Quality Management in Operations Management

Qual­ity is the degree to which a prod­uct or ser­vice meets its spec­i­fi­ca­tions and sat­is­fies cus­tomer needs; in Joseph Juran's short phrase, it is fit­ness for use. Qual­ity man­age­ment is the coor­di­nated set of activ­i­ties (plan­ning, con­trol, assur­ance and improve­ment) that makes sure an organ­i­sa­tion deliv­ers that qual­ity con­sis­tently and eco­nom­i­cally.

A cus­tomer buy­ing a pen expects it to write smoothly, not leak, last a rea­son­able time and look accept­able. A com­pany mak­ing lakhs of pens has to make sure that nearly every one meets that expec­ta­tion, and the sys­tem it uses to do so is qual­ity man­age­ment. Poor qual­ity leads to com­plaints, returns, scrap and lost sales; good qual­ity builds trust, reduces waste and becomes a com­pet­i­tive advan­tage.

Why qual­ity man­age­ment mat­ters

The objec­tive of qual­ity man­age­ment is to pro­duce goods and ser­vices that meet spec­i­fi­ca­tions and sat­isfy cus­tomers at the low­est total cost. That means proper per­for­mance, con­sis­tency, reli­a­bil­ity, few defects and cost con­trol together. The prac­ti­cal aim is con­sis­tent qual­ity deliv­ered effi­ciently, not per­fec­tion at any price.

Defin­ing qual­ity

Sev­eral view­points

• User-based: qual­ity is what the cus­tomer says it is; fit­ness for use.
• Man­u­fac­tur­ing-based: qual­ity is con­for­mance to require­ments (Philip Cros­by's phrase), that is, meet­ing the spec­i­fi­ca­tion.
• Prod­uct-based: qual­ity is a mea­sur­able attribute, such as the thread count of a shirt.
• Value-based: qual­ity is per­for­mance at an accept­able price.

A prod­uct can meet every inter­nal spec­i­fi­ca­tion and still dis­ap­point cus­tomers. A restau­rant may serve food quickly, but if taste and hygiene are poor, cus­tomers call it low qual­ity. Qual­ity man­age­ment must there­fore look both at spec­i­fi­ca­tions and at cus­tomer expec­ta­tions.

Qual­ity in prod­ucts and ser­vices

For prod­ucts, qual­ity cov­ers per­for­mance, size, dura­bil­ity, appear­ance, design and free­dom from defects: a mobile phone should work prop­erly, look good and not fail often. For ser­vices, it cov­ers speed, accu­racy, cour­tesy, reli­a­bil­ity, respon­sive­ness and the over­all expe­ri­ence: in a hos­pi­tal, cor­rect treat­ment, clean­li­ness, quick response and proper patient care.

Garv­in's eight dimen­sions of qual­ity

David Garvin of Har­vard Busi­ness School pro­posed that prod­uct qual­ity has eight dimen­sions. A prod­uct can be strong on some and weak on oth­ers.

Reli­a­bil­ity mat­ters most for med­ical equip­ment, vehi­cles, elec­tron­ics and machin­ery, where fail­ure is costly or dan­ger­ous. Aes­thet­ics shapes first impres­sions and accep­tance. Qual­ity is there­fore both func­tional and expe­ri­en­tial.

Ser­vice qual­ity dimen­sions

For ser­vices, the widely taught SERVQUAL model uses five dimen­sions: tan­gi­bles (facil­i­ties and appear­ance), reli­a­bil­ity (doing what was promised, accu­rately), respon­sive­ness (will­ing­ness to help promptly), assur­ance (knowl­edge and cour­tesy that inspire trust) and empa­thy (indi­vid­ual care and atten­tion).

Ele­ments of qual­ity man­age­ment

Qual­ity man­age­ment is a com­plete sys­tem, not just inspec­tion. Juran described it as a tril­ogy of plan­ning, con­trol and improve­ment; assur­ance is usu­ally added as a fourth ele­ment.

Qual­ity plan­ning

Decid­ing in advance who the cus­tomers are, what they need, what qual­ity level and stan­dards are required, and how the process will achieve them.

Qual­ity con­trol

Check­ing whether actual out­put meets the required stan­dard and cor­rect­ing devi­a­tions. It includes inspec­tion, test­ing and sta­tis­ti­cal process con­trol, and main­tains the desired level of qual­ity.

Qual­ity assur­ance

Planned and sys­tem­atic activ­i­ties that give con­fi­dence that the sys­tem is capa­ble of pro­duc­ing qual­ity con­sis­tently, such as doc­u­mented pro­ce­dures, audits, sup­plier approval and cer­ti­fi­ca­tion. Qual­ity con­trol finds prob­lems in the out­put; qual­ity assur­ance pre­vents them in the process.

Qual­ity improve­ment

Con­tin­u­ously rais­ing per­for­mance by remov­ing the causes of defects, using tools such as PDCA, Six Sigma projects and employee sug­ges­tion schemes.

Evo­lu­tion of qual­ity man­age­ment

1. Inspec­tion: fin­ished goods are checked and defec­tive ones removed.
2. Sta­tis­ti­cal qual­ity con­trol: Wal­ter She­whart's con­trol charts in the 1920s and 1930s mon­i­tored process vari­a­tion, and accep­tance sam­pling reduced inspec­tion cost.
3. Qual­ity assur­ance: the focus moved to pre­vent­ing defects through sys­tems, pro­ce­dures and design.
4. Total qual­ity man­age­ment (TQM): qual­ity becomes a com­pany-wide strat­egy built on cus­tomer focus, con­tin­u­ous improve­ment and employee involve­ment, strongly influ­enced by W. Edwards Dem­ing, Joseph Juran and Japan­ese prac­tice after the Sec­ond World War.

Total qual­ity man­age­ment and its tools

Prin­ci­ples of TQM

• Cus­tomer focus: qual­ity is defined by inter­nal and exter­nal cus­tomers.
• Con­tin­u­ous improve­ment (kaizen): small, ongo­ing gains in every process.
• Employee empow­er­ment: work­ers are trained and allowed to solve prob­lems, for exam­ple through qual­ity cir­cles.
• Man­age­ment com­mit­ment: lead­ers set the pol­icy and pro­vide resources.
• Process approach and fact-based deci­sions: deci­sions rest on data, not opin­ion.
• Sup­plier part­ner­ship: fewer, bet­ter sup­pli­ers who share qual­ity goals.

The PDCA cycle

Dem­ing pop­u­larised the Plan–Do–Check–Act cycle, which She­whart had orig­i­nated. The team plans a change after find­ing the cause of a prob­lem, tries it on a small scale, checks the results against the tar­get and then acts, either stan­dar­d­is­ing the change or start­ing the cycle again.

Seven basic qual­ity tools

• Check sheet: a sim­ple form for tal­ly­ing defects by type or loca­tion.
• His­togram: shows the dis­tri­b­u­tion of a mea­sure­ment.
• Pareto chart: ranks causes so the vital few that cause most defects are tack­led first.
• Cause-and-effect (Ishikawa or fish­bone) dia­gram: lists pos­si­ble causes under head­ings such as man, machine, method, mate­r­ial, mea­sure­ment and envi­ron­ment.
• Scat­ter dia­gram: shows the rela­tion­ship between two vari­ables.
• Flow chart: maps the steps of a process.
• Con­trol chart: tracks a process over time against sta­tis­ti­cal lim­its; it is cov­ered in the arti­cle on sta­tis­ti­cal qual­ity con­trol.

Other approaches

• Six Sigma: a data-dri­ven method that aims for no more than 3.4 defects per mil­lion oppor­tu­ni­ties, using the DMAIC steps (Define, Mea­sure, Analyse, Improve, Con­trol).
• ISO 9001: an inter­na­tional stan­dard for qual­ity man­age­ment sys­tems; cer­ti­fi­ca­tion shows that doc­u­mented, audited processes are in place.
• Poka-yoke (mis­take-proof­ing): sim­ple devices that make an error impos­si­ble or imme­di­ately vis­i­ble.
• Bench­mark­ing and qual­ity func­tion deploy­ment (QFD), which trans­lates cus­tomer needs into design require­ments.

Qual­ity gurus in brief

Cost of qual­ity

Qual­ity is not free to achieve. The cost of qual­ity (COQ) is the total cost of pre­vent­ing, detect­ing and cor­rect­ing defects. It is usu­ally divided into four cat­e­gories.

Pre­ven­tion costs

Costs of activ­i­ties that stop defects from occur­ring: train­ing, qual­ity plan­ning, process improve­ment, pre­ven­tive main­te­nance, prod­uct design reviews and sup­plier devel­op­ment.

Appraisal costs

Costs of mea­sur­ing, eval­u­at­ing and audit­ing prod­ucts or ser­vices: inspec­tion, test­ing, test equip­ment, qual­ity audits and cal­i­bra­tion.

Inter­nal fail­ure costs

Costs of defects found before the prod­uct reaches the cus­tomer: scrap, rework, re-inspec­tion, down­time and down­grad­ing.

Exter­nal fail­ure costs

Costs of defects found after deliv­ery: returns, war­ranty claims, replace­ments, com­plaint han­dling, prod­uct recalls, lia­bil­ity and lost good­will.

Pre­ven­tion and appraisal are the costs of con­for­mance; inter­nal and exter­nal fail­ure are the costs of non-con­for­mance. The cen­tral les­son is that pre­ven­tion is usu­ally cheaper than cor­rec­tion: each rupee spent on pre­ven­tion can save sev­eral rupees of fail­ure cost, and exter­nal fail­ures are the most expen­sive because they also dam­age rep­u­ta­tion.

Worked exam­ple: cost of qual­ity

Sup­pose a plas­tic bot­tle maker (hypo­thet­i­cal fig­ures) has annual sales of ₹4 crore (₹400 lakh). In Year 1 it relies on inspec­tion and records the fol­low­ing qual­ity costs. In Year 2 it dou­bles its spend­ing on pre­ven­tion (oper­a­tor train­ing, bet­ter mould main­te­nance and sup­plier checks).

Step 1: total cost of qual­ity.

$$\text{Year 1} = 2 + 3 + 6 + 9 = 20 \text{ lakh} \qquad \text{Year 2} = 4 + 2.5 + 3 + 3.5 = 13 \text{ lakh}$$

Step 2: COQ as a per­cent­age of sales.

$$\displaystyle \text{Year 1} = \frac{20}{400} \times 100 = 5.0\% \qquad \text{Year 2} = \frac{13}{400} \times 100 = 3.25\%$$

Step 3: fail­ure costs as a share of COQ.

$$\displaystyle \text{Year 1} = \frac{6 + 9}{20} \times 100 = 75\% \qquad \text{Year 2} = \frac{3 + 3.5}{13} \times 100 = 50\%$$

Step 4: return on the extra pre­ven­tion spend­ing. An extra ₹2 lakh on pre­ven­tion pro­duced a net sav­ing of ₹7 lakh in total qual­ity cost. Fail­ure costs alone fell by $15 - 6.5 = 8.5$ lakh, so each extra rupee on pre­ven­tion cut fail­ure costs by

$$\displaystyle \frac{8.5}{2} = 4.25 \text{ rupees}$$

This is the "pre­ven­tion is cheaper than cor­rec­tion" prin­ci­ple in num­bers.

Qual­ity, oper­a­tions and pro­duc­tiv­ity

Qual­ity man­age­ment is at the core of oper­a­tions, because oper­a­tions pro­duces the goods and ser­vices. When qual­ity is out of con­trol, mate­r­ial and machine time are wasted, sched­ules are dis­rupted and cus­tomers are let down. Qual­ity links closely with pro­duc­tion effi­ciency, inven­tory (defects need safety stock), main­te­nance (worn equip­ment makes defects), the sup­ply chain (bad inputs make bad out­puts) and cus­tomer ser­vice.

Good qual­ity also raises pro­duc­tiv­ity. Fewer defects mean less rework, fewer delays, less inspec­tion effort and less wasted mate­r­ial and labour, so the same resources yield more accept­able out­put. This is why the belief that high qual­ity always means high cost is only partly true: bet­ter pre­ven­tion often low­ers total cost, as the exam­ple shows.

Appli­ca­tions

Man­u­fac­tur­ing

Raw mate­r­ial checks, process con­trol, dimen­sional accu­racy, final inspec­tion, prod­uct reli­a­bil­ity and defect reduc­tion. A fur­ni­ture fac­tory, for instance, con­trols wood qual­ity, cut­ting accu­racy, fin­ish, joint strength and final appear­ance.

Ser­vices

• hos­pi­tal: accu­rate treat­ment, clean­li­ness, time­li­ness
• bank: cor­rect trans­ac­tions, speed, cour­te­ous han­dling
• col­lege: teach­ing qual­ity, admin­is­tra­tion, com­mu­ni­ca­tion
• restau­rant: food qual­ity, hygiene, speed of ser­vice

Ser­vice qual­ity depends heav­ily on con­sis­tency and the cus­tomer's expe­ri­ence at each point of con­tact.

Require­ments for effec­tive qual­ity man­age­ment

• clear, mea­sur­able qual­ity stan­dards
• vis­i­ble com­mit­ment and sup­port from top man­age­ment
• train­ing for all employ­ees
• process con­trol and reli­able mea­sure­ment with feed­back
• employee involve­ment and team­work
• sup­plier coop­er­a­tion
• a cul­ture of con­tin­u­ous improve­ment

Qual­ity does not improve on its own; it has to be man­aged delib­er­ately.

Key terms

Qual­ity

The degree to which a prod­uct or ser­vice meets spec­i­fi­ca­tions and cus­tomer needs; fit­ness for use.

Qual­ity man­age­ment

The sys­tem of plan­ning, con­trol­ling, assur­ing and improv­ing qual­ity across an organ­i­sa­tion.

Qual­ity con­trol

Check­ing out­put against stan­dards and cor­rect­ing devi­a­tions to main­tain the desired qual­ity.

Qual­ity assur­ance

Planned, sys­tem­atic activ­i­ties that give con­fi­dence that the process will pro­duce qual­ity con­sis­tently.

Reli­a­bil­ity

The prob­a­bil­ity that a prod­uct will oper­ate with­out fail­ure for a stated period under stated con­di­tions.

Con­for­mance

The extent to which a prod­uct matches its design spec­i­fi­ca­tions.

Cost of qual­ity

The total of pre­ven­tion, appraisal, inter­nal fail­ure and exter­nal fail­ure costs.

Total qual­ity man­age­ment

A com­pany-wide approach built on cus­tomer focus, con­tin­u­ous improve­ment and employee involve­ment.

PDCA cycle

Plan, Do, Check, Act: a repeat­ing cycle for con­tin­u­ous improve­ment.

Six Sigma

A data-dri­ven approach aim­ing for no more than 3.4 defects per mil­lion oppor­tu­ni­ties.

Com­mon ques­tions

What is the dif­fer­ence between qual­ity con­trol and qual­ity assur­ance?

Qual­ity con­trol checks the out­put and cor­rects defects that have occurred, so it is detec­tion-ori­ented. Qual­ity assur­ance builds pro­ce­dures, audits and sys­tems so that defects are pre­vented, so it is pre­ven­tion-ori­ented.

What are Garv­in's eight dimen­sions of qual­ity?

Per­for­mance, fea­tures, reli­a­bil­ity, con­for­mance, dura­bil­ity, ser­vice­abil­ity, aes­thet­ics and per­ceived qual­ity.

What are the com­po­nents of the cost of qual­ity?

Pre­ven­tion costs (such as train­ing), appraisal costs (such as inspec­tion), inter­nal fail­ure costs (such as scrap and rework) and exter­nal fail­ure costs (such as war­ranty claims and returns).

Why is exter­nal fail­ure cost con­sid­ered the worst?

Because the defect has reached the cus­tomer. Besides repair or replace­ment, the firm pays in com­plaints, lost good­will and lost future sales, which are hard to mea­sure and recover.

Does bet­ter qual­ity always cost more?

Not nec­es­sar­ily. Higher design grade can cost more, but bet­ter con­for­mance through pre­ven­tion usu­ally reduces scrap, rework and returns, so total cost often falls. In the exam­ple, total qual­ity cost fell from ₹20 lakh to ₹13 lakh.

How is inspec­tion dif­fer­ent from qual­ity man­age­ment?

Inspec­tion only sorts good items from bad after or dur­ing pro­duc­tion. Qual­ity man­age­ment cov­ers plan­ning, pre­ven­tion, con­trol and improve­ment across the whole organ­i­sa­tion, and inspec­tion is just one small part of it.

Ref­er­ences

1. Dem­ing, W. E. (1986) Out of the Cri­sis. MIT Press.
2. She­whart, W. A. (1931) Eco­nomic Con­trol of Qual­ity of Man­u­fac­tured Prod­uct. D. Van Nos­trand Com­pany.
3. Mont­gomery, D. C. Intro­duc­tion to Sta­tis­ti­cal Qual­ity Con­trol. Wiley.
4. Heizer, J., Ren­der, B. and Mun­son, C. Oper­a­tions Man­age­ment: Sus­tain­abil­ity and Sup­ply Chain Man­age­ment. Pear­son.
5. Slack, N., Bran­don-Jones, A. and Burgess, N. Oper­a­tions Man­age­ment. Pear­son.
6. Bedi, K. Pro­duc­tion and Oper­a­tions Man­age­ment. Oxford Uni­ver­sity Press.

Related read­ing

• Time Study and Work Mea­sure­ment in Oper­a­tions Man­age­ment
• Sta­tis­ti­cal Qual­ity Con­trol in Oper­a­tions Man­age­ment
• Main­te­nance Man­age­ment in Oper­a­tions man­age­ment