Chapter 3 Quality and Performance

Complete Inspection

-Inspect each service or product at each stage of the process for quality -Used when the costs of passing defects to an internal or external customer outweigh the inspection costs

Sampling

-Sample Size -Time between successive samples -Decision rules that determine when action should be taken

Variables [Performance Measurements]

-Service or product characteristics that can be measured -such as weight, length, volume, or time, can be measures -advantage is that if a service or product misses its performance specifications, the inspector knows by how much. -disadvantage is such measurements typically involve special equipment, employee skills, exacting procedures, and time and effort

Attributes [Performance Measurements]

-Service or product characteristics that can be quickly counted for acceptable performance -allows inspectors to make simple "yes or no" decision about whether a product meets specifications. -often used when performance specifications are complex and measurement of variable is difficult or costly. -advantage of counting attributes is less effort and fewer resources are needed than variables -disadvantage is that they can't indicate by how much.

Steps for using a control chart

1. Take a random sample from the process and calculate a variable or attribute performance measure. 2. If a statistic falls outside the chart's control limits or exhibits unusual behavior, look for an assignable cause. 3. Eliminate the cause if it degrades performance; incorporate the cause if it improves performance. Reconstruct the control chart with new data. 4.Repeat the procedure periodically.

Six Sigma

A comprehensive and flexible system for achieving, sustaining, and maximizing business success by minimizing defects and variability in processes Goal of achieving low rates of defective output by developing processes whose mean output for a performance measure is +/- six standard deviations (sigma) from the limits of the design specifications for the service or product. focus on reduction on variation in process as well as centering processes on their target measures of performance

Total Quality Management

A philosophy that stresses three principles -customer satisfaction -employee involvement -continuous improvement for achieving high level of process performance and quality

Quality

A term used by customers to describe their general satisfaction with a service or product

customer satisfaction [TQM]

Conformance to Specifications -Consistent quality, on-time delivery, delivery speed Value -Intended purpose at a price customers are willing to pay Fitness for Use - convenience of a service, the mechanical features of a product, or other aspects such as appearance, style, durability, craftsmanship, and serviceability Support - warranty claims, advertising, useless employee - good support once the sale has been made can reduce the consequences of quality failures Psychological Impressions -atmosphere, image, aesthetic - good looking, manner, friendly, sympathetic employees

Prevention costs [Costs of Quality]

Costs associated with preventing defects before they happen

Appraisal costs [Costs of Quality]

Costs incurred when the firm assesses the performance level of its processes When the Prevention costs increase and performance enhances, *Appraisal costs* decrease because fewer resources are needed for quality inspections and the subsequent search for causes of defects

Internal Failure costs [Costs of Quality]

Costs resulting from defects that are discovered *during the production of a service or product* 1) rework - incurred if some aspect of a service must be performed again or it a defective item must be rerouted to some previous operation to correct the defect 2) scrap - incurred if a defective item is unfit for further processing.

External Failure costs [Costs of Quality]

Costs that arise when a defect is discovered after the customer receives the service or product Warranty cost Warranty - a written guarantee that producer will replace or repair defective parts or perform the service to the customer's satisfaction.

Employee Involvement [TQM]

Cultural Change -Quality at the Source + Philosophy whereby defects are caught and corrected where they were created or at the source, not passed along to an internal or external customer. + Should avoid trying to "inspect quality into the product" by using inspectors to weed out unsatisfactory service or defective products after all operations have been performed Teams Small groups of people who have a common purpose, set their own performance goals and approaches, and hold themselves accountable for success. -Employee Empowerment An approach to teamwork that moves responsibility for decisions further down the organizational chart - to the level of the employee actually doing the job +Problem-solving teams +Special-purpose teams +Self-managed teams

Sampling distribution

Process distribution, with a mean and variance that will be known only with a complete inspection with 100 percent accuracy. -the purpose of sampling, is to estimate a variable or attribute measure for the output of the process without doing a complete inspection -that measure is then used to assess the performance of the process itself.

Variable Control Charts

R-Chart - Measures the variability of the process 𝒙 ̅-Chart - Measures whether the process is generating output, on average, consistent with a target value

Type II error [Control Charts]

An error that occurs when the employee concludes that the process is in control and only randomness is present, when actually the process is out of statistical control

Type I error [Control Charts]

An error that occurs when the employee concludes that the process is out of control based on a sample result that fails outside the control limits, when it fact it was due to pure randomness

Defect

Any instance when a process fails to satisfy its customer

Assignable cause [Categories of Variation]

Any variation-causing factors that can be identified and eliminated -also known as special causes - included an employee needing training or a machine needing repair.

Continuous Improvement [TQM]

Kaizen - Japanese Concept of continuous improvement. - The philosophy of continually seeking was to improve processes - Involve identifying benchmarks of excellent practice and instilling a sense of employee ownership in the process - Reduce waste such as length of time during process - People closely associated with a process Problem-solving tools - A sense of operator ownership emerges when employees feel a responsibility for the processes and methods they use and take pride in the quality of the product and services. - Participation of work team Plan-Do-Study-Act Cycle - A cycle, Deming Wheel, used by firms actively engaged in continuous improvement to train their work teams in problem solving 1. Plan - the team selects the process then documents the process and discuss ways to achieve goals. and then develops a plan with quantifiable measures for improvement 2. Do - the team implements the plan and monitors progress. Data are collected continuously to measure improvement in the process. Any changes are documented and then revised 3. Study - The team analyze the data collected during the do step to find out how closely the results correspond to the goals set in the plan step - when there are issues, then the team reevaluates the plan or stops the project 4. Act - IF the results are successful, the team documents the revised process so that it becomes the standard procedure for all who may use it. Then instruct other new employees

Variation of Outputs

No two services of products are exactly alike because the processes used to produce them contain many sources of variation, even if the processes are working as intended.

Acceptance Sampling

The application of statistical techniques to determine if a quantity of material from a supplier should be accepted or rejected based on the inspection or test of one or more samples.

Statistical Process Control (SPC)

The application of statistical techniques to determine whether a process is delivering what the customer wants. -control charts used primarily to detect defective services or products or to indicate that the process has changed and that services or products will deviate from their design specifications, unless something is done to correct the issue.

Common cause [Categories of Variation]

The purely random, unidentifiable sources of variation that are unavoidable with the current process - If process variability results solely from common causes of variation, a typical assumption is that the distribution is symmetric, with most observations near the center

Acceptable Quality Level

The quality level desired by the consumer. -a statement of the proportion of defective items (outside of specifications) that the buyer will accept in a shipment

Control Chart

Time-ordered diagram that is used to determine whether observed variations are abnormal Controls chart have a nominal value or center line, Upper Control Limit (UCL), and Lower Control Limit (LCL)

range

the difference between the largest observation in a sample and the smallest largest minus smallest

standard deviation

the square root of the variance of a distribution.

Sample mean

the sum of the observations divided by the total number of observations [x-bar]

Sampling Plan

a plan that specifies a sample size, the time between successive samples, and decision rules that determine when action should be taken -well-conceived sampling plan can approach the same degree of protection as complete inspection -A sampling plan specifies a sample size, which is a quantity of randomly selected observations of process outputs, the time between successive samples, and decision rules than determine when action should be taken

Attribute Control Charts

p-chart - Measures the proportion of defective services or products generated by the process c-chart - Measures the number of defects when more than one defect can be present in a service or product