BUSI 411 Key Terms
Ch. 9 and 10
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Appraisal Costs: costs of activities designed to ensure quality or uncover defects
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Baldrige Award: annual award given by the U.S. government to recognize quality
achievements of U.S. companies.
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Benchmarking: process of measuring performance against the best in the same or other
industry.
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Brainstorming: technique for generating a free flow of ideas in a group of people.
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Cause-and-Effect (fishbone) Diagram: a diagram used to search for the cause(s) of a
problem; also called the fishbone diagram.
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Check Sheet: a tool for recording and organizing data to identify a problem.
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Continuous Improvement: philosophy that seeks to make never-ending improvements
to the process of converting inputs into outputs.
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Control Chart: a statistical chart of time-ordered values of a sample statistic.
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Deming Prize: prize established by the Japanese and awarded annually to firms that
distinguish themselves with quality management programs.
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European Quality Award: European award for organizational excellence.
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External Failures: failures discovered after delivery to the customer.
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Fail-Safing: incorporating design elements that prevent incorrect procedures.
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Failure Costs: costs caused by defective parts or products or by faulty services.
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Flowchart: a diagram of the steps in a process.
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Histogram: a chart of an empirical frequency distribution.
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Internal Failures: failures discovered during production.
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ISO 9000: a set of international standards on quality management and quality assurance,
critical to international business.
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ISO 14000: a set of international standards for assessing a company’s environmental
performance.
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ISO 24700: a set of international standards that pertains to the quality and performance
of office equipment that contains reused components
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Kaizen: Japanese terms for continuous improvements
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Pareto Analysis: technique for classifying problem areas according to degree of
importance and focusing on the most important.
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Plan-Do-Study-Act (PDSA) Cycle: a framework for problem solving and improvement
activities.
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Prevention Costs: costs of preventing defects from occurring
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Process Improvement: a systematic approach to improving a process.
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Quality: an ability of a product or service to consistently meet or exceed customer
expectations.
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Quality at the Source: the philosophy of making each worker responsible for the quality
of his or her work.
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Quality Circles: group of workers who meet to discuss ways of improving products or
processes.
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Quality of Conformance: the degree to which goods or services conform to the intent of
the designers.
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Quality of Design: intention of designers to include or exclude features in a product or
service
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Return on Quality: an approach that evaluates the financial return of investments in
quality.
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Run Chart: tool for tracking results over a period of time.
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Scatter Diagram: a graph that shows the degree and direction of relationship between
two variables.
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Six Sigma: a business process for improving quality, reducing costs, and increasing
customer satisfaction.
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Total Quality Management (TQM): a philosophy that involves everyone in an
organization in a continual effort to improve quality and achieve customer satisfaction.
Ch. 10
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Assignable Variation: in process output, a variation whose cause can be identified. A
nonrandom variation.
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Attributes: generate data that are counted.
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Capability Index: used to assess the ability of a process to meet specifications
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C-Chart: control chart for attributes, used to monitor the number of defects per unit.
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Central Limit Theorem: the distribution of sample averages tends to be normal
regardless of the shape of the process.
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Control Chart: a visual tool for monitoring forecast errors.
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Control Limits: the dividing lines between random and nonrandom deviations from the
mean of the distribution.
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Inspection: appraisal of goods or services.
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Mean Control Chart: control chart used to monitor the central tendency of a process.
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P-Chart: control chart for attributes, used to monitor the proportion of defective items in
a process.
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Process Capability: the inherent variability of process output relative to the variation
allowed by the design specification.
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Process Variability: natural or inherent in a process.
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Quality Control: a process that evaluates output relative to a standard and takes
corrective action when output doesn’t meet standards.
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Quality of Conformance: a product or service conforms to specifications.
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Random Variation: natural variation in the output of a process, created by countless
minor factors.
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Range Control Chart: control chart to monitor process dispersion.
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Run: sequence of observations with a certain characteristic.
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Run Test: a test for patterns in a sequence
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Sampling Distribution: a theoretical distribution of sample statistics
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Specification: a range of acceptable values established by engineering design or
customer requirements.
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Statistical Process Control (SPC): statistical evaluation of the output of a process.
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Type I Error: concluding a process is not in control when it actually is
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Type II Error: concluding a process is in control when it is not
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Variables: generate data that are measured.
