LGT 5105

Managing Operations
Systems

Lecture 6
Quality Management
Key Topics

>Understand the nature of quality.

>Know three quality gurus.
>Learn QC tools.
>Understand the Six Sigma approach for quality
and productivity improvement.
>Realize core quality management concept.
Key Performance Results of
Business Excellence
 Great financial performance
 Higher operating efficiency
 Sizable market share
 Greater customer satisfaction
 More engaged employees
 Gain recognition of quality outputs
 Build a sustainable long term viable business
Quality
Meeting, or exceeding, customer requirements now
and in the future.
(i.e., The product or service is fit for customer’s use.)

Only the customer can determine quality.

Quality involves the entire organization, 
and the supply chain.
....
Performance Metrics:
Balance Scorecard Approach
The Balanced Scorecard Addresses
Four Key Perspectives
The balanced scorecard allows managers to look at the business 
from four important perspectives providing the answer to four basic 
questions:

How do customers see us? Customer perspective

What must we excel at? Internal perspective

Can we continue to improve Innovation and learning

and create value? perspective

How do we look to
Financial perspective
shareholders?

R.S. Kaplan and D.P. Norton, Harvard Business Review, January‐February, 71‐79 (1992)
Shareholder Value is No Longer the
Top Priority
Business Roundtable redefined on August 19, 2019
the purpose of a corporation and share a
fundamental commitment to all of their stakeholders:
>Delivering value to our customers.
>Investing in our employees.
>Dealing fairly and ethically with our suppliers.
>Supporting the communities in which we work.
>Generating long-term value for shareholders.
(Updated statement moves away from shareholder primacy,
includes commitment to all stakeholders)
https://www.businessroundtable.org/business‐roundtable‐redefines‐the‐purpose‐of‐a‐
corporation‐to‐promote‐an‐economy‐that‐serves‐all‐americans
What is Quality?
>Quality is a subjective term for which each
person or sector has its own definition.
>“Fitness for use” – Joseph Juran
> “Conformance to requirements” – Philip Crosby
>“A predictable degree of uniformity and
dependability at low cost and suited to the
market” – Edward Deming
>In technical usage, quality means:
1. the characteristics of a product or service
that bear on its ability to satisfy stated or
implied needs;
2. a product or service free of deficiencies.
Two Aspects of Quality Management
1. Strategic: 2. Operational:
Quality of Design Quality of Conformance
- affect revenue - affect cost
Quality of Design

>Determined before the product is produced

>Cross-functional team for product design
>Translates the “wishes” of customers into
specifications
>Depends on market research, design
concept, specifications
Quality of Conformance
>Producing a product/service that meets
specifications
>Even ‘cheap’ products can have conformance
quality
• May not be durable, but conformance quality is
achieved if they match their design

“Product/service that meets specifications does not mean meet 
requirement of customers. We should allow quality standards to be 
revised constantly to reflect the voices of consumers and their 
complaints as well as the requirements of the next process.”
‐ Ishikawa (1985) What is total quality control? – The Japanese way
Quality Specifications
> Design quality:
inherent value of Performance Features
the product in the
marketplace
> Conformance Reliability/
Serviceability
quality: degree to Durability
which the product
or service design
specifications are Perceived 
Aesthetics Quality
met.
After 1990 Evolution of Quality Management
Performance Excellence
Leadership, strategy, partnership, processes, measurement, improvement, results

Total Quality Management

60~80’s Continuous Improvement, Mobilizing The Organization
System Improvement

Quality Assurance
Statistical Process Control, Quality Programs,
Quality System Development
1940’s
Quality Control
Develop Quality Manual, Process Performance Data
Product Testing

Inspection
1900 – 1930’s Sorting, Grading, Measurement, Corrective Action
Detection
The Rise of Japanese Manufacturing Quality
> Before 1970s, Japanese goods were publicly known as
cheapness and low quality.
> However, Japan is achieving very high levels of quality in
products from the 1970s onward after Deming, Juran, &
etc introducing quality management concepts and
techniques into the country in 1950s.
> Japanese has been promoting company-wide quality
control (CWQC) since late 1960s.
> By the 1970s, U.S. industrial sectors such as automobiles
and electronics had been hit by Japan’s high-quality
competition.
> The U.S. response, emphasizing not only statistics but
approaches that embraced the entire organization,
became known as total quality management (TQM).
Total Quality Management (TQM)

> Total quality management: managing the

entire organization so that it excels on all
dimensions of products and services that are
important to the customer
> Two fundamental operational goals
1. Careful design of the product or service
2. Ensuring that the organization’s systems can
consistently produce the design
 Quality Gurus

>Philip B. Crosby
• Wrote Quality Is Free in 1979.
• Company should have the goal of zero defects.
• Cost of poor quality is greatly underestimated.
• Traditional trade-off between costs of improving quality
and costs of poor quality is misguided.
• “Do it right the first time!”
• “It is always cheaper to do the job right the first time.”
Who’s Job?

Traditional Wisdom
Quality is the duty of QC department

New Concept
Quality is everyone’s business
Who’s Responsibility?
Traditional Wisdom
Mainly responsibility for quality – workers

New Concept
Mainly responsibility for quality – Top management
The Shingo System: Fail-Safe Design
> Poka-yoke (mistake-proofing) includes:
• Checklists
• Special tooling that prevents workers from making
errors
> Shingo’s argument:
• SQC methods do not prevent defects.
• Defects arise when people make errors.
• Defects can be prevented by providing workers with
feedback on errors.
1. Successive check
2. Self-check
3. Source inspection

12-19
Quality is Perfect

Traditional Wisdom
Quality = Perfect or Goodness

New Concept
Quality = Fitness for use
= Meeting the requirements
Quality Cost

Traditional Wisdom
High Quality Higher cost

New Concept
Cost can be reduced through improving
quality
What is Quality Cost?
Appraisal costs – Prevention costs –
costs of the inspection and  sum of all the costs to prevent 
testing to ensure that the  defects
product or process                     
is acceptable Quality 
Costs
Internal failure costs – External failure costs –
costs for defects incurred  costs for defects that pass 
within the system through the system

2% 4% 6% 10%

Note: Percentages 
in this example 
are not standards 
or targets.

Quality cost bar chart - % turnover (Taiwan example)

 Failure Costs

>Internal failure costs:

• To remedy defects discovered before the product or
service is delivered to the customers
>External failure costs:
• To remedy defects discovered by customers.

Duffy, G. L. (2013) The ASQ Quality Improvement Pocket Guide: Basic 
History, Concepts, Tools, and Relationships, ASQ Quality Press
The Best Total Quality Costs: Prevention

Excellent doctor prevents 
people to have disease;
Good doctor avoids people 
being sick; 
Normal doctor cures patients' 
illness.
‐An ancient Chinese medical book

Source: Juran’s Quality Handbook, 5th ed.

What is the Key Quality Issue?
>Variation is existed in outputs that customers do
not accept all of them.
>In other words, outputs are hard to be identical
and consistent in its specification or cannot meet
expectation, e.g.
• The volume of a soft drink in milliliter is inconsistent
among boxes;
• Minor fabric faults are found in a garment;
• The waiting time in a bank before being served,
expressed in minutes, is different among customers.
Quality Control in Industrial 4.0
>Artificial Intelligence (AI) and Internet of Things
(IoT) will allow a production lines:
>Self optimization：
• Automatically adjusting parameters to avoid incidents
• Self-controlled rerouting of products within the factory to
allow for maintenance activities
>Self inspection：
• Inspection ability of AI surpasses humanity
• Exceptional detective ability
• Higher stability
• Better reliability
Deming’s 14 Points for Managers
1. Create constancy of purpose toward product
quality to achieve organizational goals.
2. Refuse to allow commonly accepted levels of
poor quality.
3. Stop depending on inspection to achieve quality.
4. Use fewer suppliers, selected based on quality
and dependability instead of price.
5. Instill programs for continuous improvement of
costs, quality, service, and productivity.
6. Train all employees on quality concepts.
7. Focus supervision on helping people do a better
job.
Deming’s 14 Points for Managers
8. Eliminate fear, create trust, and encourage two-
way communications between workers and
management.
9. Eliminate barriers between departments and
encourage joint problem-solving.
10.Eliminate the use of numerical goals and
slogans to make workers work harder.
11. Use statistical methods for continuous
improvement of quality and productivity instead
of number.
12. Remove barriers to pride of workmanship.
13. Encourage education and self-improvement.
14. Clearly define management’s permanent
commitment to quality and productivity.
 ISO 9000 and ISO 14000
> Series of standards agreed upon by the International
Organization for Standardization (ISO)
• Adopted in 1987
• Used in more than 160 countries
> A prerequisite for global competition?
> ISO 9000 an international reference for quality; ISO
14000 primarily concerned with environmental
management
> By process certification, it does not mean that an
organization has good management; it only means a
basic management system in place
PDCA Cycle

4. ACT 1. PLAN
Permanently Identify
implement improvement
improvements and
develop plan

3. CHECK 2. DO
Evaluate plan Try plan on
to see if it a test basis
works
Six Sigma

>A philosophy and set of methods companies use

to eliminate defects in their products and
processes
>Seeks to reduce variation in the processes that
lead to product defects
>The name, “Six Sigma,” refers to the goal of no
more than four defects per million units
 Six Sigma Quality
> It is a term used to indicate a process is well controlled
(±6 s from the centerline in a control chart).

USL  LSL  6 Quality performance if 

1.5σ shift is allowed:
Sigma Yield DPMO*

1 30.9% 690,000
2 69.2% 308,000
3 93.3% 66,800
4 99.4% 6,210
5 99.8% 320
6 99.9997% 3.4

USL = Upper Specification Limit *Defects per Million Opportunities
LSL  = Lower Specification Limit
Six Sigma Methodology: DMAIC Cycle

identify customers’ 
priorities and our gaps

determine how to maintain  measure the performance 
the improvements of process

identify means  determine the most 
to eliminate the  likely causes of 
causes of defects defects
Overall focus of the methodology is to understand and achieve what the customer wants.
Seeks to reduce the variation in the processes that lead to these defects.
 Six Sigma Analytical Tools:
The Basic Quality Control Tools
>Seven Basic Quality Control (QC) Tools
• Process flowcharts (or diagrams)
• Checksheets
• Histograms
• Pareto charts
• Scatterplots (or diagrams)
• Control charts and run charts
• Cause-and-effect (fishbone) charts
 Flowchart For An Order Entry
Start

End
Flowchart / Process Maps
>A picture of a process, or map of the process, as
it exists
>The following set of symbols is used:

Start/Stop Processing

Decision Flowline

Page connector
Simple Rules for Process Maps
>Use the simple symbols to chart the process from
the beginning, with all arcs in the process map
leaving and entering a symbol.
• The arcs represent the progression from one step to the
next.
>Develop a general process map and then fill it out
by adding more detail, or a subflowchart, to each of
the elements.
>Step through the process by interviewing those
who perform it – as they do the work.
>Review the process map with the employees to
make needed changes and adjustments to the
process map.
Flowchart Example:
Selecting a Supplier

Schroeder, Goldstein & Rungtusanatham (2013), Operations Management in the Supply Chain (6th ed.), McGraw-Hill.
Flowchart Example:
Selecting a Supplier (Modified)

Clarify No
information
Checksheet for Recording Complaints

Checksheet for Group Sizes in a Restaurant
Bar Chart of Daily Units Produced

Histogram of Hole Diameters

 Pareto Chart of Factors in an Emergency Room
The Pareto principle  
( 80–20 rule) states 
that, for many events, 
roughly 80% of the 
effects come from 
20% of the causes.

Scatterplot of Customer Satisfaction and

Waiting Time in an Upscale Restaurant
Cause-and-Effect Diagram for Customer
Complaints in a Restaurant
Process Control Chart
 Additional Tools
>Failure mode and effect analysis (FMEA): is a
structured approach to identify, estimate,
prioritize, and evaluate risk of possible failures at
each stage in the process
>Design of experiments (DOE): a statistical
methodology to determine cause-and-effect
relationships between process variables and
output
• Permits experimentation with many variables
simultaneously
Goal of Quality Management in Industry 4.0:
Meet the Lowest Quality Cost by Reducing 
Defect Rate in AI Inspection

Strategic Operational
Quality Quality
Management Management

To satisfy customers
The Five Core Features of TQM
1. Customer focus
• Are organization members assessing customer requirements and
measuring performance against those requirements continuously?
2. Supplier management
• Are suppliers chosen on the basis of quality, rather than solely on
the basic of cost, and are organization members working with
suppliers to improve suppliers’ quality practices?
3. Teamwork
• Are members operating interdependently, as teams, across
traditional organizational functions, rather than independently or in
ways that maintain functional separateness?
4. Evidence based management
• Are members using statistics and scientific reasoning to formulate
and test hypotheses about work processes and strategies for
performance improvement?
5. Improvement processes
• Are members using process-management heuristics to enhance
team problem solving and decision making?
Quality Management
- A Paradigm Shift
Go from
Measure the process and manage the results
(Inspection and Corrective Action Approach)

To
Manage the process and measure the results
(Prevention Approach)
New Approach in Industry 4.0 Era
Old Way New Way
> Find solution > Find problem
> Solve problem > Prevent problem
> Quantity reliability > Reduce unreliability
> Allow errors > Eliminate errors
> Under constraints > Breakthrough constraints
> Blame people > Educate people
Thank You