stimulate quality initiatives
-Deming Price: international quality award
Quality Improvement
-Poka-yokes: completely eliminating variation in a step. “Fool-Proofing”
-External Benchmarking: incorporate best practices from industry leaders. Typically looking to benchmark qualities from best leaders.
The dimension of design quality that concerns the consistency of performance over time or the probability of failing is…?
-Reliability
Find the appraisal cost, prevention cost, internal failure cost and external failure cost:

Advertising: 200,000
Returned Products: 175,000
Cost of Training: 120,000
Inspection cost: 20,000
Lost sales: 16,000
Testing cost: 12,500
Cost of rework: 10,000
cost of inspection of rework: 5,000

-Appraisal costs:20,000 (inspection costs)+12,500(testing cost)=32,500

-Prevention Costs:120,000(cost of training)=120,000

-Internal failure costs: 10,000 (cost of rework)+5,000 (cost of inspection of rework)=15,000

-External Failure costs: 175,000(returned products)+16,000 (lost sales)=191,000

Six Sigma refers to the philosophy that some companies use to eliminate defects in their products and processes?
true
Which is not a primary reason for a company to improve quality?
D- to win the Baldridge Award

A- to attract new customers
B- to avoid losing existing customers
C-to increase profits
D- to win the Baldridge Award

An operational goal of total quality management is ensuring that the organizations systems will never produce a defective product or service
false
A fishbone diagram as part of a six-sigma quality improvement process might be found in which DMAIC category?
Analyze
Which is not a dimension of service quality?
A- Features

A-features
B-timeliness
C-Courtesy
D-Consistency