Quality Improvement in the Modern Business Environment PDF

Quality Improvement in the Modern Business Environment MODULE 1 Learning Outcome 1. Define and discuss quality and quality improvement 2. Discuss the different dimensions of quality 3. Discuss the evolution of modern quality improvement methods 4. Discuss the role that variability and stat...

Quality Improvement in the Modern Business Environment MODULE 1 Learning Outcome 1. Define and discuss quality and quality improvement 2. Discuss the different dimensions of quality 3. Discuss the evolution of modern quality improvement methods 4. Discuss the role that variability and statistical methods play in controlling and improving quality 5. Describe the quality management philosophies of W. Edwards Deming, Joseph M. Juran, and Armand V. Feigenbaum Learning Outcome 6. Discuss total quality management, the Malcolm Baldrige National Quality Award, Six Sigma, and quality systems and standards 7. Explain the links between quality and productivity and between quality and cost 8. Discuss product liability 9. Discuss the three functions: quality planning, quality assurance, and quality control and improvement The Meaning of Quality and Quality Improvement The Meaning of Quality and Quality Improvement  The Meaning of Quality and Quality Improvement ü Premium ü Durable ü Reliable ü Expensive ü Fast ü High-performance  The Meaning of Quality and Quality Improvement Brainstorm specific, measurable criteria that define the quality of this smartphone.  The Meaning of Quality and Quality Improvement ü Camera resolution (e.g., 48 megapixels) ü Battery life (e.g., 29 hours of video playback) ü Processor speed (e.g., A17 Pro chip performance in GHz) ü Material design (e.g., titanium build) ü Display quality (e.g., 120Hz refresh rate, OLED) ü Durability (e.g., water resistance up to 6 meters) ü User experience (e.g., iOS 17 smoothness) The Meaning of Quality and Quality Improvement Conceptual (Vague and subjective) Operational (Specific and Measurable) ü Premium ü Camera resolution (e.g., 48 megapixels) ü Durable ü Battery life (e.g., 29 hours of video ü Reliable playback) ü Expensive ü Processor speed (e.g., A17 Pro chip ü Fast performance in GHz) ü High-performance ü Material design (e.g., titanium build) ü Display quality (e.g., 120Hz refresh rate, OLED) ü Durability (e.g., water resistance up to 6 meters) ü User experience (e.g., iOS 17 smoothness) Dimensions of Quality u 8 Dimensions of Quality (Garvin, 1987) 1. Performance 2. Reliability 3. Durability 4. Serviceability 5. Aesthetics 6. Features 7. Perceived Quality 8. Conformance to Standards  Dimensions of Quality 1. Performance 2. Reliability Ø Definition: Effectiveness in fulfilling Ø Definition: Consistency of performance intended functions. and frequency of failures. Ø Example: The smartphone’s speed and Ø Example: Frequency of crashes, glitches, responsiveness when launching apps, or issues with software updates over time. processing data, or multitasking. Ø Importance: Reliability ensures the Ø Importance: Performance is a critical smartphone operates smoothly over its factor as it directly affects user experience expected lifespan, minimizing disruptions and satisfaction with the device’s core for the user. functionalities.  Dimensions of Quality 3. Durability 4. Serviceability Ø Definition: The smartphone’s lifespan and Ø Definition: Ease of repair and how long it continues to function maintenance. effectively. Ø Example: Availability of service centers, Ø Example: The device’s ability to withstand ease of accessing and replacing battery physical stress, such as drops or water or screen, and the efficiency of customer exposure, and maintain battery health support for resolving issues. over time. Ø Importance: Serviceability affects how Ø Importance: Durability is crucial for easily users can maintain and repair their ensuring the smartphone remains devices, impacting overall satisfaction and functional and retains value, reducing the convenience. need for frequent replacements.  Dimensions of Quality 5. Aesthetics 6. Features Ø Definition: Visual and sensory appeal of Ø Definition: Additional attributes or the smartphone. capabilities beyond basic functionality. Ø Example: Design features such as screen Ø Example: Extra functionalities such as quality, color options, build materials, and advanced camera systems, biometric the overall look and feel of the device. security features (like facial recognition or fingerprint sensors), and unique software Ø Importance: Aesthetics play a significant capabilities. role in user preference and brand appeal, influencing buying decisions based on the Ø Importance: Features differentiate the smartphone’s visual and tactile attributes. smartphone from competitors and can justify a higher price point, adding perceived value to the device.  Dimensions of Quality 7. Perceived Quality 8. Conformance to Standards Ø Definition: Customer’s impression based on Ø Definition: Adherence to design reputation and branding. specifications and industry standards. Ø Example: Brand reputation for producing Ø Example: Compliance with safety high-quality, reliable smartphones, standards, consistency in manufacturing influenced by customer reviews, specifications, and adherence to software marketing, and previous experiences. updates and security patches. Ø Importance: Perceived quality impacts Ø Importance: Ensures the smartphone consumer trust and loyalty, affecting meets required performance and safety purchasing decisions and brand benchmarks, contributing to its overall preference even if the product may not quality and user safety. have superior technical specifications. Dimensions of Quality u Additional Dimensions for Service and Transactional Organizations 1. Responsiveness 2. Professionalism 3. Attentiveness  Dimensions of Quality 1. Responsiveness 2. Professionalism Ø Definition: Time taken to reply, willingness Ø Definition: Knowledge, skills, and to help, and promptness in handling competency of the service provider requests Ø Importance: Ensures effective service Ø Importance: Affects customer satisfaction delivery and customer trust and perception of service efficiency Ø Example: Competence of a financial Ø Example: Speed of response in a customer advisor in providing accurate investment service call center advice  Dimensions of Quality 3. Attentiveness Ø Definition: Caring and personalized attention given to customers Ø Importance: Enhances customer experience and addresses individual needs Ø Example: Personalized care and attention from a healthcare provider  The Meaning of Quality Traditional Modern “Fitness for use” “Inversely Proportional to Variability” Focuses on products/services meeting user requirements Quality improves when there is less unwanted variability in the TWO (2) ASPECTS product’s key characteristics. Quality of Design Quality of Conformance How a product is planned How well the product and made to stand out. matches its original design INPUT OUTPUT PROCESS Modern Definition of Quality Real-World Impact: The Japanese transmissions, with less variability, not only cost less to maintain but also performed better in the eyes of customers. Business Relevance: Reduced variability means lower costs, less rework, and happier customers, which is directly tied to profitability—a language every manager understands. Quality Improvement “The reduction of variability in processes and products.” Excess variability WASTE  Quality Engineering Terminology u Critical-to-Quality (CTQ) Characteristics u Elements of a product that determine how well it meets user or consumer expectations. u Types of Quality Characteristics Physical Sensory Time Orientation Description: Measurable Description: Attributes perceived Description: Characteristics related attributes of the product through the senses, impacting to the product’s performance over that can be quantified. user experience. time and its longevity. Examples: Length, weight, Examples: Taste, appearance, Examples: Reliability, durability, voltage, viscosity color serviceability  Identifying Critical-to-Quality (CTQ) Characteristics for Iced Cafe Americano Identify CTQs: Identify at least 5 Critical-to-Quality (CTQ) characteristics for the Iced Cafe Americano. Classify each characteristic into one of the three types: Physical Sensory Time Orientation  Identifying Critical-to-Quality (CTQ) Characteristics for Iced Cafe Americano 1.Physical: Temperature: Must be adequately chilled. Volume: Consistent serving size. 2.Sensory: Taste: Proper balance of coffee strength and water dilution. Aroma: Fresh and rich coffee aroma. Appearance: Clear, appealing look without excessive ice dilution. 3.Time Orientation: Preparation Time: Efficient and quick preparation without compromising quality. Shelf Life: Should maintain its quality over a reasonable period if stored. Quality Engineering Terminology u Quality Engineering Quality engineering involves operational, managerial, and engineering activities designed to ensure that the quality characteristics of a product meet the required levels and that variability is minimized. Quality Engineering Terminology u Statistical methods are essential for describing and managing variability in quality improvement efforts. u Types of Data: Variables Data: Continuous measurements (e.g., length, voltage, viscosity). Attributes Data: Discrete counts (e.g., number of loan applications processed incorrectly, waiting times in emergency rooms). Activity: Identifying Attribute vs. Variable Data Objective: Determine whether given data types are attribute data or variable data. 1. Number of defective items in a batch 7. The count of missed deadlines in a 2. Weight of a product in grams project 3. Whether a customer is satisfied (Yes/No) 8. The volume of liquid in a container (in 4. Temperature of a machine (in Celsius) liters) 5. Whether an item passes a quality 9. Presence of a defect (Defective/Non- inspection (Pass/Fail) Defective) 6. Length of a metal rod in millimeters 10. Height of a tree in meters  Quality Engineering Terminology u Specifications u Define the desired measurements and performance levels for a specific Quality characteristic of a product or service. Manufacturing Example Diameter of a Shaft: The shaft must have a diameter that is neither too large nor too small. Upper Limit: Too large, and it won’t fit into the bearing. Lower Limit: Too small, and it will create a loose fit, leading to vibrations and early wear. Quality Engineering Terminology u Nominal or Target Value: Ø Definition: The ideal or desired value for a quality characteristic, set by design engineers. u Specification Limits: Ø Upper Specification Limit (USL): The maximum allowable value for a quality characteristic. Ø Lower Specification Limit (LSL): The minimum allowable value. Ø Example: If a metal rod should be 100 mm ± 2 mm, the USL is 102 mm and the LSL is 98 mm.  Quality Engineering Terminology u Over-the-wall Approach u A traditional design method where engineers set specifications without fully considering manufacturing processes or variability. Quality Engineering Terminology u Concurrent Engineering u A team approach to design, with specialists in manufacturing, quality engineering, and other disciplines working together with the product designer at the earliest stages of the product design process. A Brief History of Quality Control and Improvement Quality Improvement in the Modern Business Environment Early Development in Quality (Pre-1900s) u Frederick W. Taylor Introduced scientific management principles. Focused on task division, enhancing productivity and quality. Impact: Standardization of work methods. u Frank Gilbreth Extended work on motion study and work design. Issue: Early emphasis was more on productivity than quality. Beginning of Statistical Quality Control u Walter A. Shewhart (1924) Developed the statistical control chart. Significance: Marked the formal beginning of statistical quality control. u Harold F. Dodge and Harry G. Romig (Late 1920s) Developed acceptance sampling as an alternative to 100% inspection. Widespread use in Western Electric by the 1930s. Growth During WWII Ø World War II Era Expanded use and acceptance of statistical quality control in manufacturing. 1946: Formation of the American Society for Quality Control. Promoted quality improvement techniques in various industries. Advancement in the 1950s – 1960s Ø Emergence of Reliability Engineering Focused on ensuring product reliability. Ø Introduction of Designed Experiments (1950s) Initially applied in the chemical industry. Impact: Strengthened U.S. chemical industry’s competitiveness. Global Influence and Japanese Methods Ø 1970s -1980s Western companies realized Japanese competitors used designed experiments since the 1960s. Applications in process improvement, new product design, and reliability enhancement. Ø Result: Sparked interest in adopting these methods in the West. Modern Development in Statistical Method Ø Post-1980s Growth Profound increase in the use of statistical methods for quality and business improvement in the U.S. Example: U.S. automobile industry’s re-emergence from near collapse. Ø Management Systems Emergence of frameworks for implementing quality improvement. Statistical Methods for Quality Control and Improvement Quality Improvement in the Modern Business Environment Overview u Focuses on statistical and engineering technology essential for quality improvement. u Key areas: 1. Statistical Process Control (SPC), 2. Design of Experiments (DOE), and 3. Acceptance Sampling. Process as a System Ø Inputs: Controllable factors (x1, x2,... xp): Process variables (e.g., temperatures, pressures, feed rates). Ø Uncontrollable factors (z1, z2,... zq): Environmental factors, raw material properties. Ø Output: Quality characteristic (y) – A measure of process and product quality. Process as a System Application in Non-Manufacturing Ø Example: Financial institutions processing automobile loan applications. Inputs: Loan applications, customer credit history. Controllable factors: Loan officer training, bank policies. Uncontrollable factors: Interest rates, capital availability. Output: Funded loans, acceptance rate, cycle time. Critical Quality Characteristics (CTQ): Cycle time in loan processing – crucial for customer satisfaction. Activity: Analyzing the Cheeseburger- Making Process u Inputs: What ingredients and tools are required to make a cheeseburger? u Controllable Factors: Which parts of the process can be controlled by the cook? u Uncontrollable Factors: Which factors are difficult or impossible to control? u Outputs: What is the final product of the process? u Quality Characteristics: What defines the quality of the final cheeseburger? Activity: Analyzing the Cheeseburger- Making Process u Inputs: Ingredients like the beef patty, cheese, bun, vegetables, condiments, and tools such as a grill, spatula, and knife. u Controllable Factors: The cook can control aspects like cooking time, temperature, seasoning, ingredient assembly, and presentation. u Uncontrollable Factors: Elements such as the quality and freshness of ingredients, environmental conditions, and grill heat distribution are difficult or impossible to control. u Outputs: The final product is a fully assembled cheeseburger. u Quality Characteristics: The quality of the cheeseburger is defined by taste, texture, temperature, appearance, ingredient balance, patty doneness, cheese melt, freshness, and bun integrity.  Control Chart - Overview u Purpose: Control charts are a key tool in Statistical Process Control (SPC) used to monitor and improve process quality over time. u Components: Center Line (CL): This represents the expected average value of the quality characteristic if the process is stable. Upper Control Limit (UCL) & Lower Control Limit (LCL): Define the boundaries within which the process should operate if there are no unusual variations.  Control Chart - Overview u Functionality: Plots the average measurements of a quality characteristic from process samples over time or sample numbers. Helps identify when process variations exceed normal limits, signaling the need for investigation and corrective action.  Control Chart - Overview u Applications: Typically used to monitor output variables but can also be applied to input variables in some cases. u Benefits: Detects unusual sources of variability. Facilitates corrective actions to maintain process stability and reduce variability. Designed Experiments Purpose: Ø Designed experiments systematically vary controllable input factors to understand their impact on output quality characteristics. This helps in identifying key variables affecting process performance and product quality.  Designed Experiments u Factorial Design Types 1. Two-Factor Example (2^2): Four combinations of low and high levels for two factors. 2. Three-Factor Example (2^3): Eight combinations for three factors, arranged in a cube. Designed Experiments u Benefits: q Reducing Variability: Helps in determining optimal levels of controllable variables to minimize process variability. q Improving Quality: Significant improvements in process performance and product quality can be achieved by analyzing the effects of different factor combinations. q Breakthroughs in Performance: Often leads to discoveries that enhance overall process efficiency and product quality. Acceptance Sampling - Overview u Purpose: Inspect and classify samples from a larger batch to decide if the whole lot should be accepted or rejected. Types of Acceptance Sampling a. Outgoing Inspection: Conducted post-production, before shipping. b. Incoming Inspection: Applied to batches received from suppliers. c. Rectifying Inspection: Involves scrapping, recycling, reworking, or replacing rejected units. Evolution of Quality Techniques Ø Early Stage: Reliance on acceptance sampling and inspection. Ø Intermediate Stage: Increased use of sampling inspection with the realization that quality can’t be solely inspected into products. Ø Advanced Stage: Emphasis on process improvement through Statistical Process Control (SPC) and designed experiments. Management Aspects of Quality Improvement Quality Improvement in the Modern Business Environment 3 Main Activities of QMS Quality Planning Quality Assurance (QA) Quality Control & Improvement (QC&I) Quality Planning Ø Purpose: Develop a strategic plan for quality to align with business goals. Ø Key Activities: q Identify customer needs (Voice of the Customer, VOC). q Develop products/services that meet or exceed these expectations. q Plan for systematic quality improvement. Ø Importance: Prevents wasted resources on defects, complaints, and failures. Quality Assurance Ø Purpose: Maintain quality levels and resolve quality issues. Ø Key Components: q Documentation (4 Components): ü Policy: What is to be done and why? ü Procedures: Methods and personnel that will implement the policy. ü Work Instructions/Specifications: Product, tool, or machine-specific. ü Records: Track production, support customer complaints, corrective actions, and recalls. q Document Control: Ensure up-to-date procedures and specifications. Quality Control & Improvement Ø Quality Control and Improvement Ø Purpose: Ensure products/services meet requirements and continuously improve. Ø Key Activities: Use statistical techniques like SPC and designed experiments. Conduct project-based quality improvement. Select projects with significant business impact aligned with quality goals. Utilize specialized knowledge and statistical methods for effective improvement. Quality Philosophy and Management Strategies Management Aspects of Quality Improvement Key Figures in Quality Management William Edwards Deming Joseph M. Juran Dr. Armand V. Feigenbaum Father of Quality Management Architect of Quality “Father of Total Quality Control” 1900 - 1993 1904 - 2008 1920 - 2014  W. Edwards Deming (1900 -1993) u Background: Educated in engineering and physics at the University of Wyoming and Yale University. u Influences: Greatly influenced by Walter A. Shewhart, known for developing the control chart. u Career: Worked at Western Electric, held government positions, and contributed significantly during WWII. u Impact on Japan: Post-war consultant to Japanese industries, advocating for statistical methods, which fueled Japan’s industrial growth. The Deming Prize was established in his honor. u Philosophy: Emphasized that quality improvement is primarily the responsibility of management, not the workforce. Critiqued traditional American management practices. Deming’s 14 Points POINT 1 - Long-term focus: Instead POINT 3 - Prevent problems: Don’t of aiming for short-term profits, rely on inspections to catch focus on improving the quality of mistakes—improve the processes products/services for long-term that produce goods to avoid success. defects from the start. POINT 2 - Commit to quality: POINT 4 - Choose quality Embrace a new mindset that suppliers: Don’t pick suppliers rejects defective products, poor based only on price. Look for service, and inefficiency. those who maintain high standards of quality. Deming’s 14 Points POINT 5 - Never stop improving: POINT 7 - Help, don’t micromanage: Continuously refine and improve Supervisors should focus on helping production processes to raise workers improve, not just overseeing quality and reduce costs tasks POINT 6 - Train your people: Make POINT 8 - Create a safe environment: sure everyone knows how to do Encourage employees to speak up their job well and understands the about problems or concerns without tools to improve quality fear of punishment Deming’s 14 Points POINT 9 - Encourage teamwork: POINT 11 - Stop using quotas: Avoid Different departments should setting strict targets for the workforce collaborate rather than working in without considering quality; focus on isolation. doing things right. POINT 10 - Avoid empty slogans: POINT 12 - Remove obstacles: Make Instead of motivational slogans or it easy for workers to do their best job unrealistic goals, provide practical without unnecessary barriers. plans for real improvements Deming’s 14 Points POINT 13 - Educate everyone: POINT 14 - Leadership commitment: Keep educating employees about Ensure top management fully how to improve processes and use supports these principles and makes problem-solving tools continuous improvement a core part of the company culture. Activity: Deming's 14 Points in Your Life u Instructions: (1/4 Sheet of Paper) 1. Select one of Deming's 14 Points for Management. 2. Reflect on the following questions for the selected point: 1. How can this point be applied to your personal, academic, or professional life? 2. What specific habits or practices can you change or improve using this principle? 3. What positive outcomes do you expect by implementing this point in your daily routine? 3. Write a reflection addressing these questions with specific examples. Deming’s 7 Deadly Diseases of Management Lack of Constancy of Purpose: Short-Term Profits Focus: Cutting Companies prioritize immediate costs for short-term profits leads to gains over innovation, risking future poor quality and customer loss. competitiveness. Ex. A smartphone brand skips improving Ex. A car maker uses cheap materials, battery life, losing out to competitors. resulting in safety issues and lost trust. Performance Evaluation Issues: Management Mobility: Frequent Rewarding short-term targets leadership changes disrupt discourages teamwork and strategy and employee morale. customer care. Ex. New store managers bring constant Ex. A sales team rushes deals to meet strategy shifts, confusing employees. quotas, ignoring long-term customer needs. Deming’s 7 Deadly Diseases of Management Focus on Visible Figures Alone: Excessive Medical Cost: Expensive Focusing only on profits ignores employee healthcare drains customer feedback and resources needed for employee well-being. improvement. Ex. A factory meets production targets Ex. A U.S. factory spends so much on but neglects safety, leading to healthcare it cuts training and accidents. upgrades. Liability and Legal Issues: Legal battles over defects or disputes divert resources from growth. Ex. A toy company faces lawsuits for defective products, delaying new developments. The Shewhart Cycle Deming’s Obstacles 1. Automation as a Solution: Technology alone won't fix process problems. 2. Copying Solutions: Imitating others' successes without adapting to your context is ineffective. 3. "Our Problems Are Different": Ignoring universal principles limits improvement. 4. Outdated Education: Many business schools fail to teach modern quality management skills. Deming’s Obstacles 5. Poor Use of Statistics: Teaching statistical tools without a clear purpose leads to ineffective results. 6. Relying on Inspection: Inspections catch defects too late; prevention is key. 7. Quality as a Departmental Task: Quality should be everyone's responsibility, not just one department’s. 8. Blaming Workers: Most problems stem from systems and management, not employees. Deming’s Obstacles 9. False Starts: Launching improvement programs without clear plans leads to failure. 10. The fallacy of Zero Defects: Meeting specifications doesn’t guarantee business success. 11. Inadequate Prototype Testing: Testing one prototype doesn’t reveal variability or long-term performance. 12. External Help Misconception: External experts offer fresh perspectives, even if they don’t know all the business details.  Joseph M. Juran (1904 -2008) u Pioneer in Quality Management: Key figure in the development of quality control and improvement, influenced by Walter A. Shewhart. u Career Highlights: Chief industrial engineer at Western Electric, simplified processes during WWII, and led NYU’s Department of Administrative Engineering. A key influencer in Japan's industrial rise. u Major Contributions: Co-authored the Quality Control Handbook and founded the Juran Institute. u Juran Trilogy: Focuses on three pillars—Planning, Control, and Improvement—emphasizing project-based quality improvement, either through continuous or breakthrough efforts.  Armand V. Feigenbaum(1920 -2014) u Concept of Total Quality Control: Introduced in his 1951 book Total Quality Control, which greatly influenced early quality management practices in Japan. u Three-Step Approach: Emphasized quality leadership, quality technology (statistical methods and technical tools), and organizational commitment. u Organizational Focus: Advocated for a systems approach to quality improvement, highlighting the importance of management commitment and a structured process for successful implementation. u 19-Step Improvement Process: Proposed a detailed framework for quality improvement, with statistical methods as a key component. Initially suggested centralizing technical expertise in a specialized department. Total Quality Management (TQM) Ø A strategy for implementing organization-wide quality improvements focused on continuous improvement, customer satisfaction, and integrating quality with business goals. Ø Origins: Emerged in the 1980s, influenced by Deming and Juran's philosophies. Ø Key Elements: 1. Customer Focus: Meeting and exceeding customer expectations. 2. Workforce Engagement: Teams at all levels addressing quality issues. 3. Supplier Improvement: Fostering supplier relationships to enhance quality. 4. Integration with Business Goals: Aligning quality efforts with overall organizational objectives. Quality System and Standards Ø The International Standards Organization (ISO) established standards for quality systems, with the ISO 9000 series being the most widely adopted. Ø ISO 9000 Series: Ø ISO 9000: Fundamentals and vocabulary Ø ISO 9001: Requirements for quality management systems Ø ISO 9004: Guidelines for performance improvement Ø ISO Certification Process: Involves selecting a registrar, preparing for audits, and ensuring compliance with the standard’s clauses (e.g., management responsibility, resource management). Quality System and Standards Ø Challenges of ISO Certification: q Heavy focus on documentation and paperwork q Lack of emphasis on variability reduction and process improvement q Examples of certified organizations (e.g., Bridgestone/Firestone) that still faced quality issues despite certification Ø Criticism: Some argue ISO certification is a costly endeavor with limited impact on actual quality improvement, suggesting companies may benefit more from focusing on internal quality standards and variability reduction. Malcolm Baldrige National Quality Award (MBNQA) Ø Overview: q Established by U.S. Congress in 1987 q Recognizes U.S. organizations for performance excellence q Administered by the National Institute of Standards and Technology (NIST) Ø Five Categories: 1. Manufacturing 2. Service Up to 3 awards may be given in each category 3. Small Business annually. 4. Healthcare 5. Education Malcolm Baldrige National Quality Award (MBNQA) Six Sigma Ø What is Six Sigma? q A methodology developed by Motorola in the late 1980s. q Focus on reducing variability and defects in products and processes. q Goal: Achieve a defect rate of 3.4 defects per million opportunities (DPMO). Ø Three Sigma Quality: q 2,700 parts per million (ppm) defective. q Example: With 100 components in a product, the probability of a non-defective product is 76.31%. q This means 23.7% of products may be defective—unacceptable for modern needs. Six Sigma The Link Between Quality & Productivity u Producing high-quality products is challenging in today’s rapidly evolving industrial environment. u Technology advances in fields like electronics, metallurgy, and biotechnology complicate product design and manufacturing. u Challenges in Balancing Quality and Productivity u Rapid technological advancements require the: q integration of new technologies quickly for competitive advantage. q Optimizing processes for economy, efficiency, productivity, and quality. u Without focusing on all dimensions, companies face higher costs and reduced productivity. The Link Between Quality & Productivity u Producing high-quality products is challenging in today’s rapidly evolving industrial environment. u Technology advances in fields like electronics, metallurgy, and biotechnology complicate product design and manufacturing. u Challenges in Balancing Quality and Productivity u Rapid technological advancements require the: q integration of new technologies quickly for competitive advantage. q Optimizing processes for economy, efficiency, productivity, and quality. u Without focusing on all dimensions, companies face higher costs and reduced productivity. Quality Cost Ø Financial controls in business management often overlook quality costs. Ø Why quality costs matter: q Increasing complexity of products due to technological advances. q Growing awareness of life-cycle costs (maintenance, spare parts, failures). q Quality engineers can better communicate with management via cost metrics. Quality Cost Categories of Quality Costs Ø Quality costs help in identifying and reducing expenses. Ø Four major categories: 1. Prevention Costs 2. Appraisal Costs 3. Internal Failure Costs 4. External Failure Costs Prevention Costs u Costs associated with avoiding defects: 1. New products review (e.g., design evaluations and testing). 2. Product/process design (e.g., using more reliable materials). 3. Process control (e.g., statistical process control to reduce variability). 4. Burn-in (e.g., testing products before shipping). 5. Training (e.g., developing quality-related training programs). 6. Quality data acquisition (e.g., collecting and analyzing performance data). Appraisal Costs u Costs related to evaluating product quality: 1. Inspection/testing of incoming materials. 2. Product inspections throughout production stages. 3. Calibration and maintenance of testing equipment. Internal Failure Costs u Costs from defects identified before the product reaches the customer: 1. Scrap (loss of materials due to irreparable defects). 2. Rework (correcting defective products). 3. Retesting of reworked items. 4. Downtime due to nonconforming materials. 5. Yield losses (inefficiency in the production process). External Failure Costs u Costs arising after delivery to customers: 1. Complaint adjustments (investigating and resolving issues). 2. Returned products handling and replacement. 3. Warranty charges (service costs under warranty). 4. Liability costs (e.g., product liability lawsuits). 5. Indirect costs (e.g., loss of business reputation). The Impact of Quality Costs on the Bottom Line Ø Quality costs can range from 4% to 40% of sales depending on the industry. Ø Prevention and appraisal investments reduce internal/external failure costs. Ø Example: $1 invested in prevention can save $10–$100 in failure costs. Identifying Improvement Opportunities u Use Pareto analysis to identify key areas for quality improvement. u Example: Insufficient solder in PCB assembly accounts for 42% of defects and 52% of scrap costs. u Solution: Improve the wave soldering process to reduce costs dramatically.