Formula Summary Process Sigma or rs r1 r2 rn Z Process Capability Statistical Process Control Average Chart Range Chart p chart c chart UTL LTL X 6LSLUSLCp 3 3LSLUSLMinCpkUCLxARLCLxARxx 22nppzpCLp 1 czcCLc UCLR D4R LCLR D3R BM630 Final Review Outline I Quality Management Define quality and identify the determinants of quality in goods and services Quality means the ability of a product to consistently meet or exceed customer expectations o Ability refers to the competence either native or acquired that enables one to do something well o Consistently refers to a reliable or steady pattern of performance o Expectations refers to a state of anticipation about a future outcome Determinants of Quality in Goods PSRCODS o Performance the primary purpose of the good o Special Features additional characteristics o Reliability consistency in performance o Conformance a good matches the prespecified standards or guidelines o Durability useful life of a good o Serviceability ability to perform with ease Determinants of Quality in Services RRCACCCSUT o Reliability consistent performance o Responsiveness willingness of their service provider o Competence knowledge and skills of the service provider o Access approachability of provider o Courtesy provides politeness respect consideration and friendliness o Communication using language customers can understand o Credibility provider s trustworthiness believability and honesty o Security confidentiality personal and financial security o Understanding Knowing the Customer listening to customer s requirements providing individualized attention and recognizing regular customers o Tangibles physical characteristics Customer Expectations Influenced by factors such as personal needs word of mouth and individual s own past experiences o o A customer compares the objective quality of a product based on specific determinants with their expectations o Based on such comparisons the perceived quality is thought to be higher or lower than expectations o Objective quality is the quality of a good or service based on its determinants o Perceived quality is the quality of a product or service as perceived by the customer o Quality excellence means improving the dimensions of both objective and perceived product quality Why firms improve quality to achieve the following goals o Cost Reduction o Customer Satisfaction o o Increased Customer Loyalty Improvement of financial and market performance Identify and define the costs associated with quality improvement prevention appraisal assurance internal and external failure costs Cost Reduction o Investments that lead to cost reductions are in better employees raw materials production processes and all support activities o The four broad categories of costs associated with quality improvement are Internal Failure Cost External Failure Cost If a defective good or service is produced but the error is caught before the product leaves the production facility then all costs associated with rework scrap and lost production time are classified as an internal failure cost 2 If the error is found after the customer has purchased the product or service then the associated costs are classified as an external failure cost Also this error may lead to loss of the customer s goodwill and also negative word of mouth Assurance Costs Prevention Costs The costs necessary to ensure that the product or service meets quality standards i e cost of sampling and inspection are classified as assurance costs All costs and efforts associated with preventing quality problems are classified as prevention costs o As quality increases but internal and external failure costs decrease while assurance and prevention costs increase Customer Satisfaction Enhancement indication of the long term profitability Customer Loyalty o The quality of products and services can have a big impact on customer satisfaction which is an o Research over a long period has shown that it is less costly to continue serving existing customer than to increase market share o A customer who is satisfied and more loyal to a company is also likely to spread positive word of mouth and therefore create additional goodwill in the marketplace Increase in Profitability and Market share o Companies that produce high quality products and services are also rewarded handsomely by enhanced financial performance o Research has shown that the long term profitability of companies that have won various quality awards increase significantly more by about 25 50 Summarize the philosophies of the quality gurus W Edwards Deming o Considered the father of modern quality management o Taught that the quest for quality is a never ending journey o He summarized his teachings into 14 points o Continuous Improvement Philosophy an approach involving continuously searching for improving the o He summarized his continuous improvement philosophy using a diagram of a wheel with 4 activities quality of goods and services plan do check act Plan a change for improvement Do implement the change Check the results did it work Act by institutionalizing the change or by abandoning it and doing it again Philip Crosby o Widely known for his book Quality if Free o His ideas came from his experiences as a quality inspector on an assembly line o He proposed that if management does not create a system in which zero defects are the objective then employees are not to blame when things go wrong and defects occur o Defined quality as containing 4 absolutes Quality is defined as conformance to requirements not as goodness or elegance The system for causing quality is prevention not appraisal The performance standard must be zero defects not that s close enough The measurement of quality is the price of nonconformance not indices Armand Feigenbaum o The author of a book on quality control o In his book he developed the concept of total quality control TQC which later evolved as part of total quality management 3 Kaoru Ishikawa o Created a cause and effect diagram also known as the fishbone diagram that allows a user to visualize all possible causes of a result and hopefully find the root cause of process imperfections o Also explored and popularized the concept of quality circles which is a small group of employees who are responsible for similar or related work functions Joseph M Juran o Helped Deming revolutionize the Japanese practice of quality managements and helped shape that country s economy into the industrial leader