UNIT II. TOTAL QUALITY MANAGEMENT PDF

BA 26 - OPERATIONS MANAGEMENT (TQM) UNIT II. TOTAL QUALITY MANAGEMENT At the end of the unit, the students must have: 1. discussed the perspective of quality; 2. recognized the dimensions of quality; 3. explained the meaning and importance of TQM; and 4. ident...

BA 26 - OPERATIONS MANAGEMENT (TQM) UNIT II. TOTAL QUALITY MANAGEMENT At the end of the unit, the students must have: 1. discussed the perspective of quality; 2. recognized the dimensions of quality; 3. explained the meaning and importance of TQM; and 4. identified significant philosophies and advocates of TQM. DEFINING QUALITY The definition of quality depends on the role of the people defining it. Most consumers have a difficult time defining quality, but they know it when they see it. For example, your friends may have different opinions regarding which athletic shoes are of highest quality. The difficulty in defining quality exists regardless of product, and this is true for both manufacturing and service organizations. Definitions of Quality A. Conformance to specifications. It measures how well the product or service meets the targets and tolerances determined by its designers. B. Fitness for use. It focuses on how well the product performs its intended function or use. You can also see that fitness for use is a user-based definition in that it is intended to meet the needs of a specific user group. C. Value for price paid. It is a definition of quality that consumers often use for product or service usefulness. This is the only definition that combines economics with D. Support services. Quality defined in terms of the support provided after the product or service is purchased. It often refers how the quality of a product or service is judged. Quality does not apply only to the product or service itself; it also applies to the people, processes, and organizational environment associated with it. Overall, quality is the degree to which a set of inherent characteristics fulfills requirement. - ISO 9000:2000 IMPORTANCE OF QUALITY Here are some of the reasons why creating a standard of quality with your products is so important for keeping customers:  BA 26 - OPERATIONS MANAGEMENT (TQM) 1. Competition. In niche-specific companies, using quality products to beat the competition is essential. Because they are focused on selling just a few products, they need something that can set their products apart from the competition. Overall, quality always sells better than other factors, like low pricing. For example, EarthLite, a company that sells massage-related products, has built their company on a foundation of high quality products, marketing them as handmade with eco-friendly materials that are superior to what you might find elsewhere. As a result, they’ve managed to claim the number one spot in massage-related retail. 2. Customer Expectations. At first, your customers will appreciate quality. Then, as they tell more people about it and continue shopping, they will begin to expect such. After expectation comes a demand for quality products. In addition, if you do not deliver, your customer will leave. When your company offers quality products every time, you can create a standard of satisfying customers in the retail spectrum. In return, you will receive loyalty and continued lead generation that allows your company to grow. 3. Business Reputation. Quality and your company’s reputation are more closely linked than many businesses realize. When your products do not match the standard of quality that was promised, people will hear about it on social media, through review sites, on forums, and from their friends. Nike is a great example of a company that links its brand reputation with the quality of their products. They have built their company on great marketing and products that stand the test of time. People know they can trust Nike and are willing to pay more because their products provide the quality they have come to expect. 4. Customer Loyalty. Customers always come back when a product is good, even if the price is high. A quality product creates unshakeable customer loyalty that generates increased leads. When customers find a product they trust, they return, make repeat purchases, and recommend the product or service to others. Consider Apple’s success in selling more than 800 million devices to more than 130 million users in the last year alone. Those numbers show that customers have bought multiple products from the retailer, and they would not have that kind of success if people did not love the quality, even though their products are considerably more expensive than other options. In the end, product quality is something companies should always emphasize. Creating quality products will continue to be the most important thing to customers. In a world where it is hard to predict the demands of customers, this is an important concept to master.  BA 26 - OPERATIONS MANAGEMENT (TQM) DIMENSIONS OF QUALITY PRODUCT QUALITY is essential to a company, as any business functions because of the consumer’s inclinations, preferences, and loyalties their product. Hence, without the satisfaction of the customer, there is nearly no future for the company. The customer decides the business of the company. If the consumers are not happy with the product they are getting, then it will not turn up well for the company. The most common quality definition in manufacturing is the following: 1. Functionality. This refers to the core features and characteristics of a product. It is a set of attributes that bear on the existence of a set of functions and their specified properties. The functions are those that satisfy stated implied needs. 2. Reliability. Consistency of performance over time. Reliability is measured by mean average time between failures (MTBF). Reliability is the indicator of the durability of the products. 3. Usability. A product should be easily usable. The customer should be able to use the product easily without help of experts. Thus, each product should be made so that a person can use it with minimum training. 4. Maintainability. It refers to the ease with which a product can be maintained in the original condition. It should be repairable to retain to the original quality at the lowest cost at the earliest possible time. 5. Efficiency. It is the ratio of output to input. If a car gives a mileage of 20 kms per litre of gasoline and another car with identical features gives 15 kms per liter, then the former is more efficient than the latter. 6. Portability. It is defined as set of attributes that bear on the ability to be transferred from one environment to another.  BA 26 - OPERATIONS MANAGEMENT (TQM) Manufactured products have several quality dimensions including the following: 1. Performance. A product’s primary operating characteristics 2. Features. The “bells and whistles” of a product 3. Reliability. The probability of a product is surviving over a specific period under stated condition of use. 4. Conformance. The degree to which physical and performance characteristics of a product match pre-established standards. 5. Durability. The amount of use one gets from a product before it physically deteriorates or until replacement is preferable. 6. Serviceability. The ability to repair a product quickly and easily. 7. Aesthetics. How a product looks, feels, sounds, tastes, or smells. 8. Perceive quality. Subjective assessment resulting from image, advertising, or brand names. SERVICE QUALITY. A business with a high level of service quality is likely capable of meeting customer needs while also remaining economically competitive in their respective industry. Successful businesses who remain competitive and relevant in the marketplace work proactively to obtain information from their current or potential customer base so they can ensure they are meeting their needs. The Most Important Dimensions of Service Quality include the following: 1. Time. How much time must a customer wait? 2. Timeliness. Will a service be performed when promised? 3. Completeness. Are all items in the order included? 4. Courtesy. Do frontline employees greet each customer cheerfully? 5. Consistency. Are services delivered in the same fashion for every customer, and every time for the same customer? 6. Accessibility and Convenience. Is the service easy to obtain? 7. Accuracy. Is the service performed right the first time? 8. Responsiveness. Can the service personnel react quickly and resolve unexpected problems? WHY SHOULD YOU CARE TO ALL OF THESE? Below are eight features of using a quality management system, and how they benefit you: 1. Improves organizational culture. A good Quality Management System begins with top management and is communicated down throughout the entire company. Benefit to you. Every employee that touches your product understands the agreed upon specifications and standards you expect for the final outcome.  BA 26 - OPERATIONS MANAGEMENT (TQM) 2. Provides consistency across all processes. By defining and documenting all processes, each procedure is standardized and performed in a consistent manner. Benefit to you. Accurate products, peace-of-mind. 3. Helps to easily transition employees. Since all processes are standardized and documented, it takes less time to train new employees or transfer existing employees into a new position. For our clients, this means that their projects will be completed accurately and on time. Benefit to you. Accurate products delivered when you expect them. 4. Helps to constantly improve processes and products. With structured systems in place, such as our corrective action program, we are able to identify, correct and improve processes, which lead to a better product for our clients. Benefit to you. Superior products & programs that keep getting better. 5. Improves efficiency. By establishing processes, it is easier for employees to follow the guidelines, resulting in improved time management and less waste of resources. Benefit to you: Smooth-running program at a reasonable cost. 6. Improves customer satisfaction. Increased efficiency, consistency and a high-quality product will lead to improved customer satisfaction. Benefit to you: Happiness in knowing that you will receive your product as expected. 7. Encourages customer feedback. We learn a lot from our customers through their feedback, as it provides us with an opportunity to grow and improve together. Benefit to you: We are a part of your team, not just a supplier. 8. Higher quality product. The goal of a QMS is to provide overall improved customer satisfaction and nothing does that well than a quality end product. Consistency, efficiency and removing the chance for error help to ensure a better product. Period. Benefit to you: A quality card that represents your quality brand well. COST OF QUALITY. The reason quality has gained such prominence is that organizations have gained an understanding of the high cost of poor quality. Quality affects all aspects of the organization and has dramatic cost implications. The most obvious consequence occurs when poor quality creates dissatisfied customers and eventually leads to loss of business. However, quality has many other costs, which can be divided into two categories. The first category consists of costs necessary for achieving high quality,  BA 26 - OPERATIONS MANAGEMENT (TQM) which are called quality control costs. These are of two types: prevention costs and appraisal costs. The second category consists of the cost consequences of poor quality, which are called quality failure costs. These include external failure costs and internal failure costs Two categories: 1. Quality Control Costs - The first category consists of costs necessary for achieving high quality, which are called quality control costs. These are of two types: prevention costs and appraisal costs. A. Prevention costs are all costs incurred in the process of preventing poor quality from occurring. They include quality planning costs, such as the costs of developing and implementing a quality plan or information costs. Also included are the costs of product and process design, from collecting customer information to designing processes that achieve conformance to specifications. Employee training in quality measurement is included as part of this cost, as well as the costs of maintaining records of information and data related to quality. B. Appraisal costs. These are incurred in the process of uncovering defects. They include the cost of quality inspections, product testing, and performing audits to make sure that quality standards are being met. Also included in this category are the costs of worker time spent measuring quality and the cost of equipment used for quality appraisal. i. Inspection and testing. costs of testing and inspecting materials, parts, and product at various stages and at the end of a process. ii. Test equipment costs. costs of maintaining equipment used in testing quality characteristics of products. iii. Operator costs. costs of time spent by operators to gar data for testing product quality, to make equipment adjustments to maintain quality, and to stop work to assess quality. 2. Quality Failure Costs- The second category consists of the cost consequences of poor quality, which are called quality failure costs. These include external failure costs and internal failure costs.  BA 26 - OPERATIONS MANAGEMENT (TQM) A. Internal failure costs. These are costs associated with discovering poor product quality before the product reaches the customer site. One type of internal failure cost is rework, which is the cost of correcting the defective item. Sometimes the item is so defective that it cannot be corrected and must be thrown away. This is called scrap, and its costs include all the material, labor, and machine cost spent in producing the defective product. Other types of internal failure costs include the cost of machine downtime due to failures in the process and the costs of discounting defective items for salvage value. B. External failure costs. These are associated with quality problems that occur at the customer site. These costs can be particularly damaging because customer faith and loyalty can be difficult to regain. They include everything from customer complaints, product returns, and repairs, to warranty claims, recalls, and even litigation costs resulting from product liability issues. A final component of this cost is lost sales and lost customers. For example, manufacturers of lunchmeats and hot dogs whose products have been recalled due to bacterial contamination have had to struggle to regain consumer confidence. Other examples include auto manufacturers whose products have been recalled due to major malfunctions such as problematic braking systems and airlines that have experienced a crash with many fatalities. External failure can sometimes put a company out of business almost overnight. TOTAL QUALITY MANAGEMENT In this chapter, you will learn that making quality a priority means putting customer needs first. It means meeting and exceeding customer expectations by involving everyone in the organization through an integrated effort. Total quality management (TQM) is an integrated organizational effort designed to improve quality at every level. Let us define the words that made up TQM. Total. It means system-wide. It means the involvement of everyone and everything in the organization in a continuous improvement effort. This not only includes all the people but it also encompasses all the systems, processes, operation and equipment. Quality. Quality means customer defined. total customer satisfaction and focuses on satisfying all customers, both internal and external, of the organization.  BA 26 - OPERATIONS MANAGEMENT (TQM) Management. It refers to people and processes. First, management is the leader of an organization. Management creates and maintains the TQM environment through leadership and empowerment. Management ensures quality (customer satisfaction) by continuous improvement of processes, products. Total Quality Management or TQM is an integrative philosophy of management for continuously improving the quality of products and processes. TQM functions on the premise that the quality of products and processes is the responsibility of everyone. The management. The workforce. The suppliers. The community. The customers. Total Quality Management is a leadership and management philosophy, processes, and guiding principles stressing continuous improvement through people involvement and qualitative methods focusing on total customer satisfaction. Is the management of total quality. Total quality refers to 3 qualities namely: ⮚ Quality of return to satisfy the needs of the shareholders; ⮚ Quality of products and services to satisfy specific needs of consumers; and ⮚ Quality of life –at work and outside work – to satisfy the needs of the people in the organization. TQM TRUTHS TQM is not a program. TQM is not a management fad. TQM is not only about a product or service quality. TQM is only a means to an organizational end. TQM should never be the focus of an organization. It is one of the means to achieve the focus of the organization. Philosophies of TQM. There are two key philosophies in this approach. Frist, continuous improvement. This Continuous improvement, called kaizen by the Japanese, requires that the company continually strive to be better through learning and problem solving. Because we can never achieve perfection, we must always evaluate our performance and take measures to improve it. Second, customer satisfaction.  BA 26 - OPERATIONS MANAGEMENT (TQM) Quality is defined as meeting or exceeding customer expectations. The goal is to first identify and then meet customer needs. TQM recognizes that a perfectly produced product has little value if it is not what the customer wants. Therefore, we can say that quality is customer driven. CORE VALUES OF TQM. 1. Methods and processes are designed to meet the needs of internal and external customers. 2. Every employees in the company receives training in quality. 3. The company promotes cooperation with vendors, suppliers and customers to improve quality and hold down costs. 4. Managers measure progress with feedback based on the data. Theories of Total Quality Management. 1. Quality can and must be managed. 2. Processes, not people, are the problem. 3. Don’t treat symptoms, look for the cure. 4. Every employee is responsible for quality. 5. Quality must be measurable. 6. Quality improvements must be continuous. 7. Quality is a long-term investment. Importance of TQM. 1. Ensures quality in a company’s products and services. 2. For customer satisfaction. 3. Increase revenues. 4. Reduce wastes. 5. Induces teamwork. 6. Encourages innovation.  BA 26 - OPERATIONS MANAGEMENT (TQM) Obstacles in Implementing TQM. Once an organization embarks on TQM, there will be obstacles to its successful implementation. The eight most common obstacles were determined by Robert Masters after an extensive literature search. These are: 1. Lack of management commitment. 2. Inability to change organization culture. 3. Improper planning. 4. Lack of continuous training and education. 5. Incompatible organizational structure and individuals and departments. 6. Ineffective measurement techniques and lack of access to data and results. THE EVOLUTION OF TOTAL QUALITY MANAGEMENT (TQM). The concept of quality has existed for many years, though its meaning has changed and evolved over time. In the early twentieth century, quality management meant inspecting products to ensure that they met specifications. Quality Gurus. To fully understand the TQM movement, we need to look at the philosophies of notable individuals who have shaped the evolution of TQM. Their philosophies and teachings have contributed to our knowledge and understanding of quality today.  BA 26 - OPERATIONS MANAGEMENT (TQM) A. WALTER A. SHEWHART was a statistician at Bell Labs during the 1920s and 1930s. Shewhart studied randomness and recognized that variability existed in all manufacturing processes. He developed quality control charts that are used to identify whether the variability in the process is random or due to an assignable cause, such as poor workers or miscalibrated machinery. He stressed that eliminating variability improves quality. His work created the foundation for today’s statistical process control, and he is often referred to as the “grandfather of quality control.” B. W. EDWARDS DEMING is often referred to as the “father of quality control.” He was a statistics professor at New York University in the 1940s. After World War II he assisted many Japanese companies in improving quality. The Japanese regarded him so highly that in 1951 they established the Deming Prize, an annual award given to firms that demonstrate outstanding quality. It was almost 30 years later that American businesses began adopting Deming’s philosophy. A number of elements of Deming’s philosophy depart from traditional notions of quality. The first is the role management should play in a company’s quality improvement effort. Historically, poor quality was blamed on workers — on their lack of productivity, laziness, or carelessness. However, Deming pointed out that only 15 percent of quality problems are actually due to worker error. Processes and systems, including poor management, cause the remaining 85 percent. Deming said that it is up to management to correct system problems and create an environment that promotes quality and enables workers to achieve their full potential. He believed that managers should drive out any fear employees have of identifying quality problems, and that numerical quotas should be eliminated. Proper methods should be taught and detecting and eliminating poor quality should be everyone’s responsibility. Deming outlined his philosophy on quality in his famous “14 Points.” These points are principles that help guide companies in achieving quality improvement. The principles are founded on the idea that upper management must develop a commitment to quality and provide a system to support a commitment that involves all employees and suppliers. Deming stressed that quality improvements cannot happen without organizational change that comes from upper management. C. DR. JOSEPH JURAN is considered to have had the greatest impact on quality management. Juran originally worked in the quality program at Western Electric. He became better known in 1951, after the publication of his book Quality Control Handbook. In 1954 he went to Japan to work with manufacturers and teach classes on quality. Though his philosophy is similar to Deming’s, there are some differences. Whereas Deming stressed the need for an organizational “transformation,” Juran  BA 26 - OPERATIONS MANAGEMENT (TQM) believes that implementing quality initiatives should not require such a dramatic change and that quality management should be embedded in the organization. One of Juran’s significant contributions is his focus on the definition of quality and the cost of quality. Juran is credited with defining quality as fitness for use rather than simply conformance to specifications. As we have learned in this chapter, defining quality as fitness for use takes into account customer intentions for use of the product, instead of only focusing on technical specifications. Juran is also credited with developing the concept of cost of quality, which allows us to measure quality in dollar terms rather than on the basis of subjective evaluations. Juran is well known for originating the idea of the quality trilogy: quality planning, quality control, and quality improvement. The first part of the trilogy, quality planning, is necessary so that companies identify their customers, product requirements, and overriding business goals. Processes should be set up to ensure that the quality standards can be met. The second part of the trilogy, quality control, stresses the regular use of statistical control methods to ensure that quality standards are met and to identify variations from the standards. The third part of the quality trilogy is quality improvement. According to Juran, quality improvements should be continuous as well as breakthrough. Together with Deming, Juran stressed that to implement continuous improvement workers need to have training in proper methods on a regular basis. D. PHILIP B. CROSBY is another recognized guru in the area of TQM. He worked in the area of quality for many years, first at Martin Marietta and then, in the 1970s, as the vice president for quality at ITT. He developed the phrase “Do it right the first time” and the notion of zero defects, arguing that no amount of defects should be considered acceptable. He scorned the idea that a small number of defects is a normal part of the operating process because systems and workers are imperfect. Instead, he stressed the idea of prevention. To promote his concepts, Crosby wrote a book titled Quality Is Free, which was published in 1979. He became famous for coining the phrase “quality is free” and for pointing out the many costs of quality, which include not only the costs of wasted labor, equipment time, scrap, rework, and lost sales, but also organizational costs that are hard to quantify. Crosby stressed that efforts to improve quality more than pay for themselves because these costs are prevented. Therefore, quality is free. Like Deming and Juran, Crosby stressed the role of management in the quality improvement effort and the use of statistical control tools in measuring and monitoring quality. E. KAORU ISHIKAWA is best known for the development of quality tools called cause-and-effect diagrams, also called fishbone or Ishikawa diagrams. These diagrams are used for quality problem solving, and we will look at them in detail  BA 26 - OPERATIONS MANAGEMENT (TQM) later in the chapter. He was the first quality guru to emphasize the importance of the “internal customer,” the next person in the production process. He was also one of the first to stress the importance of total company quality control, rather than just focusing on products and services. Dr. Ishikawa believed that everyone in the company needed to be united with a shared vision and a common goal. He stressed that quality initiatives should be pursued at every level of the organization and that all employees should be involved. Dr. Ishikawa was a proponent of implementation of quality circles, which are small teams of employees that volunteer to solve quality problems.