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Chapter 5 - Total Quality Management

Operations Management 6th Edition

R. Dan Reid & Nada R. Sanders

Learning Objectives

 Explain the meaning of total quality management (TQM).

 Identify costs of quality.

 Describe the evolution of TQM.

 Identify features of the TQM philosophy.

 Describe quality awards and quality certifications.

 Understand why and how TQM efforts fail.

Defining Quality

 Definition of quality is dependent on the people defining it

 There is no single, universal definition of quality  “performance to standards”, “meeting customer’s needs”,

“satisfying the customer”

 5 common definitions (See next slide)

Defining Quality – 5 Ways

1. Conformance to specifications  How well a product/service meet targets and tolerances defined

by its designers.

2. Fitness for use  Evaluates performance for intended use

3. Value for price paid  Evaluation of usefulness vs. price paid

4. Support services  Quality of support after sale

5. Psychological  Ambiance, prestige, friendly staff

Manufacturing Quality vs. Service Quality

 Manufacturing focuses on tangible product features (can be seen, touched, directly managed)  Conformance

 Performance

 Reliability

 Features

 Durability

 Serviceability

 Service produce intangible products that must be experienced (cannot be seen or touched)  Intangible factors

 Consistency

 Responsiveness

 Courtesy, friendliness

 Promptness, timeliness

 Atmosphere

Cost of Quality

 Quality affects all aspects of the organization

 Quality has dramatic cost implications of:  Quality control costs (to achieve high quality)

 Prevention costs

 Appraisal costs

 Quality failure costs (consequences of poor quality)  Internal failure costs

 External failure costs

Cost of Quality – 4 Categories 7

Evolution of TQM – New Focus 8

Quality Gurus 9

TQM Philosophy 10

 TQM focuses on identifying quality problem root causes  Encompasses the entire organization  Involves the technical as well as people  Relies on seven basic concepts of

1. Customer focus 2. Continuous improvement 3. Employee empowerment 4. Use of quality tools 5. Product design (discussed later in Chapter) 6. Process management (discussed later in Chapter) 7. Managing supplier quality (discussed later in Chapter)

TQM Philosophy 11

TQM Philosophy Concepts

 Focus on Customer  Identify and meet customer needs  Stay tuned to changing needs, e.g. fashion styles

 Continuous Improvement  Continuous learning and problem solving, e.g. Kaizen, 6

sigma  Plan-Do-Study-Act (PDSA)  Benchmarking

PDSA Details

 Plan  Evaluate current process  Collect procedures, data, identify problems  Develop an improvement plan, performance objectives

 Do  Implement the plan – trial basis

 Study  Collect data and evaluate against objectives

 Act  Communicate the results from trial  If successful, implement new process

PDSA Details - cont'd

 Cycle is repeated  After act phase, start planning and repeat process

TQM Philosophy Concepts - cont'd

 Employee Empowerment  Empower all employees; external and internal customers

 Team Approach  Teams formed around processes; 8-10 people

 Meet weekly to analyze and solve problems

 Use of Quality Tools  Ongoing training on analysis, assessment, and correction,

& implementation tools

 Studying practices at “best in class” companies

Ways of Improving Quality

 Plan-Do-Study-Act Cycle (PDSA)  Also called the Deming Wheel after originator

 Circular, never ending problem solving process or continuous improvement process

 Seven Tools of Quality Control  Tools typically taught to problem solving teams

 Quality Function Deployment (QFD)  Used to translate customer preferences to design

Seven Tools of Quality Control

1. Cause-and-Effect Diagrams

2. Flowcharts

3. Checklists

4. Control Charts

5. Scatter Diagrams

6. Pareto Analysis

7. Histograms

TQM Philosophy Concepts - cont'd 18

1. Cause-and-Effect Diagrams

 Called Fishbone Diagram

 Focused on solving identified quality problem

 Used by quality control teams; brainstorming

2. Flowcharts

 Schematic diagram

 Used to document the detailed steps in a process

 Often the first step in Process Re-Engineering

3. Checklist

 Simple data check-off sheet

 Designed to identify type of quality problems at each work station; per shift, per machine, per operator

4. Control Charts

 The UCL and LCL are calculated limits used to show when a process is in or out of control i.e.; weight, width, or volume

 Key tool used in Statistical Process Control - Chap. 6

5. Scatter Diagrams

 A graph showing how two variables are related to one another

 The greater the degree of correlation, the more linear are the observations

6. Pareto Analysis

 Technique that displays the degree of importance for each element

 Named after the 19th century Italian economist; often called the 80- 20 Rule  Principle is that quality problems are the result of only a few problems i.e.; 80%

of problems are caused by 20% of causes

7. Histograms

 A chart that shows the frequency distribution of observed values of a variable (i.e.; service time at a bank drive-up window)

 Displays whether the distribution is symmetrical (normal) or skewed

Product Design - Quality Function Deployment (QFD)

 Critical to ensure product design meets customer expectations (and enhance communications internally)

 QFD is a useful tool for translating customer specifications into technical requirements

 QFD encompasses  Customer requirements  Competitive evaluation  Product characteristics  Relationship matrix  Trade-off matrix  Setting Targets

Quality Function Deployment (QFD) Details

QFD - House of Quality 28

Reliability – Critical to Quality

 Reliability is the probability that the product, service or part will function as expected

 No product is 100% certain to function properly

 Reliability is a probability function dependent on sub- parts or components

Reliability; Critical to Quality - cont’d

 Reliability of a system is the product of component reliabilities

RS = (R1) (R2) (R3) . . . (Rn)

RS = reliability of the product or system

R1 = reliability of the components 1 thru n

Reliability; Critical to Quality - cont’d

 Increase reliability by placing components in parallel

 Parallel components allow system to operate if one or the other fails

RS = R1 + (R2* Probability of needing 2 nd component)

Process Management & Managing Supplier Quality

 Quality products come from quality sources

 Quality must be built into the process

 Quality at the source is the belief that it is better to uncover source of quality problems and correct it

 TQM extends to quality of product from company’s suppliers

Quality Awards and Standards

 Malcolm Baldrige National Quality Award (MBNQA)

 The Deming Prize

 ISO 9000 Certification

 ISO 14000 Standards

MBNQA- What Is It?

 Award named after the former Secretary of Commerce – Regan Administration

 Intended to reward and stimulate quality initiatives  Given to no more that two companies in each of three

categories; manufacturing, service, and small business  Past winners; Motorola Corp., Xerox, FedEx, 3M, IBM,

Ritz-Carlton

MBNQA- Criteria

# Categories Points

1 Leadership 120

2 Strategic Planning 85

3 Customer and Market Focus 85

4 Information and Analysis 90

5 Human Resource Focus 85

6 Process Management 85

7 Business Results 450

TOTAL POINTS 1000

Criteria represents Quality belongs to everyone! And criteria promotes “continuous improvement”.

The Deming Prize

 Given by the Union of Japanese Scientists and Engineers

since 1951

 Named after W. Edwards Deming who worked to improve

Japanese quality after WWII

 Not open to foreign companies until 1984

 1989 - Florida P & L was first US company winner

ISO Standards

 ISO 9000 Standards: (1987)  Certification developed by International Organization for

Standardization  Set of internationally recognized quality standards  Companies are periodically audited & certified  ISO 9000:2000 QMS – Fundamentals and

Standards  ISO 9001:2000 QMS – Requirements  ISO 9004:2000 QMS - Guidelines for Performance  More than 40,000 companies have been certified

 ISO 14000: (1987)  Focuses on a company’s environmental responsibility

Why TQM Efforts Fail

 Lack of a genuine quality culture

 Lack of top management support and commitment

 Over- and under-reliance on SPC methods

TQM Within OM

 TQM is broad sweeping organizational change  TQM impacts

 Marketing – providing key inputs of customer information  Finance – evaluating and monitoring financial impact  Accounting – provides exact costing  Engineering – translate customer requirements into specific

engineering terms  Purchasing – acquiring materials to support product development  Human Resources – hire employees with necessary skills  Information systems – increased need for accessible information

Chapter 5 Highlights

 TQM is different from the old concept of quality  Focus is on serving customers, identifying the causes of quality

problems, and building quality into the production process

 Four categories of quality costs:  Prevention, Appraisal, Internal and External

 Seven TQM notable individuals include:  Walter A. Shewhart, W. Edwards Demings, Joseph M. Juran,

Armand V. Feigenbaum, Philip B. Crosby, Kaoru Ishikawa, & Genichi Taguchi

Chapter 5 Highlights – cont'd

 Seven features of TQM combine to create TQM philosophy:  Customer focus, continuous improvement, employee

empowerment, use of quality tools, product design, process management, and managing supplier quality

 QFD  a tool used to translate customer needs into specific engineering

requirements  Reliability

 the probability that the product will functions as expected  The Malcolm Baldrige Award

 given to companies to recognize excellence in quality management.