the impact of methods of quality assurance on a business

9.2 Quality Management – Quality Control and Assurance

Learning objective

To understand the impact of different methods of quality assurance (QA) and quality control (QC) on a business, to link them to strategic objectives, and to evaluate their financial implications.

Key definitions

• Quality Control (QC): Operational techniques and activities used to detect defects in products or services and to ensure they meet required specifications.
• Quality Assurance (QA): Systematic processes put in place to prevent defects from occurring; a proactive approach that guarantees quality requirements will be met.

QC vs. QA – quick comparison

Why QC and QA matter to a business

• Customer satisfaction – meeting or exceeding expectations reduces complaints and builds loyalty.
• Cost reduction – fewer defects mean less re‑work, scrap, warranty claims and lower operating costs.
• Regulatory compliance – many sectors (food, pharmaceuticals, aerospace) require documented quality systems to avoid legal penalties.

Cost of Quality (CoQ)

The total cost of quality is split into four categories. Reducing the “failure” costs through effective QA can improve profit margins.

Numeric example – A small electronics firm spends $40 000 on prevention (training, ISO 9001) and $20 000 on appraisal (inspection). Before QA, internal‑failure costs are $70 000 and external‑failure costs $60 000. After implementing Six Sigma, internal‑failure falls to $30 000 and external‑failure to $15 000.

• Total CoQ before QA = $40 k + $20 k + $70 k + $60 k = $190 k
• Total CoQ after QA = $40 k + $20 k + $30 k + $15 k = $105 k
• Net saving = $85 000 (≈ 45 % reduction in total quality cost)

Common methods of Quality Control (QC)

• Inspection – visual or instrument‑based checking of finished goods against specifications.
• Statistical Process Control (SPC) – monitoring process variation using statistical techniques.
• Control charts – graphical tools (e.g., X‑bar, R‑chart) that show whether a process is stable.
• Pareto analysis – 80/20 rule to identify the few causes that generate most defects.
• Sampling – inspecting a representative subset of output when 100 % inspection is impractical.

Mini‑guide to reading a control chart

• Data points within the upper and lower control limits (UCL/LCL) indicate common‑cause variation – the process is in statistical control.
• Any point outside the limits signals a special‑cause that requires investigation.
• Run rules (e.g., 7 points in a row on one side of the centre line) also indicate loss of control even if limits are not breached.
• Action: stop the line, identify the cause, correct it, then resume monitoring.

Process capability – Cp and Cpk

These indices compare the spread of a process to the specification limits.

Cp = (USL – LSL) / (6σ)

Cpk = min[(USL – μ) / (3σ), (μ – LSL) / (3σ)]

Where USL = upper specification limit, LSL = lower specification limit, μ = process mean, σ = standard deviation.

Worked example

• USL = 50 mm, LSL = 30 mm
• Sample data: μ = 40 mm, σ = 2 mm
• Cp = (50 – 30) / (6 × 2) = 20 / 12 = 1.67 (process spread fits the spec range)
• Cpk = min[(50 – 40)/(3 × 2), (40 – 30)/(3 × 2)] = min[10/6, 10/6] = 1.67 (process is centred)
• Interpretation: Cp and Cpk > 1.33 indicate a capable process; the firm can expect very few defects.

Methods of Quality Assurance (QA)

1. ISO 9001 certification
   • International standard for a documented Quality Management System (QMS).
   • Requires internal audits, management review, corrective‑action handling and a focus on continual improvement.
   • Limitations: Certification fees and paperwork can be costly for small firms; benefits depend on genuine implementation.
   • Cross‑topic link: Integrates with ERP systems for document control and traceability.
2. Six Sigma
   • Data‑driven methodology targeting ≤ 3.4 defects per million opportunities (DPMO).
   • Uses the DMAIC cycle:
   1. Define – project charter, customer requirements (CTQs), scope.
   2. Measure – collect data, establish baseline performance, calculate sigma level.
   3. Analyse – identify root causes using tools such as cause‑and‑effect diagrams, hypothesis testing.
   4. Improve – design and implement solutions, pilot test, optimise parameters.
   5. Control – put control charts and SOPs in place to sustain gains.
   • Limitations: Requires skilled Green/Black Belts and statistical software; may be over‑kill for low‑volume or low‑complexity operations.
   • Cross‑topic link: Complements Lean production by focusing on variation reduction.
3. Total Quality Management (TQM)
   • Company‑wide philosophy that involves every employee in continuous improvement.
   • Key principles:
   1. Customer focus – understand and exceed customer needs.
   2. Process orientation – view activities as inter‑linked processes.
   3. Integrated systems – align quality with strategy, finance, HR, etc.
   4. Employee involvement – empowerment, training, suggestion schemes.
   5. Fact‑based decision making – use data, benchmarking, and performance metrics.
   • Limitations: Success hinges on strong leadership and cultural change; can be vague without clear metrics and accountability.
   • Cross‑topic link: Aligns with motivational theories (Maslow, Herzberg) and can be supported by performance‑management software.
4. Benchmarking
   • Systematic comparison of an organisation’s processes and performance with best‑in‑class firms.
   • Types:
   • Internal benchmarking – compare units or sites within the same organisation.
   • External benchmarking – compare with competitors or firms in other industries.
   • Functional benchmarking – compare specific processes (e.g., order fulfilment) regardless of industry.
   • Limitations: Reliable data can be hard to obtain; copying without adaptation may lead to misfit.
   • Cross‑topic link: Feeds into strategic analysis (SWOT, Porter’s Five Forces) by highlighting performance gaps.
5. Internal & external audits
   • Systematic examinations of processes against set standards (ISO, industry regulations, internal policies).
   • External audits provide third‑party verification; internal audits support ongoing monitoring and corrective action.
   • Limitations: Audit fatigue if too frequent; corrective actions can be costly if major non‑conformities are found.
   • Cross‑topic link: Audit findings often feed into risk‑management registers and can trigger capital‑budget decisions.
6. Sector‑specific standards (examples)
   • HACCP – Hazard Analysis and Critical Control Points, essential for food safety.
   • AS9100 – Aerospace quality management standard, builds on ISO 9001 with additional safety and reliability requirements.
   • ISO 13485 – Medical device quality management, emphasises regulatory compliance and risk management.
   • These standards operate alongside generic QA methods and are often mandatory for market entry.

Impact of QA methods on a business

Linking QA methods to business objectives

When selecting a QA approach, managers should ask: “How does this method help us achieve our strategic goals?”

• Cost reduction – Six Sigma or ISO 9001 to minimise waste, re‑work and warranty claims.
• Brand reputation & premium pricing – TQM or sector‑specific standards to demonstrate reliability and safety.
• Regulatory compliance – ISO 9001, audits and industry standards (HACCP, AS9100).
• Market expansion – Benchmarking to identify gaps and meet new market requirements.
• Employee engagement & turnover reduction – TQM or continuous‑improvement programmes that involve staff at all levels.

Worked example – Cost‑benefit of Six Sigma

Factory output: 500 000 units per year.
Current defect rate: 2 % (10 000 defects).
Target defect rate after Six Sigma: 0.1 % (500 defects).
Cost per defect (re‑work + warranty): $25.

Savings = (10 000 – 500) × $25 = 9 500 × $25 = $237 500

Implementation cost (training, software, project time): $120 000.

Net benefit (Year 1) = $237 500 – $120 000 = $117 500

Pay‑back period ≈ 6 months, illustrating how a QA method can directly improve profitability.

Suggested diagrams (for classroom use)

• Flowchart of the DMAIC cycle (Define → Measure → Analyse → Improve → Control).
• Sample X‑bar control chart with UCL, LCL and a highlighted special‑cause point.
• Venn diagram showing the overlap between QC, QA and Continuous Improvement.
• Cost of Quality pie chart (prevention, appraisal, internal‑failure, external‑failure).

Summary

Quality Control and Quality Assurance are complementary tools that enable a business to meet customer expectations, reduce total cost of quality, comply with regulations and enhance its reputation. The choice of method—ISO 9001, Six Sigma, TQM, benchmarking, audits or sector‑specific standards—must align with the organisation’s strategic objectives, resources and culture. When implemented effectively, QA is not a cost centre but a source of competitive advantage and a catalyst for continuous improvement.